Ohio Supreme Court: Taxing stay-at-home workers during pandemic was constitutional

Larry Limpf

News Editor
A state law allowing municipalities to temporarily collect income tax from persons working from home but who lived outside of municipal limits during the COVID-19 pandemic was constitutional, the Ohio Supreme Court ruled last week.
The court, by a 5-2 decision, ruled the state had a legitimate interest in ensuring municipal revenues were stable during the pandemic while employees were directed to work from home.
The case decided last week involved a man, Josh Schaad, who lived and was working from his home in Blue Ash, Ohio but was still being taxed by the City of Cincinnati. Schaad argued allowing Cincinnati to tax his income while he worked at home violated the U.S. Constitution.
The supreme court ruled that the due process clause of the U.S. Constitution has been understood to limit the power of states and cities to tax out-of-state persons.
The court also ruled the state law did not violate the home rule provision of the Ohio Constitution, which allows cities to enact their own tax laws.
In 2020, Ohio declared a state of emergency due to COVID and the Ohio Department of Health directed workers to stay home during the pandemic. The health department order allowed only those working in “essential” jobs to go to their places of employment.
Shortly after the order was issued, the state legislature enacted House Bill 197, which included a provision requiring that each day an employee spent working from home or an off-site location would “be deemed to be a day performing personal services at the employees’ principal place of work.”
In the Schaad case, Chief Justice Sharon Kennedy dissented and wrote that even if the tax law purported to require municipalities to impose an extra-territorial tax on non-residents, the home rule amendment denies municipalities the power to tax those who do not live or work inside the city limits and prohibits the state legislature from compelling municipalities to impose such taxes.
Justice Patrick Fischer also dissented, noting the U.S. Supreme Court has never ruled on a case regarding whether the federal constitution’s due process protections apply when a municipal tax is extended outside the municipality’s boundaries.
A similar case to Schaad originated in Lucas County involving residents of the Village of Walbridge and City of Maumee.
Joel Curcio and Summer Curcio, of Maumee, and Chris Ackerman, Walbridge, worked from their homes starting in March 2020 due to the stay-at-home order but the cities of Oregon and Toledo continued to tax them under HB 197.
They challenged being taxed but their case was dismissed in Lucas County Common Pleas Court in December 2021. The Ohio Sixth District Court of Appeals upheld the dismissal in December 2022.
In both cases and a few others, the plaintiffs were represented by the Buckeye Institute.
Robert Alt, president and CEO of the institute, said he was disappointed by the ruling in the Schaad case.
“Local taxing authorities should be able to tax only within their own jurisdictions – where people live and actually perform the work. There will be other opportunities for the Ohio Supreme Court to recognize those limitations,” he said.


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