KINNEAR ROAD REDEVELOPMENT, L.L.C., APPELLEE, v. TESTA, TAX COMMR., APPELLANT.
No. 2015-0976
SUPREME COURT OF OHIO
December 6, 2017
Slip Opinion No. 2017-Ohio-8816
Taxation—Real property—Exemptions—R.C.5709.87—Exemption for increase in value of real property subject to environmental cleanup—Exemption applies both to increase in value of land and to increase in value of improvements, buildings, fixtures, or structures situated on the land that were newly constructed after remediation.
[Until this opinion appears in the Ohio Official Reports advance sheets, it may be cited as Kinnear Rd. Redevelopment, L.L.C. v. Testa, Slip Opinion No. 2017-Ohio-8816.]
NOTICE
This slip opinion is subject to formal revision before it is published in an advance sheet of the Ohio Official Reports. Readers are requested to promptly notify the Reporter of Decisions, Supreme Court of Ohio, 65 South Front Street, Columbus, Ohio 43215, of any typographical or other formal errors in the opinion, in order that corrections may be made before the opinion is published.
SLIP OPINION NO. 2017-OHIO-8816
[Until this opinion appears in the Ohio Official Reports advance sheets, it may be cited as Kinnear Rd. Redevelopment, L.L.C. v. Testa, Slip Opinion No. 2017-Ohio-8816.]
(Submitted October 17, 2017—Decided December 6, 2017.)
APPEAL from the Board of Tax Appeals, No. 2013-1407.
Per Curiam.
I. SUMMARY
{¶ 1} This case concerns a partial tax exemption under
{¶ 2} Appellee, Kinnear Road Redevelopment, L.L.C. (“Kinnear“), owned the property in question until it was transferred to Lennox Flats Apartments, L.L.C., on December 20, 2013. On the January 1, 2012 tax-lien date, the property had an assessed value of $478,000. The land was vacant at that time, so the assessed value was composed solely of land value. Kinnear remediated the property and improved it with apartment buildings in 2012. On January 1, 2013, the assessed value of the land had increased to $874,000. As for the newly built apartments, the auditor assessed their value at $4,076,000.
{¶ 3} On March 25, 2013, appellant, the tax commissioner, granted an exemption of $396,000 for the increase in the assessed value of the land. The tax commissioner, however, found that the apartment buildings did not qualify for an exemption under
{¶ 4} Kinnear appealed to the Board of Tax Appeals (“BTA“). The BTA reversed the tax commissioner‘s determination, finding that Kinnear was entitled to a tax exemption for the assessed value of the apartment buildings under
{¶ 5} The tax commissioner challenges the BTA‘s decision on appeal, raising one proposition of law consisting of several arguments. The tax commissioner has waived his main argument and one other issue by failing to raise them first at the BTA. The remaining arguments lack merit. Therefore, we affirm the BTA‘s order.
II. FACTS AND PROCEDURAL HISTORY
A. Remediation, New Construction, and EPA Certification
{¶ 6} The property is a 2.39-acre parcel located on Kinnear Road in Franklin County, identified as parcel number 420-290066. From 1965 to 2007, the property was used for the manufacture and repair of industrial magnets, and chemicals from the manufacturing process contaminated the soil and groundwater.
{¶ 7} In 2012, Kinnear undertook action to remove the hazardous materials from the soil and groundwater and redevelop the land with residential apartments. Both the remediation and the construction of the apartments were completed in 2012.
{¶ 8} On February 26, 2013, the director of the Ohio Environmental Protection Agency (“EPA“) issued a covenant not to sue pursuant to
| January 1, 2012 Tax-Lien Date | |
| Land: | $478,000 |
| Building/Improvements: | $0 |
| Total: | $478,000 |
| January 1, 2013 Tax-Lien Date | |
| Land: | $874,000 |
| Building/Improvements: | $4,076,000 |
| Total: | $4,950,000 |
B. Tax Proceedings
{¶ 10}
{¶ 11}
{¶ 12} Kinnear appealed to the BTA, challenging the tax commissioner‘s refusal to include the increased value of the apartment buildings in the exemption. The BTA reversed the tax commissioner‘s determination, finding that Kinnear was entitled to an exemption for the assessed value of the apartment buildings under the plain language of
III. DISCUSSION
A. Standard of Review
{¶ 14} This court must affirm the BTA‘s decision if it was “reasonable and lawful.” Columbus City School Dist. Bd. of Edn. v. Zaino, 90 Ohio St.3d 496, 497, 739 N.E.2d 783 (2001). In making this determination, we must consider legal issues de novo. Akron City School Dist. Bd. of Edn. v. Summit Cty. Bd. of Revision, 139 Ohio St.3d 92, 2014-Ohio-1588, 9 N.E.3d 1004, ¶ 10-11. But we defer to the BTA‘s findings concerning the weight of the evidence so long as they are supported by the record. Olmsted Falls Bd. of Edn. v. Cuyahoga Cty. Bd. of Revision, 122 Ohio St.3d 134, 2009-Ohio-2461, 909 N.E.2d 597, ¶ 27.
B. Analysis
{¶ 15} The tax commissioner raises a single proposition of law with two subparts, each containing several arguments. As mentioned previously, two of these arguments have been waived. As to the remaining arguments, the tax commissioner fails to demonstrate reversible error on appeal. Therefore, we affirm the BTA‘s decision.
1. Issue presented: Whether the tax exemption under R.C. 5709.87 is limited to land and real-property improvements that were the subject of a voluntary cleanup action under R.C. Chapter 3746
{¶ 16} The tax commissioner first argues that the plain meaning of the relevant statutes limits the scope of the tax exemption and thereby defeats Kinnear‘s exemption claim. The tax commissioner also argues, in the alternative, that any doubts about the applicability of the tax exemption should be strictly construed against the exemption claim. The tax commissioner raises several arguments in conjunction with each claim. We address the arguments out of order for ease of discussion.
a. Should the tax exemption under R.C. 5709.87 be construed strictly against the taxpayer?
{¶ 17} The tax commissioner argues that the statutory language of
{¶ 18} First, the tax commissioner points to no language in
{¶ 19} Second, the plain language of former
Upon receipt by the tax commissioner of a certification for property under division (B) of this section, the commissioner shall issue an order granting an exemption from real property taxation of the increase in the assessed value of land constituting property that is described in the certification, and of the increase in the assessed value of improvements, buildings, fixtures, and structures situated on that land at the time the order is issued as indicated on the current tax lists.
(Emphasis added.) 151 Ohio Laws, Part V, 8511.
{¶ 20} This provision separates the components of real property that qualify for the tax exemption into two distinct categories: one for “land constituting property” and a second for “improvements, buildings, fixtures, and structures.” Under the first category, a property owner would be entitled to an exemption based on the increase in the assessed value of “land constituting property that is described in the [EPA‘s] certification.” Under the second category, the property owner can also exempt “improvements, buildings, fixtures, and structures” from taxation, the only criteria being that the improvement be “situated on that land [described in the EPA certification] at the time the order is issued as indicated on the current tax list.” Nothing in
{¶ 21}
{¶ 22} The tax commissioner also argues that the BTA‘s determination “violate[s] the plain meaning of the phrase ‘increase in the assessed value of improvements’ ” as set forth in
{¶ 23} Under
{¶ 24} As to the tax commissioner‘s claim that the apartment buildings had no assessed value on January 1, 2012, this is not an accurate statement. The tax commissioner overlooks the fact that his counsel stipulated that the Franklin County auditor had certified that the assessed value for “[i]mprovements” on the January 1, 2012 tax-lien date was zero dollars. And as Kinnear aptly notes, zero is a numeric value that can increase. To be sure, counsel could have stipulated that there was no assessed value for improvements in 2012 or even that there were no improvements to be valued in 2012. But because counsel stipulated to a “$0” value, the tax commissioner is now precluded from arguing that the apartment buildings has no assessed value for the 2012 tax year.
c. Does Columbus City School Dist. Bd. of Edn. v. Wilkins support the tax commissioner?
{¶ 25} The tax commissioner argues that the BTA‘s decision to grant the exemption for the newly constructed apartments is contrary to Columbus City School Dist. Bd. of Edn. v. Wilkins, 101 Ohio St.3d 112, 2004-Ohio-296, 802 N.E.2d 637. The tax commissioner maintains that Columbus City School Dist. held that only real-property improvements already in existence during the environmental cleanup qualify for the tax exemption under
{¶ 26} First, Columbus City School Dist. is not controlling, because the issue we confront here was not presented in that case. The issue in Columbus City School Dist. was whether the requested exemption applied to the increase in value of both the remediated land and the nonremedial improvements to property that included an already existing hotel. But the specific question raised here—whether buildings that were newly constructed after remediation qualify for the exemption under
{¶ 27} Second, the reasoning of Columbus City School Dist. favors Kinnear. In that case, both the tax commissioner and the BTA had found that the exemption under
{¶ 28} Finally, the tax commissioner maintains that Columbus City School Dist. expressly refutes the BTA‘s holding that
d. Does the definition of “property” in R.C. 3746.01(M) limit the scope of the tax exemption under R.C. 5709.87?
{¶ 29} The tax commissioner also argues that Kinnear‘s apartment buildings cannot qualify for the exemption under
(1) The tax commissioner has waived his argument on the definition of “property”
{¶ 30} As Kinnear argues, this issue has been waived because the tax commissioner did not make this argument to the BTA. The Chapel v. Testa, 129 Ohio St.3d 21, 2011-Ohio-545, 950 N.E.2d 142, ¶ 26-27; Oak View Properties, L.L.C. v. Franklin Cty. Bd. of Revision, 146 Ohio St.3d 478, 2016-Ohio-786, 58 N.E.3d 1133, ¶ 9.
(2) The tax commissioner‘s arguments that waiver does not apply are not well taken
{¶ 31} On reply, the tax commissioner disputes that he waived his property-definition argument. After review, we find that the commissioner‘s counterarguments are not persuasive.
{¶ 32} First, the tax commissioner does not claim that he raised this argument before the BTA. Instead, the tax commissioner asserts that he was not required to present the issue to the BTA, because this court‘s case law “directly refute[s]” Kinnear‘s waiver claim. The commissioner cites Toledo Business & Professional Women‘s Retirement Living, Inc. v. Bd. of Tax Appeals, 27 Ohio St.2d 255, 272 N.E.2d 359 (1971), for the proposition that the “specific statutory exemption criteria imposed by the General Assembly cannot be ‘waived’ by the Tax Commissioner or by this Court.” The tax commissioner‘s reliance on this case is unavailing. We held in Toledo Business that the General Assembly has the exclusive power to decide what property is exempt from taxation and to establish the criteria for exemption. Id. at paragraph one of the syllabus. But we did not even imply, let alone hold, that the tax commissioner can never waive a particular reason for denying an exemption by failing to raise it in his final determination or before the BTA.
{¶ 33} Second, in a related argument, the tax commissioner claims that ” ‘ignorance of the law’ is no excuse, [and] Kinnear is charged with knowledge of the express requirements of statutory exemptions enacted by the General Assembly, regardless of whether or not the Commissioner expressly advises Kinnear of those criteria in his briefing or otherwise.” As the tax commissioner sees it, this principle means that waiver does not apply, because Kinnear cannot claim to have relied to its detriment on the commissioner‘s failure to notify Kinnear that it had to establish its apartment buildings as qualifying property under
{¶ 34} While “taxpayers are charged with a knowledge of the law, they are not charged with knowledge of what theory of liability the tax commissioner is relying upon, apart from being informed of that theory by the commissioner himself.” Krehnbrink v. Testa, 148 Ohio St.3d 129, 2016-Ohio-3391, 69 N.E.3d 656, at ¶ 24. As a result of his omission, the tax commissioner, not Kinnear, is bound by waiver. The Chapel, 129 Ohio St.3d 21, 2011-Ohio-545, 950 N.E.2d 142, ¶ 28.
{¶ 35} Finally, the tax commissioner points out that his brief was not filed until after the BTA hearing, and he claims that it was Kinnear‘s responsibility to
{¶ 36} In sum, by failing to mention this issue at the BTA, the tax commissioner failed to put Kinnear on notice of his reliance on this basis for denying the exemption and thereby waived the argument. The Chapel at ¶ 27-28. Therefore, we disregard this argument as a basis for granting relief to the tax commissioner on appeal.
e. Does R.C. 5709.87(C)(1)(a) exempt only the “improvements, buildings, fixtures, and structures” that are described in the EPA‘s certification?
{¶ 37} The tax commissioner argues that to be exempt from taxation under
IV. CONCLUSION
{¶ 38} For the foregoing reasons, we reject the tax commissioner‘s contentions on appeal and affirm the decision of the BTA.
Decision affirmed.
O‘CONNOR, C.J., and O‘DONNELL, KENNEDY, FRENCH, O‘NEILL, FISCHER, and DEWINE, JJ., concur.
Dinsmore & Shohl, L.L.P., Brian C. Close, and Alan H. Abes, for appellee.
Michael DeWine, Attorney General, and Sophia Hussain and Barton A. Hubbard, Assistant Attorneys General, for appellant.