• Ohio: Cleveland Beats the Colts (Well, A Former Colt), At Least for Now; Cleveland “Jock Tax” Upheld
  • March 12, 2014 | Authors: David M. Kall; Susan Millradt McGlone
  • Law Firms: McDonald Hopkins LLC - Cleveland Office ; McDonald Hopkins LLC - Columbus Office
  • Jeffrey Saturday was an NFL player for the Indianapolis Colts in 2008. On Nov. 30, 2008, the Colts played the Cleveland Browns. The City of Cleveland imposed its so-called “jock tax” on Mr. Saturday and taxed a portion of his salary. One minor problem - Mr. Saturday not only did not play during the game, he also was not in Cleveland. Mr. Saturday was injured and stayed in Indianapolis.

    Due in part to these circumstances, Mr. Saturday challenged Cleveland’s assessment of the “jock tax” against him and sought a refund. However, the tax administrator for the City of Cleveland denied his request for a refund. The administrator’s decision was affirmed by the Municipal Board of Appeal (MBOA).

    In the MBOA decision, the board found that Mr. Saturday did not meet his burden of proof that the “games-played” allocation used by the City of Cleveland was unreasonable and that Mr. Saturday’s absence from the November 30 game was properly treated as a “sick day” and therefore, subject to tax.

    Not satisfied with the MBOA’s decision, Mr. Saturday appealed the case to the Ohio Board of Tax Appeals (OBTA) in Saturday v. City of Cleveland Bd. of Review (Jan. 28, 2014), BTA No. 2011-4027, assigning the following errors:

    • The MBOA erroneously characterized November 29 and 30, 2008 as “sick days” despite Mr. Saturday’s participation in rehabilitation activities in Indianapolis on those days;
    • Cleveland did not have authority to tax Mr. Saturday’s income when he “did not travel to or perform any services in Cleveland in 2008,” because such taxation was in violation of the Ohio and US constitutions;
    • The City of Cleveland’s use of a games-played formula results in the City of Cleveland imposing a tax on income that is not earned for work done or services performed in the City of Cleveland which violates both Ohio law and Cleveland ordinances;
    • The MBOA erroneously concluded that appellants failed to supply facts demonstrating that the games-played allocation method is unreasonable;
    • The MBOA erroneously found that Mr. Saturday failed to present sufficient evidence because it was presented by affidavit rather than by live testimony at the hearing; and
    • “[T]he exclusion of professional athletes from the protection afforded by R.C. 718.011 *** violates the Equal Protection clauses of the United States and Ohio Constitutions.”

    Unfortunately for Mr. Saturday, a very similar case was decided by the OBTA just weeks before the decision (Hillenmeyer v. City of Cleveland Bd. of Review (Jan. 14, 2014), BTA No. 2009, unreported). In Hillenmeyer, while the OBTA acknowledged the appellant’s constitutional claims, the Ohio Supreme Court has prohibited the OBTA from deciding such claims. Additionally, in Hillenmeyer, the OBTA found that the City of Cleveland “jock tax” ordinances “do not operate in contravention of any state statute regarding municipal income taxes or Ohio case precedent” and, therefore, the OBTA has no equity jurisdiction to render a “determination whether the Cleveland ordinances constitute a fair or reasonable method by which to apportion [Hillenmeyer’s] income for the subject years.”

    However, the facts in Hillenmeyer differed from those in Mr. Saturday’s case. Contrary to the facts in Hillenmeyer, Mr. Saturday was never physically present in Cleveland. Nonetheless, the OBTA refused to find for Mr. Saturday and affirmed the decision of the MBOA, finding that: (1) Mr. Saturday did not carry his burden of proof to establish a right to the relief he requested; and (2) the relevant “jock tax” ordinance did not operate in contravention of any state statute or Ohio case and is a valid exercise of the city’s municipal power to tax.

    While it is not presently clear, the Multistate Tax Update believes that the OBTA is unlikely the last stop on Mr. Saturday’s quest to seek a refund. Mr. Saturday’s case presents several interesting constitutional issues that may ultimately reach the Ohio Supreme Court. However, at least for now, the City of Cleveland wins this round.