Municipal income tax uniformity passes Ohio General Assembly, awaits Gov. Kasich’s signature

A key legislative priority of the Ohio Association of REALTORS — bringing about uniformity to Ohio’s complex municipal income tax system — cleared both chambers of the General Assembly and awaits Gov. John Kasich’s signature.

The measure, House Bill 5, is designed to streamline Ohio’s municipal tax code, establishing standards that all municipalities assessing a tax on businesses or individuals will follow. OAR, along with more than 30 business groups and organizations comprising the Municipal Tax Reform Coalition, have been pursuing passage of the common-sense initiative for two-plus years, notes Paul Glass, OAR’s director of political affairs.

“Ohio has hundreds of cities and taxing entities — each with varying rules, forms and regulations in terms of tax collection — that causes record-keeping problems for business and individuals,” Glass said. “This has been particularly problematic for REALTORS who sell or lease business space in a number of communities in any given year and have been required to complete different tax returns on the portion of the commission earned.

“This bill is a step forward in establishing a standardized form, deadlines and clearer definitions of what is deemed income so that everyone can more easily and equitably pay their fair share.”

The measure was strongly opposed by municipalities, citing concerns over the potential of lost revenue. The outcome is a compromise between proponents and opponents. Among the new standards:

  • Businesses with an annual income of $500,000 or less would be charged municipal income tax only in the area where they’re located;
  • Workers on a job in a different city wouldn’t have to start paying income tax in that municipality during their first 20 days there. Under current law, the threshold is 12 days, after which employees are charged for every day they did work in the city; and
  • Under a phase-in plan starting in 2016, companies would also be able to carry forward net operating losses for five years to offset taxes on future profits – a policy that most Northeast Ohio municipalities already have but is less common elsewhere in the state. The bill would also allow individual taxpayers to carry forward net operating losses.

Rep. Cheryl Grossman (R-Grove City), who co-sponsored the legislation, said the measure will create a more competitive and uniform municipal income tax system in Ohio.

“The lack of uniformity in filing rules and regulations has been a deterrent to businesses seeking to invest in Ohio,” Grossman said. “Economic development is a critical issue for Ohio’s competitiveness, and HB 5 increases simplicity and mandates uniform treatments across the board.”

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