Charitable Health Systems and Other Owners of Tax-Exempt Property with Operations in Ohio Should Prepare for Upcoming Changes to Real Property Tax Exemption Laws

Starting in 2022, Ohio will require owners of tax-exempt real property to notify the county auditor if the exempt property ceases to qualify for exemption.

This is a substantial departure from current law, which had left the role of monitoring changes in exempt properties’ uses to the county auditors or Ohio’s tax commissioner; under the new law, health care entities that own property in the state must determine whether or not their property continues to qualify for exemption.

Ohio’s recent Budget Bill – House Bill 110 – created the new reporting requirement, which will be codified at section 5713.083 of the Ohio Revised Code.  The change will require those who own real estate that is exempt from property tax to notify the county auditor by December 31 of the year in which the property ceases to qualify for exemption.

Property owners who do not comply with this new requirement will face a monetary penalty equivalent to up to five years of tax savings that they received while the property was treated as exempt, even though it had ceased to qualify for exemption. The five-year look-back will be limited to years in which the current owner held title to the property.

It is still unclear what test property owners are supposed to use to determine whether their properties have ceased to qualify for exemption.  In Ohio, property owners must apply to receive exemption for their property, and the Ohio Tax Commissioner is typically the official who grants exemption to real estate.  Ohio law does not require owners to disclose changes in use, or leases of property, so property owners may struggle to determine whether or not their exempt property’s qualification for exemption has ended. It is also unclear how the county auditors across Ohio are going to review the existing exempt properties in order to enforce the monetary penalties.  The Ohio Tax Commissioner will promulgate forms that property owners can use to attempt to comply with the law, but those forms are not yet available.

While that form remains in the works, prudent property owners may wish to review their inventory of exempt real estate, and to compare their current uses of those properties with the use of the property when they applied for and received exemption.