The Supreme Court of Ohio has held the Ohio legislature did not violate the Due Process Clause of the U.S. Constitution by directing an Ohio citizen to pay taxes to the municipality where the employee’s principal place of work was located rather than to where the employee actually worked.

During the COVID-19 pandemic, the state legislature passed a temporary law (Section 29 of L. 2020, Am. Sub. H.B. No. 197, or “Section 29”) designed to maintain consistency in municipal tax revenue.  The law provided that for a limited time, Ohio workers would be taxed by the municipality that was their “principal place of work” rather than by the municipality where they physically performed their work.  As a result of the state’s pandemic directives, the employer advised the taxpayer to work primarily from his home in Blue Ash, beginning in March 2020.  The taxpayer complied and did not work from Cincinnati, which was the location of his employer’s business, again until December 2020.  In compliance with Section 29, the employer withheld municipal taxes from the taxpayer’s wages and forwarded them to Cincinnati.

After the taxpayer was denied a tax refund from Cincinnati for taxes he paid for days he had worked outside Cincinnati while Section 29 was in effort, the taxpayer filed a lawsuit challenging the law’s constitutionality.  The taxpayer alleged Section 29 violated the U.S. and Ohio Constitutions because it authorized a municipality to tax income that nonresidents earned outside the municipality.  The Supreme Court of Ohio rejected the taxpayer’s constitutional arguments because the taxpayer did not allege a violation of a fundamental right and Ohio had a rational basis for the enactment of Section 29 – “ensuring that municipal revenues remained stable amidst the rapid switch to remote work that occurred during the pandemic.”  Thus, the court held, “the law easily survives rational-basis review.”  Additionally, the court rejected the taxpayer’s arguments that the state legislature cannot authorize a municipality to collect an extraterritorial tax because (1) the legislature may enact any law which is not prohibited by the Ohio Constitution, and (2) Section 29 was within the Ohio legislature’s constitutional authority.

The case is Schaad v. Alder, Slip Opinion No. 2024-Ohio-525 (Feb. 14, 2024).  The opinion is available here.

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