27th Annual Tuesday & Wednesday, January 23‐24, 2018 Hya� Regency Columbus, Columbus, Ohio Ohio Tax Ohio Tax & Jobs 2018... Significant Developments in Real Property Appraisals, Valuation & Classification David D. Ebersole Attorney McDonald Hopkins LLC Columbus Tuesday, January 23, 2018 10:00 a.m. to 12:15 p.m.
Biographical Information David D. Ebersole, Associate, McDonald Hopkins, LLC 250 West St., Suite 550, Columbus, OH 43215 (614) 484-0716 debersole@mcdonaldhopkins.com Dave is an associate attorney in McDonald Hopkins’ Tax and Benefits Group who advises clients on a multitude of tax issues, particularly state and local taxes. As a former Assistant Attorney General for the Ohio Attorney General, Mike DeWine, 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 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 also advises clients with respect to federal tax matters, including federal tax structuring and analysis for business transactions, federal tax controversies including IRS audits, 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.
Significant Developments in Ohio Real Property Taxation 27 th Annual Ohio Tax Conference David D. Ebersole McDonald Hopkins LLC 614.484.0716 debersole@mcdonaldhopkins.com 6392676
Overview Leased Fee/Fee Simple Appraisals and Burden of Proof Reliance on Auditor Valuation Low Income Housing Bulk Sales and Purchase Price Allocations Exemption Cases and Leased Properties Jurisdiction and Procedural Issues 2
Leased Fee/Fee Simple Common Fact Pattern – Large commercial structure constructed to user’s specifications • Owner-occupied or leased (including sale-leasebacks) – Either: • First generation user contests valuation • Initial occupant vacates structure; sits empty or repurposed – Market includes first generation users, second generation users, and vacant properties Issue – Is an adjustment to true value needed, or is a recent arm’s length sale conclusive evidence of true value in these situations? 3
Leased Fee/Fee Simple Terraza 8 LLC , 2017-Ohio-4415 – Recent arm’s length sale is NOT conclusive evidence of true value under R.C. 5713.03, as amended – Presumptions apply; burden on opponent of sale price – BTA must consider appraisal evidence – Applies to the 2013 tax year and more recent years Compare, Columbus City Sch. Bd. of Ed ., 2017-Ohio- 7578 (“State Farm” case); Rite Aid of Ohio , 2016- Ohio-371; Lowe’s Home Centers , 2016-Ohio-372 – Cases addressing former R.C. 5713.03 4
Burden of Proof and Expert Appraisals Burden of Proof – Taxpayer carries burden to prove claimed value reduction – See, Moskowitz v. Cuy. Cty. Bd. of Rev. , 2017-Ohio-4002 Competing Appraisals – Abuse of discretion standard for the Ohio Supreme Court reviewing the weight the BTA afforded competing appraisals • See, Johnston Coca-Cola Bottling Co. , 2017-Ohio-870; NWD 300 Spring LLC , 2017-Ohio-7579 – BTA must consider and weigh conflicting evidence when it adopts an appraiser’s opinion of value • See, Lutheran Social Services of Central Ohio Village Housing, Inc. , 2017-Ohio-900 5
Reliance on Auditor Valuation “Bedford Rule” – In general, BOE may not invoke the auditor’s valuation if BOR reduction “minimally plausible” and based upon competent evidence – See, Dublin City Sch. Bd. of Ed. , 2016-Ohio-3025, ¶¶ 9-11 (specifying four criteria to invoke the Bedford Rule). BTA Reliance on Auditor Valuation – BTA may rely on auditor valuation where BOR reasonably upheld auditor valuation (no duty to independently investigate). – See, W. Carrollton City Sch. BOE , 2017-Ohio-4328 (stipulated cost of construction did not “negate” auditor valuation) 6
Gov’t Subsidized Housing Col. City Sch. Bd. of Ed. v. Franklin Cty. Bd. of Rev. , 2017-Ohio-2734 (“Network Restorations”) – Facts: Low-income residential parcels, benefitting from low income housing tax credit (LIHTC) and housing-assistance payments (HAP) through Section 8 of the Housing Act of 1937 – Held: • Under income approach, use market (not actual) rents to value government subsidized housing • Under income approach, government subsidies should not taken into account so as to increase value • Cost approach should not be used to value government subsidized housing 7
Gov’t Subsidized Housing Notestine Manor , Inc. v. Logan Cty. Bd. of Rev. , 2018-Ohio-2 – Facts: • Apartment building for low-income, elderly individuals • Federal subsidies under Section 202 of the Housing Act of 1959; “capital advance” to developer; agreement limits rent to prevent excessive surplus income to owner – Held: Network Restorations “rule” favoring market rents is presumptive, not conclusive • “Contract rents” may be used to determine value where method used removes “affirmative value” of gov’t subsidies 8
Bulk Sales Value Listed On Conveyance Fee Statements – Taxpayer bears the burden to disprove value as reported on the conveyance fee statement – BTA unlawfully excluded admissible business records – See, Buckeye Terminals, LLC , 2017-Ohio-7664 (bulk purchase of 32 facilities in several states) Allocation to Goodwill – Burden on taxpayer claiming value reduction to show propriety of allocated bulk-sale price to goodwill – See, Cincinnati City Sch. Dist. BOE , 2017-Ohio-7650 9
Exemption Cases: Leased Property Trilogy of Similar Cases with Different Outcomes Compare, 250 Shoop Mill , 2016-Ohio-5012 (exemption denied); 2350 Morse LLC , 2017-Ohio-7800 (exemption granted); Breeze, Inc. , 2017-Ohio-7801 (remanded) Leased Property: Holding company leased property to community schools; excess revenue “View to Profit” requires subjective intent – Breeze, Inc : for-profit corp may not have “view to profit” Dissenting & Concurring Opinions (O’Connor, O’Neill) 10
Current Agricultural Use Valuation Adams v. Testa , 2017-Ohio-8853 (“ Adams I”) – The Tax Commissioner’s annual journal entry setting forth CAUV tables are appealable “final determinations” – Landowners have standing to appeal CAUV tables Adams v. Testa , 2017-Ohio-8854 (“ Adams II”) – The Tax Commissioner’s annual journal entry setting forth CAUV tables are not appealable agency rules – Landowners did not satisfy burden to show that O.A.C. provisions requiring CAUV tables are unreasonable 11
Exemption Cases: Health Care Another Dialysis Clinic Case – No req’d level, i.e. “quantum”, of unreimbursed care – See, Dialysis Centers of Dayton, LLC v. Testa , 150 Ohio St.3d 208 (2017) (exemption granted) Other Dialysis Clinic Cases – Pending: Chagrin Realty, Inc. v. Testa , OSC Case No. 2017-0469 (notice and jurisdictional issues involved) – Decided: Dialysis Clinic, Inc. v. Levin , 127 Ohio St.3d 215 (2010) (denied); Rural Health Collaborative v. Testa , 145 Ohio St.3d 430 (2016), denied on remand to Ohio BTA, Case No. 2012-3421 (Apr. 12, 2016) 12
Jurisdiction and Procedural Issues Evidence: County may not contest defects in the record that they prepared and certified – See, Dauch v. Erie Cty. Bd. of Rev. , 2017-Ohio-1412 Notice & Jurisdiction: Groveport Madison , 2017-Ohio-1428 – BTA notice to owner must be “reasonably calculated” to notify the owner – BTA lacks jurisdiction to vacate its decision after appeal window closes , even if the decision is void Jurisdiction: Filing jurisdictionally invalid complaint in later year does not cut off continuation of prior year complaint – See, Col. City Sch. Bd. of Ed. , 2017-Ohio-5823, ¶ 10 13
Questions? David Ebersole, Esq. – McDonald Hopkins, LLC – Phone: (614) 484-0716 – Email: debersole@mcdonaldhopkins.com 14
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