On April 6, 2022, the Ohio House and Senate each passed House
Bill 126 and sent it on to Gov. DeWine for his likely signature.
This bill will change the role of boards of education in real
estate valuation appeals and will also prohibit, as of its
effective date, “private payment” agreements entered into
after the effective date. Private payment agreements were often
used to settle property tax disputes in the past. To understand the
effect of the changes, it is helpful first to restate the current
law.
Property tax valuation complaints under current law
Under current law, property tax valuation complaints are
typically controversies between the property owner – who wants a
lower value and thus a lower tax bill – and the local board of
education – that wants a higher value and thus a higher tax bill.
Although theoretically other property owners and other political
subdivisions can file valuation complaints also1, school
boards are usually the only political subdivision filing complaints
or counter-complaints in these cases because most of the tax money
at stake is paid to the school district in which the property is
located. The county auditor makes an initial determination of
taxable value for each parcel in the county, which is reflected on
a tax bill that is sent to the owner in late December or
January.
Either the property owner or the school board may challenge this
value by filing a valuation complaint with the County Board of
Revision no later than March 312. If the owner files a
complaint to reduce the value, and the change in value sought is at
least $17,500, the school board must receive notice of the
complaint within 30 days of the deadline for filing valuation
complaints3. The school board may file a
counter-complaint, seeking either to retain the auditor’s value
or to establish a higher value, within 30 days of receiving notice
of the complaint4. The school board may also file an
original complaint by March 31 seeking to increase the value set by
the auditor, and the owner may then file a
counter-complaint5.
Under current law, the County Board of Revision retains
jurisdiction over these complaints and counter-complaints until
they are decided6, which often can take a year or more.
If either the owner or the school board disagrees with the Board of
Revision decision, either of them may appeal that board’s
decision to the Ohio Board of Tax Appeals7. The owner
also has the right to appeal, instead, to the local Court of Common
Pleas, as long as the appeal to the court is filed before the
appeal to the Board of Tax Appeals8. Appeals allow the
school board to seek additional information about the property that
they usually cannot obtain at the Board of Revision level, since
the school board may use discovery requests under the civil rules
and subpoenas to force the disclosure of sale information,
appraisals, property income information, etc. that might help to
establish a higher value for the property9.
An Ohio Attorney General’s opinion allows school board and
property owners to enter into “private pay” or
“direct pay” settlement agreements, under which the
property owner makes a payment to the school board only in exchange
for the school board either dismissing a complaint,
counter-complaint or appeal, or agreeing not to file
one10. The result is that the school board receives the
benefit of additional revenues from the property, but that other
local governments that receive property tax do not receive
additional property tax. This is either a break-even or a slight
windfall to the school district but a net savings to the property
owner compared to having the property value increase as a result of
the valuation complaint.
How House Bill 126 would change the appeal process
House Bill 126 will not change the appeal process and rights of
the property owner -except with respect to the availability of
“private pay” agreements – but will significantly
change the rights and process for boards of education in the
property tax appeal process.
First, a school board could not file an original valuation
complaint seeking to increase the property’s value unless both
of the following occur:
1) The property was sold in an
arm’s length transaction in the year before the tax lien date
for the year for which the complaint was filed, for a sale price
that is more than 10% and more than $500,000 (indexed for
inflation) above the value set by the county auditor, and
2) The school board passes a
resolution authorizing the complaint, after giving seven days’
notice to the property owner of the meeting at which the resolution
will be considered11.
The complaint form would have to state that the school board
passed the authorizing resolution after the required
notice12. School boards would retain the right to file
counter-complaints, but only if the original complaint sought a
change of at least $17,500 in taxable value13. School
boards would no longer receive mandatory notice of original
complaints – although many may still obtain such notice via public
records requests – and must file counter-complaints within 30
days of the filing of the original complaint14. Note
that the changes in filing rights would first take effect with the
2022 tax year – taxes payable in 2023 and complaints filed in
202315.
A second change is that, when a school board files an original
complaint, the Board of Revision must decide on the complaint
within one year or it loses jurisdiction over the
complaint16. This change would also first take effect
for complaints filed for the 2022 tax year17.
Two other changes would take effect on House Bill 126’s
effective date, which under the Ohio Constitution will be 90 days
after the bill is signed by the governor and filed with the Ohio
secretary of state18. First, while the owner retains the
right to appeal decisions by the Board of Revision, school boards
would no longer have the right to appeal a Board of Revision
decision unless it is with respect to the property they
own19. They may retain their right under Board of Tax
Appeals rules and the civil rules to appear in opposition to an
appeal by the owner; House Bill 126 does not address this. This
will affect many tax year 2021 complaints since few of them will be
decided by the local Board of Revision within 90 days of the
bill’s effective date. The prohibition against “private
pay” agreements also will become effective for agreements
entered into on or after the bill’s effective
date20. Thus, property owners who still wish to enter
into such agreements for pending appeals should negotiate and enter
into them quickly.
Key takeaways
With the exception of the prohibition of “private pay”
agreements, the bill will on balance benefit property owners.
Owners will retain their existing rights to seek reductions in
property tax values, but school boards will have more limited
rights to seek higher values. School boards will only be able to
file complaints when they can prove an arm’s length sale in the
prior tax year from information that they can obtain without
subpoenas or civil discovery. School boards would have to
“win” at the Board of Revision or not at all, while the
owner could still appeal an adverse decision. Before appealing,
however, the owner should consider that the school board might
retain the right to appear at the Board of Tax Appeals or in Common
Pleas Court to contest an appeal by the owner.
Footnotes
1 O.R.C 5715.19(A)(1) (prior to changes made by 2022 H.B.
126).
2 Id.
3 O.R.C. 5715.18(B) (prior to changes made by 2022 H.B.
126).
4 Id.
5 O.R.C 5715.19(A)(1) & (B) (prior to changes made by
2022 H.B. 126).
6 O.R.C. 5715.19(D).
7 O.R.C. 5717.01 (prior to changes made by 2022 H.B.
126).
8 O.R.C. 5717.05.
9 O.A.C. 5717-1-02(B), 5717-1-04(B), 5717-1-12,
5717-1-14.
10 Op. Att’y Gen. 2018-011.
11 O.R.C. 5715.19(A)(6) (as amended by 2022 H.B.
126).
12 O.R.C. 5715.19(A)(8) (as amended by 2022 H.B.
126).
13 O.R.C. 5715.19(B) (as amended by 2022 H.B.
126).
14 Id.
15 2022 H.B. 126, Section 3. (A).
16 O.R.C. 5715.19(C) (as amended by 2022 H.B.
126).
17 2022 H.B. 126, Section 3. (A).
18 2022 H.B. 126, Section 3. (B).
19 O.R.C. 5717.01 (as amended by 2022 H.B.
126).
20 2022 H.B. 126, Section 3. (B).
The content of this article is intended to provide a general
guide to the subject matter. Specialist advice should be sought
about your specific circumstances.