The Supreme Court of Ohio today ruled the Ohio Department of Taxation did not base the tax rate for the clearing of wooded areas of agricultural lands on any data or evidence and must recalculate the tax rates based on reliable data and evidence.

In a unanimous opinion, the Supreme Court found the current agricultural use values (CAUVs) for woodlands for tax years 2015 to 2020 are not “accurate, reliable, and practical,” which is required by the Ohio Administrative Code. A group of landowners challenged the tax values, arguing the state underestimates the costs of clearing wooded land, which results in taxes being too high for unfarmed wooded areas.

Writing for the Court, Justice Melody Stewart explained the tax commissioner, now Patricia Harris,  acknowledged the $500-per-acre clearing cost rate used prior to 2015 was too low and the tax department was having difficulties finding reliable data to produce a more accurate figure. The commissioner adopted a $1,000-per-acre clearing cost rate. Some forestry experts argued the cost of clearing woodland was far higher than the cost rate the tax commissioner adopted, leading to woodlands being overtaxed.

“But the problem is that simply doubling the rate does not necessarily result in a reasonable endpoint,” Justice Stewart wrote. “The doubling method used to calculate the rate is not supported by any recognized authority, whether it be statistical, legal, agricultural, or otherwise.”

The decision reversed an Ohio Board of Tax Appeals (BTA) decision, which allowed the tax commissioner to use the $1,000 figure. The Court remanded the case to the tax commissioner with instruction to adopt a new clearing-cost rate that complies  with the directives of Adm. Code 5703-25-33.

Case Traced Back to Prior Supreme Court Decision
Many of the landowners involved in today’s case were part of an appeal of the $1,000-per-acre clearing costs the BTA approved in 2015. In Adams v. Testa, the Court overturned a BTA decision denying the landowners the right to challenge the CAUV entry for the per acre clearing costs of woodlands. As the case returned to the BTA for further proceedings, landowners continued to challenge the clearing rate costs for woodlands for the additional tax years 2016 through 2020.

The Court explained that a 1974 amendment to the Ohio Constitution created the CAUVs. The amendment allowed land devoted exclusively to agricultural use to be valued for property tax purposes based on the current value of land when it is used for agricultural purposes, rather than the current fair market value. To determine CAUVs, the tax commissioner was required to adopt rules to consider numerous factors, such as soil productivity and crop prices, to determine values for various types of farmland.

Forested land located on or adjacent to farmland is considered agricultural land. The tax commissioner is required to calculate the cost of clearing the wooded land to convert it into cropland. The clearing costs are then subtracted from the cropland value to determine the woodland value. Once the commissioner adopts a value, the CAUVs for each type of land are set out in a table county auditors must use to set property tax values for agricultural lands.

From 1983 to 2014, the tax commissioner applied a $500-per-acre clearing cost rate for woodlands. The tax commissioner proposed raising the per-acre cost to $1,000 in 2015, which was contested by some landowners, who argued the rate did not reflect the true costs of land clearing and that it needed to be higher.

Board Considered Clearing Costs
The BTA conducted a hearing on the contested rate. Gloria Gardner, a former Ohio Department of Taxation employee who worked specifically on the CAUV program from about 2009 to 2020, described how the $1,000 rate was adopted. She said in 2014, the department was researching the clearing cost rate. She emailed John Dorka, the executive director of the Ohio Forestry Association, asking if he could document the costs. Dorka was also a member of the agricultural advisory committee, which under Adm. Code 5703-25-33(A) is supposed to advise the tax commissioner on developments to consider when setting CAUVs.

Dorka told Gardner he did a survey of Forestry Association members who provide clearing services, and they suggested a proper clearing rate would be between $2,200 and $4,500 per acre. Gardner estimated the average clearing cost at $3,350 per acre. By valuing the cropland at 30% of fair market value, she suggested the clearing costs should be $1,000 an acre.

Shelley Wilson, the department administrator overseeing CAUVs, told Gardner in an email that while she found some truth in Gardner’s efforts, there did not seem to be a rationale for artificially reducing the clearing costs from $3,350 to $1,000.

Gardner responded it was difficult to generate an appropriate clearing cost rate given the information she had. Gardner received some results from other timber consultants and the Ohio Farm Bureau Federation ranging from $800 to $5,000 per acre.

Wilson testified at the BTA hearing she could not identify any person or organization that provided reliable data on the clearing costs below $1,000 and the most the department could do was conclude the current $500 rate was too low. She stated the tax commissioner used her discretion to double the rate and settled on $1,000 per acre.

After the rate was set in 2015, agricultural advisory committee meetings continued to provide the commissioner with figures showing clearing costs were more than $3,750 per acre. Forestry representatives continued to warn the commissioner the higher taxes on woodlands could drive farmers into selling the woodland for housing development and other non-agricultural uses, thus leading to the loss of forested land in Ohio.

In 2023, the BTA upheld the $1,000 clearing cost rate for woodlands for the six contested tax years from 2015 and 2020. The landowners appealed to the Supreme Court, which was required to consider the case since it was a direct appeal from a decision of the BTA.

Supreme Court Analyzed Calculation Rule
The landowners pointed to three provisions of the administrative rule they contend the tax commissioner violated. Justice Stewart explained those sections require the CAUV tables to be accurate, reliable, and practical. To make the CAUV tables, the rule states information “shall be obtained” from cooperative extension agencies, Ohio State University, U.S. Department of Agriculture, National Forest Service, Ohio Department of Natural Resources, Ohio Department of Agriculture, and others.

The rule also requires costs from lands not producing agricultural products to be derived from “the best available resources.”

Reading the provisions together, the Court determined that the tax commissioner had a mandatory duty to obtain information from reliable sources and did not have the discretion to produce her own formula without relying on data to support it.

The tax commissioner argued she did not ignore reliable data, but rather the information provided to her was not reliable. The Court cited Wilson’s testimony, which suggested finding reliable data was difficult but not impossible. Wilson testified that after 2015, the department made no phone calls or information requests from clearing companies to attempt to find reliable data. And despite having the apparent means to do so, the department did not attempt to conduct any surveys or questionnaires on the subject either, the Court concluded.

The Court stated: “Adm.Code 5703-25-33(B) contemplates that the tax commissioner will issue a CAUV table that is ‘accurate, reliable and practical.’ By the tax commissioner’s logic, this standard need not be met when, as here, the department deems the information given to it by the advisory committee unreliable or faces difficulties in obtaining such information. Yet there is no exception in the rule that would allow the tax commissioner to depart from the standard under the circumstances presented here. And this court can no more create an exception to an administrative rule that it can a statute.”

The opinion noted the tax commissioner is not bound by the information in the appeal to decide on a clearing rate value and can use additional evidence to select an appropriate rate.

2023-0733. Adams v. Harris, Slip Opinion No. 2024-Ohio-4640.

View oral argument video of this case.

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