The opinion
[Until this opinion appears in the Ohio Official Reports advance sheets, it may be cited as
Talawanda City School Dist. Bd. of Edn. v. Testa, Slip Opinion No. 2015-Ohio-5450.]
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. 2015-OHIO-5450
TALAWANDA CITY SCHOOL DISTRICT BOARD OF EDUCATION, APPELLANT, v.
TESTA, TAX COMMR., APPELLEE.
[Until this opinion appears in the Ohio Official Reports advance sheets, it
may be cited as Talawanda City School Dist. Bd. of Edn. v. Testa, Slip Opinion
No. 2015-Ohio-5450.]
Taxation—R.C. 3313.44—Real-property-tax exemption—Real property owned by
a board of education is exempt from taxation.
(No. 2014-1798—Submitted October 27, 2015—Decided December 30, 2015.)
APPEAL from the Board of Tax Appeals, No. 2012-1224.
____________________
O’CONNOR, C.J.
{¶ 1} In this real-property-tax exemption case, the tax commissioner found
that a portion of the property owned by the Talawanda City School District Board
of Education (“BOE”) was not used for school purposes, and he denied the claim
of exemption as to that portion of the property. The Board of Tax Appeals (“BTA”)
affirmed, and the BOE has appealed.
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{¶ 2} On its face, R.C. 3313.44 permits exemption based solely on
ownership by the BOE. The dispute in this appeal centers on whether the statute
nonetheless also requires that the property be used exclusively for school purposes.
We hold that following its amendment in 2010, 2010 Am.Sub.S.B. No. 181, the
statute does not contain a use restriction. Accordingly, we reverse the decision of
the BTA and hold that the entire property described in the application shall be
exempt for the year at issue.
RELEVANT BACKGROUND
{¶ 3} On January 26, 2010, the BOE filed its application to exempt property
located within the district, which encompasses Oxford in Butler County.
Exemption was sought for tax year 2010 and remission for 2008 and 2009. The
application recited that the BOE acquired five parcels in March and April 2009 to
construct a new high school, which was scheduled to open in August 2011. The
tax commissioner found that the total acreage involved in the application was
154.0487.
{¶ 4} The application disclosed that one of the five parcels was subject to
two leasehold interests. First, one of the sellers was permitted to remain in his
house under a lease that the BOE later terminated; the tenant departed in September
2009. Second, the BOE leased 34 acres for farming under an agreement with a
term extending from April 15, 2009, through April 15, 2012. The lease contained
an early termination clause. The rent was $65 per acre or $2,210 annually.
{¶ 5} On March 14, 2012, the tax commissioner granted an exemption
pursuant to R.C. 3313.44 for all of the property except the 34 acres being farmed
pursuant to lease. Citing a 2001 BTA decision involving the denial of an exemption
for school land rented for farm use, the tax commissioner concluded that the
pecuniary benefit realized by the farmer disqualified the land from exemption
because that portion was not used for school purposes.
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{¶ 6} The BOE appealed. At the BTA hearing on July 30, 2013, the BOE
offered the testimony of the school district treasurer, along with several exhibits.
The tax commissioner cross-examined the school district treasurer and presented
exhibits of his own.
{¶ 7} The testimony primarily addressed the use of the property by the
lessee of the BOE. The original use of the 34 acres as a farm had changed under a
new lease to private farming of about 17 acres, with the farmer restoring natural
grasses and maintaining trails on the remaining 17 acres as a nature preserve. Some
school programs use the sustainable area. The Future Farmers of America program
at the school derived some benefit from the farm’s presence. The school treasurer
asserted that the private farming reduced the BOE’s costs in maintaining the
property.
{¶ 8} The BTA issued its decision on September 26, 2014. BTA No. 2012-
1224, 2014 WL 5148349 (Sept. 26, 2014). Relying primarily on its prior decision
in London City Schools Bd. of Edn. v. Zaino, BTA No. 2000-B-1478, 2001 WL
46382 (Jan. 12, 2001), a case decided before the 2010 amendment to the statute at
issue, the BTA agreed with the tax commissioner that school-owned property used
for private farming rather than school purposes did not qualify for exemption.
{¶ 9} The BOE has appealed.
THE STATUTE AT ISSUE
{¶ 10} The statute at issue, R.C. 3313.44, is an exemption provision that
dates back to comprehensive school-reform legislation enacted in 1873. See An
Act for the reorganization and maintenance of Common Schools, Section 72, 70
Ohio Laws 195, 215. The application at issue here pertains to 2010, and the General
Assembly amended R.C. 3313.44 during 2010.
{¶ 11} Prior to the 2010 amendment, the statute read as follows: “Real or
personal property vested in any board of education shall be exempt from taxation
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and from sale or execution or other writ order in the nature of execution.” H.B. No.
217, 120 Ohio Laws 475, 523.
{¶ 12} After the amendment, the statute reads as follows: “Real or personal
property owned by or leased to any board of education for a lease term of at least
fifty years shall be exempt from taxation.” 2010 Am.Sub.S.B. No. 181 (“S.B.
181”).
{¶ 13} Also pertinent is uncodified Section 5 of S.B. 181:
[Be it enacted] [t]hat section 3313.44 of the Revised Code, as
amended by this act, is remedial in nature and applies to tax years at
issue in any application for exemption from taxation pending before
the Tax Commissioner, Ohio Board of Tax Appeals, any Court of
Appeals, or the Supreme Court on the effective date of this act and
to the property that is the subject of the application.
{¶ 14} The effective date of S.B. 181 was September 13, 2010, and the
application at issue was filed in January 2010. Accordingly, the application was
pending on the effective date of S.B. 181, and the amended version of the
exemption statute—and not the earlier version—applies here.1
R.C. 3313.44 DOES NOT CONTAIN A USE RESTRICTION
{¶ 15} The BOE argues that the bare fact of ownership by the BOE accords
exempt status to the 34 acres at issue. Given the 2010 amendment of the statute,
we agree.
{¶ 16} We have stated that although “[w]e read exemption statutes strictly,
* * * we will not require more qualifications for an exemption than the General
1
We note that no constitutional challenge has been raised to the retroactivity of this provision.
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January Term, 2015
Assembly does.” Newfield Publications, Inc. v. Tracy, 87 Ohio St.3d 150, 153, 718
N.E.2d 420 (1999). For this reason, we reverse the decision of the BTA.
The amendment of R.C. 3313.44 in 2010 eliminated the basis for an implied use
restriction
{¶ 17} The tax commissioner argues that R.C. 3313.44 incorporates an
implied restriction that the property must be used for school purposes. Indeed, our
opinion in Cincinnati City School Dist. Bd. of Edn. v. Bd. of Tax Appeals, 149 Ohio
St. 564, 80 N.E.2d 156 (1948), demonstrates that the parties and the court assumed
that use of the property for school purposes was necessary for exemption. In that
case, the property was being developed for construction of a school, but the school
had not yet been built. The court held that the property was entitled to exemption.
The entitlement to the exemption, however, was not based on the bare ownership
of the property by the board of education but rather on its prospective use as a
school building.
{¶ 18} Before the 2010 amendment, there was reason to consider that the
exemption for board-of-education property incorporated an implied use restriction.
As already noted, the exemption currently codified at R.C. 3313.44 was enacted in
1873; at the time of that enactment, the Ohio Constitution authorized the General
Assembly to exempt property from taxation only under specific circumstances.
Specifically, Article XII, Section 2 of the Ohio Constitution of 1851 authorized the
exemption of “public schoolhouses” and “public property used exclusively for any
public purpose.” Notably absent was any authorization to exempt property merely
because it was owned by a public body such as the board of education; accordingly,
the enacted language of tax exemptions was sometimes confined by the
constitutional basis for enacting the exemption. See Gerke v. Purcell, 25 Ohio St.
229 (1874), paragraph five of the syllabus (holding that a privately owned school
building would be exempt from taxation only if it was operated without any view
to profit, because the constitutional basis for the exemption was that the school must
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qualify as an “ ‘institution[ ] of purely public charity’ ”); see also Anderson/Maltbie
Partnership v. Levin, 127 Ohio St.3d 178, 2010-Ohio-4904, 937 N.E.2d 547, ¶ 18,
20 (citing Gerke with approval).
{¶ 19} The constitutional basis for a board-of-education exemption was
then either the authorization to exempt public schoolhouses or, alternatively, the
authorization to exempt public property used exclusively for public purposes.
Either way, the constitutional authorizations justified reading a use restriction into
the exemption for board-of-education owned property.
{¶ 20} In 1931, the Ohio Constitution was amended to allow the General
Assembly general power to determine exemptions. Although the Constitution was
amended, that fact alone did not expand the scope of the previously enacted
exemptions. See Denison Univ. v. Bd. of Tax Appeals, 2 Ohio St.2d 17, 25, 205
N.E.2d 896 (1965) (endorsing the principle that the adoption of an amendment to
the Constitution cannot be helpful in interpreting legislation that had been enacted
before the amendment); compare Anderson/Maltbie at ¶ 18-21 (applying the
public-schoolhouse-exemption statute with implied constitutional restrictions) with
Montgomery Cty. Park Dist. v. Kinney, 61 Ohio St.2d 88, 90, 399 N.E.2d 556
(1980) (reenactment of an exemption statute after the Ohio Constitution was
amended in 1931 to allow the General Assembly to determine exemptions removed
a constitutional public-use restriction).
{¶ 21} It is evident, however, that the basis for an implied use restriction no
longer existed when R.C. 3313.44 was amended in 2010. Because the legislature
had broad constitutional authority to enact exemptions in 2010, there is no longer
any reason to read a use restriction into R.C. 3313.44. It follows that after the 2010
amendment, there is no use restriction, because the legislature did not include one
in the statutory language.
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The General Assembly did not intend to impose a use restriction when it amended
R.C. 3313.44
{¶ 22} The tax commissioner contends that “[t]he General Assembly has
not amended the school board exemption to eliminate the exclusive public school
use requirement” and that there is no affirmative indication of legislative intent in
2010 or at any other time to eliminate the restriction on the exemption. We
disagree.
{¶ 23} The 2010 amendment constitutes, in the language the General
Assembly adopted, the strongest manifestation of its intent: because no use
restriction was set forth in the statute, the General Assembly must be understood to
have exercised its broad power under Article XII, Section 2 of the Ohio
Constitution to exempt property as it sees fit. Before the 2010 amendment, a
presumption that the General Assembly intended the statute to stay within the
confines of what the Constitution authorized in 1873 was justified; after the
amendment, that logic no longer applied, and any restriction must be expressly
stated.
{¶ 24} Nor are we persuaded that by extending the exemption to premises
leased to a school board, R.C. 3313.44 precludes exemption when the board is a
lessor. To the contrary, the latter situation is governed by the overriding principle
that the BOE’s ownership entitles the property to exemption.
{¶ 25} The tax commissioner also cites Columbus City School Dist. Bd. of
Edn. v. Testa, 130 Ohio St.3d 344, 2011-Ohio-5534, 958 N.E.2d 557, in which we
denied exemption to the Ohio State University for property leased to a commercial
enterprise. But the statute allowing an exemption for property of a state university
did impose a use restriction, which makes the case inapposite.
There is no reason to harmonize R.C. 3313.44 with R.C. 5709.86
{¶ 26} The tax commissioner argues that R.C. 5709.86, which was enacted
by the General Assembly in 1994, is the sole path for exempting real property when
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it is leased to others. That section permits a board of education or other local
legislative body to enact a declaration that “abandoned school property” is being
used for the public purpose of restoring unused public property to productive use;
doing so has the effect of exempting the abandoned school property from taxation.
The commissioner argues that the BOE’s reading of R.C. 3313.44 makes R.C.
5709.86 superfluous, because the BOE need not pass the resolution required by the
latter statute since its property would be exempt based solely on school-board
ownership.
{¶ 27} The tax commissioner’s point is not well taken. As the BOE
correctly notes, R.C. 5709.86 was enacted as a tax-incentive provision that is
available to a variety of public-sector property owners, not only boards of
education. Moreover, when a legislative body acts under R.C. 5709.86, it thereby
acquires the power to confer that exemption upon a transferee for up to ten years.
R.C. 5709.86(B). In the alternative, if the legislative body is a board of education
that desires to retain ownership of the property, it may exempt the property under
R.C. 3313.44. The statutes have different purposes, and R.C. 5709.86 has a range
of operation beyond the scope of exemption under R.C. 3313.44.
BY ITS TERMS, R.C. 3313.44 DOES NOT CONDITION EXEMPTION ON THE
BOE’S COMPLIANCE WITH R.C. 3313.17
{¶ 28} The tax commissioner also argues that the BOE has acted outside of
the powers granted it under R.C. 3313.17 and thus an exemption cannot be granted.
According to the commissioner, a school board is not given the authority under
R.C. 3313.17 to lease property for commercial use. According to the tax
commissioner’s argument, the BOE should not enjoy the benefit of the tax
exemption because it exceeded its authority as a school board.
{¶ 29} In part, the commissioner bases this argument on our observation
that boards of education are “without authority or power to purchase [property] for
any other purpose than a public use,” Cincinnati City School Dist., 149 Ohio St. at
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January Term, 2015
568, 80 N.E.2d 156. The tax commissioner asserts that this pronouncement limits
the scope of the tax exemption under R.C. 3313.44.
{¶ 30} We disagree. The issue in Cincinnati City School Dist. was whether
the exemption could be granted before completion of the school building on the
premises; we held that it could. We did not address circumstances in which
property was not improved with a school building but was instead owned by a
school board and in part leased to a farmer. And recent case law involving
exemptions that do contain a public-use requirement have tended to regard the uses
presented here as so incidental and de minimis that they do not disturb the
exemption. See Whitehouse v. Tracy, 72 Ohio St.3d 178, 181, 648 N.E.2d 503
(1995); South-Western City Schools Bd. of Edn. v. Kinney, 24 Ohio St.3d 184, 187,
494 N.E.2d 1109 (1986).
{¶ 31} The exemption allowed by R.C. 3313.44 depends upon stated
conditions; compliance with R.C. 3313.17 is not one of those conditions.
Moreover, not only is the BOE a creature of statute limited to exercising the powers
conferred on it by law, but so also are the tax department and the BTA. Although
those taxing authorities have jurisdiction to construe and apply laws pertaining to
taxation and exemption, they do not possess general authority to rule on the
lawfulness of a school board’s dispositions relating to its realty.
{¶ 32} Because we conclude that R.C. 3313.44 does not condition
exemption on compliance with R.C. 3313.17, we need not decide whether the
leasing of the property for farm purposes exceeded the board of education’s
authority under the latter provision. We do note, however, that the BOE apparently
acted in accordance with a formal Attorney General Opinion that stated that a
school board may lease property “not presently needed for school purposes” and
which “cannot be advantageously sold,” as long as a provision of the lease permits
the board to terminate the lease if the property is needed for school purposes. 1992
Ohio Atty.Gen.Ops. No. 92-016, paragraph two of the syllabus. As a result, the
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BOE appears to have at least a good-faith belief that it has acted in accordance with
the statutes.
{¶ 33} For all these reasons, we reject the tax commissioner’s argument that
an exemption should be denied because the BOE exceeded its statutory authority
in leasing the property.
THE BOE’S REQUEST THAT WE ADDRESS CHANGED CIRCUMSTANCES IS
MOOT, AS IS ITS CLAIM FOR EXEMPTION UNDER OTHER PROVISIONS
{¶ 34} The BOE has also requested that we address the exempt status of the
property for years after 2010 in light of circumstances that have changed with
respect to the property’s use. Because we grant the exemption based on the BOE’s
continuing ownership of the property, we find that the BOE’s request is moot, and
we decline to address it. Additionally, we need not consider alternative claims for
exemption under R.C. 5709.07 or 5709.08, or even whether we have jurisdiction
over those claims, because the allowance of exemption under R.C. 3313.44 makes
those claims moot.
CONCLUSION
{¶ 35} For the foregoing reasons, we reverse the decision of the BTA.
Decision reversed.
PFEIFER, O’DONNELL, LANZINGER, KENNEDY, FRENCH, and O’NEILL, JJ.,
concur.
__________________
Ennis, Roberts & Fischer Co., L.P.A., and Gary T. Stedronski, for appellant.
Michael DeWine, Attorney General, and David D. Ebersole and Barton A.
Hubbard, Assistant Attorneys General, for appellee.
Britton, Smith, Peters & Kalail Co., L.P.A., Karrie M. Kalail, and Paul J.
Deegan, urging reversal for amici curiae Ohio School Boards Association and Ohio
Association of School Business Officials.
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