OFFICE OF REAL ESTATE DATE: October 25, 2017 TO: FROM: RE: Users of the Real Estate Manual Wayne Pace, Manager Acquisition Unit Changes and Updates to the Real Estate Manual The only current and accurate source of ODOT s Real Estate Manual is on the Office of Real Estate s website. This site is located at: http://www.dot.state.oh.us/real. Desired information can be accessed by scrolling down the left column and selecting Manuals and Booklets. Specific information can be selected by clicking on the desired section. The Real Estate Manual is a living document as procedures will evolve and change. Individuals or firms providing various services to the Office of Real Estate (e.g. negotiations, titles, appraisal, appraisal review, relocation, relocation review, closing, property management, railroad coordination and utility relocation) must perform these services in compliance with current published policies and procedures. Individuals utilizing a hard copy version of the manual, without accessing the website for updates, risk providing non-compliant services to the Office of Real Estate. Therefore, all users must be aware of the changes as various sections of the manual are updated. ODOT will provide notice of manual changes on the Design Reference Resource Center (DRRC) web page. Users of the manual can access this page and subscribe to be made aware of manual changes via e-mail notification. Then, when changes to the manual occur, ODOT will provide direct notice to the subscriber. This page can be accessed at http://www.dot.state.oh.us/drrc. Scroll down to Real Estate Policies and Procedures Manual and select the desired section for updates, or enter your e-mail address to subscribe for changes. It is the user s responsibility to maintain their most current e-mail address on the DRRC notification system. The DRRC web site is updated four times a year. The Office of Real Estate may also provide additional guidance to its procedures by Inter-Office Communications (IOC s). These communications will be made a part of the Real Estate Manual. If Individuals having questions pertaining specifically to this Section, contact me at (614) 995-3541.
TABLE OF CONTENTS 5600 REAL ESTATE TAXES... 1 5601 REFERENCES... 1 5602 COLLECTING and NOT COLLECTING TAXES... 1 5602.01 Counties where the Auditor does not require collection of taxes... 1 5602.02 Counties where the Auditor requires taxes to be collected... 2 5603 COLLECTING REAL ESTATE TAXES... 2 5603.01 General... 2 5603.02 Process of Collecting Real Estate Taxes... 3 5604 EXEMPTING ODOT from PAYING REAL ESTATE TAXES... 4 5604.01 General... 4 5604.02 The Tax Exemption Process... 4 5604.03 Tax Exemption for Appropriated Properties... 6 5604.04 Tax Exemptions and LPA Projects... 6 5605 TAXES and EASEMENT-ACQUIRED PROPERTIES... 7 5605.01 Comparing Tax Process for Fee and Easement Acquisitions... 7 5606 TAXES for LANDS in PROPERTY MANAGEMENT... 8 5607 TAXES and CAUV PROPERTY... 9 Date 07/07/2017 56-i
5600 REAL ESTATE TAXES The only source of approved ODOT Real Estate Tax forms referenced in this Manual is from the ODOT Office of Real Estate web page which is: (http://www.dot.state.oh.us/divisions/prodmgt/realestate/pages/default.aspx). 5601 REFERENCES 1. R.C. 319.20 Pertaining to apportionment of taxes 2. R.C. 319.201 Pertaining to filing evidence of title; Requirement of Auditor to reduce tax value on portion of property occupied by highway 3. R.C. 5713.04 Partial taking to be split and listed as exempt 4. R.C. 5713.08 Exemption on property acquired by the State in fee simple 5. R.C. 5713.081 Application for exemption must be filed within 3 years of acquisition 6. R.C. 5713.34 Recoupment of tax savings on land devoted to agricultural use 7. R.C. 5713.30 Definitions of land devoted exclusively to agricultural use 8. Ohio Constitution, Article XII, Section 5A Prohibits ODOT from using funds derived from gasoline tax revenues to pay real estate taxes or assessments 5602 COLLECTING and NOT COLLECTING TAXES Some County Auditors do not require the collection of real estate taxes for property acquired for highway projects. Districts should survey counties in their jurisdictions to determine which Auditors require collection of real estate taxes and which do not. 5602.01 Counties where the Auditor does not require collection of taxes The district need not collect taxes from the owner of the acquisition parcel if the County Auditor does not require payment of taxes for highway acquisition parcels. The District should determine if the Auditor requires other documentation to reduce the tax burden to the underlying fee-owner when ODOT acquires easement interests from the fee owner. The procedures in the following sections of the Manual need not be followed when taxes are not collected. Date 07/07/2017 56-1
5602.02 Counties where the Auditor requires taxes to be collected Some Auditors require real estate taxes to be collected from owners of real property acquired for highway projects. The property rights acquired by WD, WL, SH and LA instruments are the most common acquisitions requiring the collections of taxes. The procedures in this Manual are to be followed when a County Auditor requires real estate taxes to be collected from an owner. 5603 COLLECTING REAL ESTATE TAXES 5603.01 General The fee owner is liable for taxes and assessments until the date of closing. Prior to closing, district offices are to determine real estate taxes and assessments owed on the property acquired for the project. This may vary per county with some requiring tax payments for only feeacquired property rights such as WD and WL. Categories of taxes and assessments that the owner may be liable to pay at closing are: 1. Delinquent: Taxes, assessments, penalties and interest that are delinquent. 2. Taxes In Collection: Current taxes which are a lien and have been determined and are (or will be) in the process of collection. 3. Assessments: Current and all future installments of assessments that have been assessed, levied, and are in the process of collection. 4. Prorated Taxes: Taxes for that portion of the calendar year, prorated to the date of acquisition of title or possession by the State, whichever is earlier, provided all private use has terminated. Real estate taxes are assessed on the County Auditor s General Tax List and Treasurer s General Duplicate of Real and Public Utility Property for the current year. Although taxes on real property for any calendar year become a lien on the first day of January of that year, such taxes are not actually determined until after the November general elections, (or later if a special election is necessary) and are retroactive to the first day of January. Once taxes have been determined, the law provides that taxes may be paid in full on or before December 31, or payment shall be one-half of the current taxes together with the full amount of any delinquent taxes before such date and the remaining half on or before the twentieth day of June. After a closing when WD and WL property rights are conveyed to ODOT, ODOT becomes the fee owner and is liable to pay real estate taxes. The Ohio Constitution does not allow ODOT to use gas tax revenue to pay real estate taxes. To avoid this issue: 56-2 Date 07/072017
Districts are to collect taxes and assessments owed against the property from the fee owner at the closing, and Districts are to exempt ODOT from the payment of real estate taxes for WD and WL acquisitions. 5603.02 Process of Collecting Real Estate Taxes When the district office and the fee owner agree to settle, the process to collect real estate taxes begins. 1. To determine taxes and assessments owed, the district prepares the RE 57 form by completing all of page 1 and sends the form to the County Auditor s Office. The form provides information to the Auditor so it can document taxes owed on the property to be acquired. The Auditor may also require maps, plats, drawings or sketches. For total takes, the district must clearly state on page 1 that the acquisition is a total take and there is no residue. For partial takes, the area taken must be stated. A sufficiently detailed description of buildings taken is required. 2. The Auditor determines taxes, tax rate, and assessments against the property acquired for the highway project and then completes page 2 of the RE 57. The Auditor s Office returns the form to the district. 3. The County Auditors use a common Tax Table to prorate taxes to a date of closing (when real property is transferred to ODOT). This Tax Table is available on ODOT s Office of Real Estate web site. By using this Tax Table, taxes can be prorated by the Auditor or a district s closing agent. If the date of closing changes, taxes can be re-prorated by using this table. 4. The district s closing agent and the fee owner agree to a date of closing. Taxes are prorated to this date. The closing agent notifies the fee owner of the taxes owed and any assessments owed. The owner generally has the following options: The owner writes a check payable to the County Treasurer for the amount due and presents it to the closing agent during closing, or The owner pays the County Treasurer the amount due prior to closing and receives a receipt marked Paid and shows the receipt at closing as proof that the amount due has been paid. If the owner has no funds to pay his or her share of real estate taxes, then prior to closing, the district is to contact ODOT s Division of Finance- Project Accounting for further guidance. Date 07/07/2017 56-3
5604 EXEMPTING ODOT from PAYING REAL ESTATE TAXES 5604.01 General Per Section 5713.08(D) of the R.C., ODOT has legal authority to exempt fee-acquired real estate from (ad valorem) taxation. Before fee-acquired property can be exempted from taxation, taxes must be paid and private use of the property must have stopped. If the district enters into a rental agreement on fee-acquired property, it must monitor the rental period and ensure that taxes are exempted when the rental period has expired. Section 5713.081(A) of the R.C. allows a district three years from date of transfer to ODOT to exempt fee-acquired property from taxation. If the property is not exempted, a district will continue to be taxed on the acquired property. As a district cannot use gas tax revenues to pay delinquent taxes, it has two options: 1. Legislation may be passed by the Ohio General Assembly permitting exemption of tax delinquent parcels. This option only occurs on an infrequent basis. 2. The district may request the County Auditor pay the delinquency from inheritance tax revenue. ODOT may use revenues derived from inheritance taxes to pay delinquent taxes and assessments per the Syllabus of the Attorney General Opinion No. 69-121 which states: Pursuant to Section 5713.081, ORC, inheritance tax revenues are a proper source of monies for the payment of delinquent taxes owed by the state to the County, as contemplated in Section 5713.081, ORC. A request to the Auditor must list each parcel with more than three years delinquency and seeks to have the Auditor deduct from each distribution of inheritance tax revenues the amount necessary to pay the tax delinquency and credit the State pursuant to Section 5713.081 of the Ohio Revised Code and Opinion No. 69-121. Once the County Auditor has allocated these inheritance tax monies for the payment of the delinquent taxes, the exemption process may start. To avoid these problems, it is recommended a district initiate the tax exemption process at every closing of a WD or WL instrument. 5604.02 The Tax Exemption Process The exemption process occurs by a district office notifying the County Auditor that it has acquired the fee ownership rights in real property and that it requires the Auditor to exempt ODOT from paying real estate taxes on this property. This is done by notifying the County Auditor using the RE 30-A form. This notification occurs after closing. 56-4 Date 07/072017
This notification process only occurs for parcels acquired in the name of the State of Ohio for the use and benefit of the Ohio Department of Transportation. This notification process is not used for V-designated parcels (when ODOT acquires in the name of an LPA) and for LPA projects. See section 5604.04 of these procedures when dealing with LPA projects or V parcels. The district s agent completes the RE 30-A Application for Exemption form and delivers the original and two copies of this form to the County Auditor. This process is to occur at the same time that an instrument conveying a WD or WL parcel is recorded. See the Office of Real Estate webpage for an example of a completed form RE 30-A. The County Auditor completes its portion of the RE 30-A, keeps a copy for its records, and then sends the remaining copy to the County Treasurer s Office. The County Treasurer s Office fills out its portion of the RE 30-A. 1. To comply with the Records Keeping provisions of 23 CFR 710.201(f) and the 5800 section of the Real Estate Manual, the ODOT agent shall obtain a copy of the RE 30-A that has been stamped by the Auditor and retain that copy in the parcel file thereby documenting the initiation of the RE 30-A process. The County Auditor will review the RE 30-A form and determine if the property acquired by ODOT will be exempted from real estate taxation. The County Auditor will reject the RE 30-A if it is not filled out completely and correctly. The RE 30-A must include the date private use of the subject property stopped. A common problem on the RE 30-A is: Common Problem: When the agent prepares form RE 30-A, the form will allow one parcel interest to be typed in the parcel field. If you have another property interest in the same parcel series, another RE 30-A will need to be used. For example, ODOT acquires parcel 1WD and 1WL. The agent will need to prepare two separate RE 30-A s to exempt both property interests on the parcel series. If the RE 30-A is rejected by the County Auditor, it will send a Denial Letter to the district office. Upon receipt of the Denial Letter, the district must review, research, and analyze the parcel file to determine why the tax exemption was denied. Once the reason for denial is determined and the condition corrected, a revised RE 30-A for the parcel is resubmitted to the County Auditor. Whether the parcel is accepted or rejected, the County Auditor will keep one copy of the RE 30- A for its records and send a copy to the district office. Date 07/07/2017 56-5
When a parcel is approved for tax exemption, the County Auditor issues a Determination Letter to the district office stating the property is now exempt from real estate taxes. The original Determination Letter is filed in the parcel acquisition file. 5604.03 Tax Exemption for Appropriated Properties When ODOT appropriates a WD/WL parcel, it may have the right to take possession, but ownership has not been transferred to ODOT. Therefore, a district office must monitor WD and WL parcels that are appropriated because real estate taxes cannot be exempted until the case has been resolved and a judgment entry has been created by the court. 1. Case Settlements The Attorney General s Office [ AGO ] creates a judgment entry for approval by all parties and the judge. Once the judgment entry is filed in the court, a certified copy of it must be recorded; it is at this time that ownership of the take area is transferred to ODOT. After the certified copy of the judgment entry has been recorded, the district office can start the tax exemption process. In some cases, the County Treasurer requires the taxes to be paid before the parcel can be exempted. 2. Trial Verdicts At the end of a trial, a verdict is rendered. The judgment entry on verdict will be prepared and approved by all parties and the court. Once a certified copy of the judgment entry on verdict is recorded, the ownership will transfer to the State of Ohio. After the certified copy of the judgment entry on verdict has been recorded, the district office can start the tax exemption process. In some cases, the County Treasurer requires the taxes to be paid before the parcel can be exempted. Exempting appropriated fee parcels from real estate taxation requires coordination between the Assistant Attorney General [ AAG ] assigned to the appropriation case and the district office to ensure the judgment entry on settlement or verdict is recorded. It is at this time that ownership of the take area is transferred to the name of the State of Ohio for the use and benefit of ODOT. Once the judgment is recorded, the tax exemption process can start. 5604.04 Tax Exemptions and LPA Projects ODOT involvement with an LPA can occur with V-designated parcels when the district office acquires in the name of the LPA. ODOT does not file the Application for Exemption (the RE 30-A) for any LPA. The tax exemption process for an LPA is different than the process mandated for ODOT. For example, an LPA is responsible to pay real estate taxes to the end of the calendar year, but ODOT is required to collect taxes from the owner to the date of closing and transfer of title to the State of Ohio. 56-6 Date 07/072017
On LPA projects, after closing, the district office should send a letter to the LPA explaining that it is the LPA s responsibility to file for exemption from taxation. When sending that letter, the district is to include the original recorded deed documenting the acquisition of the property and copies of all closing documents. The LPA agent sends the recorded deed to the County Auditor. To exempt itself from taxation, the LPA will use the Application for Real Property Tax Exemption and Remission (form DTE 23). This is a four page document provided by the Ohio Department of Taxation. 5605 TAXES and EASEMENT-ACQUIRED PROPERTIES For easement-acquired property rights, (i.e. SH, LA, CH), the original owner retains the underlying fee ownership of the property that is subject to the ODOT-held easement. The owner may be required to pay real estate taxes on property that is encumbered by ODOT s easement. A district office is required to notify the County Auditor when it has acquired an easement interest in an owner s property by use of the RE 31 form Lands Acquired by Easement for Highway Purpose. The form identifies the type of easement acquired, and the County Auditor will then calculate any reduction of real estate taxes. The provision in the Ohio Revised Code requiring this action is Section 5713.04 which states: The county auditor shall deduct from the value of each separate parcel of real property the amount of land occupied and used by a canal or used as a public highway at the time of such assessment. 5605.01 Comparing Tax Process for Fee and Easement Acquisitions Fee Acquisitions Easement Acquisitions 1. RE 57 sent to County Auditor. No RE 57 sent 2. Auditor fills out RE 57 which informs ODOT about how much money to collect for taxes owed. 3. At closing, ODOT collects from the owner the amount of taxes owed on the property based on the information on the RE 57. 4. ODOT closes and disburses funds and transfers title and becomes liable for future taxes. No RE 57 sent No RE 57 sent; no money collected from owner. ODOT closes and disburses funds. Seller retains fee ownership position and land is encumbered by an ODOT easement. Seller is still responsible for taxes. Date 07/07/2017 56-7
Fee Acquisitions 5. ODOT agent must collect the taxes and pay the County Treasurer the taxes owed on the property that was acquired, or receive a receipt from property owner that taxes are paid. 6. ODOT must exempt the acquired property from taxation. The form used for this process is the RE 30-A. 7. RE 30-A is presented to the County Auditor who processes the form. Easement Acquisitions ODOT pays no tax as fee owner retains an underlying fee ownership position in the acquired property. ODOT must inform the Auditor that it has encumbered the owner s property with an easement use RE- 31. The Auditor will determine how much taxes are reduced. RE-31 is presented to the Auditor s Office after closing. The agent is to have the Auditor s Office date stamp a copy of the RE-31 and the stamped copy is to be retained in the acquisition file. 5606 TAXES for LANDS in PROPERTY MANAGEMENT The Property Management Manual (7000 series of the Real Estate Manual) is also to be referenced when dealing with leases of ODOT-owned property. When private use continues after acquisition and begins and ends in the year of acquisition, the taxes for the short period that the property was privately used must be computed and prorated to the date rent terminated. This amount is paid by the district to the Auditor. Once the taxes are paid or provision is made for their payment, the RE 30-A process may start. When private use extends beyond the year of acquisition, the property is not placed on the RE 30-A. The district office is to contact the County Auditor or Treasurer requesting a bill for the balance due for that year. For each successive year a parcel is subject to property management, it will be taxed and billed the same as privately owned property. The property shall be added to the RE 30-A in the year that private use/property management ceases. Then all taxes due on the property will be prorated to the date rent and private use terminates and is paid by the district office. If the property is not exempted from taxation, there is no time period when real estate taxes do not accrue to the property. If the district office acquires vacant property and it is subsequently rented, ODOT is liable for taxation until private use has terminated. The income collected from the property is used to pay the real property taxes avoiding any possibility of ODOT using fuel tax revenues for a purpose prohibited by the Ohio Constitution. 56-8 Date 07/072017
When the private use of any parcel subject to property management has terminated, that parcel should be listed on the RE 30-A. 5607 TAXES and CAUV PROPERTY In Ohio when property is devoted exclusively to agricultural use, even if its highest and best use is a more intensive use than agricultural, the property may qualify to be valued and assessed on an agricultural basis for real property tax purposes. This is known as Current Agricultural Use Value (CAUV) which is a reduction of property tax assessment on property that qualifies as agricultural land. If only a portion of a tract of land is used for agricultural purposes, only that portion used for agricultural purposes is eligible for CAUV valuation. ODOT is obligated to pay a recoupment penalty when an ODOT highway project acquires real property, taking that property out of its CAUV classification. If the taking results in the residue no longer qualifying as agricultural use land, ODOT shall also pay the recoupment penalty for the residue being taken out of the CAUV program. The charge shall be determined by the County Auditor who determines if land devoted exclusively to agricultural use is converted to a non-agricultural use. The recoupment charge is the tax savings on the converted land during the three tax years immediately preceding the year in which the conversion occurs. This charge is the difference in taxes of the land as agricultural from the taxes on what the value on the land would be in the open market for the entire CAUV area over the preceding 3 years. Often, this charge is not determined until well after the closing. Date 07/07/2017 56-9