The Metamora Elevator Company owns eight acres of land in Fulton County that contains grain silos, storage bins, tanks, and buildings used to process and store grain. When Metamora challenged the assessed value of the property for tax purposes, the challenge eventually made its way before us – the Ohio Supreme Court.
In March 2010, Metamora filed separate complaints with the Fulton County Board of Revision (“BOR”) – which handles such challenges for the county – seeking to reduce the property value of two parcels from just over 2 million dollars to roughly 1.5 million. Metamora also sought to remove the storage bins from the real property assessment, claiming that they were business fixtures.
The BOR conducted a hearing, and at that time, Metamora orally amended its complaints to seek a further reduction of the real estate value to $820,740.
At the BOR hearing, Daniel Dembowski – testifying on behalf of Metamora – argued that the storage bins were being improperly taxed as real property because they are business fixtures. He explained that on the company’s books, the bins are classified as equipment items.
In the past, because personal property used in business was generally taxable, the owner made no effort to correct the county’s classification of the bins from real preoperty to personal property; but the phase-out of the general personal property tax made it important to now obtain the proper classification.
Using photographs of the premises, Dembowski distinguished the concrete silo structures from the corrugated metal storage bins. He conceded that the concrete bins are permanent and constitute realty. But, he asserted, the storage bins are modular units of corrugated sheeting bolted down in concrete foundations which can be – and sometimes have been – disassembled and reassembled. In fact, Dembowski noted, Metamora had sold and removed bins in the past.
Nevertheless, the BOR rejected Metamora’s claim, leaving the assessed valuation unchanged. Metamora then appealed to the Board of Tax Appeals (“BTA”), a statewide tax authority.
In reviewing Metamora’s case, the BTA reviewed the legal definitions of “structure” and “fixture” related to real property, both of which refer to the “permanent” character of the item or the permanency of its attachment to the land. It then made a specific finding that “the grain storage bins at issue are not permanent, but temporary structures.”
Based on that finding, the BTA concluded that the grain storage bins did not come within the definition of real property.
The BTA stated in its opinion, “Even if we had found that the storage grain bins were real property…we would have found that they meet the definition of ‘business fixture’…because it is a category specifically enumerated” in the law.
In summarizing, the BTA stated that the testimony, in effect, established that the grain storage bins “were modular, not permanent, they can be removed and sold, and they can be disassembled for repair and subsequently reassembled.”
The BTA therefore reversed the BOR’s decision and removed the storage bins from the assessment. The BTA determined that the true value of the property was $738,240, which it derived from the auditor’s original value minus the auditor’s value of the storage bins, which was about 1.1 million dollars.
When Metamora’s case came before us, the county claimed that a building or structure on the land is a permanent fabrication or construction that is attached or affixed to land and that increases or enhances utilization or enjoyment of the land, and constitutes an improvement on the land as defined by the Ohio Constitution, and must therefore be taxed as real property.
Ultimately, we had to determine whether the storage bins at issue are fixtures or improvements subject to real property tax or whether they are business fixtures and should be classified as personal property and, therefore, not subject to property tax.
In writing the majority opinion for our court, Justice Terrence O’Donnell stated, “Historically, the distinction between fixtures that were real property and fixtures that were personal property was elusive.”
To that point, he cited several cases decided by our court over the years, dating back to 1945, in which various pieces of machinery, structures, and even – in a case from 1966 – a miniature golf course watering system, were to be considered personal property and thus not taxable, or were determined to be realty and therefore subject to property tax.
But then, in 1992, the Ohio legislature amended the definitions of “real property” and “personal property” in a manner that resolved that issue. The 1992 law harmonized the definition of “real property” with the definition of “personal property.”
Now as it stands, the law relating to personal property defines “business fixture” this way: “Business fixture means 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.” Here’s the important part, at least as far as this case is concerned: “Business fixture includes, but is not limited to, machinery, equipment, signs, storage bins and tanks, whether above or below ground…”
It’s quite apparent that the legislature has expressed its intent that a business fixture is an item of tangible personal property that is permanently attached to the land or to a building or structure, and primarily benefits the business conducted on the premises. Furthermore, in establishing that 1992 law, the legislature expressly defined the term “business fixture” to include storage bins, and therefore, storage bins are personal property not subject to real property tax.
As it pertains to Metamora’s case, there was no dispute that the items at issue were storage bins. And because the legislature has expressly stated that the term “business fixture” includes storage bins as personal property, we affirmed – by a seven-to-zero vote – the decision of the Board of Tax Appeals.
Paul E Pfeifer is a judge in the Ohio Supreme Court of Appeals.