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Court News Ohio
Court News Ohio

Landowners Can Challenge Increased Property Tax Value Placed on Woodlands

Image of farmland next to a wooded area (Thinkstock)

Ohio Supreme Court rules owners of woodlands next to farms can challenge how the tax value of the land was computed by the state.

Image of farmland next to a wooded area (Thinkstock)

Ohio Supreme Court rules owners of woodlands next to farms can challenge how the tax value of the land was computed by the state.

The Ohio Supreme Court ruled today that landowners who complain that their agricultural lands have been overtaxed may challenge their land values before the Ohio Board of Tax Appeals. In proceedings before the board of tax appeals (BTA), the landowners had sought to challenge current agricultural use values (CAUVs) established by the tax commissioner on the basis that the values set for their woodlands were too high.

In a pair of decisions, the Court rejected arguments by the tax commissioner that the BTA lacked jurisdiction to hear objections to the CAUVs because the commissioner’s entry was not a “final determination.” Under guidelines established by administrative rules, the tax commissioner sets the CAUVs after consulting with an expert advisory committee. The values are adopted in a “journal entry.”

In the Supreme Court majority opinion, Justice R. Patrick DeWine noted that the entry is the last step in the process of setting CAUVs, so it is a final determination under the plain language of the law. The BTA has jurisdiction to hear final determinations and must hear the landowner’s challenges, he wrote.

The Court also rejected the landowners’ claims that the entries themselves were rules issued illegally and that administrative rules regarding the CAUVs were unreasonable. The Court remanded the case to the BTA, where the board will determine whether the commissioner followed the rules in setting the CAUVs.

The Court’s decision concluding that the CAUV entry was a final determination was joined by Chief Justice Maureen O’Connor and Justices Terrence O’Donnell, Sharon L. Kennedy, Judith L. French, and William M. O’Neill. Justice Patrick F. Fischer concurred in judgment only. Justices O’Donnell and Fischer dissented from the rejection of the rule-making claim. Justice O’Donnell wrote the landowners provided evidence that the CAUV journal entries were unreasonable because the commissioner failed to follow the rules when he produced them.

Tax Values Shifted
In 1974, Ohioans amended the state constitution to allow land exclusively devoted to agriculture to be taxed at its value based on agricultural use rather than its fair market value. Each year, to enable county auditors to determine the value of farmland for tax purposes, the state tax commissioner adopts a journal entry with a table assigning per-acre values to different types of farmland.

To accomplish the valuations, the tax commissioner is required to adopt rules to determine the CAUVs. The values vary depending on soil type, crop-pricing patterns, and several other factors. Tentative values are developed, the commissioner conducts a public hearing, and then adopts final CAUVs. The adopted values are placed in the commissioner’s administrative journal as a table.

Calculation of Wooded Land Value
Agricultural land also includes the value of wooded land where timber can be grown that is part of or next to farmland. To tax woodlands, the commissioner makes further adjustments. The value is computed based on the income the woodlands would produce if converted to cropland.

The land-clearing costs are deducted from the value. One clearing cost estimate presented to the commissioner found the current state average to be $3,350 per acre. For the 2015 tables, the commissioner used $1,000 per acre for land, which applied to 24 counties. Because of the way counties update their property taxes, 64 counties were directed to use the tables produced in 2013 and 2014. For those two years, the clearing costs were set at $500 per acre.

Landowners Submit Two Challenges
The landowners challenged the CAUVs, claiming that the commissioner set the woodland clearing costs too low, and as a result, their lands were overvalued and overtaxed.

The landowners challenged the woodland clearing costs in the CAUVs before the BTA. The group cited R.C. 5717.02 as the law that allowed for the challenge, but the BTA dismissed the case after the commissioner argued that the CAUV tables are not “final determinations” under the terms of the statute, and that the BTA had no authority to hear the appeal. The BTA also rejected the landowners’ claim that the commissioner had issued the CAUVs in violation of the rule-making procedures. The landowners then sought a second path to have the BTA overturn the 2015 CAUVs. The group argued that under R.C. 5703.14 the BTA could invalidate the CAUVs because the commissioner failed to comply with required rule-making steps and that the administrative rules providing for the determination of the CAUVs were unreasonable. A BTA examiner again found the journal entry itself was not a rule, and that the landowners had not presented support for their claim that the administrative rules were unreasonable. The BTA dismissed the second appeal.

The landowners appealed both cases to the Ohio Supreme Court. The Court heard both cases in one consolidated oral argument, and today issued separate opinions for each.

Values Are Final Determinations
The Court’s opinion stated that there was little dispute the CAUV journal entry was a determination and noted the rules “explicitly refer to the result of the process as a determination.” It also found the entry was a final determination because adoption of the entry is the last step in the process of setting the CAUVs. Once the entry is adopted, county auditors are required to use the CAUVs for the next three years.

The Court agreed with the BTA that the CAUV entries were not rules and that the landowners had not presented grounds for finding the administrative rules were unreasonable. But the Court concluded the BTA has the authority to hear the appeal of a final determination, and the landowners can challenge whether the tax commissioner ignored evidence of a higher clearing cost for woodlands when he adopted the CAUVs using the $1,000 rate.

2016-0256 and 2016-0510. Adams v. Testa, Slip Opinion No. 2017-Ohio-8853 and Slip Opinion No. 2017-Ohio-8854.

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