Ohio Senate Passes Municipal Tax Reform Bill – OML Legislative Bulletin

Posted on: December 3rd, 2014

“Am. Sub. HB5 continues its legislative journey through the Ohio Statehouse with the Senate Ways and Means Committee holding a hearing last night and again this morning. Today, the bill was officially approved by the committee through a party line vote, meaning all democratic members voted against the substitute version that included the amendments added by the Senate majority while all republican members of the committee supported the substitute bill and voted against amendments offered by their democratic counterparts which would have offered municipalities relief from the onerous reform treatments that will needlessly drain the fragile revenues of Ohio cities and villages.

We have provided a synopsis HERE that was distributed by the Chairman of the Senate Ways and Means Committee last night, highlighting what changes the accepted amendments will offer to the sub bill. Because the league was not provided with a copy of the senate version of the changes made to Am. Sub. HB5 until after the committee hearing had begun last night, we continue to review the language that has been added or altered in the bill and will be able to provide our members with greater detail to how the municipal income tax has been altered in upcoming legislative bulletins.

The lowlights of what the Senate has adopted as a substitute version that will be voted on by the full Senate later today and sent back to the Ohio House for their concurrence includes the 5 year Net Operating Loss Carry Forward mandate on all municipalities in Ohio; the prohibition on municipalities to collect back to the first day withholding tax obligations incurred by occasional entrant workers; the adoption of the new system for determining offsets and the ability of taxpayers to comingle all sources of income together to produce the most advantageous municipal tax exposure for the taxpayer while allowing double deductions; backdoors the implementation of the State’s Bright Line Residency Test to be applied by municipalities to determine who qualifies as a municipal resident; the usurping of the Municipal Home Rule authority of the Ohio Constitution, surrendering to the state the administrative authority on how the municipal tax can be administered in the future and the expansion of certified mail requirements for routine correspondences from a local tax office to taxpayers.

The highlights that will benefit municipal revenues are the reinstatement of the Throwback provision, which is uniformly administered in current law. The bill passed by the House would have removed the Throwback provision. Also, a committee has been established and has until May 1, 2015 to determine the best procedure for requiring municipalities to annually report to Ohio’s State Tax Commissioner revenues collected by resident and nonresident taxpayers.

As our municipal tax experts dig through this monstrous bill in the coming days, as stated above, we will provide greater and explanation on the changes made by the Senate and ultimately enacted by the Ohio legislature.”

OML Legislative Bulletin - December 3, 2014