Court Opinion

ID: 6762463
Source: CourtListenerOpinion
Date Created: 2022-07-21 00:32:57.818012+00
Date Added: 2024-06-11T16:02:37.896200
License: Public Domain

Handwork, J.,
dissenting. It is a fundamental principle of law that the *5court should give the strictest interpretation to the language of a tax statute so as to avoid restricting the legislature’s power to tax. Herrick v. Lindley (1979), 59 Ohio St. 2d 22, 27, 13 O.O. 3d 13, 16, 391 N.E. 2d 729, 733. The majority has failed to adhere to this principle and, therefore, I respectfully dissent. Since the General Assembly could have taxed each Ohio resident based upon total income, no matter where it was earned, and the statute is unclear as to how extensive an exemption is intended, the majority’s interpretation of R.C. 5747.05(B)(1) is inappropriate.
R.C. 5747.02 provides that a tax shall be levied on each individual residing in or earning or receiving income in the state of Ohio based upon the individual’s adjusted gross income less a statutory exemption for the individual taxpayer, the taxpayer’s spouse, and each dependent. Certain credits are permitted against the income tax imposed by R.C. 5747.02. Among those credits is the “resident tax credit” for the tax due under R.C. 5747.02 on that part of the adjusted gross income of a resident taxpayer which was subject to tax in another state. R.C. 5747.05(B)(1).
As noted by the majority, the Board of Tax Appeals has interpreted this section on at least three prior occasions. In each case, the board interpreted R.C. 5747.05(B)(1) strictly and found that the credit must be based on taxable income. The board interpreted Ohio law strictly to avoid expanding the deductions and allowances intended by the legislature.
Appellants argue that the board’s interpretation of the statute is improper because it conflicts with the obvious intent of the legislature to prevent double taxation. They assert that the legislature could have provided a credit equal to the actual tax paid, but chose instead to provide a credit which would avoid double taxation. Appellants conclude, therefore, that the method used by the other state to calculate the tax due is irrelevant. Otherwise, the Ohio credit would be directly related to the deductions allowed by the other state. The greater the deductions, the lower the credit and vice versa. Appellants argue that this result is inequitable and, therefore, clearly not the legislative intent.
Appellants are correct in their assertion that the allowance of a credit for tax paid to another state based upon the same income is a means by which Ohio may prevent double taxation which would otherwise penalize a taxpayer living in Ohio and earning income outside the state. However, the legislature also seeks to equalize .the tax burden among all residents because they all enjoy the benefits of residing in Ohio. Therefore, the General Assembly designed the resident tax credit to achieve both of these goals.
While it is true that Oklahoma could have taxed appellants’ entire gross income, it did not. Oklahoma, like other states, allows certain deductions to be taken against gross income, excluding some income from taxation. To give appellants a credit based upon income which was not actually taxed would not further the goals of the Ohio General Assembly. Although it may appear under appellants’ analysis that they are being taxed by both states on the same income, they are not. If Oklahoma had actually taxed appellants’ total gross income, appellants’ resident tax credit would have been proportionately larger, thus preventing any double taxation. If we adopted appellants’ view, we would be preventing the state of Ohio from taxing that portion of appellants’ adjusted *6gross income which Oklahoma’s legislature has exempted from taxation. This result would be contrary to the purposes behind the resident tax credit.
The majority premises its decision on a comparison of the statute at issue with sections of the Internal Revenue Code pertaining to corporate taxation. While either the phrase, “subject to taxation,” or the phrase, “subjected to taxation,” is used in both sections, the function of each statute is uniquely different. The considerations made by
Congress when it determined how to tax income earned by a United States corporation in a foreign country are not comparable to those made by a state legislature with regard to how to tax a resident individual who earned income in another state.
I would find that the Board of Tax Appeals’ decision is reasonable and lawful.
Sweeney, Acting C.J., and Re snick, J., concur in the foregoing dissenting opinion.