The Supreme Court of Ohio (Court) has accepted an appeal of a decision by the Court of Appeals for Hamilton County to uphold Cincinnati's imposition of income tax on a nonresident working remotely during the COVID-19 pandemic (Schaad v. Adler, Appeal No. C-21034; 2022-Ohio-340).
In 2020, The Buckeye Institute initiated challenges to a provision in H.B. 197 that stated that the remote work performed by an employee working from home during the COVID-19 pandemic occurs at an employee’s principal place of business. Section 29 in H.B. 197 deems employees to be performing personal services at their principal place of work, even though their employer requires them to perform those services at another location, like their home, because of the COVID-19 emergency. This provision was intended to ease employers’ administrative burden of withholding and remitting tax to each employee's municipality of residence by allowing the employer to continue withholding based on the employee's principal place of work. However, Section 29 did not expressly address whether employees' wages are subject to municipal income tax by their principal place of work or place of residence.
Earlier this year, the Court declined to hear one of The Buckeye Institute’s other challenges.
In 2021, H.B. 110 became law, which allowed employees working remotely to claim refunds of tax paid to the principal-place-of-work municipalities, including tax that was withheld by employers, for days that the employee worked elsewhere during 2021, such as their home. The employee personal income tax refund provisions of H.B. 110 did not expressly apply to the 2020 tax year. Therefore, the availability of refunds for 2020 is still an open question and the Court’s review of this case will affect 2020 refunds. In addition, the Court’s decision could provide guidance as to how Ohio cities may tax remote work.
If you have any questions about the upcoming appeal, be sure to reach out to a professional at FORVIS or submit the Contact Us form below.