Victory on Tax Appeals

Once in a while, government will admit to a step too far. After nearly a year of hard work by the Ohio Chamber and others and many discussions, the Senate passed HB 292 on May 23rd. The bill included an amendment that restores a limited right of direct appeal as championed by the Ohio Chamber of Commerce.

Let us first review a little history of the issue. Last year, in HB 49, otherwise known as the biennial budget, the Senate adopted an amendment that eliminated the direct appeal for both taxpayers and taxing authorities to the Ohio Supreme Court in tax matters.  The Senate amendment, without a single hearing, eliminated a right taxpayers and taxing authorities had for over 75 years. Under prior law, taxpayers and taxing authorities could appeal a decision of the Board of Tax Appeals (BTA) to either the Ohio Supreme Court or the local court of appeals in which the taxpayer resides.  The right to appeal a BTA decision directly to the Supreme Court has been a part of Ohio’s tax policy since 1939.

Its implementation gave us some major concerns.  By eliminating the direct appeal, whoever wins at the court of appeals would face the cost of incurring another level of appeal if the losing party (either the taxpayer or the taxing authority) receives a discretionary review by the Supreme Court. This would make a costly process much more so.

The change could also result in the tax law possibly being applied differently across Ohio, thereby eliminating uniformity. Depending on the court of appeals that covers the taxpayer’s geographical location, different courts of appeals could decide important tax issues in different ways.  As a result, taxpayers with plants in two different Ohio jurisdictions could have those plants taxed differently.  Also, the Department of Taxation would be required to apply different tax rules during an audit, depending on a taxpayer’s location or the same taxpayer’s different locations.

The Department of Taxation will not be bound if a taxpayer wins an issue in one court of appeal, the department would not be required to follow that result in the other eleven districts.  This would require additional litigation by other taxpayers to obtain a uniform, state-wide decision.

Finally, we feared that venue challenges would proliferate. The provision enhanced the risk that a taxpayer with multiple locations in Ohio may inadvertently choose the incorrect court of appeals, thereby losing their appeal on a mere technicality.  This problem is eliminated with direct appeals to the Supreme Court.

Uniform application of Ohio’s tax law is important to Ohio’s tax policy and economic competitiveness.  The state recognized this in 1939 when, shortly after adopting the state-wide sales and use tax, the right of direct appeal from the BTA to the Supreme Court was provided.  Backing off uniformity is not good for Ohio or Ohio taxpayers.

Our effort began with discussions with both the Senate and the Supreme Court. The argument we presented was to restore the right to cases involving the Ohio Tax Commissioner and those of statewide import. This amounts to a fraction of the appeals previously eligible, in most years being around a half dozen. The court understood our concerns but felt that the change should be given time to evaluate.

It was our opinion that this was much too important an issue to sit idly by. We therefore continued our efforts with many meetings. Our work has now been rewarded by the restoration by the Senate of the direct appeal for tax commissioner and Municipal tax cases.

Through the efforts of the Ohio Chamber, in concert with other statewide business groups, we will soon have restored good government policy. The one hitch left is the situation in the Ohio House. Until they name a speaker and resume holding sessions, there will be no concurrence. It is our hope that this will happen very soon, maybe even next week.

We appreciate the efforts of all involved and give a special thank you to Senator Bob Peterson for his shepherding of the issue. We will continue to update as needed and appreciate the efforts of all our members.