H.B. 126: One Year Later
Ohio property tax reform reached a turning point in July 2022 when lawmakers passed House Bill 126, introducing the most significant changes to the state’s property tax complaint process in decades. The legislation dramatically altered how property owners and school districts challenge property valuations,
creating new restrictions and eliminating long-standing appeal rights. For property owners seeking to challenge their assessments, understanding the new Ohio property tax reform is critical. A year after implementation, the law has generated widespread confusion, mounting litigation, and unresolved constitutional questions that continue to impact property tax practitioners across Ohio.
This article originally appeared in the Cleveland Metro Bar Association publication in September 2023.
Background: Ohio Property Tax Reform Under H.B. 126
Last year, the Ohio General Assembly passed Am. Sub. H.B. No. 126. Effective on July 19, 2022, the bill marked a major Ohio property tax reform that drastically changed the statutory provisions that govern challenges to Ohio’s property tax valuation process, which has gone mostly unchanged for years. As a result, practitioners in this area have been grappling with these changes and the resulting impact on their practice.
Under Ohio law, county auditors establish a value for each parcel in the county. Pursuant to R.C. 5715.19, property owners have the right to file complaints challenging the value established for their property. Those complaints are heard and determined by the county board of revision (“BOR”). Because Ohio’s public school districts receive their funding predominantly from property taxes, Ohio is one of the few states that permits school districts to participate in this complaint process. Specifically, pursuant to R.C. 5715.19(B), a board of education may file a counter-complaint to an owner’s complaint seeking a change of $17,500 or more in the taxable value of property in the school district. Additionally, a school district may file an original complaint seeking to increase the value of property in the district. As a result, property valuation complaints are typically disputes between a school district seeking higher taxes and a property owner desiring lower taxes.
Key Changes in Ohio Property Tax Reform
However, H.B. 126 brought substantial changes to the complaint procedure. One of the most significant changes pertains to a school district’s ability to seek increases in value. Prior to H.B. 126, a school board’s ability to seek an increase in value was not limited. Beginning with tax year 2022, however, school districts may file a complaint to increase the auditor’s valuation of real property only if the requested increase is based on a sale that occurred prior to the tax lien date for the year for which the complaint is filed. Moreover, the requested increase must be at least $500,000 and 10% higher than the county auditor’s value. Additionally, while R.C. Chapter 5717 permitted both property owners and school boards to appeal unfavorable decisions to the Ohio Board of Tax Appeals (“BTA”), H.B. 126 amended R.C. 5717.01 to provide that school boards may no longer appeal BOR decisions to the BTA, effectively cutting off a school board’s appeal rights. These changes represent the core of Ohio property tax reform under the new law.
Despite the language of H.B. 126, some Ohio boards of education filed original complaints for tax year 2022 that seek increases in value based on sales that took place after the 2022 tax lien date. In some cases, a third-party taxpayer filed an identical complaint seeking an increase in value based on the same sale cited by the school board. Then, the school board filed a counter-complaint, making it a party to the third-party taxpayer’s complaint. Moreover, school boards continue to file appeals with the BTA in the hope that H.B. 126 will ultimately be deemed unconstitutional. Sound like chaos? It is.
Ongoing Legal Challenges to the Reform
As the effective date of H.B. 126 passes its one-year anniversary, litigation regarding the new law continues to amass. Most significant is a declaratory judgment action claiming that the new law is unconstitutional. While the constitutionality issue is under consideration, boards of revision, the BTA and Ohio courts continue to wrestle with how to proceed in the face of other challenges regarding H.B. 126. One issue is whether the new law applies to complaints pending before the July 2022 effective date. Initially, the BTA determined that H.B. 126 applied to all appeals filed after the 2022 effective date, regardless of whether the underlying complaint was pending at that time. However, on appeal the Third District Court of Appeals disagreed, holding that H.B. 126 was not applicable to appeals where the underlying complaint was filed prior to the effective date of the new law. The owner in that case is currently seeking review of the decision by the Ohio Supreme Court. The constitutional challenges to this Ohio property tax reform continue to generate uncertainty.
Another issue that has arisen is whether school boards have another avenue of appeal from BOR decisions. With the BTA appeal route closed by H.B. 126, school boards have been filing appeals with the local courts, seeking review under R.C. 2506.01. Thus far, the common pleas courts of Cuyahoga and Delaware Counties have determined that boards of education do not have standing to appeal BOR decisions under R.C. 2506.01. Other cases have been stayed while courts await a final determination on the constitutionality issue. In the meanwhile, appeals continue to pile up at boards of revision, the courts and the BTA.
The Impact of Ohio Property Tax Reform
In summary, H.B. 126 was promulgated to provide clarity and simplicity to the valuation complaint process. Unfortunately, the opposite result is occurring as litigation, confusion and frustration continue to mount. Hopefully, there will be some light at the end of the tunnel and Ohio courts will soon provide insight and clarification. Stay tuned.
For guidance on navigating these changes, property owners should consult with experienced property tax counsel.
Are you a commercial property owner rather than a tax practitioner? Read the property owner version of this article that explains these changes in plain language.
About the Author
Robert “Kip” Danzinger is a property tax attorney based in Cleveland, Ohio. The attorneys at Sleggs, Danzinger & Gill, Co., LPA have over 100 combined years of real estate tax law experience and have been reducing real property tax assessments throughout Ohio and across the United States as a team since 2005.