The Ohio Society of CPAs has shared the following information on their web site (ohiocpa.com) following the passing of House Bill 5:
House Bill 5 took a significant step toward becoming law on Wednesday when it was passed in the Ohio Senate.
The amended bill, which would reform Ohio’s complex municipal income tax system, next faces a concurrence vote in the House, early next week. If passed, the bill would then go to Gov. John Kasich, who is expected to sign the bill into law.
The bill passed the Senate 23-8, with 21 Republicans and two Democrats in favor, and seven Democrats and one Republican opposed.
Floor speeches by senators echoed the arguments made over the bill for the last two years, with opponents claiming HB 5 will cost cities revenue and supporters saying it will help taxpayers and the state’s business environment.
“This bill is a major rewrite of state law that would overhaul our municipal income tax system and, unfortunately, result in heavy revenue losses for our communities,” said Sen. Charleta Tavares, D-Columbus. “Businesses depend on services just as much as citizens do … This bill makes it more difficult for municipalities in our state to provide those services.”
Sen. Dave Burke, R-Marysville, countered that taxpayers are the focus of HB 5.
“Government is not the customer here: the taxpayers are,” Burke said. “This bill is about … willing participants who simply want to pay their taxes. The problem is, they have to do it a dozen, two dozen, three dozen different ways. That’s a problem with Ohio. That’s a problem that needs to be fixed.”
Sen. Bob Peterson, R-Sabina, who chairs the Senate Ways and Means Committee and invested untold hours in working on this issue, said the bill is the result of months of discussions and compromise. Points of disagreement between groups representing municipalities and the Municipal Tax Reform Coalition – the OSCPA-backed 33-member group supporting HB 5 – were reduced significantly, though some remain.
“At the end of the day, House Bill 5 represents a cut to the costs of compliance and a significant step toward uniformity,” Peterson said. “The heart of this bill is truly a benefit to our smallest of business people.”
Earlier on Wednesday, the Senate Ways & Means Committee approved a version of the bill that included more than two dozen revisions. The vote followed brief proponent testimony from members of the Municipal Tax Reform Coalition.
Barbara Benton, OSCPA’s vice president of governmental affairs, identified some of the administrative provisions of the bill that will help Ohio taxpayers by making Ohio municipal tax law simpler, fairer and more predictable, noting the bill will significantly improve the complexity of the current local tax system.
Senate changes include:
- Consistent quarterly and annual filing due dates for all cities and villages, plus ensuring that the postmark date will determine if a filing is timely filed vs. date of receipt.
- Increasing the estimated payment threshold, so that businesses owing less than $200 a year in net profits tax to a city can file annually vs. quarterly or monthly.
- A taxpayer bill of rights at the local level, modeled after the state taxpayer bill of rights – to ensure that taxpayers encounter a consistent approach from one city to another.
- Consistent penalties and interest rates, with all penalties discretionary on the part of a city.
- Imposing limits on the number of forms and attachments a city can require to be filed with a tax return.
- Removing the requirement that employers must give each city where they do business a list of employees who worked there less than 20 days.
The Senate maintained the required five-year net operating loss provision for all cities, consistent treatment of pass-through entities, and a non-retroactive 20-day occasional entrant provision under which a “day” is defined to ensure a worker will allocate all hours worked to whichever city he worked for the preponderance of that day.
As HB 5 moves back to the House for a concurrence vote, CPAs need to speak up loudly to help it become law. Call or email your representatives today. Visit OSCPA’s Municipal Income Tax Reform page to learn more.