COLUMBUS -- Owners of rural woodlands asked the Ohio Supreme Court Tuesday to allow a challenge of land values set by the state tax commissioner and used by county auditors to determine annual property tax bills.
More than 40 property owners signed on as plaintiffs in the case say they've been improperly thwarted in their efforts to push for changes in how valuations are determined for wooded sites enrolled in the state's current agricultural use value (CAUV) program.
"The outcome of these appeals will determine whether or not an agricultural landowner with CAUV land will ever had the opportunity to challenge the appraisals of that person's land based on the soil values that have been set by the tax commissioner," said Jack Van Kley, legal counsel for landowners in the case.
" It seems that every time some landowner tries to contest the CAUV value the tax commissioners or the Board of Tax Appeals contends that person has been filing [the] cases in the wrong forum."
Legal counsel for the state tax commissioner countered, however, that the landowners should pursue their legal challenges through the courts system rather than through the Board of Tax Appeals, where the cases were originally filed and dismissed.
"We really shouldn't be here," said attorney Daniel Fausey.
The two attorneys appeared before the Ohio Supreme Court for oral arguments Tuesday. Justices have taken the case under advisement, with no firm deadline for a ruling.
The state's CAUV program was established by voters, via a constitutional amendment, in the early 1970s as a way to ensure farmland remained in agricultural production.
Through the program, farmland is taxed at its current agricultural use value rather than its actual market value. The resulting tax bills are lower, enabling farmers to continue producing crops or livestock or using the sties for other agricultural purposes rather than developing them for residential, commercial or other uses.
The basic formula takes into consideration a variety of factors, including crop yields and prices, production costs and interest and equity rates.
For years, the formula worked as intended, with a statewide CAUV per acre in 2008 of $475, versus a market value average of more than $2,700, according to the Ohio Department of Taxation.
But there's a larger CAUV debate under way at the state level after rates skyrocketed in more recent years, thanks to a combination of low interest rates and high crop prices. The latter have since dropped, but farmers' tax property bills are still double, triple or more.
Separate legislation aimed at addressing the issue has moved through both the Ohio House and Senate this year. Both aim at tweaking the formula to make it more reflective of the current farm economy.
The case before the Ohio Supreme Court Tuesday focused on woodlands covered by the CAUV program -- treed parcels that are contiguous to other enrolled farmland.
The program includes adjustments to account for the costs of clearing woodland to prepare it for farm uses. But plaintiffs in the case say the tax commissioner set the clearing deduction too low -- at $1,000 per acre set in 2015 versus the $3,000 or more per acre it actually costs for such activities.
The landowners earlier asked the state's Board of Tax Appeals to set more appropriate land-clearing costs.
"The tax commissioner's failure to assign fair and accurate land clearing costs to woodlands has resulted in an unfair tax burden on their owners," they argued in court filings, citing the appraised value of a 30-acre wooded site near Dayton that rose to more than $121,000 in 2014 from $3,030 in '06. The resulting tax bill jumped to $3,140 from $62, according to documents.
But legal counsel for the tax commissioner countered that the landowners' challenge was misdirected, calling it the "wrong action in the wrong forum."
Under state law, the Board of Tax Appeals has authority to review rules but not administrative journal entires and the accompanying CAUV land tables. As such, the Board of Tax Appeals sided with the tax commissioner and dismissed the case.
Much of Tuesday's oral arguments focused on the proper forum for challenges to CAUV land tables.
Plaintiffs say the tables and the process for finalizing them are effectively rules, and challenges are appropriate before the Board of Tax Appeals.
Tax officials say that rules guide the process for adopting the land tables, but the tables themselves are not rules, so challenges should be directed through the courts.
Complicating matters is a separate class action lawsuit brought by a group of Ashtabula County landowners in which tax officials indicated that such challenges should be made to the Board of Tax Appeals -- a position that runs counter to what they proposed in the case before the Ohio Supreme Court.
That prompted questions from justices about which position was correct.
"I'm concerned that you are not being straight forward about what you argued" in the other case, Justice Judith French said, adding, "You've got to be straight forward about what you're arguing. That's my concern."
But Fausey said the tax department has been consistent in its position. Original filings in the Ashtabula case, he said, were not clear, and arguments in the case have since changed.
He said the tax commissioner sets the CAUV land values, while county auditors calculate property tax bills for individual landowners. There's a process in place to challenge those tax bills. If landowners want to challenge the final land value tables, then they need to pursue a court decision, he said.
Kovac covers the Ohio Statehouse for Gatehouse Media. Contact him at firstname.lastname@example.org or on Twitter at OhioCapitalBlog.