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How Recent Sales Affect Your Property Taxes

By Casey A. JonesJuly 26, 2022August 5, 2022

Most property owners recognize that the real estate taxes they pay are directly tied to the county auditor’s assessed value of their property. What most do not understand, however, is how those values are determined. In short, auditors in Ohio are tasked with reappraising all real estate in the county ever six years, with “updates” every three years. R.C. 5715.24.

As one might imagine, this is not an easy task, especially in more populous counties. Auditors use a variety of methods and technologies to assist them with appraising and updating the values in their counties. One of the most common and most accurate methods utilized is an examination of recent sales. This does not refer to recent sales in the area (i.e., comparable sales or “comps”)—that is a different method—but, rather, a sale of the actual subject property.

In Ohio, a recent sale of the subject property is “rebuttably presumed to be the true value and represents the best evidence of true value.” Amherst Marketplace Station, LLC v. Lorain Cty. Bd. of Revision, 2021-Ohio-3866, ¶ 10 (emphasis added), citing Terraza 8, L.L.C. v. Franklin Cty. Bd. of Revision, 150 Ohio St.3d 527, 535 (2017). See also R.C. 5713.03. In other words, “[t]he use of a recent arm’s-length sale price is [] the favored means of determining value for purposes of taxation.” Amherst, at ¶ 10. However, this presumption is subject to rebuttal via evidence that the sale was either (a) not at arm’s length or (b) not recent. Id.

What is an “arm’s length” transaction?

For purposes of R.C. 5713.03, an “arm’s length sale” is “a voluntary sale without compulsion or duress, that generally takes place in an open market where the parties act in their own self-interest.” Buck Warehouses, Inc. v. Bd. of Revision, 2d Dist. Montgomery No. 2007-Ohio-2132, ¶ 13, citing Walters v. Knox City Bd. of Revision, 47 Ohio St.3d 23, 25 (1989). Put simply, the inquiry is: What would a willing buyer pay to an unrelated, willing seller for this property on the open market? Of course, the presumption makes sense in this context—obviously, a buyer would pay what a buyer did pay.

What is considered a “recent” sale?

The recency question is a bit more complex. The Ohio Supreme Court appears to say that courts (or taxing authorities) are not “compelled” to presume the recency of a sale that occurs more than 24 months before the tax lien date. See generally Akron City Sch. Dist. Bd. of Educ. v. Summit County Bd. of Revision, 139 Ohio St. 3d 92 (2014). The “tax lien date” is most easily understood as January 1 of the tax year in question. While the Akron case appears to set a “bright-line rule” as to how recent a sale must be in order to be afforded the true value presumption, the Court qualified it by saying that recency should not be presumed relative to a sale that occurred more than 24 months before the tax lien date, “when a different value has been determined for that lien date as part of the six-year reappraisal.” So, if the auditor determines that a value other than the sale price applies, then that sale price (more than 24 months old) cannot be used to create a presumption of the true value of the property.

Regardless of whether a prior sale is sufficiently recent to trigger a presumption as to the value of the property, even older sales are important to the determination of the true value. The Ohio Supreme Court has held that, even where sales are too remote to be afforded a presumption of value, they are “some indication of true value” and “should [be] taken into account.” Dublin-Sawmill Properties v. Franklin County Bd. of Revision, 67 Ohio St. 3d 575, 576-77 (1993) (emphasis added). Similarly, the First District Court of Appeals has held that taxing authorities act appropriately in “considering evidence of [a] sale . . . in making [their] determination of value” even where the sale was not sufficiently recent to create a presumption of value. Othman v. Bd. of Educ., 1st Dist. Hamilton Nos. C-160878, C-170187, 2017-Ohio-9115, ¶ 22.

What does all of this mean for property owners?

Practically speaking, this body of law affects the average property owner in two ways: (1) preparing for a potential increase in property taxes relative to recently purchased property, and (2) knowing the available options relative to tax appeals.

The first scenario is perhaps most common in the current, booming real estate market. Consider the following:

You purchased a home in May 2019 for a purchase price of $350,000.00. The county auditor’s assessed value of the home was $180,000.00 as of the date you purchased. In 2020, the auditor increases your value to $350,000.00.

(Side Note: Many homeowners are pleased when the auditor increases the value of their home because they think it corroborates the investment they made and demonstrates that they now own a more valuable piece of property. While this makes sense, it is also important to consider that this value is what sets the amount of property taxes for which the owner will be responsible. In short, the higher the value, the higher the taxes.)

In the above example, your property taxes will nearly double if the auditor catches the sale and adjusts the value to the sales price. This is not inherently unfair. Notwithstanding the rising sale prices, that is what you paid for the property so you must have thought it was worth that. But it is important that buyers are aware of this near inevitability, go into the transaction with eyes open, and have the means to properly deal with its implications.

The second scenario will likely be less common with the recent passing of HB 126 (significantly restricting school districts’ ability to file tax complaints seeking an increase in the value and, thus, taxes paid by property owners in their districts).

Your property is and has been valued between $430,000.00 and $450,000.00 from 2008-2018. You bought the property on the open market for $515,000.00 in 2018. In 2019, you receive a notice in the mail that the value is being increased to $515,000.00 (to match the sale price). Three years later (in 2022), you receive a similar notice increasing the value to $800,000.00. You haven’t made any material improvements to the property. What are your options?

Here, this is an arm’s length transaction. However, you purchased the property nearly three years prior to the “tax lien date” (Remember: 2022 tax bills relate to Tax Year 2021, so the “tax lien date” is 1/1/2021). Under the precedent set in the Akron case, you aren’t entitled to a presumption of value based on the sales price. However, the sale price is some evidence of value that any reviewing authority should take into account. These considerations are important in deciding whether to file a Complaint with the Board of Revision to challenge your value.

Our firm’s experienced attorneys represent real estate investors, property owners, and tax payers relative to these issues and can help you navigate the best option(s) for your individual circumstance, including advising as to whether and when you should challenge your property values and formulating a strategy to give you the best possible chance of success. We’d love to work with you.

Internal Revenue Service Portability of Estate Tax Exemption

By Isaac T. HeintzJuly 26, 2022August 5, 2022

If a married couple has significant wealth and is expecting to owe Federal estate taxes upon the death of the second spouse, current Internal Revenue Service Regulations allow a surviving spouse a period of five (5) years from the death of the first spouse, to elect portability.

Under current law, there is a $12,060,000 exemption from Federal estate taxes through the year 2025 (estimated to drop by approximately one-half in the year 2026), per person for estate taxes and gifts to children or other non-spouse beneficiaries during life or upon death. Any amounts above the exemption could incur up to 40 percent in estate taxes.

Even though a surviving spouse may inherit all of the deceased spouse’s assets free of estate taxes, there may be estate taxes owed after the death of the surviving spouse. Portability allows a surviving spouse the ability to transfer a deceased spouse’s unused exemption amount for estate and gift taxes to the surviving spouse. This would allow the deceased spouse’s unused exemption to become available for the application to the surviving spouse’s subsequent transfers during life or upon death.

However, a surviving spouse may elect portability, allowing the spouse to have the deceased spouse’s unused exemption amount, as well as their own exemption amount, which would allow a $12,120,000 exemption from Federal estate taxes (under current law).

Portability can be elected by a surviving spouse within five (5) years from the date of death of the spouse by filing a Federal Estate Tax Return (Form 706) with the Internal Revenue Service.

Provided the Form 706 is filed within the five (5) year period, it will not be necessary to request the Internal Revenue Service to issue a private letter ruling, as was required under previous Internal Revenue Service Regulations.

Finney Law Firm frequently utilizes “We can talk” agreements in settlement discussions

By Christopher P. FinneyJuly 22, 2022August 5, 2022

Ohio Rule of Evidence 408 generally provides that settlement discussions are “not admissible to prove liability for or invalidity of the claim or its amount.”

Public policy behind inadmissibility of settlement discussions.

Why not? Shouldn’t the judge or jury know all of the facts of a situation in determining liability and in assessing damages, for if a Defendant offered to pay he more or less must be liable, correct? Or shouldn’t the amount — the range — of settlement amount discussed, be some indication of the value of the claim?

Well, Courts have decided as a matter of public policy that the answer is “no.” It would discourage good faith settlement discussions if the fact of such discussions and what was discussed were admissible. We want parties to settle their disputes and bringing settlement conversations into Court would throw a cold wet towel on those conversations.

But Rule of Evidence 408 is not perfect

But Rule 408 is not all-encompassing. It excepts party admissions of liability jnd, if agreement is reached, — or claimed to be reached — that oral settlement can be enforceable — sometimes much to the surprise and chagrin of one of the parties.

Further, in our experience, impermissibly and unethically, what happens in the course of settlement discussions is that those conversations seep into court proceedings and discovery. Further, invariably opposing counsel will share some morsel of the tenor, tone or dialogue with a Judge to gain an advantage in the litigation. In other words, opposing counsel and parties are not always trustworthy.

“We Can Talk Agreements”

As a result, before engaging in settlement discussions with opposing parties or counsel, Finney Law Firm frequently has the parties sign what we call a “We Can Talk Agreement” that generally provides two things:

Nothing said in the course of the settlement discussions will come into play in any manner in the litigation proceedings: Not in discovery, not in “in Chambers” conversations with the Judge, and not in Court.
No claimed oral settlement agreement will be binding unless and until it is memorialized in writing and signed by our client. Period.

I recently had opposing counsel ask me: “Why would you ask me to sign such an agreement?” It was a case in which we had the upper hand and the defendant was flailing around for some foothold for a defense. Opposing counsel already had engaged in motion and discovery abuse, needlessly and substantially driving up the cost of litigation, and after 26 months of writing, twisting and turning, he had run out of underhanded tactics, and was approaching facing the music before the Judge. My answer: “Because I don’t trust you. You, in this case and attorneys at your firm over the years, have engaged in underhanded tactics, and we won’t sit and talk except on our terms.”

Setting the proper tone for settlement conversations

In addition to beefing up the protections of Rule of Evidence 408, the “We Can Talk Agreement” establishes, shall we say, imposed mutual respect between the parties. We find it a powerful tool to set the proper tone in settlement discussions.

Direct client conversations

Other times, clients want to talk directly — without the filter of attorneys. Again, it’s not just what our client may say during the course of those conversations that is potentially problematic, but what the other party will claim they said. (Side note: Assume all conversations these days are being recorded, especially those in situations of conflict.) Further, sometimes clients want to use an intermediary, such as a priest, pastor or mutual friend to resolve a dispute.

In these instances, we also recommend a “We Can Talk Agreement” to enable and encourage a full and robust conversation.

Conclusion

When you already know you are in the midst of a conflict with another party, caution is the watchword and a “We Can Talk Agreement” can greatly advance the cause of a cautious approach to settlement discussions.

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The text of Ohio Rule of Evidence 408 is below:

Evidence of (1) furnishing or offering or promising to furnish, or (2) accepting or offering or promising to accept, a valuable consideration in compromising or attempting to compromise a claim which was disputed as to either validity or amount, is not admissible to prove liability for or invalidity of the claim or its amount. Evidence of conduct or statements made in compromise negotiations is likewise not admissible. This rule does not require the exclusion of any evidence otherwise discoverable merely because it is presented in the course of compromise negotiations. This rule also does not require exclusion when the evidence is offered for another purpose, such as proving bias or prejudice of a witness, negating a contention of undue delay, or proving an effort to obstruct a criminal investigation or prosecution.

Meet Our 2022 Summer Law Clerks

By Finney Law FirmJuly 12, 2022August 5, 2022

The Finney Law Firm is excited to introduce its 2022 Summer Law Clerks! Each year, we hire incoming 2L or 3L law students to work in our various practice areas, including General Litigation, Labor and Employment, Constitutional/Public Interest, and Real Estate & Commercial Transactional (to name a few).

The Summer Law Clerk Program allows us to get to know the next generation of attorneys and serves as a mutually beneficial opportunity for them to help work on some of our pending cases and, more importantly, learn in a fast-paced, practical legal environment. This Program is something we very much enjoy and strive to make both fun and enriching for our clerks. Our law clerks draft motions and pleadings, observe depositions, assist with due diligence and document review, meet with clients, research some of the many unique legal issues with which we are often presented, and have even helped with multi-day and multi-week trials!

Ashley Duckworth

Ashley is an incoming 2L at NKU Chase College of Law and is clerking primarily with our General Litigation and Constitutional/Public Interest groups from our Eastgate location, though she also helps with Transactional projects. Ashley grew up in Morganfield (Union County), Kentucky and earned her undergraduate degree in Communication from Western Kentucky University. Outside of work and school, Ashley is an avid reader and enjoys spending time with her friends and family and her new pup, Zoey! While she still has plenty of time to narrow her legal interests, Ashley is enjoying getting to work with several of our practice groups. Fun fact: Ashley was the overall high scorer during our duckpin bowling outing with the young associates and law clerks earlier this month!

Caitlin Lancaster

Caitlin is an incoming 3L at University of Cincinnati College of Law and is clerking with our General Litigation group at our Mt. Adams location. She earned her undergraduate degree in Sports Management and Business Administration from the University of Cincinnati. Caitlin is currently a UC Law Admissions Ambassador, just completed her tenure as Social Chair of the Student Bar Association, is a member of the Moot Court Honor Board, and was recently elected to the Executive Board as the External Competitions Director. Caitlin plans to become a litigator after graduation and is enjoying the opportunity to work on a wide range of litigation matters at FLF. Outside of work and school, Caitlin can be found running away her stresses at Orangetheory, out on the town with her friends, or rooting on the Bengals and Sooners (she is also a fantasy football pro). We love that competitive spirit!

Austin Wishart

Austin is an incoming 3L at University of Cincinnati College of Law and is clerking with our Labor and Employment Group in both our Eastgate and Mt. Adams office locations. He is from Hamilton, Ohio, and currently lives in Loveland with his fiancé and their cat, Mauricio. Austin earned his undergraduate degree in Philosophy from the University of Dayton (Go Flyers!) and his Master’s in Bioethics from New York University. He enjoys writing for the University of Cincinnati Law Review and spending time with friends on campus. Austin hopes to enter the practice of labor and employment law after graduation in 2023. Outside of the law, Austin enjoys trawling local record stores for vinyl, cooking new recipes, and supporting local breweries.

Attorney Casey Jones leads our Summer Law Clerk Program. For additional information about the Program or how to apply, feel free to reach out to Casey at [email protected] or to Katherine Fox at [email protected].

The Intersection Between “Omitted” Property Taxes and TOD Affidavits

By Casey A. JonesJuly 4, 2022August 5, 2022

Pursuant to R.C. 5713.20(A), “[i]f the county auditor discovers that any building, structure, or tract of land or any lot or part of either, has been omitted from the list of real property, the auditor shall add it to the list[.]” This “omitted property” includes property that was incorrectly, though in earnest, subjected to an exemption. However, it does not stop there.

The auditor is also required to compute and assess the taxes for preceding years during which the property was incorrectly omitted or exempted, up to five years, unless the property was transferred in the meantime. For purposes of this provision, “in the meantime” means before the omitted tax is actually assessed. If the property was transferred, the assessment can only relate to the time period after the transfer – i.e., the new owner will not be responsible for omitted taxes that would have accrued prior to its ownership. This should encourage a new or prospective owner to evaluate whether and how the property is taxed, make sure any exemptions, indeed, apply or that such use will continue, and otherwise prepare themselves for the likelihood of an increased tax.

As for property taxes accrued prior to a transfer of ownership, these are typically prorated at the closing (as for arm’s length transactions for value). But what happens if there is no closing?

Consider the following scenario:

Father owns property that has, for years, been subject to a property tax exemption. Father is ill and wants to avoid probate upon his death, so he executes a Transfer on Death (“TOD”) Affidavit, which will allow the property to transfer to Daughter without the need to open an estate. Upon Father’s Death, the property transfers to Daughter. However, unbeknownst to Daughter (and, perhaps, even unbeknownst to Father), an “omitted tax” was assessed two weeks before Father’s death and, thus, prior to the point in time that the property actually transferred to her.

The omitted tax was assessed because the auditor found that the property was improperly exempted or the exemption no longer applied for tax years preceding Father’s death. Because the omitted tax was assessed prior to the actual transfer of the property (remember, it did not transfer until the time of Father’s death), the “unless in the meantime the property has changed ownership” exception to R.C. 5713.20 does not apply. However, property tax assessments “run with the property,” meaning that Daughter is now responsible for, essentially, paying back up to five years’ worth of tax savings that Father realized as the result of the improper exemption (through no fault of his own), even though Daughter had no vested interest in the property during the period for which the exemption was in effect. If Daughter does not pay the omitted tax, she risks tax liens and/or foreclosure of the property. These omitted taxes can pretty quickly add up to tens of thousands of dollars, even before non-payment penalties.

In the case of an omitted tax, timing is of the utmost importance – e.g., when the omitted tax was assessed relative to when the property changed ownership. This may seem like a one-off case or unlikely occurrence. However, TOD affidavits are becoming an increasingly popular method of avoiding probate and, often, the TOD beneficiaries take little interest in the property until such time as it is to transfer to them. The lesson: be vigilant. The county auditors’ websites publish information relating to tax assessments and payments. The knowledge of whether a property in which you may, at some future time, have an interest is literally a few mouse clicks away. And if you need help, we have attorneys who are familiar with these issues relative to each of the tax, real estate, and probate implications who can assist you.

Ohio Contract Law: Voiding contracts on the basis of fraud

By Casey A. JonesMay 12, 2022August 5, 2022

Properly drafted written contracts are typically enforceable as against the parties thereto, with few exceptions – fraud being one of them. The manner in which written contracts are treated upon the allegation of fraud is highly dependent on the type of fraud alleged. In short, it is a question of whether the party claiming fraud alleges that they were defrauded as to the terms or nature of the contract or as to the facts and representations underlying the contract.

Void and Voidability

One of the most common scenarios in which this question arises is relative to settlement agreements and/or “releases,” where one party gives some consideration (e.g., money) in exchange for the settlement and release of actual or potential legal claims. The type of fraud being alleged determines whether the contract or agreement is automatically void (void ab initio) or merely voidable. “A release obtained by fraud in the factum is void ab initio, while a release obtained by fraud in the inducement is merely voidable upon proof of fraud.” Haller v. Borror Corp., 50 Ohio St. 3d 10, 13 (1990). “Whether a release was procured through fraud of either type is a question for the trier of fact [such as a jury]. Whether the fraud as alleged is in the factum or in the inducement is an issue of law for the court.” Id., at 14-15.

Fraud in the Factum

“A release is obtained by fraud in the factum where an intentional act or misrepresentation of one party precludes a meeting of the minds concerning the nature or character of the purported agreement.” Id. Imagine a grandchild telling her grandmother that she is signing a letter for school when it is really a change to her estate plan. “Where device, trick, or want of capacity produces ‘no knowledge on the part of the releasor of the nature of the instrument, or no intention on his part to sign a release or such a release as the one executed,’ there has been no meeting of the minds.” Id., quoting Picklesimer v. Baltimore & O. R. Co., 151 Ohio St. 1, 5 (1949).

Fraud in the Inducement

As the title would suggest, “[c]ases of fraud in the inducement. . . are those in which the plaintiff, while admitting that he released his claim for damages and received a consideration therefor, asserts that he was induced to do so by the defendant’s fraud or misrepresentation.” Haller, at 14. In Haller, the alleged fraud involved the financial solvency of a defendant company. In essence, a representative of the company allegedly represented to the plaintiffs that the company would soon be closed and, therefore, if Plaintiffs did not accept the offered settlement, they would likely receive nothing with respect to their claim(s). Id., at 11-12. The plaintiffs apparently later learned that this was not true. The Ohio Supreme Court found these allegations consistent with a claim of fraud in the inducement.

Practical Considerations

“A release of liability procured through fraud in the inducement is voidable only, and can be contested only after a return or tender of consideration.” Haller v. Borror Corp., 50 Ohio St. 3d 10, 14 (1990); see also Berry v. Javitch, Block & Rathbone, L.L.P., 127 Ohio St. 3d 480, 483 (2010) (“[A]n action for fraud in the inducement of a settlement of a tort claim is prohibited unless the plaintiff tenders back the consideration received and rescinds the release.”); Manhattan Life Ins. Co. v. Burke, 69 Ohio St. 294 (1903).

While it may seem obvious, one cannot seek to void a contract while retaining the consideration they received for the same. In Haller, the plaintiffs received $50,000 in exchange for a release of their prior claims. The Court, finding their allegations of fraud to be consistent with fraud in the inducement, held that the plaintiffs were required to tender back the $50,000 to the defendants before they could seek to void the settlement agreement and release. Because they had not done so, the release they signed remained valid and enforceable, and their claims (including those released under the settlement agreement and that of fraud in the inducement) were dismissed. This is consistent with the idea that one cannot “cherry-pick” which parts of a contract to enforce; they cannot denounce their obligations under a contract while retaining the benefits thereof.

When it comes to contract negotiations, these cases demonstrate how important it is to (a) start from a properly drafted contract, and (b) do your due diligence in order to mitigate the risk of later disputes and litigation. Our transactional team is uniquely positioned to help in these negotiations, having significant experience in contract drafting, negotiation, and disputes.

For assistance with contractual matters, contact Casey Jones (513.943.5673 )

Judge Wende Cross certifies classes in Cincinnati “Alarms Tax” case

By Christopher P. FinneyApril 26, 2022August 5, 2022

Hamilton County Common Pleas Court Judge Wende Cross has certified two classes in White v. Cincinnati, litigation in which both the 1851 Center for Constitutional Law and Finney Law Firm represented payors of the illegal and unconstitutional Cincinnati tax on security alarm systems. The two distinct classes certified are (a) residential and (b) non-residential payors of the Cincinnati alarms tax.

The City charged residential alarm-system-owners $50 per year to register their systems and commercial owners $100 to register their systems. Last fall, the 1st District Court of Appeals unanimously ruled the tax illegal under Ohio law and unconstitutional, overruling a trial Court ruling on the same subject. In March of this year, the Ohio Supreme Court preserved that victory for Cincinnati property owners when it refused to accept discretionary review of the case.

We now proceed to an an Order that will establish the amount and procedures for the restitution of the illegally-collected sums, a fairness hearing, and then distribution of the refunds to payors. We aim for the conclusion of those steps this calendar year. The amount of restitution is expected to be more than $3.6 million.

For questions, contact Chris Finney at 513.943.6655.

You may read the order issued April 22 here.

Governor DeWine signs into law legislation that significantly clips wings of School Districts in tax valuation litigation

By Christopher P. FinneyApril 21, 2022August 5, 2022

Until now, School Districts in Ohio were fully empowered to participate in legal proceedings to oppose the lowering of Auditor’s property tax valuations and to seek increases in property tax valuations. No more.

As we explain here, the Ohio House and Senate in the past few weeks passed legislation that upends the current equilibrium among County Auditors, property owners and school boards, to tilt matters decidedly in favor of property owners. (In fairness, Ohio had granted school boards a far greater role in the process than most other states.)

Today, Governor DeWine signed that bill, Am. Sub. H.B. 126, into law. Read the summary of the legislation here. The Cleveland Plain Dealer covers today’s events here.

For assistance with property tax valuation matters, please contact Chris Finney (513.943.6655) or Casey Jones (513.943.5673).

Tea Party groups move to unseal Lois Lerner and Holly Paz depositions

By Christopher P. FinneyApril 21, 2022August 5, 2022

As we previously wrote about, here, Finney Law Firm was honored to serve as co-counsel to Tea Party groups throughout the nation in what we believe was the only certified class action ever against the Internal Revenue Service for its targeted discrimination against the plaintiffs resulting in protracted delays in processing and granting tax exemption status due to their political viewpoints. The targeting was led by Obama administration IRS official Lois Lerner and her chief deputy at the IRS, Holly Paz.

After years of pitched legal battles, that litigation ended with a dramatic settlement in which the IRS paid damages to Tea Party groups, the IRS paid the Tea Parties’ attorneys fees, and then-US Attorney General Jeff Sessions issued a personal apology on behalf of the United States of America that included this unequivocal statement about the IRS intentional wrongdoing: “this abuse of power will not be tolerated.”

In that litigation, plaintiffs succeeded in obtaining the depositions of Lerner and Paz, but the transcripts of the depositions — finally revealing their own testimony about the origins and implementation of the outrageous policies and practices — have remain sealed under a temporary emergency Order by Judge Michael Barrett. (Even US House and Senate Committees investigating the wrongdoing were stymied in getting that testimony when Lerner and Paz each invoked their 5th Amendment right against self-incrimination.) That Order bottling up the deposition transcripts was never made final, and thus it could not be appealed. Thus, to this day — more than three years later — the deposition transcripts remain hidden from public scrutiny.

As a result, this week, Plaintiff’s counsel filed a Motion for Writ of Mandamus before the 6th Circuit Court of Appeals seeking to have the depositions unsealed. You may read the Motion here.

Ohio legislature sends major changes in Boards of Education/Boards of Revision process to Governor DeWine for signature

By Christopher P. FinneyApril 7, 2022August 5, 2022

A bill passed this week by the Ohio legislature could make major changes in the current process for Ohio tax valuation challenges before Ohio Boards of Revision as it relates to participation by Boards of Education if Governor DeWine signs it into law.

Unlike the procedures in many other states, in Ohio, Boards of Education (the major recipients of property tax monies) may both initiate complaints to increase the valuation of real property (and thus increase property taxes owed) and may oppose a property owner’s legal attempts to secure a reduction in tax values as well.

Some major features of the legislation, Am. Sub. H.B. 126, follow:

School districts may not initiate a complaint to increase valuation unless the challenge meets all of three requirements (a) the challenge is based upon an actual arm’s length sale of the subject property before the tax lien date in question (this would then, it seems, also rule out challenges at all of “entity transfer” sales and sales after the tax lien date in question), (b) the sale is at least 10% above the then-established Auditor’s valuation and (c) such sale price exceeds the Auditor’s valuation by at least $500,000 (that amount is then annually subject to a CPI adjustment).
Boards of Education would have to carefully undertake extensive and detailed procedures to specifically authorize by resolution such challenges, on a property-by-property basis, with at least seven days’ advance certified mail notice to each affected property owner. The level of detail of these procedures appears to be nothing more than a series of procedural traps for Boards of Education to discourage their involvement in the tax valuation process.
The involvement of Boards of Education stop at the Board of Revision. While property owners or the Auditor may pursue an appeal of a Board of Revision decision, Boards of Education will have no authority to appeal (or participate in a property owner appeal) of a Board of Revision decision.
Presently, property owners may enter into private settlements with school districts to avoid or end their opposition to a valuation reduction or its attempts to seek valuation increases. H.B. 126 will outlaw the practice of entering into these “side deals.”

More minor changes include:

Boards of Education may file counterclaims to property owner complaints to reduce valuations only if the initial Complaint seeks a reduction of at least $17,500 (Boards of Education rarely if ever file counterclaims below this level at present).
Boards of Revision lose jurisdiction to increase valuations of claims by Boards of Education are not acted upon within one year of the date of the filing of the Complaint (in our experience, this delay only happens in a few large urban counties in the year following a triennial revaluation, so this type of prolonged delay is quite uncommon).

There is no language in the bill about its effective date, upon our initial review, and thus it would seem its effective date would be 91 days after it becomes law (under the Ohio Constitution). Thus, some of these provisions (pursuit of appeals, for example) could have an impact on valuation complaints and school board counterclaims filed in calendar year 2022.

We will promptly update this blog when Governor DeWine either vetoes or signs the legislation into law. He has 10 days to act, or the bill automatically becomes law.