325 N.E.2d 893
No. 74-422Supreme Court of Ohio.
Decided April 9, 1975.
Taxation — Realty — Standard gauge railroad track of steel manufacturer — In-plant rail network for transportation of materials — Classification as real property unreasonable.
APPEAL from the Board of Tax Appeals.
Appellant, Armco Steel Corporation, is an integrated steel manufacturer with its main plants in Middletown and Hamilton.
Appellant initiated these proceedings by appealing to the Board of Tax Appeals from a decision of appellee, Butler County Board of Revision, which determined that appellant’s open hearth furnace and standard gauge[*] railroad tracks, which comprise a special network of in-plant tracks upon which materials and steel products are transported in the course of manufacture from one processing facility to another, were “real property” for the purpose of taxation.
The Board of Tax Appeals reversed in part the decision of the Board of Revision, determining that the open hearth furnace was tangible personal property because it “was designed for and devoted exclusively to the production of steel and that it could not economically or practically be converted to any other use.”
However, as to the railroad tracks, the Board of Tax Appeals ruled that: (1) Appellant’s narrow-gauge and
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wide-gauge tracks are properly classified as “personal property” because they “are closely connected with appellant’s steel-making activity and would be of no particular benefit to any subsequent purchaser of appellant’s land for use in any other manufacturing activity,” but (2) appellant’s standard gauge tracks are “considered as improvements to the land and taxable as `real property,'” even though also closely connected with the steel-making activity, because they are “not tools or implements specifically designed for the steel manufacturing business”; they “play no direct part in manufacturing” steel; and they “could be used by any subsequent purchaser of the land for its own business.”
The subject of this appeal is that part of the decision of the Board of Tax Appeals which affirmed the Board of Revision’s characterization of appellant’s standard gauge tracks as real property.
Messrs. Dargusch Day, Mr. Carlton S. Dargusch, Jr., and Mr. Roger F. Day, for appellant.
Mr. John F. Holcomb, prosecuting attorney, and Mr. Russell A. Malrick, for appellees.
Per Curiam.
The question presented is whether standard gauge railroad tracks, used in conjunction with special gauge tracks which, together, comprise an in-plant rail network for the transportation of material from one processing point to another in the course of manufacturing steel, are properly classified as real property for taxation purposes.
R.C. 5701.02 reads:
“As used in Title LVII of the Revised Code, `real property’ and `land’ include land itself, whether laid out in town lots or otherwise, all growing crops, including deciduous and evergreen trees, plants, and shrubs, with all things contained therein, and, unless otherwise specified, all buildings, structures, improvements, and fixtures of
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whatever kind on the land, and all rights and privileges belonging or appertaining thereto.”
The railroad tracks involved are not among the items enumerated in R.C. 5701.02, and appellees do not argue that the tracks are mentioned in any other section of R.C. Title 57, within the meaning of the phrase “unless otherwise specified.” The tracks are neither improvements to the land nor fixtures because, from the record, this court finds that the tracks are devoted primarily to steel making on the premises and not to the use or benefit of the land.
In addition, we find that the test apparently applied by the Board of Tax Appeals — whether the tracks would be of possible benefit to a subsequent purchaser of the realty — in determining that standard gauge tracks are real property and that special gauge tracks are tangible personal property, constitutes an impermissible addition to R.C. 5701.02 of property which is possibly useful or beneficial to those other than the present user. Wheeling Steel Corp. v. Porterfield (1970), 24 Ohio St.2d 24, 27. Where two types of tracks are used in the same manner and for the same purposes, as here, any classification based upon such a test is arbitrary.
Accordingly, that part of the decision of the Board of Tax Appeals which held that the subject tracks are real property for taxation purposes is unreasonable and unlawful, and it is, therefore, reversed.
Decision reversed.
O’NEILL, C.J., HERBERT, CORRIGAN, STERN, CELEBREZZE, W. BROWN and P. BROWN, JJ., concur.
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