Is your Ohio Real Estate Tax liability going up or down? Preserve your rights!
Changing Landscape of the Tax Law
For several years, the general rule for real estate tax purposes was if property sold in an arm’s length transaction and the transaction was “recent” to the tax lien date (January 1), that sale price would generally control as the “fair market valuation” used by the county auditor for real estate tax purposes. In short, the sale price would be used to set the value for the current and future tax years. The law in this area, however, is changing. On June 22, 2017, the Supreme Court of Ohio issued an opinion in Terraza 8 L.L.C v. Franklin Cty. Bd. of Revision, Slip Opinion No. 2017-Ohio-4415. The case involved the sale of a property that was encumbered by a lease. The Supreme Court in Terraza concluded that a sale price may no longer conclusively determine value for tax purposes as it did under prior law.
This decision addresses several issues that should be considered by taxpayers:
Property should be valued based upon the fee simple interest. Leases that are in place with respect to property that is sold may be irrelevant in the ultimate conclusion of the value of the fee simple interest, notwithstanding the sale price of the property sold.
Tax appraisals that are performed when there was no sale of the appealed property (the property whose value is at issue) could be impacted by the Court’s decision as well.
Practical thoughts for 2017 Tax Year Valuation
Many counties, including Franklin County will be sending out the 2017 preliminary values to taxpayers soon. The 2017 Tax Year is the “reappraisal” year in Franklin County, and several other Ohio counties. The “re-appraisal” function is generally performed by the county auditor during the late summer of the Tax Year to which the revaluation process applies. For example, although the “as of” tax lien date valuation for Tax Year 2017 in Franklin County is January 1, 2017, the process to ascertain that value is performed retroactively, during the calendar year of 2017, with the value generally being set in the fall by the county auditor. That preliminary value, once determined by the county auditor, can be challenged either by the owner or by a school district, among other potential complainants.
Some practical points to consider include:
Watch your mail for the preliminary value sent out by the county.
If the value seems overstated, you may wish to attend one of the informal reviews that some counties hold to attempt to have that preliminary value changed.
When the county’s final value that will be used in the calculation of the tax the county believes is due is sent to you in November or December, if you believe that the value is overstated, you could consider filing a tax complaint between January 1, 2018 and March 31, 2018 to challenge the Tax Year 2017 value.
Generally, obtaining an appraisal could be useful in your attempt to establish the fair market value of the property.
Remember that some public entities (generally school districts) that receive much of the tax paid by property owners have the right to also protest the value, generally to attempt to increase a property owner’s real estate tax liability.
Our attorneys have experience in assisting owners with real estate tax reductions. If you would like to discuss whether filing an appeal makes sense for your property or if you have questions about the valuation process, please contact any one of our attorneys.