Chagrin Realty, Inc. v. Testa

Summary

The Ohio Supreme Court affirmed the Board of Tax Appeals' denial of a charitable-use property-tax exemption for property owned and leased by Chagrin Realty, a nonprofit corporation. The court held that Chagrin Realty's exclusive activity of owning and leasing property did not qualify as charitable use under Ohio law, and that its federal 501(c)(2) status and relationship to charitable entities did not establish eligibility for the exemption.

Holdings

1. An entity whose sole use of property is leasing it does not qualify for the charitable-use exemption under R.C. 5709.12(B), because leasing has not been found to constitute use exclusively for charitable purposes.
2. A property owner must establish its charitable status based on its own core activities and use of the property; it cannot rely on the activities of a lessee, parent, or other related institution to obtain a vicarious charitable exemption.
3. Federal tax-exempt status under section 501(c)(2) does not establish entitlement to Ohio's charitable-use property-tax exemption because Ohio law applies its own standards for charitable use.

Questions Presented

1. Whether a nonprofit corporation that qualifies under Internal Revenue Code section 501(c)(2), owns and leases property to a related nonprofit tenant, and distributes net rental income to a related section 501(c)(3) organization qualifies as a charitable institution or makes charitable use of the property under Ohio Revised Code sections 5709.12(B) and 5709.121(A).
2. Whether the BTA reasonably and lawfully denied Chagrin Realty's charitable-use property-tax exemption based on Chagrin Realty's own activities rather than the activities of its related entities.
3. Whether the BTA had authority to reissue its earlier decision after it had been sent to an incorrect address.

Disposition

affirmed