Benua v. City of Columbus, 35699

CourtUnited States State Supreme Court of Ohio
Citation162 N.E.2d 467,170 Ohio St. 64
Docket NumberNo. 35699,35699
Parties, 9 O.O.2d 459 BENUA, Appellant, v. CITY OF COLUMBUS, Appellee.
Decision Date18 November 1959

Syllabus by the Court.

1. Where a legislative body incorporates in an enactment definitions of words and phrases used therein, such definitions will be controlling in making a determination of the legislative intent.

2. Where rents received by a nonresident owner of real property situated in a municipality constitute 'net profits' earned from 'business,' as those terms are defined in the ordinance of the municipality levying an income tax, such rents are income subject to such tax.

3. A municipal income tax does not become a tax on real property by reason of the fact that the income on which the tax is levied consists of rentals from such real property.

4. Where a municipal income tax is levied on rentals from real property, the tax is not levied on the property from which the income is derived, there is no invasion of an area of taxation occupied by the state, and the doctrine of pre-emption is without application.

This is an action seeking a declaratory judgment and an injunction against the city of Columbus, Ohio, by a resident of another Franklin County municipality. In his amended petition the plaintiff, appellant herein, alleges that he is the owner of certain real estate located within the city of Columbus which is rented to various tenants from whom he receives rents. The testimony in the trial court developed his ownership of four Columbus properties and the details of the income produced as rentals therefrom.

The plaintiff then alleges the enactment of certain ordinances by the city of Columbus, and at the trial such enactment was stipulated and copies of the ordinances were received in evidence by agreement. The ordinances so placed in the record are No. 1030-52, No. 1209-54 (which amends certain sections of ordinance No. 1030-52), No. 536-56, and No. 1073-56. By and through these ordinances the city established and levied the Columbus city income tax.

The plaintiff next alleges that the authorities of the city of Columbus have 'insisted' that plaintiff include in his individual income tax return to the city of Columbus the income received as rents from his Columbus real estate, alleges that he has exhausted his administrative remedies in 'endeavoring to convince' the municipal taxing authorities that said rents are not subject to the income tax, alleges that he is threatened with 'civil and/or criminal proceedings' to enforce such payment by him, and alleges that he 'desires' to pay the taxes levied by the ordinances referred to if he is legally liable therefor. Plaintiff sets forth five conclusions of law to which he asks the court to subscribe and prays further for an order permanently enjoining the municipal officials from commencing or maintaining any action to enforce the income tax ordinance against him. To the extent necessary for present purposes, the propositions for which the plaintiff prays support appear hereinafter.

The conclusions of the Court of Common Pleas were directly contrary to those set forth by the plaintiff, the court finding that the rents from the Columbus properties are subject to the tax, and that they are not exempted therefrom for any of the statutory or constitutional reasons suggested in the amended petition. The court denied the injunction and rendered judgment for defendant.

Upon appeal on questions of law and fact to the Court of Appeals, that court rendered a similar judgment.

An appeal as of right and the allowance of a motion to certify the record place the cause before this court for decision on its merits.

Willis H. Liggett, Columbus, for appellant.

Russell Leach, City Atty., and John C. Young, Columbus, for appellee.

PECK, Judge.

It would at first blush appear that we have three principal issues here presented, but the plaintiff has clarified the situation with reference to the constitutional considerations by specifically stating that he is not raising the question of the constitutionality of the Columbus city income tax. Indeed, in view of the clear holding of this court in Angell v. City of Toledo 153 Ohio St. 179, 91 N.E.2d 250, there would appear to be no longer any point in further debating the power of an Ohio municipality to levy an income tax, in the absence of a pre-emption of that field of taxation by the state, or the question, which was determined in that case, whether such pre-emption exists.

It therefore becomes necessary to direct our attention only to the contention of the plaintiff that it was not the intention of the city of Columbus to include as taxable income, for the purpose of its income tax, rentals received by nonresident owners of Columbus real estate, or alternatively, if such intention existed it could not be constitutionally implemented.

The legislative intent of the Columbus city council may be ascertained by a consideration of ordinance No. 1073-56, passed July 30, 1956, the most recent of the ordinances referred to in the amended petition. In section 2 thereof a tax at the rate of one per cent per annum is levied upon personal service compensation earned by nonresidents for work done in the city of Columbus and upon 'the net profits earned on and after January 1, 1957, of all unincorporated businesses, professions, or other activities conducted in the city of Columbus by nonresidents.' Since our views with reference to this ordinance will be dispositive of the issues presented, the allied ordinances will not be considered herein.

The ordinance itself defines the word, 'business,' as used in the levying section, as 'an enterprise, activity, profession, or undertaking of any nature conducted for profit or ordinarily conducted for profit.' As used in the levying section, the phrase, 'net profit,' is defined in the ordinance as 'the net gain from the operation of a business, profession, or enterprise, after provision for all costs and expenses incurred in the conduct thereof, either paid or accrued in accordance with the accounting system used, and without deduction of taxes based on income.'

It does not seem to us that the intention of the city of Columbus to levy a tax on the net profits received by the plaintiff from his Columbus properties can be seriously questioned. He himself testified as to the 'reasonable return' from his properties, and detailed operating statements as to each of the subject properties were received in evidence. The definitions of the words and phrases at issue arrayed by the plaintiff from various authorities are interesting and standing alone might be persuasive, but they must fall before the specific definitions adopted by the ordinance itself. In the exercise of the legislative function, a legislative body may define words and phrases used within an enactment, and such definitions will be controlling in making a determination of the legislative intent in adopting that enactment. See 2 Sutherland on Statutory Construction (3 Ed.), 222, Section 3002, and cases therein cited. It is our conclusion that the activities of the plaintiff fall squarely within the definition of 'business' quoted from the ordinance above, and, as a matter of fact, his activities also constitute 'business' under the definition contained in paragraph three of the syllabus of Ransom & Randolph Co. v. Evatt, 142 Ohio St. 398, 52 N.E.2d 738. We conclude further that net rentals received by an owner of real estate within the city of Columbus from properties let by him under such circumstances are included within...

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