Anderson/Maltbie P'ship v. Levin
| Decision Date | 12 October 2010 |
| Docket Number | No. 2009-1671.,2009-1671. |
| Citation | 2010 -Ohio- 4904,937 N.E.2d 547 |
| Parties | ANDERSON/MALTBIE PARTNERSHIP et al., Appellees, v. LEVIN, Tax Commr., Appellant. |
| Court | Ohio Supreme Court |
*178 Syllabus of the Court
Property cannot be exempted from taxation as a public schoolhouse when the owner leases the property to the school for profit. (R.C. 5709.07(A)(1), construed.)
Eastman & Smith, Ltd., Graham A. Bluhm, M. Charles Collins, and Amy J. Borman, Columbus, OH, for appellees.
Richard Cordray, Attorney General, and Lawrence D. Pratt, Barton A. Hubbard, and Sophia Hussain, Assistant Attorneys General, for appellant.
{¶ 1} This is an appeal from a decision of the Board of Tax Appeals ("BTA") concerning a real property tax exemption. Appellee Anderson/Maltbie Partnership ("AMP") is a for-profit entity that leases property to an Ohio community school. Appellee LKH Victory Corporation is a nonprofit entity that runs the school under the name Cincinnati College Preparatory Academy ("CCPA"). AMP and CCPA sought to exempt the parcel under R.C. 5709.07(A)(1), the "public-schoolhouse exemption." The Tax Commissioner denied the exemption because of the for-profit nature of the lease, but the BTA reversed. Applying its analysis from the earlier casePerforming Arts of Metro. Toledo, Inc. v. Wilkins (Dec. 20, 2002), BTA No. 2001-J-977, reversed on other grounds, 104 Ohio St.3d 284, 2004-Ohio-6389, 819 N.E.2d 649, the BTA held that the property was entitled to a tax exemption based on the lessee's nonprofit use of the property as a public school.1
{¶ 2} The Tax Commissioner appealed, and we now reverse.
{¶ 3} On December 30, 2002, AMP and CCPA jointly filed their exemption application, which sought to exempt the property for tax year 2002 and to obtain remission of taxes for tax years 1999, 2000, and 2001. The application cited R.C. 5709.07(A)(1) as the basis for exemption and explained its claim as follows:
{¶ 4}
{¶ 5} At the BTA, the parties agreed to a set of stipulations based upon the documents in the record. The stipulations included the following:
{¶ 6} • Since its inception in 1998, CCPA has operated as a community school for children in kindergarten through eighth grade.
{¶ 7} • On July 28, 1999, CCPA entered into a triple-net lease with AMP as lessor, and occupied the property under that lease and its amendments from October 7, 1999 through October 6, 2004.
{¶ 8} • AMP had purchased the property leased by CCPA in 1987 for $1,325,000.
{¶ 9} • The monthly rental for the leased property was $22,958.04.
{¶ 10} • CCPA is contractually obligated under the triple-net lease to pay all real estate taxes and assessments during the lease term.
{¶ 11} • AMP did not conduct any business at the property during the lease term, other than leasing it to CCPA.
{¶ 12} For its part, AMP stipulated that it was an "entity of two or more persons to carry on as co-owners a business for profit pursuant to O.R.C. § 1775.05(A)," i.e., a for-profit partnership.
{¶ 13} This case presents a significant issue that arises in the context of Ohio's community schools. By statute, a community school "is a public school, independent of any school district, and is part of the state's program of education." R.C. 3314.01(B); see State ex rel. Ohio Congress of Parents & Teachers v. State Bd. of Edn., 111 Ohio St.3d 568, 2006-Ohio-5512, 857 N.E.2d 1148, ¶ 7 (). Since 1852, Ohio lawhas provided the exemption for "public schoolhouses" that is currently codified at R.C. 5709.07(A)(1). 50 Ohio Laws 135, 137. The exemption has been applied to public and private property: to public schools owned and operated by the public school districts in Ohio, and to nonprofit private and parochial schools operated for the public benefit.
{¶ 14} Typically, public school districts own their own school buildings; but as a community school, CCPA is not owned and operated by any school district. Community schools raise novel issues of exemption because, by statute, they qualify as public schools but often operate on privately owned property. And in this case, the school occupies the property under a commercial, for-profit lease.
{¶ 15} The Tax Commissioner in his final determination held that although community schools are public schools, the fact that the property is privately owned and is leased to the school under a for-profit lease makes the property ineligible for the exemption. Because we conclude that the commissioner's determination reflects a proper application of the standard for exemption that we articulated in Gerke v. Purcell (1874), 25 Ohio St. 229, paragraph eight of the syllabus, we reverse the decision of the BTA and reinstate the commissioner's denial of the exemption.
Property leased to a school under a for-profit lease is not exempt as a "public schoolhouse," because private property can qualify for the exemption only if it is used "without any view to profit"
{¶ 16} When a property owner applies for an exemption, we consider an overarching principle. Because laws that exempt property from tax are in derogation of equal rights, they must be strictly construed. First Baptist Church of Milford v. Wilkins, 110 Ohio St.3d 496, 2006-Ohio-4966, 854 N.E.2d 494, ¶ 10; Campus Bus Serv. v. Zaino, 98 Ohio St.3d 463, 2003-Ohio-1915, 786 N.E.2d 889, ¶ 8. The principle of strict construction requires that the statute's language be construed against the exemption, meaning that the onus is on the taxpayer to show that the language of the statute "clearly express[es] the exemption" in relation to the facts of the claim. Ares, Inc. v. Limbach (1990), 51 Ohio St.3d 102, 104, 554 N.E.2d 1310; Lakefront Lines, Inc. v. Tracy (1996), 75 Ohio St.3d 627, 629, 665 N.E.2d 662; H.R. Options, Inc. v. Wilkins, 102 Ohio St.3d 1214, 2004-Ohio-2085, 807 N.E.2d 363, ¶ 2; In re Estate of Roberts (2002), 94 Ohio St.3d 311, 314, 762 N.E.2d 1001. The fact that the burden is on the taxpayer means that " '[i]n all doubtful cases exemption is denied.' " *181 A. Schulman, Inc. v. Levin, 116 Ohio St.3d 105, 2007-Ohio-5585, 876 N.E.2d 928, ¶ 7, quoting Youngstown Metro. Hous. Auth. v. Evatt (1944), 143 Ohio St. 268, 273, 28 O.O. 163, 55 N.E.2d 122.
{¶ 17} The statute we must consider is currently codified at R.C. 5709.07(A)(1) and provides: "The following property shall be exempt from taxation: (1) Public schoolhouses, the books and furniture in them, and the ground attached to them necessary for the proper occupancy, use, and enjoyment of the schoolhouses, and not leased or otherwise used with a view to profit."
{¶ 18} The public-schoolhouse exemption was enacted along with other exemptions in the wake of the adoption of the new constitution in 1851. 50 Ohio Laws 135, 137. Before the adoption of the 1851 Constitution, "the whole matter of taxation was committed to the discretion of the general assembly." Zanesville v. Richards (1855), 5 Ohio St. 589, 592. And the "right to make exceptions and exemptions was unquestionable." Id. But the 1851Constitution circumscribed that power through Article XII, Section 2, which required uniform taxation of property and enumerated specific types of exemption the legislature could pass. Id. The legislature's power to pass exemptions was construed to be limited to exemptions expressly authorized by the Constitution. Id. at 592-593; Denison Univ. v. Bd. of Tax Appeals (1965), 2 Ohio St.2d 17, 24, 31 O.O.2d 10, 205 N.E.2d 896.2
{¶ 19} This court in Gerke, 25 Ohio St. 229, considered the claimed tax exemption of Catholic parochial schools in view of the specific constitutional authorizations and the statutory language of the exemptions. We determined that the Constitution's authorization of a public-schoolhouse exemption was applicable only to school buildings that "belong to the public," buildings that "are designed for the school established and conducted under the authority of the public." Id. at 242. In contrast, we held that the statute's reference to public schoolhouses is "not used in the sense of ownership" but rather of the "uses to which the property is devoted," with the result that the exemption applies to private property used to support instruction that is "for the benefit of the public." Id. at 246-247.
{¶ 20} The term "public" was construed differently in the statute to make sense of the statute's limitation that the schoolhouse grounds must not be "leased or otherwise used with a view to profit." Because political subdivisions such as public school districts are inherently nonprofit, the condition did not seem "appropriate if intended to apply only to institutions established by the public." Id. at 247. On the other hand, the prohibition against making a profit had *182 "marked significance when applied to private property," and accordingly, the statute was construed to reach private property. Id. The constitutional basis for exempting private property when used as a school lay in the authorization of exemptions for "institutions of purely public charity." Id. at 243-244. As a result, the "exclusion of all idea of private gain or profit" constitutes a basic condition that private property must satisfy to qualify for this exemption. Id. at 247.
{¶ 21} One dispute between the parties is therefore immaterial: the question...
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