When a property has been sold more than 24 months before the lien date in a reappraisal year, and the reappraisal does not use that sale price as the property value, the sale should not be presumed “recent” when determining the property’s value for that year, the Supreme Court of Ohio ruled today. In Ohio, the tax value of real estate is determined as of January 1 of the tax year (the lien date), and county auditors are required to perform a reappraisal every six years. 

Justice Paul E. Pfeifer, who authored the court’s opinion, wrote that this new 24-month rule will prevent a remote sale from overriding a more recent appraisal when determining a property’s value for taxes, and also clarifies the potentially conflicting statutory duties that county auditors and fiscal officers have. Justice Pfeifer added that the party favoring a sale price as the property’s value may then offer evidence to try to show that market conditions or the property’s character have not changed the property’s value, as indicated by the appraisal, between the sale and lien dates.

The 6-1 decision reverses the ruling of the Board of Tax Appeals (BTA) in a case involving the property value of an Akron-area Arby’s restaurant for tax year 2008. The case will be sent back to the BTA so the Akron City School District Board of Education has the opportunity to present additional evidence in light of this opinion.

In August 2005, the Arby’s restaurant was sold for $1.4 million. For tax year 2008, the Summit County fiscal officer reappraised the property as required by state law every six years. The fiscal officer assessed the property’s true value at $902,320.

The Akron school board filed a complaint with the Summit County Board of Revision contending that the 2005 sale price was the appropriate value for 2008 property taxes. The board of revision disagreed and kept the fiscal officer’s lower valuation. On appeal, though, the BTA reversed, adopting the $1.4 million sale price as the property’s value. The BTA relied on the relevant statute, former R.C. 5713.03, and case law from the Ohio Supreme Court in applying a legal presumption that the sale of the property was recent and should be used for the property’s tax value unless it is rebutted with evidence.

Quoting the statute, Justice Pfeifer wrote that a sale price can be used for a property’s value if the sale occurs “‘within a reasonable length of time’” of the tax lien date, but the statute does not state whether a sale should be presumed to be recent. He noted the presumption of recency was instead judicially created to put the statute into effect.

Justice Pfeifer reasoned that nothing in the Supreme Court’s case law compels the court to automatically presume that a sale is recent when the sale takes place more than 24 months before the lien date. With today’s decision, the court has created a bright line (a legal rule that resolves issues simply and straightforwardly) to indicate when a sale is close enough to the tax lien date to be considered recent for determining the property’s value, he wrote. 

 “The rule that we adopt today prevents a remote sale from controlling over a more recent appraisal, and in doing so it harmonizes the fiscal officer’s duties under former R.C. 5713.03, which stressed the primacy of the sale price, with R.C. 5713.01(B), which calls for a reappraisal every six years,” he concluded. “Were we to impose a presumption of recency that had no boundaries, the fiscal officer’s duty to conduct an accurate reappraisal every six years would be impaired by sales too remote to be relevant. A sale as old as five or even ten years could potentially cast a deep shadow over the tax assessor’s performance of his legal duty to adopt and maintain a current valuation of the property. The safeguard in this instance is to remove the recency presumption from a sale that occurred more than 24 months before the lien date.”

Joining the majority were Chief Justice Maureen O’Connor and Justices Terrence O’Donnell, Judith Ann Lanzinger, Sharon L. Kennedy, and William M. O’Neill. Justice Kennedy also wrote a separate concurring opinion. Justice Judith L. French dissented.

In her dissent, Justice French wrote that the court has recognized for decades that a sale price is presumed to reflect the property’s true value, unless rebutted. A bright-line rule has not been created by the court before because the concept of a recent sale involves more factors than a specific timeframe between the sale and a lien date, she continued. “It is illogical to restrict our recency presumption based solely on temporal proximity when we do not base recency itself solely on temporal proximity,” she wrote.

Justice French maintained that the court and the BTA have decided cases in which they used sales prices more than 24 months from the tax lien date to set a property’s value.

“The majority overreaches today by creating — unprompted — an arbitrary 24-month-rule for determining when a sale is presumed to be recent,” she concluded. “This rule contradicts case law from this court and from the BTA. In accordance with our legal precedent, and in deference to the BTA’s discretion in weighing evidence, I would apply the presumption in this case and uphold the BTA’s decision.”

Justice Kennedy concurred fully with the majority’s decision but wrote a separate opinion to explain why she thinks the dissent is mistaken. She stated that the Supreme Court case cited in the dissent did not involve the presumption of a recent sale, and the sale occurred long after the lien date.

“Like the majority, I am concerned that if there is no limit, a recent reappraisal may always be challenged with a relatively stale sale price, and the burden would then be unduly thrown on those who support the reappraisal valuation,” she wrote.

“As I understand the majority opinion, the 24-month rule is very limited: it applies to a reappraisal year in which the assessor was aware of, but did not adopt, an earlier sale price,” she continued. “The reason for having a 24-month rule in such a case is that the earlier sale was already taken into account, but found not to be probative because of a perceived change in the market. Accordingly, the 24-month rule does not necessarily apply to a sale that occurs after the lien date of the reappraisal year, because a sale that occurs many months after the reappraisal and the lien date cannot have been taken into account in the reappraisal. Arguably, a later sale constitutes brand new evidence that might call for reconsidering the question of value for the past year.”

2012-1542. Akron City School Dist. Bd. of Edn. v. Summit Cty. Bd. of Revision, Slip Opinion No. 2014-Ohio-1588.

View oral argument video of this case.

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