Municipal Business Income Tax Reform Update

As you may recall, included in Ohio’s budget (HB 49) was a provision that allows businesses to opt-in to a centralized collection process through the Ohio Business Gateway. This allows businesses to file one return rather than a separate return in each of the different municipalities in which you may do business. For some businesses, that could mean just one return instead of twenty, fifty or even more than a hundred. Savings in compliance costs to businesses are projected by the Ohio Department of Taxation to potentially be in the hundreds of millions.

Unfortunately, this fine accomplishment by the Ohio General Assembly is under attack. A group of cities and villages have filed a lawsuit against the state of Ohio over this new collection process. The lawsuit also attempts to turn back the clock by challenging the constitutionality of HB 5, legislation enacted in 2014 that delivered important common sense municipal tax reforms. They’re seeking to preserve the status quo – and all of its accompanying compliance headaches and costs.

As reported in a previous blog, these reform efforts were necessary because Ohio had the most convoluted and expensive local income tax system in the country. To become more competitive and fair, Ohio needed change. It got it through the actions of the legislature and the governor.

The lawsuit is moving forward, but very slowly as the courts often do. A hearing for preliminary injunction is scheduled to begin on February 12th with further actions during the ensuing year. The Ohio Chamber will be involved in this case, and one thing that would be helpful is if you would share your stories of difficulties in the current filings and costs of your compliance. Just let me know you’d be willing to help and I’ll be in touch.

In the meantime, you can still opt-in to use the new centralized filing process for the 2018 tax year. But the deadline is fast approaching. Interested filers must register on or before March 1st to be included for this year’s filings. You can begin the process at www.tax.ohio.gov/MunicipalTax.aspx. Remember that this process promises to save your businesses time and money, while the municipalities will still receive their full tax due.

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