ST. LOUIS — Attorneys who filed a lawsuit seeking earnings tax refunds on behalf of people who’ve worked outside the city during the pandemic are moving their case to state court.
In a motion filed Tuesday, plaintiffs’ lawyers dismissed their suit, which was initially filed last month in U.S. District Court.
Mark Milton, one of the plaintiffs’ attorneys, said Tuesday he planned to refile the lawsuit in St. Louis Circuit Court in order to avoid a drawn-out dispute on whether the federal court has jurisdiction over the case.
“We don’t want to waste time on that fight,” Milton said.
David Luce and Zachary McMichael, attorneys for St. Louis Collector of Revenue Gregory F.X. Daly, argued the federal Tax Injunction Act bars federal courts from taking action on state tax laws if any disputes can be resolved in state court.
Milton said plaintiffs initially sought the federal venue because they thought they might get a fairer hearing than from a St. Louis circuit court judge whose office receives city general revenue.
The lawsuit potentially threatens a major chunk of the city’s largest revenue stream. The 1% tax charged on income earned by those who live or work in the city generated about $180 million last year, roughly a third of the city’s general revenue. Plaintiffs estimate about 75% of the tax is generated from those who live outside the city limits.
Daly’s office has in the past allowed earnings tax refunds for days that employees traveled and worked outside the city limits. However, it has determined that days worked at home because of the COVID-19 pandemic do not qualify for refunds.
Milton said the new filing will add a plaintiff representing an additional class of people who have been unable to submit earnings tax refund claims because of the new policy.
U.S. District Judge Catherine D. Perry last week denied a temporary restraining order seeking to reword new tax refund forms from Daly’s office that ask filers to confirm regular workdays do not include “working remotely from home or other work absences.” Perry disqualified herself from hearing the case the next day “because there is a chance that its outcome could affect Court employees, including those who report to me.”