Summer Rays, Inc. v. Testa
2017 Ohio 7901
| Ohio Ct. App. | 2017Background
- Summer Rays, an Ohio 501(c)(3) nonprofit, operates recovery housing and a publicly accessible fitness/personal-training studio (Rev Studio) at 7480 E. Main St., Reynoldsburg; it charges a mandatory weekly program fee ($100–$150) and sometimes requires labor in lieu of cash.
- Summer Rays applied for a property-tax exemption under R.C. 5709.12 for the 7480 E. Main St. parcel; the Tax Commissioner denied the exemption (DTE No. WE 2704).
- Summer Rays appealed to the Ohio Board of Tax Appeals (BTA). Duplicate notices of appeal produced two BTA dockets (2015-951 and 2015-1108); the commissioner moved to consolidate and to substitute a transcript; the BTA granted consolidation and accepted the correct transcript for WE 2704.
- At BTA hearing, evidence showed Rev Studio serves the general public and uses market-based fees/membership schedule; program participants access Rev Studio contingent on paying the mandatory program fee.
- The BTA affirmed the commissioner’s denial, concluding Summer Rays is not a "charitable institution" and that 7480 E. Main St. is not used "exclusively for charitable purposes." Summer Rays appealed to the Tenth District, which affirmed.
Issues
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| Whether Summer Rays qualifies as a "charitable institution" under R.C. 5709.121 | Summer Rays: nonprofit status and program services (including access for participants) qualify it as charitable despite modest fees | Commissioner/BTA: mandatory program fees or labor show services are not provided regardless of ability to pay; core activity is not nonprofit charity | Held: Not a charitable institution — mandatory fees/labor defeat nonprofit core-activity showing |
| Whether the 7480 E. Main St. parcel is "used exclusively for charitable purposes" under R.C. 5709.12 | Summer Rays: even if not a charity, particular property use (support services, housing access) is charitable; Rev Studio serves program participants | Commissioner/BTA: primary use of parcel is Rev Studio personal-training business open to public with market fees; primary (not ancillary) use must be charitable | Held: Not used exclusively for charitable purposes — primary use is a commercial personal-training business |
| Whether administrative errors (parcel misidentification and transcript/appeal consolidation) prejudiced Summer Rays’ rights | Summer Rays: commissioner misidentified parcel and BTA consolidation/transcript errors corrupted the record and deprived review of separate appeals | Commissioner/BTA: parcel-number in final determination was a scrivener’s error; correct transcript for WE 2704 ultimately filed and considered; any WE 1596 matters are separate and not before the court | Held: Errors were inconsequential; no prejudice shown; court reviews BTA decision on WE 2704 and affirms |
Key Cases Cited
- Dialysis Clinic, Inc. v. Levin, 127 Ohio St.3d 215 (2010) (501(c)(3) status not dispositive; analyze the institution's core activity for charitable status)
- First Baptist Church of Milford, Inc. v. Wilkins, 110 Ohio St.3d 496 (2006) (R.C. 5709.121 defines exclusive-charitable-use when owner is charitable institution; statute does not itself grant exemption)
- Planned Parenthood Assn. v. Tax Commr., 5 Ohio St.2d 117 (1966) (legal definition of charity; beneficiaries' means or payment does not necessarily defeat charitable character)
- Church of God in N. Ohio, Inc. v. Levin, 124 Ohio St.3d 36 (2009) ("used exclusively" means primary use; charitable services must be on a nonprofit basis to those in need)
- Bethesda Healthcare, Inc. v. Wilkins, 101 Ohio St.3d 420 (2004) (evaluate totality of circumstances to determine charitable use of property)
- 250 Shoup Mill, L.L.C. v. Testa, 147 Ohio St.3d 98 (2016) (taxpayer bears burden of proving entitlement to exemption)