Bodnar v. Regional Income Tax Agency ( 2021 )

[Cite as Bodnar v. Regional Income Tax Agency, 2021-Ohio-1655.]
COURT OF APPEALS OF OHIO
EIGHTH APPELLATE DISTRICT
COUNTY OF CUYAHOGA
TETYANA BODNAR, :
Plaintiff-Appellant, :
No. 109715
v. :
REGIONAL INCOME TAX AGENCY, :
Defendant-Appellee. :
JOURNAL ENTRY AND OPINION
JUDGMENT: AFFIRMED
RELEASED AND JOURNALIZED: May 13, 2021
Civil Appeal from the Cuyahoga County Court of Common Pleas
Case No. CV-19-925019
Appearances:
Law Office of George W. Cochran and George W. Cochran,
for appellant.
Amy L. Arrighi and Amber Greenleaf Duber, for appellee.
EILEEN A. GALLAGHER, J.:
Plaintiff-appellant Tetyana Bodnar appeals the judgment of the
Cuyahoga County Court of Common Pleas dismissing her complaint for declaratory
judgment against defendant Regional Income Tax Agency (“RITA”) on the basis of
failing to present a justiciable issue. We affirm.
Background
This case stems from Bodnar’s failure to estimate her 2019 self-
employment tax liability as part of her 2018 Streetsboro municipal income taxes.
More specifically, it arose in response to RITA’s providing an estimation of her 2019
tax liability in response to her failure to provide her own estimate. Bodnar sought a
declaratory judgment pursuant to R.C. 2721.03 that RITA is statutorily precluded
from estimating current-year tax liability for a taxpayer who fails to report his or her
own estimate.
According to Bodnar’s amended complaint, she resided in
Streetsboro, Ohio, a municipality for which RITA served as the tax administrator.
In 2018, Bodnar “worked for a local hospital as a full-time resident in psychiatry,”
and “periodically supplemented her W-2 income as an independent contractor by
serving the night shift in the hospital’s psychiatry unit.” Bodnar timely filed her
2018 municipal income tax return with RITA, “prepared on Form 37, as prescribed
by RITA,” however she left line 20a blank, providing no estimate of her 2019
municipal tax liability pertaining to self-employment.
Form 37 at line 20a prompts “an individual reporting taxable income
from self-employment in the prior year” to “declare his [or her] estimated taxes for
the current taxable year.” Immediately below line 20a the form provides:
If your estimated tax liability is $200 or more, you are required to make
quarterly payments of the anticipated tax due. If your estimated tax
payments are not 90 percent of the tax due or not equal to or greater
than your prior year’s total tax liability, you may be subject to penalty
and interest. You may use the amount on Line 12 as your estimate or
use Worksheet 2 in the instructions to calculate your estimate. Note:
If Line 20a is left blank, RITA will calculate your estimate.
Where a taxpayer leaves line 20a blank, RITA determines the
estimated tax for the current year based on that person’s self-employment taxes for
the previous year.1
As stated, Bodnar failed to provide her estimated 2019 tax liability as
prompted by line 20a. Accordingly, RITA calculated the estimate for her,
determining the amount to be $943, the same as her 2018 self-employment tax
liability. Bodnar did not seek to amend her estimated 2019 tax liability and she has
not submitted any payment towards the estimated amount due.
Instead, Bodnar filed a complaint against RITA, initially seeking an
injunction to prevent RITA from collecting any estimated tax payments related to
her 2019 taxes as well as a declaratory judgment that RITA misinterpreted and
misapplied the law pertaining to her estimated municipal income tax. Bodnar
amended her complaint, abandoning her claim for injunctive relief. As reflected in
the amended complaint, Bodnar sought only a judicial determination that RITA may
not estimate municipal income taxes due from self-employment where the taxpayer
does not provide the estimate herself, and further, that RITA does not have the
authority to collect any such tax or charge any interest or penalty following a
taxpayer’s failure to pay it.
1Attached to the original complaint is a RITA billing statement that in relevant
part provides: “[y]ou may amend your estimated tax at any time throughout the year.”
RITA moved for dismissal under Civ.R. 12(B)(6) for failure to state a
claim upon which relief may be granted. The trial court granted the motion, finding
Bodnar’s amended complaint “does not present a justiciable issue between plaintiff
and defendant for which declaratory relief is available” stating:
The “dispute” in this action is manufactured by plaintiff, and is not a
real, actual controversy. Given the clear wording of RITA Form 37,
Plaintiff’s decision not to include estimated taxes for 2019 — even if
those estimated taxes were $0 — gave implied consent to RITA to
estimate them for her.
The court dismissed the case with prejudice.
Assignments of Error
On appeal, Bodnar asserts three assignments of error:
1. In finding Bodnar impliedly consented to RITA’s declaration of her
estimated taxes from self-employment, the trial court committed
prejudicial error by applying the wrong legal standard and relying on
clearly erroneous facts in order to justify dismissing Bodnar’s
complaint under Civ.R. 12(B)(6).
2. In finding Bodnar could have amended RITA’s declaration of
estimated taxes, the trial court committed prejudicial error by applying
the wrong legal standard and relying on clearly erroneous facts in order
to justify dismissing Bodnar’s complaint under Civ.R. 12(B)(6).
3. In finding no justiciable controversy remains, the trial court
committed prejudicial error by applying the wrong legal standard and
relying on clearly erroneous facts in order to justify dismissing
Bodnar’s complaint under Civ.R. 12(B)(6).
We address and dispose of these assignments of error together because they are
interrelated and fail for the same reasons.
Analysis
“In reviewing a motion to dismiss for failure to state a claim upon
which relief can be granted, we accept as true all factual allegations in the
complaint.” Lunsford v. Sterilite of Ohio, L.L.C., Slip Opinion No. 2020-Ohio-4193,
¶ 22, quoting Mitchell v. Lawson Milk Co., 40 Ohio St.3d 190, 192, 532 N.E.2d 753(1988). “However, unsupported legal conclusions, even when cast as factual
assertions, are not presumed true for purposes of a motion to dismiss.” State ex rel.
Martre v. Reed, 161 Ohio St.3d 281, 2020-Ohio-4777, 162 N.E.3d 773, ¶ 12, citing
Mitchell at 193. “A complaint should not be dismissed unless it appears ‘beyond
doubt from the complaint that the plaintiff can prove no set of facts entitling him to
recovery.’” Id., quoting O’Brien v. Univ. Community Tenants Union, Inc., 42 Ohio
St.2d 242, 327 N.E.2d 753 (1975), syllabus.
In general, an appellate court reviews de novo a trial court’s ruling on
a Civ.R. 12(B)(6) motion to dismiss. Stewart v. Woods Cove II, L.L.C., 2017-Ohio-
8314, 99 N.E.3d 956, ¶ 13 (8th Dist.). However, when a trial court resolves a
declaratory-judgment action by determining that there is no justiciable controversy,
we review for abuse of discretion. Arnott v. Arnott, 132 Ohio St.3d 401, 2012-Ohio-
3208, 972 N.E.2d 586, ¶ 13 (“[W]e reiterate that the abuse-of-discretion standard
applies to the review of a trial court’s holding regarding justiciability.”).
An abuse of discretion connotes more than an error of law or
judgment; it implies that the court’s action was unreasonable, arbitrary, or
unconscionable. Blakemore v. Blakemore, 5 Ohio St.3d 217, 219, N.E.2d 1140
(1983).
“The three prerequisites to declaratory relief include ‘(1) a real
controversy between the parties, (2) justiciability, and (3) the necessity of speedy
relief to preserve the parties’ rights.’” Ohioans for Concealed Carry, Inc. v.
Columbus, Slip Opinion No. 2020-Ohio-6724, ¶ 30, quoting ProgressOhio.org, Inc.
v. JobsOhio, 139 Ohio St.3d 520, 2014-Ohio-2382, 13 N.E.3d 1101. “Courts have the
duty to ensure that plaintiffs plead these elements for purposes of declaratory-
judgment actions and that the complaint sufficiently avers injury, causation, and
redressability. * * * If a party fails to establish any of the necessary showings to bring
the claims, the judge must dismiss the cause.” Moore v. Middletown, 133 Ohio St.3d
55, 2012-Ohio-3897, 975 N.E.2d 977, ¶ 49.
The Supreme Court has observed that not every case is appropriate
for a declaratory-judgment action:
Although broad in scope, the declaratory judgment statutes are not
without limitation. Most significantly, in keeping with the long-
standing tradition that a court does not render advisory opinions, they
allow the filing of a declaratory judgment only to decide “an actual
controversy, the resolution of which will confer certain rights or status
upon the litigants.”
Arnott at ¶ 10, quoting Mid-American Fire & Cas. v. Heasley, 113 Ohio St.3d 133,
2007-Ohio-1248, 863 N.E.2d 142, ¶ 9.
Here, as Bodnar alleged in her amended complaint, for the 2018 tax
year, she completed and submitted RITA Form 37, without declaring her estimated
2019 self-employment taxes as prompted by line 20a. As Form 37 makes clear by
its own terms, “[i]f Line 20a is left blank, RITA will calculate your estimate.” By
submitting Form 37 while choosing to leave line 20a blank, Bodnar thus consented
to RITA estimating the tax for her.
As such, there is no actual controversy in this case. Bodnar is
obligated to pay municipal income tax on her 2019 income from self-employment
regardless of whether she or RITA estimates the amount due. Moreover, by
submitting Form 37 she consented to RITA supplying the estimated amount when
she did not do so herself. The trial court did not abuse its discretion by dismissing
Bodnar’s complaint.
Nevertheless, we note that Bodnar’s claims on the merits are dubious
at best. She claims that both R.C. 718.08(B)(1) and Streetsboro Municipal Code
182.07(B)(1), in mandating that a taxpayer estimate his or her taxes for the current
year, proscribe RITA from supplying such an estimate in the event that the taxpayer
fails to do so.
A plain reading of the statutory language simply fails to support this
conclusion. R.C. 718.08(B)(1) provides that unless waived by the tax administrator,
“every taxpayer shall make a declaration of estimated taxes for the current taxable
year, on the form prescribed by the tax administrator, if the amount payable as
estimated taxes is at least two hundred dollars.” Similarly, Streetsboro Municipal
Code 182.07(B)(1) provides that “[e]very taxpayer shall make a declaration of
estimated taxes for the current taxable year, on the form prescribed by the Tax
Administrator, if the amount payable as estimated taxes is at least $200.” The
requirement that a taxpayer estimate his or her income says nothing of corrective
actions the tax administrator may take in response to such inaction.
This point is further illustrated by a broader view of the statutory
scheme. Ohio municipalities are empowered to levy and collect income tax absent
preemption by the General Assembly. Angell v. Toledo, 153 Ohio St. 179, 179, 91
N.E.2d 250 (1950), paragraph one of the syllabus. The Supreme Court has explained
that a municipality’s power to tax is “plenary,” although nevertheless subject to the
General Assembly’s authority to “impose specific limits on that power.” Panther II
Transp., Inc. v. Seville Bd. of Income Tax Rev., 138 Ohio St.3d 495, 2014-Ohio-1011,
8 N.E.3d 904, ¶ 11, citing Cincinnati Bell Tel. Co. v. Cincinnati, 81 Ohio St.3d 599,
602, 693 N.E.2d 212 (1998). Moreover, the Supreme Court has held that “the state’s
power to preempt must be exercised by express provision.” Id., citing Cincinnati
Bell at 605 (“[W]e will not imply a preemption merely by virtue of the state’s
entering a particular area of taxation itself.”).
Bodnar has failed to identify any specific limitation imposed by the
General Assembly or express provision that prevents RITA from estimating her
municipal income tax liability for the current year where she failed to do so herself.
We overrule the assignments of error.
Judgment affirmed.
It is ordered that appellee recover from appellant costs herein taxed.
The court finds there were reasonable grounds for this appeal.
It is ordered that a special mandate be sent to said court to carry this judgment
into execution.
A certified copy of this entry shall constitute the mandate pursuant to Rule
27 of the Rules of Appellate Procedure.
________________________
EILEEN A. GALLAGHER, JUDGE
SEAN C. GALLAGHER, P.J., and
LARRY A. JONES, SR., J., CONCUR