Should grain bins be taxed as real or personal property?

** This story has been updated from the print version in this week’s Farm and Dairy. The Ohio Supreme Court made the ruling after this week’s issue went to press.**

COLUMBUS — The Ohio Supreme Court contemplated whether grain storage bins should be taxed as real or personal property this session.

And the judges came up with a unanimous decision July 15.

The Ohio Supreme Court ruled that grain storage bins are personal property pursuant to state law and may not be taxed as real property.

The court’s unanimous decision affirmed a ruling of the Board of Tax Appeals (BTA), which determined that the actual value of property owned by Metamora Elevator Company in Fulton County was $738,240 instead of the auditor’s assessed value of more than $1.8 million that included the storage bins.

The court observed that historically the distinction between fixtures that were real property and those that were personal property was elusive. But, in 1992, the General Assembly clarified that storage bins are personal property.
Although the case originated in Fulton County, the decision  will mean an impact on tax bills for all Ohio farmers with a grain storage bin.

Background

The Metamora Elevator Company, a grain processing business, owns 18 grain storage bins built between 1977 and 1996 on eight acres in Fulton County.
The county auditor classified the storage bins as an improvement to the land and taxed them as real property.
Metamora contested that classification for tax year 2009, but the Fulton County Board of Revision agreed with the auditor. Metamora asked the state Board of Tax Appeals to review the matter.

In May 2014, the board determined that the bins should be taxed instead as personal property, concluding that they are temporary, rather than permanent, structures and are “business fixtures” under state law.
The Fulton County auditor and board of revision then filed an appeal with the Ohio Supreme Court last May, and the court received written arguments on the case May 20, 2015.

Tax values and rules

According to Metamora Elevator Company’s brief to the court, the storage bins hold, aerate, and process grain to control the grain’s humidity level.
The bins are “modular and mobile” metal structures bolted to concrete platforms.
The auditor appraised Metamora’s overall property at more than $1.8 million, which included the nearly $1.1 million value of the bins. If the bins are removed from the real property assessment and considered personal property, the property value would drop to about $738,000. The elevator is not contesting the appraised value of the bins.

Both Fulton County and the Metamora Elevator Company cite a January 2008 bulletin from the state tax commissioner in their arguments.
The bulletin states that “portable grain storage bins regardless of size” are classified as personal property, while “elevators, storage bins, and storage silos used in agricultural operations” are real property.

Bins are buildings

Attorneys for the Fulton County auditor and board of revision claim in their statements that the storage bins are “buildings” or “structures,” based on definitions in the Ohio Revised Code. This means that as buildings and structures, they should be taxed as real property.
“The grain storage facilities involved in the present appeal are precisely what is referred to in these two statutory definitions: all such grain storage structures are ‘a permanent fabrication or construction, attached or affixed to land’ and each is a structure that ‘increases or enhances utilization or enjoyment of the land,’” attorneys wrote in the court documents.

Permanent

The county contends that the 18 bins are permanent because they were constructed as buildings or structures between 19 and 39 years ago, with 13 built in the 1970s.
Whether the bins can be removed isn’t relevant to whether they are real or personal property for tax purposes, the county argues in court documents.
Attorneys for Fulton County said in their briefs that the tax commissioner’s designation of “portable storage bins” as personal property likely refers to a different type of storage unit — prefabricated bins assembled elsewhere and brought to a site.
The county states in court documents that a building or structure doesn’t have to be “permanently attached” to the land to be real property, although in their view these bins are attached to the property.

Bins aren’t fixtures

The Fulton County auditor’s and tax board’s attorneys argue the storage bins can’t be either a “fixture” or a “business fixture” under the law because the bins, according to the definitions, would first have to be “an item of tangible personal property.” Instead, the bins are “buildings” or “structures,” which are “permanent fabrication[s] or construction[s],” they maintain.
The Fulton County tax authorities contend the mentions of “storage bins” in one of the personal property definitions “does not include independent structures that are only used for the purpose of storing grain and other types of goods.”

Other side

The Metamora Elevator Company counters the Fulton County auditor by claiming the movable bins are temporary containers used to benefit the grain processing business, but that they don’t enhance the use of the property.
Metamora’s attorneys note in the briefs filed with the court that the definition of “structure,” which is real property under Ohio law, includes “storage silos for agricultural products.”

Different items

The elevator’s attorneys point out, however, that storage silos and storage bins are different items. They add that the statutory definition of “business fixture,” a type of personal property under the law, specifically includes “storage bins.”
The distinction between “storage silos” and “storage bins” is based on permanence, they argue.

Decision cited

The elevator’s attorneys cite the Ohio Supreme Court’s decision in Funtime Inc. v. Wilkins (2004), which provided a test for deciding whether an item is real or personal property.
First, it must be determined whether the item is a building, structure, improvement, or fixture according to the Ohio Revised Code section 5701.02, which defines real property.
If not, the item constitutes personal property. However, they maintain, if the item qualifies as real property under the Ohio Revised Code section 5701.02, then the Ohio Revised Code’s definitions of personal property must be reviewed as well to determine whether the item falls under one of the “otherwise specified” exceptions to real property.

Not real property

The elevator concludes in its statements that the grain storage bins are not buildings, structures, improvements, or fixtures under the Ohio Revised Code’s real property definitions, so they can’t be taxed as real property.
This view is further supported by the specific mention of “storage bins” in the definitions of personal property.

*** To find out more details about the Ohio Supreme Court’s decision, check out  this story. The Ohio Supreme Court contemplated whether grain storage bins should be taxed as real or personal property this session.
And the judges came up with a unanimous decision July 15.