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General Assembly Compromises to Reform Ohio’s Real Property Valuation Challenge Process

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UPDATE: Governor Mike DeWine signed Sub. H.B. 126 into law, a bill that significantly reforms Ohio’s real property valuation challenge process. The new law will be effective on July 21, 2022. Some property owners may want to take an important next step well before the effective date.

The Ohio House of Representatives and Senate recently reached a compromise to reform challenges to the property tax valuation system by passing Sub. H.B. 126. The reforms add transparency to the valuation challenge process, protect property owners from unnecessary legal costs and frivolous litigation, speed up the resolution of valuation complaints, and free up the Ohio Board of Tax Appeals to focus on tax issues that generally impact a wider swath of taxpayers.

H.B. 126 was originally introduced in the House by Ways & Means Committee Chair Derrick Merrin in February 2021. In representing the Coalition for Fair Property Tax Valuations, Inc., Zaino Hall & Farrin LLC and ZHF Consulting LLC spearheaded an effort by property owners and developers to strengthen H.B. 126’s reforms in the Senate by adding even more transparency and fairness to the valuation process. The Senate, led by President Matt Huffman and Ways & Means Committee Chair Bill Blessing, amended the House version to completely eliminate school districts from the real property valuation process and to prohibit private payment side deals. The compromise version, Sub. H.B. 126, balances the interests of property owners, school districts, and county auditors.

Background: For decades, Ohio law has allowed school districts and other local jurisdictions that benefit from local real property tax to challenge property valuations determined by county auditors. School districts are generally the only jurisdictions that have widely used this provision, hiring private law firms to identify valuation issues and file what are often unsupervised challenges against property owners. This tactic by local school districts has proliferated across Ohio and resulted in the creation of a cottage legal industry of private school district attorneys who aggressively pursue valuation increases on all types of property owners, including residential owners. Not all school districts made use of these tactics, but enough have been so aggressive to require statutory reforms to tamp down that practice.

The Reforms: The bill reforms Ohio’s real property tax valuation challenge system in the following ways:

  • Limits on Types of School District Challenges: Beginning with the 2022 tax year (i.e., appeals filed before March 31, 2023), school districts and other local jurisdictions are authorized to challenge a county auditor’s valuation of any real property to the county board of revision, but only if the district or jurisdiction adopts a resolution authorizing the filing of the valuation complaint at a public meeting and only if the property meets all the following criteria:

o The property was recently sold in an arm’s length transaction before the tax lien date for the tax year for which the complaint is to be filed; and

o The sale price exceeds the true value of the property appearing on the tax list for that tax year by both ten per cent and $500,000.[1]

As a result of these requirements, only substantial property value increases reflected by a sale of the property can be raised, which will protect most residential property owners from school district challenges. Also, a property valuation challenge will only impact taxes for future tax years (eliminating the retroactive impacts that can often result from property tax valuation challenges).

  • Counter-Complaints by School Boards:

o If a property owner disagrees with a county auditor’s valuation and files a valuation complaint to the local board of revision, school districts and other local jurisdictions are generally permitted to then file counter complaints to defend the county auditor’s valuation.

o A board of education must file any counter-complaint within thirty days after the original complaint is filed. Owners must file counter-complaints within thirty days after receiving notice of the original compliant.

  • Elimination of Private Pay Agreements: Private pay agreements or “side deals” to resolve pending or future valuation disputes between school districts or other jurisdictions and taxpayers are prohibited from being entered into as of the effective date of the bill.

o A “private payment agreement” is defined to mean any type of agreement in which a property owner, a tenant authorized to file a valuation complaint, or any person acting on behalf of a property owner or such a tenant agrees to make one or more payments to a subdivision in exchange for the legislative authority of that subdivision doing any of the following:

  • Refraining from filing a complaint or counter-complaint;

  • Dismissing a complaint or counter-complaint filed by the legislative authority; or

  • Resolving a claim by settlement agreement.

A “private payment agreement” does not include any agreement to resolve a claim pursuant to which an agreed-upon valuation for the property that is the subject of the claim is approved by the county auditor and reflected on the tax list, provided that the agreement does not require any payments described above.

  • Only Taxpayers May Appeal BOR Decisions to the Board of Tax Appeals: School districts and other jurisdictions that file a complaint or counter complaint with an auditor or fiscal officer with respect to property not owned by the school or other jurisdiction may not appeal the board of revision’s decision to the Ohio Board of Tax Appeals.

  • Speeding Up BOR Decisions: If an original complaint is filed by the legislative authority of a subdivision, the mayor of a municipal corporation with territory in the county, or a third party complainant, and if the board of revision does not render its decision on the complaint within one year after the date the complaint was filed, the board of must dismiss the complaint. This will encourage the parties to pursue speedy resolution of valuation matters.

Resolution Requirements: Any resolution enacted by the legislative authority of a school district or other local jurisdiction to pursue an original valuation compliant must include all the following information:

  1. Identification of the parcel or parcels that are the subject of the original complaint by street address, if available from online records of the county auditor, and by permanent parcel number;

  2. The name of at least one of the record owners of the parcel or parcels;

  3. The basis for the complaint relative to each parcel identified in the resolution;

  4. The tax year for which the complaint will be filed, which must be a year for which a complaint may be timely filed at the time of the resolution’s adoption.

Such legislative authority is not permitted to adopt a resolution that identifies more than one parcel, except that a single resolution may identify more than one parcel if each parcel has the same record owner or the same record owners, as applicable. However, a legislative authority may adopt multiple resolutions by a single vote, provided that the vote is separate from the question of whether to adopt any other type of resolution.

Other Important Benefits of the Reform: The reforms provide many benefits to Ohio.

  • Ohio’s competitiveness will be enhanced. Very few other states allow school boards and other local jurisdictions to challenge values established by another government entity. The aggressiveness of the school districts that do challenge valuations has hampered development in Ohio. With these reforms, Ohio will be a more inviting location for property developers.

  • The Board of Tax Appeals docket will no longer be inundated with valuation appeals, which currently constitute over 90% of its docket. As a result, decisions related to appeals of individual income tax and business tax assessments should be issued even more quickly, providing swifter guidance to taxpayers and state & local tax authorities.

  • The elimination of the private pay agreements will ensure that property values are properly reflected to benefit all property owners in a jurisdiction, thereby eliminating what effectively amounts to school districts “double dipping” property tax revenues by benefitting from distortions of the school funding formula and tax reduction factor system.

Important Next Step: Any property owner that is subject to a current valuation challenge and wants to settle the matter may want to expedite resolution. The use of private pay agreements will not be allowed after the bill becomes effective on July 21, 2022. Other important next steps may also apply depending on the situation.

Zaino Hall & Farrin LLC defends property owners against property tax valuation complaints and assists with filing complaints to correct the over-valuation of property by county auditors. If you have any questions about these or any other real property tax matters, please contact Tom Zaino, Steve Hall, Dan Dodd, or any of our other professionals.

[1] Beginning in tax year 2023, the $500,000 threshold is to be adjusted by October 1st of each year for inflationary changes.

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