Property Tax Gaffe: Purchase Price Equated With Market Value

Three recent Supreme Court of Ohio property tax decisions purport to examine the propriety of using the purchase price of a particular property as prima facie evidence of market value for property tax assessment purposes. In each case, the Court decided that the purchase price was equivalent to the property's market value, despite accepted appraisal practice standards, GAAP pronouncements, and actual legal contractual arrangements.

The Honorable Chief Justice Thomas Moyer wrote the majority opinion for the Ohio Supreme Court decision in AEI Net Lease Income & Growth Fund v. Erie County Bd. of Revision, 119 Ohio St. 3d 563 (Ohio 2008) [enhanced version available to lexis.com subscribers /  unenhanced version available from lexisONE Free Case Law] and in St. Bernard Self-Storage, L.L.C. v. Hamilton County Bd. of Revision, 115 Ohio St. 3d 365 (Ohio 2007) [enhanced version / unenhanced version]. Similarly, the Honorable Justice Terrence O'Donnell wrote the majority opinion in Rhodes v. Hamilton County Bd., 117 Ohio St. 3d 532 (Ohio 2008) [enhanced version / unenhanced version]. What is notable about these cases is their commonality. All of these cases purport to examine the propriety of using the purchase price of a particular property as prima facie evidence of market value for property tax assessment purposes.

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The courts have ignored accepted appraisal practices, GAAP pronouncements, actual legal contractual arrangements, and arguably common sense. It is troubling that each decision legitimized the succeeding decision, such that the faulty logic was presumed dogmatic. Certainly, it was magnified in the result of AEI.

Taxpayers beware - It will be a Herculean task to win an appeal on accepted appraisal principles in Ohio. Even in instances where the local Board of Revision has competent, appraisal minded members, success in further appeal efforts is doubtful. Taxpayers that rely on the comfort of a sale price lower than a current assessment may face the adverse results, as experienced by AEI in the misapplication and misinterpretation of Darcel from the Wisconsin Supreme Court. Interestingly, the Supreme Court of Wisconsin sought to plug any misinterpretation by its assessment community in Walgreen Co. v. City of Madison, 2008 WI 80 (Wis. 2008) [enhanced version / unenhanced version]. It is worth noting that this decision was eerily similar to Rhodes.

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