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Riverside continues lawsuit on right to tax civilian employees

By Cornelius Frolik

Riverside’s long legal battle over whether it has the right to tax civilian employees and contractors who work in Area B of Wright-Patterson Air Force Base has returned to federal court.

Earlier this month, the city of Riverside filed a civil lawsuit in U.S. District Court for the Southern District of Ohio asking the court to rule that a provision of Ohio’s municipal income tax law violates both the state and U.S. constitutions.

The provision, which was an amendment to the 2008-09 biennial budget, prevents the city from collecting income taxes on federal employees and contractors who work on a portion of Wright-Patterson that city officials claim is located within city limits.

The city contends the law is unconstitutional because it provides an arbitrary and unjustifiable tax exemption to some government employees and contractors.

“We are going to seek a determination from the federal court on whether or not this prohibition on Riverside in collecting the income taxes is in violation of the Equal Protection clause, which is a provision of both the U.S. and state Constitution,” said Bryan Chodkowski, Riverside city manager.

But the state in the past has argued that Riverside has misinterpreted the law, and the state is permitted to pass laws that restrict the taxing authority of cities.

Riverside incorporated in 1994, and it levies a 1.5 percent municipal income tax on people who work in the city.

In 2007, the city said that it would begin collecting taxes on federal employees and contractors who work on Area B of Wright-Patterson because it is located in Riverside.

But then Rep. Kevin DeWine, R-Fairborn, added an amendment to the state biennial budget that said people who work on U.S. Air Force bases are only subject to municipal income taxation in the cities in which they live and not those on which the bases are located.

The city of Riverside in March 2008 filed a lawsuit in U.S. District Court challenging this provision on several grounds. But the city voluntarily withdrew its case a few months later and filed instead in Franklin County Common Please Court.

The lower court ruled in Riverside’s favor. The city claimed the state law violated a federal law that prevents employees who work on federal property from avoiding paying local taxes by claiming an exemption. The city also claimed the amendment was illegally attached to the budget.

But an appellate court reversed the lower court’s decision and sided with the state, which argued state lawmakers have the right to pass laws that restrict the ability of cities to impose taxes. The city appealed to the Ohio Supreme Court, but the court declined to hear the case, citing a lack of any substantial constitutional questions.

Chodkowski said the remaining legal issue is whether the state’s prohibition on taxing federal employees and contractors who work on air force bases violates the state and U.S. constitutions.

“We think our arguments are very strong,” Chodkowski said. “We are going to continue to pursue what we feel is the correction of an error.”

Riverside argues that the Equal Protection clauses prevent the state from arbitrarily classifying some employees as exempt from taxation.

Chodkowski said it is unclear how many federal employees and contractors work on Area B, but the city in 2008 estimated there were about 690 people. Chodkowski said the city is only seeking the right to tax civilian and federal employees, and not military personnel. He said workers on other military installations around the state are subject to municipal income taxes.

Dan Tierney, spokesman for the Office of Ohio Attorney General Mike DeWine, said the office is reviewing the lawsuit

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