Dealing yet another blow to municipalities’ ongoing efforts to derail several of the major reforms enacted over the past four years that significantly reduce businesses’ municipal income tax compliance costs, the 10th District Court of Appeals on Tuesday ruled 2-1 that the municipal tax reform provisions of HB 5 and HB 49 are constitutional.

The lawsuit, brought by two different coalitions of municipalities, challenged six provisions of HB 5, enacted in 2014, and all of the provisions of HB 49, enacted in 2017, that deal with municipal taxation, specifically the provision that allows businesses to opt-in to a centralized filing process and the elimination of the throwback provision. Throwback is the name of the practice by which cities unfairly tax businesses on sales made to customers not located in that or any other Ohio city.

Every single one of the municipalities’ legal objections was rejected by the Court, which ultimately affirmed a February 2018 Franklin County Common Pleas Court decision.

The decision preserves each of these important provisions, the end result of which is that the burden of municipal tax compliance on Ohio businesses will be substantially reduced. In particular, the centralized filing process that allows businesses to file one return instead of twenty, fifty or more is projected by the Ohio Department of Taxation to save businesses hundreds of millions of dollars in compliance costs.

The municipalities last recourse would be to appeal the outcome of the 10th district decision to the Ohio Supreme Court, an option that the municipalities have not yet ruled out.

While this week’s decision is indeed a victory for Ohio businesses and for common sense municipal income tax reform, there is already troubling evidence of some municipalities attempting to utilize other means to obstruct employers from taking advantage of this new option to file a single municipal net profit tax return. The Ohio Chamber will be working with lawmakers to prohibit such retaliatory measures.