Exemption from Taxation, In re

• Decision Date: 20 April 1967
• Citation: 227 N.E.2d 234,10 Ohio App.2d 75
• Parties: , 39 O.O.2d 139 In re EXEMPTION FROM TAXATION. CHASE, Appellant, v. BOARD OF TAX APPEALS et al., Appellees.
• Court: Ohio Court of Appeals

Page 75

10 Ohio App.2d 75

227 N.E.2d 234, 39 O.O.2d 139

In re EXEMPTION FROM TAXATION CHASE, Appellant, v. BOARD OF TAX APPEALS et al., Appellees.

Court of Appeals of Ohio, Eighth District, Cuyahoga County.

April 20, 1967.

Daus, Schwenger & Kottler, Harry Kottler, David B. Shillman and Henry duLaurence, Cleveland, for appellant Reah E. Chase.

Falsgraf, Kundtz, Reidy & Shoup, Robert J. Shoup and Harry J. Lehman, Cleveland, for appellee, Cleveland Metropolitan Housing Authority.

John T. Corrigan, Pros. Atty., George W. Leddon and A. M. Braun, Cleveland, for Ralph J. Perk, county auditor.

SILBERT, Judge.

This is an appeal on questions of law from a decision of the Board of Tax Appeals sustaining the exemption of the various properties of the Cleveland Metropolitan Housing Authority from real estate taxation.

The relevant facts involved herein are as follows: The Cleveland Metropolitan Housing Authority, a nonprofit organization, came into existence pursuant to the Housing Act of 1933. See, Section 3735.01 et seq., Revised Code. It thereafter acquired various parcels of land in the city of Cleveland upon which it constructed low-rent housing units. Each of these projects was built and paid for, in their entirety, from the sale of bonds, and the projects are maintained from the proceeds of rents and charges against the inhabitants. The housing units are leased to private individuals and their families-the determination of who the occupants shall be remaining in the Housing Authority-under conditional one-year leases at rentals not to exceed eighty percent of 'the private rents at which a substantial supply of decent, safe and sanitary housing is available.'

In 1964 the Cuyahoga County Auditor, in conformance with past practice, listed all the real property of the Cleveland Metropolitan Housing Authority on the tax-exempt list. Thereupon, complainant-appellant, Reah Chase, pursuant to Section 5715.27, Revised Code, filed several complaints contesting the validity of these exemptions. By agreement of counsel and with the approval of the Board of Tax Appeals, two of these complaints (involving Woodhill Homes Estate and Carver Park Estate) were selected to resolve all the issues presented and were consolidated for hearings. Hearings were held before the Board of Tax Appeals and on November 29, 1965, the board entered its findings that 'the real property herein involved is property of a housing authority created and organized under and by the provisions of the housing authority law and is entitled to tax exemption under the specific provisions of Revised Code Section 3735.34 and Section 5709.10,' and held that 'the complaints are therefore denied and the Cuyahoga County Auditor is instructed to retain the subject real property upon his list of real property exempted from taxation for the tax year 1964.' Thereupon, an appeal was taken to this court.

Appellant contends that the following questions of law are presented herein:

1. Are the properties owned and operated by the Cleveland Metroplitan Housing Authority public property used exclusively for a public purpose, so as to be exempt from taxation under the provisions of Section 5709.10, Revised Code?

2. Are Sections 3735.34 and 5709.10, Revised Code, unconstitutional and void as violative of Section 1, Article IV and Section 2, Article XII of the Constitution of Ohio, as being a legislative declaration of fact which usurps the judicial function of fact finding?

3. Does the attempt to exempt from taxation the properties of housing authorities contravene the provisions of Section 2, Article I of the Constitution of Ohio (the 'equal protection' clause)?

Narrowly construed, the issue in this case involves only the validity of the exemption of the Cleveland Metropolitan Housing Authority from real property taxation granted by the provisions of Sections 3735.34 and 5709.10, Revised Code. However, a correct determination of the question can be arrived at only by viewing this issue in its context as only a part of the larger problem of the evolution of, and the conflict surrounding, the power of the Ohio Legislature to exempt real property from taxation. To achieve this perspective, the history of Section 2 of Article XII of the Ohio Constitution must first be briefly explored.

Under the Ohio Constitution of 1802 the only limitations on the taxing power were a prohibition against poll taxes and the requirement of equal protection of the laws. Hill v. Higdon (1855), 5 Ohio St. 243, 245; see City of Zanesville v. Richards (1855), 5 Ohio St. 589, 592-593. In all other respects the authority of the Legislature was absolute. However, in 1851, legislative discretion in matters of taxation and exemption therefrom was drastrically restricted-the strongest of such curbs being contained in Section 2 of Article XII, wherein it was provided that all real and personal property shall be taxed, but burying grounds, public school houses, houses used exclusively for public worship, institutions of purely public charity, and public property used exclusively for any public purposes could be exempted from taxation. See, Ohio Constitution of 1851, Section 2, Article XII.

In 1931, these restrictions on the powers of the Legislature were modified by the adoption of the 'classification amendment' which was intended to provide for a more flexible system of taxation. City of Cleveland v. Board of Tax Appeals (1950), 153 Ohio St. 97, 119, 91 N.E.2d 480, 16 A.L.R.2d 1354, overruled in part in Denison University v. Board of Tax Appeals, 2 Ohio St.2d 17, 205 N.E.2d 896. Under the amendment Section 2 of Article XII, was changed to its present form which reads, in relevant part, as follows:

'No property, taxed according to value, shall be so taxed in excess of one per cent of its true value in money for all state and local purposes, * * *. Land and improvements thereon shall be taxed by uniform rule according to value. All bonds * * * shall be exempt from taxation, and without limiting the general power, subject to the provisions of article I of this Constitution, to determine the subjects and methods of taxation or exemptions therefrom, general laws may be passed to exempt burying grounds, public school houses, houses used exclusively for public worship, institutions used exclusively for charitable purposes, and public property used exclusively for any public purpose, * * *.' (Emphasis added.)

In State ex rel. Struble v. Davis (1937), 132 Ohio St. 555, at page 560, 9 N.E.2d 684, at page 686, the Ohio Supreme Court in discussing this amendment stated:

'Thus, while the uniform rule was retained as to real estate, full and complete plenary power to otherwise classify property for taxation and determine exemptions therefrom apparently was restored substantially as it had existed under the provisions of the Constitution of 1802.'

However, partly because the Struble case involved personal property only, some confusion and conflicting opinions have resulted over the period of the past three decades. Compare, Youngstown Metropolitan Housing Authority v. Evatt, Tax Commr. (1944), 143 Ohio St. 268, 274, 55 N.E.2d 122; City of Cleveland v. Board of Tax Appeals (1950), 153 Ohio St. 97, 91 N.E.2d 480, 16 A.L.R.2d 1354, overruled in part in Denison University v. Board of Tax Appeals, 2 Ohio St.2d 17, 205 N.E.2d 896, with Carney v. Ohio Turnpike Commission (1958), 167 Ohio St. 273, 278, 147 N.E.2d 857 (Taft, J., concurring); City of Cleveland v. Board of Tax Appeals (1950), 153 Ohio St. 97, 116, 91 N.E.2d 480, 16 A.L.R.2d 1354 (Taft, J., dissenting). For further history and discussion of these divergent opinions, see Schnell, 'Real Property Tax Exemptions in Ohio-A Review And Critique,' 17 Western Reserve Law Review 824 (1966); Caren, 'Constitutional Limitations on the Exemption of Real Property from Taxation,' 11 Ohio St.Law Journal 207 (1950); Note, 'Tax Exemption: Real Property Used For Public Purposes,' 19 Ohio St.Law Journal 503 (1958).

Nevertheless, in the recent case of Denison University v. Board of Tax Appeals (1965), 2 Ohio St.2d 17, 205 N.E.2d 896, the Supreme Court of Ohio appears to have conclusively settled this question. Paragraph three of the syllabus in that case states:

'By reason of the amendment of Section 2 of Article XII of the Ohio Constitution effective in 1931 the General Assembly now has a power to determine exemptions from taxation that is limited only by the provisions of Article I of the Ohio Constitution. (State ex rel. Struble v. Davis et al., Tax Comm., 132 Ohio St. 555, 9 N.E.2d 684, approved and followed; paragraph two of the syllabus in City of Cleveland v. Board of Tax Appeals, 153 Ohio St. 97, 91 N.E.2d 480, 16 A.L.R.2d 1354, overruled.)'

Consequently, it is apparent that it is now established in Ohio that the General Assembly has plenary power to select subjects for exemption. See Philada Home Fund v. Board of Tax Appeals (1966), 5 Ohio St.2d 135, 147, 214 N.E.2d 431 (Schneider, J., dissenting), limited only by the provisions of Article I of the Ohio Constitution and it is not confined to the specified classes enumerated in the proviso of Article XII, Section 2, i. e., '* * * burying grounds, public school houses, houses used exclusively for public worship, institutions used exclusively for charitable purposes, and public property used exclusively for any public purpose.' State ex rel. Struble v. Davis (1937), 132 Ohio St. 555, 560, 9 N.E.2d 684; Carney v. Ohio Turnpike Commission (1958), 167 Ohio St. 273, 277, 147 N.E.2d 857 (Taft, J., concurring); Cleveland v. Board of Tax Appeals (1950), 153 Ohio St. 97, 115, 91 N.E.2d 480, 16 A.L.R.2d 1354 (Taft, J., dissenting); Skirvin v. Board of Tax Appeals (1951), 155 Ohio St. 590, 592, 99 N.E.2d 761 (Taft, J.). For similar results in other states, see Annotation, 61 A.L.R.2d 1031, 1068-1072 (1958); 51 American Jurisprudence 509, Taxation, Section 503 and 1966 Supplement, p. 34.

With this rule in mind, an...