Anderson/Maltbie Partnership v. Levin, Slip Opinion No. 2010-Ohio-4904.
Board of Tax Appeals, No. 2007-A-11. Decision reversed.
Brown, C.J., and Pfeifer, Lundberg Stratton, O'Connor, O'Donnell, Lanzinger, and Cupp, JJ., concur.
Opinion: http://www.supremecourt.ohio.gov/rod/docs/pdf/0/2010/2010-Ohio-4904.pdf
(Oct. 12, 2010) In a 7-0 decision announced today, the Supreme Court of Ohio held that the property tax exemption for a “public schoolhouse” set forth in R.C. 5709.07(A)(1) does not apply to property that is leased by its owner to a school for profit. The decision, authored by Justice Judith Ann Lanzinger, reversed a ruling by the State Board of Tax Appeals (BTA).
The case involved a for-profit company, Anderson/Maltbie Partnership (AMP), which leased property from October 1999 through October 2004 to a nonprofit corporation, which used the property to operate a community or charter school called the Cincinnati College Preparatory Academy (CCPA). Under the lease agreement, CCPA paid AMP $275,000 a year for the use of the building.
AMP filed an application with the state tax commissioner seeking a property tax exemption for the 2002 tax year and remission of taxes it had paid for 1999, 2000 and 2001. In its application, AMP asserted that because the property was used by the lessee as a public school facility, it qualified for exemption from property taxes under R.C. 5709.07(A)(1), a provision of state law that grants exemption to “public schoolhouses.” The commissioner denied the requested exemption. AMP appealed the commissioner’s determination to the BTA. On review, the BTA overruled the commissioner and ordered him to approve the requested exemption.
The commissioner exercised his right to appeal the BTA ruling to the Supreme Court.
In today’s decision, Justice Lanzinger rejected the legal reasoning underlying the BTA’s ruling as inconsistent with Supreme Court of Ohio decisions dating back to Gerke v. Purcell (1874).
She wrote: “Gerke holds that the public-schoolhouse exemption does extend to privately owned property, but only when that property is ‘appropriated to the support of education for the benefit of the public without any view to profit,’ an essential element being the ‘exclusion of all idea of private gain or profit.’ … By seeking to exempt a commercial office building that is leased to the school for profit, AMP seeks a broader exemption, an application that we reject.”
“AMP also contends that a commercial lease is irrelevant to the issue of exempt status so long as the lessee uses the property for exempt purposes. … This argument raises two questions. The first is whether ownership and use must coincide for a building to qualify as an exempt public schoolhouse. Gerke answers this question by declaring that the ‘public’ in public schoolhouse ‘is not used in the sense of ownership, but as descriptive of the uses to which the property is devoted.’ … Thus, property ‘appropriated to the support of education for the benefit of the public without any view to profit’ qualifies for exemption, … and that standard contains no requirement that the owner be the entity that operates the school. It follows that a community school that leases its building may still receive the benefit of tax exemption as a public schoolhouse.”
“But property subject to a commercial, for-profit lease is a different matter. Gerke specifically limits the exemption of privately owned property to property that is used ‘without any view to profit.’ The second question raised by AMP’s argument is whose use should be considered, the lessee’s, or both the lessor’s and the lessee’s? AMP relies on Bexley Village, Ltd. v. Limbach (1990) … to maintain that the commissioner and the BTA must focus exclusively on the lessee’s use of the property. … Because Bexley Village addresses the public-college exemption, we regard the case as inapposite. We hold that under the public-schoolhouse exemption, the restriction that the property not be used with a view to profit requires examination of the total use of the property by both lessor and lessee. If the lease is intended to generate profit for the lessor, the property does not qualify for exemption; similarly, the property does not qualify if the lessee’s use is intended to generate profit. It follows that because AMP leases the property to CCPA under a for-profit lease, the public-schoolhouse exemption is not available in the present case.”
“The BTA erred by granting a public-schoolhouse exemption for property owned by a commercial landlord and leased to a community school under a for-profit lease. We therefore reverse the decision of the BTA and reinstate the Tax Commissioner’s denial of the exemption.”
Justice Lanzinger’s opinion was joined by Chief Justice Eric Brown and Justices Paul E. Pfeifer, Maureen O’Connor, Terrence O’Donnell and Robert R. Cupp.
Justice Evelyn Lundberg Stratton entered a separate opinion in which she concurred with the majority in judgment based on established Ohio case law, but expressed concern that the Court’s holding renders operators of many community schools ineligible for property tax exemption while other provisions of state law explicitly prohibit them from using the state funds they receive to operate their schools to pay such taxes.
She wrote: “My concern is that our holding creates a predicament for community schools that lease the property and buildings that they use to operate the schools. Under our holding, lessors who lease property for use as a schoolhouse will fail to qualify for an exemption under R.C. 5709.07(A)(1) when the lessor leases the property with a view to profit. The property-tax obligation is passed on to the community school pursuant to the triple-net lease. However, community schools are prohibited by law from using state funds to pay these taxes. In my opinion, disqualifying property from the schoolhouse exemption when it is used for a public schoolhouse merely because the property’s lessor has a view to profit seems to run contrary to the general intent within R.C. 5709.07, and causes community schools that lease property to face a conundrum as to how they will pay the real estate taxes. Accordingly, although I concur in the holding in this case, I invite the General Assembly to amend R.C. 5709.07(A)(1) if they share my concerns.”
Contacts
Graham A. Bluhm, 419.241.6000, for the Anderson/Maltbie Partnership.
Sophia Hussain, 614.466.5967, for the State Tax Commissioner.
Please note: Opinion summaries are prepared by the Office of Public Information for the general public and news media. Opinion summaries are not prepared for every opinion released by the Court, but only for those cases considered noteworthy or of great public interest. Opinion summaries are not to be considered as official headnotes or syllabi of Court opinions. The full text of this and other Court opinions from 1992 to the present are available online from the Reporter of Decisions. In the Full Text search box, enter the eight-digit case number at the top of this summary and click "Submit."
Showing posts with label property tax. Show all posts
Showing posts with label property tax. Show all posts
Wednesday, October 13, 2010
Tuesday, September 28, 2010
Carryover of Prior-Year Tax Board Ruling Does Not Trump Auditor's Sexennial Reappraisal of Property
AERC Saw Mill Village, Inc. v. Franklin Cty. Bd. of Revision, Slip Opinion No. 2010-Ohio-4468.
Board of Tax Appeals, Nos. 2007-A-764 and 2008-A-157. Decision of the Board of Tax Appeals reversed and cause remanded.
Brown, C.J., and Pfeifer, Lundberg Stratton, O'Connor, and Cupp, JJ., concur.
O'Donnell, J., concurs in reversing the decision of the Board of Tax Appeals but would not remand the cause.
Lanzinger, J., concurs in judgment only.
Opinion: http://www.supremecourt.ohio.gov/rod/docs/pdf/0/2010/2010-Ohio-4468.pdf
(Sept. 28, 2010) The Supreme Court of Ohio held today that R.C. 5715.19(D), a state law requiring that a tax valuation of property established by a ruling of the State Board of Tax Appeals (BTA) must be “carried over” to subsequent tax years, does not supersede a different statute that requires county auditors to reappraise all real property within their county and establish a new tax valuation for each parcel every six years.
Applying that analysis to a Franklin County case, the Court ruled that the 2005 and 2006 property taxes assessed on a Columbus apartment complex should have been based on the county auditor’s 2005 sexennial reappraisal of that property at $17.9 million, rather than on a carryover of the $20.1 million valuation of the property established by the BTA for the 2002 tax year.
The Court’s decision was authored by Chief Justice Eric Brown.
The case involved the Sawmill Village Apartments, a 340-unit residential complex in northwest Columbus. The owners of the complex appealed the appraised value of the property set by the Franklin County auditor for the 2002 tax year. In 2005, while the owners’ 2002 valuation appeal was still pending before the BTA, the Franklin County Auditor conducted a required sexennial reappraisal of real property within the county and set a new appraised value of the Sawmill Village complex at $17.9 million.
The 2002 appeal was not finally resolved until September 2006, at which time the BTA approved a joint stipulation between the property owners and the Dublin City School District setting the true value of the complex as of Jan. 1, 2002 at $20.1 million. In its order approving the stipulated 2002 valuation of the property, the BTA directed the county auditor to carry the 2002 valuation forward and apply it to succeeding tax years “according to law.” In December 2006, after receiving notice of the BTA ruling, the county auditor’s office not only amended the tax rolls to reflect the value of the complex as $20.1 million for the 2002, 2003 and 2004 tax years, but also increased to $20.1 million the valuation of the property that had been entered on the tax list for the 2005 and 2006 tax years based on the auditor’s 2005 reappraisal of $17.9 million.
The owners appealed the increased valuation for the 2005 and 2006 tax years to the Franklin County Board of Revision (BOR). The Dublin City School District filed objections urging affirmance of the auditor’s valuation. The BOR upheld the auditor’s valuation. The property owners then appealed the BOR ruling to the BTA. The appeals board held that the $20.1 million valuation set by the county auditor based on the “carry forward” provision of R.C. 5715.19(D) was the correct valuation of the property for 2005 and 2006. The owners exercised their right to appeal the BTA’s ruling to the Supreme Court.
In today’s decision, Chief Justice Brown wrote: “According to the school board, because the tax-year-2002 complaint was not ‘finally determined’ until the BTA decision in September 2006, the tax officials acted properly in carrying the stipulated 2002 value of $20,100,000 over to tax years 2005 and 2006. In response, AERC does not question the school board’s reading of the statute but instead points to the auditor’s duties under other statutes – duties that stand in potential conflict with the mandate that the redetermined value for an earlier tax year be carried over to the next year. As the county’s tax assessor, the county auditor is required to value and assess property tax against the taxable property in the county. ... Specifically, the auditor must reappraise property values once every six years and update the values at the interim three-year point.”
“In this case, the auditor encountered potentially conflicting duties. Having carried out his statutory duty to reappraise the property at issue for tax year 2005, the auditor would have been led by the statutes to use and retain that value for 2005 and 2006. But instead, the auditor treated the 2006 stipulation of value for tax year 2002 as retroactively superseding the 2005 reappraisal value. AERC argues that this conflict in the auditor’s duties under different statutes calls for a harmonizing construction that gives effect to the various statutes while avoiding absurd and unintended outcomes.”
“We agree. To give full literal effect to the carryover provision and allow it to supersede the auditor’s ongoing duty to value and revalue real property leads to the absurd result the assessor arrived at in the present case. Here, a revaluation of the property for tax year 2005 was displaced by a different value stipulated for January 1, 2002, that no one had determined or agreed constituted the value on January 1, 2005, or January 1, 2006. To be sure, the carryover does properly apply to a subsequent year in which the auditor has not performed a new valuation of the property pursuant to his statutory duties. But to allow the carryover to displace a new valuation both defeats the purposes of the valuation statutes and thwarts the constitutional mandate that ‘[l]and and improvements thereon’ be ‘taxed by uniform rule according to value.’”
In support of that conclusion, Chief Justice Brown cited the Supreme Court of Ohio’s 1996 decision in Cincinnati School Dist. Bd. of Edn. v. Hamilton Cty. Bd. of Revision. He wrote: “Just as the school board in the present case argues that the carryover provision trumps the 2005 sexennial appraisal, the board of education in Cincinnati contended that the plain language of the carryover provision trumped the board of revision’s duty to hear the fresh complaint for the new triennium. We rejected that contention, finding that the owner’s right to file a complaint for the new triennium potentially conflicted with the carryover and continuing-complaint provisions. That conflict necessitated a harmonizing construction, under which the fresh complaint prevailed against the carryover. By the same logic, the carryover provision should not have displaced the statutory reappraisal in this case.”
Chief Justice Brown’s opinion was joined by Justices Paul E. Pfeifer, Evelyn Lundberg Stratton, Maureen O’Connor and Robert R. Cupp. Justice Terrence O’Donnell concurred with the majority’s reversal of the Board of Tax Appeals’ ruling, but indicated that he would not remand the case for further proceedings. Justice Judith Ann Lanzinger concurred in judgment only.
Contacts
J. Kieran Jennings, 216.763.1004, for AERC Saw Mill Village Inc.
Mark H. Gillis, 614.228.5822, for the Dublin City Schools Board of Education.
Please note: Opinion summaries are prepared by the Office of Public Information for the general public and news media. Opinion summaries are not prepared for every opinion released by the Court, but only for those cases considered noteworthy or of great public interest. Opinion summaries are not to be considered as official headnotes or syllabi of Court opinions. The full text of this and other Court opinions from 1992 to the present are available online from the Reporter of Decisions. In the Full Text search box, enter the eight-digit case number at the top of this summary and click "Submit."
Board of Tax Appeals, Nos. 2007-A-764 and 2008-A-157. Decision of the Board of Tax Appeals reversed and cause remanded.
Brown, C.J., and Pfeifer, Lundberg Stratton, O'Connor, and Cupp, JJ., concur.
O'Donnell, J., concurs in reversing the decision of the Board of Tax Appeals but would not remand the cause.
Lanzinger, J., concurs in judgment only.
Opinion: http://www.supremecourt.ohio.gov/rod/docs/pdf/0/2010/2010-Ohio-4468.pdf
(Sept. 28, 2010) The Supreme Court of Ohio held today that R.C. 5715.19(D), a state law requiring that a tax valuation of property established by a ruling of the State Board of Tax Appeals (BTA) must be “carried over” to subsequent tax years, does not supersede a different statute that requires county auditors to reappraise all real property within their county and establish a new tax valuation for each parcel every six years.
Applying that analysis to a Franklin County case, the Court ruled that the 2005 and 2006 property taxes assessed on a Columbus apartment complex should have been based on the county auditor’s 2005 sexennial reappraisal of that property at $17.9 million, rather than on a carryover of the $20.1 million valuation of the property established by the BTA for the 2002 tax year.
The Court’s decision was authored by Chief Justice Eric Brown.
The case involved the Sawmill Village Apartments, a 340-unit residential complex in northwest Columbus. The owners of the complex appealed the appraised value of the property set by the Franklin County auditor for the 2002 tax year. In 2005, while the owners’ 2002 valuation appeal was still pending before the BTA, the Franklin County Auditor conducted a required sexennial reappraisal of real property within the county and set a new appraised value of the Sawmill Village complex at $17.9 million.
The 2002 appeal was not finally resolved until September 2006, at which time the BTA approved a joint stipulation between the property owners and the Dublin City School District setting the true value of the complex as of Jan. 1, 2002 at $20.1 million. In its order approving the stipulated 2002 valuation of the property, the BTA directed the county auditor to carry the 2002 valuation forward and apply it to succeeding tax years “according to law.” In December 2006, after receiving notice of the BTA ruling, the county auditor’s office not only amended the tax rolls to reflect the value of the complex as $20.1 million for the 2002, 2003 and 2004 tax years, but also increased to $20.1 million the valuation of the property that had been entered on the tax list for the 2005 and 2006 tax years based on the auditor’s 2005 reappraisal of $17.9 million.
The owners appealed the increased valuation for the 2005 and 2006 tax years to the Franklin County Board of Revision (BOR). The Dublin City School District filed objections urging affirmance of the auditor’s valuation. The BOR upheld the auditor’s valuation. The property owners then appealed the BOR ruling to the BTA. The appeals board held that the $20.1 million valuation set by the county auditor based on the “carry forward” provision of R.C. 5715.19(D) was the correct valuation of the property for 2005 and 2006. The owners exercised their right to appeal the BTA’s ruling to the Supreme Court.
In today’s decision, Chief Justice Brown wrote: “According to the school board, because the tax-year-2002 complaint was not ‘finally determined’ until the BTA decision in September 2006, the tax officials acted properly in carrying the stipulated 2002 value of $20,100,000 over to tax years 2005 and 2006. In response, AERC does not question the school board’s reading of the statute but instead points to the auditor’s duties under other statutes – duties that stand in potential conflict with the mandate that the redetermined value for an earlier tax year be carried over to the next year. As the county’s tax assessor, the county auditor is required to value and assess property tax against the taxable property in the county. ... Specifically, the auditor must reappraise property values once every six years and update the values at the interim three-year point.”
“In this case, the auditor encountered potentially conflicting duties. Having carried out his statutory duty to reappraise the property at issue for tax year 2005, the auditor would have been led by the statutes to use and retain that value for 2005 and 2006. But instead, the auditor treated the 2006 stipulation of value for tax year 2002 as retroactively superseding the 2005 reappraisal value. AERC argues that this conflict in the auditor’s duties under different statutes calls for a harmonizing construction that gives effect to the various statutes while avoiding absurd and unintended outcomes.”
“We agree. To give full literal effect to the carryover provision and allow it to supersede the auditor’s ongoing duty to value and revalue real property leads to the absurd result the assessor arrived at in the present case. Here, a revaluation of the property for tax year 2005 was displaced by a different value stipulated for January 1, 2002, that no one had determined or agreed constituted the value on January 1, 2005, or January 1, 2006. To be sure, the carryover does properly apply to a subsequent year in which the auditor has not performed a new valuation of the property pursuant to his statutory duties. But to allow the carryover to displace a new valuation both defeats the purposes of the valuation statutes and thwarts the constitutional mandate that ‘[l]and and improvements thereon’ be ‘taxed by uniform rule according to value.’”
In support of that conclusion, Chief Justice Brown cited the Supreme Court of Ohio’s 1996 decision in Cincinnati School Dist. Bd. of Edn. v. Hamilton Cty. Bd. of Revision. He wrote: “Just as the school board in the present case argues that the carryover provision trumps the 2005 sexennial appraisal, the board of education in Cincinnati contended that the plain language of the carryover provision trumped the board of revision’s duty to hear the fresh complaint for the new triennium. We rejected that contention, finding that the owner’s right to file a complaint for the new triennium potentially conflicted with the carryover and continuing-complaint provisions. That conflict necessitated a harmonizing construction, under which the fresh complaint prevailed against the carryover. By the same logic, the carryover provision should not have displaced the statutory reappraisal in this case.”
Chief Justice Brown’s opinion was joined by Justices Paul E. Pfeifer, Evelyn Lundberg Stratton, Maureen O’Connor and Robert R. Cupp. Justice Terrence O’Donnell concurred with the majority’s reversal of the Board of Tax Appeals’ ruling, but indicated that he would not remand the case for further proceedings. Justice Judith Ann Lanzinger concurred in judgment only.
Contacts
J. Kieran Jennings, 216.763.1004, for AERC Saw Mill Village Inc.
Mark H. Gillis, 614.228.5822, for the Dublin City Schools Board of Education.
Please note: Opinion summaries are prepared by the Office of Public Information for the general public and news media. Opinion summaries are not prepared for every opinion released by the Court, but only for those cases considered noteworthy or of great public interest. Opinion summaries are not to be considered as official headnotes or syllabi of Court opinions. The full text of this and other Court opinions from 1992 to the present are available online from the Reporter of Decisions. In the Full Text search box, enter the eight-digit case number at the top of this summary and click "Submit."
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