Court must consider tax paid under current agricultural use valuation in farm land detachment action

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COLUMBUS — When the owner of farm land who has obtained a current agricultural use valuation of his property petitions to detach that land from a municipality under R.C. 709.42, the Supreme Court of Ohio ruled recently a court considering the detachment petition must determine the amount of property taxes the owner “is taxed and will continue to be taxed” based on the CAUV of the land rather than the tax the owner would pay based on the non-agricultural market value of the property.

The Court’s 7-0 decision, which reversed a ruling by the 12th District court of Appeals, was authored by Chief Justice Eric Brown. Under R.C. 709.42, a court may grant a property owner’s petition to detach farm land from a city if the owner shows that the amount of property tax the owner is paying to the municipality “is in substantial excess of the benefits conferred on the landowner” by the municipality.

Case details

This case involves approximately 40 acres of land owned by Helen and Wallace Campbell and located within the city of Carlisle in Warren County. The land is used exclusively for farming. The Campbells file an application with the county auditor every year and receive a reduced CAUV for the property. Based on that valuation, their annual property tax bill is approximately $172.

In 2007, the Campbells filed a petition in the Warren County Court of Common Pleas seeking to detach their property from the city for the stated purpose of protecting its future use as farmland. The city opposed the proposed detachment.

Following a trial at which the Campbells were required to establish several factors set forth in R.C. 709.42, the common pleas court denied the petition for detachment. In its opinion, the trial court found that the Campbells had not met the statutory requirement of showing that the current and future taxes they paid to Carlisle “substantially exceeded” the benefits the property received from the city.

The court based its ruling on a determination that the only tax the Campbells paid to the city each year for the property at issue was the $172 in tax they paid based on its CAUV valuation.

Appeal

The Campbells appealed. On review, the 12th District Court of Appeals reversed the trial court’s holding and remanded the case for further proceedings. The court of appeals held that the trial court erred by considering the reduced tax paid by the Campbells based on a CAUV valuation of their property.

The court observed that if the 40 acres were taxed at its true market value for non-agricultural purposes, the Campbells would owe annual property taxes of approximately $12,538, and directed the trial court to determine if that amount was “in substantial excess” of the municipal benefits received by the Campbells from Carlisle. Carlisle sought and was granted Supreme Court review of the 12th District’s decision.

In today’s decision, Chief Justice Brown wrote: “The sole issue presented to us … is the correct interpretation of the third requirement of R.C. 709.42, i.e., whether by reason of the Campbells’ property ‘being or remaining within the municipal corporation the owner thereof is taxed and will continue to be taxed thereon for municipal purposes in substantial excess of the benefits conferred by reason of such lands being within the municipal corporation.’”

“We find the third requirement established by R.C. 709.42 to be unambiguous … R.C. 709.42 requires a trial court presiding over detachment proceedings to determine the amount ‘the owner … is taxed and will continue to be taxed … for municipal purposes.’

“The record before the court suggested that the Campbells are taxed $172 annually on the 40 acres of land they sought to detach, having benefited from the CAUV for which they applied pursuant to R.C. 5713.31. The plain text of the detachment statute compels the conclusion that it is irrelevant that the Campbells would have been assessed significantly higher taxes had they not applied for, and obtained, the CAUV for their property. The annual amount of property tax the Campbells ‘are taxed’ is $172.”

“In addition, the Campbells will ‘continue to be taxed,’ as that phrase is used in R.C. 709.42, based on the CAUV of their land, assuming that they continue to file their renewal CAUV application each year and continue to use the property exclusively for agricultural purposes … (N)othing in the record suggests that the Campbells intend to forgo applying for a CAUV or change the use of the property.

“To the contrary, Helen Campbell testified that she intends to preserve the land as farmland and retain it as a farm in the future. We conclude that the Campbells not only ‘are taxed’ based on the CAUV of their property but will also ‘continue to be taxed’ based on the CAUV of their property … Based on the unambiguous text of the relevant statutes and the record before it, the trial court did not err in denying the Campbells’ detachment petition.”

Judges

Chief Justice Brown’s opinion was joined by Justices Paul E. Pfeifer, Evelyn Lundberg Stratton, Maureen O’Connor, Judith Ann Lanzinger and Robert R. Cupp. Justice Terrence O’Donnell concurred in judgment only.

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