[Until this opinion appears in the Ohio Official Reports advance sheets, it may be cited as
ShadoArt Prods., Inc. v. Testa, Slip Opinion No. 2016-Ohio-511.]




                                        NOTICE
     This slip opinion is subject to formal revision before it is published in an
     advance sheet of the Ohio Official Reports. Readers are requested to
     promptly notify the Reporter of Decisions, Supreme Court of Ohio, 65
     South Front Street, Columbus, Ohio 43215, of any typographical or other
     formal errors in the opinion, in order that corrections may be made before
     the opinion is published.



                         SLIP OPINION NO. 2016-OHIO-511
SHADOART PRODUCTIONS, INC., ET AL., APPELLANTS, v. TESTA, TAX COMMR.,
                                  ET AL., APPELLEES.

  [Until this opinion appears in the Ohio Official Reports advance sheets, it
        may be cited as ShadoArt Prods., Inc. v. Testa, Slip Opinion No.
                                    2016-Ohio-511.]
Taxation—R.C.       5715.27—R.C.       5709.12     and    5709.121—Real-property-tax
        exemption—Thirty-year lessee can file an application to exempt leased
        property—Property is not exempt when applicant has no charitable purpose
        and property does not belong to a charitable institution.
  (No. 2014-1823—Submitted October 13, 2015—Decided February 16, 2016.)
              APPEAL from the Board of Tax Appeals, No. 2012-2591.
                             _______________________
        Per Curiam.
        {¶ 1} This real-property-tax exemption case turns on the relationship between
R.C. 5715.27, which authorizes the filing of exemption applications and specifies
who has standing to file one, and R.C. 5709.12 and 5709.121, which articulate the
                             SUPREME COURT OF OHIO




substantive requirements for public-use and charitable-use exemptions. In 2008, the
General Assembly amended R.C. 5715.27 to expand the class of entities that may
submit applications for various real-property-tax exemptions. 2008 Sub.H.B. 160.
       {¶ 2} At issue here is 30,000 square feet of commercial space in Columbus.
The property is owned by a for-profit corporation, appellant 503 South Front Street
L.P., and is being leased for a term of 30 years to appellant ShadoArt Productions,
Inc. (“ShadoArt”), a nonprofit organization under 26 U.S.C. 501(c)(3) (“501(c)(3)”).
In 2011, ShadoArt filed an application for exemption under R.C. 5709.12 and
5709.121. The commissioner denied the request, and the Board of Tax Appeals
(“BTA”) affirmed.
       {¶ 3} ShadoArt appeals, arguing that because R.C. 5715.27 authorizes it to
file an application for exemption, it is also entitled to receive an exemption under
R.C. 5709.12 and 5709.121. For the reasons explained below, we reject ShadoArt’s
argument and affirm the BTA’s decision.
                                        FACTS
                      The property, its ownership, and its use
       {¶ 4} The Worly Building is a 51,362-square-foot structure located in the
Brewery District of Columbus. The building is owned by 503 South Front Street,
a corporation that leases the space to several tenants for profit.
       {¶ 5} In November 2010, 503 South Front Street entered an agreement to
lease 29,741 square feet—58 percent—of the Worly Building to ShadoArt, d.b.a.
Shadowbox, for a 30-year term, with a purchase option. ShadoArt is contractually
obligated to pay all real property taxes associated with its space.
       {¶ 6} ShadoArt modified the space to include a theater, a kitchen, a bistro
area where live performances occur and people queue for main-stage shows, and
office space.




                                           2
                                 January Term, 2016




                              Application for exemption
        {¶ 7} On April 1, 2011, ShadoArt filed an application requesting a
charitable-use exemption from Ohio’s real-property tax for tax year 2011. See R.C.
5709.12 and 5709.121. ShadoArt listed 503 South Front Street as a co-applicant.
        {¶ 8} On June 15, 2012, the tax commissioner issued a final determination
denying the exemption because the property was owned by a for-profit entity.
                                  BTA proceedings
        {¶ 9} ShadoArt appealed to the BTA, which held a hearing on March 17,
2014.
        {¶ 10} The commissioner and ShadoArt entered five stipulations:
                  503 South Front Street is a for-profit limited partnership
                   organized under the laws of Ohio.
                  503 South Front Street owns the property at issue in this case.
                  The property at issue is a commercial building leased for profit
                   to various tenants. ShadoArt is the largest tenant, with space
                   customized for its operations and productions. ShadoArt is a
                   nonprofit 501(c)(3) organization.
                  503 South Front Street is the owner and landlord of the property
                   and receives rental income from the property from tenants
                   including ShadoArt. 503 South Front Street has no charitable
                   purpose.
                  The exhibits introduced by ShadoArt are true and accurate
                   copies of authentic documents.
        {¶ 11} ShadoArt presented three witnesses, who were cross-examined by
the tax commissioner. The tax commissioner did not present any witnesses.
        {¶ 12} First, William Conner, the president and chief executive officer of
the Columbus Association for the Performing Arts (“CAPA”), testified that CAPA




                                          3
                            SUPREME COURT OF OHIO




is a nonprofit organization that owns or operates nine central Ohio theaters.
However, Shadowbox operates independently of CAPA. Both organizations are
members of the Columbus Cultural Leadership Consortium, a group of nonprofit
organizations in Central Ohio. According to Conner, CAPA’s building, which
houses the Ohio Theatre, is exempt from property taxation.
       {¶ 13} Next, Stev Guyer, a co-founder and the executive director of
ShadoArt, testified about the company’s mission. Shadowbox strives to provide
original artistic programming for a broad audience and features sketch comedy,
musical performances, theater, dance, and mixed-genre shows.         To this end,
Shadowbox regularly collaborates with other local arts organizations, such as the
Columbus Museum of Art, Opera Columbus, and BalletMet Columbus.
       {¶ 14} Guyer described Shadowbox’s significant growth since its creation
in 1988. According to Guyer, Shadowbox’s downtown location has allowed the
company to more effectively interact with the community and to present a greater
variety of productions.
       {¶ 15} ShadoArt has been recognized as a nonprofit 501(c)(3) organization
since 1991. Guyer explained that it operates on an earned-income basis, rather than
relying primarily on grants for funding.       He estimated that 60 percent of
Shadowbox’s income is generated from ticket sales, 38 percent from food and
beverage sales, and 2 percent from donations. Free tickets are available for most
of Shadowbox’s performances.
       {¶ 16} ShadoArt also presented testimony from Stacie Boord, Shadowbox’s
director of community relations and director of education.       Boord described
Shadowbox’s relationship with the community, including its charitable
contributions and sponsorship of charitable events. She also testified about the
company’s extensive educational programming, including partnerships with local
schools to provide arts education.




                                        4
                                  January Term, 2016




       {¶ 17} Finally, ShadoArt introduced 96 exhibits. These documents include
detailed information about the company’s operations, shows, collaborations,
educational efforts, and charitable endeavors.         They also include financial
information about ShadoArt, proof of its 501(c)(3) status, and copies of its federal
tax returns for 2010, 2011, and 2012.
       {¶ 18} On September 25, 2014, the BTA affirmed the commissioner’s
denial of exemption. BTA No. 2012-2591, 2014 WL 5148348 (Sept. 25, 2014). In
its decision, the BTA explained that ShadoArt did have standing to file an
application for exemption under R.C. 5715.27. Id. at *2, citing Columbus City
School Dist. Bd. of Edn. v. Wilkins, 106 Ohio St.3d 200, 2005-Ohio-4556, 833
N.E.2d 726. However, “the applicable exemption statutes, in this case R.C. 5709.12
and R.C. 5709.121, still control a determination of whether the property itself is
entitled to exemption.” Id. Accordingly, the BTA held that regardless of ShadoArt’s
use of the property, an exemption was not appropriate here: the property “belonged
to” 503 South Front Street, see R.C. 5709.121, and 503 South Front Street’s use—
renting the space—was purely for profit, see R.C. 5709.12. Id. at *3.
                                      ANALYSIS
       {¶ 19} On appeal, ShadoArt asserts two propositions of law:


               Proposition of Law No. 1: The Ohio Revised Code, §
       5715.27, confers standing on ShadoArt, as a long-term lessee, to
       seek a real-property tax exemption.
               Proposition of Law No. 2: The real property leased by
       ShadoArt is property exempt from taxation under R.C. 5709.12.
               The subject property is exempt because it “belongs to”
       ShadoArt, ShadoArt makes “exclusive charitable use” of the
       property under R.C. 5709.121, and ShadoArt is a charitable or
       educational institution.




                                          5
                              SUPREME COURT OF OHIO




                          Burdens and standard of review
       {¶ 20} This court reviews a BTA decision only to determine whether it is
“reasonable and lawful.” R.C. 5717.04; Satullo v. Wilkins, 111 Ohio St.3d 399,
2006-Ohio-5856, 856 N.E.2d 954, ¶ 14. We defer to the BTA’s factual findings,
including determinations of a property’s value, Cuyahoga Cty. Bd. of Revision v.
Fodor, 15 Ohio St.2d 52, 239 N.E.2d 25 (1968), syllabus, as long as they are
supported by reliable and probative evidence in the record, Satullo at ¶ 14. By
contrast, we review the BTA’s legal determinations de novo.                 Crown
Communication, Inc. v. Testa, 136 Ohio St.3d 209, 2013-Ohio-3126, 992 N.E.2d
1135, ¶ 16.
       {¶ 21} In reviewing a BTA decision to grant or deny an exemption, we must
be mindful that tax-exemption statutes are strictly construed under Ohio law. See
Cincinnati Community Kollel v. Testa, 135 Ohio St.3d 219, 2013-Ohio-396, 985
N.E.2d 1236, ¶ 17. Thus, ShadoArt bore “the burden of proof * * * to show that
the property is entitled to exemption.” R.C. 5715.271; see also Anderson/Maltbie
Partnership v. Levin, 127 Ohio St.3d 178, 2010-Ohio-4904, 937 N.E.2d 547, ¶ 16,
quoting Ares, Inc. v. Limbach, 51 Ohio St.3d 102, 104, 554 N.E.2d 1310 (1990)
(“the onus is on the taxpayer to show that the language of the statute ‘clearly
express[es] the exemption’ in relation to the facts of the claim”).
                             The scope of R.C. 5715.27
        R.C. 5715.27 sets forth general exemption-application procedures,
              and since 2008, it has permitted certain long-term lessees
                          to file applications for exemption
       {¶ 22} R.C. 5715.27 “is a general statute applicable to applications for
exemption.” Pump House Ministries v. Levin, 5th Dist. Ashland No. 13-COA-036,
2014-Ohio-1590, ¶ 13. It “sets forth the requirements for filing an application for
exemption,” id., such as who may file an application and when and who may contest




                                          6
                                January Term, 2016




an exemption and how. See Strongsville Bd. of Edn. v. Zaino, 92 Ohio St.3d 488,
489, 751 N.E.2d 996 (2001) (describing the mechanics of former R.C. 5715.27(A)
through (D)).
       {¶ 23} Prior to 2008, R.C. 5715.27 did not specify that a lessee could file
an exemption application. Beginning in 1982, R.C. 5715.27 limited the class of
those who could file applications to the owners of property. See Am.Sub.S.B. No.
262, 139 Ohio Laws, Pt. I, 711, 713. In 2004, we held that “owner,” as used in R.C.
Chapter 5715, “refers only to a legal title holder of the real property for which a
tax exemption is sought.” (Emphasis added.) Performing Arts School of Metro.
Toledo, Inc. v. Wilkins, 104 Ohio St.3d 284, 2004-Ohio-6389, 819 N.E.2d 649,
¶ 13. In Performing Arts School, a community school appealed the commissioner’s
denial of its application for exemption under R.C. 5709.07, the public-schoolhouse
exemption. Id. at ¶ 5, reversing B.T.A. No. 2001-J-977, 2002 Ohio Tax Lexis 2627
(Dec. 20, 2002). This court held that because the school was “a lessee rather than
* * * a titleholder of the subject property,” it could not file an application under
R.C. 5715.27. Id. at ¶ 6, 15.
       {¶ 24} In the wake of the Performing Arts School decision, the General
Assembly amended R.C. 5715.27(A) to allow certain nontitleholders to apply for
an exemption of property. See Pump House at ¶ 16.
       {¶ 25} As amended, R.C. 5715.27(A) states:


                (1) Except as provided in division (A)(2) of this section and
       in section 3735.67 of the Revised Code, the owner, a vendee in
       possession under a purchase agreement or a land contract, the
       beneficiary of a trust, or a lessee for an initial term of not less than
       thirty years of any property may file an application with the tax
       commissioner, on forms prescribed by the commissioner, requesting
       that such property be exempted from taxation and that taxes,




                                          7
                              SUPREME COURT OF OHIO




       interest, and penalties be remitted as provided in division (C) of
       section 5713.08 of the Revised Code.


       {¶ 26} Thus, a 30-year lessee—such as ShadoArt—can file an application
to exempt leased property under R.C. 5715.27(A)(1).
        The 2008 amendment of R.C. 5715.27 did not alter the substantive
        requirements for any specific exemption under R.C. Chapter 5709
       {¶ 27} ShadoArt contends that when the General Assembly amended R.C.
5715.27 to expand the class of entities who can file an exemption application, it
simultaneously expanded the exemptions available under R.C. 5709.12 and
5709.121. ShadoArt reasons that if it has standing to file an application under R.C.
5715.27, then it also must have some underlying legal right to exemption;
otherwise, the 2008 amendment would be meaningless.
       {¶ 28} Contrary to ShadoArt’s claims, the amendment to R.C. 5715.27 did
not alter the scope of the charitable-use exemption set forth in R.C. 5709.12 and
5709.121.    As explained above, the requirements in R.C. 5715.27 apply to
applicants seeking a variety of real-property-tax exemptions. But the General
Assembly’s 2008 amendment of that provision did not alter the underlying
substantive requirements for obtaining any of those exemptions, including the
charitable-use exemption.
       {¶ 29} The General Assembly’s decision to allow long-term lessees to file
exemption applications is reasonable because numerous statutes permit exemptions
for property that has been leased. For example,
           R.C. 5709.08 exempts certain property put to public use, even when
            “leased or otherwise operated by a private party”;
           R.C. 5709.081 exempts certain public recreational facilities used for
            athletic fields, even if they are leased; and




                                           8
                                January Term, 2016




          R.C. 5709.084 exempts certain convention centers and arenas
           “regardless of whether the property is leased to * * * a person other than
           the city.”
       {¶ 30} The charitable-use exemption itself may apply even when the
property is subject to a long-term lease. As explained below, under R.C. 5709.121,
property may be exempt for charitable purposes even if the owner is leasing the
property, provided that both the lessor and the lessee are charitable institutions. See
R.C. 5709.121(A)(1)(b). Thus, in some situations, there is good reason to allow a
lessee to file an application for exemption under R.C. 5709.12 and 5709.121.
       {¶ 31} In short, contrary to ShadoArt’s claims, the General Assembly did
not expressly or implicitly modify the charitable-use exemption when it authorized
additional filers under R.C. 5715.27(A)(1). In light of this conclusion, ShadoArt’s
claim for exemption turns on whether it satisfies the well-established requirements
set forth in R.C. 5709.12 and 5709.121.
                   Application of the charitable-use exemption
       {¶ 32} In its second proposition of law, ShadoArt argues that the subject
property is exempt under R.C. 5709.12 because it belongs to ShadoArt, ShadoArt
is a charitable or educational institution, and ShadoArt makes exclusive charitable
use of the property under R.C. 5709.121.          We will consider separately the
application of R.C. 5709.12 and 5709.121.
     Exemption is not warranted under R.C. 5709.12(B) because the property
             belongs to 503 South Front Street, which uses it for profit
       {¶ 33} R.C. 5709.12(B) states that “[r]eal and tangible personal property
belonging to institutions that is used exclusively for charitable purposes shall be
exempt from taxation.”
       {¶ 34} ShadoArt’s exemption claim turns on whether the leased space
belongs to it. We have long held that “belonging to,” as used in R.C. 5709.12,
means “owned by.” In 1876, the court explained that “[t]he word ‘belonging’ is




                                          9
                              SUPREME COURT OF OHIO




used in the same sense throughout” the clause defining the charitable-use
exemption, “and, as there used, means ownership.” Humphries v. Little Sisters of
the Poor, 29 Ohio St. 201, 207 (1876). Possessing a leasehold interest, even under
a long-term lease, is not ownership. See, e.g., Toledo v. Jenkins, 143 Ohio St. 141,
158-159, 54 N.E.2d 656 (1944); Evans Invest. Co. v. Limbach, 51 Ohio App.3d
104, 106, 554 N.E.2d 941 (10th Dist.1988).
       {¶ 35} Nevertheless, ShadoArt urges us to reconsider the meaning of
“belonging to.” ShadoArt reasons that the phrase “belonging to” is much broader
than “owned by” and suggests that the General Assembly indicated its preference
for this broader interpretation when it amended R.C. 2715.27. But, as explained
above, the 2008 amendment to R.C. 2715.27 changed only who may file an
application for exemption; it did not alter the requirements for qualifying for any
exemption or this court’s interpretation of those requirements.
       {¶ 36} Moreover, there is good reason to reject ShadoArt’s proposed
definition of “belonging to.” If property belongs to a long-term lessee under R.C.
5709.12, then R.C. 5709.121 would be unnecessary. R.C. 5709.121 expands the
definition of “used exclusively for charitable purposes” in R.C. 5709.12 to cover
situations in which ownership and use do not coincide. If an organization is
charitable and leases property to another organization that uses it for charitable
purposes, then the property may be exempt under R.C. 5709.121. The existence of
this provision alone proves that property does not belong to a long-term lessee under
R.C. 5709.12.     Moreover, the principle that exemption provisions are strictly
construed calls for adopting the more, rather than the less, restrictive construction of
“belonging to.”
       {¶ 37} For these reasons, the property belongs to 503 South Front Street,
not ShadoArt. 503 South Front Street’s exemption claim then turns on whether its
use of the property is charitable. See Northeast Ohio Psych. Inst. v. Levin, 121 Ohio
St.3d 292, 2009-Ohio-583, 903 N.E.2d 1188, ¶ 11 (“under the general exemption




                                          10
                                January Term, 2016




for ‘exclusive charitable use’ of property set forth at R.C. 5709.12(B), it is the
owner’s use of the property, not a lessee’s use that determines whether the property
should be exempted” [emphasis sic]).
        {¶ 38} The record here clearly indicates that, as the parties stipulated, 503
South Front Street has no charitable purpose. It is a private, for-profit company
that “is using th[e] property for leasing.” Northeast Ohio Psych. Inst. at ¶ 11; see
also Highland Park Owners, 71 Ohio St.3d at 406-407, 644 N.E.2d 284 (as a
general matter, “a private profit-making venture does not use property exclusively
for charitable purposes”). Thus, the property is not exempt under R.C. 5709.12(B).
          Exemption is not warranted under R.C. 5709.121 because the
                property does not belong to a charitable institution
        {¶ 39} In light of the above holding, the property in question “must qualify
[for an exemption], if at all, under R.C. 5709.121.” Northeast Ohio Psych. Inst. at
¶ 12.
        {¶ 40} R.C. 5709.121(A) states that if property “belong[s] to a charitable
or educational institution,” then it “shall be considered as used exclusively for
charitable or public purposes by such institution” if it meets one of several
requirements. (Emphasis added.)
        {¶ 41} R.C. 5709.121 “does not itself grant any exemption.” First Baptist
Church of Milford, Inc. v. Wilkins, 110 Ohio St.3d 496, 2006-Ohio-4966, 854
N.E.2d 494, ¶ 16. Instead, it “refines” R.C. 5709.12 by broadening the meaning of
the phrase “used exclusively for charitable purposes” in that provision. Id.; see also
Dialysis Clinic, Inc. v. Levin, 127 Ohio St.3d 215, 2010-Ohio-5071, 938 N.E.2d
329, ¶ 24. Historically, the charitable-use exemption was not available when a
property owner “had leased the property to another, even if that lessee was using
the property for charitable purposes.” Dialysis Clinic at ¶ 23. But the General
Assembly enacted R.C. 5709.121 to address that precise situation: It “expand[ed]
the charitable-use exemption to encompass (among other situations) the situation




                                         11
                              SUPREME COURT OF OHIO




in which an entity that qualifies as a ‘charitable institution’ itself leases property to
another charitable institution for charitable purposes.” Northeast Ohio Psych. Inst.,
121 Ohio St.3d 292, 2009-Ohio-583, 903 N.E.2d 1188, at ¶ 12; see also Dialysis
Clinic at ¶ 22 (when the property owner is a “charitable or educational” institution,
R.C. 5709.121 “link[s] certain property uses” to R.C. 5709.12(B)’s exclusive-
charitable use exemption”).
        {¶ 42} R.C. 5709.121 “applies only to property ‘belonging to’ i.e., owned
by, a charitable or educational institution, or the state or a political subdivision.”
(Emphasis sic.) Highland Park Owners, 71 Ohio St.3d at 406, 644 N.E.2d 284; see
also First Baptist Church, 110 Ohio St.3d 496, 2006-Ohio-4966, 854 N.E.2d 494,
at ¶ 15, quoting White Cross Hosp. Assn. v. Bd. of Tax Appeals, 38 Ohio St.2d 199,
203, 311 N.E.2d 862 (1974) (Stern, J., concurring) (the provision “ ‘has no
application to noncharitable institutions seeking tax exemption under R.C.
5709.12’ ”). Thus, “an entity that leases property to another must establish its
charitable status based on the range of its own activities and may not rely upon the
activities of a particular lessee.” (Emphasis sic.) Northeast Ohio Psych. Inst. at
¶ 14.
        {¶ 43} As discussed above, 503 South Front Street owns the subject
property and leases it to ShadoArt for profit. Because 503 South Front Street does
not purport to have any charitable purpose, the property cannot qualify for
exemption under R.C. 5709.121.
                                     CONCLUSION
        {¶ 44} For these reasons, we affirm the BTA’s decision.
                                                                Judgment accordingly.
        O’CONNOR, C.J., and PFEIFER, O’DONNELL, LANZINGER, KENNEDY,
FRENCH, and O’NEILL, JJ., concur.
                                 _________________




                                           12
                              January Term, 2016




       Laura MacGregor Comek; and Crabbe, Brown & James, L.L.P., Larry H.
James, and Andrew G. Douglas, for appellants.
       Michael DeWine, Attorney General, and Daniel W. Fausey and Raina M.
Nahra, Assistant Attorneys General, for appellee Joseph W. Testa.
       Rich & Gillis Law Group, L.L.C., Mark H. Gillis, Kelley A. Gorry, and
Karol Fox, for appellee Columbus City Schools.
                             _________________




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