A county auditor may not appeal a final settlement entered into by the state tax commissioner that determines the value of a natural gas pipeline, the Supreme Court of Ohio ruled today.

In a 4-3 decision, the Supreme Court determined that the state tax commissioner’s settlement with Nexus Gas Transmission that its 256-mile pipeline be valued at $950 million could not be appealed by Lorain County Auditor J. Craig Snodgrass. Snodgrass asked the Ohio Board of Tax Appeals (BTA) to reinstate the pipeline’s 2019 assessed value of more than $1.6 billion made by the tax commissioner before Nexus sought to lower that figure.

Writing for the Court majority, Justice R. Patrick DeWine explained that the Court had to reconcile two different state statutes — one authorizing the tax commissioner to settle tax values, and another permitting county auditors to appeal the final determinations of the tax commissioner. When the two laws are read in context, Justice DeWine wrote a county auditor’s ability to appeal a tax commissioner’s settlement is limited, and the issues raised by Snodgrass could not be appealed to the BTA.

The decision affirmed a BTA ruling to uphold the settlement, which affects 13 Ohio counties through which the pipeline travels. While Snodgrass contested the settlement, the opinion noted auditors of eight other counties and two school districts impacted by the settlement urged the Court to uphold the settlement.

Justices Michael P. Donnelly, Jennifer Brunner, and Joseph T. Deters joined Justice DeWine’s opinion.

In a dissenting opinion, Justice Patrick F. Fischer wrote the two laws are not conflicting but rather allow the state tax commissioner to settle controversies while allowing county auditors to “check” the commissioner’s decision “when it threatens a local government’s tax revenues.” Justice Fischer wrote the case should be remanded to the BTA to hear the county auditor’s challenge.

Chief Justice Sharon L. Kennedy and Justice Melody Stewart joined Justice Fischer’s dissent.

Pipeline Value Disputed
Under Ohio law, the state tax commissioner sets the tax value for all public utility personal property. The Nexus pipeline is an interstate natural gas pipeline that runs through 13 northern Ohio counties. For the 2019 tax year, the tax commissioner determined that the pipeline’s true value was more than $1.6 billion, and by applying state law, the taxable value was about $1.43 billion. Nexus appealed the commissioner’s finding to the BTA and claimed the true value was about $616 million.

Rather than continue the dispute before the board, the commissioner and Nexus reached a settlement that valued the pipeline at $950 million for 2019 and reduced the value further for the 2020 and 2021 tax years. The tax commissioner issued a new final determination that included the values stated in the settlement.

Snodgrass appealed the new determination to the BTA. He argued the tax commissioner made various errors in applying R.C. 5727.11(A), which sets the criteria for determining the value of public utility property. The issues raised by Snodgrass in his appeal to the BTA all relate to how the commissioner applied the valuation statute. The auditor maintained that the settlement was illegal because the valuations reached did not comply with the law.

Nexus asked the BTA to dismiss Snodgrass’s appeal. The company argued that it could not be appealed because the valuation was reached through a settlement with the commissioner. The BTA dismissed the case, concluding that because the valuation issue was resolved by the settlement, there was no live issue to resolve.

Snodgrass appealed the BTA’s decision to the Supreme Court, which agreed to hear the case.

Supreme Court Analyzed Valuation Laws
Justice DeWine explained the Court needed to resolve how the two tax laws interacted. The opinion describes one as the “tax commissioner settlement” law and the other as the “tax appeal” law. Under R.C. 5703.05, the tax commissioner has authority to “compromise and settle a tax claim.”  R.C. 5717.02(A) states a county auditor can “[e]xcept as otherwise provided by law” appeal final determinations of the tax commissioner to the BTA.

The opinion explained that Snodgrass argued a county auditor’s right to appeal is absolute, and it does not matter if the state contracted to settle the dispute.

“Under this view, an objecting county auditor essentially holds a trump card that allows the auditor to undo any settlement entered into by the tax commissioner,” the Court stated.

Adopting the auditor’s view would effectively eliminate the commissioner’s authority by state law to settle tax claims, the opinion noted. However, the Court stated that if the tax appeal law is read in context with the settlement law, the two laws can work in concert.

The commissioner had the authority to settle the valuation with Nexus and make a final determination based on the settlement figures. And Snodgrass had the right to appeal the final determination to the BTA, the opinion explained, but “the scope of that appeal is limited.”

The auditor cannot appeal the agreed value or the legal issues settled by the parties in the settlement, the opinion stated. However, the auditor can challenge whether the parties reached a valid settlement. An auditor may claim the settlement was the result of fraud or duress or if the final determination did not accurately reflect the terms of the settlement, the opinion stated.

The opinion noted the “[e]xcept as otherwise provided by law” clause in the auditor appeal law recognizes that other laws might limit the auditor’s rights to appeal, and one of the limits is the tax commissioner’s right to settle a case.

Snodgrass only challenged the tax commissioner's methods to value the pipeline, and he could not challenge “the essence of the compromise itself because to do so would be inconsistent with the tax commissioner’s authority to settle tax claims,” the Court concluded.

Auditor Had Right to Appeal, Dissent Maintained
R.C. 5717.02(A) gives a county auditor the right to appeal a tax commissioner’s final determination. Justice Fischer maintained the law does not make a distinction between reaching the determination by litigating the case and through a settlement. He noted the BTA relied on the concept that settlements are favored for public policy reasons because they bring finality to matters. However, it is the General Assembly, not the courts, that sets public policy, the dissent noted. The auditor appeal law gave Snodgrass the right to appeal “even when an appeal may disrupt another party's interest in the finality of the agreement,” the dissent stated.

The dissent disputed the majority opinion’s finding the auditor’s appeals rights are limited and stated that had lawmakers intended to limit the rights, they could have stated so in the law. While the majority’s interpretation to favor settlements might make for good policy, the General Assembly also established a good policy by allowing county auditors to check the state tax commissioner’s authority, the dissent stated.

“That check and balance helps ensure that the county is not harmed by a tax commissioner’s poor decision to settle a case,” Justice Fischer wrote.

2023-0354. Snodgrass v. Harris, Slip Opinion No. 2024-Ohio-3130.

View oral argument video of this case.

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