The Pellucid Perspective - March 2012 - (Page 2)

CINCINNATI UPDATE New twists in Cincinnati muni course taxation situation City changes Casper status designation in attempt to regain tax exemptions By Jim Dunlap T here have been several new developments in the ongoing regulatory and legal arguments involving the city of Cincinnati’s attempts to maintain their exemption from sales/use and property taxes due on the seven municipal courses that are operated by Cincinnati Golf Management, Inc., a subsidiary of Billy Casper Golf. The eventual final rulings will likely be watched carefully by other municipalities and public owners whose courses are operated by a private, for-profit firm, or who may be considering privatizing their golf course operations. At issue are the sales/use tax exemption on materials and equipment purchased by Cincinnati’s municipal courses, which is currently before the Ohio Supreme Court, and the city’s exemption from property taxes on the courses, which is currently before Ohio’s Board of Tax Appeals. In both cases, acting on a tax complaint filed by local golf course owner Paul Macke, the tax board and the courts have ruled to date that the courses do not qualify for the city’s tax exemptions because they are operated by a for-profit company. In a February 23 filing, the Ohio Supreme Court removed the city as an appellant party in the appeal of early rulings that denied the city’s exemption from sales and use taxes on the courses. The court ruled that since the assessments were charged to Golf Management, Inc., which at the time was acting as an independent contractor for the city, the city had no standing in the case, although in fact the city was paying the (higher) sales/use taxes as part of its agreement with the Casper subsidiary. Likely in anticipation of losses in both the sales/use and property tax matters, the city changed the description of Cincinnati Golf Management, Inc. in the new management contract signed several months ago between the Casper subsidiary and the city. Cincinnati Golf Management, Inc. is now designated as an “agent” of the city, rather than an independent contractor as they were designated under the previous contract. An agent of the city is deemed to be acting on the city’s behalf, and thus generally falls under the city’s tax-exempt status. Assuming that the Board of Tax Appeals and the Ohio Supreme Court both find Cincinnati Golf Management was not permitted to operate under the city’s tax-exempt umbrella in its previous role as an independent contractor, it seems almost certain that the city and Casper will then claim that under the new “agent of the city” designation, the golf course properties and Cincinnati Golf Management’s purchases will then be tax-exempt. Or, as Terrance Nestor of the Cincinnati City Solicitor’s Office said, “The city could take that route, or the General Assembly could just change the law.” The Ohio Assembly does have the power to change the laws governing taxation issues, although that would certainly raise the ire of Macke and some of his fellow Ohio golf course owners. “If the Ohio Supreme Court ruling [against the city’s ability to extend its tax-exempt status to a for-profit municipal course operator] did set a precedent, it could certainly be a disincentive for cities to employ private operators,” Nestor said. “With the financial pressure on so many cities and their taxpayers today, it then becomes an issue between taxation and efficiency, and that complicates matters.” According to Macke, one potential drawback to the “agent of the city” designation for Golf Management is that the city may now be liable for personal or property damages at the municipal golf courses, rather than the operator, Golf Managaement. Nestor said, however, that would likely depend on the situation. “I think it (liability) would depend on the case,” Nestor said. “Billy Casper Golf is required to continue to maintain liability insurance, and the nature of the case would determine any liability.” Nestor said that a final Supreme Court ruling on the “agency” issue and other aspects of the case is likely several months away. Regardless of the outcome, the decision should be of interest to n municipalities and private operators alike. “If the Ohio Supreme Court ruling [against the city’s ability to extend its taxexempt status to a for-profit municipal course operator] did set a precedent, it could certainly be a disincentive for cities to employ private operators.” Terrance nesTor, cincinnaTi ciTy soliciTor’s office 2 The Pellucid PersPecTive March 2012

Table of Contents for the Digital Edition of The Pellucid Perspective - March 2012

The Pellucid Perspective - March 2012
Contents
New twists in Cincinnati muni course taxation situation
Study cites “Best Practices” to generate more female play
Chip Brewer chosen to write Chapter V of Callaway Golf
Knowing your customer and making it work
Golf Industry Show, CMAA Expo to share San Diego venue in 2013
February weather impact: The hits just keep coming!
Cleveland, OH
Southworth Development acquires Willowbend CC from Reebok head Fireman
Show me the money

The Pellucid Perspective - March 2012