United States: Ohio Supreme Court Holds Implied Use Restriction In Property Tax Exemption For Schools No Longer Exists

The Ohio Supreme Court unanimously has held that real property owned by a public school district's board of education was exempt from property tax, regardless of how the property was used, reversing the Ohio Board of Tax Appeals (BTA).1 This decision allows schools to lease unused property without losing the tax-exempt status of that property. The decision was based on a 2010 amendment to a long-standing tax exemption for property owned by a municipal board of education.


In March and April 2009, the Talawanda City School District Board of Education (BOE) acquired five parcels of land totaling approximately 154 acres to build a new high school scheduled to be opened in August 2011. The BOE leased 34 acres of the property to a local farmer for the purposes of private farming. The lease contained an early termination clause. On January 26, 2010, the BOE filed its application to exempt all 154 acres of the property. The Tax Commissioner granted the exemption for approximately 120 acres, excluding the 34 acres that were leased for private farming, reasoning that it was not used for an exempt purpose, i.e., used for school purposes. The BTA affirmed the Tax Commissioner's decision and denied the exemption for the portion of the property subject to the leasehold interest. The BOE appealed this decision to the Ohio Supreme Court.

Property Owned by BOE Exempt Regardless of Use

In reversing the BTA, the Ohio Supreme Court held that the exemption applied to the entire property due to the BOE's ownership of the property. The Court considered a statute which provided a property tax exemption for real or personal property owned by a board of education and the implications of its 2010 amendment. The original statute, which was enacted in 1873, provided that "[r]eal or personal property vested in any board of education shall be exempt from taxation and from sale on execution or other writ or order in the nature of an execution."2 However, the statute was amended in 2010 to provide, in relevant part, that "[r]eal or personal property owned by or leased to any board of education for a lease term of at least fifty years shall be exempt from taxation."3 Although the language used in both versions of the statute is similar, there was a basis for an implied use restriction that existed in the original statute that was removed by the amendment. The original statute enacted in 1873 was limited by the state's Constitution to only exempt public school houses and other property owned by the school used exclusively for public purposes; school property used for non-public purposes was not exempt.4 However, the Court determined that the 2010 amendment served to broaden the scope of the exemption to include school property leased for non-school purposes.

In 1931, Ohio's Constitution was amended to give the legislature the power to determine exemptions. However, this amendment did not expand the scope of previously enacted exemptions.5 Therefore, the scope of the exemption was limited to the use restrictions in place at the time the statute was enacted in 1873. When the statute was amended in 2010, the legislature had the broad power to enact exemptions, regardless of the use of the property. The Court explained that when the legislature amended the exemption and failed to include a use restriction in the statutory language, there was no longer a reason to read a use restriction into the exemption statute.

Amended Statute Applied to BOE

The Court determined that the amended version of the statute applied to the BOE's property. This determination was important because the application of the original statute would lead to a different answer than the application of the amended statute. In determining whether the original language or the amended language applied in this case, the Court considered an uncodified section of the legislation that provided "[this amendment] is remedial in nature and applies to tax years at issue in any application for exemption from taxation pending before the Tax Commissioner, Ohio Board of Tax Appeals, any Court of Appeals, or the Supreme Court on the effective date of this act and to be property that is the subject of the application."6 The effective date of the amendment was September 13, 2010. However, the BOE's exemption application was filed January 26, 2010 and was still pending as of the effective date of the statute. Therefore, because the application was pending on the effective date of the amendment, the Tax Commissioner was required to apply the amended version of the exemption statute to the BOE's exemption application. Because the amended version did not include a use restriction, the BOE's property was considered exempt, regardless of the use of the property.

Exemption Not Conditioned on BOE's Compliance with Statutory Powers

The Tax Commissioner unsuccessfully argued that the BOE should be denied an exemption because it acted outside the corporate powers granted to it by Ohio law.7 This argument was based on a previous Ohio Supreme Court decision holding that state boards of education are "without authority or power to purchase [property] for any other purpose than a public use."8 The Tax Commissioner argued that this holding limited the scope of the tax exemption for school property. The Court disagreed and explained that because the school property exemption statute did not condition the exemption on compliance with the statute providing the powers of a board of education, the Court did not need to decide whether the leasing of the property for commercial purposes exceeded the BOE's authority.


This decision requires the state of Ohio to grant a tax exemption for all property owned by or leased to any board of education for at least 50 years, regardless of the property's current use. Retroactively, if any school or school board had an application to exempt property pending on or after September 13, 2010, it should be entitled to a tax exemption even if the property is not being used for a public purpose.9 Prospectively, any school or school board that owns property that is not currently used by the school or for a public purpose can claim an exemption for the entire property. A school or school board should not be deterred from granting future leaseholds for non-school purposes because it will not eliminate the exemption status. In addition, since the statute affords the property tax exemption to real or personal property either owned by or leased to a board of education, any taxpayer with a leasehold interest in real or personal property owned by any board of education is also exempt from taxation with respect to that property, and a tax refund should be filed for any property tax paid on this property since September 13, 2010.

Further, the limitations in the statute that provides the corporate powers to school boards do not actually limit the board's ability to receive the school property exemption. Therefore, any school or school board may lease unused property for commercial purposes and utilize the exemption. This decision also implies that any property tax exemption amended after 1931 is not limited to any previous restriction in the Ohio Constitution, unless it was subsequently included by the legislature.


1 Talawanda City School Dist. Bd. of Edn. v. Testa, Ohio Supreme Court, No. 2014-1798, Dec. 30, 2015.

2 Prior OHIO REV. CODE ANN. § 3313.44.

3 OHIO REV. CODE ANN. § 3313.44, as amended by S.B. 181, Laws 2010.

4 Prior OHIO CONST., art. XII, § 2.

5 Dennison Univ. v. Board of Tax Appeals, 205 N.E.2d 896 (Ohio 1965).

6 S.B. 181, Laws 2010, § 5.

7 OHIO REV. CODE ANN. § 3313.17. This statute provides the corporate powers of school boards:

"The board of education of each school district shall be a body politic and corporate, and, as such, capable of suing and being sued, contracting and being contracted with, acquiring, holding, possessing, and disposing of real and personal property, and taking and holding in trust for the use and benefit of such district, any grant or devise of land and any donation or bequest of money or other personal property."

8 Cincinnati City School Dist. Bd. of Edn. v. Board of Tax Appeals, 80 N.E.2d 156 (Ohio 1948).

9 Because the statute of limitations for a real property tax exemption for publicly owned property is three years in Ohio, a refund application must be filed within three years of the date of the payment to be a valid claim. OHIO REV. CODE ANN. § 5713.081.

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