Court Opinion

ID: 6793501
Source: CourtListenerOpinion
Date Created: 2022-07-21 01:14:30.181865+00
Date Added: 2024-06-11T16:03:05.324507
License: Public Domain

Lundberg Stratton, J.,
dissenting.
{¶ 25} I believe that the portion of the property leased by the Northeast Psychiatric Institute (“Northeast”) to Portage Path Community Health Center (“Portage Path”) is exempt from taxation under R.C. 5709.12. As a result, I respectfully dissent.
{¶ 26} Property is exempt from taxation under R.C. 5709.12 if it belongs to an institution, charitable or otherwise, and it is used by that institution exclusively for a charitable purpose. True Christianity Evangelism v. Zaino (2001), 91 Ohio St.3d 117, 118, 742 N.E.2d 638. R.C. 5709.121(A)(2) provides that the phrase “used exclusively for charitable purposes” within R.C. 5709.12(B) includes property “belonging to a charitable * * * institution” that “is made available under the direction or control of such institution * * * for use in furtherance of or incidental to its charitable, educational, or public purposes and not with the view to profit.” (Emphasis added.)
{¶ 27} The majority holds that the property in question is not exempt from taxation under R.C. 5709.12(B) as “property belonging to institutions that is used exclusively for charitable purposes” or, under R.C. 5709.121(A), as “property belonging to a charitable or educational institution” that “is made available under the direction or control of such institution * * * for use in furtherance of or incidental to its charitable, educational or public purposes and not with the view to a profit.” In the first instance, the majority holds that Northeast “is using the property for leasing, not for providing mental health care.” In the second instance, the majority holds that Northeast is not a charitable institution, and therefore it cannot rely on the definition in R.C. 5709.121, which applies only to charitable institutions.
{¶ 28} I would hold that the property in question is exempt from taxation under R.C. 5709.12 because it belongs in fact to Portage Path, which is a charitable institution, and it is used by Portage Path exclusively for a charitable purpose.
{¶ 29} R.C. Chapter 340 of the Ohio Revised Code created Alcohol, Drug Addiction, and Mental Health (“ADAMH”) districts in Ohio to provide community-based mental-health care. R.C. 340.02. Each district contains an ADAMH board. Id. ADAMH boards are required to hire service providers to administer mental-health-care services. R.C. 340.03(A)(8)(a).
{¶ 30} In Summit County, the ADAMH board contracted with Portage Path to provide “behavioral health psychiatric services” to persons irrespective of whether they are able to pay for such care. Jerome T. Kraker, president of both Northeast and Portage Path, testified that the board of trustees determined that it would be financially advantageous for Portage Path to own its own treatment *299facility. However, Kraker testified that Portage Path’s contract with ADAMH did not provide Portage Path with authority to purchase property. Thus, Portage Path created Northeast to acquire and hold property, which it leased back to Portage Path. Northeast is nothing more than a mechanism used to acquire property for Portage Path.
{¶ 31} Northeast’s organizational documentation requires a majority of its board of trustees to be members of Portage Path’s board of trustees. In fact, all of Northeast’s trustees are trustees of Portage Path. Portage Path and Northeast also share the same president. Thus, Portage Path controls the actions of the Institute.
{¶ 32} This evidence indicates that Northeast is merely an instrument created and controlled exclusively by Portage Path and used by Portage Path primarily to secure property for its treatment center. This structure is similar to that in First Baptist Church of Milford v. Wilkins, 110 Ohio St.3d 496, 2006-Ohio-4966, 854 N.E.2d 494, in which a church sought a tax exemption for its print shop, which was used by a nonprofit corporation called Bearing Precious Seed-Milford, Inc. (“BPS”) to print Bibles. BPS and the church shared the same trustees, and testimony indicated that BPS was part of the church. Id. at ¶ 28 (Lundberg Stratton, J., dissenting). In my dissent, I concluded that the nonprofit corporation was nothing more than an alter ego of the church, and therefore in determining whether the property was exempt from taxation, we should conclude that the church itself was the user of the print shop. Id.
{¶ 33} Applying that logic in the instant case, I would hold that for purposes of R.C. 5709.12, the property in question in fact belongs to Portage Path, not Northeast. Thus, I believe that the first element required for an exemption under R.C. 5709.12 is satisfied because the property in question effectively belongs to Portage Path, which is a charitable institution, as determined by the BTA below.
{¶ 34} In order to be exempt from taxation, R.C. 5709.12 also requires that the property in question be “used exclusively for charitable purposes.” Pursuant to the “split listing” application for exemption, the only property sought to be exempted was the property used by Portage Path for its treatment center. Portage Path uses the property as a treatment center to provide mental-healthcare services to those who could otherwise not afford such treatment. The BTA below held that these services were charitable in nature as a matter of law.
{¶ 35} Therefore, I would find that the property in question belongs to a charitable institution, Portage Path, and that it is used by Portage Path exclusively for the charitable purpose of providing mental-health treatment for those who could not otherwise afford such treatment. Accordingly, I would hold that this property is exempt from taxation under R.C. 5709.12.
Vorys, Sater, Seymour & Pease, L.L.P., and Mary C. Henkel, for appellant.
Richard Cordray, Attorney General, Sheryl Creed Maxfield, First Assistant Attorney General, and Damion M. Clifford, Assistant Attorney General, foxappellee.
Vorys, Sater, Seymour & Pease, L.L.P., John J. Kulewicz, and Michael J. Hendershot, urging reversal for amicus curiae Ohio Council of Behavioral Healthcare Providex-s.
Brindza, McIntyre & Seed, L.L.P., David H. Seed, and Daniel McIntyre, urging affirmance for amici curiae Ohio School Boards Association, Ohio Association of School Business Officials, and Buckeye Association of School Administrators.
{¶ 36} To hold otherwise would place form over substance and deprive organizations of tax exemptions that are justified by work that is clearly charitable. As Northeast states in its brief, “Corporate structure should not obscure charitable purpose, nor create anomalies in exemptions.” Funding for social services such as mental-health care for the underprivileged is scarce enough and is increasingly being cut during these tough economic times. Permitting the taxation of the property herein further deprives a charitable-care provider of funding to continue treatment, much of which is provided by the state through the ADAMH board in the first place. Peter is being robbed to pay Paul instead.
{¶ 37} Where the BTA has denied a tax exemption that is not consistent with legislative intent, the General Assembly has acted to correct such decisions. For example, in Columbus Bd. of Edn. v. Limbach (June 26, 1992), BTA No. 86-H-566, 1992 WL 153126, *14, the BTA denied a propex“ty-tax exemption to the American Chemical Society, a nonprofit professional association. In 1993, the General Assembly amended R.C. 5709.12 to establish that associations like those in Limbach were “conclusively presumed” to be charitable or educational institutioxxs. See 144 Ohio Laws, Pax-t IV, 6487, 6491. Similarly, if the majority has misconstrued the General Assembly’s intent in denying a tax exemption in the instant case, a legislative fix may be needed here as well. Therefore, I respectfully dissent.