On October 12, 2010, the Supreme Court of Ohio held that property that a for-profit partnership owned and leased to a school could not receive property tax exemption. The school that leased the property in this case was a community or "charter" school; however, the court's decision would also apply to traditional public schools that lease property from for-profit businesses. The court’s decision reversed an earlier decision by the Ohio Board of Tax Appeals (BTA) to grant the owner’s exemption application. Anderson/Maltbie Partnership v. Levin (Oct. 12, 2010), ___ Ohio St. 3d ___, 2010-Ohio-4904.
The court emphasized that the statute that provides for the exemption of schoolhouses — O.R.C. 5709.07(1) — limits the exemption to schoolhouses and grounds that are “not leased or otherwise used with a view to profit.” To determine whether the property was used with a view to profit, the court instructed the taxing authorities to consider not only the lessee’s use of the property as a schoolhouse, but also to examine the owner’s use of the property—here, to lease the property to the school in order to make money. Because the owner used the property “with a view to profit,” the court concluded that the property could not enjoy exemption.
The court relied upon one of its 19th century decisions to reach this conclusion, explaining that “the ‘exclusion of all idea of private gain or profit’ constitutes a basic condition that private property must satisfy to qualify for this exemption.” Anderson/Maltbie Partnership v. Levin (Oct. 12, 2010), 2010-Ohio-4904, ¶ 20 (quoting Gerke v. Purcell (1874), 25 Ohio St. 229, 247).
The court distinguished its holding in this case from other decisions that arose from separate exemption statutes relating to college buildings and houses of public worship.
The court left open the possibility that property that is leased and used as a school house, but that is not leased with a view to profit, may receive property tax exemption. In particular, the court stated that property that is used to support education without any view to profit qualifies for exemption—apparently regardless of whether or not it happens to be subject to a lease. The court suggested that a lease of property to a school for nominal rent of $1 could qualify for exemption. See Anderson/Maltbie, 2010-Ohio-4904, at ¶ 32.
It should be noted that the ruling is not limited to charter schools (community schools). All public schools that lease property from for-profit entities for more than nominal rent should now be aware that the property they use will be subject to real property taxation. Property owners seeking to lease their property to schools for a profit should understand that their property will remain taxable in Ohio.