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House passes OSCPA-supported muni tax bills

Written on May 27, 2021

OSCPA staff report 

The Ohio House on May 26 approved two OSCPA-supported bills that would make needed adjustments to municipal tax collection. 

The first – House Bill 157 – would address employer withholding changes made in response to the pandemic. The bill allows employers to continue (but does not require) withholding municipal income taxes based on where the employer is located through the end of 2021 but beginning in 2022 the normal 20-day withholding rule will apply at the location where the employee is working. 

The legislature last year passed HB 197 to quickly address a variety of pandemic-related issues. HB 157 clarifies for tax year 2021 that the original legislative intent of HB 197 was to apply solely to employer withholding and not to determine the location where a nonresident employee’s wages should be subject to tax liability, thus paving the way for remote workers to request refunds for tax year 2021. 

Rep. Kris Jordan, R-Ostrander, said the presumption when HB 197 was passed was that the shift for workers was temporary, and to continue collecting taxes in this way is "simply not fair to Ohio taxpayers." 

He said HB 157 sets a clear date to end "the unfair withholding practices," adding that the end date was a compromise between businesses and local governments. 

Specifically, the bill would sunset at the end of 2021 the temporary rule that treated those working from a location other than their regular place of employment during the pandemic as working in the office for municipal income tax purposes. It would also require municipalities to approve employees' requests for a refund of taxes withheld under the rule on and after Jan. 1, 2021. 

The House on Wednesday also passed HB 228, making changes to state administration of municipal net profits taxes. The bill would extend the opt-in or opt-out date for state-administered taxes to April 15 rather than March 1 and require the tax commissioner to notify municipal corporations when a taxpayer has opted-in or out of the state-administered tax, rather than requiring the taxpayer to notify each municipal corporation. It would also allow pass-through entities to deduct pensions or benefits paid to retirees, for municipal tax purposes. 

OSCPA Tax Policy Director Greg Saul, CAE, Esq., offered sponsor testimony for HB 228 last month. 

Both bills now head to the Senate for further consideration. Meanwhile, OSCPA’s Government Relations team continues to work on issues related to the municipal income tax reform and the pandemic. Learn more

Hannah News Service contributed to this report.