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Ohio Telework Tax Sourcing Law Hit With 4th Legal Challenge

By Abraham Gross · March 11, 2021, 7:59 PM EST

Three Ohio residents lodged a constitutional challenge Thursday against a state law allowing municipalities to tax employees working remotely during the novel coronavirus pandemic, the fourth such challenge to the law in the last year.

Residents Joel and Summer Curcio and Chris Ackerman asked the Lucas County Court of Common Pleas to declare unconstitutional a law that temporarily deems remote work performed during the pandemic to occur at an employee's principal place of business. They also asked the court to order the cities of Oregon and Toledo to issue refunds for any taxes withheld while the employees were working in other municipalities.

The complaint argues that "allowing a municipality to tax employees without some fiscal relation between the municipality and the work performed violates the due process rights of those employees under the Fifth and Fourteenth Amendments to the U.S. Constitution." They added that a local income tax sourcing shift is impermissible under the Ohio Constitution.

The residents are represented by the Buckeye Institute, a free-market research group that filed similar challenges in February against Cincinnati and Columbus and another last year on behalf of three of its employees against Columbus. The Columbus cases have since been consolidated in the Franklin County Court of Common Pleas, where the parties await a ruling on the city's motion to dismiss.

Columbus has argued in that case that the law was enacted to simplify the income tax rules during the spread of COVID-19, the respiratory illness caused by the novel coronavirus, and that courts have held that states have broad sovereignty to institute tax policy within their borders as they see fit. The law's income tax sourcing provision will be in effect until 30 days after Ohio lifts the state of emergency it issued amid the pandemic.

The new complaint argues that with local income tax sourced to Oregon and Toledo, where the employers are located, the cities where the employees are working remotely, Springfield Township and Walbridge, are deprived of tax revenue under the temporary law.

Jay Carson, an attorney from the Buckeye Institute representing the challengers, said in a statement that as with the other cases, the residents had worked from home for almost a year and have not received city services.

"There is simply no constitutional basis for a city to tax workers because they 'used to work in the city,'" Carson said.

Since the income tax rates for Springfield Township and Walbridge are lower than the rates imposed by both Oregon and Toledo, the law subjected the residents to higher rates and "thereby financially penalizing them with higher taxes charged by municipalities in which they neither lived nor worked," according to the brief.

Carson told Law360 that he expects the Buckeye Institute to file additional cases challenging the law and that it was likely the challenges would ultimately be resolved through legislation or through appellate court rulings.

"What we're looking for is one, geographic diversity and two, cases to present on slightly different issues," Carson said. "We fully expect that whatever the results are in any one of these cases, we expect an appeal."

The office of Oregon Mayor Michael Seferian did not immediately respond to requests for comment.

The office of Toledo Mayor Wade Kapszukiewicz could not immediately be reached for comment.

Joel Curcio, Summer Curcio and Ackerman are represented by Jay R. Carson and Robert Alt of the Buckeye Institute.

Counsel information for the cities was not immediately available.

The case is Joel Curcio et al. v. Kathleen Hufford et al., in the Lucas County Court of Common Pleas. The case number was not immediately available.

--Additional reporting by Paul Williams and Daniel Tay. Editing by Neil Cohen.

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