## Facts

- The City of Cincinnati, City of Blue Ash, and Village of Fairfax enacted local income-tax ordinances imposing a corporate “net profits” tax on profits derived from business activities within each municipality.
- The ordinances calculated net profits using the same method corporations use to compute and report net income to the IRS.
- The ordinances applied regardless of whether the corporation maintained an office or place of business in the municipality, so long as profits were attributable to business activity occurring there.
- Cincinnati Bell Telephone Company, a public utility, was also subject to a state public-utility excise tax under R.C. 5727.30 et seq. for the privilege of owning property or doing business in Ohio.
- For tax years 1991–1993 and estimated payments for 1994, Cincinnati Bell paid municipal net profits taxes totaling $935,942.28 (Cincinnati), $17,402.59 (Blue Ash), and $2,015.64 (Fairfax).
- Cincinnati Bell sought refunds, asserting the state excise-tax scheme preempted municipal authority to tax public utilities’ net profits; the municipalities denied the refund requests.

## Issues

1. Whether Ohio’s public-utility excise-tax scheme in R.C. 5727.30 et seq. prohibits municipalities from imposing local net profits taxes on public utilities by implied preemption.
2. Whether municipal taxing authority may be restricted only by an express statutory prohibition enacted by the General Assembly.

## Decision

- The Ohio Supreme Court reversed the court of appeals and reinstated the trial court’s judgment for the municipalities.
- The Court held that local net profits taxes are valid as applied to Cincinnati Bell.
- The Court concluded that municipal taxing authority may be preempted or otherwise prohibited only by an express act of the General Assembly.
- Because R.C. Chapter 5727 contains no express prohibition on municipal net profits taxes on public utilities, Cincinnati Bell was not entitled to refunds.
- The Court overruled prior precedent to the extent it supported implied preemption of municipal taxing authority in this context.

## Legal Principles

- Local net profits taxes enacted pursuant to municipal taxing power are valid absent an express statutory prohibition by the General Assembly.
- Municipal taxing authority may be preempted or otherwise prohibited only by an express act of the General Assembly, consistent with Ohio Constitution Article XVIII, Section 13 and Article XIII, Section 6.
- A comprehensive state tax scheme, without express prohibitory language, does not impliedly eliminate municipalities’ constitutionally granted taxing authority.

## Conclusion

Ohio municipalities may impose corporate net profits taxes, including on public utilities, unless the General Assembly expressly prohibits such local taxation; a state public-utility excise-tax scheme alone does not impliedly preempt municipal net profits taxes.


Cincinnati Bell Tel. Co. v. City of Cincinnati, 81 Ohio St. 3d 599, 693 N.E.2d 212 (Ohio 1998)