[Cite as Cincinnati Community Kollel v. Testa, 135 Ohio St.3d 219, 2013-Ohio-396.]
CINCINNATI COMMUNITY KOLLEL, APPELLANT, v. TESTA,
TAX COMMR., APPELLEE.
[Cite as Cincinnati Community Kollel v. Testa, 135 Ohio St.3d 219,
2013-Ohio-396.]
Taxation—Real property—R.C. 5709.121(A)(2)—Exemption for real property
belonging to educational institution used in furtherance of educational
purposes—Residential buildings provided for staff scholars and their
families may be considered as “used in furtherance of” educational
purpose when premises are used for institution’s educational programs—
Statute does not require that such educational activities be primary or
principal use of property.
(No. 2012-0015—Submitted February 6, 2013—Decided February 13, 2013.)
APPEAL from the Board of Tax Appeals,
Nos. 2008-A-1367, 2008-A-1368, and 2008-A-1369.
__________________
Per Curiam.
{¶ 1} R.C. 5709.121(A)(2) provides that real property belonging to an
educational institution is exempt from taxation if it is made available under the
direction or control of the institution for use in furtherance of or incidental to its
educational purposes and not with a view to profit. Appellant, Cincinnati
Community Kollel, an educational institution for purposes of R.C. 5709.121,
sought exemptions for three residential apartment buildings based on the claim
that the properties were being used in furtherance of its educational purposes.
The tax commissioner denied the exemptions, and the Board of Tax Appeals
(“BTA”) affirmed.
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{¶ 2} On the merits, the kollel argues that the BTA misconstrued and
misapplied R.C. 5709.121(A)(2) and failed to cite competent and probative
evidence to support its decision. For the reasons that follow, we agree and reverse
the decision of the BTA and remand for further consideration.
Facts and Procedural Background
{¶ 3} Cincinnati Community Kollel, an Ohio nonprofit corporation, is an
institute that is devoted to the advanced study of Jewish religious texts. The
kollel combines this mission with the goal of providing educational opportunities
and outreach events for the Jewish community where it is situated. According to
the kollel’s constitution, its purpose is to “provide an environment of Torah study,
combining the advanced studies of the kollel staff scholars with a venue for
community learning.” (Italics sic.) The kollel performs this service “in the
sincere belief that this Institution will elevate the spirit of, and thereby enhance,
the Jewish Community of Cincinnati.”
{¶ 4} The kollel sought real property tax exemptions on three parcels
that it owns on Elbrook Avenue in the Hamilton County village of Golf Manor.
The parcels are adjacent to each other, with each parcel containing one building.
Each building is divided into two residential apartments. The apartments are
occupied by the kollel’s “staff scholars” and their families. The staff scholars are
Torah scholars who have moved to the kollel to continue their own Torah studies
and to teach others in the Cincinnati community. While the staff scholars study
and teach at the kollel, they and their families live rent-free in the apartment
buildings.
{¶ 5} In cases involving tax years 1998 through 2002, the BTA
previously held that two of the apartment buildings at issue in this case were not
entitled to an exemption. See Cincinnati Community Kollel v. Wilkins, BTA Nos.
2004-K-1441 and 2004-K-1442, 2006 WL 200649 (Jan. 20, 2006). Specifically,
the BTA found that irrespective of how the property was used, the kollel was not
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entitled to an exemption, because it was not an “educational institution” within
the meaning of R.C. 5709.121. Id. at *4.
{¶ 6} In Cincinnati Community Kollel v. Levin, 113 Ohio St.3d 138,
2007-Ohio-1249, 863 N.E.2d 147, we reversed the BTA and held that the kollel
did qualify as an educational institution for purposes of R.C. 5709.121. We did
not, however, decide whether the kollel’s properties were being used in a manner
that qualified for an exemption under R.C. 5709.121(A), and we remanded the
case to the BTA for consideration of that issue. Id. at ¶ 20-21.
{¶ 7} On remand, the BTA found that “[t]he record supports [the
kollel’s] contention that some learning occurs at the subject property.” Cincinnati
Community Kollel v. Levin, BTA Nos. 2004-K-1441 and 2004-K-1442, 2007 WL
2688699, *2 (Aug. 31, 2007). The BTA, however, found that the “principal use”
of the apartments was “residential in nature.” Id. Thus, despite finding that the
apartment buildings were “used in a manner not inconsistent with [the kollel’s]
mission,” the BTA determined that the kollel did not qualify for an exemption
under R.C. 5709.121, because the apartments were “used at all times and
primarily as a private personal residence.” Id. at *3. The kollel appealed to this
court, but we dismissed the appeal for want of prosecution. Cincinnati
Community Kollel v. Levin, 116 Ohio St.3d 1407, 2007-Ohio-6173, 876 N.E.2d
965.
{¶ 8} In the instant matter, the kollel sought exemptions relating to tax
years 2004 through 2007 for the two apartment buildings that were at issue in
BTA case Nos. 2004-K-1441 and 2004-K-1442. The kollel also sought an
exemption for tax year 2004 for a third apartment building that had been
purchased after the tax years at issue in the earlier case. The kollel’s exemption
claim was filed pursuant to R.C. 5709.121(A)(2), based on its status as an
educational institution and on the claim that the properties were being used in
furtherance of the kollel’s educational purpose. The tax commissioner denied the
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exemption.1 In denying the exemption, the commissioner did not expressly
determine whether the kollel was an educational institution for purposes of R.C.
5709.121. Instead, the commissioner focused primarily on the fact that the
subject properties were used as residential apartments that house the kollel’s staff
scholars and their family members.
{¶ 9} The kollel appealed to the BTA, which held a hearing on the
matter in July 2010. Following the hearing, the BTA affirmed the tax
commissioner’s decision. The BTA first found that the kollel is an educational
institution for purposes of R.C. 5709.121 based on our holding in Cincinnati
Community Kollel, 113 Ohio St.3d 138, 2007-Ohio-1249, 863 N.E.2d 147. The
BTA then turned to the question whether the three residential buildings were used
in furtherance of or incidental to the kollel’s educational purposes. For this part
of its decision, the BTA relied extensively on the analysis and legal conclusions
set forth in Cincinnati Community Kollel v. Levin, BTA Nos. 2004-K-1441 and
2004-K-1442, 2007 WL 2688699 (Aug. 31, 2007). The BTA held, as it had in
that earlier case, that the buildings were not used to further the kollel’s
educational purposes, because the principal and primary use of the properties was
as private residences.
{¶ 10} The kollel has filed this appeal of right from the BTA’s decision.
Analysis
I. The Issue on Appeal
{¶ 11} This appeal questions the BTA’s interpretation and application of
R.C. 5709.121(A)(2), which provides:
{¶ 12} “(A) Real 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. The tax commissioner did grant remission of all penalties associated with the tax years in
question.
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{¶ 13} “* * *
{¶ 14} “(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.”
{¶ 15} There is no dispute here that (1) the kollel is an educational
institution, (2) the subject property has been made available under the kollel’s
direction or control, and (3) there is no view to profit. The parties agree that the
sole issue presented for review is whether, under R.C. 5709.121(A)(2), the
property is made available for use “in furtherance of” the kollel’s educational
purposes.
II. Standard of Review
{¶ 16} When an appellant challenges a decision of the BTA, this court
looks to see whether the BTA’s decision was “reasonable and lawful.” Columbus
City School Dist. Bd. of Edn. v. Zaino, 90 Ohio St.3d 496, 497, 739 N.E.2d 783
(2001). We “will not hesitate to reverse a BTA decision that is based on an
incorrect legal conclusion.” Gahanna-Jefferson Local School Dist. Bd. of Edn. v.
Zaino, 93 Ohio St.3d 231, 232, 754 N.E.2d 789 (2001). The BTA is also
responsible for deciding factual issues, and if the record contains reliable and
probative evidence to support the BTA’s determinations, this court will affirm
them. Am. Natl. Can Co. v. Tracy, 72 Ohio St.3d 150, 152, 648 N.E.2d 483
(1995).
{¶ 17} Moreover, any claimed exemption from taxation “must be strictly
construed, and the taxpayer must affirmatively establish a right to the exemption.”
Athens Cty. Aud. v. Wilkins, 106 Ohio St.3d 293, 2005-Ohio-4986, 834 N.E.2d
804, ¶ 8. See also R.C. 5715.271 (“the burden of proof shall be placed on the
property owner to show that the property is entitled to exemption”).
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III. The BTA’s Decision Was Unlawful and Unreasonable
{¶ 18} The kollel asserts that the BTA erred as a matter of law in
construing and applying R.C. 5709.121(A)(2). The kollel also maintains that the
record does not support the BTA’s decision.
A. The BTA’s reliance on its earlier decision in case
Nos. 2004-K-1441 and 2004-K-1442 was misplaced
{¶ 19} In its decision and order in this matter, the BTA relied extensively
on the analysis and legal conclusions set forth in its earlier decision, Cincinnati
Community Kollel v. Levin, BTA Nos. 2004-K-1441 and 2004-K-1442, 2007 WL
2688699 (Aug. 31, 2007) (the “2007 remand decision”). That decision was issued
after our remand order in Cincinnati Community Kollel v. Levin, 113 Ohio St.3d
138, 2007-Ohio-1249, 863 N.E.2d 147, in which we held that the kollel qualified
as an educational institution for purposes of R.C. 5709.121. We instructed the
BTA on remand to consider “whether the purposes for which the kollel uses the
apartment buildings qualify those buildings for a property-tax exemption under
R.C. 5709.121(A).” Id. at ¶ 21.
{¶ 20} In the 2007 remand decision, the BTA expressly limited its
analysis to considering whether the property at issue qualified for exemption
under former R.C. 5709.121(A)(2), which, pursuant to a 2005 amendment to the
statute, is now codified as R.C. 5709.121(A)(1)(b). Am.Sub.H.B. No. 66, 151
Ohio Laws, Parts II-III, 2868, 4403. That provision exempts property of
educational institutions as long as the property is used for “other charitable,
educational, or public purposes.” In the present case, the BTA quoted extensively
from its 2007 remand decision, found that the evidence submitted in this case was
essentially the same as the evidence submitted in that earlier case, and rejected the
kollel’s arguments for exemption here on the grounds that its “evaluation of [the
kollel’s] use of the subject residences ha[d] not changed.” Cincinnati Community
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Kollel v. Levin, BTA Nos. 2008-A-1367, 2008-A-1368, and 2008-A-1369, 2011
WL 6323047, at *7 (Dec. 13, 2011).
{¶ 21} We conclude that the BTA erred by relying on the 2007 remand
decision when deciding the present appeal. In that earlier case, the BTA never
considered whether the property at issue qualified for exemption under a separate
provision of R.C. 5709.121: former R.C. 5709.121(B), now codified as R.C.
5709.121(A)(2). 151 Ohio Laws, Parts II-III, 2868, 4403. That provision
exempts property of an educational institution that 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.”
The BTA’s focus in the present case ought to have been on whether the use of the
property was “in furtherance of or incidental to” the kollel’s educational purposes,
and that question differs from the question whether the use of the property was
one that involved “other charitable, educational, or public purposes.” It was not
proper for the BTA to rely on an earlier decision when the legal standard applied
in that decision was different from the one to be applied in the present case.
B. The BTA misconstrued the plain language of R.C. 5709.121(A)(2)
{¶ 22} The kollel contends that the BTA erred in requiring a minimum
quantity of educational activity in order to meet the “in furtherance of”
requirement set forth in R.C. 5709.121(A)(2). According to the kollel, there is no
legal authority that requires a certain level of educational activity to occur on the
property for an exemption to be granted.
{¶ 23} R.C. 5709.121(A) provides that “[r]eal property and tangible
personal property belonging to a charitable or educational institution * * * shall
be considered as used exclusively for charitable or public purposes * * * if it
meets” one of the specified criteria under the statute. In prior cases, we have
explained the relationship between R.C. 5709.121 and 5709.12. “R.C. 5709.121
does not declare any property to be exempt but links certain property uses to R.C.
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5709.12(B)’s exclusive-charitable-use exemption.” Dialysis Clinic, Inc. v. Levin,
127 Ohio St.3d 215, 2010-Ohio-5071, 938 N.E.2d 329, ¶ 22. Under R.C.
5709.12(B), “[r]eal and tangible personal property belonging to institutions that is
used exclusively for charitable purposes shall be exempt from taxation.” Thus,
pursuant to R.C. 5709.12(B), any institution, charitable or noncharitable, may
qualify for a tax exemption if it is making exclusive charitable use of its property.
But if the property belongs to a charitable or educational institution, R.C.
5709.121 defines what constitutes exclusive use of property in order to be exempt
from taxation. Community Health Professionals, Inc. v. Levin, 113 Ohio St.3d
432, 2007-Ohio-2336, 866 N.E.2d 478, ¶ 17; Dialysis Clinic at ¶ 24. See also
State Teachers Retirement Bd. v. Kinney, 68 Ohio St.2d 195, 197-198, 429 N.E.2d
1069 (1981).
{¶ 24} The kollel sought exemption under R.C. 5709.121(A)(2), claiming
that the subject property was used “in furtherance of or incidental to” its
educational purposes. The BTA acknowledged that some educational activities
and programs were taking place at the kollel’s apartment buildings. 2011 WL
6323047, *6. The BTA, however, focused on the amount of time that the
apartments were being used for educational activities and found that the level of
activity was insufficient to qualify for a tax exemption under R.C.
5709.121(A)(2). According to the BTA, even though the properties were used at
certain times in a manner not inconsistent with the kollel’s mission, the primary
use of the properties was as private residences. Id. at *7. The BTA
acknowledged that housing has been exempted from taxation in certain situations
that required the “around-the-clock presence of the resident” to carry out the
institution’s purposes. Id. But the BTA found that the use of the kollel’s
apartments was not comparable to those situations, and because the “principal
use” of the properties was residential, the BTA affirmed the tax commissioner’s
denial of the exemptions. Id. at *6.
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{¶ 25} The first rule of statutory construction requires courts to look at the
statute’s language to determine its meaning. If the statute conveys a clear,
unequivocal, and definite meaning, interpretation comes to an end, and the statute
must be applied according to its terms. Lancaster Colony Corp. v. Limbach, 37
Ohio St.3d 198, 199, 524 N.E.2d 1389 (1988). Courts may not delete words used
or insert words not used. Cline v. Ohio Bur. of Motor Vehicles, 61 Ohio St.3d 93,
97, 573 N.E.2d 77 (1991).
{¶ 26} We find that the BTA misconstrued the plain meaning of the
language set forth in R.C. 5709.121(A)(2). The BTA’s interpretation of R.C.
5709.121(A)(2) went beyond the statutory language and in effect imposed a
primary-use test to qualify the subject property for a tax exemption. But there is
no primary-use or principal-use test set forth in R.C. 5709.121. Indeed, this court
previously rejected the argument that property must be primarily used for the
purposes specified in R.C. 5709.121 to qualify for tax exemption. Galvin v.
Masonic Toledo Trust, 34 Ohio St.2d 157, 159-160, 296 N.E.2d 542 (1973).
Rather, R.C. 5709.121(A)(2) provides a clear test for exemption: property
belonging to an educational institution is marked for exemption if it is “use[d] in
furtherance of or incidental to” the institution’s educational purposes and not with
a view to profit. Had the General Assembly intended for an exemption to hinge
on the primary or principal use of the property, it could have used words to that
effect.
{¶ 27} Contrary to the BTA’s apparent belief, nothing in the statutory
language or case law makes residential use inimical to a finding that such use is
“in furtherance of” the kollel’s educational purposes. Historically, as the tax
commissioner points out, a distinctly residential use of real property has defeated
a charitable-use exemption claim, even when the property is used at times for
charitable purposes. But this principle applies to R.C. 5709.12, not R.C.
5709.121. See NBC-USA Hous., Inc.–Five v. Levin, 125 Ohio St.3d 394, 2010-
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Ohio-1553, 928 N.E.2d 715, ¶ 6-9, 17-18. See also Galvin at 159-160 (reliance
on case law construing R.C. 5709.12 developed prior to the enactment of R.C.
5709.121 is improper). In short, nothing about the phrase “in furtherance of” in
R.C. 5709.121(A)(2) disqualifies residential property for exemption.
{¶ 28} Likewise, no requirement exists in R.C. 5709.121 that a resident be
present “around the clock” to carry out the institution’s purposes, contrary to the
BTA’s holding in this case. Rather, when considering the question whether an
educational institution uses its property in furtherance of or incidental to its
educational purposes, the focus of the inquiry should be on the relationship
between the actual use of the property and the purpose of the institution. See
Community Health Professionals, Inc. v. Levin, 113 Ohio St.3d 432, 2007-Ohio-
2336, 866 N.E.2d 478, ¶ 21.
{¶ 29} In sum, we find that the BTA’s interpretation of R.C.
5709.121(A)(2) was incorrect as a matter of law.
C. The BTA’s determination was not supported by
reliable and probative evidence
{¶ 30} The kollel also challenges the evidence relied on by the BTA to
support its decision. The kollel argues that the BTA cited no evidence that would
support a finding that the apartment buildings were not being used in furtherance
of the kollel’s educational goals. We agree.
{¶ 31} After summarizing the testimony presented by the kollel, the BTA
found that the kollel did not meet its burden of proving that the subject properties
were used in furtherance of or incidental to its educational purposes. As evidence
to support its decision, the BTA cited the kollel’s tax-exemption application.
Question 14 of the application asks the taxpayer to describe how the property is
currently being used. The BTA found that the kollel had answered this question
in the following manner: “This property was a 2-story, 4-family apartment
building. The Applicant converted it into a 2-family apartment building, with one
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apartment on each floor. The property houses two of the Applicant’s staff
members (scholars) and their families.” According to the BTA, the kollel’s
answer made “no mention of an educational component to the residences.” 2011
WL 6323047, *6. But the BTA overlooked the second paragraph of the kollel’s
answer, which states: “In addition to living in the apartments, the scholars, alone,
and with their wives, carry on activities in their residences that are an integral part
of the Kollel’s various educational programs.”
{¶ 32} The BTA also attempted to rebut the kollel’s evidence with a
statement written in the kollel’s posthearing brief. The BTA apparently found
probative counsel’s statement that “[t]he Kollel scholars and their families mostly
use the apartments in the ordinary fashion.” Statements made by counsel are not
evidence, however. See Corporate Exchange Bldgs. IV & V, L.P. v. Franklin Cty.
Bd. of Revision, 82 Ohio St.3d 297, 300, 695 N.E.2d 743 (1998). And even if
counsel’s statement qualified as evidence, the BTA quotes it out of context,
omitting the sentence immediately following the quoted excerpt, which states:
“However, the Kollel scholars also use their apartments in ways that are unrelated
to their family lives, but are specifically in furtherance of or incidental to the
Kollel’s charitable and educational purposes.”
Conclusion
{¶ 33} Based on the foregoing, we reverse the decision of the BTA. The
BTA applied the wrong legal standard and failed to cite reliable and probative
evidence to support its decision. We therefore remand the case to the BTA to
review the evidence submitted in this case and determine whether the subject
property was used in furtherance of the kollel’s educational purposes.
Decision reversed
and cause remanded.
O’CONNOR, C.J., and PFEIFER, O’DONNELL, LANZINGER, KENNEDY,
FRENCH, and O’NEILL, JJ., concur.
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__________________
Simon Groner, for appellant.
Michael DeWine, Attorney General, and Ryan P. O’Rourke, Assistant
Attorney General, for appellee.
________________________
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