ST. LOUIS — One of the region’s largest law firms says the city is trying to cheat its partners on their city income taxes.
Attorneys at Bryan Cave Leighton Paisner, a firm with roots here dating back to 1873, said in a new lawsuit that the collector of revenue has illegally changed its rules and started trying to overtax profit-sharing payments received by firm partners who work outside the city.
The Bryan Cave lawyers said no other firm in the city has been subject to such treatment.
The collector’s actions, the attorneys said in a letter attached to the suit, are “unlawful, unfair, unconstitutional, inequitable, excessive, discriminatory, erroneous, arbitrary and capricious.â€
The lawsuit introduced a new wrinkle in the ongoing siege of the city’s critical but controversial taxes on individuals’ income and company payrolls.
People are also reading…
This suit is far from the biggest threat to city coffers. The earnings and payroll taxes account for about $250 million in revenue each year, about 40% of the city’s general fund. But Bryan Cave is only asking to be reimbursed for $370,000. That’s far less than the $26 million city officials are bracing to lose if fights in the state Legislature and in court require the city to refund payments from all nonresidents who work remotely for companies based in the city.
It is a striking allegation against the collector’s office, however. And it prompted a vigorous rebuke.
“Any implication that Bryan Cave is the only law firm or partnership subject to the application of the earnings tax they are questioning is categorically false,†said Susan Ryan, a spokesperson for the office. She also disputed the way the lawsuit described the city's decision-making process.
Ryan said the issue with Bryan Cave resulted from a routine audit of the firm’s annual tax filings, something the office does with many other individual and corporate taxpayers on a regular basis.Â
“We will continue to work to resolve this issue as required,†Ryan said.
The attorneys for Bryan Cave representing the firm in the suit, including partner Mark Leadlove, did not immediately return calls seeking comment Tuesday afternoon.
The dispute at the heart of the case centers on how the city taxes the portion of businesses’ income paid to owners or partners, and how it applies that to nonresidents — like partners in a law firm with offices around the world.
For years, Bryan Cave’s attorneys say in the lawsuit, the city has seen such payments as part of business profits. But in 2023, the lawsuit says, the collector’s office started considering those payments part of salaries, wages, and other compensation.
And that led to a change in taxes for Bryan Cave partners who don’t live in the city.
Residents of the city must pay the full 1% city earnings tax on all of their income, no matter where they work. But until recently, nonresidents have generally been able to exempt income they earned while working outside the city.
For at least 10 years, the lawsuit says, the firm had allocated about 14% of each nonresident partners’ share of the firm’s profits as subject to the city earnings tax — and received no complaint from the city.
But in 2023, the lawsuit says, the city began taxing 100% of the profit shares for nonresident partners assigned to the downtown ºüÀêÊÓƵ office.
The city followed up with an invoice, made public in the lawsuit, seeking $274,000 in back taxes, a $69,000 penalty and $27,000 in interest.
Bryan Cave paid the bill under protest in February, and filed suit last week. A court hearing has not yet been scheduled.