EQUITY DUBLIN ASSOCIATES ET AL., APPELLEES, v. TESTA, TAX COMMR., ET AL., APPELLANTS.
No. 2014-0168
Supreme Court of Ohio
December 2, 2014
142 Ohio St.3d 152, 2014-Ohio-5243
Submitted September 10, 2014
Conclusion
{22} This issue has troubled lower courts throughout our state. And this case is optimally positioned to resolve this question of law and provide guidance to courts and litigants. The division on this issue in the appellate courts compels us to exercise our constitutional duty. See
FRENCH and O‘NEILL, JJ., concur in the foregoing opinion.
Ernest E. Cottrell Jr., for appellee.
Wesley M. Miller Jr., for appellant.
O‘DONNELL, J.
{11} This appeal addresses a claim of tax exemption for two separate buildings located on two separate parcels of real property, one of which is situated in the Dublin City School District, the other in the Columbus City School District. The landlords seek the exemption on the basis that Columbus State Community
{12} The appellants are the tax commissioner and the boards of education of the two school districts (collectively, the “BOE“). The commissioner and the BOE seek reversal of the partial grant of exemption by the Board of Tax Appeals (“BTA“). The BTA predicated its decision on the public-college exemption in
Facts and Procedural History
{13} This case involves two different exemption applications, two different parcels of real property in Franklin County, and two different property owners, but the exemption claims presented share a common issue for our review. The buildings that are located in the Dublin school district were owned by Equity Dublin Associates, and the building in the Columbus school district was owned by SHSCC #2 Limited Partnership. We will refer to the owners collectively as “Equity Dublin.”
{14} Equity Dublin filed the applications for exemption on March 16, 2005, seeking exemption for tax year 2005 and remission for the preceding three years. Both applications predicate the claim for exemption on
{15} The Dublin application sought to exempt 13,545 square feet of a 116,000-square-foot office complex, stating that the annual enrollment of students at the site was 1,490 and reciting that “[a] full array of courses are [sic] offered and students in these locations can earn an Associate of Arts and Sciences Degree at these sites.” The Columbus application sought to exempt 12,000 square feet of office space in Groveport, leased to and occupied by Columbus State to educate some 490 enrolled students.
{16} Excerpts of lease instruments were attached to both applications, showing Columbus State as lessee. The lease of the Groveport property shows Columbus State‘s contractual obligation to pay the property taxes. The lease for the Dublin property differs, presumably because there Columbus State is renting part but not all of the premises. In the Dublin lease, the contract obligates Columbus State to pay taxes with respect to its personal property, but the real property tax is built into the rent; indeed, the contract contains a rent-
{17} On May 23, 2011, the tax commissioner issued final determinations on the two applications. Regarding
{18} Next, the commissioner proceeded to determine possible exempt status pursuant to
{19} Finally, the tax commissioner cited former
{110} Equity Dublin appealed to the BTA.1 The BTA consolidated the cases and held a hearing at which the parties elected not to present additional evidence. In its decision, the BTA held that
{111} As for the public-college exemption at
{12} The tax commissioner moved the BTA for reconsideration. The primary ground of the motion was that consideration of the exemption claim under
{113} On January 28, 2014, the BTA issued a decision denying the motion for reconsideration. First, the BTA rejected the primary ground for reconsideration, noting that
{14} The tax commissioner and the BOE have appealed the partial grant of exemption, and for the following reasons, we reverse.
Arguments of the Parties
{15} Combined, the BOE and the tax commissioner advance ten propositions of law, but these can be consolidated into to three main arguments. First, the BOE and the commissioner argue that exemption is not justified under R.C.
{16} Second, the BOE and the commissioner contend that the existence of an exemption specifically aimed at community colleges at
{117} In response, Equity Dublin points out that the court in Athens Cty. Auditor proceeded to consider whether the property there was exempt under
{18} Third, the BOE and the commissioner contend that the public-college exemption is not available to a for-profit landlord, and they place heavy reliance on
{19} Equity Dublin counters primarily with its direct reliance on Perk, 26 Ohio St.2d 1, 268 N.E.2d 577, in which Cleveland State University was able to exempt modular buildings located on the campus even though those buildings were owned by a for-profit landlord and leased out to Cleveland State for its use. At oral argument, the tax commissioner additionally contended that our decision in Case W. Res. Univ. v. Wilkins, 105 Ohio St.3d 276, 2005-Ohio-1649, 825 N.E.2d 146, “said that [Perk] has no applicability anymore.”
{1120} The tax commissioner makes one additional argument of a jurisdictional nature. According to the commissioner, a claim of exemption under
Standard of Review
{121} We review BTA decisions to determine whether they are reasonable and lawful.
{22} The essential facts of this matter are not in dispute; instead, this appeal confronts us with how the exemption statutes, properly construed, apply to those facts. This presents us with a question of law, which we decide de novo. Akron Centre Plaza, L.L.C. v. Summit Cty. Bd. of Revision, 128 Ohio St.3d 145, 2010-Ohio-5035, 942 N.E.2d 1054, 1 10.
Failure to File Cross-Appeal
{123} Both the tax commissioner and the BOE argue that the appellee/property owners are not entitled to exemption under
{1124} For its part, Equity Dublin asserts that the BTA erred in denying exemption pursuant to
{125} Because Equity Dublin did not cross-appeal, we cannot grant relief on the basis that the BTA rejected the exemption claim premised upon
Identifying a Particular Statute on an Exemption Application Is Not a Jurisdictional Prerequisite
{26} Before considering the property exemption issue, we address the threshold issue of jurisdiction raised by the tax commissioner, who contends that
{27} We reject the commissioner‘s argument. Even when a requirement on a tax form has been omitted and is procedurally important, it is not a jurisdictional prerequisite unless the statutes prescribe that requirement. Groveport Madison Local Schools Bd. of Edn. v. Franklin Cty. Bd. of Revision, 137 Ohio St.3d 266, 2013-Ohio-4627, 998 N.E.2d 1132, 114-15, 23, citing Knickerbocker Properties, Inc. XLII v. Delaware Cty. Bd. of Revision, 119 Ohio St.3d 233, 2008-Ohio-3192, 893 N.E.2d 457.
{128} In this case, the relevant statute is
{129} As we explained in Groveport Madison, the fact that the form itself calls for identification of an exemption statute did not create a jurisdictional requirement; there, the valuation-complaint form called for identification of the property owner, but proper identification of that person was not a jurisdictional prerequisite, because it was not directly required by the statute. Accord Knickerbocker, at 10-14 (although form called for setting forth the property owner‘s address, supplying a proper address was not a jurisdictional prerequisite, because the statute did not require it).
{130} In accord with this case authority, Equity Dublin‘s failure to identify
{131} The tax commissioner and the BOE argue that because
{32} What this argument ignores is that in Athens Cty. Auditor, we did proceed to consider the claim of exemption under
{1133} Beyond those factors, our consideration of Equity Dublin‘s claim under Perk, 26 Ohio St.2d 1, 268 N.E.2d 577, gives us cause to call into question the validity of our pronouncement in Athens Cty. Auditor. In Perk, a state university sought exemption as a lessee of modular buildings that had been installed on its land and were used for university purposes.
The Public-College Exemption Applies to Buildings Leased by the College Only When the College Owns the Land
1. Case W. Res. Univ. applies where the college is lessor, not lessee
{135} In arguing that exemption under
{136} The tax commissioner is mistaken on both counts. Case W. Res. Univ. addresses the situation where the public college is the owner and lessor of property that has been leased by the public college to a third-party tenant. That is the opposite of the situation here. Moreover, far from saying that Perk “has no applicability anymore,” Case W. Res. Univ. does not even cite Perk.
{137} Because Case W. Res. Univ. is inapposite, we proceed to address whether the property at issue is exempt under the holding of Perk.
2. Perk limits its holding to buildings “on campus,” i.e., on the land owned by the institution
{138} The case law is clear that, as the claimant seeking exemption, Equity Dublin has “the onus * * * to show that the language of the statute ‘clearly express[es] the exemption’ in relation to the facts of the claim.” Anderson/Maltbie, 127 Ohio St.3d 178, 2010-Ohio-4904, 937 N.E.2d 547, 116, quoting Ares, Inc. v. Limbach, 51 Ohio St.3d 102, 104, 554 N.E.2d 1310 (1990). The court also stated in Anderson/Maltbie that it would not broaden the judicial reading of the statute beyond the scope of exemption already established in the case law. Id. at 122-23.
{139} In plain terms,
buildings at issue in Perk, the university had to seek exemption under
R.C. 5709.07(A)(4) . Under the appellants’ exclusivity argument in this case, the exemption sought in Perk would have had to be denied; yet we granted the exemption in that case.
(A) The following property shall be exempt from taxation:
* * *
(4) Public colleges and academies and all buildings connected with them, and all lands connected with public institutions of learning, not used with a view to profit * * *.
{40} The starting point is that “public colleges” are listed as a type of “property” to be exempted. The clear implication of this manner of speaking is that the statute‘s reference to public colleges and academies is intended to refer to property insofar as it is owned and occupied and used by those institutions for their basic institutional purposes.
{41} Equity Dublin seeks exemption by citing the statute as construed and applied in Perk, 26 Ohio St.2d 1, 268 N.E.2d 577. In that case, Cleveland State was unable to afford to construct permanent buildings on part of its campus. As a result, it contracted for modular buildings to be installed that were owned by the installer, a for-profit company that leased the buildings to Cleveland State. Id. at 3. The BTA in this case read Perk as holding that “property used solely for classrooms and faculty offices were buildings ‘connected with’ a public college,” and in the BTA‘s view the court had “specifically rejected the argument that the property must be owned and used by the public college to be entitled to exemption.” (Emphasis sic.) BTA Nos. 2011-Q-1192 and 2011-Q-1195, at 8. But the BTA‘s characterization ignores a crucial element of the court‘s reasoning in Perk.
{142) Consistent with Anderson/Maltbie, Equity Dublin must present facts governed by Perk and the language of the statute in order to prevail. In Perk, the buildings were leased from a for-profit company, as in this case; but those buildings were installed on land owned by Cleveland State for which Cleveland State had obtained exemption as public property used exclusively for public purposes. Perk at 2. That circumstance factually distinguishes Perk from this case.
{143} Two circumstances support the interpretation that ownership of land was decisive in Perk. First, the language of the statute that the court relied on indicates that it was. “Looking solely at the language ‘public colleges and academies and all buildings connected therewith,’ we think it clear that the buildings in question, standing on the campus of Cleveland State and being used solely for classroom and faculty offices, are buildings ‘connected’ with a public college.” Id. at 5. Notably, the court‘s process of reasoning in that passage identifies both the use of the buildings and their presence “on the campus” as
{144} Second, Perk relied heavily on the court‘s earlier decision in Denison Univ. v. Bd. of Tax Appeals, 2 Ohio St.2d 17, 205 N.E.2d 896 (1965). In that case, Denison sought exemption for various parcels of real property that it owned: a 127-acre farm with certain buildings, including a carpentry shop used for university maintenance and repair, a lumber shed used for storing lumber intended for the carpentry shop, the dwelling of the caretaker, and riding facilities used for physical education; the president‘s home on the college campus; and a guesthouse and its eight-acre tract. Id. at 19. In upholding the exemption claim as to all of the property, and in finding that the buildings were sufficiently “connected with” the college and that the ancillary lands were not used for profit, we stated that it would be “unreasonable to tax facilities for such education where private donations have provided those facilities and thereby relieved tax dollars from providing them.” (Emphasis added.) Id. at 28-29.
{145} In other words, the ownership of the lands by the public college as an endowment for the public good justified the broad scope of exemption under
CONCLUSION
{146} The BTA erred by construing
Decision reversed.
O‘CONNOR, C.J., and KENNEDY and FRENCH, JJ., concur.
PFEIFER, LANZINGER, and O‘NEILL, JJ., dissent.
PFEIFER, J., dissenting.
{148} Under
{1149} But the majority inserts an additional requirement for the exemption—that the land beneath the buildings be owned by the public college—which it claims was made mandatory by this court in Cleveland State Univ. v. Perk, 26 Ohio St.2d 1, 268 N.E.2d 577 (1971). In Perk, this court considered whether the exemption in former
“The buildings are being used by Modulux, Inc., a corporation for profit, to generate income and profit. The fact that the lessee uses the property for educational purposes is immaterial. Modulux, Inc., is not an institution of learning and, as owner of the subject property, Modulux, Inc., is not using the property for educational purposes.”
{50} This court reversed, holding instead that the fact that the lessee used the property for educational purposes was not immaterial, but crucial: “Looking solely at the language ‘public colleges and academies and all buildings connected therewith,’ we think it clear that the buildings in question, standing on the campus of Cleveland State and being used solely for classrooms and faculty offices, are buildings ‘connected’ with a public college.” Id. at 5.
{151} The majority has made this court‘s recognition in Perk that the buildings at issue were on Cleveland State‘s campus a sine qua non of eligibility for an
{1152) Perk resolved two key issues. First, the court held that the applicant for the exemption need not be the owner. The second issue was whether the limiting phrase “not used with a view to profit” of
{153} Whether the buildings were connected with Cleveland State was never an issue in Perk. Yes, the court noted that the buildings were on the campus of Cleveland State and used exclusively for classrooms and offices, but this court in no way held that buildings must be on an institution‘s main campus in order to qualify for the exemption. All that the statute requires is that the building be connected with the college. Perk does not hold otherwise.
{1154} The exemption at issue applies to the buildings, and thus, who owns the land below the buildings is not relevant.
{155} The General Assembly has determined that buildings used to educate Ohioans at public colleges are exempt from taxation. This court has previously determined that that exemption should apply regardless of the owner of the buildings. But the majority takes an incidental fact from Perk and makes it an essential element of eligibility for an
LANZINGER and O‘NEILL, JJ., concur.
Luper, Neidenthal & Logan, Matthew T. Anderson, and M. Salman Shah, for appellees.
Michael DeWine, Attorney General, Barton A. Hubbard and David D. Ebersole, Assistant Attorneys General, for appellant Tax Commissioner of Ohio.
Rich & Gillis Law Group, L.L.C., Mark H. Gillis, and Kimberley G. Allison, for appellants Dublin City School District Board of Education and Columbus City School District Board of Education.