Equity Dublin Assocs. v. Testa

• Citation: 2014 Ohio 5243,28 N.E.3d 1206,142 Ohio St.3d 152
• Decision Date: 02 December 2014
• Docket Number: No. 2014–0168.,2014–0168.
• Court: Ohio Supreme Court
• Parties: EQUITY DUBLIN ASSOCIATES et al., Appellees, v. TESTA, Tax Commr., et al., Appellants.

142 Ohio St.3d 152

28 N.E.3d 1206

2014 Ohio 5243

EQUITY DUBLIN ASSOCIATES et al., Appellees,

v.TESTA, Tax Commr., et al., Appellants.

No. 2014–0168.

Supreme Court of Ohio.

Submitted Sept. 10, 2014.

Decided Dec. 2, 2014.

Luper, Neidenthal & Logan, Matthew T. Anderson, Columbus, and M. Salman Shah, for appellees.

Michael DeWine, Attorney General, Barton A. Hubbard and David D. Ebersole, Assistant Attorneys General, for appellant Tax Commissioner of Ohio.

Rich & Gillis Law Group, L.L.C., Mark H. Gillis, Dublin, and Kimberley G. Allison, for appellants Dublin City School District Board of Education and Columbus City School District Board of Education.

O'DONNELL, J.

{¶ 1} This appeal addresses a claim of tax exemption for two separate buildings located on two separate parcels of real property, one of which is situated in the Dublin City School District, the other in the Columbus City School District. The landlords seek the exemption on the basis that Columbus State Community College is a tenant in each of the buildings and provides educational services to its students at each location.

{¶ 2} The appellants are the tax commissioner and the boards of education of the two school districts (collectively, the "BOE"). The commissioner and the BOE seek reversal of the partial grant of exemption by the Board of Tax Appeals ("BTA"). The BTA predicated its decision on the public-college exemption in R.C. 5709.07(A)(4) as construed in Cleveland State Univ. v. Perk, 26 Ohio St.2d 1, 268 N.E.2d 577 (1971). Because we conclude that Perk 's holding does not apply to the facts in this case, we reverse the decision of the BTA.

Facts and Procedural History

{¶ 3} This case involves two different exemption applications, two different parcels of real property in Franklin County, and two different property owners, but the exemption claims presented share a common issue for our review. The buildings that are located in the Dublin school district were owned by Equity Dublin Associates, and the building in the Columbus school district was owned by SHSCC # 2 Limited Partnership. We will refer to the owners collectively as "Equity Dublin."

{¶ 4} Equity Dublin filed the applications for exemption on March 16, 2005, seeking exemption for tax year 2005 and remission for the preceding three years. Both applications predicate the claim for exemption on R.C. 3354.15 (releasing a "community college district" from the requirement to pay taxes or assessments on real or personal property) and 3358.10 (applying R.C. 3354.15 to "state community college districts"). Each application recites that the property was leased to Columbus State Community College.

{¶ 5} The Dublin application sought to exempt 13,545 square feet of a 116,000–square–foot office complex, stating that the annual enrollment of students at the site was 1,490 and reciting that "[a] full array of courses are [sic] offered and students in these locations can earn an Associate of Arts and Sciences Degree at these sites." The Columbus application sought to exempt 12,000 square feet of office space in Groveport, leased to and occupied by Columbus State to educate some 490 enrolled students.

{¶ 6} Excerpts of lease instruments were attached to both applications, showing Columbus State as lessee. The lease of the Groveport property shows Columbus State's contractual obligation to pay the property taxes. The lease for the Dublin property differs, presumably because there Columbus State is renting part but not all of the premises. In the Dublin lease, the contract obligates Columbus State to pay taxes with respect to its personal property, but the real property tax is built into the rent; indeed, the contract contains a rent-adjustment clause, which, in case of a real-property tax increase, would increase the rent amount based on Columbus State's pro rata share of the tax increase.

{¶ 7} On May 23, 2011, the tax commissioner issued final determinations on the two applications. Regarding R.C. 3354.15, the tax commissioner's determinations reject the claim of exemption based on the language of the statute and Athens Cty. Auditor v. Wilkins, 106 Ohio St.3d 293, 2005-Ohio-4986, 834 N.E.2d 804. Because the owner and taxpayer was a for-profit landlord, and because real-property taxes are imposed on the owner rather than the lessee, the tax commissioner ruled that the exemption was not available pursuant to R.C. 3354.15.

{¶ 8} Next, the commissioner proceeded to determine possible exempt status pursuant to R.C. 5709.07(A)(4), which exempts "[p]ublic colleges and academies and all buildings connected with them" and additionally exempts "all lands connected with public institutions of learning, not used with a view to profit." Relying on R.C. 5709.07(B), which states, "This section shall not extend to leasehold estates or real property held under the authority of a college or university of learning in this state," the commissioner concluded that "the statute provides exemption to college buildings and land, not leased or otherwise used for profit." According to the commissioner, this exemption did not extend to the properties at issue, because of the for-profit nature of the leases. In reaching that conclusion, the commissioner distinguished two cases: Bexley Village, Ltd. v. Limbach, 68 Ohio App.3d 306, 588 N.E.2d 246 (1990), and Perk, 26 Ohio St.2d 1, 268 N.E.2d 577.

{¶ 9} Finally, the tax commissioner cited former R.C. 5709.07(A)(1), which exempted "[p]ublic 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." Am.S.B. No. 171, 142 Ohio Laws, Part I, 147. Here the commissioner regarded the court's decision in Anderson/Maltbie Partnership v. Levin, 127 Ohio St.3d 178, 2010-Ohio-4904, 937 N.E.2d 547, as dispositive, and concluded that because "the applicant is a for-profit commercial property management company that leases the subject property to a school under a commercial lease," the property "is not entitled to exemption."

{¶ 10} Equity Dublin appealed to the BTA.¹ The BTA consolidated the cases and held a hearing at which the parties elected not to present additional evidence. In its decision, the BTA held that R.C. 3354.15 did not apply, because, as explained in Athens Cty. Auditor, 106 Ohio St.3d 293, 2005-Ohio-4986, 834 N.E.2d 804, the community college is not being required by law to pay property tax when it is not the owner of the property, given that the law imposes the obligation to pay on the owner alone. BTA Nos. 2011–Q–1792 and 2011–Q–1795.

{¶ 11} As for the public-college exemption at R.C. 5709.07(A)(4), the BTA held that this court's decision in Perk, 26 Ohio St.2d 1, 268 N.E.2d 577, along with the Tenth District decision in Bexley Village, 68 Ohio App.3d 306, 588 N.E.2d 246, permitted exemptions when the public college leased the property from a landlord. The BTA found it particularly important that the modular buildings at issue in Perk were owned by a for-profit private company and leased by Cleveland State University. Yet although the leased building space was held to be exempt, the BTA also held that the parking lot in the Groveport case was not exempt under the authority of Bexley Village . Thus, the BTA decision was a split: the buildings or portions of buildings leased and occupied by Columbus State were exempt, but the parking lots were not.

{¶ 12} The tax commissioner moved the BTA for reconsideration. The primary ground of the motion was that consideration of the exemption claim under R.C. 5709.07(A)(4) was barred because the existence of a "more specific" exemption referring to community colleges at R.C. 3354.15 meant that " R.C. 5709.07(A)(4) cannot provide the appellant commercial property owners/lessors with a property-tax exemption." The "controlling holding" for this proposition was Athens Cty. Auditor, in which the court stated that " R.C. 3357.14 is the only appropriate statutory provision under which to consider [the for-profit landlord's] application for exemption." 106 Ohio St.3d 293, 2005-Ohio-4986, 834 N.E.2d 804, ¶ 13. As a second ground for reconsideration, the commissioner advanced R.C. 5709.07(B)'s statement that the section does not extend exemption to "leasehold estates."

{¶ 13} On January 28, 2014, the BTA issued a decision denying the motion for reconsideration. First, the BTA rejected the primary ground for reconsideration, noting that R.C. 3354.15 "is not applicable at all" because the properties "are owned by private, for-profit corporations." Second, the BTA rejected the second ground for reconsideration by relying on Perk, 26 Ohio St.2d 1, 268 N.E.2d 577, in which, as in the present case, buildings "connected" with Cleveland State were exempted even though Cleveland State leased them from a for-profit company.

{¶ 14} The tax commissioner and the BOE have appealed the partial grant of exemption, and for the following reasons, we reverse.

Arguments of the Parties

{¶ 15} Combined, the BOE and the tax commissioner advance ten propositions of law, but these can be consolidated into to three main arguments. First, the BOE and the commissioner argue that exemption is not justified under R.C. 3354.15. They advance this argument even though the BTA rejected the claim of exemption on that ground below, and even though no cross-appeal was filed by Equity Dublin. In response, Equity Dublin takes up the invitation to address the claim of exemption under R.C. 3354.15, contending that the statute furnishes an alternative ground for affirming the decision below.

{¶ 16} Second, the BOE and the commissioner contend that the existence of an exemption specifically aimed at community colleges at R.C. 3354.15 precludes the possibility of exemption under the general public-college exemption set forth at R.C. 5709.07(A)(4). This argument rests on a pronouncement in Athens Cty. Auditor, 106 Ohio St.3d 293, 2005-Ohio-4986, 834 N.E.2d...