Posts By Date

By: Peggy Kirk Hall, Wednesday, July 15th, 2015

Grain bins are “business fixtures” that are personal property not subject to real property tax, according to a decision issued today by the Ohio Supreme Court. 

The court case arose when the Metamora Elevator Company challenged the Fulton County auditor’s inclusion of grain storage bins in the company’s real property valuation.  Metamora filed complaints with the county Board of Revision, arguing that the grain bins are business fixtures that should not be included in the company’s real property assessment.   The Board of Revision disagreed with Metamora and the company appealed to the Board of Tax Appeals (BTA). 

The Fulton County BTA ruled in favor of the company, determining that grains bins are personal property and should not be taxed as real property.  The BTA reduced Metamora’s real property value by nearly $1.1 million, the value of the grain bins.  Fulton County requested a review of the BTA decision by the Ohio Supreme Court, which agreed to hear the case.   The issue before the Court was whether the grain bins are “fixtures” or “improvements” that are subject to real property tax or whether they are not subject to real property tax because they are “business fixtures” that qualify as personal property. 

Ohio Supreme Court’s reasoning

In its decision authored by Justice O’Donnell, the Supreme Court explained that the legislature amended the Ohio Revised Code in 1992 to clarify the historically “elusive” distinction between real and personal property in Ohio.  The court stated that the changes expressed a clear intent to identify fixtures as real property while defining business fixtures as personal property,  according to two of th revised sections of Ohio law:

  • ORC 5701.02(A), which states that “real property” includes “land itself * * * and, unless otherwise specified in this section or section 5701.03 of the Revised Code, all buildings, structures, improvements, and fixtures of whatever kind on the land.”
  • ORC 5701.03(B), which defines “business fixture” as “an item of tangible personal property that has become permanently attached or affixed to the land or to a building, structure, or improvement, and that primarily benefits the business conducted by the occupant on the premises and not the realty.  Business fixture includes, but is not limited to, machinery, equipment, signs, storage bins and tanks, whether above or below ground, and broadcasting, transportation, transmission, and distribution systems, whether above or below ground.

“Our analysis need go no further than to apply the expressed intent of the General Assembly to the undisputed facts of this case,” said the Court, and concluded that the legislature clearly intended for the term “business fixture” to include storage bins, and therefore to define storage bins as personal property not subject to real property tax.   

The Court rejected the two arguments advanced by the county, that property classification cases depend upon what constitutes an “improvement” under the Ohio Constitution and that it would be unconstitutional for the legislature to classify constitutional “improvements” such as fixtures or structures as personal property simply because the fixtures might be used in business.  Because the grain bins related more to the personal business than to the land, based on the definition of “business fixture” in ORC 5701.03, the Court saw no conflict between the personal property classification and the Ohio Constitution.

Implications for agriculture

Fulton County may not be the only county that classifies grain bins as real property for tax purposes.  Landowners who own grain bins should review their property tax records and determine whether the real property value includes the value of grain bins located on the parcel.  If the property tax does incorporate grain bin values, consult with the county auditor to discuss the situation.  Ohio law allows a county auditor to correct "clerical errors" made in the collection of real property taxes, although there is a question of whether inclusion of grain bins in the real property value constitutes a clerical error.  Ohio law also provides remedies for taxpayers who have overpaid taxes; landowners should consult with a tax attorney for guidance on these remedies.  Note that filing a complaint with the Board of Revision is not an option, as March 30 was the deadline for filing complaints for the current tax year.

The case of Metamora Elevator Co. v. Fulton Cty. Bd. of Revision, Slip Opinion No. 2015-Ohio-2807 is available on the Ohio Supreme Court’s website, here.

 

By: Peggy Kirk Hall, Monday, July 06th, 2015

Ohio's newest legislation addressing water quality concerns became effective on July 3, 2015.  The new law, enacted by the Ohio legislature earlier this year as Senate Bill 1, affects Ohio agriculture with the following provisions:

1.  Fertilizer application restrictions in the western basin.  In the western basin of Lake Erie, a person may not apply fertilizer (defined as nitrogen or phosphorous) under these conditions:

  1. On snow-covered or frozen soil
  2. When the top two inches of soil are saturated from precipitation
  3. In a granular form when the local weather forecast for the application area contains greater than a 50% chance of precipitation exceeding one inch in a twelve-hour period

Exceptions—the above restrictions do not apply if the fertilizer is:

  1. Injected into the ground
  2. Incorporated within 24 hours of surface application
  3. Applied onto a growing crop

2.  Manure application restrictions in the western basin.  In the western basin of Lake Erie, a person may not surface apply manure (defined as animal excreta) under these conditions:

  1. On snow-covered or frozen soil
  2. When the top two inches of soil are saturated from precipitation
  3. When the local weather forecast for the application area contains greater than a 50% chance of precipitation exceeding 1/2 inch in a 24 hour period

Exceptions—the above restrictions do not apply if the manure is:

  1. Injected into the ground
  2. Incorporated within 24 hours of surface application
  3. Applied onto a growing crop
  4. Or if, in the event of an emergency, the chief of the division of soil and water resources provides written consent and the application is in accordance with NRCS practice standard code 590.

3.  Exemptions for small and medium operations.  Small and medium agricultural operations in the western basin, defined by number of species using the same criteria as Ohio Department of Agriculture's (ODA's) livesock environmental permitting program, may apply to the chief of the division of soil and water resources for a temporary exemption from the restrictions on manure applications. 

  1. A medium agricultural operation may be exempt for one year, up to July 3, 2016.
  2. A small operation may be exempt for two years, up to July 3, 2017.
  3. An exempt operation will not be subject to civil penalties for violations if working toward compliance and may request technical assistance to reach compliance standards.

4.  Certification requirements for any persons using manure from CAFFs anywhere in Ohio.  On 50 acres or more used in agricultural production anywhere in Ohio, no person may apply manure from a concentrated animal feeding facility regulated under a permit from ODA's Division of Livestock Environmental Permitting unless:

  1. The person has obtain Certified Livestock Manager (CLM) certification by ODA.
  2. The person has been certified by ODA through Ohio's fertilizer applicator certification program.

Complying with the new law

To ensure compliance with Senate Bill 1's fertilizer and manure restrictions that are now effective in Ohio, producers should consider these questions before making an application of manure or fertilizer:

1.  Will the application of fertilizer or manure occur in the western basin of Lake Erie?  If so, the new restrictions may apply to the application.  A map that outlines the 11 watersheds and all or parts of 25 counties that comprise the western basin is available here.

  • Does the application involve a restricted nutrient?  The new restrictions apply to any application that involves nitrogen, phosphorous or any type of animal manure.
  • Will the restricted nutrient be injected into the ground, incorporated within 24 hours, applied onto a growing crop or made with permission of the chief of soil and water resources due to an emergency involving manure applications?  If so, the application is permissible as an exception to the restrictions.
  • If one of the above exceptions does not apply to the application, do weather conditions prohibit the application?  
    • Is the ground frozen, snow covered or saturated two inches deep or more?  If so, the application is prohibited. 
    • Is there a greater than 50% chance that precipitation will exceed one inch in the next 12 hours for the area where the application will occur?  If so, an application of granular fertilizer is prohibited.
    • Is there a greater than 50% chance that precipitation will exceed one-half inch in the next 24 hours for the area where the application will occur?  If so, an application of manure is prohibited.
    • Refer to OSU Extension's C.O.R.N. newsletter for guidance on how to obtain important precipitation information prior to an application.

2.  Is a temporary exemption from the manure restrictions available?  If manure applications will be made by a "small" or "medium" animal feeding facility in the western basin, the facility may request the temporary exemption from the restrictions.  Refer to ODA's explanation of what qualifies as a small or medium animal feeding facility on its website, here.

3.  Is the manure or fertilizer obtained from a confined animal feeding facility regulated by ODA's Division of Livestock Environmental Permitting and to be applied on more than 50 acres of land in agricultural production anywhere in Ohio?  If so, the person applying the manure or fertilizer must be certified by ODA as a Certified Livestock Manager or agricultural fertilizer applicator.  A tool to search for concentrated animal feeding facilities operating under permit is available on ODA's website, here, as is information about CLM certification and the agricultural fertilizer certification program.

Non-compliance risk

ODA has authority to investigate potential violations of the new fertilizer application restrictions and the Division of Soil and Water Resources has similar authority over potential violations of manure application restrictions.  The agencies may investigate upon receiving a complaint from any person or receiving any information that suggests a potential violation.  If a violation has occurred or is occurring, the law grants the agencies rulemaking authority to establish penalty amounts for violations, which may not exceed $10,000 per separate violation.  To date, the agencies have not yet initiated proposed rules for the penalty amounts.  The agencies may not assess penalties until after providing an alleged violator opportunity for a hearing.

Due to the risk of non-compliance with the new law, producers should review insurance policies and determine whether insurance coverage exists or is available for a mishap under the new law.