Court Opinion

ID: 6778712
Source: CourtListenerOpinion
Date Created: 2022-07-21 00:53:17.758774+00
Date Added: 2024-06-11T16:02:50.229098
License: Public Domain

Lundberg Stratton, J.,
concurring in part and dissenting in part. I agree with the majority’s holding with two exceptions. I believe that the parking garage and the below-market-cost office space made available to start-up technology-based companies should be exempt from taxation.
Office Space Provided by the Incubator Program
The majority reverses the BTA’s decision to exempt the office space. The majority reasons that the incubator tenants do not use the office space for a charitable purpose and therefore the office space is not tax-exempt. I believe a more reasonable interpretation of R.C. 5709.121(A) requires examination of EDI’s use of the office space to determine whether it should be exempt from taxation.
A statute is presumed to intend a just and reasonable result. R.C. 1.47(C). Thus, courts should construe a statute to avoid an unreasonable result. Canton v. Imperial Bowling Lanes, Inc. (1968), 16 Ohio St.2d 47, 45 O.O.2d 327, 242 N.E.2d 566, paragraph four of the syllabus. Former R.C. 5709.121 stated:
“Real property * * * belonging to a charitable or educational institution * * * shall be considered as used exclusively for charitable * * * purposes * * * if it is either:
*324“(A) Used by such institution * * *, or by one or more other such institutions
* * * .
íí ¡h
“(2) For other charitable, educational, or public purposes.” 133 Ohio Laws, Part III, 2646.
The majority examines the incubator tenants’ use of the office space to determine whether an exemption applies. Instead, I would find that former R.C. 5709.121(A) requires examination of EDI’s use of the office space. EDI uses the office space to implement the facilities portion of the Incubator Program by offering below-market-cost office space to start-up technology-based companies. Thus, the incubator tenants’ occupation and use of the office space are merely a consequence of EDI’s use. In other words, it is EDI’s use of the office space that is relevant to whether an exemption applies, not the tenant’s use. Accordingly, I would examine EDI’s use of office space by making it available to start-up technology-based companies to determine whether that use is for a charitable purpose.
EDI is a division of Weatherhead School of Management, which is part of CWRU. EDI’s mission is to encourage, support, and recognize entrepreneurial achievement in northeast Ohio. EDI is partially funded by state funds from the Thomas Alva Edison program, established by R.C. 122.33(C). Nonstate support is provided by foundation funding, grants and contracts from the federal government, memberships, and contract services from industrial sources, as well as rent and service fees from incubator tenants. EDI developed and administers the Incubator Program, supported by the same mixture of funds.
The purpose of EDI’s Incubator Program is to further develop and better establish start-up technology-based companies ultimately to create job opportunities.1 In support of this goal, the Incubator Program offers services primarily in three major categories: office and laboratory space; business assistance; and business training and education. The Incubator Program provides numerous services to assist these companies, including managerial assistance, technical assistance, office services and facilities, financial assistance, marketing assistance, public relations assistance, and entrepreneurial education.
The Incubator Program provides the sophisticated laboratory and office space needed by start-up technology companies at below market cost. In the Cleveland *325area, this space is either unavailable or very expensive environments. Without such space for these companies, it is likely that they would fail or locate in another, more business-friendly environment. Thus, availability of the discount rental space is a crucial aspect of the Incubator Program to enable start-up technology-based companies to become viable and to locate in the Cleveland area.
Thus, providing office space in this context is for charitable, educational, or public purpose because, consistent with' the majority’s finding that the remainder of EDI’s Incubator Program serves a charitable purpose, it also serves to “promote and develop emerging technologies and emerging companies in order to provide jobs for people and to strengthen the economy of the state.”
Therefore, I would find that EDI’s use of the office space by offering it to start-up technology companies at below market cost is a charitable purpose within the context of R.C. 5709.121(A). Accordingly, I would affirm the BTA’s determination that the office space was exempt from taxation as being reasonable and lawful.
CWRU’s Garage
The majority also affirms the BTA’s determination that the CWRU parking garage is not exempt from taxation. In denying the exemption for the parking garage, the BTA cited State Teachers Retirement Bd. v. Kinney (1981), 68 Ohio St.2d 195, 22 O.O.3d 434, 429 N.E.2d 1069, in determining that because the CWRU parking garage was not open to the public, it could not be exempted under former R.C. 5709.121. The BTA also found that there was “insufficient information * * * to accurately split-list the facility in order to account for exempt and non-exempt use.” I disagree with both conclusions.
In Cincinnati Nature Ctr. Assn. v. Bd. of Tax Appeals (1976), 48 Ohio St.2d 122, 2 O.O.3d 275, 357 N.E.2d 381, this court set out a three-prong test to determine whether property is exempt from taxation under R.C. 5709.121(B). In order for the property to be exempt, it must “(1) be under the direction or control of a charitable institution or state or political subdivision, (2) be otherwise made available ‘for use in furtherance of or incidental to’ the institution’s ‘charitable * * * or public purposes,’ and (3) not be made available with a view to profit.” Id. at 125, 2 O.O.3d at 277, 357 N.E.2d at 383.
In State Teachers Retirement Bd., the court, construing R.C. 5709.121(B), stated that “a new parking lot owned by the State Teachers Retirement Board restricted to exclusive use by its employees is not ‘in furtherance of or incidental to its * * * public purposes.’ ” (Emphasis sic.) 68 Ohio St.2d at 198, 22 O.O.3d at 436, 429 N.E.2d at 1071. The court reasoned, “There is no nexus between a parking lot owned by the retirement board and used exclusively for its employees *326and the public purpose served by the board.” 68 Ohio St.2d at 198, 22 O.O.3d at 436, 429 N.E.2d at 1072.
I disagree with this interpretation of R.C. 5709.121(B). I would find that exclusive use of a charitable institution’s parking facility by its employees does not necessarily preclude a finding that such use is in furtherance of or incidental to the institution’s charitable purpose.2'
A better-reasoned analysis is made in Am. Chem. Soc. v. Kinney (1982), 69 Ohio St.2d 167, 23 O.O.3d 197, 431 N.E.2d 1007. In Am. Chem. Soc., decided after State Teachers Retirement Bd., the American Chemical Society (“ACS”) sought a tax exemption pursuant to R.C. 5709.121(B) for landscaped property which surrounded ACS’s office budding. In support of its contention, ACS submitted a study undertaken to determine the effect of the “campus-like” setting on its employees. The study concluded that the beautification promoted the recruitment, retention, and productivity of the staff. Applying the test set out in Cincinnati Nature Ctr., the court in Am. Chem. Soc. held:
“When landscaped and beautified property surrounding a charitable institution is shown to be instrumental in the recruitment, retention and productivity of the institution’s employees, and such employees play an integral role in the continued success of the institution, the property is exempt from taxation and falls within the purview of R.C. 5709.121.” 69 Ohio St.2d 167, 23 O.O.3d 197, 431 N.E.2d 1007, paragraph two of the syllabus.
The court reasoned,
“Since the landscaped property surrounding Chemical Abstracts’ facilities has been shown to be instrumental in attracting and retaining [trained personnel] this land is clearly held ‘ “in furtherance of or incidental to” the institution’s “charitable * * * purposes.’”” Id. at 172, 23 O.O.3d at 200, 431 N.E.2d at 1010.
Thus, in contrast to State Teachers Retirement Bd., this court in Am. Chem. Soc. determined that property used for the purpose of retaining and aiding its employees was used in furtherance of or was incidental to ACS’s charitable purposes. The decision in State Teachers is an aberration, and should be overruled. As the BTA has recognized, “ ‘[p]arking is essential and integral to such institutions’ charitable missions, for without a means to park vehicles at *327their business locations, said businesses could not operate/” Missionary Church, Ohio Dist., Inc. v. Limbach (Mar. 19, 1993), BTA No. 90-A-504.
Therefore, in the case at bar, I would apply the three-prong test from Cincinnati. I would also hold, consistent with the rationale of Am. Chem. Soc., that the exclusion of the public from a charitable institution’s property does not necessarily preclude a finding that the property is used in furtherance of or is incidental to a charitable purpose pursuant to R.C. 5709.121(B).
Property is used in furtherance of a charitable purpose where it is shown that the use is integral to the institution’s charitable function. Am. Chem. Soc. at paragraph two of the syllabus; Bowers v. Akron City Hosp. (1968), 16 Ohio St.2d 94, 96, 45 O.O.2d 445, 447, 243 N.E.2d 95, 97. Evidence that a parking facility provides a safe and convenient place to park is sufficient to prove that a parking lot is integral to the institution’s charitable purpose. Id.
In the case at bar, University Circle Incorporated is a nonprofit corporation established by CWRU. Under the direction of CWRU, University Circle Incorporated operated the parking garage attached to the University West Building. University Circle determined parking rates “based on the budgeted costs and income on a break-even basis.” Thus, the garage is under the direction of CWRU, a charitable and or educational institution, and the garage is not run for profit. Thus, the first two prongs of the Cincinnati Nature Ctr. test are met.
The garage provides parking primarily for occupants of the University West Building. Most of the approximately one hundred and seventy permits issued for the parking garage in 1992 were for EDI, EBTC, or CWRU employees. As determined above and in the majority opinion, EDI and EBTC engage in charitable acts and, presumably, CWRU employees serve an educational purpose.
The garage is needed for these employees because the University West Building sits on the periphery of the campus, so there is little other available parking in the area. Additionally, the area is run-down and subject to urban blight, so the employees feel safer parking in the enclosed garage which directly accesses the University West Building. Finally, although there are public transportation stops nearby, most occupants of the University West Building do not use„public transportation because it is inconvenient.
Thus, there is sufficient evidence to indicate that the CWRU parking garage is used in furtherance of or incidental to EDI’s, EBTC’s, and CWRU’s charitable/educational charitable purposes because it is integral to the parking needs for EDI, EBTC, and CWRU employees.
Therefore, I would find that there is sufficient evidence to satisfy the three-prong Cincinnati Nature Ctr. test. Accordingly, I would reverse the BTA’s *328denial of a tax exemption for the parking garage property as being unlawful and unreasonable;
Cook, J., concurs in the foregoing opinion.

. EDI defined start-up companies as those less than two years old, or companies that have recently undergone a management change, or high technology companies up to ten years old that have not yet brought products to market. Typically, start-up companies have an eighty percent failure rate within five years of then- inception. Technology-based start-up companies are even more frail than other start-up companies. But with the assistance of incubator programs, these figures are reversed, with eighty percent of the start-up companies still in business after five years.

. State Teachers Retirement Bd. addresses whether a parking lot is used in furtherance of or is incidental to a public purpose, while this case involves a determination as to whether the garage property is used in furtherance of or is incidental to a charitable purpose. But for purposes of analysis there should be no distinction between a charitable purpose and a public purpose in the context of whether exclusive use of the property by employees of the owner precludes a finding that the property is used in the furtherance of or is incidental to a charitable or public purpose pursuant to R.C. 5709.121(B).