In March 2020, the Ohio Legislature passed House Bill 197, which allowed cities to continue collecting local income taxes from workers even if they worked remotely in a city other than where the employer is located. The purpose of the bill was to stabilize revenues for the municipalities during the pandemic but caused discontent among employees working remotely.
The Buckeye Institute (“the Institute”) is a nonprofit, non-partisan think tank based in Columbus, Ohio, which filed several cases in Ohio cities challenging the bill based on violation of the Ohio and U.S. Constitutions. The Institute believes that the Ohio Supreme Court’s (“the Court’s”) directive—that a city can only tax nonresidents on work that is performed within the taxing cities’ limits—has been misapplied and infringes on the due process rights of workers.
On March 29, 2022, the Court declined to hear a case in Franklin County and let stand the ruling of the Ohio Court of Appeals, which upheld the decision to dismiss the Institute’s challenge to the law.1 Despite many parties filing amicus briefs urging the Court to hear the case, in a 4-3 decision, the Court concluded that it would not hear the case.
Meanwhile, in Cleveland (“the city”) the Institute filed a case on behalf of an employee who formerly worked in the city but began working remotely in March 2020 at her residence in Pennsylvania. In this case,2 the city argued that Morsy’s employer was permitted by the law passed during the pandemic to remit taxes for all employees who “either are working in Cleveland currently or those who were working in Cleveland prior to COVID-19 and who pivoted to remote work as a result of the pandemic.” The city concluded that the lawsuit was moot. The Cuyahoga County Court of Common Pleas (“the Court of Common Pleas”) did not agree with the city and allowed the case to continue. The parties await a ruling by the Court of Common Pleas at this time.
One additional case remains pending in Ohio—Schaad v. Adler3—which was filed in Hamilton County Court. Upon an adverse ruling to the taxpayer, on March 24, 2022, the Institute petitioned the Court for a review of the decision, and it is unknown at this time if the Court will accept the case for review.
Taxpayers and practitioners alike are hopeful the Court will take one of these cases currently decided by the lower courts. Ryan will continue to monitor developments with respect to these issues in Ohio and promptly notify taxpayers what changes, if any, will be made to the existing law.
1 The Buckeye Institute, et al. v. Megan Kilgore, In the Court of Appeals of Ohio Tenth Appellate District, No. 21AP-193 (November 30, 2021).
2 Morsy v. Dumas, (Case No. CV-21-946057).
3 Appeal No. C-210349; 2022 Ohio-340.
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Mark L. Nachbar
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Ryan
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mark.nachbar@ryan.com
Mary Bernard
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Ryan
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The material presented in this communication is intended to provide general information only and should solely be seen as broad guidance and not directed to the particular facts or circumstances of any individual who may read this publication. No liability is accepted for acts or omissions taken in reliance upon the content of this piece. Before taking (or not taking) any action, readers should seek professional advice specific to their situation from Ryan, LLC or other tax professionals. For additional information about this topic, please contact us at info@ryan.com.
- Topics
- Mark L. Nachbar
- Income Tax
- Ohio