American Chemical Soc. v. Kinney, 81-321

• Decision Date: 10 February 1982
• Docket Number: No. 81-321,81-321
• Citation: 431 N.E.2d 1007,23 O.O.3d 197,69 Ohio St.2d 167
• Parties: , 23 O.O.3d 197 AMERICAN CHEMICAL SOCIETY, Appellant, v. KINNEY, Commr., Appellee.
• Court: Ohio Supreme Court

Page 167

69 Ohio St.2d 167

431 N.E.2d 1007, 23 O.O.3d 197

AMERICAN CHEMICAL SOCIETY, Appellant, v. KINNEY, Commr., Appellee.

No. 81-321.

Supreme Court of Ohio.

Feb. 10, 1982.

Syllabus by the Court

1. When property is being used in furtherance of or incidental to an institution's charter provisions, i.e., charitable, educational or public purposes and not with a view to profit, it is exempt from taxation under R.C. 5709.121.

2. When landscaped and beautified property surrounding a charitable institution is shown to be instrumental in the recruitment, retention and productivity of the institution's employees, and such employees play an integral role in the continued success of the institution, the property is exempt from taxation and falls within the purview of R.C. 5709.121.

On June 21, 1977, appellant, American Chemical Society (hereinafter referred to as "ACS"), filed two applications with the Franklin County Auditor: (1) an application for exemption of property from taxation; and (2) an application for remission of taxes and penalty. The parcels referred to in both applications are situated on the campus of Chemical Abstracts Service, a division of ACS located in Columbus, Ohio. Both ACS and Chemical Abstracts are non-profit organizations, with ACS being congressionally chartered. Section 2 of ACS's national charter states:

" * * * the objects of the incorporation shall be to encourage in the broadest and most liberal manner the advancement of chemistry in all its branches; the promotion of research in chemical science and industry, the improvement of the qualifications and usefulness of chemists through high standards of professional ethics, education, and attainments; the increase and diffusion of chemical knowledge; and by its meetings, professional contacts, reports, papers, discussions and publications, to promote scientific interests and inquiry, thereby fostering public welfare and education, aiding the development of our country's industries, and adding to the material prosperity and happiness of our people."

In order to fulfill these stated objectives Chemical Abstracts compiles, publishes and disseminates abstracts of chemical research. Furthermore, Chemical Abstracts offers courses to its employees in the areas of chemistry, languages and management training. Chemical Abstracts also offers courses to visiting professors on the use of research materials.

The entire campus area of Chemical Abstracts consists of approximately 60 acres of land, 15 to 20 acres of which are used for office buildings and parking lots. The remainder of the land is largely open space which appellant has had professionally landscaped and improved in compliance with a master plan. Among the changes made to the property were: (1) improving the river bank to give the site a more campus-like appearance; (2) placing electrical wires underground; (3) building a multi-tier parking facility so the campus "did not end up as a city of blacktop"; and (4) adding picnic benches, volleyball courts, a softball diamond and a walking path. These facilities are used primarily by Chemical Abstracts' employees.

The Franklin County Auditor suggested appellant's application be approved. Despite these recommendations, the three examiners who heard the case advised the Commissioner of Tax Equalization (hereinafter referred to as "commissioner") to deny the appellant's application. On November 28, 1977, the commissioner followed the examiner's suggestion and found the property described in the application not entitled to a tax exemption. In a separate entry the commissioner also concluded additional land located on the premises of Chemical Abstracts, which had previously been exempt from taxes, should be removed from the tax exempt list.

ACS appealed both of these adverse determinations, asserting it was entitled to a tax exemption pursuant to either R.C. 5709.07 (as a public institution of learning), or pursuant to R.C. 5709.12 and 5709.121 (as the parcels in question are used in furtherance of or incidental to, ACS's charitable purposes). The Board of Tax Appeals (hereafter "BTA" or "board") heard the cause and reversed the determinations of the commissioner, finding the appellant entitled to a tax exemption under R.C. 5709.07, as a public institution of learning. The board did not address appellant's second assertion relating to R.C. 5709.12 and 5709.121.

On the first appeal to this court by the Commissioner of Tax Equalization from the BTA's adverse ruling, we reversed the BTA and held ACS was not a "public institution of learning" within R.C. 5709.07, and therefore, was not entitled to a tax exemption. American Chemical Soc. v. Kinney (1980), 62 Ohio St.2d 258, 405 N.E.2d 272. This court then remanded the case to the board for a determination of the previously unresolved issue of a tax exemption for these parcels under R.C. 5709.12.

On remand, the board concluded appellant's property was not entitled to an exemption pursuant to R.C. 5709.12 and 5709.121.

The ACS appeals from the BTA's adverse ruling and the cause is now before this court upon the second appeal as of right.

Bricker & Eckler, William R. Chadeayne, Jerry E. Nathan and Michael K. Gire, Columbus, for appellant.

William J. Brown, Atty. Gen., and Charles M. Steines, Asst. Atty. Gen., for appellee.

KRUPANSKY, Justice.

The primary issue is whether the decision of the BTA is reasonable and lawful. In deciding this issue we must determine, are the parcels in question (approximately 30 acres of land) owned by appellant being used "in furtherance of or incidental to" the charter provisions, viz., its charitable purposes within the purview of R.C. 5709.12 and 5709.121.

R.C. 5709.12 provides, in pertinent part:

" * * * Real and tangible personal property belonging to institutions that is used exclusively for charitable purposes shall be exempt from taxation. * * * "

In 1969 the General Assembly adopted R.C. 5709.121 to clarify the phrase "used exclusively for charitable purposes" found in R.C. 5709.12. R.C. 5709.121 provides in relevant part:

"Real property and tangible personal property belonging to a charitable or educational institution * * * shall be considered as used exclusively for charitable or public purposes by such institution * * * if it is either:

"(A) * * *

"(B) Otherwise made available under the direction or control of such institution * * * for use in furtherance of or incidental to its charitable, educational or public purposes and not with a view to profit."

In 1976 this court, in Cincinnati Nature Center v. Bd. of Tax Appeals, 48 Ohio St.2d 122, 357 N.E.2d 381, established a three-pronged test to determine when a taxpayer could be said to come within the purview of R.C. 5709.121. In that case, at page 125, 357 N.E.2d 381, we stated:

"To fall within the terms of R.C. 5709.121, property must (1) be under the direction or control of a charitable institution or political subdivision, (2) be otherwise made available 'for use in furtherance of or incidental to' the institution's 'charitable * * * or public purposes,' and (3) not be made available with a view to profit."

A review of Section 2 of ACS's national charter reveals that ACS is clearly a charitable or public institution for R.C. 5709.121 purposes. It is also unquestioned the land at issue is "under the direction or control" of ACS. Thus, the first prong of the Cincinnati Nature Center inquiry has been satisfied.

A survey of the evidence submitted in the present action indicates the third prong of this test can be also quickly resolved since no evidence was presented to indicate this property is "made available with a view to profit." To the contrary, these parcels of land are maintained primarily for the use of the employees of Chemical Abstracts and occasionally for other public groups who are granted access to the Chemical Abstracts' grounds.

According to the BTA's decision, the real problem arises concerning the second requirement of the Cincinnati Nature Center test, which demands the property be made available "for use in furtherance of or incidental to the institution's charitable or public purposes." Appellee commissioner contends the land in question is used solely to create a "pleasant environmental setting" for Chemical Abstracts' employees, a use which in no way furthers its stated purpose of publishing chemical abstracts and indexes. The appellee has failed however, to take into account the integral part the entire Chemical Abstracts complex plays in the operation's success.

As previously stated, Chemical Abstracts' function is to collect, abstract and disseminate highly complicated and technical chemical information. In order to fulfill this goal the institution must employ highly qualified individuals who are much sought after by other educational institutions and businesses. Consequently, the inducement must be great to entice these people into employment at Chemical Abstracts. Appellant contends the attractive campus-like setting of its institution is of considerable importance in attracting and retaining these individuals, and thus, has an important effect on the success of its operations. As the Director of Business Operations for Chemical Abstracts stated in his testimony before the board:

"In general, we have felt that an attractive campus-like site has helped us to recruit good people, and also retain good people. In general, we have felt that attractive surroundings are a positive effect with employees."

In order to substantiate these assertions, appellant submitted into evidence the results of a study undertaken to determine the effect of Chemical Abstracts' campus-like setting on its employees. The study concluded the beautified and preserved property in question had a significant impact upon the recruitment, retention and productivity of Chemical Abstracts' staff. The board acknowledged its acceptance of this determination stating, " * * * despite...