The city of Cleveland has agreed to refund a South Carolina resident $18,000 in income taxes that were improperly collected in 2021 and 2022.
Anthony Alfieri lives in Hilton Head Island, South Carolina. Before retiring in 2021, he worked remotely from hundreds of miles away in his home in South Carolina for a Cleveland-based financial services company, brokering deals that earned him commissions once a deal closed.
Due to the nature of this work, Alfieri often received income from commissions months or years after performing the work that generated the commission, as it could take several months or years for deals to close. In 2023, Alfieri received several commission payments for deals he brokered in 2020 and 2021.
The city of Cleveland taxed Alfieri’s income under Ohio’s pandemic tax law, which deemed all work performed in 2020 to have been performed in the office location.
When Alfieri requested a refund for his work in South Carolina, the city refused and adjusted his 2020, 2021, and 2022 filings. In doing so, the town essentially clawed back the refunds Alfieri previously received.
However, officials with The Buckeye Institute, a free market think tank that represented Alfieri, city officials should have known their actions were unconstitutional, as the city lost a similar case in 2015. Alfieri’s win follows one that The Buckeye Institute secured for Dr. Manal Morsy in May 2024.
“As with The Buckeye Institute’s client Dr. Manal Morsy, Cleveland had no legal authority to tax the income Mr. Alfieri earned while working at his home in South Carolina,” Jay R. Carson, senior litigator at The Buckeye Institute and the lead attorney representing Alfieri, said in a release. “In issuing Mr. Alfieri a refund, Cleveland has done the right thing.”
Before the pandemic, Morsy commuted to Cleveland for work, spending the week in the city and returning to Pennsylvania on weekends. Amid the pandemic, she worked from her Blue Bell, Pennsylvania, home, as required, and paid local income tax to the municipality where she lived.
City officials objected, and the Buckeye Institute filed the case against the city in April 2021 on behalf of Morsy.
Cleveland officials ultimately agreed to fully refund the taxes it had collected from Morsy, who lived in Blue Bell, Pennsylvania, near Philadelphia, pay the interest owed to her under a Cleveland city ordinance, and reimburse her court costs.
The Buckeye Institute cited an Ohio Supreme Court ruling in Hillenmeyer v. Cleveland Board of Revenue, in which the state’s highest court ruled that “[l]ocal taxation of a nonresidents’ compensation for services must be based on the taxpayer’s location when the services were performed.”
Cleveland abandoned its appeal in the case in April 2024 and refunded the taxes that had been taken.
According to The Center Square, state lawmakers passed legislation at the start of the pandemic permitting cities to collect taxes from workers even when they worked remotely in another city, rather than in the city where the employer was.
It was a measure to stabilize municipalities’ revenue collections, especially for the state’s larger communities where major employers are based. However, the temporary accommodation for employers ended on Dec. 31, 2021.
Lawmakers later passed a bill in June 2021 that mandated employees to pay income taxes in the city where they work, according to the site. If work is performed at home, then the community reaps the revenues, rather than the community where the company’s office is located.
