2003 Ohio 5466 | Ohio Ct. App. | 2003
{¶ 2} Dr. Czubaj was employed as Superintendent of the Summit County Board of Mental Retardation and Developmental Disabilities ("MRDD"). From January 1, 2000 through September 6, 2000, Dr. Czubaj resided in Stow, Ohio in Summit County. On September 6, 2000, Dr. Czubaj resigned from the Superintendent position, and from September 7, 2000 onward, he resided in Stow, New York. It is an uncontroverted fact that Dr. Czubaj was never a resident of Tallmadge, Ohio at any time relevant to the subject matter of this appeal.
{¶ 3} MRDD and Dr. Czubaj entered into a Severance Agreement (the "Agreement") pursuant to his resignation. Included in the Agreement are promises on Dr. Czubaj's part to refrain from doing certain activities. Specifically, paragraph five of the Agreement provides that, for a period of three years from the date of the execution of the Agreement, Dr. Czubaj is to refrain from participation in activities and functions sponsored by the Board of the MRDD and other listed organizations. The non-compete clause in paragraph six of the Agreement states that, for the same three-year period, Dr Czubaj is to also refrain from directly or indirectly engaging in any position in the MRDD field in Summit County in any capacity, and from performing services in any position outside of Summit County but within Ohio through which he would have dealings with the Board of the MRDD or any of its operations.
{¶ 4} The Agreement provides that Dr. Czubaj was to receive a total payment of $350,000.00, "[i]n consideration of [Dr.] Czubaj's commitments pursuant to the various provisions of this Agreement, * * * less appropriate withholding (Federal, State, and Local withholdings[.])" (Emphasis added.) That same provision of the Agreement also states that the $350,000.00 payment relates to the following items: (1) $207,351.00 for accrued vacation and sick days, and salary through December 31, 2001; (2) $122,649.00 for pension, medical, disability, and life insurance coverage; and (3) $20,000.000 for outplacement. In 2000, Dr. Czubaj received $26,400.00 as partial payment on the Agreement, which included his salary as well as vacation and sick time accruals. Dr. Czubaj paid income tax on the $26,400.00 amount to the City of Tallmadge, and Dr. Czubaj does not contest the payment of local tax for this amount on appeal.
{¶ 5} In 2001, Dr. Czubaj received a payment of $323,529.62 pursuant to the Agreement, and $6,470.59 was withheld from this amount for Tallmadge income taxes. Dr. Czubaj filed a Tallmadge income tax return for 2001 with Tallmadge, claiming a refund of $6,470.59 on the basis that he had neither worked nor resided in Tallmadge during the year 2001. In March 2001, Dr. Czubaj wrote a letter to Tallmadge, requesting a refund. In a letter dated April 17, 2002, the Tallmadge Income Tax Department denied this request, reasoning that the $323,529.62 amount was listed on a federal W-2 form, and that this payment was related to his employment with MRDD. Dr. Czubaj appealed the Income Tax Department's decision to the Tallmadge Income Tax Department Board of Review (the "Board"), which, in a hearing on June 5, 2002, unanimously voted to deny his request for a refund. In a letter dated July 3, 2002, the Tallmadge Income Tax Department formally notified Dr. Czubaj of the Board's decision to deny his request.
{¶ 6} On July 22, 2003, Dr. Czubaj filed an administrative appeal with the Summit County Court of Common Pleas, contending that (1) the Board's decision was not supported by substantial, reliable, and probative evidence, and is not in accordance with law; (2) the Board's decision was contrary to R.C.
{¶ 7} Dr. Czubaj timely appealed, asserting one assignment of error.
{¶ 8} In his sole assignment of error, Dr. Czubaj avers that the common pleas court abused its discretion when it affirmed the Board's decision to deny his request for a Tallmadge local tax refund, and that the court's decision is not supported by a preponderance of reliable, probative, and substantial evidence. We agree.
{¶ 9} We first note the appropriate standard of review. Appeals taken from a tax board's decision are governed by Chapter 2506 of the Revised Code. R.C.
"[T]he court is required to confirm the decision of the administrative agency unless, as a matter of law, it finds that the decision or actions of the administrative agency in reaching that decision is not supported by a preponderance of reliable, probative, and substantial evidence upon the whole record." (Emphasis sic.) Copley Twp. Bd. of Trustees v.Lorenzetti,
{¶ 10} R.C.
{¶ 11} When reviewing the decision of the common pleas court with respect to an administrative appeal, the appellate court's review includes a determination of whether the trial court abused its discretion. Kisil,
{¶ 12} Chapter 181 of the Administrative Code of the Tallmadge Codified Ordinances addresses Tallmadge's income tax. That chapter references Article XVIII, the Home Rule Amendment of the Ohio Constitution, and Chapter 718 of the Revised Code. Section seven of Article
{¶ 13} In deciding whether Tallmadge's ordinances permit taxation of the severance payment in question in this case, we must abide by the rules of statutory construction. First, if the specific language of an ordinance is unambiguous, the clear meaning of the words must be used.Bosher v. Euclid Income Tax Bd. of Rev.,
{¶ 14} In support of his sole assignment of error, Dr. Czubaj argues that the denial of the refund violates Tallmadge Ordinances
"On or after January 1, 2001, a municipal corporation shall not tax thecompensation paid to a nonresident individual for personal servicesperformed by the individual in the municipal corporation on twelve or fewer days in a calendar year[.]" (Emphasis added.)
{¶ 15} In order for a municipality to evade the mandate of R.C.
{¶ 16} Chapter 5747 of the Revised Code governing income taxes defines the term "compensation" as "any form of renumeration paid to an employee for personal services." R.C.
{¶ 17} Additionally, we note that R.C.
{¶ 18} Although we have concluded that Dr. Czubaj's 2001 severance payment is not considered "personal services" performed, and find that R.C.
{¶ 19} Mindful of the rules of construction discussed above which direct our analysis, we now turn to a discussion of the Tallmadge ordinances in question. Tallmadge Ordinance 181.03 provides, in pertinent part, the following:
"(a) Subject to the provisions of Section 181.16 an annual tax * * * shall be imposed * * * upon the following:
"(1) On all taxable income earned * * * by nonresidents for work doneor services performed or rendered in the City of Tallmadge." (Emphasis added.) Tallmadge Codified Ordinances
{¶ 20} In order for a nonresident to be taxed by Tallmadge pursuant to this ordinance section, the income earned by the nonresident must be (1) "taxable," (2) "earned," and (3) for "work done or services performed or rendered" in Tallmadge. Of the pertinent words in this ordinance section, the Tallmadge Ordinances only provide a definition for the phrase "taxable income." The ordinances provide that definitions of terms not expressly defined by the ordinances are to carry the same meaning as they would when used in a similar context in the Internal Revenue Code of 1986, Title 26, U.S. Code. The ordinances define "taxable income" as "salaries, wages, commissions, or any other compensation paid by an employer before any deductions[,] * * * except all forms of compensation described as being exempted in Section
{¶ 21} This ordinance section states, at the outset, that included in the term "compensation" are "all forms of earned income." (Emphasis added.) Id. The section then articulates what forms of earned income are to be considered compensation and therefore taxable income for the purposes of levying the Tallmadge local tax. Initially, we observe that the ordinance section, while enumerating a sizeable number of categories of payment to be considered "other compensation" (and therefore "taxable income"), does not explicitly list severance pay, insurance coverage, or outplacement as categories of payment subject to the Tallmadge tax. The term "earned" is not defined by the Tallmadge Ordinances, and therefore we follow the rules of statutory construction to apply both the clear meaning as well as the meaning of "earned" as employed by the Internal Revenue Code. See Bosher at ¶ 14. Furthermore, we must keep in mind that tax ordinances must be strictly construed, and that doubts as to meaning are to be resolved in favor of the taxpayer. Id.
{¶ 22} The Internal Revenue Code defines the phrase "earned income" in various ways, depending on the taxation context in which it is used. Internal Revenue Code section 911 pertaining to the taxation of income earned by nonresident citizens of the United States, defines "earned income" as "wages, salaries, or professional fees, and other amounts received as compensation for personal services actuallyrendered[.]" (Emphasis added.) Section 911(d)(2)(A), Title 26, U.S. Code. Webster's Dictionary defines the word "earned" as "to receive, as equitable return for work done or services rendered[.]" Webster's Third New International Dictionary (1993) 714. Additionally, Webster's defines the phrase "earned income" as "income (as wages, salary, professional fees, or commissions) that results from the personal labor or services of an individual[.]" Id. Webster's defines "render" as "to give back, deliver, yield, cause to become," and "to hand over to another[.]" Id. at 1922. Furthermore, this Court has previously employed the following definition for "earned," in a similar context: "to gain, get, obtain, or acquire as the reward of labor or performance of some service." Campbellv. Don Plusquellic (May 8, 1991), 9th Dist. No. 14936, quoting Quaid v.Tax Rev. Bd. (1959),
{¶ 23} We now turn to an application of the law to the facts of this case. As mentioned above, Dr. Czubaj contests that portion of the severance payment paid to him in 2001. Dr. Czubaj's 2001 severance payment consisted of salary through December 2001, pension, insurance coverage, and outplacement, for none of which Dr. Czubaj performed any affirmative acts or services within Tallmadge, Ohio. Moreover, we have already concluded supra that Dr. Czubaj's forbearance of service cannot be deemed a service performed. Considering the fact that Dr. Czubaj did not work for the MRDD after September 6, 2000, and since Dr. Czubaj's severance payment did not consist of "compensation for personal services actually rendered," this Court concludes that the severance payment is not "earned income" within the sphere of "compensation" as defined by the Tallmadge Ordinances. Consequently, we conclude that Dr. Czubaj's severance payment cannot be regarded as "taxable income" pursuant to Tallmadge Ordinance
{¶ 24} Furthermore, we note that the Tallmadge Ordinances state that certain forms of payments are exempt from taxation under
{¶ 25} When the terms of the statute are unambiguous, it is our responsibility to follow the rules of statutory construction which dictate that the provisions of the statute are to be applied and not interpreted. See Toliver, supra. It is this Court's responsibility to apply the unambiguous provisions and terms of the Tallmadge ordinance, and to make certain that we are not interpreting plain language, which would enter the realm of legislating. See Id. This Court would be venturing outside the bounds of its authority if we were to read into the Tallmadge ordinance a legislative intent to consider severance pay a category of "other compensation." Thus, a reading of the plain language of Ordinance section
{¶ 26} Based upon the aforementioned, we find that the common pleas court's decision, as a matter of law, is not supported by a preponderance of reliable, probative, and substantial evidence. See R.C.
{¶ 27} Because our finding — that the common pleas court's decision is not supported by a preponderance of reliable, probative, and substantial evidence and that the common pleas court abused its discretion — is dispositive of the instant case, it is not necessary for this Court to address Dr. Czubaj's constitutional due process argument. A court should avoid deciding a case on constitutional grounds if it can on statutory grounds. See Ohio Roundtable v. Taft,
{¶ 28} Dr. Czubaj's assignment of error is sustained. The judgment of the Summit County Court of Common Pleas is reversed and remanded to the trial court for proceedings consistent with this opinion.
Judgment reversed, and cause remanded.
BAIRD, P.J., WHITMORE, J. CONCUR
