McConnell v. City of Columbus

• Decision Date: 29 March 1961
• Docket Number: No. 36698,36698
• Parties: , 15 O.O.2d 168 McCONNELL, Appellant, v. CITY OF COLUMBUS et al., Appellees.
• Court: Ohio Supreme Court

Page 95

172 Ohio St. 95

173 N.E.2d 760, 15 O.O.2d 168

McCONNELL, Appellant, v. CITY OF COLUMBUS et al., Appellees.

No. 36698.

Supreme Court of Ohio.

March 29, 1961.

Syllabus by the Court.

1. A city may levy a tax on income earned within that city by a nonresident thereof. Angell v. City of Toledo, 153 Ohio St. 179, 91 N.E.2d 250, followed.

2. A nondiscriminatory tax on income earned for services rendered to or work done for a government does not represent a legally recognizable interference with the activities of that government so as to constitute a tax upon that government.

3. The application of the Columbus income tax to tax compensation paid by Ohio State University for services performed for that university, which is an instrumentality of the state, does not represent a legally, recognizable interference with the activities of that university or of the state so as to constitute a tax upon either.

4. Ownership and use of an area within the boundaries of a municipal corporation by Ohio State University do not have the effect of detaching or withdrawing that area from the confines of the municipal corporation.

5. Columbus has the power and duty to provide the area in Columbus owned and operated by Ohio State University with the same police and fire protection that is afforded by Columbus to other property owners in Columbus.

6. Since Columbus affords those nonresidents of Columbus who earn income in the area within Columbus owned and operated by Ohio State University not only a place to work within its boundaries but also a place to work protected by its municipal government, there is sufficient fiscal relationship between the Columbus income tax on such income and the protections, opportunities and benefits made available by Columbus with respect to that area (assuming the necessity of such fiscal relationship) to justify Columbus in imposing that tax on such income.

7. Columbus may levy an income tax on compensation earned by a nonresident of the city for services paid for by Ohio State University and performed for it within that portion of the property of Ohio State University located within the boundaries of Columbus.

This action for a declaratory judgment questions the application of the Columbus city income tax to plaintiff and others similarly situated, sometimes referred to herein as plaintiff's class.

Admittedly, the city of Columbus, herein referred to as Columbus, has levied a tax of one per cent per annum upon 'all salaries, wages, commissions and other personal service compensation earned * * * by nonresidents of * * * Columbus for work done or services performed or rendered in * * * Columbus.'

The Common Pleas Court made separate findings of fact and conclusions of law and rendered judgment for Columbus and against plaintiff and his class.

So far as pertinent, its findings of fact read:

'1. * * * all persons in plaintiff's class are, and were * * * nonresidents of * * * Columbus * * *

'2. * * * all [their] wages and salaries * * * were earned for work done, or services performed, on university property and within The Ohio State University's jurisdiction * * * in [a certain specified area] * * * in Columbus; * * *

'4. * * * all said wages and salaries were paid by The Ohio State University;

'5. * * * the action taken in the [1870] annexation of certain property to * * * Columbus * * * duly conformed to the requirements of law at that time, and * * * the area involved therein is the same * * * in which * * * plaintiff's class are employed.'

The Court of Appeals affirmed the judgment of the Common Pleas Court.

The cause is now before this court on plaintiff's appeal as of right from the judgment of the Court of Appeals and pursuant to allowance of plaintiff's motion to certify the record.

W. Robinson Watters, Columbus, for appellant.

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

TAFT, Judge.

The question to be decided is whether Columbus may levy an income tax on compensation earned by a nonresident of the city for services paid for by Ohio State University and performed for it within that portion of the property of Ohio State University located within the boundaries of the city.

This court has previously held that a city may levy a tax on income earned within that city by a nonresident thereof. Angell v. City of Toledo, 1950, 153 Ohio St. 179, 91 N.E.2d 250. See also Benua v. City of Columbus, 1959, 170 Ohio St. 64, 162 N.E.2d 467.

At one time, it was considered that any tax by one government on income received from another government would represent such an undue interference with the governmental activities of the latter government as to constitute a tax upon that latter government or its activities.

However, since the decision in Graves v. People of State of New York ex rel. O'Keefe, 1939, 306 U.S. 466, 59 S.Ct. 595, 83 L.Ed. 927, 120 A.L.R. 1466, it no longer can be seriously argued that a nondiscriminatory tax on income earned for services rendered to or work done for a government represents a legally recognizable interference with the activities of that government so as to constitute a tax upon that government. In that case, which was decided before enactment of any federal statute providing for taxation by a state or its subdivisions of income received from the federal government, several prior decisions were overruled and it was held that such income was subject to taxation. See also Metcalf & Eddy v. Mitchell, 1926, 269 U.S. 514, 46 S.Ct. 172, 70 L.Ed. 384 (upholding federal tax on income from contract with state); James v. Dravo Contracting Co., 1937, 302 U.S. 134, 58 S.Ct. 208, 82 L.Ed. 155, 114 A.L.R. 318 (upholding state tax on income from contract with federal government); Helvering v. Mountain Producers Corp., 1938, 303 U.S. 376, 58 S.Ct. 623, 82 L.Ed. 907 (upholding federal tax on income from lands leased from state); Helvering v. Gerhardt, 1938, 304 U.S. 405, 58 S.Ct. 969, 82 L.Ed. 1427 (upholding federal tax on salary of state employee); Marson v. Philadelphia, 1941, 342 Pa. 369, 21 A.2d 228 (upholding city income tax on state officers and employees); Fordham and Mallison, Local Income Taxation (1950), 11 Ohio State Law Journal, 217, 254.

In our opinion, the application of the Columbus income tax to tax compensation paid by Ohio State University for services performed for that university, which is an instrumentality of the state, does not represent a legally recognizable interference with the activities of that university or of the state so as to constitute a tax upon either. This conclusion also necessarily follows from the decision in and that part of the syllabus of Benua v. Columbus, supra, 170 Ohio St. 64, 162 N.E.2d 467, 468, which reads:

'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 [i. e., taxation of real estate], and the doctrine of pre-emption is without application.' But, cf. Ohio Finance Co. v. City of Toledo, 1955, 163 Ohio St. 81, 125 N.E.2d 731, where it was held that the General Assembly, pursuant to Section 13 of Article XVIII and Section 6 of Article XIII of the Ohio Constitution, had enacted legislation having the effect of limiting the power of a city to tax certain income. See also Glander, Pre-emption Doctrine (1960), 21 Ohio State Law Journal, 343, 353.

Plaintiff contends that the jurisdiction of Columbus to levy an income tax against a nonresident cannot, as it can with a resident, be based upon the presence of the taxpayer in Columbus, but must be based upon the power of Columbus over the income earned by the taxpayer in Columbus. If we assume that that contention is sound, the question then arises whether Columbus has power to tax income earned by a nonresident taxpayer in that part of Columbus which is in the area under control of the trustees of Ohio State University.

There are no statutory or constitutional provisions...