April 11, 2022
On April 6, 2022, the Ohio General Assembly overwhelmingly passed Am. Sub. H.B. 126, which dramatically reforms Ohio’s property tax appeal system. Gov. Mike DeWine signed the bill into law on April 21. This article details the significant impact this legislation will have for Ohio property owners.
For decades, Ohio school districts had the statutory right to file Complaints Against Valuation (CAV) with the local Board of Revision (BOR) whenever the school district believed that a property was undervalued by the County Auditor. Most typically, this resulted in school districts filing CAVs after a property sold for more than the County’s market value. School districts only filed Complaints against commercial properties not owner-occupied single-family residences (however, some Cuyahoga Co. school districts did go after homeowners). Aggressively pursuing higher property values boosted school district tax revenues since they didn’t have to wait the normal 3 or 6 years for the County to take those sale transactions into account when conducting the normal County-wide reappraisals and updates.
H.B. 126 significantly curtails school districts’ ability to file increase CAVs. Beginning with tax appeals relating to tax year 2022 (filed in calendar year 2023), the following additional requirements must be met before a school district can file a CAV:
- The property must have been sold in an arm’s length transaction prior to the tax lien date at issue (so prior to January 1, 2022 for TY 2022 CAVs).
- The sale price must exceed the County’s current market value by at least 10% and by greater than the Auditor’s current value by at least $500,000 (to be adjusted for inflation after TY 2022).
- And before filing a tax appeal, the school district must send written notice to the affected property owner at least 7 days prior to a Board of Education public meeting where a Resolution authorizing the filing of the CAV is to be considered. An authorizing resolution must be adopted by the Board of Education for each CAV filing. Presumably, property owners will be allowed to address the BOE members at the public meeting before the vote.
H.B. 126 blocks school districts from becoming involved at all in property owner-initiated cases where the amount of the reduction is $50,000 or less. And where it is allowed to file a Counter-Complaint, the school district must do so within 30 days from the date the original Complaint was filed as opposed to current law which starts the 30 days from the date that the School District received notice of the owner’s Complaint.
Other H.B. 126 changes include the amount of time a case can remain “open” on the BOR docket. Under current law, the BOR is supposed to render decisions within 180 days of a CAV being filed – however, there are no consequences for failure to do so. Under H.B. 126, the BOR must dismiss cases filed by a school district when a decision is not issued by the BOR within 12 months of the case being filed.
One of the most drastic changes to be implemented by H.B. 126 is the elimination of “private pay agreements” which greatly benefited property owners A private pay agreement involves a property owner making a payment directly to the school district in exchange for the school district withdrawing the tax appeal case and agreeing not to re-file for a set period of years. These types of agreements were mutually beneficial to the parties, although frowned upon by the other County agencies that were cut out of receiving additional tax revenue. Private pay agreements will now be completely prohibited once H.B. 126 becomes effective on July 21, 2022. It is important to note that private pay agreements entered into prior to the effective date of H.B. 126 will still be upheld as valid.
A questionable new rule contained in H.B. 126 is that school districts will no longer permitted to appeal unfavorable BOR decisions to the Ohio Board of Tax Appeals, starting with TY 2022 tax appeals. Schools will get one chance to be heard on the issues. We believe this will cause school districts to litigate cases much harder at the BOR level. We foresee more instances of school districts commissioning their own appraisals and may even see them invoking the BOR’s subpoena power since they will not get the opportunity for more thorough discovery now afforded school districts at the Ohio Board of Tax Appeals.
Next, it appears that our law firm is possibly the first to notice that the General Assembly has created a situation where school districts may not be able to file any tax appeals (or nearly zero) for TY 2022 because of the prohibition on using sales that occurred after the tax lien date at issue as the basis for a tax appeal. For the January 1, 2022 tax lien date, school districts can only rely on sales that occurred prior to December 31, 2021. However, most school districts already filed increase tax appeal CAVs relating to sales that took place prior to December 31, 2021 when they filed their TY 2021 CAVs earlier this year. Since school districts are no longer able to use sales that occurred after the tax lien date, there may not be any eligible sales to form the basis of a TY 2022 school district tax appeal, meaning that school districts may have to wait an entire year to begin filing increase CAVs again. And, even when we get to the TY 2023 filing cycle where sales that took place during calendar year 2022 can be used, the new $500,000/10% filing threshold discussed above will reduce the number of filings by itself.
This type of sweeping changes to Ohio’s real property tax appeal system has not been enacted in a generation. The full impact of these changes may not be realized for some time.
With an even more complex tax system under the new regime, it is important to have someone with experience representing your best interests. Property owners with questions about the impact of H.B. 126 needing assistance with a real property tax issue should feel free to call any of the professionals at Bluestone Law Group, LLC.
DISCLAIMER – These materials have been prepared for general educational purposes only and are not intended as legal advice for any specific case. The reader is strongly encouraged to seek professional legal representation with respect to the filing of any proceedings by the Board of Revision or the Ohio Board of Tax Appeals.
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