Case Title: Panther II Transp., Inc. v. Seville Bd. of Income Tax Review

Citation: 2014-Ohio-1011

Docket Number: 2012-1589

State: ohio

Court: Ohio Supreme Court

Date: 2014-03-19T00:00:00Z

Document:
[Until this opinion appears in the Ohio Official Reports advance sheets, it may be cited as 
Panther II Transp., Inc. v. Seville Bd. of Income Tax Rev., Slip Opinion No. 2014-Ohio-1011.] 
 
 
NOTICE 
This slip opinion is subject to formal revision before it is published in 
an advance sheet of the Ohio Official Reports.  Readers are requested 
to promptly notify the Reporter of Decisions, Supreme Court of Ohio, 
65 South Front Street, Columbus, Ohio 43215, of any typographical or 
other formal errors in the opinion, in order that corrections may be 
made before the opinion is published. 
 
SLIP OPINION NO. 2014-OHIO-1011 
PANTHER II TRANSPORTATION, INC., APPELLEE, v. VILLAGE OF SEVILLE 
BOARD OF INCOME TAX REVIEW ET AL., APPELLANTS. 
[Until this opinion appears in the Ohio Official Reports advance sheets,  
it may be cited as Panther II Transp., Inc. v. Seville Bd. of Income Tax Rev., 
Slip Opinion No. 2014-Ohio-1011.] 
Taxation—Municipal home rule—Exemption of motor-transportation companies 
from municipal income tax—Former R.C. 4921.18 and 4921.25. 
(Nos. 2012-1589 and 2012-1592—Submitted December 11, 2013—Decided 
March 19, 2014.) 
APPEALS from the Court of Appeals for Medina County, Nos. 11CA0092-M and 
11CA0093-M, 2012-Ohio-3525. 
____________________ 
O’NEILL, J. 
{¶ 1} In these appeals, we address a corporate taxpayer’s claim that state 
law exempts it from the imposition of a local income tax on its net profit.  Both 
the Board of Tax Appeals (“BTA”) and the Ninth District Court of Appeals 
agreed that state law preempted the local tax as applied to “motor transportation 
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companies” that are subject to state taxes, fees, and regulatory requirements.  The 
Central Collection Agency (“CCA”) and its tax administrator and the Seville 
Board of Income Tax Review have appealed from the judgment of the court of 
appeals, contending that the state law at issue does not preclude the imposition of 
generally applicable local income taxes.  We disagree and affirm the court of 
appeals’ order. 
Procedural History 
{¶ 2} These consolidated cases are separately filed appeals from the 
same court of appeals decision, one filed by the Seville Board of Income Tax 
Review and the other filed by the CCA and its tax administrator, Nassim Lynch. 
{¶ 3} By letter dated March 5, 2007, appellee, Panther II Transportation, 
Inc., requested refunds for tax years 2005 and 2006 of the amounts paid, totaling 
$161,761.  The claim was predicated on preemption of the village’s income tax 
under former R.C. 4921.25.  By letter dated August 2, 2007, CCA denied the 
refund claim, and Panther appealed to the Seville Board of Income Tax Review.  
That board issued its decision denying the appeal on June 5, 2008, after which 
Panther appealed to the BTA. 
{¶ 4} In its August 23, 2011 decision, the BTA reversed, holding that 
former R.C. 4921.25 did in fact preempt Seville’s tax on net profits as applied to a 
motor-transportation company such as Panther.  Panther II Transp., Inc. v. Seville 
Bd. of Income Tax Review, BTA No. 2008-M-1247, 2011 WL 3795676, *2-3 
(Aug. 23, 2011).  When CCA and the Seville Board of Income Tax Review 
appealed, the Ninth District Court of Appeals affirmed the decision of the BTA.  
2012-Ohio-3525.  Both CCA and the Seville Board of Income Tax Review 
appealed to this court.  We originally denied jurisdiction, but then granted a 
motion for reconsideration and accepted jurisdiction. 
 
 
January Term, 2014 
3 
 
Factual Background 
1.  Seville’s income tax is imposed on an allocated share of corporate net profit 
{¶ 5} In 2005 and 2006, Seville’s income-tax ordinance imposed 
municipal income tax on the “adjusted federal taxable income” of corporations 
that have property, payroll, or receipts within the village limits.  The starting point 
was federal taxable income, after which the ordinance required some adjustments 
to arrive at what was referred to as “adjusted federal taxable income.” 
{¶ 6} Next, a “business allocation percentage” was computed based on 
the location of the corporate taxpayer’s property, payroll, and receipts.  Three 
percentages were calculated, using the property, payroll, and receipts inside the 
village of Seville as numerators; and property, payroll, and receipts everywhere as 
the denominators.  The average of these three percentages was the business-
allocation percentage, which was then multiplied by the taxable net profits to 
derive the net profits allocable to Seville.  That portion of Panther’s income was 
then subjected to Seville’s tax. 
2.  Panther is a regulated entity under state law 
{¶ 7} According to testimony and documentation presented at the BTA, 
Panther has been operating since 1992, holds a certificate of the Federal Highway 
Administration, is registered with the Ohio Public Utilities Commission 
(“PUCO”) as a motor carrier for hire, and holds a certificate of public 
convenience and necessity from the PUCO.  The certificate of public convenience 
and necessity was a requirement for Panther to operate as a “motor transportation 
company” in Ohio pursuant to former R.C. 4905.07 and 4921.10.1  Although the 
                                                 
1 The 129th General Assembly enacted 2012 Am.Sub.H.B. No. 487, effective June 11, 2012.  The 
act completely rewrote R.C. Chapter 4921; among other things, it eliminated the category “motor 
transportation company” and established a new designation “for-hire motor carrier.”  R.C. 4921.01 
and 4921.02.  The statute preserved but recodified two provisions that, in their former iteration, 
are of interest in this case: former R.C. 4921.18, which imposed fees on former motor-
transportation companies, is now codified at various divisions of R.C. 4921.19, while former R.C. 
4921.25—the tax-immunity provision directly at issue in this case—is now codified as modified at 
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federal and state authorities at one time regulated rates, that function was phased 
out, and currently the regulations impose important safety requirements.  As 
Panther’s witness, Allen Motter, explained, the PUCO “give[s] a carrier a life” as 
to its intrastate operations, because former R.C. 4921.10 prohibited operation as a 
motor-transportation company without a certificate issued by PUCO. 
{¶ 8} Panther also presented copies of receipts showing payment of the 
per-vehicle tax imposed by former R.C. 4921.18, which is referred to in the 
statute at issue, former R.C. 4921.25.  Panther maintains that Motter’s testimony 
and the receipts establish that Panther itself paid a substantial amount of fees 
imposed by former R.C. 4921.18.2 
{¶ 9} CCA offered the testimony of Robert G. Meaker, a CPA who is an 
assistant tax administrator at CCA.  Meaker established that Panther had an 
extensive history of filing and paying municipal income taxes on its net profits, 
both in Medina and in Seville.  This course of performance supposedly establishes 
a general understanding that state law does not preempt the tax as to motor-
transportation companies.  However, statements by amici Con-Way Freight, Inc. 
and United Parcel Service indicate that, for the most part, trucking companies 
have successfully persuaded local governments that former R.C. 4921.25 does 
preempt the tax. 
Analysis 
{¶ 10} Three provisions of the Ohio Constitution underlie the statutory 
issue presented in this case. 
                                                                                                                                     
R.C. 4921.19(J).  Because this case involves refund claims for tax years 2005 and 2006, we will 
refer to the former version of the statutes that were in effect at that time and to “motor 
transportation company” as the category of regulated entity. 
 
2 There is some dispute about the testimony in this regard.  CCA’s cross-examination of Motter 
focused on the fact that Panther owns trailers but not tractors.  Tractors were taxed under former 
R.C. 4921.18, but trailers were not. 
January Term, 2014 
5 
 
{¶ 11} First, the Home Rule Amendment, Article XVIII, Section 3 of the 
Constitution, confers upon municipalities the “authority to exercise all powers of 
local self-government,” and there can be “ ‘no doubt that the grant of authority to 
exercise all powers of local government includes the power of taxation.’ ”  
Cincinnati Bell Tel. Co. v. Cincinnati, 81 Ohio St.3d 599, 602, 693 N.E.2d 212 
(1998), quoting State ex rel. Zielonka v. Carrel, 99 Ohio St. 220, 227, 124 N.E. 
134 (1919).  Second, Article XIII, Section 6 provides that the General Assembly 
“shall provide for the organization of cities, and incorporated villages, by general 
laws, and restrict their power of taxation * * * so as to prevent the abuse of such 
power.”  Third, under Article XVIII, Section 13, “[l]aws may be passed to limit 
the power of municipalities to levy taxes and incur debts for local purposes * * *.”  
Thus, municipal governments have a plenary power to tax, but the General 
Assembly has authority to impose specific limits on that power.  Cincinnati Bell 
at 602; see also Gesler v. Worthington, ___ Ohio St.3d ___, 2013-Ohio-4986, ___ 
N.E.2d ___, ¶ 17, 21.  Moreover, we have held that the state’s power to preempt 
must be exercised by express provision; we will not imply a preemption merely 
by virtue of the state’s entering a particular area of taxation itself.  Cincinnati Bell 
at 605. 
{¶ 12} The question before us concerns the preemptive scope of former 
R.C. 4921.25, 1953 H.B. No. 1: 
 
The fees and charges provided under section 4921.18 of the 
Revised Code shall be in addition to taxes, fees, and charges fixed 
and exacted by other sections of the Revised Code * * *, but all 
fees, license fees, annual payments, license taxes, or taxes or other 
money exactions, except the general property tax, assessed, 
charged, fixed, or exacted by local authorities such as municipal 
corporations, townships, counties, or other local boards, or the 
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officers of such subdivisions are illegal and, are superseded by 
sections 4503.04, 4905.03, and 4921.02 to 4921.32, inclusive, of 
the Revised Code.  On compliance by such motor transportation 
company with sections 4503.04, 4905.03, and 4921.02 to 4921.32, 
inclusive, of the Revised Code, all local ordinances, resolutions, by 
laws, and rules in force shall cease to be operative as to such 
company, except that such local subdivisions may make reasonable 
local police regulations within their respective boundaries not 
inconsistent with such sections. 
 
(Emphasis added.) 
{¶ 13} The focal point of the dispute in this case is the preemptive sweep 
of the italicized language: does the statute broadly exempt motor-transportation 
companies from generally applicable local taxes, or is the preemption limited to 
regulatory fees and taxes, as CCA and the village tax review board contend? 
{¶ 14} We think that former R.C. 4921.25 by its plain and expansive 
terms shows the General Assembly’s intent to impose the broadest possible 
preemption of local taxing power.  Far from limiting the scope of that preemption 
to regulatory fees and taxes, the statute unmistakably expands the preemption to 
encompass generally applicable taxes, including the tax on corporate net profits at 
issue here.  The list of precluded levies includes not only “all fees, license fees, 
annual payments, license taxes,” but extends beyond that to “taxes or other money 
exactions.”  The General Assembly could not have expressed itself more clearly: 
all monetary “exactions” of any kind, be they regulatory or ordinary tax measures, 
are declared to be “illegal” and “superseded” by state-law regulatory provisions.3   
                                                 
3 CCA attempts to accord “exaction” a limited meaning, but in actual usage the term connotes the 
broadest sense in which government demands money from the citizenry.  For a persuasive 
example, we look no further than the United States Supreme Court case addressing the 
January Term, 2014 
7 
 
{¶ 15} Any remaining doubt as to the breadth of the statute’s scope is 
removed by the explicit saving of “general property tax”: because the scope of 
preemption broadly extended to generally applicable taxes, it became necessary to 
expressly permit the property tax to be imposed.  Nor is there any merit to CCA’s 
claim that reading the statute literally leads to a chamber of horrors.  For example, 
CCA argues that a literal reading of former R.C. 4921.25’s broad language would 
lead to a preemption of local building and zoning ordinances.  But the legislature 
already preserved those local ordinances: former R.C. 4921.25 expressly 
permitted “reasonable local police regulations” not in conflict with the state law. 
{¶ 16} In light of the clear import of the statutory language, our duty is to 
apply the statute rather than interpret it, as CCA would have us do here.  
Lancaster Colony Corp. v. Limbach, 37 Ohio St.3d 198, 199, 524 N.E.2d 1389 
(1988), citing Provident Bank v. Wood, 36 Ohio St.2d 101, 105-106, 304 N.E.2d 
378 (1973); Sears v. Weimer, 143 Ohio St. 312, 55 N.E.2d 413, paragraph five of 
the syllabus. 
{¶ 17} Against our straightforward reading of the words of the statute, 
CCA argues that at the time the statute became law as part of the Ohio Motor 
Transportation Act in 1923, G.C. 614-98, H.B. No. 474, 110 Ohio Laws 211-223, 
there were no local income taxes in Ohio.  Indeed, the constitutionality of such 
taxes was established many years after the enactment of the preemption provision.  
See Angell v. Toledo, 153 Ohio St. 179, 91 N.E.2d 250 (1950), paragraph one of 
                                                                                                                                     
constitutionality of the Patient Protection and Affordable Care Act.  Writing for a majority of 
justices, Chief Justice Roberts concluded that the monetary payment Congress enacted as a 
“penalty” could properly be understood as a “tax” within Congress’s taxing power.  The chief 
justice used the word “exaction” repeatedly as a broad and neutral term that avoided the pitfall of 
using either the narrower term “penalty” or the narrower term “tax.”  Natl. Fedn. of Indep. 
Business v. Sibelius, ___ U.S. ___, 132 S.Ct. 2536, 2594-2601, 183 L.Ed.2d 450 (2012).  The four 
justices who dissented from that ruling also used the word “exaction” in the very same broad and 
neutral sense.  Id. at 2651-2655. 
 
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the syllabus.4  But CCA’s argument lacks merit because R.C. 4921.25 by it terms 
does not limit its preclusive effect to taxes on the books on the date of its 
enactment; to the contrary, the statute broadly preempts without regard to when 
the municipality might choose to pass a new tax ordinance. 
{¶ 18} To bolster its position, CCA reiterates the central holding of 
Cincinnati Bell that “a proper exercise of [the power to limit the taxing authority 
of municipalities under Ohio Constitution Article XVIII, Section 13] requires an 
express act of restriction by the General Assembly.”  Cincinnati Bell, 81 Ohio 
St.3d at 605, 693 N.E.2d 212.  Because former R.C. 4921.25 does not explicitly 
mention a prohibition of local income taxes, the imposition of those taxes has 
supposedly not been subjected to “an express act of restriction.” 
{¶ 19} That argument is mistaken because it confuses two different 
things:  explicitness on the one hand and specificity on the other.  Cincinnati Bell 
does require “an express act of restriction by the General Assembly” for local 
taxes to be preempted.  Id.  Consistent with that requirement, former R.C. 4921.25 
very explicitly states that local taxes are “illegal” and “superseded.” 
{¶ 20} But Cincinnati Bell does not state that an express preemption must 
specifically identify the tax to be preempted.  Nor does it necessarily follow that 
the legislature must specifically have that tax in mind (here, an income tax that 
did not exist when the predecessor of former R.C. 4921.25 was enacted) as the 
type of tax that will be preempted.  Indeed, in the context of Cincinnati Bell’s 
reasoning, the requirement of “an express act of restriction” means only that the 
state does not preempt local taxes merely by enacting a similar tax of its own. 
                                                 
4 CCA quotes a passage of Angell, paragraph two of the syllabus, to the effect that “the General 
Assembly has not * * * passed any law limiting the power of municipal corporations to levy and 
collect income taxes.”  This pronouncement, according to CCA, shows that R.C. 4921.25, the 
predecessor of which, G.C. 614-98, was on the books when Angell was decided, cannot be read to 
preempt an income tax.  That argument has no merit.  In context, the syllabus merely asserts that 
no general limitation of the local power to impose income taxes had been enacted by the General 
Assembly as of the date on which Angell was decided.  The Angell court was not asserting that no 
state laws precluded the imposition of a local income tax under particular circumstances. 
January Term, 2014 
9 
 
{¶ 21} Equally unavailing is CCA’s reliance on R.C. Chapter 718.  CCA 
points to R.C. 718.01(D)(1)’s requirement that “no municipal corporation shall 
exempt from a tax on income * * * the net profit from a business or profession.” 
Contrary to CCA’s suggestion, this provision on its face does not somehow 
mandate taxation of Panther.  The argument is flawed for two reasons.  First, R.C. 
718.01(D)(1) by its terms restricts the acts of the local government, not other laws 
enacted by the General Assembly itself.  Second, as the Ninth District pointed out, 
R.C. 718.01(J) specifically prevents R.C. Chapter 718 from superseding other 
state-law restrictions on the local taxing power:  “Nothing in this section or 
section 718.02 of the Revised Code shall authorize the levy of any tax on income 
that a municipal corporation is not authorized to levy under existing laws * * *.”  
CCA completely ignores this provision. 
{¶ 22} Additionally, CCA contends that Panther is not exempt if its 
contractors pay the fees imposed by R.C. 4921.18.  Panther owns primarily 
trailers, which are not subject to the fees, but usually does not own the tractors, 
which are.  Panther contracts with the owner-operators of the tractors, and CCA 
asserts that “[u]nder Panther’s owner-operator lease agreement, it is clear that the 
parties have ‘contractually’ agreed that the owner-operators will pay the R.C. 
4921.18 tax.”  But the plain language of former R.C. 4921.25 preempts locally 
imposed taxes based on the regulatory status of the potential taxpayer.  Namely,  
the statute declares local taxes to be “illegal” because they are “superseded by 
sections 4503.04, 4905.03, and 4921.02 to 4921.32, inclusive, of the Revised 
Code,” i.e., the provisions regulating a former “motor transportation company” 
(currently, a “for-hire motor carrier”) such as Panther.  Nothing in the statute 
conditions the exemption on the allocation of financial burdens under the parties’ 
contracts. 
{¶ 23} Finally, CCA contends that the principle of strict construction that 
we apply to tax exemptions requires us to restrict the scope of former R.C. 
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4921.25.  To be sure, “[t]ax exemption statutes must be strictly construed,” a 
principle necessary “in order to preserve equality in the burden of taxation.”  
Lutheran Book Shop v. Bowers, 164 Ohio St. 359, 362, 131 N.E.2d 219 (1955).  
But that principle does not help CCA.  As a potential taxpayer, Panther had the 
onus of showing that “the language of the statute ‘clearly express[es] the 
exemption’ in relation to the facts of the claim.”  Anderson/Maltbie Partnership v. 
Levin, 127 Ohio St.3d 178, 2010-Ohio-4904, 937 N.E.2d 547, ¶ 16, quoting Ares, 
Inc. v. Limbach, 51 Ohio St.3d 102, 104, 554 N.E.2d 1310 (1990).  It did so by 
showing that it was regulated as a motor-transportation company and that former 
R.C. 4921.25 preempted local taxes as applied to such entities.  Under strict 
construction, nothing more was required. 
Conclusion 
{¶ 24} For the foregoing reasons, we conclude that the BTA and the Ninth 
District Court of Appeals correctly determined that Seville’s tax on corporate net 
profits was preempted by former R.C. 4921.25.  We therefore affirm the judgment 
of the court of appeals. 
Judgment affirmed. 
O’CONNOR, C.J., and O’DONNELL, LANZINGER, KENNEDY, and FRENCH, 
JJ., concur. 
PFEIFER, J., dissents. 
____________________ 
PFEIFER, J., dissenting. 
{¶ 25} In Cincinnati Bell Tel. Co. v. Cincinnati, 81 Ohio St.3d 599, 693 
N.E.2d 212 (1998), syllabus, this court held, “The taxing authority of a 
municipality may be preempted or otherwise prohibited only by an express act of 
the General Assembly. Section 13, Article XVIII, and Section 6, Article XIII, 
Ohio Constitution.”  When the predecessors of former R.C. 4921.18 and 4921.25 
were enacted as part of the Ohio Motor Transportation Act in 1923, there were no 
January Term, 2014 
11 
 
municipal income taxes in Ohio.  Thus, the imposition of a municipal income tax 
on motor carriers was not expressly prohibited or preempted by the General 
Assembly by those statutes. 
{¶ 26} The Ohio Motor Transportation Act prevented motor carriers from 
having to traverse through a treacherous, winding road of local fees and licensure, 
streamlining the process statewide into an easily navigable system.  The General 
Assembly made clear that it intended to preempt only the area of transportation-
related taxes and fees when it excepted “the general property tax” from the scope 
of the statute in R.C. 4921.25.  Again, there were no municipal income taxes to 
except from the statute. 
{¶ 27} Furthermore, the income of a motor-transportation company is 
clearly not exempt from municipal income taxation under R.C. 718.01 or 715.013.  
The majority decision holding that the income of a motor-transportation company 
is now exempt from municipal income tax because of a law enacted in 1923 that 
taxes motor-transportation companies by the vehicle, G.C. 614-94, now R.C. 
4921.18, and has nothing to do with the income of a motor-transportation 
company is counterintuitive and runs counter to this court’s holding in Angell v. 
Toledo, 153 Ohio St. 179, 91 N.E.2d 250 (1950), paragraph two of the syllabus, 
which recognized the power of Ohio municipalities to levy and collect income 
taxes and noted that “the General Assembly has not * * * passed any law limiting 
[that] power.” 
{¶ 28} Finally, we must strictly construe tax-exemption statutes “in order 
to preserve equality in the burden of taxation.” Lutheran Book Shop v. Bowers, 
164 Ohio St. 359, 362, 131 N.E.2d 219 (1955).  It seems that the majority strains 
the relevant statutes beyond recognition to find an exemption from municipal 
income tax for an industry that never asked for it. 
____________________ 
 
 
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Calfee, Halter & Griswold, L.L.P., and James F. Lang, for appellee. 
 
Roderick Linton Belfance, L.L.P., and Theodore J. Lesiak, for appellant 
Village of Seville Board of Income Tax Review. 
 
Barbara A. Langhenry, Cleveland Director of Law, and Linda L. 
Bickerstaff, Assistant Director of Law, for appellants Nassim M. Lynch and 
Central Collection Agency. 
 
Zaino, Hall & Farrin, L.L.C., and Richard C. Farrin, urging affirmance for 
amicus curiae United Parcel Service, Inc. 
 
Schumaker, Loop & Kendrick, L.L.P., and Michael M. Briley, urging 
affirmance for amicus curiae the Dump Truck Carriers Conference. 
 
AldenLaw, John L. Alden, and Anthony E. Palmer Jr., urging affirmance 
for amicus curiae the Ohio Trucking Association. 
 
Benesch, Friedlander, Coplan & Aronoff, L.L.P., and Marc S. Blubaugh, 
urging affirmance for amicus curiae Con-way Freight, Inc. 
 
Ice Miller, L.L.P., Philip Hartmann, Rebecca K. Schaltenbrand, and 
Stephen J. Smith; and John Gotherman, Ohio Municipal League, urging reversal 
for amicus curiae Ohio Municipal League. 
_________________________