Doctor wins income tax case against Cleveland stemming from pandemic

The city of Cleveland must refund income taxes collected from a Pennsylvania doctor forced to pay those taxes while working from home during the pandemic, a judge ruled.

A Cuyahoga County judge said Cleveland owes Dr. Manal Morsy a refund of more than $12,000 in withholding or payments collected, along with court costs. Jay Carson, senior litigator at The Buckeye Institute, said he’s unsure if the city will appeal.

As previously reported by The Center Square, The Buckeye Institute has a similar case pending before the Ohio Supreme Court.

Morsy lives outside of Philadelphia in Blue Bell, Pennsylvania, more than 400 miles southeast of Cleveland. Before the pandemic she commuted to Cleveland, spent the week there and returned home on the weekends.

During the pandemic, according to court filings, she worked exclusively from home in Pennsylvania, as ordered by Gov. Mike Dewine. She paid local income tax in Blue Bell, and Cleveland continued to tax her under a new Ohio law that deemed all work performed at her home in 2020 to have been performed at her office location in Cleveland.

“The Buckeye Institute argued that Dr. Morsy – who doesn’t even live in Ohio – could not be forced to pay municipal income tax on her earnings from working at home in Pennsylvania during the pandemic,” said Robert Alt, president and CEO of The Buckeye Institute and one of the attorneys representing Morsy. “In ordering a refund to Dr. Morsy, the court reaffirmed the fundamental right of due process and reminded local governments that they cannot tax nonresidents for work that was performed outside of the state of Ohio.”

The Ohio General Assembly passed legislation at the beginning of the pandemic that allowed cities to continue to collect taxes from workers even though they worked remotely in another city rather than working in the city where the employer was located. It was an effort to stabilize revenue for municipalities, and, in particular, larger communities, where larger employers are based.

The House passed a bill in June 2021 that required employees to pay income taxes in the city where they work. If work is done at home, then that community benefits, rather than where the traditional workplace is located.