[Cite as Salibra v. Mayfield Hts. Mun. Bd. of Appeal, 2016-Ohio-276.]

                              IN THE COURT OF APPEALS OF OHIO

                                   TENTH APPELLATE DISTRICT


Lawrence A. Salibra, II,                             :

                 Appellant-Appellant,                :                    No. 14AP-890
                                                                        (B.T.A. No. 2012-933)
v.                                                   :
                                                              (ACCELERATED CALENDAR)
Mayfield Heights Municipal Board                     :
of Appeal et al.,
                                                     :
                 Appellees-Appellees.
                                                     :




                                         D E C I S I O N

                                    Rendered on January 26, 2016


                 Lawrence A. Salibra, II, pro se.

                 Amy L. Arrighi, for appellee City of Mayfield Heights, c/o
                 Regional Income Tax Agency, Tax Administrator; Paul T.
                 Murphy for appellee City of Mayfield Heights Municipal
                 Board of Appeal.

                           APPEAL from the Ohio Board of Tax Appeals

BROWN, J.
        {¶ 1} This is an appeal by appellant, Lawrence A. Salibra, II, from a decision and
order of the Ohio Board of Tax Appeals ("BTA"), affirming a decision of appellee, the City
of Mayfield Heights Board of Review ("BOR"), denying appellant's appeal of a decision by
the Regional Income Tax Authority ("RITA") which granted in part and denied in part
appellant's request for a refund of tax withheld by his employer and paid to appellee, the
City of Mayfield Heights ("Mayfield Heights" or "the city") in 2007.
        {¶ 2} The following background facts, taken primarily from the decision and
order of the BTA, dated September 26, 2014 are generally undisputed. At issue in this
No. 14AP-890                                                                              2

case is a tax arising out of the cancellation of stock options which appellant's former
employer, Novelis, Inc. ("Novelis"), granted to appellant.          In 1995, appellant began
working for Alcan Aluminum Corporation ("Alcancorp"), the predecessor to Novelis, at
Alcancorp's office in Mayfield Heights.        During the course of his employment with
Alcancorp, appellant was granted company stock options. In 2005, Novelis was formed as
a spinoff from a portion of the Alcancorp operation; as a result of the spinoff, appellant's
unexercised stock options were converted to Novelis stock options.
       {¶ 3} During the time appellant worked in Mayfield Heights for Alcancorp and
Novelis, he requested and received from the city refunds of a portion of the tax his
employer withheld and remitted to the city each year; these refunds represented days that
appellant, a non-resident of Mayfield Heights, demonstrated he performed work outside
of the city. Appellant received these refunds by filing a request with RITA, documenting
the days he worked outside the city and including a certification by his employer that it
had withheld the city tax from appellant in excess of his liability to the city.
       {¶ 4} Appellant retired from Novelis, effective January 1, 2006. In 2007, an
India-based company acquired Novelis; as a result of the acquisition, all existing Novelis
stock options were cancelled and the resulting income paid to the holders, including stock
options still held by appellant. Appellant received a form W-2 from Novelis for tax year
2007 which reported the income he received as a result of the cancellation of the stock
options. Novelis withheld and remitted tax to the city at the rate of 1 percent of the
income reported to appellant.
       {¶ 5} Appellant sought a refund from RITA of all income tax withheld and paid to
the city by his former employer on the basis that he neither worked nor lived in the city
during 2007 when he received the stock option income. RITA granted in part and denied
in part appellant's refund request. The partial refund was calculated by apportioning the
dollars received by appellant in 2007 by the average percentage of time he worked outside
the city over the course of his employment with Alcancorp and Novelis, as demonstrated
by prior refund requests certified by the employer. Upon notification of the partial denial,
appellant appealed to the BOR, which affirmed RITA's denial of the remainder of the
refund. Appellant appealed that determination to the BTA, which issued its decision and
order September 26, 2014 affirming the decision of the BOR.
No. 14AP-890                                                                          3

       {¶ 6} On appeal, appellant sets forth the following four assignments of error for
this court's review:
              1. The Ohio Board of Tax Appeals (hereinafter "BTA") erred in
              characterizing the legal issue in this case as a challenge to the
              Appellees authority to tax stock options granted while the
              Appellant was employed in the municipality but were
              exercised after he retired and no longer worked or resided in
              the municipality.

              2. The BTA erred by not detailing in its opinion the
              undisputed facts concerning the manner in which stock
              options are granted and exercised in the context of s [sic]
              globally mobile workforce of a foreign multinational
              corporation.

              3. The BTA erred by not addressing the issue of whether the
              Appellees refusal to apply its standard rule to determine
              taxable income by creating a fraction whose numerator are
              the days worked in the municipality and whose denominator
              is total work days to allocate taxable income and instead
              creating a new rule unique to Appellant was legally
              appropriate[.]

              4. The BTA erred by not complying with the Ohio Rules of
              Civil Procedure by failing to grant the appropriate sanctions
              against the Appellee for failure to answer interrogatories.

       {¶ 7} At the outset, we note that appellant has failed to separately argue each
assignment of error as required by App.R. 16(A)(7). Accordingly, we will address the
assignments of error jointly.
       {¶ 8} The standard of review for an appellate court on an appeal from the BTA is
set forth in R.C. 5717.04, which states in part:
              If upon hearing and consideration of such record and
              evidence the court decides that the decision of the board
              appealed from is reasonable and lawful it shall affirm the
              same, but if the court decides that such decision of the board
              is unreasonable or unlawful, the court shall reverse and vacate
              the decision or modify it and enter final judgment in
              accordance with such modification.
No. 14AP-890                                                                                4

       {¶ 9} Pursuant to the above cited provision, a decision of the BTA "is to be
affirmed unless the decision is unreasonable or unlawful." Ohio Natl. Bank v. Franklin
Cty. Bd. of Revision, 10th Dist. No. 00AP-1161 (Mar. 30, 2001).
       {¶ 10} Although not styled as an assignment of error, appellant argues in his
"issues presented for review" that "Appellees' taxation of a small segment of the class of
persons which it has defined as subject to the tax simply because they can be conveniently
taxed when the Appellee has neither the administrative capability, infrastructure or * * *
capability of taxing the vast majority of the taxable class violates the 'as applied'
provisions of the Due Process Clauses of the Constitution of The United States and the
State of Ohio." We note that, in the body of his appellate brief, appellant refers to his "as-
applied" challenge as an equal protection argument.
       {¶ 11} As noted under the facts, appellant was granted company stock options as
part of his employment with Alcancorp and Novelis. Over the course of his employment,
appellant, a non-resident of Mayfield Heights, requested and received from the city
refunds of a portion of the tax his employer withheld and remitted to the city each year
based upon days appellant demonstrated that he performed work outside the city. In
2007, following appellant's retirement (effective January 1, 2006), Novelis was sold, and
existing Novelis employee stock options were cancelled; the resulting income was paid to
the holders, including stock options held by appellant. Novelis withheld and remitted to
the city tax at the rate of 1 percent of the income reported to appellant. Appellant applied
for a refund from RITA, which RITA granted in part and denied in part based on
appellant's past allowed refunds for income he received with respect to days he worked for
his employer outside the city.
       {¶ 12} Appellant challenged RITA's determination, and a hearing was conducted
before the BOR on December 1, 2008. The BOR affirmed RITA's denial of the remainder
of the refund on the basis that the stock options granted to appellant were compensation
taxable when granted (i.e., while appellant was working in the city), and therefore subject
to taxation pursuant to Section 739.03 of the Codified Ordinances of Mayfield Heights
(hereafter "the city ordinance"). The BTA affirmed that decision, finding no error with the
BOR's determination that the tax was properly imposed "per the City's ordinances and
related RITA rules and regulations." In its decision, the BTA agreed with the position of
No. 14AP-890                                                                               5

Mayfield Heights that, under Ohio law, "stock options have been repeatedly found to be
earned for municipal income tax purposes when they are granted, but taxable when
exercised."
       {¶ 13} While appellant's primary argument on appeal focuses on an "as-applied"
constitutional challenge, we begin with a consideration of the BTA's finding that the BOR
did not err in its determination that the tax was properly imposed with respect to stock
options granted to appellant pursuant to the city's taxing ordinances and related RITA
rules and regulations. On this point, appellant contends that the city, if it was "seriously
concerned about the most revenue at the lowest cost, * * * would argue its right to tax
arises when the income is received regardless of when the options are granted."
       {¶ 14} Several Ohio courts have addressed the issue of municipal tax liability
associated with income from employee stock options. In Hartman v. Cleveland Heights,
8th Dist. No. 66074 (Aug. 11, 1994), the court held that an employee's receipt of stock
options was a form of compensation that was taxable under the city's Income Tax Rules
and Regulations. In so holding, the court relied in part on C.I.R. v. Lo Bue, 351 U.S. 243
(1956), in which the United States Supreme Court recognized that stock options are
treated as compensation, includible as taxable income.
       {¶ 15} In Rice v. Montgomery, 104 Ohio App.3d 776 (1st Dist.1995), the plaintiffs-
taxpayers appealed from a trial court's decision affirming a determination by the
Montgomery Board of Tax Appeals that the plaintiffs' exercise of an employee stock
option was subject to municipal income taxation.          The court in Rice affirmed the
judgment of the trial court, finding that the grant of a stock option constituted
compensation subject to municipal income taxation. In its decision, the court addressed
and rejected the plaintiffs' contention that an owner exercising stock options would first
have to realize money from the sale of the stock in order for the municipality to tax the
stock option. Rather, the court determined, the city "is using the exercise event to assign a
fair market value to the compensation earned in the form of stock options." Id. at 781.
Thus, the court held, "[e]arned compensation only need be recognized, not realized,
income for tax purposes," and the Ohio Revised Code "does not prevent recognized
income from being taxed by municipalities." (Emphasis sic.) Id.
No. 14AP-890                                                                              6

       {¶ 16} In Wardrop v. Middletown Income Tax Review Bd., 12th Dist. No.
CA2007-09-235, 2008-Ohio-5298, the appellants, two retirees of AK Steel, challenged
whether the city of Middletown could tax them on income received from stock options
where the appellants neither worked nor lived in the city in the year of receipt. Under the
facts of that case, the appellants, who both retired in 2003, exercised stock options in
2004 which their employer had granted them during the course of their employment. For
the 2004 tax year, the employer withheld and remitted to the city of Middletown 1.5
percent of the compensation as city personal income tax. The appellants filed income tax
returns with the city of Middletown for the tax year 2004, seeking a refund of a
percentage of the income tax they paid based on the average number of days each was
physically present in the city over the past five years. The city of Middletown denied the
refund requests.    The city of Middletown Income Tax Review Board also rejected
appellants' claims for refunds, and the trial court affirmed that decision.
       {¶ 17} On appeal, the appellants raised several challenges, including a claim that
the options should not be subject to the Middletown tax because they did not realize the
income at issue until after their retirement. The court rejected this argument, agreeing
with the trial court's determination that the critical issue "was when appellants earned the
income, not when they received it." Id. at ¶ 16.
       {¶ 18} The appellants in Wardrop also asserted that the income they earned while
working on behalf of AK Steel outside the territorial jurisdiction of Middletown was not
subject to municipal income tax. More specifically, the appellants argued that the city was
required to apportion their income based on the number of days they worked within the
city. The city ordinance at issue in that case imposed "a municipal tax '[o]n all qualifying
wages, commissions, and other compensation and other taxable income earned or
received during the effective period * * * by nonresidents for work done or services
performed or rendered in the City.' " Id. at ¶ 19.
       {¶ 19} The    reviewing    court   in   Wardrop     construed    the   ordinance   as
"unambiguously" restricting the city to "taxing nonresidents for work activities occurring
within its territorial boundaries." Id. at ¶ 20. The court found that, to the extent the
appellants performed work within the city, such work was subject to taxation under the
ordinance; conversely, to the extent they performed work outside of the city, it was not
No. 14AP-890                                                                               7

subject to taxation. The court therefore concluded that the appellants "were entitled to
apportion the income, for municipal tax purposes, based on the number of days they
worked within the city." Id. at ¶ 29. The court further found that "absent any guidance
from Middletown prescribing an alternative method of allocation, appellants adopted a
reasonable allocation based on the average number of days worked within the city over
the preceding five years." Id.
       {¶ 20} Finally, the court in Wardrop addressed the appellants' argument that the
trial court erred in finding that the appreciated value of their stock options was subject to
the city's income tax. The appellants asserted that the profit was not subject to taxation
under the city ordinance because they did not work or reside in Middletown when the
appreciation occurred or when they exercised the options. The court, relying in part on
the decision in Rice, rejected this argument, holding in part:
               [Appellants] earned compensation in the form of stock
               options while working for AK Steel. Middletown could tax
               this compensation to the extent it constituted "income earned
               * * * by nonresidents for work done or services performed or
               rendered in the City." * * * Middletown necessarily had to wait
               until the option-exercise date to assign a value to the
               compensation, however, because the value of the options
               could not be determined until then. Although [appellants] did
               not reside or work in Middletown when they exercised the
               options, the fact remains that they earned the stock-option
               compensation while working for AK Steel. Therefore, [the city
               ordinance] authorized Middletown to tax the resulting gain,
               which could be calculated only when appellants exercised the
               options.

(Emphasis sic.) Wardrop at ¶ 47.

       {¶ 21} In the present case, Section 793.03 of the city ordinance states in part: "An
annual tax * * * shall be imposed * * * at the rate of one percent per year upon * * * all
salaries, wages, commissions and other compensation earned after December 31, 1971, by
nonresidents of the City for work done or services performed or rendered in the City."
       {¶ 22} The BTA, in addressing appellant's claim that the city ordinance was
improperly applied to the facts, found no error with the BOR's determination that the tax
was properly imposed in accordance with the city's tax laws and related RITA rules and
regulations.   As previously noted, the BTA agreed with the city's argument that, in
No. 14AP-890                                                                                8

accordance with Ohio law, "stock options have been repeatedly found to be earned for
municipal income tax purposes when they are granted, but taxable when exercised." In so
holding, the BTA relied in part on Hartman and Rice.
       {¶ 23} Upon review, we find that the BTA's determination on this issue was neither
unreasonable nor unlawful. Under Ohio law, the employer's grant of stock options to
appellant while he worked in Mayfield Heights was a form of compensation for work done
or services performed, but the value of those options could not be determined until the
exercise of those options. The fact that appellant was retired, and did not reside or work
in Mayfield Heights at the time the options were exercised (or cancelled), did not preclude
the city from imposing the tax at issue (subject to the income tax rate in effect at the time
the income was earned). Wardrop at ¶ 47 (although retirees did not reside or work in
taxing city when they exercised the options, "the fact remains that they earned the stock-
option compensation while working for" their employer and, therefore, the city ordinance
authorized the city to tax the resulting gain "which could be calculated only when [the
retirees] exercised the options"). (Emphasis sic.)
       {¶ 24} Further, we agree with appellees that the manner in which the city, through
RITA, provided a partial refund to appellant was appropriate. As noted by appellees, the
city apportioned the stock option income to account for time appellant worked outside the
city, resulting in a partial refund of the tax paid to the city on the stock options. On this
issue, we find persuasive the reasoning of the court in Wardrop, which deemed such a
method of allocation as reasonable. See id. at ¶ 29.
       {¶ 25} We next address appellant's "as-applied" constitutional argument. In his
appellate brief, appellant contends that neither the city nor the BTA "appear to
acknowledge (or perhaps understand) the nature of [an] as-applied challenge," suggesting
that they treated his constitutional claim as a facial challenge to the city's ordinance.
       {¶ 26} In general, statutes, ordinances and administrative rules "may be
constitutionally challenged on their face or as applied." Wymsylo v. Bartec, Inc., 132
Ohio St.3d 167, 2012-Ohio-2187, ¶ 20. Thus, "[a] statute which is constitutional on its
face may be found unconstitutional if it is applied in a discriminatory manner." Cleveland
v. Pfledger, 8th Dist. No. 58314 (Mar. 21, 1991). Further, " '[i]f a statute is
unconstitutional as applied, the State may continue to enforce the statute in different
No. 14AP-890                                                                                9

circumstances where it is not unconstitutional, but if a statute is unconstitutional on its
face, the State may not enforce the statute under any circumstances.' " Fagan v. Boggs,
4th Dist. No. 10CA17, 2011-Ohio-5884, ¶ 22, quoting Ruble v. Ream, 4th Dist. No.
03CA14, 2003-Ohio-5969, ¶ 17.
       {¶ 27} A facial challenge involves an allegation that "a statute, ordinance, or
administrative rule, on its face and under all circumstances, has no rational relationship
to a legitimate government purpose." Wymsylo at ¶ 21. By contrast, a party raising an as-
applied constitutional challenge "alleges that 'the "application of the statute in the
particular context in which he has acted, or in which he proposes to act, would be
unconstitutional. The practical effect of holding a statute unconstitutional 'as applied' is
to prevent its future application in a similar context, but not to render it utterly
inoperative." ' " Id. at ¶ 22, quoting Yajnik v. Akron Dept. of Health, Housing Div., 101
Ohio St.3d 106, 2004-Ohio-357, ¶ 14, quoting Ada v. Guam Soc. of Obstetricians &
Gynecologists, 506 U.S. 1011 (1992) (Scalia, J., dissenting). Further, "[a] statute may be
unconstitutional as applied if the government selectively enforces it in violation of equal
protection rights." Fagan at ¶ 23. Thus, " '[t]hough the law itself be fair on its face, and
impartial in appearance, yet, if it is applied and administered by public authority with an
evil eye and an unequal hand, so as practically to make unjust and illegal discriminations
between persons in similar circumstances, material to their rights, the denial of equal
justice is still within the prohibition of the constitution.' " Id., quoting Yick Wo v.
Hopkins, 118 U.S. 356, 373-74 (1886).
       {¶ 28} Under Ohio law, "[b]ecause an as-applied challenge depends upon a
particular set of facts, this type of constitutional challenge to a rule must be raised before
the administrative agency to develop the necessary factual record." Wymsylo at ¶ 22. See
also Temponeras v. Ohio State Med. Bd., 10th Dist. No. 14AP-970, 2015-Ohio-3043, ¶ 15
(noting that "a facial constitutional challenge may be raised for the first time in an appeal
from an administrative agency, but an as-applied constitutional challenge must be raised
first in the agency to allow the parties to develop an evidentiary record").
       {¶ 29} In order to prevail on a constitutional challenge to a statute "as applied, the
challenger has the burden of presenting clear and convincing evidence of a presently
existing set of facts that make the statute unconstitutional when applied to those facts."
No. 14AP-890                                                                               10

Simpkins v. Grace Brethren Church of Delaware, 5th Dist. No. 13 CAE 10 0073, 2014-
Ohio-3465, ¶ 66.
       {¶ 30} Appellant argues on appeal that "in the context of a globally mobile
workforce," the taxing statute at issue, "which defines the tax class as one whose liability
arises when the options are granted * * * was not and practically could not be
administered in [a] manner that was not discriminatory." Appellant contends that such
"discrimination arises not from commission but from omission." According to appellant,
while "the statute is facially constitutional," appellee "is not enforcing the statute" in
instances in which "the costs of collecting it would be prohibitive." Appellant also raises
what appears to be a selective enforcement equal protection argument, asserting that this
case involves one "of affirmative discrimination in the statute's administration" based on
the formula it used to calculate his tax liability, i.e., that the taxing authority utilized a
standard that applied solely to him.
       {¶ 31} In order to prevail on a claimed denial of equal protection by selective
enforcement of a law, a taxpayer is required to show: "(1) [the taxpayer], compared with
others similarly situated, was selectively targeted; and (2) that such selective treatment
was based on impermissible considerations such as race, religion, intent to inhibit or
punish the exercise of constitutional rights, or malicious or bad faith intent to injure a
person." Rubinovitz v. Rogato, 60 F.3d 906, 909-10 (1st Cir.1995).
       {¶ 32} Based upon this court's review of the record of proceedings before both the
BOR and BTA, appellant's equal protection challenge, whether viewed as a standard "as-
applied" claim or as a selective enforcement claim, fails. We note that, during the hearing
before the BOR, appellant offered his own views regarding the application and
enforcement of the city ordinance with respect to a hypothetical set of circumstances
involving stock option holders residing outside the state or country. There is, however, no
factual evidence in the record reflecting that the city administered or applied the
ordinance in an unequal or unreasonable manner, or that the city treated similarly
situated individuals differently. See, e.g., Hegwood v. Eau Claire, 676 F.3d 600, 603 (7th
Cir.2012) ("When we are confronted with an as-applied challenge, we examine the facts of
the case before us exclusively, and not any set of hypothetical facts under which the
statute might be unconstitutional."). Nor did appellant submit evidence that the city
No. 14AP-890                                                                             11

administered the tax in a manner that singled him out in contrast to others similarly
situated, or that it enforced the ordinance against him based upon discriminatory or
impermissible considerations. Accordingly, appellant has failed to show by clear and
convincing evidence that the income tax ordinance, as applied by the city under the facts
of this case, violated his equal protection rights.
       {¶ 33} Appellant also contends that the BTA erred in ruling on his motion to
compel answers to interrogatories.        In his "issues presented for review," appellant
contends he was deprived of his "right to sanctions for failure to obtain a timely response
to interrogatories."
       {¶ 34} By way of background, the record indicates that appellant submitted
interrogatories to the BOR during the administrative proceedings before the BTA. On
September 19, 2012, the BOR submitted answers to the interrogatories. On October 19,
2012, appellant filed a motion to compel answers to interrogatories propounded to the
BOR. In the motion, appellant argued in part that the decision of the BOR had failed to
address the constitutional issues he raised, and that the BOR's answers to his
interrogatories "reflect an unwillingness * * * to effectively address this constitutional
challenge." By order filed October 30, 2012, the BTA denied the motion to compel on the
basis that appellant had not acted in a timely manner.
       {¶ 35} On November 8, 2012, appellant filed a motion for reconsideration of the
BTA's order denying his motion to compel answers to interrogatories. On November 9,
2012, the BTA rendered a decision granting appellant's motion for reconsideration based
on the BTA's acknowledgment that "some confusion could have resulted from the board's
failure to respond to the parties' multiple joint motions for extension of time
response/object to interrogatories." In considering the merits of appellant's motion to
compel, the BTA denied the motion on the basis that the BOR "provided adequate
responses/appropriate objections to the subject discovery requests."
       {¶ 36} In general, the determination of discovery disputes and decisions with
respect to discovery rules "are confided to the sound discretion of the BTA, and absent a
showing that the BTA abused its discretion, such decisions by the BTA will not be
disturbed on appeal." HK New Plan Exchange Property Owner II, LLC v. Hamilton Cty.
Bd. of Revision, 122 Ohio St.3d 438, 2009-Ohio-3546, ¶ 16.
No. 14AP-890                                                                               12

       {¶ 37} We note that, pursuant to Section 793.29(b) of the city ordinance, "[t]he
Administrator shall enforce payment of all taxes owing to the City," while Section 793.32
of the city ordinance authorizes the board of trustees of RITA, pursuant to an agreement
entered into by the city, "to administer and enforce" Chapter 793 as the agent of the city.
Section 793.36 of the city ordinance authorizes the BOR to hear appeals from "any ruling
or decision of the Administrator" and, in its adjudicative capacity, the BOR has
"jurisdiction to affirm, reverse or modify any such ruling or decision or any part thereof."
       {¶ 38} In the instant case, many of the interrogatories propounded to the BOR
called for legal conclusions or sought explanations as to the administration and/or
enforcement of the income tax, including inquiries as to the "legal basis" upon which the
BOR "relies to assess the income tax," whether it was the position of the BOR "that the
United States may tax * * * income of a US citizen that is subject to treaty exclusion," and
whether it was the position of the BOR that "the United States may tax the income of a
non US citizen." In response to these latter inquiries, the BOR stated that it "cannot
speculate or opine on the taxability of the income by the United States." Appellant also
inquired whether the BOR had "ever collected income tax on stock options exercised by
US nationals who were former employees" of Alcancorp or Novelis. The BOR responded
that it "is a reviewing board and does not collect tax." Upon review of the interrogatories
and responses at issue, we find that the BTA did not abuse its discretion in its
determination that the BOR provided adequate responses and objections to the discovery
requests. Thus, the BTA did not err in denying the motion to compel.
       {¶ 39} Based upon this court's review of the record, we find the BTA's decision and
order was reasonable and lawful. Accordingly, appellant's first, second, third, and fourth
assignments of error are not well-taken and are overruled, and the order of the Ohio
Board of Tax Appeal, affirming the decision of the City of Mayfield Heights Board of
Review, is hereby affirmed.
                                                                            Order affirmed.

                              KLATT and HORTON, JJ., concur.

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