2016 Ohio 276
Ohio Ct. App.2016Background
- Salibra, a nonresident retiree, worked for Alcancorp/Novelis in Mayfield Heights and received employee stock options while employed there.
- He retired effective January 1, 2006; in 2007 Novelis was acquired and unexercised options were cancelled, producing taxable income reported on a 2007 W-2; Novelis withheld 1% city tax and remitted it to Mayfield Heights via RITA.
- Salibra sought a full refund from RITA, claiming he neither lived nor worked in the city in 2007; RITA granted a partial refund by apportioning the option income based on his historical outside-the-city work percentage and denied the remainder.
- The Mayfield Heights Board of Review (BOR) affirmed RITA, holding the options were earned while Salibra worked in the city and taxable under the city ordinance; the Ohio Board of Tax Appeals (BTA) affirmed the BOR.
- Salibra appealed to the Tenth District, raising four assignments: (1) mischaracterization of the legal issue; (2) failure to detail stock-option facts for a globally mobile workforce; (3) improper deviation from the city’s usual apportionment method; and (4) failure to sanction appellee for discovery noncompliance; he also advanced an "as-applied" equal protection/selective-enforcement claim.
- The appellate court reviewed statutory/ordinance application and constitutional claims, affirmed the BTA, and rejected Salibra’s discovery/sanctions challenge.
Issues
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| Whether stock-option income paid after retirement is taxable by the city | Salibra: income paid in 2007 should not be taxable because he neither lived nor worked in the city when income was received | City/RITA: options were compensation earned while he worked in Mayfield Heights and taxable when valued/recognized (exercise/cancellation) | Held: Taxation proper—options earned while employed and taxable when value is determined, even if paid after retirement |
| Proper method to apportion tax for work performed outside city | Salibra: city should apply its standard day-based apportionment or avoid single-person formula that treats him uniquely | City/RITA: applied a reasonable apportionment using Salibra’s historical refund percentages to credit days worked outside the city | Held: RITA’s partial refund and apportionment were appropriate and reasonable |
| As-applied / equal protection challenge (selective enforcement) | Salibra: ordinance, as applied to globally mobile workforce and selectively enforced, discriminates by omission and convenience | City/RITA: no evidence of unequal application; ordinance facially valid and applied consistently; BOR/BTA lacked record of discriminatory enforcement | Held: Salibra failed to present clear and convincing evidence of discriminatory or selective enforcement; equal protection/as-applied claim fails |
| Discovery / sanctions for alleged failure to answer interrogatories | Salibra: BOR/BTA failed to timely/adequately answer interrogatories and sanctions were warranted | BOR/BTA: responses were adequate or appropriately objected to; BTA exercised discretion and denied relief | Held: BTA did not abuse discretion; denial of motion to compel and refusal to impose sanctions affirmed |
Key Cases Cited
- Rice v. Montgomery, 104 Ohio App.3d 776 (1st Dist. 1995) (grant of stock option is compensation and municipal tax may use exercise to assign value)
- C.I.R. v. Lo Bue, 351 U.S. 243 (U.S. 1956) (stock options are compensation includible as taxable income)
- Yick Wo v. Hopkins, 118 U.S. 356 (U.S. 1886) (selective application of a law may violate equal protection)
- Rubinovitz v. Rogato, 60 F.3d 906 (1st Cir. 1995) (elements required to prove selective targeting in equal protection claim)