Post-pandemic, a former Deloitte employee residing outside Cincinnati, Ohio found himself entangled in a legal dispute over the city's income tax during the pandemic. Despite his arguments to the contrary, the employee was deemed liable for local income tax assessed by Cincinnati on his remote work earnings during the pandemic period.
“... [he] performed personal services for Deloitte from his home ... after Deloitte’s office closed because of the COVID-19 declaration. Thus, they were properly deemed to be a day performing personal services at his principal place of work, which was Deloitte’s office in the [c]ity.”
Pandemic-era Legislation interpretation
The former employee maintained that his remote work wasn't subject to the pandemic tax withholding law, citing its exemption for essential workers. The law states, ‘”[d]uring the period of the emergency declared by Executive Order 2020-01D, issued on March 9, 2020, and for thirty days after the conclusion of that period, any day on which an employee performs personal services at a location, including the employee’s home, to which the employee is required to report for employment duties because of the declaration shall be deemed to be a day performing personal services at the employee’s principal place of work.”
However, the Ohio Board of Tax Appeals, drawing on precedent set by the Ohio Supreme Court in a similar case, ruled against him. The court's decision in Schaad v. Karen Alder et al. established that pandemic-induced remote work did not exempt individuals from city income tax obligations.
Implications
The basis of the Board's ruling rested on the employee’s location while performing his duties for Deloitte during the pandemic. Despite his physical absence from the office, the employee was deemed to be conducting "personal services at his principal place of work," i.e., the Deloitte office in Cincinnati. “Principal place of work,” according to Schaad v. Alder relates to an employer’s withholding requirements which is distinct from the employee’s tax liability.
Takeaway
The ruling in Price v. City of Cincinnati serves as a reminder of the far-reaching implications of pandemic-related legislation on remote work taxation. As the legal landscape continues to evolve, staying informed and seeking professional guidance is paramount in navigating the complexities of income tax obligations for remote workers and the conflicting Governor’s Executive Orders. If you require assistance or clarification regarding your tax obligations in similar circumstances, please reach out to us.