561 F. App'x 476
6th Cir.2014Background
- Plaintiffs Douglas and Karla LaBorde, Gahanna, Ohio residents, sued the City of Gahanna and RITA claiming Form 37 understated their municipal tax credit for taxes paid to other municipalities for tax years 2009–2011.
- Gahanna levies a 1.5% municipal income tax and City Code § 161.18(a) provides an 83 1/3% credit for taxes paid to another municipality, capped at the amount of Gahanna’s tax.
- The LaBordes alleged the form limits the credit to 83 1/3% of 1.5% of earnings rather than 83 1/3% of the actual tax paid elsewhere, causing underpayments of $347–$473 per year.
- They asserted state-law claims and federal takings claims (Fifth Amendment/§ 1983) and sought injunctive and declaratory relief; defendants removed to federal court.
- The district court dismissed the federal takings counts and the injunctive count, held the Tax Injunction Act (TIA) barred certain federal challenges to city tax practices, and remanded the remaining state-law claims to state court.
- The Sixth Circuit affirmed dismissal of counts 5, 6, and 7 and the remand of the state-law claims.
Issues
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| Whether miscalculation of credit constitutes a Fifth Amendment taking | LaBorde: tax-credit is a property right (intangible or monetary) and miscalculation is a taking requiring compensation/injunction | Gahanna: tax collection and adjustments to tax liability are not takings; miscalculation is part of tax administration | Dismissed—tax collection/miscalculation does not state a plausible constitutional taking claim |
| Whether TIA bars federal injunctive/declaratory relief | LaBorde: not seeking to enjoin assessment/collection but to require proper enforcement of City Code, so TIA inapplicable | Defendants: relief would limit tax liability and thereby fall within TIA’s prohibition on federal restraint of state/local taxation | Held TIA applies—claims seeking prospective relief affecting tax liability are barred federally |
| Whether state remedies are "plain, speedy and efficient" under TIA | LaBorde: state remedies (refund statutes) are inadequate/limited by statutes of limitation | Gahanna/RITA: Ohio provides adequate remedies (e.g., Ohio Rev. Code §§ 2723.01, 2721.03) permitting full constitutional challenge | Held state procedures satisfy the TIA requirement; federal court must defer to state remedies |
| Whether federal court should retain supplemental jurisdiction over state-law claims | LaBorde: implicit desire to keep claims in federal forum | Defendants: after federal claims dismissed, district court should decline supplemental jurisdiction and remand | Held remand appropriate—the balance favors declining to exercise supplemental jurisdiction and sending state claims to state court |
Key Cases Cited
- Bell Atl. Corp. v. Twombly, 550 U.S. 544 (establishes plausibility standard for pleadings)
- Hibbs v. Winn, 542 U.S. 88 (distinguishes when federal courts may enjoin state tax-related actions)
- Schneider Transp., Inc. v. Cattanach, 657 F.2d 128 (7th Cir.) (constitutional claims do not automatically avoid TIA)
- Aluminum Co. of Am. v. Dep’t of Treasury, 522 F.2d 1120 (6th Cir.) (state-court remedy satisfies TIA if it provides full hearing on constitutional objections)
- Kunkle v. Fulton Cnty. Bd. of Comm’rs, 922 F.2d 841 (6th Cir.) (interpreting TIA and state remedy requirement)
- Woda Ivy Glen L.P. v. Fayette Cnty. Bd. of Revision, 902 N.E.2d 984 (Ohio 2009) (tax credits treated as intangible for property-tax valuation purposes; not a Fifth Amendment takings precedent for income-tax credit miscalculation)