Revised budget includes ups, downs

Written on Apr 27, 2017

OSCPA staff report

While a number of positive changes were included in the Ohio House’s first effort to revise Gov. Kasich’s biennial budget, lawmakers also took steps in the wrong direction this past week by adding troublesome provisions to House Bill 49.

Among the positive developments, the House Finance Committee included the following changes to Sub. H.B. 49 at OSCPA’s encouragement:

1) Reducing Ohio’s income tax brackets from nine to seven.
2) Eliminating the sales tax rate increase and the base expansion to other services.
3) Changing the municipal income tax penalty language to “not exceeding 50%” of the unpaid withholding amount rather than “equal to 50%.”
4) Requiring the Deputy Auditor of State to be a CPA.
5) Combining ODT’s sales and use tax forms.
6) Clarifying when various electronic services are considered a nontaxable service.

However, OSCPA Tax Policy Director Greg Saul, Esq., CAE, told legislators Wednesday that the changes related to municipal net profits collection undermine efforts to simplify the state’s convoluted tax system.

Current Ohio law allows taxpayers the option to file net profits returns and make payments via the Ohio Business Gateway free of charge, but each return must be filed individually and paid separately. Substitute H.B. 49 still allows for the filing of a single return as proposed in the “as introduced” version, but would now charge taxpayers a 1% fee to do so.

“This is unprecedented for taxpayers to be charged for the convenience of merely filing your taxes in a certain manner,” Saul said in testimony before the House Finance Committee. “It is also unclear whether the substitute bill allows for a single payment, so the taxpayer may still need to make separate payments.”

OSCPA has supported a plan introduced in late January to centralize the collection of municipal net profits taxes, which would save money and time for businesses and cities. The Ohio Department of Taxation would charge cities a 1% administrative fee – a standard procedure for other local government tax collections – retaining the following percentages to defray its administrative costs: county sales taxes (1%), school district income taxes (1.5%), and municipal electric, light, & telephone companies (1.5%).

“Please keep in mind that the 1% administrative fee as originally proposed was only charged on the business net profits tax, which averages just 14% of total municipal tax collections,” Saul said. “As a result, there would be no state administrative fee assessed on cities for the remaining 86% of municipal income tax revenue.”

The substitute bill also removes the auditing authority from the Ohio Department of Taxation and returns it to cities.

“Giving audit authority to the state would have provided significant relief to businesses that currently must deal with widely varying interpretations from city to city, resulting in predictability and consistency of treatment,” Saul said.

Despite data that shows the 1% fee on cities is significantly less than what most municipalities already pay for administration, city and village officials across the state are vocally opposed, saying it will result in lost revenue.

Saul said an appealing alternative would be to allow businesses required to file in multiple jurisdictions to choose, or “opt in,” to file net profits taxes through the Ohio Business Gateway, and have ODT perform any needed audits, appeals and administration.

“That’s a positive compromise that will address the needs of currently burdened business owners filing in potentially dozens of cities, yet allow all other businesses wishing to file directly with their cities to continue to do so,” he said.

Additional changes are expected early next week before the Finance Committee sends the bill to the floor, and OSCPA is working hard to make improvements to the municipal tax language.  The full House is expected to vote on HB 49 on May 4, after which the  Senate will consider the proposal. A final budget bill must be passed by the full Legislature by the end of June, and Gov. Kasich has the authority to line-item veto items he doesn’t support.

For the huge percentage of OSCPA members who, for years, have clamored for centralized collection of municipal taxes: you need to speak up NOW! Doing so is as easy as leaving a phone message with your state representative or sending a letter or email, and will have a meaningful impact. Need help? OSCPA’s government relations team is standing by to help.

3 comments

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  1. Bill Chorba | May 01, 2017

    The OSCPA is completely transparent when it comes to how much budget is spent on advocacy.  11% of OSCPA membership dues are not deductible as a business expense due to OSCPA’s overall lobbying activities. This amount is disclosed on the member dues statement or when the member pays online. This percentage has not varied much year over year and has not increased as a result of the municipal income tax reform.  

  2. 40 year OSCPA Member | Apr 30, 2017
    I agree with Veteran member. You lost this round. Let's spend time on improving workforce development and solving the drug epidemic. This is what responsible business leaders need.
  3. Veteran member | Apr 27, 2017
    I believe that the OSCPA is spending more monetary resources on lobbying for centralized collection than the members can accept.   We, as members, should be told how much of our dues is being spent on this lobbying.  It affects the deductibility of our dues.  I seriously doubt if the PAC money is being spent on this issue.  Let us have some transparency on this matter.

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