Bipartisan Group of Representatives Introduce Bill After Eye on Ohio Investigation Into Property Tax Loophole

Ohio lawmakers reached across the aisle to introduce a new bill that would close a property tax loophole on commercial property sales in the state. 

Reps. Mike Skindell (D-13) and Doug Green (R-66) co-sponsored HB449 in late December. The proposed law would not allow businesses to avoid conveyance taxes by spinning off commercial properties into shell companies. 

"We have been seeing a loss of revenue because of companies being placed in these LLCs. So when the property is transferred, it's in the LLC and that [conveyance] fee is avoided. So what you have is a situation where the counties have less revenue on these, then they have to raise it on other people," Skindell said. "So that's one reason. The bigger reason is because when the properties are in the LLC and transferred to another LLC, it's very difficult for the county officials to make the proper evaluation as to that property." 

Thirteen states and the District of Columbia have addressed transfer tax avoidance in recent years, but despite strong support from the County Auditors' Association in Ohio, no Ohio legislator had yet even introduced any legislation on the issue. 

This summer, after a 10 month investigation, the Ohio Center for Investigative Journalism published a story on the property tax loophole, using millions of public record to calculate a conservative estimate of how much extra small business owners pay. 

Entity property sales currently cost the median Franklin County commercial business property owner an average of at least $4,893 per year, up to $65,642 in Hilliard. In Cuyahoga County, the median commercial property owner paid an average of at least $2,928 more, up to $31,736 more in Richmond Heights. In Warren County, neighboring Cincinnati, the median commercial property owner paid an average of $9,490 extra per year, up to $146,732 extra in Harlan Township. 

On October 8, lawmakers met with representatives from the Ohio State Bar Association, the County Auditors' Association in Ohio, and Ohio Realtors, the Ohio real estate trade organization. The goal, Skindell said, was to find bill language that would get the most support, though it's too early to tell if the bill will pass.