Cincinnati off the hook for paying taxes on its golf courses, appeals board rules

CINCINNATI – Cincinnati is exempt from paying property taxes on its golf courses, according to a state tax board ruling that, if it stands, will save the city $450,000 a year and possibly bolster its case against paying millions more on the downtown convention center.

The Ohio Board of Tax Appeals ruling on March 6 reversed an earlier decision by Tax Commissioner Joseph Testa that determined Cincinnati had surrendered its tax-exempt status for the golf courses when it hired contractors to run the courses.

The appeals board instead concluded that the courses are still exempt because Cincinnati maintains significant control over operations through its management contract and because it doesn't lease the property to the operators.

The ruling can be appealed to the Ohio Supreme Court. The tax commissioner's office has 45 days to decide whether to appeal, and it will take time to decide, said chief counsel Matt Chafin.

Paul Macke, a private golf course operator who initiated legal action challenging the city, was leaning toward an appeal pending a discussion on the matter with his attorney.

"I've researched this for five years, and I think that the decision is so flawed and in such error it would totally shock me if the tax commissioner's office did not appeal it," Macke said. "That is my firm belief."

The ruling has broad implications on two fronts:

  • For local governments throughout Ohio, if it stands, the ruling offers assurance that public-private partnerships can be structured in certain ways that preserve tax exempt status
  • For Cincinnati, it offers fuel for its argument that the Duke Convention Center, which is owned by the city but operated privately, is also not subject to property taxes.

As previously reported by WCPO's Dan Monk, filings show the city faces a tax bill of more than $12 million – including $7 million that would go to Cincinnati Public Schools – if the exemption is lost on convention center parcels dating back to 2006.

In 2011, state lawmakers crafted amendment to state law that "exempts from property taxation a convention center and golf courses owned by the largest city in a county having a population greater than 750,000 but less than 850,000." In other words, Hamilton County.

Cincinnati Public Schools is challenging the constitutionality of that amendment in a case that is before the Ohio Supreme Court.

Terrance Nestor, acting city attorney, said the ruling bodes well for the city's defense of its exemption.

"It's a positive ruling for the city, and we're very pleased with the outcome," said Terrance Nestor, action city attorney. "We think the board got this right."

Nestor said the case came down squarely in favor of allowing governments to engage in public-private partnerships that won't remove tax exemption. "We think this case will at least be influential (in the convention center case)," he said.

Daniel Hoying, a CPS attorney, disagreed, drawing a distinction between the cases. The tax appeals board ruled that golf courses were exempt from property taxes because they were used "exclusively for public purposes," he said.

The tax commissioner ruled in 2011 that the convention center was not used exclusively for public purposes, opening up the possibility that the city would be liable for property tax payments if the tax exemption is ruled unconstitutional.

"The BTA decision should have no impact on the Supreme Court's decision as to whether the new exemption violates the Ohio Constitution," Hoying said.

Chafin was more retrospective about the ruling, noting that he's always grateful for clarification on ambiguous areas of tax law whether his office wins or loses a particular ruling.

"It helps us rein in and understand the grayer areas of the law," he said.

At early glance, he noted a possible contradiction between this ruling and a 2012 Ohio Supreme Court ruling that involved one of Cincinnati's golf course operators, Billy Casper Golf.

The company claimed it was exempt from taxes on goods it purchased for the city courses, but the court said Billy Casper was liable as a private contractor to pay sales and use taxes.

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