The Supreme Court of Ohio on Nov. 19 ruled that a Worthington couple are entitled to a refund plus interest from the city of Worthington for income tax they had paid over several years on investment income that was not subject to taxation under former city ordinances.
In a unanimous decision authored by Justice Terrence O'Donnell, the court overturned a decision by the Ohio Board of Tax Appeals.
James and Angeline Gesler, 6663 Lakeside Circle East, filed city income-tax returns in 2005, 2006 and 2007 that included income of more than $2.9 million through the exercise of stock options provided to Mr. Gesler as compensation for work he had done for clients in his business as a certified public accountant.
The amount of tax paid on this income was estimated to be $60,000.
After questioning whether he owed this tax, Mr. Gesler paid it and concluded that he and his wife had not been required to report the stock-option income on their return, and they requested for a refund plus interest.
The request was denied by the city, and the Geslers appealed this decision to the Worthington Income Tax Board of Appeals. After a hearing and consideration of briefs from both sides, the board denied the refund, and the Geslers appealed to the Ohio Board of Tax Appeals, which upheld the decision to deny the Geslers a refund.
They appealed to the Ohio Supreme Court, which concluded that the BTA's decision was unreasonable and unlawful. The court also noted that the ordinance in question has been amended since then to include such income.
O'Donnell wrote, "Since the imposition of a municipal tax is an exercise of a power of local self-government and the General Assembly does not limit or restrict the exercise of municipal taxing authority in this case, we need not determine whether a conflict exists between the former Worthington ordinances and the state statutory provisions."
He concluded: "The former Worthington ordinances at issue excluded Schedule C income from the definition of net profits, and therefore, the Geslers' Schedule C income for the years at issue is excluded from municipal tax. ... Accordingly, we reverse the determination of the BTA as being unreasonable and unlawful and order that the Geslers are entitled to the refund they seek, together with statutory interest."
The city issued a response: "While the city does not agree with the ruling, we nevertheless must abide by it. We continue to believe that our position in this matter is reasonable, equitable and in the best interest of all of the residents of the City. The Codified Ordinances were amended years ago to remedy the particular code provision at issue."