Login | October 18, 2024
Ohio Supreme Court orders revision of calculation used to tax woodlands
KEITH ARNOLD
Special to the Legal News
Published: October 17, 2024
The Supreme Court of Ohio recently reversed a Board of Tax Appeals holding that resulted in some state woodlands––forested lands that produce timber––being overtaxed.
The 7-0 court remanded the issue, which centers on an arbitrary $1,000-per-acre clearing-cost rate used for the valuation of agricultural land, to state Tax Commissioner Patricia Harris with instruction to adopt a new clearing-cost rate that complies with state administrative code.
“We conclude under these facts that the tax commissioner abused her discretion in selecting the $1,000 clearing-cost rate for woodlands,” Justice Melody Stewart wrote for the court. “First, the $1,000 rate is arbitrary because it is ‘not governed by any fixed rules or standard,’” as in Dayton ex rel. Scandrick v. McGee.
In the case cited, justices considered whether the city had abused its discretion in selecting one bidder over another to construct a recreation center, the opinion detailed. Dayton officials had explained that the city’s selection process had preferred local bidders even if their bids were not the lowest, adding the caveat that the city might select a nonlocal bidder if the bid was ‘many percentages’ below a local bidder.
“We found that the many-percentages standard was arbitrary because it contained absolutely no guidelines or established standards for deciding by how many percentages a bid may exceed the lowest bid and yet still qualify as the lowest and best,” Stewart wrote. “We stated that absent such standards, the bidding process becomes an uncharted desert, without landmarks or guideposts to guide an official’s exercise of discretion.”
According to a court summary, a number of the landowners involved in the current case were part of an appeal of the $1,000-per-acre clearing costs the tax appeals board approved in 2015.
In Adams v. Testa, the court overturned a BTA decision denying landowners the right to challenge the Current Agricultural Use Valuation entry for the per-acre clearing costs of woodlands. As the case returned to the BTA for further proceedings, landowners continued to challenge the clearing-rate costs for woodlands for the additional tax years 2016 through 2020, summary detailed.
A 1974 amendment to the Ohio Constitution created the CAUV program, which allowed land devoted exclusively to agricultural use to be valued for property tax purposes based on the current value of land when it is used for agricultural purposes, rather than the current fair market value.
One of the stipulations of the amendment required the tax commissioner to calculate the cost of clearing wooded land adjacent to farmland for the purposes of converting it to cropland. Clearing costs then could be subtracted from the value of the cropland to determine the value of the woodland.
From 1983 to 2014, the tax commissioner applied a $500-per-acre clearing-cost rate for woodlands. The tax commissioner proposed raising the per-acre cost to $1,000 in 2015, which was contested by some landowners, who argued the rate did not reflect the true costs of land clearing and that it needed to be higher, the summary continued.
In 2023, the BTA upheld the $1,000 clearing cost rate for woodlands for those tax years, prompting landowners to appeal to the Supreme Court.
Stewart noted that nothing in the CAUV regulations or statutes authorizes the tax commissioner to apply a doubling method to the previous rate, nor did the parties offer evidence to support how the figure was derived.
“The tax commissioner’s decision to increase the rate is warranted in light of the department’s view that the existing rate was too low, but the problem is that simply doubling the rate does not necessarily result in a reasonable endpoint,” Stewart wrote. “By the tax commissioner’s logic, if she has discretion to double the rate with no concrete basis or reason to do so, then she seemingly has discretion to triple or quadruple the rate.”
Under that argument, the justice added, any other multiplier would satisfy the tax commissioner’s discretion.
“The tax commissioner’s method is bereft of standards by which to test the exercise of discretion, and therein lies the problem,” she wrote.
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