Attorneys and governments typically classify everything in the world into three categories. People are people. Real estate and buildings are real property. Everything else is personal property.
Of course, personal property is classified into two sub-categories: tangible (that you can touch) personal property and intangible personal property (such as reputation and goodwill).
Traditionally, Ohio has taxed tangible personal property and allocated almost all of those tax proceeds to local governments and schools. Obviously, the tangible personal property tax most frequently affected businesses because many businesses use expensive machinery and store large inventories of their product. Therefore, tangible personal property tax was seen as an impediment to our state’s growth.
By 2011, Ohio completely ended Ohio’s tangible personal property tax. As a replacement, Ohio created the commercial activity tax, or “CAT tax.” Unlike personal property tax proceeds, CAT tax proceeds were allocated entirety to the state government.
Without tangible personal property tax revenue, local governments and schools became even more dependent upon real estate taxes. Many local governments and schools strongly encouraged and sometimes pressured county auditors to try to classify everything possible as real property instead of personal property.
The personal property sought to be classified as real property has often been “fixtures.” The word “fixtures” often invokes thoughts of light fixtures. Fixtures are generally considered personal property, even though they are attached to real property.
Interestingly though, windows, doors and hot tubs are also personal property attached to real estate. However, these items become real property when they are attached to land or a building.
The question has been whether grain bins are more like doors and windows (taxed as a part of real estate) or light fixtures (not taxed). Grain bins can be disassembled and reassembled. However, grain bins are almost always literally attached to real estate when they are used. Based upon that reasoning, many county auditors (including many in our region) have traditionally treated grain bins as real property, like windows and doors. Then local governments and schools could tax them.
Several years ago, a grain elevator in Fulton County contested the Fulton County Auditor’s classification of grain bins as real property, subject to real estate taxes. The grain elevator appealed to the Fulton County Board of Revision, which ruled in favor of the county auditor.
On a second appeal by the grain elevator, the Ohio Board of Tax Appeals decided that grain bins were personal property.
Last week, the Ohio Supreme Court affirmed the most recent decision. The Supreme Court’s decision provides a final word on the conclusion that grain storage bins are fixtures that are not real property and are therefore not subject to real estate taxes.
This decision will bring a tiny bit of relief to farmers and agribusinesses in Ohio, many of whom are facing their worst year financially in a generation.
Owners of grain bins should review their 2015 real estate tax bills (sent in early 2016) to ensure that the value of the grain bins are no longer included in the tax calculation.
Lee R. Schroeder is an Ohio licensed attorney at Schroeder Law LLC in Putnam County. He limits his practice to business, real estate, estate planning and agriculture issues in northwest Ohio. He can be reached at Lee@LeeSchroeder.com or at 419-523-5523. This article is not intended to serve as legal advice, and specific advice should be sought from the licensed attorney of your choice based upon the specific facts and circumstances that you face.