(THE CENTER SQUARE) – The Ohio Supreme Court will hear a case challenging the state’s municipal income tax code that allowed cities to levy taxes on workers who did not live or work in those communities during the COVID-19 pandemic.
The court agreed to hear The Buckeye Institute’s case of Schaad v. Adler, one of five the Columbus-based policy group filed relating to municipal income tax collection.
“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 the lawyers representing Schaad. “The Ohio Supreme Court finally has the opportunity to correct this Orwellian system in which the state forced people to work from home under threat of criminal penalties, but then also absurdly deemed that same work to have been performed where it wasn’t – often in higher-taxed office locations.”
Even before the pandemic, Josh Schaad of Blue Ash, Ohio, worked offsite multiple days per week for his employer, and – in years past – received proportional refunds for work performed outside of Cincinnati.
When the Ohio General Assembly passed House Bill 197 in 2020 – which deemed all work performed elsewhere because of the health emergency to have been performed at the employee’s principal place of work for income tax purposes – Schaad’s Cincinnati municipal income tax bill increased even though he spent less time at his primary office location in Cincinnati than he had in the prior year.
The lawsuit is one of five similar cases filed by The Buckeye Institute. Two others are on appeal, one has yet to have a judgment made and the other was settled in favor of the group’s client.
The Ohio General Assembly passed legislation at the beginning of the pandemic that allowed cities to continue to collect taxes from workers even though they worked remotely in another city rather than working in the city where the employer was located. It was an effort to stabilize revenue for municipalities, and, in particular, larger communities, where larger employers are based.
The House passed a bill in June 2021 that required employees to pay income taxes in the city where they work. If work is done at home, then that community benefits, rather than where the traditional workplace is located.
