Muni tax policy’s day in court is Oct. 17

OSCPA staff report

Ohio’s 10th District Court of Appeals is set to hear arguments next week in appeals filed by cities looking to block centralized collection of municipal net profits taxes.

Close to 150 cities had filed two lawsuits – later merged into one – claiming the municipal income tax reforms passed into law last year as part of Am. Sub. House Bill 49 were unconstitutional. They also filed an injunction to stop the Ohio Department of Taxation from allowing businesses to centrally file and pay net profits tax.

Franklin County Common Pleas Court Judge David Cain on Feb. 21 denied the injunction and terminated the case. He said the Ohio Constitution “makes it clear that the general assembly has the power to pass laws that limit the power of municipalities to levy taxes.”

As expected, the cities appealed the decision and will have their day in court Oct. 17.

Meanwhile, businesses may continue to register for centralized collection of municipal net profits taxes, a reform the Ohio Department of Taxation has said could save up to $800 million per year.

Administrative fees for the state-operated process (0.5%) also average 70% less than those charged by regional tax administration entities such as the Regional Income Tax Agency (1.67%) doing similar work for Ohio municipalities.

On May. 30, OSCPA joined other business groups in filing an amicus brief explaining the need for the centralized collection and administration of the municipal net profits tax. The brief detailed the municipal tax compliance requirements businesses faced before the enactment of H.B. 5 (130th GA) and H.B. 49 (132nd GA) and explained the need for the reforms those bills brought.