Case Title: Columbus City School Dist. Bd. of Educ. v. Testa

Citation: 2011-Ohio-5534

Docket Number: 2010-1754

State: ohio

Court: Ohio Supreme Court

Date: 2011-11-01T00:00:00Z

Document:
[Until this opinion appears in the Ohio Official Reports advance sheets, it may be cited as 
Columbus City School Dist. Bd. of Edn. v. Testa, Slip Opinion No. 2011-Ohio-5534.] 
 
 
NOTICE 
This slip opinion is subject to formal revision before it is published in 
an advance sheet of the Ohio Official Reports.  Readers are requested 
to promptly notify the Reporter of Decisions, Supreme Court of Ohio, 
65 South Front Street, Columbus, Ohio 43215, of any typographical or 
other formal errors in the opinion, in order that corrections may be 
made before the opinion is published. 
 
SLIP OPINION NO. 2011-OHIO-5534 
COLUMBUS CITY SCHOOL DISTRICT BOARD OF EDUCATION, APPELLANT, v. 
TESTA, TAX COMMR., ET AL., APPELLEES. 
[Until this opinion appears in the Ohio Official Reports advance sheets, it 
may be cited as Columbus City School Dist. Bd. of Edn. v. Testa,  
Slip Opinion No. 2011-Ohio-5534.] 
Taxation—Tax on income from property used for the support of a state 
university—R.C. 3345.17—Income-producing property may not be 
exempted under the statute unless the activity conducted on the property 
bears an operational relationship to university activities—Decision 
reversed. 
(No. 2010-1754—Submitted October 18, 2011—Decided November 1, 2011.) 
APPEAL from the Board of Tax Appeals, No. 2008-M-408. 
__________________ 
Per Curiam. 
{¶ 1} In this real property tax exemption case, the Columbus City School 
District Board of Education (“school board”) appeals from the decision of the 
Board of Tax Appeals (“BTA”), which affirmed the tax commissioner’s grant of 
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tax-exempt status to certain property owned by the “State of Ohio for the use and 
benefit of the Ohio State University” (“OSU”).  The dispute centers on the proper 
construction of R.C. 3345.17, which provides that state-university property is 
exempt from real property taxation if it is “used for the support of such 
university.” 
{¶ 2} Under this statute, the tax commissioner and the BTA granted 
exemption to a two-story building with basement that generates rental income 
from a first-floor commercial tenant and second-floor residential tenants.  OSU 
received title to the building through a bequest intended to provide scholarships to 
veterinary-medicine students at OSU.  Before this court, the tax commissioner 
argues that income-producing property like the parcel at issue qualifies for 
exemption under R.C. 3345.17 to the extent that the income generated by the 
property is devoted to university purposes.  The school board contends that 
income-producing property may not be exempted under the statute unless the 
activity conducted on the property bears an operational relationship to university 
activities.  We agree with the school board, and we therefore reverse. 
I.  Factual Background 
{¶ 3} The two-story building at issue is located south of the Ohio State 
University campus in Columbus.  It houses four residential rental units on the 
second floor and a commercial space on the first floor and in the basement that 
was occupied at the time of the application by a McDonald’s, and later by a credit 
union. 
{¶ 4} OSU acquired title to the property in 1992 through the estate of 
Mabel Elizabeth White, who bequeathed it subject to the requirement that the 
“real estate, or the proceeds from any sale therefrom” be “used to further fund, or 
establish, the David Stuart White Fellowship Fund.”  The testator then specified 
that the fund should be “invested and the income therefrom used for providing 
graduate fellowships * * * in any branch of veterinary medicine.”  When OSU 
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acquired title, the property was subject to a 99-year renewable lease held by 
Long’s College Book Company.  In 2000, Long’s had transferred the leasehold 
interest to Campus Partners for Community Urban Redevelopment.  In October 
2002, Campus Partners assigned the leasehold interest to OSU in consideration of 
a payment of $500,000, which led to a merger of title and termination of the lease. 
{¶ 5} A memorandum of understanding (“MoU”) was executed on 
March 26, 2004, to “document[ ] the agreement, responsibilities and 
commitments of various [OSU] offices regarding the assignment of the [property 
at issue] in exchange for payment for all costs incurred by [OSU].”  The stated 
“primary goal” of the MoU is to “fund the David Stuart White Fellowship Fund 
(“Fund”) to the fullest extent allowable under University policy and the law.” 
{¶ 6} According to the MoU, income from the property at issue would be 
applied first to paying down OSU’s acquisition expense, after which the property 
would be assigned to the veterinary-medicine college.  Under the MoU, proceeds 
of a sale by OSU would be directed to the veterinary-medicine college, and that 
college also would enjoy an option to occupy the building if a tenant vacated. 
{¶ 7} OSU hired a commercial property-management firm, Buckeye 
Realty, to collect rents and maintain the property.  Buckeye Realty retained a 
portion of rent to pay its management-related fees and expenses.  There was no 
evidence whether the residential tenants were OSU students. 
{¶ 8} The McDonald’s lease called for the tenant to pay to the landlord 
two-thirds of the real estate taxes plus 100 percent of any increased taxes 
attributable to improvements made by McDonalds.  Under its 2006 lease, the 
credit union pays 100 percent of real estate taxes based on the square footage that 
it occupies.  Under these circumstances, the benefit of a tax exemption inures in 
part to OSU’s commercial tenants. 
II.  Procedural History 
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{¶ 9} On May 18, 2004, OSU filed an application to exempt the property 
for 2004, predicating the exemption claim on R.C. 3345.17.  The school board 
opposed the exemption on the grounds that the property “consists of residential 
apartment units and a retail establishment.”  On March 18, 2008, the 
commissioner issued his final determination, which granted the exemption based 
on its review of the facts in light of State ex rel. Univ. of Cincinnati v. Limbach 
(1990), 51 Ohio St.3d 6, 7, 553 N.E.2d 1056. 
{¶ 10} The school board appealed the final determination to the BTA, 
which held a hearing on August 14, 2009.  At that hearing, OSU presented four 
witnesses and several exhibits in support of the claim, and the school board’s 
counsel cross-examined the OSU witnesses.  On September 14, 2010, the BTA 
issued its decision upholding the commissioner’s determination.  Columbus City 
School Dist. Bd. of Edn. v. Levin (Sept. 14, 2010), BTA No. 2008-M-408, 2010 
WL 3614560, * 6.  Reiterating the commissioner’s reliance on Univ. of Cincinnati 
and citing Ohio State Univ. Bd. of Trustees v. Kinney (1983), 5 Ohio St.3d 173, 5 
OBR 392, 449 N.E.2d 1282, the BTA rejected the school board’s contention that 
the use of property under R.C. 3345.17 may not be predicated solely on the use of 
the proceeds derived from purely commercial, income-producing property.  
Columbus City School Dist. at * 5.  According to the BTA, the distinction 
between “use of property” and “use of proceeds derived from property” pertains 
to the charitable-use exemption at R.C. 5709.12(B), but not to R.C. 3345.17.  Id. 
{¶ 11} The school board has appealed, and we now reverse. 
III.  Analysis 
{¶ 12} R.C. 5717.04 requires us to determine whether the BTA’s decision 
was “reasonable” and “lawful.”  Under this standard, we acknowledge that “ 
‘[t]he BTA is responsible for determining factual issues and, if the record contains 
reliable and probative support for these BTA determinations,’ ” we will affirm 
them.  Satullo v. Wilkins, 111 Ohio St.3d 399, 2006-Ohio-5856, 856 N.E.2d 954, 
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¶ 14, quoting Am. Natl. Can Co. v. Tracy (1995), 72 Ohio St.3d 150, 152, 648 
N.E.2d 483.  In the present case, however, we are not called upon to review 
factual determinations of the BTA, but rather the scope of exemption under R.C. 
3345.17.  Because this analysis requires us to construe and apply the language of 
the statute, we confront a question of law, and our review is de novo.  Akron 
Centre Plaza L.L.C. v. Summit Cty. Bd. of Revision, 128 Ohio St.3d 145, 2010-
Ohio-5035, 942 N.E.2d 1054, ¶ 10. 
A.  The language of R.C. 3345.17 ties the exemption to 
use of the property, not to the use of the proceeds. 
1.  OSU had the burden to show clear entitlement to the exemption. 
{¶ 13} R.C. 3345.17 provides a tax exemption for “[a]ll property * * * of 
the boards of trustees and of the housing commissions of the state universities, * * 
* and of the state held for the use and benefit of any such institution,” if that 
property is “used for the support of such institution,” and the exemption continues 
“so long as such property is used for the support of such university.”  Uncontested 
is the ownership qualification:  the property at issue is owned by the state for the 
benefit of Ohio State University.  The dispute in this case centers on whether 
using income derived from rent paid by commercial and residential tenants 
qualifies the property at issue as being “used for the support of such university” 
under R.C. 3345.17. 
{¶ 14} In construing statutory language, we “must ascertain and give 
effect to the intent of the legislature,” which we determine by “ ‘read[ing] words 
and phrases in context and constru[ing] them in accordance with rules of grammar 
and common usage.’ ”  HIN, L.L.C. v. Cuyahoga Cty. Bd. of Revision, 124 Ohio 
St.3d 481, 2010-Ohio-687, 923 N.E.2d 1144, ¶ 15, quoting State ex rel. Russell v. 
Thornton, 111 Ohio St.3d 409, 2006-Ohio-5858, 856 N.E.2d 966, ¶ 11.  
 
{¶ 15} In Univ. of Cincinnati, 51 Ohio St.3d at 7, 553 N.E.2d 1056, fn. 1, 
we cited a dictionary definition of “support”:  support means “ ‘actively promote 
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the interest or cause of,’ ” “ ‘give assistance to,’ ” and “ ‘pay the costs of:  
maintain.’ ”  Id., quoting Webster’s Third New International Dictionary (1986) 
2297.  But while “support” unquestionably could encompass the use of proceeds 
to defray costs incurred by the university, the statute subordinates the concept of 
support to the concept of use:  to qualify for exemption, the property must be used 
for the support of the university.  The statute notably does not explicitly allow or 
tie the exemption to the use of income from the property, but rather to the use of 
the property itself. 
{¶ 16} In light of the foregoing discussion, an expansive reading of the 
phrase would permit the use of income by itself to qualify the property for 
exemption.  But reading R.C. 3345.17 expansively would contravene the usual 
manner of construing exemption statutes.  As the proponent of a tax exemption, 
OSU had the burden to “show that the language of the statute ‘clearly express[es] 
the exemption’ in relation to the facts of the claim.”  Anderson/Maltbie 
Partnership v. Levin, 127 Ohio St.3d 178, 2010-Ohio-4904, 937 N.E.2d 547, ¶ 16, 
quoting Ares, Inc. v. Limbach (1990), 51 Ohio St.3d 102, 104, 554 N.E.2d 1310.  
Indeed, R.C. 3345.17 creates an “exclusion from taxation” that as such “must be 
construed strictly against the taxpayer.”  (Emphasis sic.) H.R. Options, Inc. v. 
Wilkins, 102 Ohio St.3d 1214, 2004-Ohio-2085, 807 N.E.2d 363, ¶ 2.  We have 
enforced this principle to the point of declaring that “ ‘ “[i]n all doubtful cases 
exemption is denied.” ’ ” Anderson/Maltbie Partnership, ¶ 16, quoting A. 
Schulman, Inc. v. Levin, 116 Ohio St.3d 105, 2007-Ohio-5585, 876 N.E.2d 928, ¶ 
7, quoting Youngstown Metro. Hous. Auth. v. Evatt (1944), 143 Ohio St. 268, 28 
O.O. 163, 55 N.E.2d 122.  Our review of the record in light of the language of 
R.C. 3345.17 and the case law leads us to conclude that OSU did not sustain its 
burden. 
2.  The legislative process negates an intent to permit property to 
qualify for exemption based solely on the use of its income. 
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{¶ 17} The need to focus on the use of the property itself, as opposed to 
the use of the proceeds from the property, is underscored by the existence of a 
much older companion provision to R.C. 3345.17 that exempts property of 
municipal universities.  R.C. 3349.17.  That statute explicitly exempts “property * 
* * located within the county in which a university, college, or other educational 
institution of any municipal corporation is located” when the “rents, issues, 
profits, and income of [that property] are used exclusively for the use, 
endowment, or support of such institution.”  This provision on its face provides an 
exemption primarily if not exclusively to income-producing property.  By 
contrast, R.C. 3345.17 makes no mention of income-producing property—with 
the result that any extension of the exemption to such property requires an 
expansive reading of its language. 
{¶ 18} The state-university provision in this case, R.C. 3345.17, was 
enacted by the 105th General Assembly in 1963.  Am.S.B. No. 271, 130 Ohio 
Laws 783, 1515 (“S.B. 271”).  By contrast, the municipal-university exemption 
was enacted by the 79th General Assembly in 1911 as G.C. 7915-1.  H.B. No. 65, 
102 Ohio Laws 32.  Given that the provision at issue was enacted against the 
background of the earlier provision, the focus of R.C. 3345.17 on the use of the 
property rather than its proceeds is striking and significant. 
{¶ 19} Any doubt that the legislature enacted R.C. 3345.17 in 1963 with 
R.C. 3349.17 in mind is eliminated by the background of the 1963 enactment.  As 
originally introduced on March 25, 1963, S.B. 271 contained language exempting 
state-university property based on the use of “the rents, issues, profits, or income” 
derived from the property, just as R.C. 3349.17 exempts municipal-university 
property on that basis.  But amendments deleted the reference to rents, issues, 
profits or income from state-university property.  Thus, the legislature appears to 
have specifically contemplated an exemption for income-producing property at 
the outset, only to change its mind during deliberations.  The General Assembly 
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ultimately opted for an exemption based on the use of the property, not on the use 
of its proceeds. 
{¶ 20} The tax commissioner characterizes the language of R.C. 3349.17 
as “restrictive” compared to R.C. 3345.17.  R.C. 3345.17, he asserts, exempts 
from taxation property based on the use of its proceeds as well as the use of the 
property itself.  But the suggestion that the process of legislative amendment 
supports applying R.C. 3345.17 in the present case is anomalous.  As originally 
introduced, the statute would grant an exemption to income-producing property 
by its plain terms, but the amendment process specifically removed all reference 
to income-producing property from the exempting language of the statute. 
{¶ 21} We conclude that the amendment process militates against, not in 
favor, of granting the exemption in this case.  While the position of the 
commissioner and OSU in this case would fit neatly under the originally proposed 
language, it requires an expansive reading of the language that was actually 
enacted.  The legislative background suggests that such a reading is particularly 
inappropriate in this case. 
B.  The case law does not establish the availability of exemption 
under R.C. 3345.17 based solely on the use of income. 
{¶ 22} Central to the appellees’ arguments is the contention that the case 
law has already furnished the expansive reading that is required to justify the 
grant of exemption in this case. This argument necessitates a close look at those 
cases. 
{¶ 23} In Kinney, 5 Ohio St.3d 173, 5 OBR 392, 449 N.E.2d 1282, OSU 
had acquired a 1.993-acre parcel adjacent to its airport.  Id. The property was part 
of the airport’s “control zone” and was also used as part of the agriculture 
college’s program for crop production to support animals that were “part of the 
teaching and research mission in animal husbandry.”  Id. at 173-174.  On a small 
portion of the parcel was a house that was subject to a residential lease, under the 
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terms of which the university received rent.  Id. at 173.  The tax equalization 
commissioner contended that the half-acre with the rented house could not be 
exempted, but the BTA and the court disagreed.  The court characterized the 
house rental as a “secondary use” and held that the primary use was “in support of 
the academic mission of the Department of Aviation and Aeronautical and 
Astronautical Engineering and the College of Agriculture.”  Id. at 174-175. 
{¶ 24} In Univ. of Cincinnati, 51 Ohio St.3d 6, 7, 553 N.E.2d 1056, a 
1.13-acre parcel improved with two buildings was donated to the university.  One 
of the buildings housed a Laundromat, and the other was occupied in part by a 
convenience store.  Id. at 6-7.  These two establishments occupied 12 percent of 
the property and paid rent that was directed into the university’s general fund.  
But the other 88 percent of the property was occupied, in part, by the university’s 
College of Design, Art, Architecture and Planning, with the remainder being 
planned as either a maintenance garage for the main campus or as a residence 
facility for the medical center.  Id. at 7.  The court affirmed the BTA’s grant of 
exemption based not only on the finding that the rent went into the university’s 
general operating fund, but that “there were plans to develop the property in a 
manner to serve the university’s medical center or its main campus.”  Id. 
{¶ 25} The tax commissioner (who in the earlier cases took a more 
restrictive approach to R.C. 3345.17) now champions the view that Kinney and 
Univ. of Cincinnati established that “the leased properties were ‘used for the 
support of’ the state universities because  the rental income was deposited into the 
universities’ general fund and used for daily operational expenses.”  OSU 
supports that position, while noting that the specific scholarship-fund purposes to 
which the income would be devoted (after the university’s cost of purchasing the 
leasehold interest had been reimbursed) furnished additional grounds for 
exemption.  Both appellees regard the earlier cases as controlling, and argue that 
they require the grant of the exemption here. 
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{¶ 26} As the foregoing discussion of the cases reveals, however, Kinney 
and Univ. of Cincinnati do not stand for the proposition advanced by the 
appellees.  To be sure, the use of rental income for the support of the university 
was an element in each of those cases, but in neither case did the court understand 
the university to be using the property solely for the production of income through 
rent paid by private parties—which is the situation that we confront in the present 
case.  To the contrary, in Kinney, we specifically declared that the use of the 
house and grounds as rental property was a secondary use, and in Univ. of 
Cincinnati, we emphasized that the commercial use encompassed only 12 percent 
of the property, which was also subject to both current and prospective uses that 
supported university activities apart from the generation of any income. 
{¶ 27} Indeed, the principle to be derived from Kinney and Univ. of 
Cincinnati is that an ancillary use of property that generates income does not 
defeat exemption as long as the property is used, to some degree, either currently 
or prospectively, in a way that operationally relates to university activities.  The 
use of the income to support university activities, whenever there is any such 
income, is probably a necessary condition for exemption.  But that does not mean, 
as the appellees assert here, that the use of income, by itself, suffices to qualify 
the property for exemption.  Indeed, allowing an exemption for property leased to 
a commercial tenant is particularly troubling, since it makes the tax exemption 
inure to the benefit of a commercial enterprise rather than the intended nonprofit 
beneficiary. 
{¶ 28} The tax commissioner also contends that the narrower reading of 
R.C. 3345.17 advocated by the school board violates the precept that the court 
should construe statutes to give effect to all their language.  See R.C. 1.47(B).  In 
the commissioner’s view, the narrower reading of R.C. 3345.17 makes it largely, 
if not completely, duplicative of other exemption statutes, especially the 
exemption for “public colleges and academies” at R.C. 5709.07(A)(4).  But the 
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fact that R.C. 3345.17 may substantially or completely overlap other exemptions 
does not furnish a reason to override a clearly intended legislative limitation—in 
this case, the limitation of R.C. 3345.17 to situations where property is used in 
ways that operationally support university activities.  Tellingly, the commissioner 
does not cite authority for his view.  Indeed, in the past, we have applied R.C. 
1.47(B) not to expand the scope of real property tax exemptions but to enforce 
their limitations.  See Church of God in N. Ohio, Inc. v. Levin, 124 Ohio St.3d 36, 
2009-Ohio-5939, 918 N.E.2d 981, ¶ 30 (“a property owner may not evade the 
limitations imposed with respect to a specific tax exemption by claiming 
exemption under a broad reading of other exemption statutes”), citing 
Rickerbacker Port Auth. v. Limbach (1992), 64 Ohio St.3d 628, 631-632, 597 
N.E.2d 494. 
C.  Neither the location of the property nor its status as a bequest 
to provide scholarships establishes its entitlement to exemption. 
{¶ 29} Although endorsing the broad view of exemption under R.C. 
3345.17, OSU also advances another argument as a fallback position.  Namely, 
OSU suggests that an aggregation of circumstances specific to this case brings it 
within the holding of the earlier cases that allowed exemption. 
{¶ 30} In particular, OSU points to (1) the location of the property on 
“one of the main arteries running through campus,” Neil Avenue, as well as in the 
south campus “Gateway” area; and (2) the property’s status as a bequest intended 
to generate money for veterinary-medicine scholarships.  While the properties at 
issue in both Kinney and Univ. of Cincinnati were near a university facility or 
campus, neither decision attached overriding significance to the bare fact of 
physical proximity. 
{¶ 31} In Kinney, the residential parcel at issue was close to the 
university’s airport, but the overriding factor was that the parcel “was a small part 
of a seventy-eight acre acquisition which was intended to and does further 
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teaching and research in aviation and agriculture.”  Id., 5 Ohio St.3d at 174, 5 
OBR 392, 449 N.E.2d 1282.  In Univ. of Cincinnati, the proximity to the nursing 
college and the university hospital was significant because of the “plans for 
development of the site as a maintenance service garage for the main campus or 
as a residence facility for the medical center.”  51 Ohio St.3d at 7, 553 N.E.2d 
1056. 
{¶ 32} Moreover, the fact that the ultimate destination of the property’s 
income was a scholarship fund does not change the analysis.  Use of income from 
property can “support” the university whether the income is placed into general 
revenues or into an earmarked fund.  But in neither instance does the statute 
permit the exemption based upon the use of income. 
{¶ 33} Nor is it insignificant that the commercial tenant who pays the tax 
with respect to the square footage that it occupies receives the actual benefit of the 
exemption.  To be sure, the tax commissioner argues that the existence of the tax 
exemption may permit OSU to extract a higher rent in future years to benefit the 
scholarship fund.  But OSU would be able to do so only because the exemption 
allows it to enjoy a preferred tax status as a commercial landlord—a competitive 
advantage that the legislature does not appear to have intended. 
{¶ 34} Because there is neither a current nor a prospective use of the 
property operationally related to university activities, OSU’s exemption 
application should have been denied.1 
IV.  Conclusion 
{¶ 35} For all the foregoing reasons, the BTA acted unlawfully when it 
affirmed the tax commissioner’s grant of exemption.  We therefore reverse the 
decision of the BTA. 
Decision reversed. 
                                                 
1 The school board also advances a constitutional argument, but our disposition of the case on 
statutory grounds makes that argument moot. 
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O’CONNOR, C.J., and PFEIFER, LUNDBERG STRATTON, O’DONNELL, 
LANZINGER, CUPP, and MCGEE BROWN, JJ., concur. 
__________________ 
 
Rich Gillis Law Group, L.L.C., Mark Gillis, and Kelley Gorrey, for 
appellant. 
 
Michael DeWine, Attorney General, and Julie E. Brigner, Assistant 
Attorney General, for appellee tax commissioner. 
 
Carlile, Patchen & Murphy L.L.P., and Jackie Lynn Hager, for appellee 
State of Ohio for the use and benefit of Ohio State University. 
______________________