Tetlak v. Village of Bratenahl

Cook, J.,

dissenting. For the following reasons, I respectfully dissent from the majority’s decision reversing the judgment of the court of appeals.

As the majority notes, state law prohibits municipalities from taxing “intangible income.” R.C. 718.01(F)(3).1 State law defines nontaxable “intangible income” to include “income arising from the ownership * * * of * * * investments.” (Emphasis added.) R.C. 718.01(A)(4). For a definition of “investments,” the General Assembly explicitly refers courts to R.C. Chapter 5701. Id. What today’s majority omits from its analysis is that Chapter 5701’s definition of “investments” includes “[sjhares of stock in corporations.” (Emphasis added.) R.C. 5701.06(A).

*53The majority’s omission of this key statutory reference leads the majority astray in the remainder of its analysis. As part of this analysis, the majority adopts the theory that an S corporation is somehow “an unincorporated business entity.” (Emphasis added.) As Tetlak stated in an early notice of appeal, however, such a theory — in addition to being counterintuitive — conflicts with the legal reality that “a subchapter S corporation is just that, a corporation.”2

A straightforward application of the plain language of all of the relevant provisions of the Revised Code — without resort to unnecessary statutory interpretation — would avoid such analytical conflicts and result in the following inescapable conclusions: (1) state law prohibits Bratenahl from taxing “intangible income”; (2) state law defines “intangible income” to include income arising from the ownership of “investments”; and (3) state law defines “investments” to include shares of stock “in corporations,” without regard to those entities’ status for purposes of federal or state taxation. Simply put, state law prohibits Bratenahl from taxing the income that Tetlak received arising from his ownership of stock “in corporations.” Indeed, this court has already recognized that the General Assembly has placed “income from such sources as stocks” within a “fortress of protection from municipal taxation.” Fisher v. Neusser (1996), 74 Ohio St.3d 506, 512, 660 N.E.2d 435, 440.

As Tetlak has argued at every stage of these proceedings, Bratenahl violated the foregoing provisions of state law by assessing additional residence taxes based on the income arising from his ownership of Willow Hill corporate stock. Notably, though Tetlak raised these provisions of state law below, neither the Administrator nor the Board of Review of the Village of Bratenahl even mentioned them in their decisions affirming the assessments.

For the foregoing reasons, like the court of appeals, I would affirm the trial court’s order cancelling the assessments. Tetlak satisfied his burden at the administrative level “to show in what manner and to what extent” the assessments were faulty and incorrect. Maxxim Med., Inc. v. Tracy (1999), 87 Ohio St.3d 337, 339, 720 N.E.2d 911, 913, quoting Federated Dept. Stores, Inc. v. Lindley (1983), 5 Ohio St.3d 213, 215, 5 OBR 455, 457, 450 N.E.2d 687, 688.

Pfeifer and Lundberg Stratton, JJ., concur in the foregoing dissenting opinion. Baker & Hostetler, L.L.P., Christopher J. Swift and Michael K. Farrell, for appellee. Stephen M. OBryan; Taft, Stettinius & Hollister, L.L.P., and Elizabeth A. Popovich, for appellants. Cornell P. Carter, Kim D. Amponsah and William E. Gareau, Jr., urging reversal for amicus curiae city of Cleveland, Central Collection Agency. John E. Gotherman, Barry M. Byron and Stephen L. Byron, urging reversal for amicus curiae Ohio Municipal League.

. The general prohibition on municipal taxation of intangible income contained in R.C. 718.01(F)(3) is subject to an exception in division (6) not applicable here. Id.

. In an admirable yet ultimately unsuccessful effort to emphasize this point at the administrative level, Tetlak went so far as to attach the Ohio Secretary of State’s certificate of good standing to his notice of appeal before the Board of Review of the Village of Bratenahl. That certificate, signed by then-Secretary of State Taft, plainly states that Willow Hill Industries, Inc. is “an Ohio Corporation.” (Emphasis added.)