In an order issued Monday, Judge Christopher McGraugh said that the request for an 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 was unnecessary. The reason, the judge said, is that those nonresidents could still protest the tax.
Judge McGraugh agreed with arguments presented by Daly's counsel last week that the nonresidents could seek relief absent an order by simply protesting the taxes directly, as several of the nonresidents appear to have done.
"Indeed, the forms used by the collector for tax year 2020 seem to put taxpayers on notice that the collector is not considering telework days for a refund," he said in his order.
Judge McGraugh also said the nonresidents failed to show that there was a threat of irreparable harm or that they were likely to succeed on the merits of their case.
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.
In their motion filed in April, the individuals asked the court to remove the new document requirements, arguing that the treatment they considered unconstitutional would irreparably harm them and served no public interest.
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. They also contend that the city continues to violate their individual rights by denying refunds for tax already paid through withholdings by their employers.
The federal court rejected those arguments 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.
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.
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.
Susan Ryan, a spokeswoman for Daly, previously told Law360 that individuals have 12 months from the extended tax filing deadline of May 17, 2021, to file a protest for taxes withheld in 2020.
"The plaintiffs clearly provided insufficient evidence to secure their position at this time, and the court made it clear that the plaintiffs neglected to demonstrate their probability of ultimately being successful on the merits of the case," Ryan said in an email to Law360 on Tuesday.
She added that counsel for Daly would file its response by May 24.
Nick Dunne, public information officer for the mayor, told Law360 in an email, "The city still offers the legal means by which the plaintiffs can contest the 1% earnings tax withholding, and that option is still available to them." .
Mark Milton, a representative of the individuals, said in an email to Law360 that the city and court confirmed that individuals could still protest and seek a refund for earnings tax withheld in 2020 and that he had established a website guiding other nonresidents through the process.
"If and when the city denies such claims, we believe those taxpayers would be properly included in our class-action suit," Milton said. "We hope everyone affected will file a protest and claim for refund and receive the money to which they are entitled."
Boles, Oar, Semonski and Stein are represented by Mark Milton of the Milton Law Group and by Bevis Schock.
Daly is represented by David H. Luce and Zachary R. McMichael of Capes Sokol Goodman & Sarachan PC and by John F. Garvey Jr. of Carey Danis & Lowe.
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.
--Editing by Neil Cohen.
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