One issue we frequently encounter relates to the acquisition of property by a charitable entity. Most entities are aware that Ohio exempts from real property taxation the land and buildings used exclusively for charitable purposes. At issue is when the entity may file for the exemption.

Generally, the property in question must be owned by the person claiming the exemption, and used for exempt purposes, on January 1 of the year for which an exemption is sought. Therefore, an exempt entity is not eligible for an exemption for the year in which it acquires property. Instead, it must wait until the following year before it may file for and obtain the exemption. Taxes for the year of acquisition still have to be paid. If they are not paid at closing (and usually they are not because they are not yet determined), the charitable entity will receive a tax bill during the following year and will be required to pay the taxes before it may file for the exemption. Keep in mind that due to the sale of the property, the value of the property for the year of acquisition could be increased to match the sales price, resulting in an increase in the taxes due for that year.

Normally, all taxes must be paid through the year prior to the year in which the application for exemption is filed.  However, Ohio permits the tax commissioner to remit paid or unpaid taxes for up to three years prior to the year in which the application is filed, but in no event for any year prior to the acquisition of the property by the exempt entity.