Opinion ID: 2659073
Heading Depth: 2
Heading Rank: 1

Heading: Federal Claims: Counts 5 and 6

Text: The LaBordes’ complaint alleged a “taking” of their private property, i.e., that Gahanna residents’ overpayment of income taxes and Gahanna’s retention of these overpayments constitutes a taking of private property without compensation. The LaBordes argue that the district court erred in dismissing the federal takings claims stated in counts 5 and 6.5 They assert that under state law, the tax credit is an “intangible” property interest that falls within the ambit of the Fifth Amendment takings clause, or alternatively, that it is tangible in that it can be considered a monetary appropriation. The LaBordes seek to enjoin Gahanna from using Form 37 in its present configuration, which they allege results in incorrect calculation (to Gahanna taxpayers’ detriment) of the tax credit for taxes paid to other municipalities on income earned outside Gahanna. They argue that the TIA does not bar their federal claims because they are not seeking to enjoin the assessment, levy, or collection of any taxes, but rather, are requesting that Gahanna follow the Gahanna City Code and collect only those income taxes provided for by ordinance. Their position is that the tax is legal; it is just not being properly enforced. The district court recognized the well-established proposition that a government’s act of taxation is not a “taking” of private property under the Constitution. The court rejected the argument that the tax credit to which the LaBordes claim entitlement represents an intangible property right. The court determined that Woda Ivy Glen L.P. v. Fayette Cnty. Bd. of Revision, 902 N.E. 2d 984 (Ohio 2009), relied on by the LaBordes, and a similar case the LaBordes cited, Cottonwood Affordable Hous. v. Yavapai Cnty., 72 P.3d 357 (Ariz. Tax Ct. 2003), simply hold 5 The LaBordes have not appealed the dismissal of count 7. Nor do they challenge the remand of state-law claims to state court. 4 No. 13-3731, LaBorde, et al. v. City of Gahanna, et al. that tax credits are an intangible asset that should not be taken into account in valuing lowincome housing property for property-tax purposes, and do not support the position that miscalculating an income tax credit implicates the Fifth Amendment takings principle. The district court found that the tax credit issue in the present case is part and parcel of the entire municipal income tax system implemented by Gahanna, and that since the Fifth Amendment takings clause is not implicated by the collection of taxes, it is not implicated by a miscalculation of the tax credits. We find no error in the district court’s reasoning. Whether or not a tax credit is a property right, the LaBordes failed to allege facts that, if proved, would establish an unconstitutional taking. Moreover, allegations of deprivation of constitutional rights do not render the TIA inapplicable. Schneider Transp., Inc. v. Cattanach, 657 F.2d 128, 131 (7th Cir. 1981). The TIA’s prohibition of federal court restraint of state or local taxation encompasses a broad array of state and local taxes. The TIA does not bar all federal court challenges to state and local tax policies, but only those in which the taxpayer seeks to avoid a tax obligation, where the relief sought is prospective in nature, whether injunctive or declaratory. Hibbs v. Winn, 542 U.S. 88, 99–100 (2004). Although Ohio distinguishes a tax credit from the imposition of a tax, a tax credit impacts the taxpayer’s tax liability. The Gahanna tax credit is a credit for taxes already paid to another municipality. The credit operates to reduce the tax liability that a resident would otherwise owe, thereby reducing revenue collected by Gahanna. The LaBordes’ takings claims clearly implicate the correct interpretation of the Gahanna City Code and seek judicial relief that would have the effect of limiting their tax liability. This is a question that, when raised in federal court in support of injunctive or declaratory relief, per the TIA, must be left to state procedures, provided they satisfy the plain, speedy, and efficient state remedy requirement. 5 No. 13-3731, LaBorde, et al. v. City of Gahanna, et al.