In two separate cases last week, the Ohio Supreme Court ruled that Cleveland improperly taxed two former NFL athletes. We first looked at these cases in January. The first case, Hillenmeyer v. Cleveland Board of Review, dealt with former Chicago Bears player Hunter T. Hillenmeyer, who challenged Cleveland’s taxation scheme relating to the calculation of taxes for professional athletes. Cleveland uses a “games-played” method of calculating taxes, which involves dividing the number of games played in Cleveland by the total number of games in a season. All other cities use a “duty-days” calculation, which divides the number of days spent in the city by the total number of days worked in a year. In a unanimous decision written by Justice Lanzinger, the Court found that while this taxation scheme does not violate local, state or federal laws, it does violate players' due process rights. The Court emphasized that this scheme taxed income that was not actually earned in Cleveland, as players are compensated for more than just the actual games played, holding:
By using the games-played method, Cleveland has reached extraterritorially, beyond its power to tax. Cleveland’s power to tax reaches only that portion of a nonresident’s compensation that was earned by work performed in Cleveland. The games-played method reaches income for work that was performed outside of Cleveland, and thus Cleveland’s income tax violates due process as applied to NFL players such as Hillenmeyer.
The Court ordered that Hillenmeyer was entitled to a refund of the taxes in accordance with a "duty-days" calculation, plus interest. Hillenmeyer also challenged a law that provided a 12-day grace period, wherein workers were not required to pay taxes for employment lasting twelve or fewer days, but that provided an exception for professional athletes or entertainers. The Court found that this did not violate equal protection rights, however, as the state had a rational basis for excluding athletes and entertainers from this grace period.
The second case, Saturday v. Cleveland Board of Review, involved Jason B. Saturday, a retired Indianapolis Colts player who challenged Cleveland for taxing him for a game his team played in the city when he was injured and recuperating in Indianapolis. The Court found that because none of Saturday's job-related duties took place in Cleveland, the city could not tax him. Although Justice Pfeifer, who wrote the opinion for the Court, touched on Hillenmeyer, he emphasized that this case was separate as it was decided on different grounds. The Court ordered a full refund of the 2008 taxes that Saturday paid to the city of Cleveland.
Photo credit: Elvert Barnes, via Flickr.