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Mo. State Court Asked To Undo St. Louis Teleworker Tax Rules

By Abraham Gross · April 26, 2021, 8:23 PM EDT

A proposed class of Missouri individuals asked a state circuit court to undo St. Louis' rules on non-city resident tax refunds for days worked outside the city, saying they would suffer irreparable harm absent a temporary restraining order.

In two filings submitted Friday, the nonresidents asked the court for a temporary restraining order and preliminary injunction against the city and its revenue collector, Gregory Daly, to undo the limits on nonresident refunds of the city's 1% earnings tax that the residents argue are unlawful and unconstitutional.

Mark Boles, Nicholas Oar, Kos Semonski and Christian Edward Stein III said Daly's guidance and additional documentation requirements for refund requests effectively limited tax refunds to nonresidents traveling for work and excluded individuals teleworking outside the city, violating the state and U.S. Constitutions.

The individuals asked the court to order that the city remove new document requirements for refund requests, arguing that the unconstitutional treatment would irreparably harm them and did not serve any public interest.

"Without change, there will be confusion within the public, more submission of multiple forms and due to the impending deadline, some taxpayers may never receive refunds of their pay withheld but not owed," the nonresidents said. "Those events would cause irreparable harm."

The case stems from a complaint filed in federal court March 29 by Boles, Oar and Semonski, who say they were denied tax refunds for 2020 after Daly issued new guidance and required additional documentation that effectively refused refunds to individuals teleworking outside the city.

They argue that distinguishing between nonresidents working outside the city and those traveling outside the city for business purposes was an arbitrary distinction without rational basis and that the city continues to violate their individual rights by denying refunds for tax already paid through withholdings by their employers.

The arguments presented in the latest filing are similar to those rejected by the federal court after Daly told the court that it lacked subject matter jurisdiction to reach the merits of a dispute involving state taxes. The nonresidents subsequently refiled the challenge in state court, which Mark Milton — who represents the individuals — previously told Law360 will avoid arguments related to subject matter jurisdiction.

Daly told the federal court that the individuals failed to show that they would suffer irreparable harm absent an order because the injury was monetary and could be compensated by state courts and that the harms his office would suffer from an order outweigh the harms claimed by the individuals.

Boles, Oar and Semonski seek to represent a class of nonresidents of St. Louis whose employers withheld the tax and paid it from Jan. 1, 2020, onward and who have been denied similar refund requests. Stein is also seeking to represent a separate class of similar nonresidents who have either not yet submitted a request or not sought a refund for days teleworking. Stein replaced a separate individual, Ross Henry, as a representative of the class. 

The individuals are seeking damages equal to the tax paid for days worked out of the city and attorney fees. They are also asking the court to preliminarily enjoin the city to reinstate the old requirements for seeking a refund.

The city's guidance has raised concerns for state lawmakers. A state Senate panel approved legislation April 1 that would specify that cities with an earnings tax cannot impose it on workers who previously worked in the city but are currently telecommuting from outside the city. A similar House bill advanced April 19 after the chamber's tax-writing committee panned St. Louis' treatment of teleworkers.

The lawsuit was originally brought against the city under the administration of former Mayor Lyda Krewson, who was replaced by Mayor Tishaura Jones on April 20.

Bevis Schock, who is also representing the nonresidents, said in an email to Law360 that in addition to not having to fight a jurisdictional issue, the new request also includes Stein, who has not sent in the new form out of concern over the teleworking guidance. 

In an email to Law360, Daly spokeswoman Susan Ryan said that the office would hold the same position it presented to the federal court.

A spokesperson for Jones did not immediately respond to requests for comment on Monday.

Boles, Oar, Semonski and Stein are represented by Mark Milton of the Milton Law Group and by Bevis Schock.

Gregory Daly is represented by David H. Luce and Zachary R. McMichael of Capes Sokol Goodman & Sarachan PC.

The city of St. Louis is represented by Michael A. Garvin and Robert H. Dierker of the city counselor's office

The case is Mark Boles et al. v. City of St. Louis et al., case number 2122-CC00713, in the Missouri Circuit Court for the City of St. Louis.

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

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