[Until this opinion appears in the Ohio Official Reports advance sheets, it may be cited as
Obetz v. McClain, Slip Opinion No. 2021-Ohio-1706.]
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. 2021-OHIO-1706
THE VILLAGE OF OBETZ, APPELLANT, v. MCCLAIN, TAX COMMR., ET AL.,
APPELLEES.
[Until this opinion appears in the Ohio Official Reports advance sheets, it
may be cited as Obetz v. McClain, Slip Opinion No. 2021-Ohio-1706.]
Taxation—R.C. 5709.40(G)—Tax-increment-financing (“TIF”) exemption may
commence no earlier than the tax year following the effective date of the
ordinance creating the TIF arrangement—Decision of Board of Tax
Appeals affirmed.
(No. 2020-0541—Submitted January 12, 2021—Decided May 20, 2021.)
APPEAL from the Board of Tax Appeals, No. 2018-1008.
____________________
KENNEDY, J.
{¶ 1} This appeal as of right from a decision of the Board of Tax Appeals
presents the question whether a municipality may reinstate the tax-exempt status of
real property under a tax-increment-financing (“TIF”) arrangement by amending
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the ordinance that originally authorized the TIF arrangement after the exemption
has expired.
{¶ 2} R.C. 5709.40(G) provides that a TIF exemption may commence no
earlier than the tax year following the effective date of the ordinance creating the
TIF arrangement. Although appellant, the village of Obetz, enacted an ordinance
in 2017 in an effort to reinstate the exemption after it expired in 2014, the exemption
could not retroactively apply to tax years 2015, 2016, and 2017. Rather, pursuant
to R.C. 5709.40(G), 2018 was the first tax year that the exemption could
commence.
{¶ 3} Because the 2017 ordinance created a new exemption rather than
extending the prior one, the BTA reasonably and lawfully upheld appellee tax
commissioner’s denial of an exemption for tax years 2015, 2016, and 2017.
{¶ 4} We therefore affirm the decision of the BTA.
Facts and Procedural History
{¶ 5} On April 7, 1997, Obetz passed Ordinance 6-97 to enact a TIF
arrangement related to the development of an approximately 643,000 square-foot
warehouse on property owned by Goodyear Tire & Rubber Company. The
ordinance stated “that the increase in true value of the Property subsequent to the
effective date of this Ordinance * * * is a public purpose for 16 years, and 25% of
the [property’s increased value] is hereby declared to be exempt from taxation [for
16 years].” It approved the TIF agreement with Goodyear, which required the
company to deposit semiannual service payments into a TIF fund in lieu of taxes.
An exhibit to the ordinance describes the public-improvement projects to be
financed with the TIF fund.
{¶ 6} On October 13, 1999, the tax commissioner granted the tax exemption
relating to the Goodyear TIF, finding the increased value of the property to be
“legally exempt from taxation pursuant to R.C. section 5709.40 in accordance with
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the provisions of the municipal ordinance.” In granting the exemption, the
commissioner ordered that
100% of the [increased value] of the real property described above
be entered upon the list of property in said county which is exempt
from taxation commencing in the first year in which the real
property would first be taxable were that property not exempted
from taxation, and ending on the earlier of thirty years from such
date of passage or the date on which the City can no longer require
semiannual service payments in lieu of taxes.
{¶ 7} The tax commissioner granted a 100 percent exemption for increased
property value while the ordinance provided for only 25 percent of the newly
accrued value to be exempt. Further, the tax commissioner provided for the
exemption to continue for the shorter of 30 years or the end of the obligation to
make service payments, while the ordinance stated that the exemption would last
for 16 years.
{¶ 8} In June 2017, an attorney for Obetz, Eugene Hollins, e-mailed the
Franklin County auditor’s office concerning the expiration of the exemption
provided in the Goodyear TIF. Rebecca Wirthman, a deputy auditor, replied that
the county auditor had erroneously determined the exemption to have a 30-year
duration and stated that the exemption “should have actually ended for tax year
2015.” Wirthman noted that payments had been erroneously deposited into the
Goodyear TIF account since the beginning of tax year 2015 and that the state
department of taxation had directed that the property be returned to the taxable list
for 2015, 2016, and 2017. Wirthman also relayed to Hollins the tax department’s
suggestion that “if [Obetz] pass[es] an ordinance, before the end of [2017], * * *
they should be able to re-TIF those parcels for 2015-2017.”
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{¶ 9} On December 28, 2017, Obetz enacted Ordinance 64-17 to amend the
1997 ordinance, seeking to extend the TIF exemption from 16 to 30 years, to
increase the exemption from 25 percent to 100 percent of the increased value, and
to expand the list of public-infrastructure projects to which TIF service payments
would be applied. It also varied from the 1997 ordinance by providing for Obetz
to pay appellee Hamilton Local School Board of Education 60 percent of the “net
TIF funds” plus an advance payment of $200,000.
{¶ 10} After passing the 2017 ordinance, Obetz applied for a tax-incentive-
program exemption. In May 2018, the tax commissioner issued a final
determination denying Obetz’s application. The commissioner acknowledged the
discrepancies between the 1999 entry granting the exemption and the 1997
ordinance, but he noted that the entry made the exemption “subject to the
limitations of the underlying ordinance,” so that “the TIF exemption expired in
2014 with the exempt value of the property to be returned to the tax list in 2015.”
{¶ 11} The commissioner explained that the 2017 ordinance could not
retroactively reinstate the exemption for tax years 2015, 2016, and 2017, because
R.C. 5709.40(G) provides that an exemption may begin no earlier than a tax year
that “commences after the effective date of the ordinance.” The commissioner
reasoned that because the 2017 ordinance became effective upon enactment in late
2017, 2018 was the first tax year the exemption could commence. And because the
1997 ordinance’s exemption had expired in 2014, the amendment of that ordinance
related to a new exemption that could not retroactively restore the property to the
exempt list for the three lapsed years. Therefore, the commissioner concluded, the
auditor had “properly returned the property to the tax list for tax years 2015, 2016,
and 2017.”
{¶ 12} Obetz appealed to the BTA, which affirmed the commissioner’s
final determination. BTA No. 2018-1008, 2020 WL 1657890 (Mar. 22, 2020). It
agreed with the commissioner that the 2017 ordinance created a new exemption
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rather than extending the earlier one, so that R.C. 5709.40(G) barred the exemption
from applying to 2015, 2016, and 2017. Id. at *3. The BTA also rejected Obetz’s
argument that the commissioner was estopped from claiming that the original
exemption had expired. Id.
{¶ 13} Obetz appeals and advances three propositions of law:
1. A Final Determination of the Tax Commissioner cannot
be overridden or subsequently revised if it is not appealed within the
statutorily prescribed window.
2. Land classified as tax exempt according to the express
terms of an unchallenged Final Determination of the Tax
Commissioner cannot be retroactively placed on the tax rolls by
either the Tax Commissioner or a county official because the tax
exempt status of land is determined as of January 1 of the tax year
at issue.
3. The terms of an unchallenged twenty-year old Final
Determination of the Tax Commissioner and the written direction of
a known representative of a public office are sufficient to establish
reasonable reliance on behalf of a municipality such that estoppel
may be applied against the State.
Law and Analysis
Standard of Review
{¶ 14} We review BTA decisions to “determine whether they are
reasonable and lawful.” Grace Cathedral, Inc. v. Testa, 143 Ohio St.3d 212, 2015-
Ohio-2067, 36 N.E.3d 136, ¶ 16, citing R.C. 5717.04. Although we defer to the
“BTA’s determination of the credibility of witnesses and its weighing of the
evidence subject only to an abuse-of-discretion review on appeal,” HealthSouth
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Corp. v. Testa, 132 Ohio St.3d 55, 2012-Ohio-1871, 969 N.E.2d 232, ¶ 10, we do
not defer to the BTA’s resolution of legal questions but rather apply de novo review,
Crown Communication, Inc. v. Testa, 136 Ohio St.3d 209, 2013-Ohio-3126, 992
N.E.2d 1135, ¶ 16.
{¶ 15} R.C. 5715.271 provides that “[i]n any consideration concerning the
exemption from taxation of any property, the burden of proof shall be placed on the
property owner to show that the property is entitled to exemption.” Although Obetz
is neither the owner of the property at issue nor the taxpayer, it is the applicant for,
and proponent of, the exemption. It therefore bears the burden to show that the
property is entitled to an exemption from real-property taxes. Anderson/Maltbie
Partnership v. Levin, 127 Ohio St.3d 178, 2010-Ohio-4904, 937 N.E.2d 547, ¶ 16.
R.C. 5715.271 further provides that the “fact that property has previously been
granted an exemption is not evidence that it is entitled to continued exemption.”
Tax-Increment Financing
{¶ 16} Tax-increment financing “is a method of promoting and financing
the development of real property by directing ‘ ‘‘all or a portion of the increased
property tax revenue that may result” ’ from the development to defraying the cost
of improvements that are part of the development.” Kohl’s Illinois, Inc. v. Marion
Cty. Bd. of Revision, 140 Ohio St.3d 522, 2014-Ohio-4353, 20 N.E.3d 711, ¶ 3,
quoting Princeton City School Dist. Bd. of Edn. v. Zaino, 94 Ohio St.3d 66, 68, 760
N.E.2d 375 (2002), quoting Meck & Pearlman, Ohio Planning and Zoning Law,
Section T 15.29, at 704 (2000).
{¶ 17} “Once a TIF agreement is in place, any increase in the assessed value
of the designated parcels is subject, in whole or in part, to (1) an exemption from
taxation and (2) a concomitant obligation of the property owner to make payments
‘in lieu of tax’ into a special fund used to pay for the development—such payments
are referred to as ‘service payments.’ ” Fairfield Twp. Bd. of Trustees v. Testa, 153
Ohio St.3d 255, 2018-Ohio-2381, 104 N.E.3d 749, ¶ 5, quoting R.C. 5709.73(B)
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and 5709.74. The service payments “cover the cost of public improvements in the
incentive district, such as roads, water and sewer lines, or environmental
remediation.” Sugarcreek Twp. v. Centerville, 133 Ohio St.3d 467, 2012-Ohio-
4649, 979 N.E.2d 261, ¶ 7.
{¶ 18} In its first proposition of law, Obetz contends that the 2017
amendment would permit an extension of the original exemption under the 1997
ordinance from 16 to 30 years because the tax commissioner’s 1999 entry had
authorized a maximum 30-year exemption. The tax commissioner responds that
Obetz failed to raise this argument in its notice of appeal to the BTA, so that both
the BTA and this court lack jurisdiction to entertain Obetz’s first proposition of
law. We disagree.
{¶ 19} Prior to its amendment in 2013, former R.C. 5717.02(B) required a
taxpayer seeking to appeal the final determination of the tax commissioner to
“specify the errors * * * complained of” in the notice of appeal to the BTA. 2011
Sub.H.B. No. 225. Construing this requirement as it previously appeared in the
General Code, this court held that the taxpayer’s duty to specify the tax
commissioner’s errors is mandatory and a condition for perfecting an appeal. E.g.,
Am. Restaurant & Lunch Co. v. Glander, 147 Ohio St. 147, 149-150, 70 N.E.2d 93
(1946). Then in Queen City Valves v. Peck, we held that “a notice of appeal which
does not enumerate in definite and specific terms the precise errors claimed but uses
language so broad and general that it might be employed in nearly any case is
insufficient to meet the demands of the statute” and permits the BTA to dismiss the
appeal for lack of jurisdiction. 161 Ohio St. 579, 120 N.E.2d 310 (1954), syllabus.
Adhering to that precedent, we have explained that “[i]t is well settled that ‘the
BTA lacks jurisdiction to grant relief from a final determination based on * * *
alleged errors that were not sufficiently specified in the notice of appeal.’ ”
(Ellipsis added in Testa.) Cuyahoga Cty. v. Testa, 145 Ohio St.3d 157, 2016-Ohio-
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134, 47 N.E.3d 814, ¶ 26 (considering the pre-2013 version of R.C. 5717.02),
quoting Brown v. Levin, 119 Ohio St.3d 335, 2008-Ohio-4081, 894 N.E.2d 35, ¶ 17.
{¶ 20} However, in 2013, the General Assembly amended R.C. 5717.02,
eliminating the requirement to “specify the errors” in the notice of appeal and
replacing it with language requiring that “[a] notice of appeal shall contain a short
and plain statement of the claimed errors in the determination * * * of the tax
commissioner * * * showing that the appellant is entitled to relief and a demand for
the relief to which the appellant claims to be entitled.” 2013 Sub.H.B. No. 138.
{¶ 21} The General Assembly’s use of different words signals a different
meaning. See Loughrin v. United States, 573 U.S. 351, 357-358, 134 S.Ct. 2384,
189 L.Ed.2d 411 (2014); Kiefer v. State, 106 Ohio St. 285, 290, 139 N.E. 852
(1922). Further, we presume that the legislature is fully aware of our prior
construction of a statute when amending it. Riffle v. Physicians & Surgeons
Ambulance Serv., Inc., 135 Ohio St.3d 357, 2013-Ohio-989, 986 N.E.2d 983, ¶ 19.
By amending R.C. 5717.02 to eliminate the requirement to “specify the errors,”
then, the General Assembly has abrogated our precedent requiring a notice of
appeal to set out the errors in definite and specific terms. With the amendment, the
General Assembly eliminated a procedural pitfall requiring unwary taxpayers to
provide a laundry list of errors and thereby helped to ensure that tax appeals are
decided on their merits—not denied because of a technical defect.
{¶ 22} Obetz’s notice of appeal to the BTA gave fair notice of the argument
now asserted in the first proposition of law by contesting the commissioner’s
finding that the 2017 ordinance “creates a new tax increment financing (TIF)
exemption rather than amending the TIF exemption created by the Village of
Obetz” in the 1997 ordinance. It was not necessary for Obetz to mention the 1999
entry in its notice of appeal, because Obetz did not need to set forth a full legal
argument or specific reasoning in the notice of appeal but rather had to provide only
a short and plain statement of the claimed errors in the tax commissioner’s
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determination. We therefore reject the commissioner’s contention that Obetz
forfeited its main argument by not specifically referring to the 1999 entry in its
notice of appeal to the BTA.
{¶ 23} In support of its first proposition of law, Obetz maintains that its
2017 ordinance extends the original exemption through 2015, 2016, 2017, and
beyond by amending the exemption’s term from 16 years to 30 years in accordance
with the commissioner’s 1999 entry. It asserts that because the 1999 entry was not
appealed and its errors were not corrected, the 2017 amendment effectuates the full
30-year exemption granted by the 1999 entry. Obetz further contends that the
commissioner, by denying Obetz’s current exemption application, has unlawfully
overruled his 1999 entry.
{¶ 24} However, the 1999 entry did not permit Obetz to retroactively
reinstate the exemption after it had expired. First, the entry grants the tax
exemption “in accordance with the provisions of the municipal ordinance,” and the
language of the 1997 ordinance provides for a 16-year exemption. Second, the
entry terminates the exemption at the earlier of 30 years or the “date on which
[Obetz] can no longer require semiannual service payments in lieu of taxes.”
Because the 1997 ordinance created a 16-year exemption from taxes on the
increased value of the property, the ordinance required “service payments in lieu of
[those] taxes” only as long as the exemption itself lasted, which was 16 years.
Therefore, under the plain language of both the 1997 ordinance and the 1999 entry,
the exemption expired after tax year 2014.
{¶ 25} Further, pursuant to R.C. 5709.40(G), an exemption can only take
effect in a tax year that “commences after the effective date of the ordinance.” As
a result, R.C. 5709.40(G) barred Obetz’s attempt to obtain an exemption for past
years, since that provision limited any exemption under the 2017 ordinance to tax
years following 2017. The tax commissioner and the BTA properly treated the
2017 ordinance as creating—and the exemption application filed pursuant to that
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ordinance as seeking—a new exemption under R.C. 5709.40. We therefore reject
the argument asserted in support of the first proposition of law.
Retroactive Removal from the Exempt List
{¶ 26} In its second proposition of law, Obetz argues that it was unlawful
for the Franklin County auditor to retroactively remove the property from the
exempt list at the tax commissioner’s directive after having originally maintained
it on the exempt list for 2015, 2016, and 2017.
{¶ 27} R.C. 5713.08(A) provides that “[n]o additions shall be made to [the
county auditor’s] exempt lists and no additional items of property shall be exempted
from taxation without the consent of the tax commissioner.” The statute continues:
The commissioner may revise at any time the list in every county so
that no property is improperly or illegally exempted from taxation.
The auditor shall follow the orders of the commissioner given under
this section.
{¶ 28} This statute authorized the commissioner to direct the auditor to
return the property to the taxable list in mid-2017. The plain terms of R.C.
5713.08(A) permit the commissioner to “revise at any time the list in every county
so that no property is improperly or illegally exempted from taxation,” whereby
“[t]he auditor shall follow the orders of the commissioner given under this section.”
(Emphasis added.) The statute authorizes the removal of property from the exempt
list after the lien date of the tax year, to the extent that the owner is no longer legally
entitled to the exemption. We therefore reject Obetz’s argument under its second
proposition of law.
Estoppel
{¶ 29} In support of its third proposition of law, Obetz argues that the tax
commissioner is estopped from denying the extension of the TIF exemption. But
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although the BTA addressed the estoppel claim on the merits, the commissioner
asserts that Obetz forfeited this argument by failing to include it as a statement of
error in its notice of appeal to the BTA.
{¶ 30} As already discussed, R.C. 5717.02(C) requires a “short and plain
statement of the claimed errors” in the notice of appeal. Here, the notice of appeal
to the BTA provided a short and plain statement of the village’s claimed errors that
challenged the tax commissioner’s findings that the property is not exempt, that the
village had created a new TIF exemption rather than amending the prior one, and
that the subject parcels were properly returned to the tax list. Obetz did not have to
further specify the reasoning, argument, or authority supporting the errors asserted
in its notice of appeal of the tax commissioner’s findings.
{¶ 31} We therefore review the merits of the village’s argument that the tax
commissioner is estopped from denying the village the claimed exemption. That
argument, however, is unavailing for the following reasons.
{¶ 32} Obetz points to our decision in Crown for the proposition that
estoppel applies when “the tax commissioner had in writing committed himself
over an extended period to a particular construction of tax law as applied to the
taxpayer,” 136 Ohio St.3d 209, 2013-Ohio-3126, 992 N.E.2d 1135, at ¶ 21. In
Crown, this court noted that it had applied “a kind of estoppel” “in a very limited
context” when the tax commissioner “change[d] position and then retroactively
assess[ed] tax on transactions that had previously been found by the commissioner
to be exempt.” Id.
{¶ 33} That is not the case here. The 1999 journal entry granting the TIF
exemption stated that the exemption ended “on the earlier of thirty years from such
date of passage or the date on which the City can no longer require semiannual
service payments in lieu of taxes,” and the village’s 1997 ordinance expressly
provided that the exemption expired after 16 years. The village therefore could not
reasonably rely on the 1999 journal entry to extend the exemption for 14 years more
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than the timeframe authorized by the ordinance. Nor can a 2017 e-mail
correspondence with the county auditor’s office estop the tax commissioner from
recognizing that the TIF exemption had expired. The e-mail simply confirmed that
the exemption had expired and relayed the tax department’s suggestion that if Obetz
passed a new ordinance, then the TIF exemption might retroactively apply to prior
tax years. The village could not have relied on that after-the-fact correspondence
in treating the property as tax exempt from 2015 to 2017.
{¶ 34} We therefore reject the argument raised under the third proposition
of law.
Conclusion
{¶ 35} Finding no merit to Obetz’s arguments, we conclude that the
decision of the BTA is reasonable and lawful. And because Obetz has not sought
application of the TIF exemption for years subsequent to 2017, we affirm the
complete denial of the exemption application.
Decision affirmed.
O’CONNOR, C.J., and FISCHER, DEWINE, DONNELLY, STEWART, and
BRUNNER, JJ., concur.
_________________
Frost Brown Todd, L.L.C., Frank J. Reed Jr., Eugene L. Hollins, and
Thaddeus M. Boggs, for appellant.
Dave Yost, Attorney General, and Daniel G. Kim, Assistant Attorney
General, for appellee tax commissioner.
_________________
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