IN THE SUPREME COURT OF OHIO

William E. MacDonald, III, et al.,

V.

Case No. 14-0574

Appellees, . On Appeal from the FranklinCounty Court of Appeals,Tenth Appellate District

City of Shaker Heights Income Tax • Court of AppealsBoard of Review, et al., : Case No. 13AP-71, 2014-Ohio-708

Appellants.

APPELLEES' MEMORANDUM OPPOSING JUI2ISDICTION

William M. Ondrey Gruber (0005950)Counsel of RecordCity of Shaker Heights, Ohio3400 Lee RoadShaker Heights, OI-1 44120(216) 491-1445Fax: (216) 491-1447willaam. gi-uber'a shakeronline. com

AttoYney for Appellants,City of Shaker Heights andMatthew Rubino

Amy L. Arrighi (0070061)Counsel of RecordRegional Income Tax Agency10107 Brecksville Road(440) 922-3201Fax: (440) 922-3515aarrighi@,ritaohio.com

Attorney forAppellant,Regional Income Tax Agency

5A<

Cliristopher J. Swift (0025763)Counsel of RecordBaker & Hostetler, LLP1900 East Ninth StreetCleveland, OH 44114(216) 861-7461Fax: (216) 696-0740cswiftra&bakerlaw. com

Edward J. Bemert (0025808)Baker & Hostetler, LLPCapital Square, Suite 210065 East State StreetColumbus, OH 43215(614) 462-2687Fax: (614) 462-2616ebernerta,bakerlaw.com

Attorneys for Appellees,William E. MacDonald, III andSusan iVac1)onald

€ L.^'s7 >f ^L;.^4

' EiPF'sR;fiE: ^C) U RT 0 F f..jH 10

Linda L. Bickerstaff (0052101)Counsel of RecordAssistant Director of LawCity of Cleveland Department of Law205 West St. Clair AvenueCleveland, OH 44113(216) 664-4406Fax: (216) 420-82991bickerstaffjcity, clevel and. oh.us

Counselfor Amicus Curiae7he City of Cleveland

TABLE OF CONTENTS

1. THE COURT SHOULD DECLINE JIII2ISDICTION ....................... ......... ...............1

A. The Determination by the Court of Appeais and the Ohio Board of TaxAppeals that the Supplemental Executive Retirement Plan at Issue is aPension for Municipal Income Tax Purposes is Well Supported and is theCorrect Determination ..................... ......... ......... ............................ ...............1

B. The Analysis of the Wardrop Decision by the Tenth District Does NotWarrant Revxevv . ....................................................................................................2

C. The Ohio Board of Tax Appeals Applied the Correct Standard ofRevi ew . ..................................................................................................................... 4

D. The Other Factors Cited by Appellants and Amicus Do Not Support theExercise of Jurisdiction ........... .................... ......... ................... . ........ ...............8

II. Statement of the Facts and the Case ................................................................................9

III. Responses to Appellants' Propositions of Law.............................................................. 10

Appellants' Proposition of Law No. 1 : .......... ......... ................... ...................................1D

Appellants Proposition of Law No. 2: ........ ....................................................................13

IV. Conclusion ..........................................................................................................................14

TABLE OF AUTHORITIES

Page(s)

Cases

Akron Centre Plaza, L.L.C. v. Summit Cty. Bd. Of Revision,128 Ohio St.3d 1.45, 2010-Ohio-5035, 942 :N.E.2d 1054, 10 .. ......................:......................7

Alcan Aluminum Corp. v. Limbach(1989), 42 Ohio St.3d 121 ................................................................................................. .....5

Gesler v. Worthington Income Tax Bd ofAppeals,138 Ohio St.3d 76, 2013-Ohio-4986 .................................................. ........................................ 7

HIN, L.L, C. v. Cuyahoga Cty. Bd of Revision,124 Ohio St.3d481, 2010-Ohio-687, 923 N.E.2d 1144, T 13.... ......... ....................................7

AIacDonald v. City of Shaker Heights, et al,Case No. 2008-K-1883 (December 28, 2012) ("BTA Slip Op") at 11 ........................3, 5, 6, 10

1Marion v. Marion Bclof Rev,(Aug. 10, 2007), BTA No. 2005-T-1464 ...................................... .........5

Panther II TransB., Inc. v. Seville Bd. of Income Tax Rev.,Slip Opinion No. 2014-Ohio-1011 ............................................................................................ 7

Satullo v. Wilkins,111 Ohio St.3d 399, 2006-Ohio-5856, 856 N.E.2d 954, ^ 14 ................................... ...............7

Wat'•drop v. Middletown Income Tax Review Bd,12th Dist. No. CA2007-09-235, 2008-Ohio-5298 ............................................................Bassim

YY'illiaan E. MacDonald, et al. v. City of Shaker Heights Income 7ax Board ofReview et al,lOth Dist. No. 13AP-71, 2014-Ohio-708 ..........................................................................passim

Statutes

Codified Ordinances of Shaker Heights 111.2501 ..... ..................................................................8-9

Codified Ordinances of Shaker Heights 111.0901 ...... ............................. ..................................13

R.C. 718.03 (A-)(2)(c) .................... ..... ....................... ....... ... .... ......................... .. ... ........... ..... 2, 12, 13

R.C. 5717.04 ............................................................................................. .................................... .7

R.C 5717.011 ...................................................................................................... .....................5,6

ii

I. THE COURT SHOULD DECLINE JURISDICTION

A. The Determination by the Court of Appeals and the Ohio Board of TaxAppeals that the Supplemental Executive Retirement Plan at Issue is aPension for Municipal Income Tax Purposes is Well Supported and is theCorrect Determination.

The decision of the Ohio Board of Tax Appeals, which was affirmed by a majority of the

Tenth District Court of Appeals, and in large measure affi.rmed by the entire Court of Appeals,

was grounded on the facts adduced and the plain language of the relevant Shaker Heights

Ordinance. The decision confirmed the widely-held understanding of taxpayers as to the scope

of the pension exemption from the municipal income tax. The issues presented for review by the

City of Shaker Heights, Matthew Rubin, Tax Administrator, and Regional Income Tax Agency

(collectively "Appellants") do not warrant review by this Court.

The issue is whether the former National City Bank Supplemental Executive Retirement

Plan ("SERP"), a type of retirement plan, was a pension that is exempt from the Shaker Heights

ntunicipal income tax. I'he Ohio Board of Tax Appeals (BTA) and the Court of Appeals found

that the SERP was an exempt pension. Appellants do not foeus on the determination that the

SERP is an exempt pension as a reason for the requested review. Instead, Appellants make

collateral challenges to: (1) the Court of Appeal's characterization of an earlier non-conflicting

appellate case: iVardrop v. Middletown Income I'ax Review Bd, 12th Dist. No. CA2007-09-235,

2008-Ohio-5298 (" Vardrop '), construing a differently-worded ordinance from another

municipality; and (2) the degree of deference accorded to the local officials' decision by the

BTA notwithstanding the distinct deference accorded by the BTA in actuality and the explicit

burden placed on the taxpayers to overcome the presumption accorded the decision of the

Municipal Board of Appeals ("MBOA") of the City of Shaker Heights.

1

Appellants argue that the SERP cannot qualify as a pension for municipal income tax

purposes because amounts attributable to the SERP are wages, as defined in Section 3121(a) of

the Internal Revenue Code. Tn the Joint Memorandum in Support of Jurisdiction (hereafter

"Joint Memorandum"), however, Appellants fail even to confront the state statute (R.C.

718.03(A)(2)(c)) that fully supports the decision of Court of Appeals to reject that argurnent.

Two propositions of law have been pursued by Appellants through the appeals process:

(1) that the SERP was not a pension for purposes of the municipal income tax and thus could. be

taxed by the municipality; and (2) that the BTA erred by (a) conducting a hearing and (b) failing

to defer sufficiently to the decision of the MBOA. Both propositions were rejected by all three

members of the BTA. The majority of the Court of Appeals (Judges Klatt and O'Grady)

affirnied the decision of the BTA. Judge Tyack dissented only from proposition 2(b) as to the

deference issue. Judge Tyack did not expressly dissent from the finding that the SERP was a

pension under the Ordinance and he agreed that the BTA correctly followed the relevant statute

in conducting a hearing. William R. MacDonald, et al. v. City of Shaker Heiglzts Income 7ax

Board of Review et al, 10`h Dist. No. 13AP-71, 2014-Ohio-708 ("App. Op.") 31.

B. The Analysis of the Wardrop Decision by the Tenth District Does NotWarrant Review.

Appellants argue that the Court of Appeals misconstrued the Wardrop decision thereby

inviting employers to call their plans "pensions" to secure favorable tax treatment and elevating

form over substance. In reply, the Court of Appeals cited the extensive testimony and evidence

that supported the B'I'A's determination that the SERP was a pension beyond the characterization

of the SERP as a pension by the employer. App. Op. ^^j 17 and 18. In addition to finding that

the YI'ardrop decision was distinguishable and unpersuasive, the Court of Appeals explicitly

rejected the argument that the BTA's decision could be read as characterizing the SERP as a

2

pension solely because the employer, National City Bank, classified the SERP as a pension.

App. Op. ¶ 17

Appellants also argue that because Wardrop was an appeal from the common pleas court,

it somehow follows that the determination as to whether the SERP is a pension depends on the

path of appeal with different answers arising solely based on whetlier the appeal from the MBOA

proceeded to a court of common pleas or the BTA. Because both the BTA and the Court of

Appeals found Wardrop distinguishable from this appeal, (MacDonald v. City of'Shaker Heights,

et al, Case No. 2008-K-1883 (December 28, 2012) ("BTA S1ipOp") at 1 l and App. Op.^, 16),

Appellants' premise fails. Moreover, Appellants present nothing to support the conclusion that

courts of common pleas would decide the present appeal differently than did the BTA (which in

any case was affirmed by tlle Court of Appeals). Absent an indication that a conzmon pleas court

would decide this appeal differently than the BTA, as a threshold matter, no issue is presented

for this Court's review.

At page 8 of the Joint Memorandum, Appellants assert that "the language differences in

the ordinances in Shaker Heiglits and Middletown. [the municipality at issue in Wardrop] are not

relevant to the applicability of the law of the Wardrop case to this case." (Bracketed material

added.) Appellants never explain why differences between the language in the two ordinances

can be dismissed without explanation. This argument was rejected by both the BTA and the

Court of Appeals.

No uncertainty is created by the existence of Wardrop and the Court of Appeals decision

below because the Wardrop decision is distinguishable. No conflict has been certified for the

two decisions for purposes of invoking this Court's jurisdiction and no basis exists for even

asserting that such a conflict exists. Appellants provide no basis to conclude that a re-

3

examination by this Court of the analysis of the Wardrop decision by the Tenth District Court of

Appeals would meaningfully influence the outcome of this appeal.

C. The Ohio Board of Tax Appeals Applied the Correct Standard of Review.

Appellants argue that the BTA applied the wrong standard of review. The BTA's

articulation of the standard of review reveals that Appellants have no reason to complain. The

BTA explicitly cited the standards of review applicable to appeals of municipal tax matters to the

common pleas and also to the review of state tax cases that come to the BTA from the Ohio Tax

Commissioner. The BTA stated the following as its standard of review at Slip Op. 4-5:

Initially, we acknowledge the standard by which our reviewis to be conducted. Although the Supreme Court has not yetconsidered an appeal filed pursuant to R.C. 5717.011, [footnoteomitted] it has reviewed similar appeals taken from municipal boardsof appeal to conimon pleas courts pursuant to R.C. 2506.01,commenting in Tetlak v. Bratenahl (2001), 92 Ohio St.3d 46, as tothe burden borne by an appellant:

"The taxpayer, not the village, has the burden ofproof on the nature of the income at issue. It is wellsettled that " when an assessment is contested, thetaxpayer has the burden '*** to show in what mannerand to what extent *' the commissioner'sinvestigation and audit, and the findings andassessments based thereon, were faulty andincorrect."' Maxxim Med., Inc. v. Tracy (1999), 87Ohio St.3d 337, 339, *** quoting Federated Dept.Stores, Inc, v. Lindlev (1983), 5 Ohio St.3d 213, 215***. Furthernmore, the 'Tax Commissioner's findingsare presumptively valid, absent a demonstration thatthose findings are clearly unreasonable or unlawful.'Id., 87 Ohio St.3d at 339- 340, ***."

"This reasoning is applicable at the municipal level." Id. at51-52. (Parallel citations omitted.")

See, also, Marion v. Marion Bd. of Rev. (Aug. 10, 2007), BTA No. 2005-T-1464,unreported, at 3 ("[W]hen cases are appealed from a municipal board of review to

4

the BTA, the burden of proof is on the appellant to establish its right to the reliefrequested. Cf. Alcan Aluminum Corp: v. Limbach(1989), 42 Ohio St.3d 121.").

The BTA applied the articulated standard of review to this appeal. Appellants do not argue to

the contrary.

Appellants are not correct in asserting that the no stan:dard. of review is applicable on

appeals to the BTA from the MBOA. While R.C. 5717.011 may not set forth the standard of

review, the BTA declared the standard of review before proceeding to deten-nine the case. BTA

Slip Op. at 4-5. The B'CA correctly used the standard of review derived from prior tax cases

including a reference to the standard of review applied by courts of conzmon. pleas for tax

appeals from an MBOA.

Appellants coMplain that the standard of review would have been more deferential if the

appeal had proceeded from the MBOA to the common pleas court rather than through the BTA.

Appellants provide nothing to support that supposition. No reason exists to conclude that a

decision of a common pleas court would have differed from that rendered by the BTA.

Moreover, Appellants' argument is fatally flawed for several reasons.

First, the BTA explicitly applied the same standard as that standard of review that would

be applied by a common pleas court in a municipal tax matter. As a result, Appellants' premise

collapses as a basis for review.

Moreover, as the Court of Appeals found, the BTA followed R.C. 5717.011, which

statute defines the jurisdiction of the BTA and its procedures in municipal income tax cases.

Whatever the standards for appeals to the courts of common pleas may be, the BTA had

jurisdiction of the case and properly followed R.C. 5717.011. No reversible error arises from

either MacDonald's decision to appeal the MBOA's decision to the BTA or from the BTA's

decision to follow the relevant statute (i.e., R.C. 5717.011). Any objections of Appellants as to

5

the availability of the BTA to taxpayers as an alternative forum mtist be directed to the General

Assembly.

Second, the BTA explicitly placed the burden squarely on the MacDonalds and presumed

the decision of the MBOA to be correct. BTA Slip Op. at 5. The MacDonalds overcanie the

presumption of correctness accorded by the BTA to the decision of the MBOA. Contrary to

Appellants, even if their requested standard of review were applied, the outcome would not

change.

Third, the underlying premise of Appellants is that the BTA must have applied the wrong

standard of review and must have ignored the decision of the MBOA because the BTA's

decision came down against Appellants. A decision of the BTA in favor of the MacDonalds,

however, does not mean that the standard of review was improper or that the BTA ignored the

decision of the MBOA. No reason exists to doubt that the BTA reviewed the transcript certified

to the BTA from the MBOA, applied a presumption of correctness to the decision of the MBOA,

but in furtherance of the BTA's statutory mandate, and in consideration of the additional

evidence submitted at the BTA hearing, the three members of the BTA disagreed with the

MBOA.

Fourth, Appellants cannot reasonably argue that the B'TA failed to accord proper

deference to the finding of facts by the MBOA. While Appellants argued below that the BTA

erred by taking testimony at the BTA hearing, Appellants have not preserved that issue on

appeal. As the Court of Appeals reasonably found, the BTA need not defer on fact=finding when

the BTA is authorized to and accepts additional evidence at the BTA. App. Op. ^i 24.

Fifth, the deference accorded to the MBOA by the BTA on questions of law presents no

issue worthy of review. This Court hears questions of tax law de novo. In a recent decision on

6

appeal from the BTA on a municipal income tax appeal, the Court stated its standard of review

on legal issues as follows:

{¶ 101 Pursuant to R.C. 5717,04, this court reviews a decision of the BTA todetermine whether it is reasonable and lawful. We will uphold the BTA'sdetermination of fact if the record contains reliable and probative evidencesupporting its determination. Satullo v. YVilkins, 1I 1 Ohio St.3d 399, 2006-Ohio-5856, 856 N.E.2d 954, TI, 14. Moreover, the court's review of a question of law isnot deferential but de novo. Akron Centre Plaaa, L. L. C. v. Summit ('ty. Bd. OfRevision, 128 Ohio St.3d 145, 2010-Ohio-5035, 942 N.E.2d 1054, ^ 10. Thus, wewill affirm a decision of the BTA only if it correctly applies the law. H.I1V, L.L.C.v. Cuyahoga Cty. Bd. Uf Revision, 124 Ohio St.3d 481, 2010-Ohio-687, 923N.E.2d 1144, T 13.

Gesler v. Worthington Income Tax I3d ofAppeals,13$ Ohio St.3d 76, 2013-Ohio-4986.

Whatever deference as to legal issues was accorded the MBOA by the BTA, that measure

of deference would be moot if this Court entertained jurisdiction and decided the legal issues de

novo. Appellants' argument actually amounts to a demand that not just the BTA but this Court

and the Court of Appeals nlust defer to the legal findings of the MBOA.

Sixth, Appellants assert that this case is a matter of first impression. This Court,

however, has announced two other appeals from the BTA on municipal income tax cases since

the BTA decision below. Gesler, supra and Panther II Transp., Inc. v. Seville 13d of Income

7cax Rev., Slip Opinion No. 2014-Ohio-1011. In addition, over the years, numerous appeals in

municipal income tax review cases have reached this Court and the courts of appeal when

originating from the courts of common pleas and through the BTA from the Ohio Tax

Commissioner. Because the BTA in this case consciously applied a standard of review

consistent with prior tax cases, no reason exists to review the accepted standard of review in a

case in which the standard of review applied will not alter the outcome of the current appeal.

'Che BTA's statement of the proper standard of review completely answers Judge Tyack

when he concludes at App. Op. 39 that the stanciard of review for appeals should be the same

7

standard for appeals from determinations of the Ohio T'ax Commissioner. In fact, the BTA

applied the same standard of review applied in Ohio Tax Commissioner appeals.

In this appeal, the facts are not in dispute. Appellants present nothing that would tend to

support a conclusion that the deterna:inations of the BTA and the Court of Appeals on the central

issues in the case would change upon the utilization by the BTA of a more deferential standard

of review. Nothing in the Court of Appeals decision supports the conclusion that the outcome

adverse to the Appellants depended on the standard of review that was applied by the BTA.

D. The Other Factors Cited by Appellants and Amicus Do Not Support theExercise of Jurisdiction

Appellants argue that the proceedings of the MBOA must be accorded unprecedented

deference or no one should expect the municipalities to take the initial appeal process at the

MBOA seriously. Joint Memorandum at 4. Appellants do not explain the legal basis for local

officials to disregard the statutory requirements for the maintenance of the MBOA. Further, one

would expect that localities would embrace the concept of providing the local taxpayers a local

fonim for disputing tax assessnlents.

Ultimately, the Ohio Tax Commissioner provides taxpayers an informal hearing at the

Appeals Division of the Tax Commissioner and the local county boards of revisions consider real

estate tax appeals although neither type of deterniination is the final word. The BTA. had the

benefit of the transcript certified to it and the decision of the MBOA and nothing suggests that

the BTA did not utilize those sources in its determination.

Also at page 4 of the Joint Memorandum, Appellants observe that local elected officials

are accountable to the voters and that is said to support a high degree of deference to the MBOA.

The members of the MBOA were a member of City Council, the Law Director and a lay person

appointed by the Mayor. Codified Ordinances of Shaker Heights 111.2501. Giving taxpayers

8

access to local governm.ent officials can be a good policy but does not support total reliance on

the local MBOA comprised of elected officials--who by definition are not independent from the

municipality and its tax department--to provide the due process hearing from which no

meaningful appeal is permitted. Also, the Court should take judicial notice that many taxpayers

are workers in the community, not residents, and so the local elected officials owe no political

accountability to those taxpayers when appearing before the MBOA.

Amicus City of Cleveland argues that the BTA did not assume its proper appellate role.

A complete response to that argument is that the BTA accorded the MBOA with a presumption

of correctness, «%hich by its nature is recognition of an appellate role.

Amicus argues as if the use of a SERP were tax evasion. The SERP is aii accepted tool to

provide retirement benefits. Both the BTA and the Court of Appeals rejected these and similar

arguments by Amicus with little or no comment. It is noteworthy that neither Cleveland nor

Shaker I-Ieights has amended their respective ordinances to remove or revise the pension

exemption, thcreby belying the Amicus' expressed outrage at the outcome. "Ihese allegations by

the Amicus are off the mark and provide no basis to entertain jurisdiction.

The suggestion by Amicus that Home Rule is implicated by the decision of the Cotuft of

Appeals is wholly unfounded. No violation of Home Rule arises when the BTA and the Court of

Appeals apply the local ordinance as written.

II. Statement of the Facts and the Case

William and Susan MacDonald ("MacDonalds") accept the Facts and Procedural I-listory

in the decision of the Court of Appeals. App. Op. '^[ ^j 2-8. The MacDonalds were represented at

both the MBOA and the hearing at the BTA. Mr. MacDonald, Richard Tomen and Patricia

Emond, representatives of Mr. McDonald's employer National City Bank, testified at the

9

MBOA. The MacDonalds supplemented that testimony at the BTA as authorized by the statute

conferring jurisdiction upon the BTA. Ms. Emond testified again. The BTA heard the testimony

of William Dunn, a senior benefits partner of the accounting firm PricewaterhouseCoopers, who

analyzed the National City SERP, provided a history of the taxation of pensions over the years,

and examined the common usage of the term "pension." Dunn concluded that the National City

SERP was a pension. BTA Slip Op. at 9-10. Professor Ray Stephens, an accounting expert,

testified that the reporting of the National City SERP as a pension was proper under GAAP.

B"I'A Slip Op. at 10. The BTA made its factual determinations based on the Transcript from the

MBOA and the hearing at the BTA.

William M:acDonald qualified for pa,yments under the SERP beginning in 2007. Shaker

Heights as Mr. MacDonald's former city of residence, sought to tax the present value of all of

those future monthly payments in 2006 immediately upon his retirement. The City of Cleveland,

Mr. MacDonald's work city, also asserted tax on the same present valuation in the same tax year.

Shaker Heights provides only partial credit for tax paid to the work city. Thus, both

municipalities seek tax upon the same benefit.

Mr. MacDonald's employer withheld Shaker Heights and Cleveland taxes on his salary,

401(k) elective deferrals, a bonus, stock compensation dividends taxed as compensation and

computed income associated with life insurance. His employer did not withhold taxes on the

SERP because the ordinances of both municipalities exempted pensions and the SERP was a

pension.

IIT. Responses to Appellants' Propositions of Law

Appellants' Proposition of Law No. 1: The proper municipal income tax treatment ofthe amounts attributable to the National City S};:[ZP under the City's income taxordinance are as taxable wages and not tax exempt pensions.

10

Appellants do not confront the central determination of the case that the SERP is a

"pension" as that word appears in the Shaker Ileights ordinance for purposes of defining

exemption from the municipal income tax. Shaker 1-Ieights exempts pensions from its municipal

income tax in the following terms:

111.0901 SOURCES OF INCO1VIE NOT TAXED.

The [Shaker Heights municipal income] tax provided for herein shall not be levied on the

following:

(c) Proceeds of insurance paid by reason of the death of theinsured, pensions, disability benefits, annuities, or gratuities not in thenature of compensation for services rendered from whatever sourcederived.

Bracketed material and e.mphasis added. The Codified Ordinances of Shaker Heights do not

contain a definition of "pension."

Appellants do not dispute: (1) that Shaker Heights exempts pensions; (2) that no

definition of`pension" appears in the Ordinance; (3) that the common meaning of the word is an

appropriate legislative aid in determining the meaning of the word to be applied for purposes of

the legislation; and (4) that the common meaning of the word "pension" includes the SERP. By

failing to challenge these findings, Appellants have conceded the core of the appeal.

Appellants argue that the SERP is a "wage" and not a "pension" although the two ternls

are not mutually exclusive. Cleveland argues that the SERP cannot be a pension because it is

nonqualified deferred compensation. Neither of these characterizations prevents the finding that

the SERP is an exempt pension. The relevant Ohio statute provides that "qualifying wages" are

subject to municipal income tax but that same state statute is clear in permitting the local

11

ordinance to exempt certain wages and in particular to exempt nonqualified deferred

compensation in the following terms:

(2) "Qualifying wages"3121(a) of the lnternal Revenuelimitations, adjusted as follows:

ineans wages, as defined in sectionCode, without regard to any wage

(c) Deduct any amount attributable to a nonqualified deferredcompensation plan or program described in section 3 l21(v)(2)(C) of thelnternal Revenue Code if the compensation is included in wages and has,by resolution or ordinance, beetl exempted from taxation by the municipalcorporation.

R.C. Section 718.03(A)(2)(c).

Thus, the SERP is classified as wages but also is a pension and as a pension is exempt

under Shak-er Fleights local law. Both the BTA and the Court of Appeals relied on this state

statute to suppoz-t the conclusion reached. The failure of Appellants to confront the relevant state

statute provides a strong basis for the Court to decline to review the appeal. 'I'he very purpose of

R.C. 718.03(A)(2)(c) is to sanction the local pension exemptions, l"zkc those of Shaker Heights

and Cleveland; which have been in place for decades. Further, the argument by Cleveland that

nonqualified deferred compensation cannot be an exempt pension cannot survive a review of the

express language of the local ordinance or the state statute.

Appellants place inappropriate reliance on the kVardrop decision. The Court of Appeals

found the Wcrrdrop decision to be distinguishable and therefore unpersuasive. App. Op. Tl 16.

Additional reasons supporting the conclusion that Appellants' reliance on Wardrop was wholly

unwarranted were expressed above. The reliance on the Wardrop decision is a transparent effort

to avoid the natural consequences of the language of the local ordinance, Codified Ordinance of

Shak-er Heights 111.0901 and the state statute, R.C. 718.03(A)(2)(c).

12

Appellants Proposition of Law No. 2: The BTA failed to follow the proper standard ofreview in the Appellee taxpayer's[taxpayers'] appeal from the Appellant City's MBOA,because in such appeals the B'I'A acts in an appellate capacity and decisions of MBOAsare presumptively valid, absent a demonstration that those findings are clearlyunreasonable or unlawful.

Appellants are asking for a declaration that a presumption of correctness be applied as the

standard of review by the BTA of decisions of a MBOA and that the taxpayer, when in the role

of appellant, needs to establish that the detei-mination of the MBOA is clearly unreasonable and

unlawful in order to prevail. The threshold problem with this appeal is that the BTA did exactly

what Appellants are requesting. The full expression of the standard of review at the BTA. is set

forth at pages 4-5 of the Memorandum above. Appellants' Proposition of Law No. 2 is moot.

The BTA utilized (1) the standard of review for appeals of nlunicipal tax cases to the

common pleas court and (2) the standard of review utilized by this Court in state and local tax

cases for decades. The BTA's reliance on settled law should totally insulate the BTA's finding

from the very attack mounted by Appellants in this case. The decisions of the BTA and the

Court of Appeals reflect the facts and law in this case and result from the application of the

customary standard of review that has been applied in hundreds of tax appeals. No reason exists

for the Court to impose a new greatly-elevated standard of review designed solely to ensure that

the taxpayer must lose his or her appeal from the MBOA. Finally, as stated by the majority of

the Court of Appeals:

"Moreover, deference to a board of review decision is illogical when the BTA hearsevidence not presented to the board of review in conducting its own adjudication of theappeal. It is not this court's role to second guess the state legislature policy reasons forestablishing two different appeal mechanisms for board of review decisions." App. Op.1j24.

13

IV. Conclusion

The MacDonalds respectfully request that the Court decline jurisdiction in this case.

Respectfully submitted,

^

iChristop er Swift 002 63)Counsel of RecordBaker & Hostetler LLPPNC Center,1900 East 9t1' St., Suite 3200Cleveland, OH 44114Telephone: (216) 621-0200Facsimile: (216) 696-0740cswift^.bakerlaw. cozn

Edward J. Bemert (0025808)Baker & liostetler LLPCapitol Square, Suite 210065 East State St.Columbus, C)II 43215Telephone: (614) 228-1541Facsimile: (614) 462-2616ebernertoa,bakerlaw. com

Attorneys for AppelleesWilliam E. MacDonald III and SusanMacDonald

14

CERTIFICATE OF SERVICE

The undersigned hereby certifies that the foregoing was served upon William Ondrey

Gruber (williain.gruber g)shakeronline.com}, Attorney for Appellees, City of Shaker Heights

Income Tax Board of Review and Matthew Rubino, Tax Administrator, City of Shaker Heights,

at City of Shaker Heights, 3400 Lee Rd., Shaker I-Ieights, OH 44120 and Amy L. Arrighi

(aarrighi@ritaohio.com), Attorney for Appellee Regional Income Tax Agency, at Regional

Income Tax Agency, 10107 Brecksville Rd,; Brecksville, OI-I 44141, and Linda L. Bickerstaff

(lbickerstaff@city.cleveland.oh.us), City of Cleveland, 205 W. Saint Clair Avenue, Cleveland,

C)fl 44113, Attorney for Amicus Curiae by electronic mail and U.S. first class mail, postage

./Sprepaid, on this 1,3 day of May, 2014.

9e of th attorneys for William and SusanMacDonald

15