New York Frozen Foods, Inc. v. Bedford Hts. Income Tax Bd. of Rev. (Slip Opinion)
150 Ohio St. 3d 386
| Ohio | 2016Background
- New York Frozen Foods, Inc. ("Frozen Foods") filed separate-entity municipal income-tax returns for Bedford Heights for tax years 2005–2007 and paid tax accordingly.
- In March 2010 Frozen Foods filed consolidated amended returns (matching its federal consolidated filings) seeking a $698,294 refund; RITA (the city tax administrator) denied the refund.
- Bedford Heights Income Tax Board of Review denied relief; the Board of Tax Appeals (BTA) affirmed the denial but rested its decision on a 2009 RITA rule amendment that explicitly barred changing the method of filing on an amended return.
- The Ohio Supreme Court reviewed de novo whether the change from separate to consolidated filing on amended returns constituted a prohibited "change in method of accounting" under Bedford Heights Codified Ordinance 173.15(a).
- The court held the change from separate to consolidated reporting is a change in method of accounting (and therefore barred by the ordinance when asserted on amended returns) and affirmed denial of the refund; it declined to reach the taxpayer’s constitutional challenges to the RITA rule.
Issues
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| Whether converting from separate to consolidated filing on an amended return is a "change in method of accounting" barred by the city ordinance | Frozen Foods: "method of accounting" is limited (e.g., cash vs. accrual) and does not include filing method | Bedford Heights/RITA: change to consolidated filing materially changes computation of taxable income and is within "method of accounting" prohibited on amended returns | Held: Change from separate to consolidated filing is a change in method of accounting and is barred by the ordinance when asserted on an amended return |
| Whether RITA's 2009 rule amendment (explicitly prohibiting change in method of filing on amended returns) was controlling and constitutional | Frozen Foods: challenged the rule as retroactive and an improper delegation; argued BTA erred applying it | RITA: rule clarifies/prohibits changing filing method on amended returns; BTA applied it | Court: did not decide constitutional questions because ordinance ground alone sufficed; treated 2009 rule as clarifying, not necessary to resolve the case |
| Whether former R.C. 718.06 preempted a municipal limitation on changing filing method via amended return | Frozen Foods: state law requiring acceptance of consolidated returns preempts local restriction on later adopting consolidated filing via amended return | Bedford Heights: R.C. 718.06 required acceptance of consolidated returns but did not address amended-return elections or limit local power to restrict changes by amended return | Held: No implied preemption; R.C. 718.06 did not explicitly restrict municipal ability to bar amended-return changes in accounting method |
| Whether the BTA’s procedural republishing affected appealability (raised in dissent) | Frozen Foods: timely appealed after BTA vacated and republished its decision correcting typographical error | Bedford Heights: contends procedural steps were proper | Majority: did not address this procedural/time-bar argument; dissent argued appeal was untimely and should be dismissed |
Key Cases Cited
- EOP-BP Tower, L.L.C. v. Cuyahoga Cty. Bd. of Revision, 829 N.E.2d 686 (Ohio 2005) (appellate review does not substitute for BTA factfinding; legal questions reviewed de novo)
- Akron Centre Plaza, L.L.C. v. Summit Cty. Bd. of Revision, 942 N.E.2d 1054 (Ohio 2010) (issues of statutory construction reviewed de novo)
- Sheldon Rd. Assocs., L.L.C. v. Cuyahoga Cty. Bd. of Revision, 963 N.E.2d 794 (Ohio 2012) (remedial tax provisions construed liberally but not to create unintentional remedies)
- Phoenix Amusement Co. v. Glander, 76 N.E.2d 605 (Ohio 1947) (refund provisions aim to remedy illegal exactions; distinction between correcting errors and changing reporting method)
- NLO, Inc. v. Limbach, 613 N.E.2d 193 (Ohio 1993) (statutory amendment can codify prior law rather than change it)
- Williams v. Akron, 374 N.E.2d 1378 (Ohio 1978) (amendments may clarify existing language rather than add substantive changes)
- Cincinnati Bell Tel. Co. v. Cincinnati, 693 N.E.2d 212 (Ohio 1998) (preemptive limits on municipal taxing power must be expressly stated by the General Assembly)
- Panther II Transp., Inc. v. Seville Bd. of Income Tax Rev., 8 N.E.3d 904 (Ohio 2014) (broad preemptive statute required explicit language to displace local tax rules)