Geneva Area Recreational, Educational & Athletic Trust v. Testa (Slip Opinion) ( 2016 )


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  • [Until this opinion appears in the Ohio Official Reports advance sheets, it may be cited as
    Geneva Area Recreational, Educational & Athletic Trust v. Testa, Slip Opinion No. 2016-Ohio-
    2695.]
    NOTICE
    This slip opinion is subject to formal revision before it is published in an
    advance sheet of the Ohio Official Reports. Readers are requested to
    promptly notify the Reporter of Decisions, Supreme Court of Ohio, 65
    South Front Street, Columbus, Ohio 43215, of any typographical or other
    formal errors in the opinion, in order that corrections may be made before
    the opinion is published.
    SLIP OPINION NO. 2016-OHIO-2695
    GENEVA AREA RECREATIONAL, EDUCATIONAL & ATHLETIC TRUST,
    APPELLANT, v. TESTA, TAX COMMR., APPELLEE.
    [Until this opinion appears in the Ohio Official Reports advance sheets, it
    may be cited as Geneva Area Recreational, Educational & Athletic Trust v.
    Testa, Slip Opinion No. 2016-Ohio-2695.]
    Taxation—Real property—Charitable-use exemption—R.C. 5709.12(B) and
    5709.121—Property owned by for-profit entity and used for leasing is not
    exempt—Prospective-use doctrine does not apply.
    (No. 2014-1778—Submitted February 9, 2016—Decided April 27, 2016.)
    APPEAL from the Board of Tax Appeals, No. 2012-841.
    _______________________
    PFEIFER, J.
    {¶ 1} In 2009, appellant, the Geneva Area Recreational, Educational and
    Athletic Trust, a nonprofit 501(c)(3) corporation d.b.a. Spire Institute (“Spire”),
    entered into an agreement to lease more than 160 acres of land in Geneva, Ohio,
    from Roni Lee, L.L.C. (“Roni Lee”), a for-profit company. By 2012, Spire had
    SUPREME COURT OF OHIO
    constructed Olympic-grade athletic facilities and related improvements on about
    one fourth of the property.    In tax year 2010, Spire sought a real-estate-tax
    exemption for the entire property under the charitable-use exemption, citing R.C.
    5709.12 and 5709.121. The commissioner denied the request, and the Board of Tax
    Appeals (“BTA”) affirmed.
    {¶ 2} Spire appealed, arguing that the exemption applies because the
    property belongs to it (not Roni Lee) and because Spire uses the property
    exclusively for charitable purposes. We reject Spire’s arguments and affirm the
    BTA’s decision.
    FACTS
    The property and its ownership
    {¶ 3} Roni Lee owns the subject property, a 163.09-acre tract in Geneva.
    On March 31, 2009, Roni Lee leased the property to Spire for a renewable term of
    99 years. Under the lease, Spire agreed to pay Roni Lee $1 annually and assumed
    responsibility for all maintenance and improvements. The record reveals a close
    connection between Roni Lee and Spire. Spire’s chief executive officer, Ron
    Clutter, is the primary owner and managing member of Roni Lee. Clutter owns a
    95 percent interest in Roni Lee; his wife owns the remaining interest.
    {¶ 4} Consistent with the lease terms, Spire has constructed Olympic-grade
    athletic facilities and ancillary improvements, collectively known as the Spire
    Complex, on the property. The facilities include the following:
       The Fields and Courts Building, which houses a full-size synthetic turf
    field and a large multipurpose court area. All-Star Physical Therapy and
    Wellness, a for-profit company, pays $4,473 monthly to lease 4,000
    square feet in the building and provides Spire with trainers.
       The Aquatics Center, which includes two pools (recreational and
    Olympic-sized), diving areas, a restaurant, and the Michael Johnson
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    January Term, 2016
    Performance Training Center (a training and fitness center). Spire pays
    the center $150,000 annually to operate on the premises.
         The Indoor Track and Field Building, which accommodates football,
    baseball, track-and-field events, and a 25,000-square-foot banquet area.
    It also houses Spire Fit, a fitness center that offers public memberships.
         A nine-acre outdoor stadium, which accommodates football, soccer, and
    track-and-field events. The stadium seats 10,000 and includes ten
    enclosed luxury suites.
    {¶ 5} Spire has developed only about 45 acres of the property so far, but it
    has plans for future development. It has contemplated, among other things, a tennis
    complex, broadcast facilities, a spa and wellness center, a hotel and conference
    center, freestanding restaurants, commercial development, a retail village, and a
    residential sports academy. In the meantime, Spire partners with a private school
    near Mentor to operate “Spire Academy,” a residential program that allows students
    to train at Spire while they live and study at Andrews Osborne Academy.
    Application for exemption
    {¶ 6} In tax year 2009, the county auditor valued the subject property at
    $2,660,220. Spire filed an application requesting exemption for tax year 2010
    under R.C. 5709.12(B) and 5709.121.
    {¶ 7} Before the tax commissioner, Spire presented evidence that the Spire
    Complex serves unmet community needs. For example, the local high school uses
    Spire’s fields for a cost comparable to what it would pay to maintain its own fields.
    Spire has also agreed to let the school retain the amount of gate revenues from
    football games that it would have earned at its own facilities; Spire takes the
    remainder.
    {¶ 8} Spire also asserted that its services are available regardless of ability
    to pay. In its exemption application, Spire explained that it would set fees at an
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    affordable rate for local residents and noted that fees “may be waived in special
    circumstances, especially for underprivileged youth.”
    {¶ 9} As to the undeveloped property, Spire’s application stated, “In the
    future, it is possible that any excess real estate in the Complex may be sold to
    businesses for commercial development.”
    {¶ 10} On January 23, 2012, the tax commissioner denied exemption. The
    commissioner found that Roni Lee uses the property for “land development and
    commercial leasing.”     The commissioner found “no evidence that [Spire] is
    engaged in charitable activity in any substantial way, even though it is a non-profit
    entity.” Ultimately, the commissioner concluded,
    the owner’s primary use of the subject property is leasing it for
    development as an elite sports training facility to develop Olympic
    and professional caliber athletes, together with the appreciation and
    development of the surrounding property controlled by the owner
    and not subject to the lease.
    {¶ 11} The commissioner also denied exemption of the undeveloped
    property under the prospective-use doctrine—which can exempt real property
    acquired with the intention of devoting it to a use that would exempt it from taxation
    but that has not yet begun—explaining that Spire’s own exemption application
    stated that this land may be sold to developers for commercial use.
    BTA proceedings
    {¶ 12} Spire appealed to the BTA, arguing that it is a charitable institution
    and that it uses the subject property exclusively for charitable purposes. In addition,
    Spire argued that the property “belongs to” it—rather than to Roni Lee—for
    purposes of R.C. 5709.12(B) and 5709.121.
    4
    January Term, 2016
    {¶ 13} The BTA held a hearing on July 29, 2013. Spire presented extensive
    testimony from Jeffrey Orloff, Spire’s chief operating officer, about Spire’s
    operations and charitable activities. Orloff testified that Ron Clutter created Spire
    to give the local community access to athletic facilities that did not otherwise exist
    in the region. Spire’s mission is to “unlock the full potential of the human spirit
    through athletics, academics, and service.” According to Orloff, the goal of Spire
    is “not to make money but to provide * * * services.” He testified that Spire
    provides many services for free or at a reduced rate. Orloff emphasized that the
    policy is well known to both employees and patrons.
    {¶ 14} In support of this testimony, Spire introduced a copy of a board
    resolution indicating that it “will offer its services at its own expense, or on a sliding
    scale of cost, based on any individual’s or organization’s ability to pay” and will
    “make a special effort to offer [its] services, programs and facilities” to individuals
    in need of that assistance. Orloff explained that this was Spire’s intent “from day
    one,” although he was uncertain when the board adopted this policy or when similar
    language appeared on Spire’s website. Orloff conceded that Spire does not have a
    published sliding fee scale or any written policy for reduced rates, even for tuition
    at Spire Academy. Instead, Spire awards discounts on a case-by-case basis, relying
    on the “honor system.”
    {¶ 15} As to the undeveloped portions of the property, Orloff testified that
    Spire has yet to make final plans or secure funds for future projects. He indicated
    that Spire intends to build dormitories and possibly other sporting complexes.
    Orloff asserted that any future uses of the property would be consistent with Spire’s
    mission, but on cross-examination he conceded that “it is possible any excess real
    estate in the Complex may be sold to businesses for commercial development.” In
    fact, one projection for Spire in “2011 and beyond” specifically mentions a
    “Commercial Development/Retail Village.” Ultimately, Orloff stated that Spire
    hopes to keep a high percentage of the property, perhaps 80 percent.
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    SUPREME COURT OF OHIO
    {¶ 16} At the hearing, counsel for the tax commissioner inquired about
    Spire’s 2010 tax returns. Although the returns reported $15,243,518 in net income,
    Orloff insisted that Spire “[broke]-even at best.” He explained that the tax figures
    did not account for capital expenditures and noted that Ron Clutter donated $19
    million to Spire in 2010.
    {¶ 17} On September 16, 2014, the BTA issued a decision affirming the
    denial of exemption. The BTA found that Roni Lee did not use the property for
    charitable purposes; the only activity there was evidence that the company
    undertook was leasing the property to Spire. The BTA also found that Spire does
    not use the property solely for charitable purposes. It described Spire’s “main goal”
    as “creat[ing] an elite athletic training facility” for professional and Olympic-
    caliber athletes. The BTA concluded that most Spire patrons pay for services; it
    saw no concrete evidence that Spire offers many services for a reduced rate, and it
    was unconvinced that Spire has a formal policy to provide services without regard
    to ability to pay. Finally, the BTA held that Spire failed to satisfy its burden with
    respect to the unused portions of the property under the prospective-use doctrine.
    ANALYSIS
    {¶ 18} On appeal, Spire asserts six propositions of law:
    PROPOSITION OF LAW NO. 1: Real property a charitable
    institution leases pursuant to a 99-year renewable ground lease
    agreement “belongs to” that charitable institution for purposes of
    applying R.C. 5709.12 and R.C. 5709.121.
    PROPOSITION OF LAW NO. 2: An institution operated
    without any view to profit and exclusively for charitable purposes is
    a charitable institution.
    6
    January Term, 2016
    PROPOSITION OF LAW NO. 3: Real property that is used
    exclusively for charitable purposes is exempt from taxation under
    R.C. 5709.12(B).
    PROPOSITION OF LAW NO. 4: A charitable institution’s
    real property is exempt from taxation under R.C. 5709.121(A)(2) if
    it is made available under the direction or control of the charitable
    institution for use in furtherance of or incidental to the charitable
    institution’s charitable, educational or public purposes and not with
    a view to profit.
    PROPOSITION OF LAW NO. 5: R.C. 5709.12 and R.C.
    5709.121 do not preclude the collection of fees for services nor do
    they require a certain percentage of free or discounted services.
    PROPOSITION OF LAW NO. 6: Engaging in extensive
    planning to develop real property for activities consistent with a
    charitable institution’s charitable purposes satisfies this court’s
    “prospective use” standard.
    Standard of review
    {¶ 19} We review the decisions of the BTA to determine whether they are
    reasonable and lawful. R.C. 5717.04. We will defer to the BTA’s factual findings
    as long as they are supported by reliable and probative evidence in the record.
    Satullo v. Wilkins, 
    111 Ohio St. 3d 399
    , 2006-Ohio-5856, 
    856 N.E.2d 954
    , ¶ 14. By
    contrast, the BTA’s legal determinations are subject to de novo review. Crown
    Communication, Inc. v. Testa, 
    136 Ohio St. 3d 209
    , 2013-Ohio-3126, 
    992 N.E.2d 1135
    , ¶ 16.
    {¶ 20} Tax exemption statutes are strictly construed under Ohio law. See
    Cincinnati Community Kollel v. Testa, 
    135 Ohio St. 3d 219
    , 2013-Ohio-396, 
    985 N.E.2d 1236
    , ¶ 17. Accordingly, Spire bore “the burden of proof * * * to show that
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    SUPREME COURT OF OHIO
    the property is entitled to exemption.” R.C. 5715.271; see also Anderson/Maltbie
    Partnership v. Levin, 
    127 Ohio St. 3d 178
    , 2010-Ohio-4904, 
    937 N.E.2d 547
    , ¶ 16
    (“the onus is on the taxpayer to show that the language of the statute ‘clearly
    express[es] the exemption’ in relation to the facts of the claim” [brackets sic]),
    quoting Ares, Inc. v. Limbach, 
    51 Ohio St. 3d 102
    , 104, 
    554 N.E.2d 1310
    (1990).
    The charitable-use exemption: R.C. 5709.12(B) and 5709.121
    {¶ 21} The outcome of Spire’s appeal turns on the application of two
    statutory provisions—R.C. 5709.12(B) and 5709.121—that set forth aspects of
    Ohio’s charitable-use exemption.
    {¶ 22} R.C. 5709.12(B) states that “[r]eal * * * property belonging to
    institutions that is used exclusively for charitable purposes shall be exempt from
    taxation * * *.” For purposes of this section, “institutions” includes both charitable
    and noncharitable organizations. First Baptist Church of Milford, Inc. v. Wilkins,
    
    110 Ohio St. 3d 496
    , 2006-Ohio-4966, 
    854 N.E.2d 494
    , ¶ 15. If a property belongs
    to a charitable institution, however, it is also necessary to look to R.C. 5709.121.
    This provision “does not itself grant any exemption.” 
    Id. at ¶
    16. Instead, it
    “constitutes a refinement of R.C. 5709.12(B)” that broadens the meaning of “used
    exclusively for charitable purposes” for property that belongs to a charitable
    institution. See Dialysis Clinic, Inc. v. Levin, 
    127 Ohio St. 3d 215
    , 2010-Ohio-5071,
    
    938 N.E.2d 329
    , ¶ 22, 24.
    {¶ 23} R.C. 5709.121(A) states:
    Real property and tangible personal property belonging to a
    charitable or educational institution * * * shall be considered as used
    exclusively for charitable or public purposes by such institution * *
    * if it meets one of the following requirements:
    (1) It is used by such institution * * * under a lease, sublease,
    or other contractual arrangement:
    8
    January Term, 2016
    (a) As a community or area center in which presentations in
    music, dramatics, the arts, and related fields are made in order to
    foster public interest and education therein;
    (b) For other charitable, educational, or public purposes.
    (2) It is made available under the direction or control of such
    institution * * * for use in furtherance of or incidental to its
    charitable, educational, or public purposes and not with the view to
    profit.
    {¶ 24} R.C. 5709.121 was enacted to address situations where ownership
    and use of property do not coincide. Traditionally, the existence of a lease defeated
    exemption under R.C. 5709.12; that is, exemption was not available if the property
    “owner had leased the property to another, even if that lessee was using the property
    for charitable purposes.” Dialysis Clinic at ¶ 23. When the General Assembly
    enacted R.C. 5709.121 in 1969, Am.Sub.H.B. No. 817, 133 Ohio Laws, Part III,
    2646, it “expanded the charitable-use exemption to encompass * * * the situation
    in which an entity that qualifies as a ‘charitable institution’ itself leases property to
    another charitable institution for charitable purposes,” Northeast Ohio Psych. Inst.
    v. Levin, 
    121 Ohio St. 3d 292
    , 2009-Ohio-583, 
    903 N.E.2d 1188
    , ¶ 12.
    {¶ 25} R.C. 5709.121 does not apply when exemption is sought for property
    that belongs to a noncharitable institution. See First Baptist Church, 110 Ohio
    St.3d 496, 2006-Ohio-4966, 
    854 N.E.2d 494
    , at ¶ 13-15, citing White Cross Hosp.
    Assn. v. Bd. of Tax Appeals, 
    38 Ohio St. 2d 199
    , 203, 
    311 N.E.2d 862
    (1974) (Stern,
    J., concurring). It “applies only to property ‘belonging to’ i.e., owned by, a
    charitable or educational institution, or the state or a political subdivision.”
    (Emphasis sic.) Highland Park Owners, Inc. v. Tracy, 
    71 Ohio St. 3d 405
    , 406, 
    644 N.E.2d 284
    (1994); see also Dialysis Clinic, 
    127 Ohio St. 3d 215
    , 2010-Ohio-5071,
    
    938 N.E.2d 329
    , at ¶ 22 (when the owner is a charitable or educational institution,
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    SUPREME COURT OF OHIO
    R.C. 5709.121 “links certain property uses to R.C. 5709.12(B)’s exclusive-
    charitable-use exemption”). Thus, to trigger this definition of exclusive charitable
    use, “an entity that leases property to another must establish its charitable status
    based on the range of its own activities and may not rely upon the activities of a
    particular lessee.” (Emphasis sic.) Northeast Ohio Psych. Inst. at ¶ 14.
    The BTA reasonably and lawfully determined that the
    property belongs to Roni Lee, not Spire
    {¶ 26} To analyze Spire’s exemption request, the BTA first had to
    determine which entity the subject property belongs to for purposes of R.C.
    5709.12(B) and 5709.121. Spire argues that the BTA erred by holding that the
    property belongs to Roni Lee, the titleholder, rather than to Spire, which has a long-
    term leasehold interest in the property. As a starting point, we have equated
    “belonging to” with “owned by” in the charitable-exemption context.               See
    Humphries v. Little Sisters of the Poor, 
    29 Ohio St. 201
    , 207 (1876) (explaining
    that as used throughout an earlier version of the charitable-use exemption, “[t]he
    word ‘belonging’ * * * means ownership”); Episcopal Parish of Christ Church v.
    Kinney, 
    58 Ohio St. 2d 199
    , 201, 
    389 N.E.2d 847
    (1979) (“ ‘The legislative
    definition of exclusive charitable use found in R.C. 5709.121, however, applies
    only to property ‘belonging to,’ i.e., owned by, a charitable or educational
    institution’ ” [emphasis sic]), quoting White 
    Cross, 38 Ohio St. 2d at 203
    , 
    311 N.E.2d 862
    (Stern, J., concurring). And recently we stated in the context of
    analyzing a 30-year lease with a purchase option that “[p]ossessing a leasehold
    interest, even under a long-term lease, is not ownership.” ShadoArt Prods., Inc. v.
    Testa, ___ Ohio St.3d ___, 2016-Ohio-511, ___ N.E.3d ___, ¶ 5, 34. But notably,
    ShadoArt did not involve a renewable 99-year lease, which arguably presents a
    different question.
    {¶ 27} Spire now contends that it qualifies as the entity to which the
    property belongs because its renewable 99-year leasehold interest amounts to
    10
    January Term, 2016
    ownership. See Ralston Steel Car Co. v. Ralston, 
    112 Ohio St. 306
    , 309, 319, 
    147 N.E. 513
    (1925) (holding that 99-year lease, renewable forever, amounted to a
    permanent fee-simple estate for purposes of evaluating a widow’s right to dower);
    Carney v. Cleveland City School Dist. Pub. Library of Cuyahoga Cty., 169 Ohio
    St. 65, 69-70, 
    157 N.E.2d 311
    (1959) (permitting public-property exemption under
    R.C. 5709.08 when public library spanned two parcels, the smaller of which was
    held under a long-term lease). But even assuming, without deciding, that property
    can belong to the holder of a renewable 99-year lease for purposes of analyzing the
    charitable-use exemption, there remains a factual question whether the lessee
    qualifies as an owner in a particular case.
    {¶ 28} Having reviewed the record, we cannot conclude that the BTA
    abused its discretion by concluding that Roni Lee’s contract and relationship with
    Spire did not effectively transfer ownership of the property to Spire. The close
    relationship between the lessor and lessee—Ron Clutter is the primary owner and
    managing member of Roni Lee, and he is also the president, founder, and director
    of Spire—makes it unclear how much control the lease transferred to Spire. The
    lease states that both parties can modify its terms by a signed writing; over time,
    the president of Spire could benefit himself as principal of Roni Lee by creating
    new lease terms. Finally, Spire has limited control over its use of the property; for
    example, the lease permits Spire to improve the property only as specifically
    contemplated by the agreement. Under these circumstances, it is not unreasonable
    to conclude that the property continues to belong to Roni Lee.
    {¶ 29} In short, the BTA did not err by finding that the property belongs to
    Roni Lee, the titleholder, for purposes of analyzing the charitable-use exemption.
    The BTA properly denied exemption under R.C. 5709.12 and 5709.121
    {¶ 30} We next analyze whether the property is exempt under R.C. 5709.12
    or 5709.121.
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    SUPREME COURT OF OHIO
    R.C. 5709.121 does not apply because the property belongs to
    Roni Lee, which is not a charitable institution
    {¶ 31} As explained above, R.C. 5709.121 applies only when property
    belongs to a “charitable or educational institution or to the state or a political
    subdivision.” Accordingly, we may look to 5709.121 only if Roni Lee qualifies as
    a charitable or educational institution.
    {¶ 32} Here, the BTA concluded that Roni Lee is not a charitable or
    educational institution. As the BTA explained, “[i]t is clear from the record that
    Roni Lee, LLC is not a charitable institution. The only evidence of its activities
    indicates that it solely leases the subject property to [Spire].” Spire does not contest
    this finding on appeal; to the contrary, Spire’s own brief states that Roni Lee is a
    “for-profit limited liability company” and describes it as “a non-charitable
    institution.”
    {¶ 33} Because the subject property does not belong to a charitable or
    educational institution, we turn to R.C. 5709.12.
    The BTA properly denied exemption under R.C. 5709.12 because
    it reasonably and lawfully concluded that Roni Lee does not use
    the property “exclusively for charitable or public purposes”
    {¶ 34} The availability of exemption under R.C. 5709.12 turns on whether
    Roni Lee is using the property “exclusively for charitable purposes.” For purposes
    of this analysis, Spire’s use of the property is irrelevant. See Northeast Ohio Psych.
    Inst., 
    121 Ohio St. 3d 292
    , 2009-Ohio-583, 
    903 N.E.2d 1188
    , at ¶ 11 (“under the
    general exemption for ‘exclusive charitable use’ of property set forth at R.C.
    5709.12(B), it is the owner’s use of the property, not a lessee’s use, that determines
    whether the property should be exempted” [emphasis sic]).
    {¶ 35} We have held that “a private profit-making venture does not use
    property exclusively for charitable purposes.” Highland Park Owners, 71 Ohio
    St.3d at 406-407, 
    644 N.E.2d 284
    , citing Cullitan v. Cunningham Sanitarium, 134
    12
    January Term, 
    2016 Ohio 99
    , 
    16 N.E.2d 205
    (1938), Cleveland Osteopathic Hosp. v. Zangerle, 
    153 Ohio St. 222
    , 
    91 N.E.2d 261
    (1950), and Lincoln Mem. Hosp., Inc. v. Warren, 
    13 Ohio St. 2d 109
    , 
    235 N.E.2d 129
    (1968). Thus, exemption under R.C. 5709.12 is
    not appropriate when an owner uses property “for leasing.” Northeast Ohio Psych.
    Inst. at ¶ 11; see also Community Health Professionals v. Levin, 
    113 Ohio St. 3d 432
    , 2007-Ohio-2336, 
    866 N.E.2d 478
    , ¶ 8. Indeed, the case law has long rejected
    a finding of exclusive charitable use under R.C. 5709.12(B) when a for-profit entity
    owns the property and allows a nonprofit to use it—and the BTA has adhered to
    that authority. See Lincoln Mem. Hosp. at 110; Evans Invest. Co. v. Limbach, 
    51 Ohio App. 3d 104
    , 106, 
    554 N.E.2d 941
    (10th Dist.1988).
    {¶ 36} Here, the record supports the tax commissioner’s and the BTA’s
    findings that Roni Lee did not use the property exclusively for charitable purposes.
    The commissioner found that Roni Lee’s “use of the property is that of land
    development and commercial leasing” and that Roni Lee used the property to lease
    it and also to contribute to “the appreciation and development of the surrounding
    property” owned by Roni Lee that is not subject to the lease. Roni Lee does not
    significantly profit from rental payments under the lease, which requires payment
    of only $1 per year. See Bexley Village, Ltd. v. Limbach, 
    68 Ohio App. 3d 306
    , 310,
    
    588 N.E.2d 246
    (10th Dist.1990) (“$1 per year rental does not qualify as profit”
    under R.C. 5709.07). But Roni Lee stands to profit from the lease in other ways.
    As the tax commissioner’s final determination explained, public records indicate
    that Roni Lee owns 445 acres of property adjacent to the subject parcels whose
    value is affected by Spire’s improvement of the parcels it rents. In addition, Roni
    Lee will retain Spire’s improvements to the property when Spire’s interest reverts
    to Roni Lee.
    {¶ 37} Given these facts, the BTA did not act unlawfully or unreasonably
    when it found that Roni Lee does not use the property exclusively for charitable
    13
    SUPREME COURT OF OHIO
    purposes. Accordingly, we affirm the BTA’s denial of exemption under R.C.
    5709.12.
    The prospective-use doctrine does not apply
    {¶ 38} Finally, Spire contends that the undeveloped portions of the property
    qualify for exemption under the prospective-use doctrine.
    {¶ 39} The prospective-use doctrine states:
    Where an entity, which under the law is entitled to have
    its property exempted from taxation, acquires real property
    with the intention of devoting it to a use exempting it from
    taxation, such property is entitled to be exempted from
    taxation, as long as it is not devoted to nonexempt or
    commercial use, even though actual physical use of the
    property for the exempt purpose has not yet begun.
    Carney, 
    169 Ohio St. 65
    , 
    157 N.E.2d 311
    , at paragraph one of the syllabus.
    {¶ 40} To establish a right to exemption for a prospective use, a private
    property owner must show that it is “actively working toward [an] actual use for
    the public benefit.” Holy Trinity Protestant Episcopal Church of Kenwood v.
    Bowers, 
    172 Ohio St. 103
    , 107, 
    173 N.E.2d 682
    (1961). “Evidence that surveys
    have been made and plans drawn or that active fund-raising campaigns are being
    carried on is indicative that the exempting use will be made of the property within
    a reasonable time.” 
    Id. A property’s
    ability to satisfy this standard turns on whether
    its “owner is developing the property for [an] exempt use” as of the tax-lien date of
    the tax year at issue. Episcopal School of Cincinnati v. Levin, 
    117 Ohio St. 3d 412
    ,
    2008-Ohio-939, 
    884 N.E.2d 561
    , ¶ 1, 25.
    {¶ 41} The prospective-use doctrine does not apply to the undeveloped
    property here for two reasons. First, the same reasoning that leads us to affirm the
    14
    January Term, 2016
    BTA’s decision that the developed property at issue is not exempt under R.C.
    5709.12 or 5709.121 compels us to conclude that the undeveloped property is not
    exempt. It is, after all, only the prospect of an exempting use that justifies
    exemption under the prospective-use doctrine. Episcopal School at ¶ 10, citing
    Carney at paragraph one of the syllabus. Second, although Spire introduced some
    evidence of plans for future development, it is unclear how much of the
    undeveloped property those plans account for. Indeed, Spire’s witness conceded
    that some of the property might be sold to developers for commercial use, which
    precludes application of the prospective-use doctrine to that land. See Carney at
    paragraph one of the syllabus.
    {¶ 42} We affirm the BTA’s holding that the prospective-use doctrine does
    not apply.
    CONCLUSION
    {¶ 43} Because Spire has not established that any portion of the subject
    property qualifies for a charitable-use exemption, we affirm the BTA’s decision.
    Decision affirmed.
    O’CONNOR, C.J., and O’DONNELL, LANZINGER, KENNEDY, and FRENCH, JJ.,
    concur.
    O’NEILL, J., not participating.
    _________________
    Warren & Young, P.L.L., Ryan M. Ellis, and Stuart W. Cordell; and
    Thrasher, Dinsmore & Dolan, L.P.A., and Mary Jane Trapp, for appellant.
    Michael DeWine, Attorney General, and David D. Ebersole, Assistant
    Attorney General, for appellee.
    _________________
    15
    

Document Info

Docket Number: 2014-1778

Judges: Pfeifer, O'Connor, O'Donnell, Lanzinger, Kennedy, French, O'Neill

Filed Date: 4/27/2016

Precedential Status: Precedential

Modified Date: 11/13/2024