250 Shoup Mill, L.L.C. v. Testa (Slip Opinion)
147 Ohio St. 3d 98
| Ohio | 2016Background
- 250 Shoup Mill, L.L.C. (Shoup), a single-member nonprofit LLC wholly owned by New Plan Learning, leased a renovated building to Horizon Science Academy-Dayton High School, a nonprofit community (charter) school, and sought a property-tax exemption for tax year 2010.
- New Plan is a 501(c)(3) nonprofit that forms and supports community schools; Shoup was a "disregarded entity" for federal tax purposes and New Plan reported Shoup’s leasing activity on its Form 990.
- Leases were structured to cover financing, construction and operating costs; rents were set to cover loan payments with modest escalations, and New Plan sometimes deferred or forgave rent to aid tenant schools.
- Financial records showed modest net surplus/net-asset increases across New Plan’s portfolio of six school properties, and Shoup (through New Plan) had positive net income in the relevant years.
- The Tax Commissioner denied exemptions under former R.C. 5709.07(A)(1) (public-schoolhouse) and R.C. 5709.12/.121 (charitable-use) because the properties were leased "with a view to profit;" the BTA affirmed.
- The Ohio Supreme Court affirmed the BTA, holding Shoup’s leasing activity showed a view to profit and rejecting attempts to claim an exemption vicariously through the lessee’s public/charitable use.
Issues
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| Whether property qualifies for public-schoolhouse exemption (former R.C. 5709.07(A)(1)) | Shoup: nonprofit ownership and financially interlinked structure with New Plan and tenant schools means leasing is not "with a view to profit" and should be exempt | State: lease generates excess revenue and is operated with a view to profit; Anderson/Maltbie bars exemption if lessor intends profit | Court: Denied exemption — finds view to profit in lessor’s leasing activity defeats public-schoolhouse claim |
| Whether property qualifies for exclusive charitable-use exemption (R.C. 5709.12/.121) | Shoup: owner’s nonprofit status and use to support community schools makes use charitable | State: leasing for market-level rent is not exclusive charitable use; owner’s core activity (leasing) is not charitable | Court: Denied — owner’s leasing activity is not an exclusive charitable use and cannot qualify under charitable-institution provisions |
| Whether Shoup may rely on lessee’s activities (vicarious exemption) | Shoup: corporate loop (owners and tenants intertwined) makes lessor effectively an instrumentality of schools; should be able to claim exemption based on lessee’s public-educational use | State: exemption depends on owner’s own activities; courts bar vicarious exemptions | Court: Denied — rejects vicarious exemption; owner must meet exemption criteria based on its own activities |
| Sufficiency of BTA’s factual finding of "view to profit" | Shoup: rents aimed at minimum necessary to cover costs; any surplus is modest, incidental, or used to subsidize tenant schools | State: financial statements show rent exceeds expenses and net-asset increases; surplus demonstrates profit motive or view to profit | Court: Affirms BTA — factual finding supported by record and within BTA’s discretion |
Key Cases Cited
- Anderson/Maltbie v. Levin, 937 N.E.2d 547 (Ohio 2010) (public-schoolhouse exemption defeated if lease intended to generate profit for lessor or lessee)
- OCLC Online Computer Library Ctr., Inc. v. Kinney, 464 N.E.2d 572 (Ohio 1984) (rejects vicarious charitable exemption based on customers’ charitable status)
- Joint Hosp. Servs. v. Lindley, 370 N.E.2d 474 (Ohio 1977) (entity providing services to charities not automatically exempt; must satisfy charitable-purpose test itself)
- Am. Soc. for Metals v. Limbach, 569 N.E.2d 1065 (Ohio 1991) (profit defined as excess of income over expenditure for charitable-exemption analysis)
- Benjamin Rose Inst. v. Myers, 110 N.E. (Ohio 1915) (real estate rented for commercial purposes is not exempt even if income is devoted to charity)