The Ohio Supreme Court stated on Tuesday that it will hear Schaad v. Alder, one of five municipal income tax cases brought to court by The Buckeye Institute, to challenge Ohio’s emergency-based system employed during the COVID-19 outbreak. The cases revolve around the first year of the epidemic when municipalities rejected otherwise qualified remote employees’ municipal tax refunds.

 

The debate boils down to the location of where the services were rendered and who the tax responsibility lies with. According to the Buckeye Institute, “For more than 70 years, the Ohio Supreme Court has recognized that the Constitution prohibits local governments from taxing the income of individuals who neither live nor perform work in the taxing city – and, yes, the constitution applies even during a global pandemic,” said Robert Alt, president and chief executive officer of The Buckeye Institute and one of Mr. Schaad’s lawyers. “The Ohio Supreme Court now has the chance to fix an Orwellian system in which the state forced people to work from home under penalty of criminal penalties, but then arbitrarily deemed that same job was conducted when it wasn’t—often in higher-taxed office settings.”

 

Looking back to a similar case from 2015. The Ohio Supreme Court case, Hillenmeyer v. Cleveland, stated that local taxation of nonresident compensation “must be based on the taxpayer’s location when the services were rendered.”

 

Even before the pandemic, Josh Schaad of Blue Ash, Ohio, worked offsite for his job several days a week and had regularly requested and received appropriate refunds for labor accomplished outside Cincinnati. However, after the Ohio General Assembly passed House Bill 197 which deemed all labor conducted remotely because of a health emergency was determined to have been completed at the employee’s primary place of work for income tax withholding reasons. Due to this change, Mr. Schaad’s municipal income tax bill increased even though he was spending less time in his main office than he had the years before.

 

In 2021, OSCPA campaigned to achieve an amendment in H.B. 110 that would allow qualifying remote workers to receive municipal tax refunds for Tax Year 2021. In the same bill, the Ohio Legislature delegated responsibility for 2020 refunds to the Ohio Supreme Court. The goal for the Buckeye Institutes to have the Ohio Supreme Court acknowledge the distinction between employers’ withholding and employees’ tax responsibility.

 

The Court has not scheduled a hearing date for this case. However, it will most likely be in late 2022 or early 2023. The case was taken up by Justices Kennedy, DeWine, Fischer, and Donnelly. Justices O’Connor, Stewart, and Brunner were the only ones to vote no.

 

Whalen CPAs has been on top of this matter since the start of the pandemic. If your work location was impacted during, and possibly after the pandemic, it is likely your Whalen professional has spoken to you about your municipal tax filing options. We are staying current on the Schaad case. Rest assured, should a favorable ruling mean a tax refund opportunity for you, Whalen will be ready to assist.

• Category: Business, Other News & Info, Tax