Simplifying Ohio municipal tax codes

A few sparks are beginning to be seen as Ohio's House Ways & Means Committee undertakes deliberations HB 5, which is intended to simplify the state's tax structure and help businesses that operate in multiple communities by reducing where they have to pay taxes, simplifying the forms they use and standardizing definitions & deductions.

That might not be as easy as it may sound.

A Cincinnati.com article yesterday related that according to Amy Mignogna, director of tax policy for the Ohio Society of CPAs, Ohio is the only state that allows every municipality to establish its own tax rates, forms and rules about income and deductions -- and, Southwest Ohio's four counties alone have 53 municipal tax plans that will be affected should HB 5 become law. Townships don't assess income taxes but can receive them through a cooperative agreement with a city or cities involving a Joint Economic Development District or Zone.

"The first municipal taxes were levied in the 1940s," Mignogna was quoted as saying. "Now there are 600 communities across Ohio with 300 tax-related forms, each having its own definition of what is taxed, rates, filing requirements, deadlines and reciprocity amounts… It's an accounting nightmare."

Cincinnati.com's article said proponents of the bill had introduced a like bill last October as a municipal tax reform package, but that that measure had died when the legislative session ended in December. "They reintroduced a modified package on Jan. 30, ranking it as one of House Republicans' priority bills, all but guaranteeing its passage in some form this year."

A reader’s digest look at the bill includes:

• Its creating a Municipal Tax Policy Board, composed of seven Governor-appointed municipal tax administrators, to create rules, prescribe forms and other documents, provide instructional materials to taxpayers, and take other actions concerning the state-wide administration and enforcement of municipal income taxes.

• Requiring municipal corporations levying an income tax as of January 1, 2015, and that intend to continue levying the tax thereafter to amend or repeal and re-enact their existing income tax ordinances in a form to comply with the bill's limitations; amended or re-enacted ordinances continuing an existing tax rate above 1% do not require voter approval.

• Expressly prohibits municipal corporations and tax administrators from adopting rules to administer a municipal income tax that conflict with statutory limitations on the tax or rules of the Municipal Tax Policy Board.

Legislative Service's analysis of HB 5