OHIO Some cities decline to tax lottery winnings

Marion's mayor, meanwhile, wants to make sure his city can tax such windfalls.
SOUTH EUCLID (AP) -- Although a legal oversight caused this Cleveland suburb to lose out on taxes from a $162 million Mega Millions jackpot, other cities have decided they don't want to collect on such winnings.
South Euclid estimates it will lose $1.4 million from resident Rebecca Jemison's jackpot because the city's charter was never changed to allow income taxes on lottery winnings.
Cincinnati's city code excludes lottery prizes from taxes. Columbus and its suburb Westerville also chose not to tax lottery winnings.
"We only tax earned income," said Melinda Frank, Columbus' income-tax division administrator. "That doesn't include the lottery, just like it doesn't include bingo winnings or if you win at Scioto Downs [horse racetrack]."
Westerville tax administrator Melinda Ulry said her city hasn't lost out on much money because it never had a big lottery winner.
South Euclid Law Director Michael Lograsso said former Mayor John Kocevar's administration failed to act on a 1996 letter from a state agency advising the city to amend its charter.
Court ruling
That year, the Ohio Supreme Court ruled that in order for cities to collect the tax, they would have to specifically state lottery winnings as taxable income in their charters, Lograsso said.
Kocevar says the letter simply went into city files. City council is expected to discuss changing the charter, though it would be too late to profit from Jemison's winnings.
South Euclid's $16.5 million budget must be whittled down to $13 million, and Mayor Georgina Welo must go ahead with plans to put off road work and building repairs and lay off six employees in the payroll and building departments.
"A lot of people feel that the little guy won out," Welo said. "We're going to be fine. It's just something that happens."
Kocevar said there are several reasons why some cities may choose not to tax lottery prizes.
"There have always been questions about how practical it is," he said. "Who do you collect from, just the big winners that you know about?"
At least one city said it learned from South Euclid.
Marion Mayor Jack Kellogg said his administration spoke with Law Director Mark Russell and realized the city's code does not include lottery winnings as taxable income.
Kellogg expects to have legislation in front of city council soon so the city about 40 miles north of Columbus can avoid losing any income from winnings.
"It can happen," Kellogg said. "Just think what we could do with that money."
In Northeast Ohio, Canton taxes lottery and other gambling winnings at a 2 percent annual rate. And Akron spokesman Mark Williamson said the city has taxed lottery winnings for many years.
The Columbus suburb of Dublin, which subjects lottery winnings to its 2 percent municipal tax, has had one $14 million winner, said Faye Gibson, director of the city division of taxation.
Unfortunately for the city, the winner took the payout over 20 years.
"We collected $130,000 during the 10 years he lived here," Gibson said. "If he would have taken it in a lump sum, we would have taxed the entire amount."
Reynoldsburg, east of Columbus, is another city that taxes lottery winnings.
"We've taxed lottery winnings since I've been here, and I've been here 20 years," tax administrator Brenda Browning said.