Representatives Cheryl Grossman (R-Grove City) and Michael Henne (R-Clayton) introduced House Bill 601 on October 3, 2012, to create uniform rules for income withholding and taxation among all Ohio cities. The measure received the praise of business interests but criticism from a statewide group representing local communities.
House Bill 601 institutes uniform deadlines and definitions for the municipal income tax, but does not impose centralized collection. The sponsors have stated that uniform rules will make Ohio’s business climate more competitive by reducing businesses’ administrative costs in preparing and filing tax returns with multiple cities. The Ohio Chamber of Commerce, a key supporter of the bill, has long decried Ohio’s municipal tax system as one of the most complicated in the nation and argued that thousands of Ohio businesses prepare and file tax returns with multiple cities and often incur more administrative costs than the amount of taxes they owe. The National Federation of Independent Business/Ohio and the Ohio Society of CPAs have also issued statements praising the bill’s introduction. But the Ohio Municipal League (OML) had several objections to the bill, saying numerous provisions would cause “serious revenue loss” for cities and villages. The OML cited several changes as potential revenue hits to municipalities including an “unfunded mandate” regarding the treatment of net operating loss carry forwards, a change in the definition of residency and the elimination of the throwback provision.
Given the contentiousness of the bill, it is difficult to say whether House Bill 601 will make it through the General Assembly before the end of the year. Any bills not passing by December 31, 2012, expire, but could be reintroduced as new legislation in the next General Assembly. In fact, Representative Grossman would not commit to a time frame for passage and has said it is possible the bill will be reintroduced next year. Also, the Kasich administration has indicated that it is interested in pursuing comprehensive tax reform legislation in the next General Assembly, meaning the Governor may not be interested in House Bill 601’s reforms passing as a stand-alone measure. Without the Governor’s full support, it is unlikely that any legislation would be passed during the quick lameduck session that will follow the general election.
A copy of the bill can be found on the General Assembly’s website at: http://www.legislature.state.oh.us/.