A luxury mountain resort’s tax assessment should be higher, after a state board improperly omitted rental income and amenity fees from its calculation, the Court of Appeals ruled on Thursday.

Vail Resorts, Inc. owns the Lodge at Vail Resort and Hotel, which includes 80 hotel rooms and 74 separately-owned condominium units. However, the condo rooms are physically connected to the hotel, and guests are unaware of the difference in ownership, according to court documents. People staying in each section have access to the condo’s amenities.

A second Vail subsidiary manages the hotel and the condo’s homeowners association, and a third subsidiary helps condo owners rent their rooms. Some owners manage the rentals themselves or engage an outside company. In exchange for its services, Vail’s subsidiary takes in 40% of the rental proceeds and other fees.

For the 2017 tax year, the Eagle County assessor valued at $41.1 million the Lodge’s taxable real property, including income from the company’s share of the rent. The Lodge’s own appraiser estimated their tax liability as half that amount, contenting that “property management revenue” not be included.

The Eagle County Board of Equalization adjusted the value higher, to $44.3 million, and an expert appraiser testified that condo income is an ownership benefit and should be calculated. Ultimately, the state’s Board of Assessment Appeals sided with Vail Resorts and ordered a reduction in value closer to the company’s estimate.

A three-member panel for the court of appeals determined that the board made a mistake when it reasoned that it was only appropriate to value the rental income “outside of taxation.”

“[B]ecause market value is synonymous with actual value,” wrote Judge Neeti Vasant Pawar, referring to the standard for assessment, “the BAA is not permitted to assign a special meaning to actual value for tax purposes.”

She explained that the condominium’s rental income to Vail Resorts would transfer to a new owner with the hypothetical sale of the Lodge, and its website advertises 165 rooms without treating the hotel and the condos as separate. The court further decided the state board was mistaken to conclude the rental income was an intangible asset: per the dictionary definition of the term, condo income was something physical.

“We do not perceive a readily identifiable and measurable stream of income such as condo net income as equivalent to things like patents, business goodwill, computer programs, literary rights, and stock options,” Pawar concluded.

The court ordered the board to recalculate the taxable value by including the condo income as well as the amenity fees that went directly to Vail Resorts and its subsidiary. The case is Lodge Properties v. Eagle County Board of Equalization.