[Until this opinion appears in the Ohio Official Reports advance sheets, it may be cited as
Krehnbrink v. Testa, Slip Opinion No. 2016-Ohio-3391.]




                                        NOTICE
     This slip opinion is subject to formal revision before it is published in
     an advance sheet of the Ohio Official Reports. Readers are requested
     to promptly notify the Reporter of Decisions, Supreme Court of Ohio,
     65 South Front Street, Columbus, Ohio 43215, of any typographical or
     other formal errors in the opinion, in order that corrections may be
     made before the opinion is published.



                         SLIP OPINION NO. 2016-OHIO-3391
    KREHNBRINK ET AL., APPELLANTS, v. TESTA, TAX COMMR., APPELLEE.
  [Until this opinion appears in the Ohio Official Reports advance sheets, it
   may be cited as Krehnbrink v. Testa, Slip Opinion No. 2016-Ohio-3391.]
Income taxation—Tax commissioner’s notice to appellants one month before
        Board of Tax Appeals hearing of presumption of their Ohio residency was
        sufficient to avoid waiver of residency as basis for assessments—
        Appellants proved neither that they were not Ohio residents nor that they
        were entitled to relief as nonresidents—Board’s decision affirmed.
     (No. 2014-0249—Submitted January 26, 2016—Decided June 15, 2016.)
              APPEAL from the Board of Tax Appeals, No. 2012-2368.
                               ____________________
        Per Curiam.
        {¶ 1} This is an appeal from a decision of the Board of Tax Appeals
(“BTA”), which affirmed the tax commissioner’s assessment of Ohio individual
income tax against appellants, Robert G. and Leslie R. Krehnbrink, for tax years
2002 through 2007. The assessments resulted from information supplied to the
                                 SUPREME COURT OF OHIO




tax commissioner by the Internal Revenue Service, in particular the Ohio address
used by the Krehnbrinks as their residential address on their federal tax returns.
         {¶ 2} For the years at issue, the Krehnbrinks originally filed no Ohio
returns at all. The Krehnbrinks have contended that income was earned outside
Ohio, but if they are in fact residents and domiciliaries of Ohio, they would be
generally taxed on all their income, subject to a credit for income taxes paid to
other states on income earned in those other states.
         {¶ 3} Beginning    in     the   proceedings   before   the   BTA,   the     tax
commissioner’s counsel clarified that the assessments were predicated on the
unrebutted presumption that the Krehnbrinks are in fact Ohio residents and
domiciliaries, even though the tax commissioner’s notices and final determination
did not say so. It appears that the Krehnbrinks take the position that they should
prevail if they can show that income was earned outside Ohio. But as residents of
Ohio, they would be taxed on out-of-state income as a general matter.
         {¶ 4} On appeal here, the Krehnbrinks renew their contention that income
was earned outside Ohio, and they challenge, for the first time, the admission of
five exhibits introduced by counsel for the tax commissioner during the
November 13, 2013 hearing before the BTA. Despite the tax commissioner’s
initial failure to give notice of his reliance on the presumption of Ohio residency,
we disagree that appellants have demonstrated a legal error or abuse of discretion
by the BTA. Accordingly, we affirm the decision of the BTA.
                           FACTUAL BACKGROUND
         {¶ 5} The procedural starting point of this case consists of a letter from the
tax department to both the Krehnbrinks dated January 8, 2010, stating that the
department’s records “indicate Ohio individual income tax return(s) were not filed
in [their] name(s) for [tax] years [2002 through 2006].”        The letter went on to
state:




                                            2
                                     January Term, 2016




        The Internal Revenue Service (“IRS”) has provided to us taxpayer
        information that we use to verify our records. Specifically, the IRS
        has provided us information that shows you have received 1099
        miscellaneous income from various Ohio payer(s) * * *. It is
        urgent you respond to this letter by reading the situations described
        below and taking the appropriate action.


The letter then described two options for responding: filing the missing returns or
offering reasons why no returns were required to be filed.
        {¶ 6} Notably absent from this initial communication is any statement that
the Krehnbrinks were presumed to be domiciled in Ohio, which would form the
basis for presuming that all their income for the years at issue should have been
reported and taxed. That presumption would naturally have arisen from the use of
a Cincinnati, Ohio, address as the residential address listed on their federal tax
returns.
        {¶ 7} Next, the tax department prepared and issued assessments against
the Krehnbrinks for unpaid Ohio individual income taxes.1 The record shows the
computation of tax for five of the six tax years at issue (2002 through 2006) in the
form of “Audit Chang[e]” sheets, also referred to as “correction notices.” The
state then computed Ohio income tax based on the federal adjusted-gross-income
figure reported on the federal returns for the years at issue. The total tax, interest,
and penalty assessed for tax years 2002 through 2006 was $25,034.
        {¶ 8} The correction notices were sent to the Krehnbrinks on or about
March 18, 2010, with the demand that, by April 8, the Krehnbrinks “provide
proof that the taxes were previously paid, provide wage statements (W-2’s,

1
  The assessments were issued against both the Krehnbrinks. Although the focus has been on
Leslie Krehnbrink’s income, only Robert Krehnbrink has appeared in these proceedings. He has
appeared pro se based on his joint and several liability with respect to the assessments. See R.C.
5747.08(E).




                                                3
                             SUPREME COURT OF OHIO




1099’s, etc.) that would change the proposed correction notices, or * * * remit the
balance due.”
       {¶ 9} An apparent lack of response by the Krehnbrinks led to the issuance
of two assessments. One was issued on April 26, 2010, for tax year 2007,
imposing liability of $1,778.91 in tax, interest, and penalty.         The second
assessment covered tax years 2002 through 2006, based on the correction notices,
and was issued on May 5, 2010. The total owed on the second assessment was
$25,123.   The certified mailing was apparently unsuccessful, and follow-up
service by regular mail became necessary.
       {¶ 10} By letter dated August 31, 2010, the Krehnbrinks petitioned for
reassessment, stating four grounds for relief, including the claim that “[a]ssessed
incomes were earned outside of the State of Ohio and are not subject to State of
Ohio income tax,” with no mention of Ohio residency. Next, an official of the tax
department’s Office of Chief Counsel contacted the Krehnbrinks by letter dated
February 14, 2012, asking for evidence or authority in support of their position, to
be submitted by March 30, 2012.
       {¶ 11} The tax commissioner issued his final determination in the matter
on May 22, 2012. The determination states that the Krehnbrinks were assessed
“for failing to file their individual income tax returns for [tax years 2002 through
2007]” and notes that the Krehnbrinks “contend that their income was earned
outside of the State of Ohio and should not be subject to Ohio income tax”:


       However, [the Krehnbrinks] did not respond to multiple
       Department requests for information to verify their contention.
       The [Krehnbrinks] have failed to present evidence to refute the
       accuracy of the tax, interest and penalty amounts assessed in these
       matters. Therefore, [the Krehnbrinks’] objection is not well taken.
                Accordingly, the assessments are affirmed.




                                         4
                                January Term, 2016




       {¶ 12} Conspicuous in its absence once more is any mention of a
presumption of Ohio domicile and residence; indeed, the final determination
appears to acquiesce in the Krehnbrinks’ suggestion that proof of a non-Ohio
source of income would negate the assessments.
       {¶ 13} The Krehnbrinks appealed to the BTA, renewing in their notice of
appeal their primary contention that their income was earned outside Ohio. The
BTA scheduled a hearing on May 29, 2013, at which the Krehnbrinks did not
appear. At that hearing, the then-counsel for the tax commissioner merely stated,
“[W]e would like to dismiss for the failure to prosecute, or in the alternative, [the
Krehnbrinks] have not provided sufficient documentation to establish that any
income that they say shouldn’t be pledged to Ohio was, in fact, earned outside of
Ohio.” Again here, the tax commissioner made no reference to predicating the
assessment on the Krehnbrinks’ residency but instead focused exclusively on
whether income was or was not earned in Ohio.
       {¶ 14} The BTA issued an order on June 6, 2013, dismissing the appeal
for failure to prosecute.   The Krehnbrinks moved for reconsideration on the
premise that they had not received notice of the hearing. The BTA granted
reconsideration and scheduled a new hearing for November 13, 2013.
       {¶ 15} On October 3, 2013, counsel for the tax commissioner sent Robert
Krehnbrink an e-mail making clear that the Krehnbrinks’ Ohio residency would
be presumed and would serve as a basis for the assessments unless and until the
Krehnbrinks provided documentation rebutting the presumption.
       {¶ 16} At the November 13 hearing, Leslie Krehnbrink was not in
attendance but Robert Krehnbrink was, and he testified concerning her
employment. Robert testified that the documentation he had submitted to the
BTA showed that Leslie worked outside Ohio during the tax years at issue. He
stated at the hearing that she was a corporate trainer hired by companies to




                                         5
                              SUPREME COURT OF OHIO




provide training sessions for middle and upper management. Robert further stated
that other documentation of the out-of-state locations where Leslie had resided
was no longer in existence.
       {¶ 17} Robert Krehnbrink admitted that the documentation he had
submitted showed that some of Leslie Krehnbrink’s work was performed in Ohio.
Further, Robert stated his view that this Ohio-sourced income was subject to Ohio
income tax. But the Krehnbrinks did not quantify how much income was earned
in Ohio and how much was earned outside the state. The documentation that
Robert submitted to the BTA consists of printouts of the Krehnbrinks’ form 1099
information for tax years 2002 through 2006 and a portion of the Krehnbrinks’
W-2 form for tax year 2007. The documents often show the location of a payor,
but they do not on their face show the location at which work was performed.
       {¶ 18} Robert Krehnbrink offered no evidence to controvert the tax
commissioner’s position on Ohio residency; indeed, he admitted that Leslie
Krehnbrink “comes back to Ohio” to reside when she has completed a particular
assignment. For his part, the tax commissioner introduced without objection what
counsel summarized as “a printout from the public records information available
on Westlaw for Mr. Krehnbrink’s wife,” which “shows real property records for
various years, vehicle registrations for years, and addresses in Ohio, voter
registration information, so a lot of the common law information that’s used for
determining whether an individual is a resident or a nonresident.”             That
information—reflecting an Ohio home with a mortgage, Ohio auto registrations,
and an Ohio voting registration—was offered to establish an affirmative case that
the Krehnbrinks were domiciled in Ohio.
       {¶ 19} The BTA issued its decision on January 15, 2014. The board
recited the presumption of validity attaching to the tax commissioner’s
determinations and held in effect that the Krehnbrinks had not presented sufficient
evidence to rebut that presumption:




                                        6
                                January Term, 2016




               Upon review of the record before us, we find that
       appellants have failed to provide sufficient evidence to
       demonstrate an error in the commissioner’s final determination.
       Indeed, the only evidence presented, aside from general testimony
       devoid of specific details about Ms. Krehnbrink’s employment
       outside the state, are 1099’s indicating that Ms. Krehnbrink was
       paid by many entities, both in and out-of-state, during the period in
       question. We find such evidence insufficient to demonstrate a
       right to the relief requested.


BTA No. 2012-2368, 2014 WL 351136, *2 (Jan. 15, 2014). Notably, the BTA
decision makes no mention of the Ohio-residency issue.
       {¶ 20} The Krehnbrinks have appealed.
                                    ANALYSIS
  OHIO TAXES RESIDENTS ON ALL INCOME, NONRESIDENTS ON OHIO INCOME
       {¶ 21} R.C. 5747.02 imposes Ohio income tax on “every individual * * *
residing in or earning or receiving income in this state.” R.C. 5747.02(A). R.C.
5747.01(N) defines “taxpayer” as “any person subject to the tax imposed by
section 5747.02 of the Revised Code,” and R.C. 5747.08 requires the filing of a
return by “every taxpayer for any taxable year for which the taxpayer is liable for
the tax imposed by [R.C. 5747.02], unless the total credits allowed * * * for the
year are equal to or exceed the tax imposed by section 5747.02 of the Revised
Code.” Finally, “resident” applied to an individual means “[a]n individual who is
domiciled in this state * * *,” R.C. 5747.01(I)(1), and “nonresident” means “an
individual * * * that is not a resident,” R.C. 5747.01(J).
       {¶ 22} As for “domicile,” that is “ ‘ “the technically pre-eminent
headquarters that every person is compelled to have in order that certain rights




                                          7
                             SUPREME COURT OF OHIO




and duties that have been attached to it by the law may be determined.” ’ ”
Cunningham v. Testa, 144 Ohio St.3d 40, 2015-Ohio-2744, 40 N.E.3d 1096, ¶ 12,
quoting Schill v. Cincinnati Ins. Co., 141 Ohio St.3d 382, 2014-Ohio-4527, 24
N.E.3d 1138, ¶ 24, quoting Williamson v. Osenton, 232 U.S. 619, 625, 34 S.Ct.
442, 58 L.Ed. 758 (1914).
         {¶ 23} In sum, all income of Ohio residents is taxable wherever earned or
received, subject to a “resident credit” for amounts of state income tax paid to
another state where the income was earned or received. Cunningham at ¶ 10. As
for nonresidents, all their income that is earned or received in this state is taxable.
Id.    The nonresident limits the tax to Ohio income only by claiming the
nonresident credit under R.C. 5747.05(A).
THE KREHNBRINKS FAILED TO PROVE THAT THEY DO NOT HAVE TO PAY THE
                                AMOUNTS ASSESSED
      The presumption of Ohio residency was not originally mentioned in the tax
                                     assessments
         {¶ 24} Unfortunately for the goal of sound tax administration, the tax
department initially failed to state that it was relying on the presumption of Ohio
domicile.     Neither the notices received by the Krehnbrinks nor the tax
commissioner’s final determination made any mention of a presumption of Ohio
domicile, let alone set forth any finding thereof in light of the information in hand.
And although it is true that taxpayers are charged with a knowledge of the law,
they are not charged with knowledge of what theory of liability the tax
commissioner is relying upon, apart from being informed of that theory by the
commissioner himself.
The Krehnbrinks did not refute the assessment, either as residents or nonresidents
         {¶ 25} At the BTA, the tax commissioner’s counsel attempted to rescue
the assessments by identifying Ohio residency as their basis. She introduced into
evidence the e-mail she had sent on October 3, 2013, to Robert Krehnbrink, which




                                          8
                               January Term, 2016




was admitted after he reviewed it and declined to object to its admission. It reads
as follows:


               The Tax Commissioner reviewed the information provided
       and is unable to adjust the assessments based upon the
       documentation provided. The presumption is that you and Mrs.
       Krehnbrink are residents of the state of Ohio, until shown
       otherwise. You had indicated to me that your wife resided in
       different locations between 2002 and 2007. I would appreciate it if
       you could please provide me with information and documentation
       that shows where she lived out of state between 2002 and 2007.
       Also, please provide me any information regarding income tax
       paid to other states.
               Some of the information provided indicates that your wife
       received income from businesses in Ohio. The Tax Commissioner
       has not received any returns from you for the years 2002 to 2007.


       {¶ 26} On the one hand, the failure of the tax commissioner to
communicate to the taxpayer and the BTA the need to offer proof on a particular
point can lead to a waiver by the commissioner of that point. See The Chapel v.
Testa, 129 Ohio St.3d 21, 2011-Ohio-545, 950 N.E.2d 142, ¶ 25-28. On the other
hand, in a proper case, the tax commissioner can take a position at the BTA that
proof of particular points is required, and the de novo nature of the BTA
proceeding permits those issues to be raised and adjudicated. See Key Servs.
Corp. v. Zaino, 95 Ohio St.3d 11, 16, 764 N.E.2d 1015 (2002).
       {¶ 27} Here, the tax commissioner’s reliance on the Krehnbrinks’ Ohio
residency was not raised until the commissioner’s counsel notified the
Krehnbrinks by e-mail just over one month before the second BTA hearing.




                                        9
                             SUPREME COURT OF OHIO




Then, at that hearing, counsel argued that the assessments were justified by the
Krehnbrinks’ Ohio residency.
       {¶ 28} In response, Robert Krehnbrink failed to deny Ohio residency or to
assert residency outside Ohio. He also admitted that when Leslie Krehnbrink
would travel to perform corporate training services, she would “com[e] back to
Ohio” when a job assignment was completed.             This testimony invokes the
essential feature of domicile: an intent to return to a place even if one is away
from it for a long time. Schill, 141 Ohio St.3d 382, 2014-Ohio-4527, 24 N.E.3d
1138, at ¶ 24 (“ ‘ “that is properly the domicile of a person where he has his true,
fixed, permanent home and principal establishment, and to which, whenever he is
absent, he has the intention of returning” ’ ”), quoting Sturgeon v. Korte, 34 Ohio
St. 525, 535 (1878), quoting Story, Conflict of Laws, Section 41.
       {¶ 29} While this situation reflects bad administrative practice by the
state, the fact remains that Robert Krehnbrink could have, at a minimum,
challenged the assertion of Ohio residency for himself and Leslie Krehnbrink, but
he did not. Additionally, Krehnbrink declined to object to admission of the five
exhibits introduced by the tax commissioner’s counsel, including the Westlaw
printout of public-records information that furnished evidence of the Krehnbrinks’
Ohio residency. Krehnbrink thereby acquiesced in viewing residency as an issue
to be determined by the BTA and waived the Krehnbrinks’ challenge to the
admissibility of the five exhibits as an issue reviewable by this court.
       {¶ 30} In any event, even if residency had not been validly placed at issue,
Krehnbrink failed to rebut the assessment even if the Krehnbrinks were deemed
not to be Ohio residents. The rule is well settled that a taxpayer challenging the
assessment has the burden to “ ‘ “show in what manner and to what extent * * *
the commissioner’s investigation and audit, and the findings and assessments
based thereon, were faulty and incorrect.” ’ ” Maxxim Med., Inc. v. Tracy, 87
Ohio St.3d 337, 339, 720 N.E.2d 911 (1999), quoting Federated Dept. Stores, Inc.




                                         10
                                 January Term, 2016




v. Lindley, 5 Ohio St.2d 213, 215, 450 N.E.2d 687 (1983), quoting Midwest
Transfer Co. v. Porterfield, 13 Ohio St.2d 138, 141, 235 N.E.2d 511 (1968). See
also Tetlak v. Bratenahl, 92 Ohio St.3d 46, 51, 748 N.E.2d 51 (2001) (taxpayer
had the burden of showing manner and extent of error in a municipal income-tax
assessment).     Quite simply, Robert Krehnbrink admitted that some of Leslie
Krehnbrink’s work was performed in Ohio and failed to prove the amount that
was not.
          {¶ 31} As a result, the Krehnbrinks proved neither that Leslie Krehnbrink
was not a resident nor that they were entitled to relief as nonresidents. Either
way, the Krehnbrinks opened the door to affirmance of the entire assessment.
                                    CONCLUSION
          {¶ 32} For the foregoing reasons, we affirm the decision of the BTA.
                                                                 Decision affirmed.
          O’CONNOR, C.J., and PFEIFER, O’DONNELL, LANZINGER, and O’NEILL, JJ.,
concur.
          KENNEDY, J., concurs in judgment only with an opinion.
          FRENCH, J., concurs in judgment only.
                                _________________
          KENNEDY, J., concurring in judgment only.
          {¶ 33} I concur only in the majority’s judgment affirming the decision of
the Board of Tax Appeals (“BTA”). I write separately to express concern about
the cavalier attitude of appellee, the tax commissioner, in failing to meet the case-
management deadline established in Ohio Adm.Code 5717-1-07(A)(3)(f) and
about the BTA’s failure to ensure that its procedural rules are enforced.
          {¶ 34} Reasonable procedural rules adopted pursuant to statutory authority
have the “force and effect” of law. Lyden Co. v. Tracy, 76 Ohio St.3d 66, 69, 666
N.E.2d 556 (1996). “Certainly, if the administrative agency itself has established
rules to be followed by its own representatives, such rules are the agency’s




                                          11
                             SUPREME COURT OF OHIO




expression of what is regarded as necessary to a fair hearing, and the rules should
be respected.” (Emphasis added.) Lawrence v. Leach, 120 Ohio App. 411, 413,
202 N.E.2d 703 (10th Dist.1964).
       {¶ 35} The General Assembly afforded the BTA the power to “[a]dopt and
promulgate” and the duty to enforce “all rules relating to the procedure of the
board in hearing appeals it has the authority or duty to hear.” R.C. 5703.02(D).
In accordance with R.C. 5703.02(D), the BTA promulgated Ohio Adm.Code
5717-1-16(I), which states that “[e]ach party shall provide copies of the
documentary exhibits it plans to offer into evidence * * * to all parties consistent
with the period set forth in the applicable case management schedule.” (Emphasis
added.) For appeals in which a hearing is scheduled, an appellee “shall disclose
to all other parties the witnesses and evidence upon which it relies not more than
two hundred ten days after the filing of the appeal.” (Emphasis added.) Ohio
Adm.Code 5717-1-07(A)(3)(f).         This court construes the word “may” as
permissive and the word “shall” as mandatory unless there appears a clear and
unequivocal intent that these words receive a construction other than their
ordinary usage. Dorrian v. Scioto Conservancy Dist., 27 Ohio St.2d 102, 271
N.E.2d 834 (1971), paragraph one of the syllabus; see also State v. Palmer, 112
Ohio St.3d 457, 2007-Ohio-374, 860 N.E.2d 1011, ¶ 19, citing Dorrian at
paragraph one of the syllabus (applying this principle of statutory interpretation to
a rule of criminal procedure).
       {¶ 36} The BTA’s use of the word “shall” in the above procedural rules
reflects its clear and unequivocal intent to require that evidence be disclosed to
the opposing party within the specified time period.         To conclude that the
language of these provisions is permissive would render the disclosure
requirement meaningless.
       {¶ 37} Appellants, Robert G. and Leslie R. Krehnbrink, filed their appeal
in the BTA on July 25, 2012. Therefore, the tax commissioner was required by




                                         12
                               January Term, 2016




Ohio Adm.Code 5717-1-07(A)(3)(f) to disclose his evidence to appellants within
the next 210 days, or by February 20, 2013. At the BTA hearing on November
13, 2013, the tax commissioner introduced exhibits B, D, and E, which, on their
face, reveal that they were not provided to the Krehnbrinks by February 20, 2013.
       {¶ 38} The tax commissioner does not deny failing to disclose exhibits B,
D, and E to the Krehnbrinks within the time period established by Ohio
Adm.Code 5717-1-07(A)(3)(f). Instead, the tax commissioner asserts that the
Krehnbrinks did not raise an objection and “never expressed * * * concern” after
reviewing the exhibits at the hearing. Perhaps pro se litigants are not as savvy as
an assistant attorney general representing the tax commissioner, but they should
not be required to be.
       {¶ 39} The procedural rules established in the Ohio Administrative Code,
consistent with the grant of authority by the General Assembly, are to ensure that
opposing parties are litigating on a level playing field. “Mutual knowledge of all
the relevant facts gathered by both parties is essential to proper litigation.”
Hickman v. Taylor, 329 U.S. 495, 507, 67 S.Ct. 385, 91 L.Ed. 451 (1947).
Discovery rules “prevent unfair surprise and the secreting of evidence by ensuring
the free flow of information.” Weckel v. Cole & Russell Architects, 1st Dist.
Hamilton No. C-110590, 2013-Ohio-2718, 994 N.E.2d 885, ¶ 24. All litigants,
especially pro se litigants like the Krehnbrinks, are entitled to have these rules
complied with and enforced.
       {¶ 40} While it is clear that the BTA did not rely on exhibits B, D, and E
in rendering its decision, in my view, the tax commissioner and the BTA shirked
their respective legal obligations as outlined above. “No officer of the law may
set that law at defiance with impunity. All the officers of the government, from
the highest to the lowest, are creatures of the law and are bound to obey it.”
United States v. Lee, 106 U.S. 196, 220, 1 S.Ct. 240, 27 L.Ed. 171 (1882).
       {¶ 41} Accordingly, I concur in judgment only.




                                        13
                            SUPREME COURT OF OHIO




                              _________________
       Robert G. Krehnbrink, pro se.
       Michael DeWine, Attorney General, and Sophia Hussain, Assistant
Attorney General, for appellee.
                              _________________




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