On Thursday, the Ohio Supreme Court ruled that evidence of a commercial real estate transaction depends on the intent of the parties and the building transferred, not the structure of the sale.
The court invalidated the "drop LLC" sale of 4121 Palmer Park Circle East, which would have deprived public coffers of about $273,000 a year in tax money, based on a lower valuation of the property.
Eye on Ohio featured the case in its August 2019 investigation of the commercial property tax loophole in Ohio, which costs the median Franklin County commercial business property owner an average of at least $4,893 per year.
A property owner with a $100,000 property in Columbus' tax district 10, where Palmer House is located, pays at least $1,800 extra.
In December 2014, Palmer Square sold an apartment building to PPG Manhattan Real Estate Partners LLC.
The 264-unit complex in New Albany, Ohio, was originally valued at $16 million in 2015.
But the Columbus City School Board, which would get most of the lost tax money, argued before the Franklin County Board of Revision that the apartments were worth more.
The Board of Tax Appeals later took the contracted sale price of $35.25 million and took out the value of personal property in the building, such as furniture, to arrive at a property value of $34,458,000.
Before the Supreme Court Palmer House argued, among other things, that an appraiser's value of $25 million should be the value of the building. The Court did not agree.
"On the record before us, the real estate at issue generates rent income, which is integral to the value of the real estate. No other income is derived from the use of the property that would relate to any business value other than the value of the real estate itself," Justice Michael Donnelly wrote for the majority.
In December, Reps. Mike Skindell (D-13) and Doug Green (R-66) co-sponsored HB449, which would address the current commercial tax loophole. On January 28, the bill was referred the House Ways and Means committee.