Buckeye Institute: Court should rein in governments’ illegal taxation

A Columbus-based think tank wants an appeals court to rein in what it says is local governments’ illegal taxation of Ohioans.

At issue is a June 2021 settlement package that Karen Kresevic, a Chagrin Falls physician assistant who worked at Akron City Hospital in 2020 during the pandemic, received following her July 2020 termination, which she challenged as wrongful and without cause. Akron officials taxed the settlement, even though it was not wages or for work performed.

The Buckeye Institute filed the lawsuit in January 2023 in the Summit County Court of Common Pleas. In July, the Summit County Court of Common Pleas granted the city’s motion to dismiss the case, prompting The Buckeye Institute to file an appeal with Ohio’s Ninth District Court of Appeals.

“The city of Akron stretched the law to take a cut of Ms. Kresevic’s settlement in breach of its own tax ordinances and forms,” Jay R. Carson, senior litigator at The Buckeye Institute and Kresevic’s attorney, said in a release. “This case allows the court of appeals to correct the trial court’s errors and rein in local governments’ illegal taxation.”

The think tank wants the court to order Krezevic’s taxes to be refunded because, they argue, a city cannot tax nonresidents if the money they receive is not for work performed in that city.

According to the think tank’s appeals brief, the trial court found that Kresevic could not seek a refund because, by allowing the payment to be processed through her former employer’s payroll system, she voluntarily paid the tax.

“This notion that withholding equates to voluntary payment, however, is at odds with Ohio’s statutes and Akron’s ordinances governing the refund of improperly paid taxes,” the think tank wrote in its appeal. “…Ohio law is clear that, but for a specific statutory exception during the COVID pandemic, municipalities may not engage in extra-territorial taxation.”

The court also ruled that Kresevic filed her claim outside the one-year statute of limitations, a point the think tank disputes.

Akron argues that the statute of limitations clock began on June 14, 2022, when Kresevic received her settlement payment. The Buckeye Institute maintains that, according to the city’s tax ordinances and forms, the clock started to tick when Kresevic filed her return.

Income tax collections were a sticking point amid the pandemic, when many workers were required to work remotely. The cities where these workers normally worked still wanted their income taxes.

Amid the pandemic, lawmakers passed House Bill 197, which temporarily treated employees’ income earned while required to work at a temporary location as being earned at their principal place of work. However, lawmakers repealed the exception with House Bill 110, which took effect for the 2021 tax year.