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Tuesday, May 25, 2010

Ohio Apartment Association and Greenwich Apartments, Ltd. and D & S Properties v. William W. Wilkins [Richard A. Levin], Tax Commissioner of Ohio, Case no. 2009-0213
State Board of Tax Appeals

Anderson/Maltbie Partnership and LKH Victory Corp (d.b.a. Cincinnati College Preparatory Academy) v. William W. Wilkins [Richard A. Levin], Tax Commissioner of Ohio, Case no. 2009-1671
State Board of Tax Appeals

In the Matter of the Adoption of P.A.C., Case no. 2009-1757
1st District Court of Appeals (Hamilton County)

In the Matter of: The Adoption of G.V., Case no. 2009-2355
6th District Court of Appeals (Lucas County)


Did 2005 Change in Tax Rules Violate Constitutional Mandate of ‘Uniform’ Taxation of Real Property

Rate Rollback Limited to Properties Occupied by Less than Four Residences

Ohio Apartment Association and Greenwich Apartments, Ltd. and D & S Properties v. William W. Wilkins [Richard A. Levin], Tax Commissioner of Ohio, Case no. 2009-0213
State Board of Tax Appeals

ISSUES:

BACKGROUND: As part of H.B. 66, an overhaul of the state’s business tax structure enacted in 2005, the legislature amended a statute, R.C. 319.302, that had previously granted a 10 percent property tax exemption or “rollback” for all real property occupied by residential dwellings regardless of the number of units constructed on that property. The amended statute limited the partial tax exemption to properties occupied by single-family, two-family or three-family dwellings, and classified properties occupied by four or more residential units as “intended primarily for use in a business activity,” and therefore not eligible for the 10 percent rollback.

After the legislature adopted  the amended statute, the state tax commissioner adopted new rules establishing definitions, policies and procedures for administration of the revised rollback provision.

The Ohio Apartment Association (OAA), which represents the owners and operators of multi-unit apartment buildings across the state, filed suit in the 10th District Court of Appeals seeking a writ of mandamus that would bar the tax commissioner from implementing the revised rollback statute and rules on constitutional grounds. The court of appeals denied the writ, holding that mandamus was not an appropriate remedy and suggesting that the OAA should instead seek a declaratory judgment in common pleas court holding that the revised statute was unconstitutional and an injunction barring its enforcement.

The OAA then filed a complaint with the State Board of Tax Appeals (BTA), invoking that body’s authority under R.C. 5307.14 to review administrative rules adopted by the tax commissioner and to bar the application of such rules if the board determined that the rules were not “reasonable.” The tax commissioner filed a motion to dismiss the complaint, arguing that the BTA did not have jurisdiction to adjudicate issues of constitutionality.  The BTA overruled that objection and proceeded to review the challenged rules, ultimately holding that the challenged rules were reasonable and therefore enforceable.

The OAA invoked its right to appeal the BTA’s ruling directly to the Supreme Court, and the Court agreed to review the case.  The Court also agreed to hear a cross-appeal by the tax commissioner challenging the BTA’s holding that it had jurisdiction to consider the constitutional issues raised by the OAA.

Attorneys for the OAA argue that the rules adopted by the commissioner to implement the revised rollback statute violate provisions of the Ohio Constitution that mandate equal protection of the laws and require uniformity in the taxation of all real property within the state.  Under those provisions, they assert, all real property that is used for residential purposes must be taxed uniformly, and the rules adopted by the tax commissioner clearly violate that mandate by granting a reduced tax rate to owners of property that is occupied by one-, two- and three-family rental units, but deny that partial exemption to property owners on whose land four or more residential units have been constructed.  They contend that the new rules use the state’s powers of taxation to give an unfair and improper competitive advantage to the owners of smaller rental properties over the owners of larger apartment complexes, when both are involved in the business of owning and renting residential premises.

Attorneys for the tax commissioner respond that Ohio’s tax laws and rules have recognized a distinction between “commercial” real estate intended primarily for business purposes and “residential” property – defined as land and improvements “used and occupied as a dwelling by one, two or three families” – since the 1970s.  They argue that in amending R.C. 319.302 and adopting the challenged rules, the General Assembly and commissioner simply applied this well-established distinction in amending the state’s tax structure applicable to businesses.  They point out that H.B. 66 was a “package deal” in which the state’s former taxes on business inventories and other tangible property were reduced or completely phased out and were replaced with a new commercial activity tax and increases in other taxes, including elimination the partial property tax exemption for commercial apartment buildings. They argue that the legislature has constitutional authority to grant or deny tax exemptions for various classes of property.

With regard to the jurisdiction of the BTA to consider the OAA’s constitutional challenges, the commissioner asserts that R.C. 5307.14, the statute that permits and regulates review of administrative agency rules, limits the bases on which the reasonableness of a rule may be challenged to 1) claims that the agency did not follow proper procedures in adopting a rule or 2) claims that the content of a rule conflicts with or exceeds the scope of the underlying statute the rule was designed to implement.  He argues that in this case, the OAA did not advance any such claims, but rather asserted only constitutional arguments that the BTA has no authority to decide. He asks the Court to clarify that the BTA should dismiss such challenges in the future as outside its jurisdiction, and advise complainants to pursue their constitutional claims through an action in common pleas court for declaratory judgment and injunctive relief.

Contacts
Mark I. Wallach, 216.622.8200, for the Ohio Apartment Association et al.

Lawrence D. Pratt, 614.466.5967, for the State Tax Commissioner.

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Is Property Leased for Profit to Charter School Operator Eligible for ‘Public Schoolhouse’ Tax Exemption?

Anderson/Maltbie Partnership and LKH Victory Corp (d.b.a. Cincinnati College Preparatory Academy) v. William W. Wilkins [Richard A. Levin], Tax Commissioner of Ohio, Case no. 2009-1671
State Board of Tax Appeals

ISSUE: Does a provision of state law that exempts “public schoolhouses” from local property tax apply to commercial real estate that is owned by a private business entity and  leased for profit to the operator of a community or “charter” school for use as a school building?

BACKGROUND: From October 1999 through October 2004, a for-profit company called Anderson/Maltbie Partnership (AMP) leased a three-story, 48,000 square foot building it owned on Central Parkway in Cincinnati to a nonprofit corporation, which used the property as the site of a community or charter school called the Cincinnati College Preparatory Academy (CCPA). Under the lease agreement, CCPA paid AMP $275,000 a year for the use of the building.

AMP filed an application for property tax exemption with the state tax commissioner for the 2000, 2001 and 2002 tax years. In its application, AMP asserted that because the Central Parkway property was used by the lessee as a public school facility,  it qualified for an exemption under R.C. 5709.07(A)(1), a provision of state law that grants exemption from property tax to “public schoolhouses.”  The commissioner denied the requested exemption. AMP exercised its right to appeal the commissioner’s determination to the state Board of Tax Appeals (BTA).  On review, the BTA overruled the commissioner and ordered him to approve the requested exemption.  The commissioner now asks the Supreme Court to reverse the BTA and affirm the commissioner’s original ruling that AMP was not entitled to a property tax exemption.

Attorneys for the commissioner argue that the BTA decision ignored the plain language of R.C. 5709.07(A)(1), which they say specifically limits the tax exemption for a “public schoolhouse” to 1) property that is owned by the state or a political subdivision of the state, rather than by a private entity; and 2) property that is “not leased or otherwise used with a view to profit.”  They point out that it is the owner, not a user of a piece of property who must qualify for a tax exemption, and contend that the BTA wrongly determined whether AMP should receive an exemption based on its lessee’s educational use, rather than the owner’s commercial use of the property to earn a profit.

Attorneys for AMP  respond that the state legislation authorizing non-profit charter schools and court decisions interpreting that legislation have established that such schools are “public schools” funded through the same tax system and appropriations process as traditional school districts.  They argue that the same rationale supporting local property tax exemption for the land and buildings used by traditional schools should also apply to property that is used by state-approved charter schools. They contend that the BTA properly interpreted the language of R.C. 5709.07(A)(1) to bar a tax exemption only if an owner or lessee using property for a charter school also uses some portion of that property to lease to a third party or for some other profit-seeking purpose. Because CCPA used the property exclusively for educational purposes during the tax years in question, they say, AMP is entitled to a “public schoolhouse” exemption for each of  those years.

Contacts
Graham A. Bluhm, 419.241.6000, for the Anderson/Maltbie Partnership.

Sophia Hussain, 614.466.5967, for the State Tax Commissioner.

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Cases Concern Rights of ‘Putative’ Father in Adoptions

In the Matter of the Adoption of P.A.C., Case no. 2009-1757
1st District Court of Appeals (Hamilton County)

In the Matter of: The Adoption of G.V., Case no. 2009-2355
6th District Court of Appeals (Lucas County)

NOTE:  The two cases captioned above will be argued separately before the Court. They are summarized together because they deal with the same underlying issue, and the parties advance similar legal arguments.

ISSUE: In cases where adoption proceedings have been initiated, what are the rights of the biological father who is not married to a child’s mother and has not established his paternity through legal proceedings?

BACKGROUND: In the P.A.C. case, Kevin Crooks filed to adopt a child as a step-parent on April 20, 2007. He had married the mother a week earlier. On March 10, 2008, the Clermont County Juvenile Court found Gary Otten to be the biological father. On Nov. 5, 2008, the Hamilton County Probate Court dismissed Crooks’ petition for adoption.

In the G.V. case, Jason and Christy Vaughn sought to adopt a child, who had lived with them since placement on Nov. 8, 2007. The Lucas County Probate Court and appeals court dismissed their Jan. 16, 2008 petition for adoption after the Lucas County Juvenile Court found Benjamin Wyrembeck to be the biological father. Wyrembeck had registered with the Ohio Putative Father Registry on Nov. 15, 2007.

In the P.A.C. case, attorneys for putative father Otten claim the appeals court “erroneously reversed” the Hamilton County Probate Court by finding that his consent was not required for an adoption since he had not registered with the putative father registry within 30 days of the child’s birth. In the G.V. case, the situation is reversed. Attorneys for putative father Wyrembeck claim he took sufficient steps to establish and safeguard his parental rights by timely registering and filing a parentage and custody action in juvenile court before an adoption petition was filed in probate court.

Both cases pin their arguments on a 2006 Supreme Court case: In Re Adoption of Pushcar.

In the P.A.C. case, Crooks’ attorneys cite the following in their brief before the Court: “Appellant is a putative father who failed to register. There are no exceptions to the thirty-day filing requirement. Given there are no exceptions to this statutory requirement, Appellant can offer no excuse. The consent of Appellant is not required, as a matter of law, pursuant to R.C. 3107.07(B)(1). The failure of the Probate Court of not entering a finding that the consent of Appellant is not required, creates an impermissible exception to the Putative Father Registry, which would render the entire statutory scheme set forth in the Ohio Revised Code as meaningless.”

In the G.V. case, the Vaughns’ attorneys state in their brief before the Court: “If the decision in (this) case is not reversed, the Ohio Putative Father Registry will be meaningless. If a putative father can change his status in an adoption proceeding by filing a paternity suit, whether he registered or not, there can be no further reliance on the Ohio Putative Father Registry. R.C. 3107.07(B) will become meaningless. The entire adoption process will fall apart. Thousands of Ohio children every year will be in an uncertain status and their permanency will be in question. … By following the clear statutory language and the clear adoption process set forth in the Ohio Revised Code, the adoption process will be completed expeditiously, which will be in the best interests of all parties, especially the child.”

In appealing the P.A.C. case to the Supreme Court, Otten asks the Supreme Court to reverse the appeals court because the decision “elevates form over the substance of a parent-child relationship. This is exactly what this Court did not want done when it authored its Pushcar decision.”

In appealing the G.V. case to the Supreme Court, the Vaughns ask the Supreme Court to reverse the appeals court decision and remand the case for further proceedings.

Contacts
Michael R. Voorhees, 513.489.2555, for Jason and Christy Vaughn.

Alan J. Lehenbauer, 419.826.0055, for Benjamin Wyrembek.

Kenneth J. Cahill, 440.352.3391, for Gary Otten.

Michael R. Voorhees, 513.489.2555, for Kevin Crooks.

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These informal previews are prepared by the Supreme Court's Office of Public Information to provide the news media and other interested persons with a brief overview of the legal issues and arguments advanced by the parties in upcoming cases scheduled for oral argument. The previews are not part of the case record, and are not considered by the Court during its deliberations.

Parties interested in receiving additional information are encouraged to review the case file available in the Supreme Court Clerk's Office (614.387.9530), or to contact counsel of record.