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House committee approves muni tax bills

Written on May 20, 2021

OSCPA staff report 

The Ohio House Ways & Means Committee this week approved two OSCPA-supported bills that fix issues related to the treatment of municipal income taxes during the pandemic. 

The committee accepted a substitute version of House Bill 157, which would modify the municipal income tax withholding rules for COVID-19-related work-from-home employees. 

The legislature last year passed HB 197 to quickly address a variety of pandemic-related issues. HB 157 clarifies that the original legislative intent of HB197 was to apply solely to employer withholding and does not determine the location where a nonresident employee’s wages are subject to tax liability, thus allowing employees who work remotely to request refunds.  

Committee Chair Rep. Derek Merrin, R-Monclova, said Sub HB 157 would resolve uncertainty over when HB197 provisions would end by extending them to Dec. 31, 2021; and that it contains "no retroactive language" – it deals with the current tax year only, though taxpayers could still file for refunds of municipal income taxes from 2020.  

The Legislative Service Commission wrote a comparative synopsis of the substitute bill with the original, saying the sub bill would: 

  • Provide "that the temporary rule applies only to tax withholding obligations, and not to an employee's tax liability, beginning Jan. 1, 2021, but that the bill's changes to the rule are not intended to affect the interpretation of the rule as it applies to taxes withheld in 2020."  
  • Retain " the requirement that the employee be working at another location due to the COVID-19 emergency …."  
  • Provide “that, if an employee requests a refund of municipal income taxes withheld pursuant to the temporary rule, the municipal tax administrator may not require any documentation from the employer to process the request other than a statement verifying that the employer has not refunded any withholding to the employee and the number of days the employee worked at their employee’s principal place of work."  
  • Prohibit “a municipal tax administrator from assessing tax, penalty, or interest for the failure to withhold municipal income tax from an employee’s wages during the period of time the temporary withholding rule is in effect, provided the employer withheld tax from those wages pursuant to that rule [and e]xpands this 'safe harbor' by also prohibiting assessments against an employer that withholds taxes during that period of time to the employee’s principal place of work, regardless of whether the employee reported to another location to work because of the COVID-19 pandemic or on the order of the employer, as otherwise required to comply with the temporary withholding rule."  

Also on May 18, the House Ways & Means Committee approved HB 228, which deals with municipal net profits taxes. Both bills now head to the House floor next week for further consideration. 

Hannah News Service contributed to this report.