By: Brian Ravencraft, CPA, CGMA, H&M Partner
Just this past July, the Ohio Supreme Court handed down a ruling that will affect Ohio farmers who own grain storage bins. The ruling explains that because grain storage bins can be moved, unlike silos that are secure fixed structures, they must be considered personal property.
When looking at farming elements such as barns, elevators, grain storage bins and silos, the county auditor distinguishes what is considered permanent and in turn adds value to the tax duplicate and increases the property tax base.
Look at the situation in this perspective – For example, there is no real difference in agribusiness mobile storage bins and equipment/parts storage bins used in manufacturing which are used for suppling parts to the manufacturing line. While grain bins are not as mobile and are a much larger (and have differing asset lives) compared to manufacturing storage bins, it makes sense that the law should be consistent and treat movable type storage bins as personal property.
This new determination that now names the grain storage bins as personal property stems from a legal case out of Fulton County involving an elevator company, and the Ohio Farm Bureau’s request that all grain bins be uniformly classified as personal property. The Bureau’s request came after they weighed in on the case by filing a brief explaining that some of their membership listed their grain bins as taxable structures while others had not.
The company involved in the legal case argued that corrugated steel storage bins are not buildings or permanent structures; therefore, they should not be subjected to the same tax as real property. They referred to the bins as being modular and mobile metal structures that are secured to concrete platforms which hold aerate and process the grain to control humidity.
In the end, the court did decide that the bins should be classified as business fixtures, which is a type of personal property. A business fixture is an item an item of tangible personal property that is permanently attached to the land or to a building, structure or improvement and primarily benefits the business conducted on the premises, according to the court’s decision. The legislature has expressly defined the term to include storage bins. The decision does not include grain silos or elevators, leaving them to be taxed as real property.
Changing the way that the storage bins must be classified will present an opportunity for savings to some farmers. Farmers with movable type grain bins will want to review their real estate assessments to determine how the property has been classified. If the property has been misclassified, contact your county auditor to request a reduction in future real estate taxes. For the typical farmer the reassessment usually is not a huge savings, but over time every bit helps.
For assistance please contact Holbrook & Manter today. We would be happy to access your situation and answer any questions you may have.