[Until this opinion appears in the Ohio Official Reports advance sheets, it may be cited as 

MacDonald v. Shaker Hts. Bd. of Income Tax Rev., Slip Opinion No. 2015-Ohio-3290.] 

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. 2015-OHIO-3290

MACDONALD ET AL., APPELLEES, v. SHAKER HEIGHTS BOARD OF INCOME TAX 

REVIEW, APPELLEE; THE CITY OF SHAKER HEIGHTS ET AL., APPELLANTS. 

[Until this opinion appears in the Ohio Official Reports advance sheets, it 

may be cited as MacDonald v. Shaker Hts. Bd. of Income Tax Rev., 

Slip Opinion No. 2015-Ohio-3290.] 

Taxation—Appeals——R.C. 5717.011—Standard of review for appeal to Board of 

Tax Appeals pursuant to R.C. 5717.011 is de novo as to both facts and 

law.

(No. 2014-0574—Submitted June 24, 2015—Decided August 19, 2015.) 

APPEAL from the Court of Appeals for Franklin County, No. 13AP-71, 

2014-Ohio-708. 

____________________ 

SYLLABUS OF THE COURT

The standard of review for an appeal to the Board of Tax Appeals pursuant to 

R.C. 5717.011 is de novo as to both facts and law. 

____________________ 
SUPREME COURT OF OHIO

2

O’NEILL, J.

{¶ 1} Before retiring as of December 31, 2006, William E. MacDonald III 

was an executive of the former National City Corporation in Cleveland. National 

City offered a “supplemental executive retirement plan” or “SERP” for its 

executives. Although for some tax purposes the SERP constituted an “unqualified 

deferred compensation plan,” MacDonald did not make contributions during his 

employment to fund the plan. As he neared retirement, MacDonald selected an 

option under that plan consisting not of a lump-sum payout but rather an annuity 

that would make periodic payments designed to replace a percentage of his 

income once he was no longer working. 

{¶ 2} Because of MacDonald’s retirement and his SERP election, in 

preparing MacDonald’s W-2 tax document, National City included an amount in 

box 5 (the “Medicare wages” box) that reflected the present value of his future 

annuity payments which was $9,107,014. But National City deliberately omitted 

this amount from box 18 of the W-2, which is the “local wages” box pertaining to 

municipal income tax, and accordingly the MacDonalds did not pay Shaker 

Heights income tax on that amount. 

{¶ 3} The substantive issue presented and decided below—first by the city 

tax administrator, then by the municipal tax board, the Board of Tax Appeals 

(“BTA”), and the Tenth District Court of Appeals, in that order—is whether, for 

tax year 2006, the present value of MacDonald’s future annuity payments 

qualifies as taxable wages or as a “pension” under a Shaker Heights ordinance 

that exempts pensions from the municipal income tax. The city—both the tax 

administrator and the municipal tax board—held that the amount at issue were 

subject to municipal income tax. The BTA reversed, and the Tenth District 

affirmed the BTA. 

{¶ 4} On appeal to this court, the city sought to raise two issues: the 

substantive issue whether the tax was properly levied on the benefits at issue, and 
January Term, 2015 

3

a procedural issue whether the BTA violated a duty of deference to the 

determination of the municipal tax board. We declined jurisdiction over the 

substantive issue, but we accepted jurisdiction over the procedural issue. 139 

Ohio St.3d 1470, 2014-Ohio-3012, 11 N.E.3d 1192. 

{¶ 5} Accordingly, the substantive tax issue is not before this court, and 

we consider only the standard of review that the BTA should employ when it 

confronts an appeal pursuant to R.C. 5717.011 from a municipal income tax 

review board. The appellants are the city of Shaker Heights, the income tax 

administrator for the city, and the Regional Income Tax Agency (“RITA”), which 

administers the municipal income tax on behalf of the city. For convenience, we 

will refer to the appellants collectively as “the city.” 

{¶ 6} The city argues that when the General Assembly enacted R.C. 

5717.011 in 2003, authorizing appeal to the BTA in addition to the preexisting 

right of appeal to the common pleas courts under R.C. Chapter 2506, the 

legislature must have intended that the BTA review decisions of the municipal tax 

boards using the same standard of review that applies under R.C. Chapter 2506. 

We disagree. Because there is no indication of any such intent in R.C. 5717.011, 

and because that section parallels the other statutes providing for appeals to the 

BTA at R.C. 5717.01 and 5717.02, we hold that the BTA’s standard of review 

under R.C. 5717.011 is de novo as to both facts and law. We therefore affirm the 

judgment of the Tenth District Court of Appeals. 

COURSE OF PROCEEDINGS BELOW

The tax assessment against the MacDonalds 

{¶ 7} This case originated with the filing of the MacDonalds’ 2006 

municipal income tax return. As discussed, MacDonald retired from his 

executive position at National City as of December 31, 2006. He selected, as 

indicated, a SERP annuity option, and as a result, its present value of $9,107,013 

was reported on the W-2 form, but not as wages for municipal income tax 
SUPREME COURT OF OHIO

4

purposes. RITA issued a tax assessment, which the MacDonalds contested. Their 

initial appeal was unsuccessful; the municipal tax appeal board upheld the 

assessment. 

The BTA proceedings and decision 

{¶ 8} The MacDonalds appealed to the BTA, which held a hearing on 

September 9, 2010. On December 28, 2012, the BTA issued its decision, which 

held that the amount at issue was exempt from taxation under the pension 

exclusion in the Shaker Heights tax ordinance. 

{¶ 9} The BTA did address the issue of its standard of review in passing. 

The board cited Tetlak v. Bratenahl, 92 Ohio St.3d 46, 748 N.E.2d 51 (2001), for 

the proposition that the municipal tax board’s findings should be presumed valid. 

It also noted that this court had not yet ruled on the standard of review under the 

newly enacted provision for appealing to the BTA rather than the common pleas 

court. Id. at *2. 

{¶ 10} Because the BTA had ruled in favor of the MacDonalds, it was 

now the city’s turn to appeal, and it elected to appeal to the Tenth District Court 

of Appeals. See R.C. 5717.04. The case was briefed and argued, and on February 

27, 2014, the Tenth District issued its decision. In a two-to-one opinion for the 

court, Judge Klatt recited the history of the case and the nature of the income at 

issue and addressed the two assignments of error. The first assignment concerned 

the merits, and the Tenth District affirmed the BTA’s approach and 

determination. A second assignment objected to the BTA’s permitting further 

testimony on appeal and its conducting “de novo review” of the municipal tax 

board’s decision. Here the Tenth District held that the restrictive review under 

R.C. Chapter 2506 did not apply because the BTA appeal statute, R.C. 5717.011, 

had materially different language and should not be read as incorporating those 

restrictions. 
January Term, 2015 

5

{¶ 11} The city appealed to this court, seeking review on both points. We 

accepted jurisdiction over the procedural issue only. 

R.C. 5717.011 REFLECTS THE GENERAL ASSEMBLY’S INTENT TO MAKE DE NOVO 

BTA REVIEW AVAILABLE IN MUNICIPAL INCOME TAX CASES

Before 2003, municipal income tax cases were appealable under R.C. Chapter 

2506 to the common pleas courts, but not to the BTA 

{¶ 12} R.C. Chapter 2506 generally provides for appeals to the common 

pleas court from administrative decisions by officers and agencies, including 

boards, of any political subdivision in Ohio. R.C. 2506.01(A). This has long 

included appeals from decisions of municipal tax boards. See, e.g., May Dept. 

Stores Co. v. Parma Taxation Div., 8th Dist. Cuyahoga App. No. 49844, 1985 

WL 4353 (Dec. 12, 1985). Beginning in 2003, the legislature created an 

alternative route of appeal to the BTA. R.C. 5717.011, Am.Sub.H.B. No. 95, 

125th General Assembly, 150 Ohio Laws, Part II, 1894-1895. 

{¶ 13} Appeals taken under R.C. Chapter 2506 go to the common pleas 

court, and the hearing of the appeal “shall proceed as in the trial of a civil action,” 

except that the court is confined to the evidentiary transcript created before the 

administrative authority below unless one of five criteria is present—all of which 

relate to some deficiency in the proceedings below. R.C. 2506.03(A). Finally, 

the standard of review prescribed by R.C. Chapter 2506 is deferential on issues of 

fact, though it is generally plenary on issues of law. See R.C. 2506.04: 

[T]he [common pleas] court may find that the order, adjudication, 

or decision is unconstitutional, illegal, arbitrary, capricious, 

unreasonable, or unsupported by the preponderance of substantial, 

reliable, and probative evidence on the whole record. Consistent 

with its findings, the court may affirm, reverse, vacate, or modify 

the order, adjudication, or decision, or remand the cause to the 
SUPREME COURT OF OHIO

6

officer or body appealed from with instructions to enter an order, 

adjudication, or decision consistent with the findings or opinion of 

the court. 

{¶ 14} The oft-quoted formulation of the standard of review under R.C. 

2506.04 comes from a case that involved a common pleas court’s review of a 

decision terminating the employment of a city employee: 

[I]t is quite evident that the Court of Common Pleas must 

weigh the evidence in the record, and whatever additional evidence 

may be admitted pursuant to R.C. 2506.03, to determine whether 

there exists a preponderance of reliable, probative and substantial 

evidence to support the agency decision. We caution, however, to 

add that this does not mean that the court may blatantly substitute 

its judgment for that of the agency, especially in areas of 

administrative expertise. 

Dudukovich v. Lorain Metro. Housing Auth., 58 Ohio St.2d 202, 207, 389 N.E.2d 

1113 (1979). 

Even under R.C. Chapter 2506, an administrative agency’s construction of local 

tax ordinances is reviewed de novo by the courts 

{¶ 15} One aspect of R.C. 2506.04 must be noted at the outset. On its 

face, the statute calls for review of the administrative decision for its 

constitutionality and legality—and there is no restriction placed upon that power 

of review. This contrasts with R.C. 2506.04’s treatment of factual issues, which 

calls for review of the administrative decision to determine whether it is 

“arbitrary, capricious, unreasonable, or unsupported by the preponderance of 

substantial, reliable, and probative evidence on the whole record.” The appellate 
January Term, 2015 

7

decisions in tax cases do not indicate that any deference is owed to the municipal 

tax board on issues of law. See Cincinnati Bengals, Inc. v. Papania, 92 Ohio 

App.3d 785, 787-788, 637 N.E.2d 330 (1st Dist.1993) (affirming the common 

pleas court’s reversal of income tax assessment on the legal ground that the 

income at issue constituted “intangible income” exempt from city tax pursuant to 

the ordinance); Cincinnati Bell Tel. Co. v. Cincinnati, 1st Dist. Hamilton Nos. C950931, C-950932, and C-950933, 1996 WL 733154, *1 (Dec. 24, 1996) (“on 

issues of law this court conducts a de novo review”), rev’d on other grounds, 81 

Ohio St.3d 599, 693 N.E.2d 212 (1998); Wardrop v. Middletown Income Tax 

Review Bd., 12th Dist. Butler No. CA2007-09-235, 2008-Ohio-5298, ¶ 14 (“The 

trial court’s application of law to undisputed facts involves a ‘question of law’ 

that we may review under R.C. Chapter 2506”). Quite simply, neither the statute 

nor the case law provides support for the city’s argument that any deference 

would be owed by the common pleas court to the municipal tax board on a 

question of law. As a result, even if the BTA’s standard of review under R.C. 

5717.011 were equivalent to that of the common pleas court under R.C. 2506.04, 

the BTA would still review legal issues without deference. 

{¶ 16} It follows that the city’s main argument here is unavailing to the 

extent that the BTA’s decision addressed a question of law. Here the BTA 

construed and applied the Shaker Heights ordinance and determined that the 

amount reported in Box 5 of MacDonald’s W-2 form that related to the SERP 

constituted a “pension” under that ordinance. The BTA acted within the proper 

sphere of its authority to review the determination of the municipal tax board in 

light of its own interpretation of the local law. 

R.C. 5717.011 tracks other BTA appeal statutes, and like them, it confers 

authority on the BTA to conduct de novo review as to both law and facts 

{¶ 17} At oral argument, the city’s counsel characterized the BTA’s 

decision as a “factual determination” that the lump sum at issue constituted a 
SUPREME COURT OF OHIO

8

“pension” under the local ordinance. As discussed, the BTA resolved the issue 

before it based on legal grounds, by construing and applying the city’s ordinance 

to essentially undisputed facts. 

{¶ 18} But even if the BTA’s decision is seen as a factual finding, it would 

still have been appropriate for the BTA to conduct a de novo review of the 

determination of the municipal tax board. This conclusion arises from a reading 

of two sources of legal authority: the statutes and the case law. 

{¶ 19} The statute providing for appeals to the BTA from the boards of 

revision, R.C. 5717.01, and the statute providing for appeals from the tax 

commissioner, R.C. 5717.02(E), both contain language nearly identical to the 

statute at issue here, R.C. 5717.011, which states: 

The [BTA] may order the appeal to be heard upon the record and 

the evidence certified to it by the tax administrator, but upon the 

application of any interested party the [BTA] shall order the 

hearing of additional evidence, and the [BTA] may make such 

investigation concerning the appeal as it considers proper. 

R.C. 5717.011(D). 

{¶ 20} R.C. 5717.03(F) adds the following contours to the BTA’s 

authority: 

The orders of the [BTA] may affirm, reverse, vacate, modify, or 

remand the tax assessments, valuations, determinations, findings, 

computations, or orders complained of in the appeals determined 

by the board, and the board’s decision shall become final and 

conclusive for the current year unless reversed, vacated, or 

modified [on appeal]. 
January Term, 2015 

9

{¶ 21} We have had occasion to fill in the blanks with case law. Unlike 

the rulings on questions of law discussed previously, we have held that factual 

issues in the tax area are confided to the administrative tribunals that are charged 

by statute to hear and decide tax cases. See Health Care REIT, Inc. v. Cuyahoga 

Cty. Bd. of Revision, 140 Ohio St.3d 30, 2014-Ohio-2574, 14 N.E.3d 1009, ¶ 19, 

quoting Cuyahoga Cty. Bd. of Revision v. Fodor, 15 Ohio St.2d 52, 239 N.E.2d 25 

(1968), syllabus (“ ‘The fair market value of [real] property for tax purposes is a 

question of fact, the determination of which is primarily within the province of the 

taxing authorities’ ”); accord Aluminum Co. of Am. v. Kosydar, 54 Ohio St.2d 

477, 483, 377 N.E.2d 785 (1978). Moreover, the BTA itself constitutes one of 

those “taxing authorities,” with an independent duty to weigh evidence and make 

findings to which this court will defer. Strongsville Bd. of Edn. v. Cuyahoga Cty. 

Bd. of Revision, 112 Ohio St.3d 309, 2007-Ohio-6, 859 N.E.2d 540, ¶ 22 (the 

value of property for tax purposes is a question of fact that is primarily within the 

province of the taxing authorities, and this court will ordinarily defer to the BTA 

on that issue); Sapina v. Cuyahoga Cty. Bd. of Revision, 136 Ohio St.3d 188, 

2013-Ohio-3028, 992 N.E.2d 1117, ¶ 15; Vandalia-Butler City Schools Bd. of 

Edn. v. Montgomery Cty. Bd. of Revision, 130 Ohio St.3d 291, 2011-Ohio-5078, 

958 N.E.2d 131, ¶ 13 (noting the duty of the BTA to independently weigh 

evidence and reach its own independent judgment concerning property value). In 

the same way, the BTA’s review of tax-commissioner determinations, factual as 

well as legal, is de novo in character. Key Servs. Corp. v. Zaino, 95 Ohio St.3d 

11, 16, 764 N.E.2d 1015 (2002), citing Higbee Co. v. Evatt, 140 Ohio St. 325, 

332, 43 N.E.2d 273 (1942) (“The BTA hearing is de novo”). Also, “[t]he BTA 

may investigate to ascertain further facts and make its own findings independent 

of those of the Tax Commissioner.” Key Servs., id., citing Nestle Co., Inc. v. 

Porterfield, 28 Ohio St.2d 190, 193, 277 N.E.2d 222 (1971). 
SUPREME COURT OF OHIO

10

{¶ 22} R.C. 5717.011 was enacted in 2003 and was numbered so as to fall 

between the statutes for appeals from decisions of boards of revision and the tax 

commissioner, R.C. 5717.01 and 5717.02. It follows the form of words in those 

two other appeal statutes, which have been construed to call for de novo review 

and independent judgment by the BTA in the cases appealed to it. Moreover, 

under appeal statutes outside R.C. Chapter 5717, the BTA possesses similar de 

novo review authority in appeals from decisions of the county budget 

commissions. See R.C. 5705.341, fourth paragraph (in a taxpayer appeal from the 

budget commission to the BTA, the BTA has broad authority to modify the 

budget commission’s action on the fixing of tax rates, and when it chooses to 

modify the commission’s action, “[t]he findings of the board of tax appeals shall 

be substituted for the findings of the budget commission * * *”); R.C. 5705.37 (in 

an appeal by a taxing district, public library, park district, or nonprofit from a 

decision of the county budget commission to the BTA, the BTA may, “in a de 

novo proceeding, * * * modify any action of the commission”). An exception is 

specifically noted in the statutes: R.C. 5747.53(G) (decisions of a county budget 

commission involving an alternative method of apportionment may be appealed to 

the BTA only “on the issues of abuse of discretion and failure to comply with the 

formula”). 

{¶ 23} Under all these circumstances, we conclude that in creating a right 

to appeal to the BTA from municipal tax boards, and in not specifying any 

limitation on the BTA authority on appeal, the General Assembly intended to 

confer on the BTA the authority to conduct de novo review in the context of 

appeals under R.C. 5717.011. It follows that the standard of review at the BTA in 

this case was de novo both as to facts and law, and as a result, the city’s argument 

in this appeal must fail. Whether the BTA’s decision in this case is understood 

primarily as a legal ruling on what constitutes a “pension” under the city 

ordinance, or as a fact-based application of the pension exclusion, the BTA 
January Term, 2015 

11

properly exercised its own independent judgment in determining the facts and the 

law.1

 Without expressing any opinion on the substantive question of tax law, on 

which we declined jurisdiction, we uphold the judgment below based on our 

disposition of the issue of the BTA’s standard of review. 

CONCLUSION

{¶ 24} For the foregoing reasons, we affirm the judgment of the Tenth 

District Court of Appeals. 

Judgment affirmed. 

O’CONNOR, C.J., and PFEIFER, O’DONNELL, LANZINGER, KENNEDY, and

FRENCH, JJ., concur. 

_________________________ 

 Baker & Hostetler, L.L.P., Christopher J. Swift, Edward J. Bernert, and 

Elizabeth A. McNellie, for appellees William and Susan MacDonald. 

 William M. Ondrey Gruber, Director of Law, for appellant Shaker Heights 

and Matthew J. Rubino, Tax Administrator. 

 Amy L. Arrighi, for appellant Regional Income Tax Agency. 

 Zaino, Hall & Farrin, Richard C. Farrin, and Stephen K. Hall, urging 

affirmance for amici curiae Ohio Chamber of Commerce and Ohio Society of 

Certified Public Accountants. 

 Barbara A. Langhenry, Director of Law, and Linda A. Bickerstaff, 

Assistant Director of Law, urging reversal for amicus curiae city of Cleveland. 

_________________________ 

 

1

 At oral argument, counsel for RITA properly disclaimed any contention that the BTA’s authority 

to hear new evidence was restricted in the same manner as the common pleas court’s authority 

under R.C. Chapter 2506. Under R.C. 2506.03(A), the common pleas court is “confined to the 

transcript.” R.C. 5717.011(D) on its face requires the BTA, “upon the application of any 

interested party,” to “order the hearing of additional evidence.” This authority to hear additional 

evidence is also part of the neighboring BTA appeal statutes, and we have confirmed that it means 

what is says. Brown v. Levin, 119 Ohio St.3d 335, 2008-Ohio-4081, 894 N.E.2d 35, ¶ 10-11.