Ohio Public Law Update: House Bill 427

    View Author Fall 2004
    Changes to Enterprise Zone and Tax Increment Financing Programs –
    House Bill 427

    House Bill 427, effective June 9, 2004, amends the Enterprise Zone and Tax Increment Financing Programs. Enterprise Zones: The Bill increases the length of the tax exemption available under the Enterprise Zone Program from 10 to 15 years, if school board approval is obtained. It also requires that each Enterprise Zone Agreement contain a clause requiring repayment of taxes abated if during any 3-year period the business fails to create or retain at least 75% of the employee positions estimated in the Agreement.

    Tax Increment Financing: The Bill confirms that delinquent payments in lieu of taxes are secured by the equivalent of a tax lien, authorizes a governmental entity to sign exemption applications, and provides for the priority of other property tax exemptions in the event either the governmental entity or property owner signs the exemption application for tax increment financing. If a governmental entity signs the tax exemption application, the tax increment financing exemption is subordinate to other applicable exemptions, unless the property owner otherwise agrees. For example, if a property has been exempted under a city tax increment financing program and a county purchases the property to build a county building, the county will not be required to make payments in lieu of taxes if the city signed the exemption application. The county, in that instance, would be required to make payments in lieu of taxes if a previous owner signed the exemption application, unless the city otherwise agrees. The Bill provides that to establish the priority of the exemptions, if the exemption application is filed by (or with the consent of) the property owner, the property owner or governmental entity must file a notice with the County Recorder stating that the exemption has priority over other exemptions, even for exemptions approved prior to June 9, 2004.

    The Bill further provides for counties to retain a portion of payments in lieu of taxes (which may be waived by a county) when a municipal corporation or township creates an Incentive District and signs the tax exemption application on behalf of property owners. There is a similar payment provided for townships resulting from a county established Incentive District. The required payment to the county or township is equal to one-half of the county's or township's inside millage on the increase in the value of the property that existed prior to the tax increment financing exemption (not taking into account improvements to the property) determined at each triennial or sexennial update. Notice to property owners and a public hearing is required if a governmental entity establishes an Incentive District and signs the tax exemptions application on behalf of property owners.

    Recent Decisions of Interest

    The United States Court of Appeals for the Sixth Circuit on September 2, 2004 held that Ohio's investment tax credit (R.C. 5733.33) violates the "dormant" Commerce Clause of the U.S. Constitution; it also held that Ohio's personal property tax exemption (R.C. 5709.62 and 5709.631) does not violate that "dormant" Commerce Clause. Cuno v. DaimlerChrysler, Inc., 2004 FED App. 0293P (6th Cir.) (Electronic citation). The State of Ohio has decided to seek a review of the court's decision on Ohio's investment tax credit.

    Court upheld a City's tax on parking revenues and found no violation of equal protection since under "especially deferential" standard of review for tax matters, the competitive and operational differences between the parking lots gave rise to plausible reasons for city council classifying them differently. Park Corp. v. Brook Park, 102 Ohio State 3d 166

    Citizens' petition contesting election approving municipal ordinance income tax increase was properly dismissed because no hearing was held or requested to be held within 30 days of the filing of the petition, and petitioner improperly acquiesced to the hearing being set beyond the deadline. Helms v. Green, 102 Ohio State 3d 295.

    In township's securities action against, inter alia, public sports authority arising out of defendants' alleged default on promissory note to build sports arena, promissory note is determined to be a "security" under R.C. 1701.01(B); furthermore "family resemblance test" does not establish that the note closely resembles notes that are not securities. Perrysburg Twp. v. Rossford, 103 Ohio State 3d 79

    A person may serve simultaneously as a member of the board of education of an exempted village school district and clerk-treasurer of a noncharter village located within the territory of the school district provided that as board member may not participate in certain matters concerning or impacting the village and as clerk-treasurer of village may not prepare or present the village's tax budget to the county budget commission. 2004 Op. Att'y Gen. No. 2004-025.

    The positions of municipal court magistrate and member of a county public defender commission are incompatible. 2004 Op.Att'y Gen. No. 2004-030.

    In Bulletin 2004-004, the State Auditor lessened restrictions on using the Auditor of State's Opinions in governments' official statements (see Bulletin 2000-09) and will not review official statements and will not request to review other documents that include such opinion unless the Auditor has become "associated" with that official statement by performing any of seven listed activities in Bulletin 2004-0004.