Tax Tip of the Week | No. 308 | Court Decisions Impact Ohio Muni Tax Law

Tax Tip of the Week | June 24, 2015 | No. 308 | Court Decisions Impact Ohio Muni Tax LawHere is another municipal tax update courtesy of the Ohio Society of CPAsOhio’s new municipal income tax law is in place and ready to make life easier for taxpayers starting next year, but court decisions continue to make an impact on the law. A Society member with connections to two of those cases discusses them with us in the latest episode of OSCPA Spotlight.In one such case, the Ohio Supreme Court struck down on Constitutional grounds the way the City of Cleveland was levying municipal income tax on visiting professional athletes. The court ordered the city to refund back taxes to Hunter Hillenmeyer, formerly of the Chicago Bears, and Jeff Saturday, formerly of the Indianapolis Colts.The city had levied municipal income tax on athletes based on game days – 1/20th of their salary – as opposed to their service days, which for NFL players is 150-170 days per year. The court ruled that scheme violated the Due Process Clause of the Fifth and Fourteenth amendments to the U.S. Constitution.“I think that we now have, at least in Ohio, a uniform method for how we’re going to tax professional athletes,” said Tom Zaino, CPA, JD, former Ohio Tax Commissioner and chair of OSCPA’s Executive Board.In another recent case, MacDonald v. Shaker Heights, the 10th District Court of Appeals made clear that Supplemental Executive Retirement Plans (SERPs) are considered pensions, and therefore exempt from city taxes.Zaino said that the Ohio Board of Tax Appeals in Nationwide v. City of Columbus BTA, recently reaffirmed that holding, both of which are in alignment with earlier drafts of HB 5, the municipal income tax law.“The cities have said that (SERPs) qualify as taxable income, while most cities exempt pensions,” Zaino said. “The court of appeals made the distinction saying that the SERP in that case was a pension for city tax purposes and therefore is exempt.”More updates on Ohio’s municipal tax law changes will be coming in future Tax Tips.You can contact us in Dayton at 937-436-3133 and in Xenia at 937-372-3504.  Or visit our website.Rick Prewitt – the guy behind TTW...until next week.