A
court ruling that keeps Willoughby from taking more than $70,000 in
taxes from two lottery winners has increased the odds against
communities trying to levy a local tax on gambling earnings.
Lake
County Common Pleas Court Judge James W. Jackson last week ruled
Willoughby can’t take a retroactive bite out of lottery funds won in
1993 by Dionne Craft and her former husband, Guy.
The city tried to tax them in 1996 after the Ohio Supreme Court ruled cities could tax lottery winnings.
Willoughby’s situation resembled those of towns like Mayfield Heights, and Chardon, which eyed such taxes as revenue.
The
ruling’s greatest impact is on communities that try to tax lottery and
other income from games of chance without first creating specific
legislation, said lawyer Philip Ciano, who represents Dionne Craft in the 1997 lawsuit.
“Absent a specific legislative authority, this municipality should not be allowed to tax,” Ciano said.
The
ruling affects only Willoughby’s case against the Crafts. The city is
not expected to appeal Jackson’s decision to the state’s 11th District
Court of Appeals. Doing so would create precedent affecting either all
five counties in the 11th District or all counties if the case went to
the Ohio Supreme Court.
The Crafts’ case got its start in 1993. when they won nearly $2 million in the Ohio Lottery.
Three
years later, the Ohio Supreme Court ruled municipa1ities could tax
lottery winnings. That 1996 ruling named a handful of communities in
Ashtabula, Cuyahoga, Geauga and Lake counties’ because the communities
had been home to lottery winners in the past.
Willoughby was
banking on that 1996 ruling when it sent the Central Collection Agency
to tax the Crafts for $71,844. That tab included taxes, interest and
penalties. Ciano said the CCA and the city’s Board of Review backed off
demands for penalties, but pursued the taxes.
Ciano said the CCA
argued in 1997 that it and member agencies could tax any income without
specific legislative authority. That’s the position Ciano challenged.
“I
don’t know the ramification this decision yet. I presume they review
their ordinance so that theyke comply with this decision in La County,”
Ciano said.
Lawyer Joseph Gibson said Willoughby’s case might mean new effort to change the city ordinance.
“We’re going to review the ruli and based on that, make a plan attack,” Gibson said. But
it’s not expected to chan things in other communities, su as Chardon
Village. The villa doesn’t specifically cite lottery winnings in its
tax ordinances. Villa officials believe they successful tax lottery
winners, regardless.
“I assume we tax them, if we find out about it,” said Chardon Law Director James Gillette.
