New tax appeal procedure threatens taxpayer right to uniform application of tax law

Blog Post
Tucked away in Ohio’s biennial budget bill for fiscal years 2018 and 2019 was an ancillary “rider” provision that fundamentally changes the procedure for contesting Ohio taxes. The budget bill eliminates the direct right of appeal from the Ohio Board of Tax Appeals (BTA) to the Ohio Supreme Court, which had been in place since 1939. For decades, the Supreme Court acted as a backstop of sorts to ensure that Ohio tax laws were uniformly applied across the state.

The new procedure does not provide the same protection. Appeals from BTA decisions may now be taken only to one of 12 county courts of appeals. The court of appeals that may take the case depends, among other things, on the individual taxpayer’s residence, a company’s principal place of business, or the location of real property at issue in the appeal. The loser at the court of appeals may still appeal to the Supreme Court, but that Court may accept or deny each case at its discretion.

Under the new procedure, taxpayers no longer have a right to be heard in a statewide court of last resort that uniformly interprets Ohio tax laws. The procedure could also lead to confusion and inconsistent tax treatment if, for example, two courts of appeals addressing the same issue reach different conclusions. Court of appeals decisions in tax appeals generally do not have binding force beyond the court’s district. Even if a court of appeals rules on an issue, the tax commissioner is not bound to apply the law beyond the district. For issues where courts of appeals diverge, the application of Ohio tax laws could depend on the arbitrary distinction of where in the state the taxpayer is located. A business taxpayer with multiple locations across the state could even experience inconsistent treatment within the same business.

Of note, the new procedure does allow for appeals from the BTA to the Supreme Court in some circumstances, though it is not clear when. Ohio Revised Code Section 5717.04, as amended, provides that a party appealing a BTA decision to a court of appeals may also petition the Supreme Court to hear the case if there is “a substantial constitutional question or a question of great general or public interest.” The meaning of these key phrases, however, is uncertain and the law does not automatically stay the appeals court proceedings if a petition is filed with the Supreme Court. Thus, much remains to be seen as to how the new procedure will work in practice.


The reasons for this change remain unknown because the legislative procedure for enacting this new tax procedure was itself deficient. The General Assembly made this change at the eleventh hour in the budget process without holding any legislative hearings. The new tax appeals procedure was added to the budget bill through an amendment introduced at the last minute, just eight days prior to the bill’s final passage. Adding to the mystery, the interests advocating for the new procedure remain unknown and undisclosed.

Even more fundamentally, the new procedure is arguably unconstitutional for violating the single subject rule. Article II, Section 15(D) of the Ohio Constitution provides that “[n]o bill shall contain more than one subject, which shall be clearly expressed in its title.” This single subject rule is designed to prevent “riders” to legislative bills from becoming law on the merits of the law to which it was attached – here the biennial budget bill. Because so many laws relate to appropriations, the budget bill is often used as a vehicle for lawmakers to enact distantly related provisions.

But, the new tax appeals procedure adds a new subject to the budget bill that is far removed from the appropriation “subject” that ties the bill together. And the single subject rule has teeth, even in the context of a broadly-reaching budget bill. In 1999, for example, the Ohio Supreme Court invoked the single subject rule to strike down a school voucher program included in the biennial budget bill for the 1996 and 1997 fiscal years. Like that school voucher program, the hastily enacted tax appeals procedure may add another subject to the budget bill and violate the single subject rule.

Barring any challenge to the new procedure in the budget bill, however, businesses and tax practitioners alike must adapt to the new and uncertain environment. The Ohio Supreme Court, on the other hand, may enjoy a noticeably lighter docket, free from contentious and complex tax cases.

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