Cincinnati School Dist. Bd. of Edn. v. Hamilton Cty. Bd. of Revision (Slip Opinion)
2017 Ohio 7650
| Ohio | 2017Background
- Queen City Terminals purchased two Ohio River parcels (7.811 acres) as part of a $2.5 million bulk asset sale in late 2010/early 2011; the contract allocated $210,000 to real estate, $833,464 to five containment tanks (personal property), $12,500 to a noncompete, and $1,444,036 to goodwill.
- Queen City reported $1,043,460 (real estate + tanks) on the conveyance statement; Hamilton County auditor assigned $1,043,460 as the 2011 real-property value during a sexennial reappraisal.
- Queen City sought a tax valuation of $210,000 (contractual real-estate allocation); the school district sought retention of the auditor’s valuation; the BOR retained the $1,043,460 valuation.
- On BTA review, the BTA accepted the $2.5 million arm’s-length sale, deducted $833,464 for nontaxable tanks, but found no evidentiary support for the contractual $1,444,036 goodwill allocation and therefore allocated the remaining $1,666,536 to real estate.
- Queen City offered an appraisal valuing the real estate at $430,000 and argued the contractual allocation should control; the BTA rejected the appraisal as insufficiently tied to the sale and found the goodwill allocation unsupported.
- The Ohio Supreme Court reviewed the BTA decision under the statutory reasonableness/lawfulness standard and affirmed.
Issues
| Issue | Plaintiff's Argument (Queen City) | Defendant's Argument (BOE/Auditor/BTA) | Held |
|---|---|---|---|
| Whether the contractual allocation of a bulk-sale price to goodwill reduces the real-property valuation for tax purposes | Allocation to goodwill ($1,444,036) was proper and should be excluded from real-estate value | Allocation lacked corroborating evidence; sale price minus tanks should be assigned to real estate | BTA reasonably found goodwill allocation unsupported and treated remaining sale proceeds (after tanks) as real-estate value |
| Whether the owner’s appraisal can supplant the bulk-sale allocation | Appraisal showing $430,000 supports lower real-estate value | Appraisal relied on noncomparable sales and bypassed the controlling arm’s-length sale | BTA reasonably rejected the appraisal as insufficient to override the sale evidence |
| Whether deduction for tanks (personal property) was appropriate | Owner agreed tanks were separate but reported lower aggregate on conveyance | Auditor and BTA supported deduction based on replacement-cost less depreciation evidence | Deduction for tanks as nontaxable personal property was accepted |
| Whether inclusion of goodwill into real-estate value violates constitutional protections (tax on intangible personal property) | Treating contractual goodwill as real estate value unlawfully taxes intangible property | Record shows the bulk of sale proceeds were attributable to real estate; goodwill not shown as separate intangible asset | Court rejected constitutional claim; inclusion supported by record and BTA findings |
Key Cases Cited
- Conalco, Inc. v. Monroe Cty. Bd. of Revision, 50 Ohio St.2d 129 (holding proper allocation of a lump-sum purchase price is best evidence of true value for real property sold near tax lien date)
- RNG Properties, Ltd. v. Summit Cty. Bd. of Revision, 140 Ohio St.3d 455 (owner bears burden to prove propriety of bulk-sale allocation)
- Hilliard City Schools Bd. of Edn. v. Franklin Cty. Bd. of Revision, 139 Ohio St.3d 1 (requirement of corroborating indicia to support allocation)
- Columbus City Schools Bd. of Edn. v. Franklin Cty. Bd. of Revision, 148 Ohio St.3d 499 (standard of appellate review: BTA determinations of value are binding unless unreasonable or unlawful)
- St. Bernard Self-Storage, L.L.C. v. Hamilton Cty. Bd. of Revision, 115 Ohio St.3d 365 (when sale complexities may justify appraisal evidence rather than sale price)
- Consol. Aluminum Corp. v. Monroe Cty. Bd. of Revision, 66 Ohio St.2d 410 (discussing use of sale vs. appraisal evidence in valuation)