28th Annual Tuesday & Wednesday, January 2930, 2019 Hya Regency - - PDF document
28th Annual Tuesday & Wednesday, January 2930, 2019 Hya Regency Columbus, Columbus, Ohio Ohio Tax & Jobs 2019... Significant Developments in Real Property Appraisals, Valuation & Classification David D. Ebersole Attorney
28th Annual
Tuesday & Wednesday, January 29‐30, 2019
Hya Regency Columbus, Columbus, Ohio
David D. Ebersole Attorney McDonald Hopkins LLC Columbus
Tuesday, January 29, 2019 10:00 a.m. to 12:15 p.m.
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Biographical Information
David D. Ebersole, Attorney McDonald Hopkins, LLC 250 West St., Suite 550, Columbus, OH 43215 (614) 484-0716 debersole@mcdonaldhopkins.com Dave is an attorney in McDonald Hopkins’ Tax and Benefits Group who advises business clients on a multitude of tax issues, particularly state and local taxes. As a former Assistant Attorney General for the Ohio Attorney General, Dave has defended the Ohio Tax Commissioner in tax litigation before the Ohio Board of Tax Appeals and Ohio courts of appeal, including several cases argued before the Ohio Supreme Court. He has extensive experience with all types of state and local taxes. These taxes include the income tax, sales and use tax, excise tax, personal and real property tax, and Ohio’s gross receipts tax, the CAT. Dave is also the author of the 2018 Edition of Baldwin’s Ohio Tax Law and Rules. Dave also represents and advises clients with respect to federal tax matters, including federal tax controversies, federal tax structuring and analysis for business transactions, executive compensation matters, and estate planning. Dave attended The Ohio State University Max M. Fisher College of Business, where he earned his B.S. with honors in Accounting and Finance. He also attended The Ohio State University Moritz College of Law on a full ride merit scholarship and graduated with honors.
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Ohio Tax & Jobs 2019: Developments in Real Property Taxation
28th Annual Ohio Tax Conference January 29, 2019 David Ebersole, Esq. McDonald Hopkins, LLC debersole@mcdonaldhopkins.com Sale In Lone Star Steakhouse & Saloon of Ohio, Inc. v. Franklin Cty. Bd. of Rev., 153 Ohio St.3d 34, 2018-Ohio-1612, the Court held that a sale that postdates the tax lien date by more than 24 months may nonetheless enjoy a presumption of recency. The property owner filed a decrease complaint for tax year 2012 (tax lien date January 1, 2012), seeking to lower the value of the property from $1,250,000 to $750,000. In support of the complaint, the owner introduced: a warranty deed dated December 13, 2013 and filed with the recorder on January 21, 2014; and a conveyance fee statement executed on December 31, 2013 and filed January 21, 2014. The BTA ruled that the sale occurred on January 21, 2014 and further found that the sale occurring more than 24 months after the tax lien date was too remote to be presumptively recent under Akron City School Dist. Bd. of Ed. v. Summit Cty. Bd. of Rev., 139 Ohio St.3d 93, 2014-Ohio-1588. The Court affirmed the BTA ruling that the sale occurred on January 21, 2014, as of the date that the conveyance fee statement was filed. However, the Court reversed the BTA and held that the sale enjoys the presumption of recency because the holding of the Akron case is limited to sales
In Hilliard City Schools Bd. of Ed. v. Franklin Cty. Bd. of Rev., __ Ohio St.3d __, 2018-Ohio- 2046, the Court addressed whether a 2009 sale of industrial property was a recent, arm’s length sale reflecting true value for 2011. The school board argued that the board of revision should adopt the sale price, based upon a conveyance fee statement and quitclaim deed filed in 2009. The deed, however, was signed and notarized in 2002. For its part, the property owner presented appraisal testimony for a lower valuation and contested the 2009 sale on the basis that it was not recent due to changes in market conditions and not arm’s length due to related parties. The BTA adopted the sale price and the Court affirmed. The Court held that the property owner bore the burden to show that the sale did not reflect true value, even though they prevailed at the board of
regarding changes in general market conditions because the testimony did not relate to the specific sale date and tax lien dates at issue. The Court further held that the BTA properly excluded the appraiser’s testimony on the related-party transaction as hearsay unsupported by testimony from the parties to the transaction and transaction documents. The Court rejected the school board’s argument that collateral estoppel precluded the property owner’s arguments as to the arm’s length nature of the sale because the board did not cross-appeal from the BTA’s contrary finding. In North Canton City Sch. Dist. Bd. of Ed. v. Stark Cty. Bd. of Revision, 152 Ohio St.3d 292, 2018-Ohio-1, the Court held that under R.C. 5713.04 “a forced sale gives rise to a presumption
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that the sale price is not the property’s true value” but that the presumption may be rebutted with evidence showing that there was a recent, arm’s length transaction. The property owner rebutted the presumption in this case with evidence showing the following: the property was aggressively marketed by a qualified marketing professional; at least six potential buyers made
highest and best offer was accepted; and a court determined that the sale was “commercially reasonable.” The Court further held that under former R.C. 5713.03 applicable to the 2012 tax year, the value as determined by a recent, arm’s length sale could not be adjusted for repair costs. As an evidentiary matter, the Court held that the school board waived objections to evidence that it not raise during the evidentiary hearing before the BTA. Terraza 8 Remand Cases In Terraza 8, LLC v. Franklin Cty. Bd. of Rev., 150 Ohio St.3d 527, 2017-Ohio-4415, the Court held that the BTA must consider appraisal evidence to determine true value despite a recent, arm’s length sale of property encumbered by a long-term lease. Due to a 2012 legislative amendment to R.C. 5713.03 (Am. Sub H.B. 487 effective September 10, 2012), the Court determined that realty must be valued based upon the unencumbered fee simple interest and that a recent arm’s length sale is not conclusive evidence of true value. The decision means that the amendment to R.C. 5713.03 legislatively supersedes the Court’s earlier decision in Berea City
presumption that a recent arm’s length sale is the best evidence of true value, but that presumption may be rebutted. The board of revision in Terraza 8 increased the auditor’s valuation of a fitness center to the sale price of a recent, arm’s length sale. The property owner purchased the property as part of a sale transaction subject to an existing long-term lease with a high-credit tenant. At the BTA, the property owner presented appraisal evidence and testimony that the sale price overvalued the property because the monthly rental payments under the lease were above market. The BTA admitted the evidence but accorded it little or no weight and affirmed the board of revision. For the reasons discussed above, the Court remanded the case for the BTA to consider the appraisal
far lower than the recent, arm’s-length sale price. See, Terraza 8, LLC v. Franklin Cty. Bd. of Rev., BTA Case No. 2015-279, 2015-280 (Nov. 8, 2017). The school board then appealed that decision to the 10th District Court of Appeals. Terraza 8 petitioned to transfer to appeal to the Ohio Supreme Court pursuant to the procedure for doing so in former R.C. 5717.04, but the petition was denied. See, 2018-Ohio-723. The parties ultimately settled the case. See, BTA Order in Case Nos. 2015-279, 2015-280 (Sep. 10, 2018). In 2018, the Supreme Court remanded several cases to the BTA in which the BTA did not properly consider or make factual findings with respect to appraisal evidence. In Westerville City Schools Bd. of Ed. v. Franklin Cty. Bd. of Rev., __ Ohio St.3d __, 2018-Ohio-3855, for example, the Court held that owners do not need to make a threshold showing before a tax board must give full consideration to appraisal evidence. There, realty sold for $44,500,000 in 2013 as encumbered by a lease and the BTA failed to adequately consider appraisal evidence and the relevant law following the enactment of H.B. 487 effective for the 2013 tax year. The Court
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remanded a separate case for the same property for the 2014 tax year in GC Net Lease @ (3) (Westerville) Investors, LLC v. Franklin Cty. Bd. of Rev., __ Ohio St.3d __, 2018-Ohio-3856. Similarly, in Lowe’s Home Ctrs., Inc. v. Washington Cty. Bd. of Rev., __ Ohio St.3d __, 2018- Ohio-1974, the Court faulted the BTA for failing to adequately make findings with respect to an appraisal report and testimony. The BTA addressed competing appraisals for realty holding a restaurant unencumbered by a lease. The property owner’s appraisal valued the property at $5.7 million and the school board’s appraisal valued the property at $8.8 million. The school board’s appraisal used comparable properties encumbered by leases to value the property and the BTA did not make express findings as to whether the appraiser made adjustments to properly value the realty “as if unencumbered” under R.C. 5713.03. Three justices dissented and found that the school board’s appraiser did, in fact, make adjustments for the leases to value the realty as an unencumbered fee simple estate. Other cases in which the Court remanded to the BTA to address appraisal evidence following the amendment of R.C. 5713.03 through H.B. 487 include the following cases: Spirit Master Funding IX, LLC v. Cuyahoga Cty. Bd. of Rev., __ Ohio St.3d __, 2018-Ohio-4302 (“The school board’s argument ignores the fact that appraisal evidence can both attack a sale price as evidence
LLC v. Franklin Cty. Bd. of Rev., __ Ohio St.3d __, 2018-Ohio-4301; Northland-4, LLC v. Franklin Cty. Bd. of Rev., __ Ohio St.3d __, 2018-Ohio-4303; MK Menlo Property Owner, LLC
Properties 28, LLC v. Franklin Cty. Bd. of Rev., __ Ohio St.3d __, 2018-Ohio-4305; Icon Owner Pool 3 Midwest/Southeast, LLC v. Franklin Cty. Bd. of Rev., __ Ohio St.3d __, 2018-Ohio-4306; Icon Owner Pool 3 Midwest/Southeast, LLC v. Franklin Cty. Bd. of Rev., __ Ohio St.3d __, 2018-Ohio-4307; Bronx Park South III Lancaster, LLC v. Fairfield Cty. Bd. of Rev., __ Ohio St.3d __, 2018-Ohio-1589; and Beavercreek Towne Station, LLC v. Greene Cty. Bd. of Rev., __ Ohio St.3d __, 2018-Ohio-4300. Procedure In Glyptis v. Cuyahoga Cty. Bd. of Rev., 152 Ohio St.3d 597, 2018-Ohio-1437, the Court allowed the filing of a second complaint against valuation in the same triennium due to the “casualty loss exception.” O.R.C. 5715.19(A) allows property owners to file complaints against valuation, but
“the property lost value due to some casualty.” The property owner in Glyptis filed a tax year 2012 complaint for residential property due to storm damage occurring in late 2012. Because the damage occurred after the tax lien date, January 1, 2012, the board of revision did not take the storm damage into consideration. The property owner subsequently filed a tax year 2013 complaint and the board of revision claimed it lacked jurisdiction as a second complaint in the same triennium. The BTA and Supreme Court found jurisdiction under the casualty exception. In Shutz v. Cuyahoga Cty. Bd. of Rev., 153 Ohio St.3d 23, 2018-Ohio-1588, the Court held that the property owner carried the burden of proof before the BTA to establish his valuation after the board of revision affirmed the fiscal officer’s valuation. The Court further held that the BTA erred by finding that the owner was required to provide appraisal evidence to satisfy his burden,
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in the absence of a recent, arm’s length sale. However, the Court nonetheless affirmed the board
did not satisfy his burden to show that his valuation was correct. In Huber Heights City Schools Bd. of Ed. v. Montgomery Cty Bd. of Rev., __ Ohio St.3d __, 2018-Ohio-4284, the board of revision lowered property value pursuant to a property owner’s decrease complaint and appraisal report and testimony. The BTA affirmed the board of revision and the Court affirmed the BTA. The Court held that the school board’s appraisal review testimony, absent their own appraisal, did not carry its burden to disprove the property owner’s appraisal that the board of revision relied upon to decrease property value. Procedure - Appraisals In South-Western City Schools Bd. of Ed. v. Franklin Cty. Bd. of Rev., 152 Ohio St.3d 548, 2018- Ohio-919, the property owner filed a decrease complaint and the board of revision reduced the value based upon the owner’s appraisal and a sheriff’s sale. The BTA rejected the owner’s appraisal because it improperly applied the sales comparison approach (did not confirm sales were at arm’s length), income approach (did not address market income, expenses, and so forth), and further erred by relying on a sheriff’s sale. Rather than reinstate the auditor’s valuation, however, the BTA remanded to the board of revision to gather evidence and determine true
Bedford rule did not apply in absence of competent and probative evidence justifying the board
In South-Western City Schools Bd. of Ed. v. Franklin Cty. Bd. of Rev., 152 Ohio St.3d 543, 2018- Ohio-918, the property owner filed a decrease complaint for agricultural land and the board of revision lowered the property’s value. The BTA affirmed the board of revision, but the Court reversed and reinstated the auditor’s valuation. The Court held that the property owner did not carry its burden to prove value to the board of revision through competent and probative
decision upon probative and competent evidence. See, Dublin City Sch. Bd. of Ed. v. Franklin
In Worthington City Schools Bd. of Ed. v. Franklin Cty. Bd. of Rev., __ Ohio St.3d __, 2018- Ohio-2909, the Court held that the BTA improperly rejected an adjustment that the property
parcel relative to other supermarkets, but enjoyed a parking easement that provided parking for Kroger customers. The owner’s appraiser made an adjustment for the unusually small size of the
parking even though the easement actually allowed parking. The Court held that the adjustment for size was warranted and held that the appraiser did not make an adjustment for lack of
Kroger did not provide a formal site visit and that it relies on the “extraordinary assumption” that the property was in the same physical condition on the tax lien date for 2014 and later in 2015.
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In Groveport Madison Local Schools Bd. of Ed. v. Franklin Cty. Bd. of Rev., __ Ohio St.3d __, 2018-Ohio-4286, the property owner, Sears Roebuck & Co., filed a decrease complaint for a distribution warehouse. The school board filed a countercomplaint to retain the auditor’s
presented its own appraisal testimony and “consulting report.” The board of revision adopted Sears’s valuation. The BTA, however, independently valued the property at a higher value very close to the auditor’s valuation. The Court affirmed the BTA’s independent valuation, finding that the BTA properly discharged its duty in reliance upon the record before it. The BTA made findings that the record from the board of revision was incomplete, but the Court rejected Sears’s argument that the incomplete records constituted reversible error. In Hilliard City Schools Bd. of Ed. v. Franklin Cty. Bd. of Rev., __ Ohio St.3d __, 2018-Ohio- 4282, the Court ruled that the BTA did not abuse its discretion in reviewing the evidence in the record and adopting the school board’s appraisal as more persuasively showing true value than the property owner’s competing appraisal. The Court rejected the owner’s argument that the school board’s appraisal effectively applied the special purpose doctrine by its choice of comparables with the specific commercial use of banking rather than commercial use generally. In HCP EMOH, LLC v. Washington Cty. Bd. of Rev., __ Ohio St.3d __, 2018-Ohio-4750, the Court addressed how to value realty separate from the facility’s business value in the context of valuing an assisted-living facility. The property owner filed a complaint against valuation and, following an appeal from the board of revision, presented an appraisal to the BTA that valued the property based upon a sales comparison approach drawing from apartment data. The county, on the other hand, presented an appraisal that used a complex “lease coverage analysis” that valued the property through an income approach. In short, the county’s appraiser computed a ratio for comparable assisted living facilities that compared income from the business to income from the
property, and applied a capitalization rate, to determine its value. The BTA adopted the county’s appraisal using the “lease coverage analysis.” The Court rejected the property owner’s claim that the county’s appraiser erred by failing to use apartment comparables. However, the Court nonetheless remanded the case to the BTA because the “lease coverage ratio” that the county’s appraiser used was, in the Court’s view, ultimately derived from the value of the business. Justice DeWine dissented, arguing that the testimony in the record supported the BTA’s finding that the lease coverage ratio was derived from the value
In Harrah’s Ohio Acquisition Company, LLC v. Cuyahoga Cty. Bd. of Rev., __ Ohio St.3d __, 2018-Ohio-4370, the Court addressed the value of the realty associated with the Thistledown Racino and horse-racing facility for the 2013 tax year. The school board and the property owner, Harrah’s, presented competing appraisals for the property. The BTA adopted the valuation in Harrah’s appraisal. The Court ruled that under a sales-comparison approach the Harrah’s appraisal may reduce comparable sales to account for the going concern of the business and potential video lottery terminal (VLT) licenses. The Court also approved the income- capitalization approach in Harrah’s appraisal whereby the entire value of the business is valued as a going concern and then the realty is isolated by removing non-real property from that going
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concern value. Nonetheless, the Court vacated and remanded for the BTA to consider the school board’s appraisal. The Court ruled that the BTA erroneously disregarded the school board’s appraisal and erred, as a matter of law, by its ruling that owner-occupied properties may not be valued through an income approach taking into account hypothetical leases. Gov’t Subsidized Housing In Columbus City Sch. Bd. of Ed. v. Franklin Cty. Bd. of Rev. __ Ohio St.3d __, 2017-Ohio-2734 (“Network Restorations I”), the Court addressed low-income housing units that received project- based subsidies under the federal Low Income Housing Tax Credit (“LIHTC”) program and housing assistance payments (“HAP”) program through Section 8 of the Housing Act of 1937. The Court reversed the BTA and reinstated the board of revision’s valuation for the government- subsidized low-income housing following the property owner’s appraisal. The Court held that market rents and expenses rather than actual rents and expenses should be applied to determine value under the income approach to valuation. The Court in Network Restorations I did not identify the market or explain how market rents and expenses are computed under this approach. The Court further held that government subsidies should not be taken into account in a way that would increase property value under the income approach. The Court also held that the cost approach should not be used to value low-income housing for real property valuation purposes. In Notestine Manor, Inc. v. Logan Cty. Bd. of Rev., __ Ohio St.3d __, 2018-Ohio-2, the Court clarified that the holding in Network Restorations I -- that market rents are to be applied to determine the value of government subsidized housing – is limited to the federal subsidies in that case that would inflate the property’s value under an income approach. By contrast, the government subsidy program at issue in this appeal, i.e. the Section 202 program, would not inflate the property value under an income approach. The Section 202 program provides a “capital advance” to developers to build rental housing for low-income elderly individuals, with any subsidized rent payments capped to prevent the owner from accumulating surplus income. In addition, the Section 202 program places restrictions on the tenant’s identity (i.e. low-income elderly individuals) and the rent level, thereby creating below-market rent levels. The Court in Notestine held that these “contract rent” levels (as opposed to “market rent”) may be used to determine the value of the property. The Court explained that “[t]he guiding principle from Alliance Towers [57 Ohio St.3d 16 (1988)], articulated in Woda Ivy Glen [121 Ohio St.3d 175 (2009)] and reiterated in [Network Restorations I], is that the valuation method must account for the ‘affirmative value’ of government subsidies, i.e., the tendency of government subsidies to inflate the value above what the market would otherwise bear.” The Court further held that the recent amendment to R.C. 5713.03 that requires the auditor to value the “fee simple estate as if unencumbered” did not apply to the tax year at issue. Even if the law change had applied, the Court stated in dicta that it would not preclude the valuation method used in this appeal because the use restriction was government imposed rather than commercially imposed. In Columbus City Schools Bd. of Ed. v. Franklin Cty. Bd. of Rev., __ Ohio St.3d __, 2018-Ohio- 3254 (“Network Restorations II”), the Court addressed 101 low-income housing units that received project-based subsidies under the federal LIHTC program and HAP program through Section 8 of the Housing Act of 1937. The property owner, Network Restorations, filed a
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decrease complaint and submitted the appraisal testimony that used the LIHTC rents as market rents in his income approach to value. The board of revision granted the reduction based upon
adopted a higher value closer to the auditor’s valuation. Relying on its recent decisions in Network Restorations I and Notestine Manor, the Court reaffirmed that market rent must be considered to determine value. The Court clarified that the market rents to be considered are the market rents for other LIHTC properties. The Court remanded to the BTA because the competing appraisals differed in their approach to market rent and the BTA failed to make findings as to the appropriate market rent. In Massillon City Schools Bd. of Ed. v. Stark Cty. Bd. of Rev., Ohio BTA No. 2017-86 (July 30, 2018), the BTA addressed low-income housing subsidized under the Section 202 Program as in the Notestine Manor case discussed above. The property owner filed a decrease complaint and submitted an appraisal based upon the government-subsidized rents. The board of revision adopted the owner’s valuation and the school board appealed to the BTA. Quoting recent Ohio Supreme Court precedent, the BTA referenced the “guiding principle” that the “valuation method must account for the ‘affirmative value’ of government subsidies, i.e., the tendency of government subsidies to inflate the value above what the market would otherwise bear.” As in Notestine Manor, the BTA held upheld the “contract rent” valuation and affirmed. Bulk Sales In Arbors East RE, LLC v. Franklin Cty. Bd. of Rev., 153 Ohio St.3d 41, 2018-Ohio-1611, the Court addressed the value of a nursing home following a sale that included realty, personal property, and intangible assets such as goodwill. The board of revision valued the realty at the gross purchase price amount, $7,490,000, less a deduction for $287,100 due to “property, plant, and equipment” shown on the property owner’s federal tax return. The federal tax return that the board of revision reviewed was not included in the record transmitted to the BTA and the BTA increased the valuation to the entire purchase price. The Court vacated and remanded the case to the BTA, ordering the BTA to obtain the federal tax return through its investigative powers and take it into consideration in determining value. The Court further held that “the BTA erred by holding as a matter of law that any allocation to goodwill is improper.” Jurisdiction In MDM Holdings, Inc. v. Cuyahoga Cty. Bd. of Rev., __ Ohio St.3d __, 2018-Ohio-541, the Court held that Ohio law does not impose a time limit or deadline for county boards of revision to exercise continuing complaint jurisdiction. R.C. 5715.19(D) provides, in pertinent part, the following: If a complaint filed under this section for the current year is not determined by the board within the time prescribed for such determination [i.e., the 90–day period set forth in R.C. 5715.19(C)], the complaint and any proceedings in relation thereto shall be continued by the board as a valid complaint for any ensuing year until such complaint is finally determined by the board or upon any appeal from a
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decision of the board. In such case, the original complaint shall continue in effect without further filing by the original taxpayer * * *. In other words, valuation complaints that are not resolved within the 90-day period set forth by statute continue in effect for subsequent years until the original complaint is finally determined. In MDM Holdings the board of revision and BTA imposed deadlines for the property owner to make a continuing complaint request and found that they lacked jurisdiction because the property
R.C. 5715.19(D) authorizes the BOR to dismiss a continuing complaint for lack of timeliness.’ Such a deadline is contrary to the plain language of the statute, which provides that until the
the original taxpayer.” Accord, Life Path Partners, Ltd. v. Cuy. Cty. Bd. of Rev., 152 Ohio St.3d 238, 2018-Ohio-230; Molly Company, Ltd. v. Cuy. Cty. Bd. of Rev., 2018-Ohio-4070 (same). In Novita Industries LLC v. Lorain Cty. Bd. of Rev., 153 Ohio St.3d 57, 2018-Ohio-2023, the Court reaffirmed its holdings in MDM Holdings and Life Path Partners, even where the county did a reappraisal during the pendency of the original complaint. There, the property owner filed a complaint for tax year 2009 that was not finally resolved until the BTA issued a decision in
revision’s continuing complaint jurisdiction through a letter submitted in July 2014. In State ex rel. Mars Urban Solutions, LLC v. Cuyahoga Cty. Bd. of Rev., __ Ohio St.3d __, 2018-Ohio-4668, the Court held that “when a subject property’s value is reduced in the middle of a triennium update, the reduced value carries forward until the end of that triennium, and at the start of the next sexennial valuation, the auditor must reappraise the property and determine a new value going forward.” There, the Court denied a writ of mandamus sought against the Cuyahoga County Fiscal Officer where the Fiscal Officer properly applied a BTA decision on property value to the last year in the applicable triennium. In Licking Heights Local Schools Bd. of Ed. v. Franklin Cty. Bd. of Ed., __ Ohio St.3d __, 2018- Ohio-3255, the Court held that county boards of revision have jurisdiction to consider a school board’s claim to value for land and improvements under to a counter-complaint, even where the complainant withdraws the original complaint. In Licking Heights, the property owner filed a complaint against valuation of land only, on the mistaken belief that the auditor had assessed more land than was actually part of the parcel. The school board filed a counter-complaint challenging the value of the land and improvements. The property owner withdrew its complaint upon learning that the auditor did not mistakenly include too much land, but the board of revision retained jurisdiction over the school board’s entire counter-complaint. In Beavercreek Towne Station, LLC v. Greene Cty. Bd. of Rev., __ Ohio St.3d __, 2018-Ohio- 4300, ¶¶ 20-25, the Court held that a lessee “[has] no standing independent from its landlord [ ] to challenge the valuation of its parcel.” In Ross v. Cuyahoga Cty. Bd. of Rev., __ Ohio St.3d __, 2018-Ohio-4746, the Court affirmed the BTA’s dismissal of the property owner’s notice of appeal to the BTA because the notice of appeal was not timely filed with the board of revision as well. R.C. 5717.01 requires dual filing
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with the BTA and the board of revision to invoke the BTA’s jurisdiction on appeal. The Court further held that the BTA was not required to hold a hearing on the matter before dismissing. In Yanega v. Cuyahoga Cty. Bd. of Rev., __ Ohio St.3d __, 2018-Ohio-5208, the Court held that it does not have jurisdiction to address errors that are absent from the notice of appeal to the
the board appealed from and the errors therein complained of.” The county appealed to the Court in this case, but could not contest error with the BTA applying a carryover value from one year to the next because it was not set forth in the notice of appeal. The Court did, however, disallow a reduction in value that the BTA made without support in the record and which the county raised as an issue in the notice of appeal to the Court. Collateral Estoppel In Julia Realty, Ltd. v. Cuyahoga Cty. Bd. of Rev., 153 Ohio St.3d 262, 2018-Ohio-2415, the Court held that collateral estoppel applies to preclude re-litigating the issue as to whether an auction sale was an arm’s length sale that reflected true value. Though this appeal addresses the 2013 tax year, the property owner in Julia Realty had previously filed a 2012 tax year reduction
because the property owner failed to overcome the presumption that an auction sale does not show true value. After the BTA hearing in the 2012 case but before the BTA issued its decision, the Supreme Court ruled in Olentangy Local Schools v. Delaware Cty. Bd. of Rev., 141 Ohio St.3d 243, 2014-Ohio-4723 that the presumption that an auction sale is not evidence of property value “may be rebutted by evidence showing that the sale occurred at arm’s length between typically motivated parties.” The BTA in its decision in Julia Realty on the 2012 tax year held that the property owner did not satisfy its burden as set forth in the Olentangy Local Schools
2013 and 2014 through the board’s continuing complaint jurisdiction. Ultimately, the Supreme Court in Julia Realty held that collateral estoppel applied as to the auction sale/arm’s length issue for the 2013 and 2014 tax years due to the BTA decision for the 2012 tax year case. The Court recognized that normally the Olentangy Local Schools case would be an “intervening case” that changed the law and thus precluded collateral estoppel. But because the Olentangy case was issued before the BTA issued its decision for the 2012 tax year, the property owner could have sought a new hearing in that case to present evidence to show that the auction sale at issue was an arm’s length sale. Because property owner failed to do so, the earlier BTA decision had the force of collateral estoppel. In Lowe’s Home Ctrs., Inc. v. Washington Cty. Bd. of Rev., __ Ohio St.3d __, 2018-Ohio-1974, the Court applied collateral estoppel to preclude an inquiry into whether realty is special purpose property for the 2013 tax year. The Court applied collateral estoppel because the county already had a full and fair opportunity to litigate the special purpose issue in Lowe’s Home Ctrs., Inc. v. Washington Cty. Bd. of Rev., 145 Ohio St.3d 375, 2016-Ohio-372, for the 2010 tax year. The Court applied collateral estoppel even though another related Lowe’s entity appeared in this case.
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Exemption In Fairfield Twp. Bd. of Trustees v. Testa, 153 Ohio St.3d 255, 2018-Ohio-2381, the Court held that the house of public worship exemption had priority over a tax-increment financing arrangement in place. Several parties including Fairfield Township and the real estate developer entered into a 20-year TIF agreement in 1998. The TIF agreement allowed property tax exemption for the subject property but required the developer and its assigns to make service payments in lieu of taxes, as TIF arrangements typically require. The developer conveyed the property to another party in 1999 and the property was used as an insurance office until a church purchased it in 2011. The church filed an application for exemption as a house of public worship, which would not require the service payments in lieu of taxes to be paid as the TIF arrangement previously had. The Court held that the plain language of the TIF property tax exemption statute, R.C. 5709.911(A), provides that the TIF exemption is subordinate to other exemptions where, as here, the political subdivision applies for the TIF exemption without the
mitigating procedures under the statute and further held that the Township lacked standing to bring as-applied constitutional challenges. In Chagrin Realty, Inc. v. Testa, __ Ohio St.3d __, 2018-Ohio-4751, the Court ruled that an entity could not qualify for charitable real property tax exemption where its sole activity was leasing realty, collecting rent, and distributing proceeds to a related foundation. Citing Northeast Ohio Psych. Inst. v. Levin, 121 Ohio St.3d 292, 2009-Ohio-583, the Court first explained that exemption failed under R.C. 5709.12(B) because leased property is not used “exclusively for charitable purposes.” Next, the Court explained that the realty did not qualify for exemption under R.C. 5709.121 because the owner, Chagrin Realty, Inc., was not a “charitable institution” because its sole and “core” activities were leasing the subject property, collecting rent, and distributing funds. Chagrin Realty, Inc. could not establish charitable activity from the use of the proceeds from the property or by claiming activities conducted vicariously through other entities. Notably, the Court in Chagrin Realty also held that it had jurisdiction over the appeal from a reissued 2017 BTA decision that was issued in 2014 and not appealed at that time. But see, Groveport Madison Local Schools Bd. of Edn. v. Franklin Cty. Bd. of Rev., 2017-Ohio-1428 (BTA lacked jurisdiction to vacate its decision after the 30 day appeal period to Supreme Court). Current Agricultural Use Valuation In Johnson v. Clark Cty. Bd. of Rev., __ Ohio St.3d __, 2018-Ohio-4390, a property owner
the BTA’s findings that the owner did not satisfy that burden. The BTA also did not abuse its discretion by failing to accept the owner’s opinion of value under the “owner-opinion rule” that allows owners to testify as fact witnesses as to the value of their property. See, Worthington City
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Unauthorized Practice of Law In Greenway Ohio, Inc. v. Cuyahoga Cty. Bd. of Rev., __ Ohio St.3d __, 2018-Ohio-4244, a property manager filed a decrease complaint on behalf of the owner, Greenway Ohio, Inc. The Court held that the preparation and filing of a complaint with the board of revision constitutes the practice of law and a property manager is not within the class of persons authorized by R.C. 5715.19(A) to file a valuation complaint on behalf of a corporate entity. The Court affirmed the BTA’s dismissal for lack of jurisdiction because the complaint prepared by a non-attorney did not invoke the board of revision’s jurisdiction upon filing. The Court further held that the BTA was not required to hold a hearing on this jurisdictional issue before dismissing the case. In Pavilonis v. Cuyahoga Cty. Bd. of Rev., 153 Ohio St.3d 18, 2018-Ohio-1480, the property
the county board of revision at the hearing. The non-attorney husband made a legal argument and questioned the appraiser. The Court found that the board of revision had allowed the unauthorized practice of law through such legal argument and questioning of witnesses by the non-attorney husband. However, the Court found that the taxpayer properly invoked jurisdiction in the board by filing the complaint and the unauthorized practice of law did not divest the board
BTA’s reduction in value. The board of revision allowed the unauthorized practice of law at the hearing and thus the county failed to timely object and waived the right to contest it later. Legislation House Bill 292 – Tax Appeal Rights In 2017, the General Assembly eliminated the direct right of appeal from the Board of Tax Appeals to the Ohio Supreme Court, as codified in R.C. 5717.04, through House Bill 49. Following this law change, R.C. 5717.04 permitted appeals from the BTA to county courts of appeal only. At the same time, House Bill 49 inserted language in R.C. 5717.04 that established a process for parties to appeal BTA decisions to the Supreme Court where “the appeal involves a substantial constitutional question or a question of great general or public interest.” The General Assembly has now reinstated the direct right of appeal from BTA decisions to the Court in 2018 through House Bill 292, effective September 13, 2018. However, real property valuation cases originating in county boards of revision were excluded from the classes of cases that may be appealed from the BTA directly to the Supreme Court. Per current R.C. 5717.04, BTA decisions on real property valuation cases may be appealed only to county courts of appeal. House Bill 292 additionally removed the procedure for petitioning the Supreme Court to directly appeal for cases “involve[ing] a substantial constitutional question or question of great general or public interest.” County court of appeals decisions on real property valuation issues may still be appealed to the Supreme Court subject to the Supreme Court’s discretionary review.
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House Bill 34 – Notice Mailing Requirements Ohio law, namely R.C. 5715.19 and R.C. 5715.20, currently requires county boards of revision to notify the complainant and the property owner via certified mail of the time and place of a hearing on a complaint regarding the property’s valuation and of its decision regarding the
property valuation hearing via certified mail when the board’s decision is appealed. Effective November 2, 2018, county boards of revision may provide notice for hearings, decisions, and appeals via certified mail or an alternative method. If the board of revision has an “internet identifier of record” for the person requiring notice, the board may notify them by
revision decisions, the alternative notice requirement additionally requires the board to file an affidavit with the BTA. “Internet identifier of record” is defined in R.C. 9.312 as “an electronic mail address, or any other designation used for self-identification or routing in internet communication or posting provided for the purpose of receiving communication.” House Bill 118 – Jurisdiction Over Property Tax Complaints House Bill 118, effective February 5, 2018, is intended to codify existing law with respect to county board of revision jurisdiction over valuation complaints that misidentify the property
in a complaint does not deprive a board of revision of jurisdiction over the complaint. See, Groveport Madison Local Schools Bd. of Ed. v. Franklin Cty. Bd. of Rev., 137 Ohio St.3d 266 (2013). House Bill 118 amends R.C. 5715.19 to include language prohibiting boards of revision from dismissing complaints because the complainant failed to accurately identify the owner. The new language also requires the board of revision to “exercise due diligence” to ensure that the correct property owner is notified of the action challenging property valuation. Court of Appeals Cases First District
Dist.) Second District
2018-Ohio-2325 (2nd Dist.)
Ohio-2323 (2nd Dist.)
2018-Ohio-2322 (2nd Dist.)
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Fifth District
Ohio-2683 (5th Dist.) Tenth District
822 (10th Dist.)
Ohio-1996 (10th Dist.)
Ohio-4621 (10th Dist.)
2018-Ohio-4622 (10th Dist.) Eleventh District
2460 (11th Dist.) Twelfth District
(12th Dist.)
YEAR OF SEXENNIAL REAPPRAISAL AND TRIENNIAL UPDATE FOR OHIO'S 88 COUNTIES 2018-2023
2018 REAPPRAISAL COUNTIES 2019 REAPPRAISAL COUNTIES 2020 REAPPRAISAL COUNTIES 2021 REAPPRAISAL COUNTIES 2022 REAPPRAISAL COUNTIES 2023 REAPPRAISAL COUNTIES BELMONT BROWN CRAWFORD CUYAHOGA ERIE FAYETTE HIGHLAND HURON JEFFERSON LAKE LORAIN LUCAS MORGAN MUSKINGUM OTTAWA PORTAGE STARK WARREN WILLIAMS 2018 UPDATE COUNTIES ALLEN COSHOCTON GUERNSEY SANDUSKY VINTON CARROLL CHAMPAIGN CLARK FAIRFIELD LOGAN MARION MEDINA MIAMI ROSS UNION WYANDOT 2019 UPDATE COUNTIES ADAMS COLUMBIANA HANCOCK HOCKING HOLMES LAWRENCE MEIGS MONROE PAULDING SCIOTO TUSCARAWAS WASHINGTON ASHLAND ASHTABULA ATHENS BUTLER CLERMONT FULTON GREENE KNOX MADISON MONTGOMERY NOBLE SUMMIT WAYNE 2020 UPDATE COUNTIES AUGLAIZE CLINTON DARKE DEFIANCE DELAWARE FRANKLIN GALLIA GEAUGA HAMILTON HARDIN HARRISON HENRY JACKSON LICKING MAHONING MERCER MORROW PERRY PICKAWAY PIKE PREBLE PUTNAM RICHLAND SENECA SHELBY TRUMBULL VAN WERT WOOD
ALLEN
COSHOCTON GUERNSEY SANDUSKY VINTON 2021 UPDATE COUNTIES BELMONT BROWN CRAWFORD CUYAHOGA ERIE FAYETTE HIGHLAND HURON JEFFERSON LAKE LORAIN LUCAS MORGAN MUSKINGUM OTTAWA PORTAGE STARK WARREN WILLIAMS ADAMS COLUMBIANA HANCOCK HOCKING HOLMES LAWRENCE MEIGS MONROE PAULDING SCIOTO TUSCARAWAS WASHINGTON 2022 UPDATE COUNTIES CARROLL CHAMPAIGN CLARK FAIRFIELD LOGAN MARION MEDINA MIAMI ROSS UNION WYANDOT AUGLAIZE CLINTON DARKE DEFIANCE DELAWARE FRANKLIN GALLIA GEAUGA HAMILTON HARDIN HARRISON HENRY JACKSON LICKING MAHONING MERCER MORROW PERRY PICKAWAY PIKE PREBLE PUTNAM RICHLAND SENECA SHELBY TRUMBULL VAN WERT WOOD 2023 UPDATE COUNTIES ASHLAND ASHTABULA ATHENS BUTLER CLERMONT FULTON GREENE KNOX MADISON MONTGOMERY NOBLE SUMMIT WAYNE
[Cite as Terraza 8, L.L.C. v. Franklin Cty. Bd. of Revision, 150 Ohio St.3d 527, 2017-Ohio-4415.]
TERRAZA 8, L.L.C., APPELLANT, v. FRANKLIN COUNTY BOARD OF REVISION
ET AL., APPELLEES.
[Cite as Terraza 8, L.L.C. v. Franklin Cty. Bd. of Revision, 150 Ohio St.3d 527, 2017-Ohio-4415.] Taxation—Real-property valuation—Amendment to R.C. 5713.03 enacted in 2012 Am.Sub.H.B. No. 487 applies to valuations for tax year 2013—Under R.C. 5713.03, as amended by 2012 Am.Sub.H.B. No. 487, a recent, arms-length sale price constitutes the best evidence of a property’s value, but such a sale price no longer conclusively determines that value as it did under prior law—Decision of Board of Tax Appeals vacated and cause remanded. (No. 2015-2063—Submitted April 5, 2017—Decided June 22, 2017.) APPEAL from the Board of Tax Appeals, Nos. 2015-279 and 2015-280. ______________ FISCHER, J. {¶ 1} At issue in this case is whether a recent amendment to R.C. 5713.03 applies to real-property valuations for tax year 2013 and, if so, whether the statutory change affects how taxing authorities must value lease-encumbered properties that have been the subject of recent arm’s-length sales. We conclude that the amendment to R.C. 5713.03 enacted in 2012 Am.Sub.H.B. No. 487 (“H.B. 487”) applies here and that the statutory change requires us to remand this case to the Board of Tax Appeals (“BTA”) for further consideration. Facts and Procedural History {¶ 2} The subject property is a 54,261-square-foot fitness center situated on 3.41 acres in Franklin County and owned by appellant, Terraza 8, L.L.C. (“Terraza”). The building was constructed in 2007.
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{¶ 3} The Franklin County auditor assessed the property at $4,850,000 for tax year 2013. Appellee Hilliard City Schools Board of Education (“BOE”) complained to appellee Franklin County Board of Revision (“BOR”) that the property should have been valued at $15,403,200, based on its assertion that that was the amount Terraza paid for it in February 2013. Terraza did not defend against the complaint, and the BOR increased the valuation to $15,403,200 for tax years 2013 and 2014. Terraza appealed both years’ valuations to the BTA. {¶ 4} At the BTA hearing, Terraza introduced the testimony and appraisal
simple market value of the property.” She used income and sales-comparison approaches to determine a value that she referred to as the property’s “fee simple”
when Terraza acquired the property, which provided for an initial 20-year term ending in 2027 and two 10-year optional renewal periods, called for monthly rental payments above the market rate. She testified that the monthly market-rate rent for comparable properties in 2013 was $11 per square foot while the lease here called for monthly rental payments of $22 per square foot in 2013. Her income-approach valuation was $5,650,000. Her sales-comparison valuation was $7,055,000. She accorded greater weight to the sales-comparison approach, reaching a final valuation of $7,055,000. {¶ 5} The BOE objected to the evidence presented by Costello, arguing that it was inadmissible because Terraza had not rebutted the recency or arm’s-length nature of the sale. Terraza countered that the evidence was admissible due to a change in R.C. 5713.03, which, it alleged, required the county auditor, the BOR, and the BTA to value the unencumbered fee-simple estate of the property. The BTA overruled the objection and admitted the evidence. {¶ 6} The BTA found that an amended version of R.C. 5713.03 applies in this case but concluded that the change did not overrule Berea City School Dist. Bd.
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834 N.E.2d 782, ¶ 13, which held that property must be valued according to the sale price of a recent arm’s-length transfer. The BTA, therefore, disregarded Costello’s appraisal and, after making a slight adjustment to the BOR’s valuation, determined a value of $15,403,120 for tax year 2013. It also found that the BOR lacked jurisdiction to determine value for tax year 2014 and instructed the BOR to vacate its decision for that year. Terraza appealed the determination for tax year 2013 to this court. Standard of Review {¶ 7} We must affirm the BTA’s decision if it was “reasonable and lawful.” R.C. 5717.04. In making this determination, we must consider legal issues de novo, Akron City School Dist. Bd. of Edn. v. Summit Cty. Bd. of Revision, 139 Ohio St.3d 92, 2014-Ohio-1588, 9 N.E.3d 1004, ¶ 10-11, and defer to findings concerning the weight of evidence so long as they are supported by the record, Olmsted Falls Bd.
909 N.E.2d 597, ¶ 27. Recent Arm’s-Length Sales under Ohio Law Ohio Constitution, Article XII, Section 2, and R.C. 5713.01 {¶ 8} The Ohio Constitution provides that “[l]and and improvements thereon shall be taxed by uniform rule according to value.” Ohio Constitution, Article XII, Section 2. In State ex rel. Park Invest. Co. v. Bd. of Tax Appeals, 175 Ohio St. 410, 195 N.E.2d 908 (1964), we held that Article XII, Section 2, along with R.C. 5713.01, establishes the criterion for the assessment of real property in
assess all the real estate situated in the county at its true value in money.” Am.S.B.
R.C. 5713.01 a number of times since then, the statute still requires county auditors to appraise real property “at its true value in money.” R.C. 5713.01(B).
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{¶ 9} “[T]he value or true value in money of real property” refers to “the amount for which that property would sell on the open market by a willing seller to a willing buyer * * *, i.e., the sales price.” Park Invest. Co. at 412. We have explained that “[t]he best method of determining value, when such information is available, is an actual sale of such property between one who is willing to sell but not compelled to do so and one who is willing to buy but not compelled to do so.” Id., citing In re Estate of Sears, 172 Ohio St. 443, 178 N.E.2d 240 (1961), paragraph two of the syllabus. “This, without question, will usually determine the monetary value of the property.” Id. Later, in Conalco, Inc. v. Monroe Cty. Bd. of Revision, 50 Ohio St.2d 129, 363 N.E.2d 722 (1977), we reiterated that “[t]he best evidence
in an arm’s-length transaction.” Id. at paragraph one of the syllabus, quoting R.C. 5713.01. The 1976 amendment to R.C. 5713.03 {¶ 10} When we decided Park Invest. Co. in 1964, R.C. 5713.03 provided that “[t]he county auditor, from the best sources of information available, shall determine, as nearly as practicable, the true value * * * of real property * * * according to the rules prescribed by sections 5713.01 to 5713.21, inclusive, and section 5715.01 of the Revised Code for valuing real property.” 128 Ohio Laws at
{¶ 11} In 1976, the General Assembly amended R.C. 5713.03 by adding now-familiar language: In determining the true value of any tract, lot, or parcel of real estate [under this section], if such tract, lot, or parcel has been the subject
within a reasonable length of time, either before or after the tax lien
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date, the auditor shall consider the sale price of such tract, lot, or parcel to be the true value for taxation purposes. Am.Sub.H.B. No. 920, 136 Ohio Laws, Part II, 3182, 3247. In Cummins Property Servs., L.L.C. v. Franklin Cty. Bd. of Revision, 117 Ohio St.3d 516, 2008-Ohio- 1473, 885 N.E.2d 222, ¶ 23, we stated that this amendment “reinforced” the idea stated in Park Invest. Co.: that the point of every valuation—whether based on a recent sale price or an appraisal—is to determine the price the property would sell for on the open market. {¶ 12} Following the 1976 amendment, we continued to adhere to the best- evidence principle articulated in Conalco when evidence of a recent sale price was
218, 219, 459 N.E.2d 894 (1984). In Fountain Square Assocs., however, we suggested that an appraisal might be used to determine a value different from an actual sale price “where it is shown that the sales price is not reflective of true value.” Id. {¶ 13} Two years later in Ratner v. Stark Cty. Bd. of Revision, 23 Ohio St.3d 59, 491 N.E.2d 680 (1986) (“Ratner I”), we again reaffirmed the best-evidence rule
market value” that establishes the property’s presumptive true value, id. at 61. But this court in Ratner I held that a sale price is “not the only evidence” of true value,
thus rejected “an absolutist interpretation” of R.C. 5713.03 that would require a property to be valued according to a recent sale price. Id. at 61. See also Ratner v. Stark Cty. Bd. of Revision, 35 Ohio St.3d 26, 28, 517 N.E.2d 915 (1988) (“Ratner II”) (“the price paid by the taxpayer is one factor, the best factor, but not the controlling factor”).
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{¶ 14} We overruled Ratner I and Ratner II in Berea, 106 Ohio St.3d 269, 2005-Ohio-4979, 834 N.E.2d 782, at ¶ 13. In doing so, we focused on the language
added in the 1976 amendment, 136 Ohio Laws, Part II, at 3247—“the auditor shall consider the sale price * * * to be the true value for taxation purposes”—and held that it requires property to be valued according to the sale price of a recent arm’s- length transaction. (Emphasis added.) Berea at ¶ 13. We later explained that the statute “reject[s] * * * appraisal evidence of the value of the property whenever a recent, arm’s-length sale price has been offered as evidence of value.” Cummins Property Servs., 117 Ohio St.3d 516, 2008-Ohio-1473, 885 N.E.2d 222, at ¶ 13. Under the former version of R.C. 5713.03 at issue in those cases, a party could avoid a recent sale price only by showing that the sale was not recent to the tax-lien date or was not an arm’s-length transaction. Berea at ¶ 13, 16. The H.B. 487 amendment to R.C. 5713.03 (effective September 10, 2012) {¶ 15} The General Assembly made two significant changes to R.C. 5713.03 in 2012 that are relevant here. First, it required county auditors to determine “the true value of the fee simple estate, as if unencumbered, of each separate tract, lot, or parcel of real property and of buildings, structures, and improvements located thereon.” (Emphasis added to indicate new words inserted.) R.C. 5713.03, as amended by 2012 Am.Sub.H.B. No. 487. And second, concerning recent arm’s-length sales, it replaced shall with may: “the auditor may consider the sale price * * * to be the true value for taxation purposes.” (Emphasis added.) Id. Terraza argues that this version of R.C. 5713.03 applies in this case. The BOE disagrees. The later 2012 amendment to R.C. 5713.03 (effective March 27, 2013) {¶ 16} The General Assembly again amended R.C. 5713.03 in late 2012, making additional changes that are not relevant here but retaining the changes introduced by H.B. 487. See 2012 Am.Sub.H.B. No. 510 (“H.B. 510”). H.B. 510
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went into effect March 27, 2013. Id. No party argues that the H.B. 510 amendment applies here. The H.B. 487 Version Applies Apply the law in effect on the tax-lien date {¶ 17} Because this case involves tax year 2013, the BTA had to determine the property’s value on January 1, 2013, the tax-lien date. See Fawn Lake Apts. v. Cuyahoga Cty. Bd. of Revision, 85 Ohio St.3d 609, 612, 710 N.E.2d 681 (1999); see also R.C. 323.11 (making January 1 of each year the tax-lien date); R.C. 5715.01(C) (preventing the tax commissioner from adopting or enforcing “any rule that requires true value for any tax year to be any value other than the true value in money on the tax lien date of such tax year”). It follows that the taxing authorities should apply the substantive law in effect on that date. See R.C. 1.58(A)(2) and (4). {¶ 18} Because the H.B. 487 amendment went into effect on September 10, 2012, and the H.B. 510 amendment went into effect on March 27, 2013, the H.B. 487 version applies to valuations for tax year 2013. Section 757.51 of H.B. 487 does not prevent application of H.B. 487 {¶ 19} The BOE insists that Section 757.51 of H.B. 487 prevented that amendment from going into effect in Franklin County until tax year 2014. Section 757.51 provides that “[t]he amendment by this act of section 5713.03 of the Revised Code applies to the first tax year, after tax year 2012, to which division (A) or (B)
{¶ 20} R.C. 5715.24 addresses the cycle of real-property valuations undertaken by county auditors, who are to assess the real property within their respective counties according to value. See R.C. 5713.01, 5713.03, and 5715.01(B). R.C. 5715.24 describes the reappraisals conducted by a county auditor every six years (R.C. 5715.24(A)) and the update valuations the auditor performs in the third year after the reappraisals (R.C. 5715.24(B)). See Soyko Kulchystsky,
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L.L.C. v. Cuyahoga Cty. Bd. of Revision, 141 Ohio St.3d 43, 2014-Ohio-4511, 21 N.E.3d 297, ¶ 20. Significantly here, not every county auditor completes reappraisals in the same year; the reappraisals are staggered statewide. See Pike- Delta-York Local School Dist. Bd. of Edn. v. Fulton Cty. Budget Comm., 41 Ohio St.2d 147, 150, 324 N.E.2d 566 (1975). This means that some auditors were in the process of completing sexennial reappraisals or triennial updates just as the H.B. 487 amendment to R.C. 5713.03 was going into effect in September 2012. See R.C. 319.28(A) (requiring auditors to certify values to the county treasurer by October 1 each year). {¶ 21} The BOE argues that Section 757.51 is an effective-date clause that prevented the amendment from going into effect in Franklin County until 2014, when the county auditor next applied R.C. 5715.24 by completing a reappraisal or triennial update. One court has adopted this view, construing Section 757.51 as an effective-date provision applicable to certain counties. See Olentangy Local Schools Bd. of Edn. v. Delaware Cty. Bd. of Revision, 2015-Ohio-2070, 34 N.E.3d 150, ¶ 38 (5th Dist.). Under this view, the BTA and boards of revision cannot apply the H.B. 487 amendment to the properties in some counties, even if they are considering a valuation complaint for a post-2012 tax year. {¶ 22} The intent of Section 757.51 is not clearly stated, but it is better understood as an instruction to apply the H.B. 487 amendment prospectively but not to valuations for tax year 2012. The section did not prevent the amendment from taking effect in any county or prevent boards of revision or the BTA from applying the amendment when considering post-2012 valuation complaints. {¶ 23} Two aspects of the language used by the General Assembly support this interpretation. First, Section 757.51 directly ties the limitation to an auditor’s application of R.C. 5713.03 when carrying out obligations under R.C. 5715.24(A)
sexennial reappraisals or triennial-update valuations under R.C. 5715.24. And
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second, Section 757.51 twice refers to “appl[ying]” the statutes, while six other sections of H.B. 487 (Sections 812.10, 812.11, 812.12, 812.20, 812.21, and 812.30) refer to when certain parts of the act were to “take effect” or when particular legislation “takes effect.” The General Assembly’s use of different language in Section 757.51 signals that that section does not address the effective date of the
auditors not to use the amended version while completing reappraisals and updates for 2012 while also instructing them to apply the amendment at the next post-2012 reappraisal or update. {¶ 24} Thus, as applicable in this case, R.C. 5713.03 provides that “[t]he county auditor * * * shall determine * * * the true value of the fee simple estate, as if unencumbered, of each separate tract, lot, or parcel of real property and of buildings, structures, and improvements located thereon * * *.” (Emphasis added.) 2012 Am.Sub.H.B. No. 487. The statute further provides that if the property has been the subject of a recent arm’s-length sale, “the auditor may consider the sale price * * * to be the true value for taxation purposes.” (Emphasis added.) Id. Recent Arm’s-Length Sales under R.C. 5713.03, as Amended by H.B. 487 {¶ 25} In its first proposition of law, Terraza argues that amended R.C. 5713.03, as applicable here, significantly changes the way taxing authorities must hear and analyze a case involving the recent arm’s-length sale of a lease- encumbered property. Terraza asserts that Berea, 106 Ohio St.3d 269, 2005-Ohio- 4979, 834 N.E.2d 782, no longer controls this inquiry and that tax valuations involving recent arm’s-length sales now must account for the value of
taxing authorities must consider whether the lease calls for rent at the market rate. With this premise, Terraza contends (1) that the BOE presented “no evidence” that the sale reflected the value of the unencumbered fee-simple estate and (2) that its
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value of the unencumbered fee-simple estate. Legislative override of Berea {¶ 26} Terraza is correct that the statutory amendment overrides Berea. The fundamental question in Berea was whether a property should be valued as if unencumbered even when it was the subject of a recent arm’s-length sale. Id. at ¶ 5-6. Relying on the plain language of former R.C. 5713.03, we held that “when the property has been the subject of a recent arm’s-length sale between a willing seller and a willing buyer, the sale price of the property shall be ‘the true value for taxation purposes.’ ” Id. at ¶ 13, quoting former R.C. 5713.03, 136 Ohio Laws, Part II, at 3247. The former statutory language thus foreclosed an opposing party from introducing appraisal evidence to override a recent arm’s-length sale price. See id. at ¶ 15. {¶ 27} In reaching that holding, we distinguished and declined to apply the first syllabus paragraph of Alliance Towers, Ltd. v. Stark Cty. Bd. of Revision, 37 Ohio St.3d 16, 523 N.E.2d 826 (1988), which stated, “For real property tax purposes, the fee simple estate is to be valued as if it were unencumbered.” See Berea at ¶ 5, 14-15. The H.B. 487 amendment—requiring valuation of “the fee simple estate, as if unencumbered”—now calls for application of that very rule, regardless of whether the property at issue was the subject of a recent sale. The General Assembly reinforced this policy change by modifying in H.B. 487 the mandatory language on which we relied in Berea, directing that the auditor may— not shall—“consider the sale price * * * to be the true value for taxation purposes.” R.C. 5713.03. The statutory amendment thus allows taxing authorities to consider non-sale-price evidence—particularly evidence of encumbrances and their effect
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{¶ 28} The BOE takes a different view of the H.B. 487 amendment. The BOE’s main argument is that if the H.B. 487 amendment applies here, the recent arm’s-length sale price remains the “best evidence” and creates a rebuttable presumption of the property’s value. We will address the merits of this argument
sale price because of the encumbrance” of the lease when the subject property was sold in a recent arm’s-length transaction and that (2) “the appraisal evidence cannot be used to rebut the arm’s-length sale.” The BOE does not explain how the language of amended R.C. 5713.03 supports this view. {¶ 29} And for its part, the BTA concluded that the changes to R.C. 5713.03 “do not overrule the directive consistently set forth by the Supreme Court that this board rely on a recent arm’s-length sale of the property if evidence of such a sale is properly before us.” BTA Nos. 2015-279 and 2015-280, 2015 Ohio Tax LEXIS 4165, *8 (Nov. 30, 2015). But like the BOE, the BTA did not reconcile the new statutory language with its conclusion, except to point out that R.C. 5713.03 still permits a property’s recent sale price to be used in determining its value. {¶ 30} In the absence of a persuasive argument to the contrary, we hold that H.B. 487 overrode Berea and that a recent arm’s-length sale price is not conclusive evidence of the true value of property under R.C. 5713.03, as amended by H.B. 487. The best-evidence rule of property valuation endures {¶ 31} Terraza argues that the BOE submitted no evidence showing that the February 2013 sale price reflected the value of the unencumbered fee-simple estate. In essence, Terraza contends that evidence of the sale price itself was insufficient— i.e., that a proponent of a recent sale price as indicative of value needs to submit evidence of the sale and affirmative evidence showing that the sale price reflects the value of the unencumbered fee-simple estate. We reject this aspect of Terraza’s argument.
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{¶ 32} Terraza’s argument implicates two distinct, yet related, judicially created rebuttable presumptions. The first is the presumption that a submitted sale price “has met all the requirements that characterize true value.” Cincinnati School
N.E.2d 1197 (1997). In Dublin City Schools Bd. of Edn. v. Franklin Cty. Bd. of Revision, 118 Ohio St.3d 45, 2008-Ohio-1588, 885 N.E.2d 934, ¶ 16, we applied Cincinnati School Dist. in the context of encumbrances, stating that “the burden lies upon the party who opposes the use of the sale price to show that the encumbrances on the property constitute a reason to disregard the sale price as an indicator of value.” This supports our conclusion that the proponent of a sale is not required, as an initial matter, to affirmatively demonstrate with extrinsic evidence that a sale price reflects the value of the unencumbered fee-simple estate. Once the BOE provided basic documentation of the sale, Terraza had the burden of going forward with rebuttal evidence showing that the price did not, in fact, reflect the property’s true value. See Cincinnati School Dist. at 327-328. {¶ 33} The second presumption is rooted in the best-evidence rule of property valuation, which, as explained earlier in this opinion, provides that “[t]he best evidence of the ‘true value in money’ of real property is an actual, recent sale
N.E.2d 722, at paragraph one of the syllabus, quoting R.C. 5713.01; Park Invest. Co., 175 Ohio St. at 412, 195 N.E.2d 908. We have said that this rule—which existed before R.C. 5713.03 was amended to refer to recent arm’s-length sales, see 136 Ohio Laws, Part II, at 3247—creates a rebuttable presumption that the sale price reflected true value. See Ratner I, 23 Ohio St.3d at 61, 491 N.E.2d 680. Nothing suggests that the General Assembly intended to depart from this longstanding rule. Indeed, R.C. 5713.03 continues to refer to recent arm’s-length sales by permitting the use of sale prices in determining value. This signals that the
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General Assembly still favors the use of recent arm’s-length sale prices in determining value for taxation purposes. {¶ 34} With this in mind, Terraza’s argument is wrong in two respects. First, it incorrectly states that there is “no evidence” that the sale price reflected the value of the unencumbered fee-simple estate. The February 2013 sale price, which Terraza does not dispute, is the best evidence of the property’s true value, subject to rebuttal. And second, R.C. 5713.03 does not now “require[ ] an inquiry into whether a lease in place reflects market rent at the time of a sale,” as Terraza maintains in its first proposition of law. (Emphasis added.) Market rent becomes relevant only if an opponent presents it as evidence in an attempt to rebut a sale price. Terraza’s rebuttal evidence {¶ 35} Terraza presented evidence—Costello’s appraisal and testimony— in an attempt to show that its arm’s-length purchase price did not reflect the value
unreasonable and unlawful because the BTA did not even consider that evidence. {¶ 36} Terraza is right. Although the BTA overruled the BOE’s evidentiary
applied our holding in Berea, valuing the property according to the sale price without addressing the substance of the appraisal. Because the BTA viewed the sale-price evidence as irrebuttable, its decision contravened R.C. 5713.03, as amended by H.B. 487. The decision, therefore, was unreasonable and unlawful. {¶ 37} We decline to undertake the task that the BTA failed to perform. As would be expected, the parties disagree about the weight that should be afforded to Costello’s opinions. Terraza argues that the appraisal is dispositive because its market-rent analysis refutes the usefulness of the sale price and the BOE offered no
the appraisal, arguing that no one with personal knowledge testified concerning the
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using the sale price as the value of the property, it did not fulfill its role as fact- finder concerning all the evidence before it. We vacate the BTA’s decision and remand this case for the BTA to address and weigh the evidence before it in the first instance. See Bedford Bd. of Edn. v. Cuyahoga Cty. Bd. of Revision, 132 Ohio St.3d 371, 2012-Ohio-2844, 972 N.E.2d 559, ¶ 3. Ohio Adm.Code 5703-25-07(D)(2) {¶ 38} In its second proposition of law, Terraza argues that Ohio Adm.Code 5703-25-07(D)(2) “requires” taxing authorities to consider whether a lease reflects market rent at the time of a sale. We hold that the administrative rule does not alter the framework outlined above, because it does not mandate a particular methodology for appraising a property’s value. Ohio Adm.Code 5703-25-07(D) instructs county auditors that they “may consider the use of any or all of the recognized three approaches to value,” and Ohio Adm.Code 5703-25-07(D)(2) addresses the income approach. (Emphasis added.) The rule does not require the use of the income approach in every valuation or require the proponent of a sale price to present evidence concerning market rent or the values of the “leasehold” and “leased fee,” terminology Terraza uses in its brief. We therefore reject Terraza’s second proposition of law. Conclusion {¶ 39} The H.B. 487 amendment to R.C. 5713.03 applies in this case. This means that the BTA had to determine the value of the subject property’s unencumbered fee-simple estate. The February 2013 sale—although recent to the tax-lien date and arm’s length in nature—does not conclusively determine that
price did not reflect the value of the unencumbered fee-simple estate in this case. Because the BTA did not properly consider that evidence, we vacate the BTA’s
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decision and remand the case for the BTA to address and weigh the evidence before it. Decision vacated and cause remanded. O’CONNOR, C.J., and O’DONNELL, KENNEDY, FRENCH, O’NEILL, and DEWINE, JJ., concur. _________________ Sleggs, Danzinger & Gill, Co., L.P.A., and Todd W. Sleggs, for appellant. Rich & Gillis Law Group, L.L.C., Mark Gillis, and Kimberly G. Allison, for appellee Hilliard City Schools Board of Education. _________________