In the case of Breeze, Inc. v. Testa, Slip Opinion No. 2017-Ohio-7801, the Ohio Supreme Court clarified – or changed according to the dissent – when the public-schoolhouse exemption and charitable-or-public-use tax exemption is available for leased property.
Former and current Ohio law provides a tax exemption for property belonging to charitable or educational institutions when the property is used in furtherance of its charitable, educational, or public purposes and not with the view to profit. The Ohio Supreme Court found that, when the property is leased to a charitable or educational institution, the “view to profit” exemption only applies when “the lease is intended to generate profit for the lessor.” Breeze at ¶ 8. Under this standard, the fact that a lease actually generates income – which occurred in this case – “is only relevant to the extent it sheds light on the lessor’s intention regarding the lease.” Breeze at ¶ 13.
It is anticipated that this standard will make it extremely difficult for a board of revision to ever demonstrate that the charitable-or-public-use tax exemption does not apply to a lease agreement – even when the property generates profit. It is difficult enough to demonstrate true intent in a criminal setting. Extending this requirement to complicated leasing arrangements will be even more fraught. The lessor will always be able to argue (with a wink and a nod) that, while the lease did generate a profit, that was never the lessor’s actual intent.
To read this case, please click here.
Authors: Matthew John Markling and Patrick Vrobel
Note: This blog entry does not constitute – nor does it contain – legal advice. Legal jurisprudence is like the always changing Midwestern weather. As a result, this single blog entry cannot substitute for consultation with a McGown & Markling attorney. If legal advice is needed with respect to a specific factual situation, please feel free to contact a McGown & Markling attorney.