Cleveland, Ohio lost a case against Jeff Saturday and, in another related case, to a Chicago Bears linebacker.
Jeff Saturday was hurt and going through physical therapy in Indianapolis during a Colts/Browns game in 2008. While he was watching the Colts/Browns game from his home in Indiana, the City of Cleveland assessed him over $3,500 . On its face, this tax assessment seems outrageous, but not to the tax administrators in Cleveland. Mr. Saturday lost in his first hearing and again on his appeal. Finally, the Ohio Supreme Court on April 30, 2015, published its conclusion that the reach of the Cleveland tax was unconstitutional and scaled it back. The holding of the case was that if you weren’t working in Cleveland, you don’t owe any tax to Cleveland even though your employer and fellow employees are playing a game there. Seems obvious.
As far as the Bears linebacker Hunter Hillenmeyer, he played games for the Chicago Bears in Cleveland. He complained that the allocation of his wages to Cleveland should be based on duty days, not games played. Cleveland assessed the tax based on games played because 20 games are played and 1 game in Cleveland allocates 5% of annual wages to Cleveland. Based on working about 160 days per year, the player’s allocation would be reduced to 2/160, or 1.25%. The game is played on Sunday, but the player arrives one day early.
If your employer withheld Cleveland income tax from your pay in the last three years based on games played instead of duty days, or withheld tax when you weren’t even in the city, you may qualify to file a refund claim for those taxes.
On a side note, the State of Indiana recently reminded payers of prize money paid for races like the Indy 500 and the Brickyard 400 to withhold taxes at the new lower state tax rate. Also included in the updated ruling are examples of how to report the payments to the ultimate winner: the driver. The prize money is allocated based on races in the year. The Ohio Supreme Court Ruling cannot be reconciled with the State of Indiana withholding rule on prize money. We understand the taxpayer’s frustration with how tax laws are administered. But as the axiom goes: taxes weren’t meant to be fair; they are meant to raise revenue.
There was some humor injected in the Jeff Saturday case where in dicta the court commented on the outcome of the 10-6 Colts win stating, “More than 72,000 other souls attended the Colts’ dismal 10-6 victory over the Browns,” implying that Jeff Saturday wasn’t one of the poor souls who had to witness the game live. We are convinced that had Saturday been playing at that game, the score would have been 30-6, and not such a dismal victory.