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Society supports muni tax cleanup bill

Written on Sep 30, 2021

OSCPA this week supported legislation that will update the centralized collection process for levying municipal income taxes based on a business’s net profits.

OSCPA Tax Policy Director Greg Saul, CAE, Esq., on Sept. 28 offered proponent testimony on House Bill 228 before the Senate Ways & Means Committee. He said two provisions of the bill are especially helpful to taxpayers:

  1. Extending the date that a taxpayer may opt in or out of the state-administered tax.
  2. Requiring the state – rather than the taxpayer – to notify cities when a taxpayer has opted in or out.

The bill, which was approved in May in the House, would also allow pass-through entities to deduct pensions or benefits paid to retirees, for municipal tax purposes.

Saul told legislators there have not been any changes since the centralized collection option was first enacted in the 132-HB49 budget bill in 2017, which allowed businesses to either continue reporting and remitting these taxes separately to each taxing municipality or (beginning in 2018) elect to report and remit all municipal net profits taxes to the Ohio Department of Taxation. For those who choose ODT, the department then ultimately directs that revenue to the appropriate taxing authorities. He said there have been some changes contemplated since that bill.

H.B. 228, he said, does not have anything controversial in it, and much is clean up. He noted that the Ohio Department of Taxation has created a portal to exchange information with municipalities. The bill codifies that portal. He also cited an LSC analysis that finds minimal fiscal impact.

Saul said before this bill, the law forced taxpayers to let every municipality that the taxpayer conducted business in during the previous year know if they are opting into paying the municipal tax through the Ohio Department of Taxation, but the bill will now allow the department to notify the municipalities through the portal. The same holds true for businesses that decide to opt out of using the state department to remit their taxes.

He also said that most businesses file and pay on a calendar year basis, and that the opt-in date for those businesses is currently March 1 of their taxable year. The bill will sync the new opt-in date with the normal tax deadline of April 15.

Taxpayers interested in the ODT centralized collection option should visit their website for information on the opt-in process.

Read Saul’s testimony in its entirety.

Hannah News Service contributed to this report.