The Ohio Supreme Court today overturned a property tax exemption for a 71-acre Dayton area property where religious leaders and their spouses are invited to stay at no charge as a type of spiritual retreat.

In a 4-3 per curiam opinion, the Supreme Court reversed the Ohio Board of Tax Appeals’ (BTA) exemption for Innkeeper Ministries in Lewisburg owned by Robert and Janet Hartenstein who permanently live in the seven-bedroom home that serves as the main accommodation for guests while a nearby home called the Eagle’s Wing Manor also serves visitors. The Court’s decision affirms the Ohio tax commissioner’s original denial of the tax exemption, which found the Hartensteins’ full-time occupancy of the main home was a key factor for rejection.

The property grew in four increments through donations of nearby property and now includes the two homes, swimming pool, basketball court, fishing ponds, and “prayer walk” through the wooded property that includes a cabin that has been converted in to a chapel. The property belongs to Innkeeper, a nonprofit corporation, where Robert Hartenstein serves as secretary/treasurer and his son as president of the three-member oversight board.

Innkeeper applied for a tax exemption in 2008, and Robert Hartenstein testified that while not a trained religious leader, he offers counseling and the couple cooks all the meals for guests and takes care of the premises. There are no charges to stay at the property, which is available to “any full-time pastor, parachurch leader, Christian school educator, missionary, or their spouses” seeking a place of “Sabbath rest.”

The tax commissioner ruled that a home site whose facilities are not open to the general public does not meet Ohio’s qualifications for a charitable use, and because Innkeeper is not a church, it does not meet any of the exemptions for property that “facilitates public worship in a principal, primary and essential way.”

The BTA reversed the commissioner’s denial in 2014, finding that under R.C. 5709.121(A)(2) the actual use of the property is for charitable purposes without a “view to profit” and the Hartensteins’ personal use of the property is incidental because they are the caretakers providing free services. The tax commissioner appealed the decision to the Supreme Court, which has mandatory jurisdiction over appeals from the BTA.

Citing its 2006 First Baptist Church of Milford v. Wilkins decision, the Court stated the charitable use exemption applies to property used exclusively for charitable purposes and once a premise is used by a family as a permanent residence, the property no longer is exclusively used for charity.

The Court noted that while the Hartensteins established a nonprofit corporation as the property owner, the couple failed to provide evidence of how many sought to use the space, how many guests it served, and how many it turned away, which is the kind of documentation expected of a nonprofit charitable institution.

“The record here shows ownership by a 501(C)(3) entity, but that entity is controlled by the Hartensteins. Moreover, the accommodation of guests at no costs in a spacious residence cannot by itself turn the residence into a charity,” the opinion stated.

Chief Justice Maureen O’Connor and Justices Paul E. Pfeifer, Judith Ann Lanzinger, and William M. O’Neill joined the opinion.

Dissent Deems Family’s Use Incidental
In a dissenting opinion, Justice Terrence O’Donnell cited the Court’s 1994 Herb Soc. Of Am. Inc. v. Tracy decision that stated “so long as an institution is operated without any view to profit and exclusively for a charitable purpose, it is a charitable institution.”

And noting the court’s holdings in True Christianity Evangelism v. Zaino (2001) and Am. Commt. of Rabbinical College of Telshe, Inc., v. Bd. of Tax Appeals (1951), Justice O’Donnell wrote that the Court has long recognized that advancing religion is a charitable purpose and that a property does not have to be open to the general public in order to be used for charity. He also questioned the majority’s conclusion that residential uses of property cannot be charitable uses, explaining that there are residential uses of property—such as for homeless shelters and battered women shelters--that are “unquestionably charitable.”

Justice O’Donnell maintained that Innkeeper’s property is tax exempt pursuant to Cincinnati Nature Ctr. Assn. v. Bd. of Tax Appeals (1976), because “the Hartensteins’ residence on the property is not only incidental to Innkeeper’s core purpose of advancing religion but also is essential to its purpose, because they tend to the needs of those seeking Sabbath rest.”

He noted that “having the Hartensteins reside on site serves Innkeeper’s core purposes, because they cook meals for all guests, provide counseling, maintain the premises, and donate their time and energy to ensure that residents can achieve physical and spiritual renewal.” Because the property is used exclusively for a charitable purpose and the use of the property as a residence by its caretakers is a necessary incident to the that purpose in “ensur(ing) the opportunity for rest and spiritual renewal of the guests,” Justice O’Donnell would affirm the BTA’s grant of a property tax exemption.

Justices Sharon L. Kennedy and Judith L. French joined Justice O’Donnell’s opinion.

2014-0490. Innkeeper Ministries, Inc. v. Testa, Slip Opinion No. 2016-Ohio-5104.

Listen to oral argument audio of this case.

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