Information Release

RP 2004-01 - Amnesty for Real Property Tax Exemption Applications Dismissed Pursuant to Cleveland Clinic Found v. Wilkins, 103 Ohio St.3d 382 (2004), December 2004 

The purpose of this information release is to address an amnesty provision the General Assembly enacted in Sub. H.B. 362. This provision was enacted to address recent decisions that reversed long-standing procedures used by the Department of Taxation to proactively assist taxpayers applying for real property tax exemption by informing them of certain requirements that must be satisfied so the Tax Commissioner will have jurisdiction to address exemption requests on their merits.

In October of this year, both the Ohio Supreme Court (Court) and the Board of Tax Appeals interpreted the payment requirements in R.C. § 5713.08(A) and (B) to be jurisdictional. In other words, if those requirements are not satisfied at the time the exemption application is filed with the County Auditor, the Commissioner cannot consider such application and must dismiss it. Cleveland Clinic Found. v. Wilkins, 103 Ohio St.3d 382 (2004); Strongsville Bd. of Educ. v. Zaino, No. 2002-G-2562 (Ohio B.T.A. Oct. 8, 2004, on appeal to the Ohio Supreme Court).

The charges on the tax list and duplicate that must be paid in full, or subject to a valid delinquent tax contract with the County Treasurer pursuant to R.C. § 323.31(A), at the time the exemption application is filed are the following:

1. all special assessments, with any interest and penalties thereon (includes the amount due for the entire tax year, even if the second-half tax bill has not been issued yet);

2. all taxes, with any penalties and interest thereon, for the tax year in which the applicant acquired title to the property and all previous years; and

3. all taxes, penalties, and interest for the tax years preceding the third year before the year in which the application is filed (the Commissioner may only remit taxes for the three years preceding the year of application).

Consequently, the Tax Commissioner must dismiss pending exemption applications if the proper taxes, assessments, penalties, and interest were not paid in full or subject to a valid delinquent tax contract at the time those applications were filed.

Amnesty Provision

The General Assembly enacted Section 3 of Sub. H.B. No. 362 (HB 362) to mitigate the consequences of the large number of exemption applications that must be dismissed because of the decision issued by the Court in Cleveland Clinic Found. The key provisions of Section 3 of Sub. H.B. 362 are the following:

Definitions

1. The amnesty provision applies to “qualified property,” which is real property that qualifies for tax exemption under any Revised Code section and for which the Tax Commissioner dismissed an exemption application because of the decision in Cleveland Clinic Found.

2. Under the amnesty provision, remission may be granted for “eligible years,” which are those tax years for which taxes, penalties, and interest could have been remitted and the property placed on the tax exempt list under a previously dismissed exemption application for qualified property. For example, assume the previous application was filed in 2002 requesting exemption for 2002 and remission for tax years 1999, 2000, and 2001, and the amnesty application is filed in 2005. In this situation, the eligible years are tax years 1999 through 2005. As a result, all taxes, penalties, and interest for tax years 1998 and earlier (plus special assessments for all years) must be paid at the time the amnesty application is filed.

Application Procedures

1. To qualify for amnesty, the current owner of qualified property must file an exemption application by July 1, 2005, to request remission of taxes, penalties, and interest for the “eligible years”. The owner must attach a copy of the Commissioner’s final determination that dismissed the previous application to the amnesty application and have the County Treasurer complete the certificate contained in the amnesty application and described in the following paragraph. Failure to strictly follow these procedures by attaching that previous final determination or obtaining the Treasurer’s completed certificate will result in dismissal of the amnesty application.

2. The County Treasurer’s certificate must include one of the following:

a. A statement that all taxes, penalties, and interest for all tax years that are not “eligible years” and all special assessments charged against the property have been paid in full (a delinquent tax contract cannot be used for purposes of this uncodified provision); or

b. A list of the tax years for which taxes, penalties, interest, and special assessments remain unpaid.

County Auditor and County Treasurer Procedures for Payments

If an amnesty application is filed, the County Auditor must notify the County Treasurer to hold any tax payments for “eligible years” that were made as a result of the previously dismissed exemption application in a special fund pending the Tax Commissioner’s decision on the amnesty application. This money may not be advanced to any taxing authority under R.C. § 321.34. After the Commissioner issues a decision, the Auditor will either refund those taxes, penalties, and interest if remission is granted and for which the subdivision has consented to remission, or distribute the payments to the proper taxing authorities if remission is denied or the subdivision has withheld consent. Note: no interest is paid on amounts refunded because of a real property tax exemption.

Tax Commissioner’s Actions

Upon receipt of the amnesty application, the Tax Commissioner will determine whether the applicant and the applicant’s qualified property meet the qualifications for tax exemption and those in the uncodified law. After such review, the Commissioner will take one of three actions.

1. If the property is not now being used for an exempt purpose, the Commissioner must deny the application. No amnesty remission is possible unless the property currently qualifies for exemption.

2. If the qualifications are met for all of the “eligible years” in addition to the current year, the Commissioner will direct that the property be placed on the tax exempt list and that all paid or unpaid taxes, penalties, and interest for every “eligible year” the property met the qualifications for exemption be remitted, unless a taxing authority has objected to the remission of such amounts. See “Subdivision Consent” below.

3. If the qualifications are met for some of the “eligible years” requested in addition to the current year, the Commissioner will direct the county auditor to place the property on the tax exempt list and remit all paid or unpaid taxes, penalties, and interest for every year the property met the qualifications for exemption, unless a taxing authority has objected to the remission of such amounts, and will direct the county treasurer to collect all taxes, penalties, and interest for every year the property did not meet the qualifications for exemption or for which a taxing authority objected to the remission.

Subdivision Consent

The County Auditor may remit taxes, penalties, and interest for “eligible years” not open under permanent law (i.e., tax year 2000 and earlier for applications filed in 2004 and tax years 2001 and earlier for applications filed in 2005) only with the consent of the taxing authority of the subdivision or other taxing unit to which such taxes, penalties, and interest are owed.

By January 15, 2005, the County Auditor must notify each subdivision or taxing unit in the county of the enactment of this uncodified provision of law and of the requirement that the taxing authority must file any objection to the remission request with the auditor by February 15, 2005. That objection must be in the form of an ordinance or resolution passed by the taxing authority and filed on a form prescribed by the Tax Commissioner (see section titled Revision of Exemption Forms at the end of this release.) The date of filing will be the date the resolution is received by the County Auditor’s office. If a taxing authority does not timely file the resolution or ordinance with the Auditor, that taxing authority will be considered to have given consent to the requested remission. Note that if one taxing authority withholds consent to amnesty remission, the application can still proceed with respect to the taxes penalties and interest owed to the remaining subdivisions. Likewise, a taxing authority may not withhold its consent only for specific properties.

1. If a taxing authority withholds consent by filing timely objections with the County Auditor, the applicant must eventually pay all the outstanding taxes, penalties, and interest owed to that subdivision or taxing unit, except for those taxes, penalties, and interest that are included in the three-year remission period under permanent law in R.C. § 5713.081(A). For example, assume the previous application was filed in 2002 requesting exemption for 2002 and remission for tax years 1999, 2000, and 2001, and the amnesty application is filed in 2005. If a taxing authority withholds consent, the applicant must eventually pay the taxes, penalties, and interest owed to that subdivision for tax years 1999, 2000, and 2001 (tax years 2002-2005 are covered under permanent law and no consent is need to remit taxes for those years).

Note: In the example above, the taxes for years 1999-2001 for which consent was not given are not considered to be unpaid taxes for purposes of establishing the Tax Commissioner’s jurisdiction to consider the amnesty application. In other words, the taxes for “eligible years” do not need to be paid at the time the amnesty application is filed, regardless of whether or not a subdivision has withheld its consent.

2. The consent given by a taxing authority under this uncodified provision does not apply to the year the amnesty application is filed and to the three-year remission period under permanent law in R.C. § 5713.081(A). The applicant retains the right to apply for those years with or without the consents of the subdivisions or taxing units.

3. The County Auditor must maintain a record of all taxing authorities that have withheld consent. After the Tax Commissioner issues a decision for each of the eligible years for which exemption or remission was requested, the Auditor will remit or refund the taxes, penalties, and interest for which consent was given, and distribute to the appropriate taxing authorities from the special fund mentioned in item 3 under “Application Procedures” above the taxes, penalties, and interest for which consent was withheld. The County Treasurer will proceed to collect the unpaid taxes, penalties, and interest for which consent was withheld.

Revision of Exemption Forms

New DTE Form 23-C, Resolution or Ordinance Withholding Consent Per Sub. H.B. 362, (125th General Assembly) is hereby prescribed for immediate use. A copy of this form is available on the Department of Taxation’s website under the Services for Local Governments tab.