Franklin County judge dismisses case that challenged cities’ rights to tax people who
COLUMBUS, Ohio – A Franklin County judge has dismissed a case that had sought to declare illegal the taxing by cities and villages of people who aren’t currently working or living in those places during the pandemic.
The allowance was made as part of a wide-ranging pandemic law approved by the Ohio legislature early last year and signed by Gov. Mike DeWine. During the governor’s emergency order, people working at home as a result of the coronavirus away from their normal work city are still taxed where they were working beforehand.
The Buckeye Institute, which brought the case and others pending like in Cuyahoga, Hamilton and Lucas county courts, essentially argued that it was illegal to tax people where they neither worked or lived. Judge Carl Aveni, however, said in his ruling late Tuesday that the provision was within the legislature’s authority.
The Buckeye Institute on Wednesday filed notice that it would appeal.
Millions of dollars in city taxes are likely involved.
“It’s big deal,” Kent Scarrett, executive director of the Ohio Municipal League. “We always felt that the challenge from the Buckeye Institute was absurd. It looks like the court agrees that it is absurd by the outright dismissal.”
Scarrett said the Municipal League is working with the legislature with hopes of extending the special taxing provision through the end of the year. Otherwise, he said the taxing of those working remotely based on their former work city, rather than their remote location, could end in late August under a law passed earlier this spring to rein in DeWine’s coronavirus powers.
The Buckeye Institute filed cases against the state and the cities of Cleveland, Columbus, Cincinnati, Oregon and Toledo in separate courts. One case was settled earlier in Franklin County – that involving a worker who was a remote employee of the Ohio Department of Health in advance of the pandemic.
The case dismissed Tuesday involved three Buckeye Institute employees normally stationed in Columbus but who were working at home outside the city under state orders. They continued to be taxed by Columbus during this time, the suit said.
Judge Aveni said in his ruling that “the General Assembly enjoys the authority to establish municipal income allocation rules among Ohio taxing authorities in order to efficiently and uniformly coordinate intrastate taxation of Ohio residents.”
He said two previous cases cited in support of the the suit – those involving cases brought against Cleveland by a Chicago Bears football player and and investor from Cleveland – did not apply, noting that neither of those cases addressed “the Ohio General Assembly’s longstanding power to tax Ohio residents wholly within Ohio’s borders.”
Robert Alt, president of the Buckeye Institute, disagreed.
“The Ohio Supreme Court has been perfectly clear in binding decisions stating that cities lack the authority to tax residents who neither work nor live there,” Alt said in a statement on Wednesday. “Further, the Ohio Supreme Court has also recognized that while the Ohio Constitution allows the legislature to limit cities’ taxing power, it does not allow the legislature to expand that power as the General Assembly did in House Bill 197.”
Oral arguments are scheduled for Tuesday in a separate Hamilton County case. And the cases are pending in Lucas and Cuyahoga counties as well. The Cuyahoga case against Cleveland is a little different in that it involves a doctor who has been working from home outside of Ohio, near Philadelphia.
Some cities are concerned that overturning the law could cost them millions of dollars.
How much this means for individuals comes down to the difference between what a worker has been paying in their former workplace city or village versus what their liability would be by working only at home. The biggest savings would be for people who live in townships without local income taxes.
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