With new legislation supporting mental health housing, property tax case gets sent back to state

The Ohio Supreme Court vacated the decision of a state tax board that said tax exemptions shouldn’t apply to a permanent supportive housing facility for low-income individuals seeking mental health and addiction services.

The case came to the state’s highest court after the Ohio Board of Tax Appeals reversed a property tax exemption for Hawthorn Grove and Terrace Place in Columbus, two nonprofit facilities that provide housing and services to individuals being treated for mental health issues, and who may suffer homelessness or institutional treatment because of it.

The state Board of Education brought the case to the Board of Tax Appeals after the state’s tax commissioner granted the property tax exemption. The education board argued the facilities were not entitled to exemption from taxation for tax year 2015 through 2018 because the property “is primarily residential in nature, and thus not utilized ‘exclusively for charitable purposes,'” as is required by state law for the exemption.

The Board of Tax Appeals agreed with the Board of Education, saying “the primary use of the subject property is as a private residence for the tenants living there.”

On Monday, the supreme court vacated the previous decisions by the Board of Tax Appeals in the case and placed the case back in the board’s hands for further review.

But, in a recent wrinkle in relevant Ohio law, that review will take place under new legislation set to take effect in August. Senate Bill 57, officially passed in April, specifically authorizes a property tax exemption for “certain housing used by individuals diagnosed with mental illness or substance use disorder.”

The law says the property owner must do one of three things to be tax exempt: use the property to provide housing, lease the property to individuals with mental illness or substance use disorder and “make supportive service available” to such individuals, or lease the property to a charitable institution.

An analysis of the law by the Legislative Service Commission mentioned the Hawthorn Grove/Terrace Place case, including the BTA finding that use of property for private residential use could not be considered charitable.

“Based on this precedent, nonprofit residential properties must generally be specifically exempted in the Revised Code,” the analysis stated.

The housing units have already received exemptions from real property tax for the last three decades, according to attorneys for Hawthorn Grove and Terrace Place.

“The Tax Commissioner’s decisions are also consistent with BTA precedent, which have never been overturned by this court, since this court has never, until now, had to review a real property tax exemption request involving (permanent supportive housing) property,” attorney Hilary Houston told the court.

Groups such as the Coalition on Homelessness and Housing in Ohio, the Corporation for Supportive Housing and the Legal Aid Society of Columbus submitted their arguments to the court. The organizations said the facilities can keep residents from going to mental institutions or even being jailed. The deviation from the last 30 years of property tax exemptions by the Board of Tax Appeals, they said, represents “a stark departure from the historical tax treatment of permanent supportive housing.”

“This departure is even more troubling given the fact that we are in a once in a century pandemic and a continuing opioid crisis, only exacerbated by the pandemic, that is placing tremendous strain on already stretched-thin social service and mental health service providers,” the groups told the court in a January brief.