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Ohio cities suing state, tax commissioner over municipal income tax reforms

tax concept

From the Society of CPA’s

A group of more than 100 Ohio cities have officially launched an effort that could harm businesses and reset the state’s tax system back to its dysfunctional past.

The municipalities joined forces (the week of Nov. 13) by hiring Frost Brown Todd LLC to file a civil lawsuit in the Franklin County Court of Common Pleas challenging the constitutionality of key municipal income tax reforms signed into law through House Bill 49 in June and House Bill 5 in December 2014. (Ohio

The suit names the State of Ohio, Ohio Tax Commissioner Joe Testa, Ohio Treasurer Josh Mandel and Director of the Ohio Office of Budget and Management Tim Keen as defendants, and asserts violation of the Ohio Constitution’s Home Rule Amendment as the primary argument for seeking the repeal of hard-won reforms to the most burdensome municipal income tax structure in America.

The suit seeks an immediate preliminary and permanent injunction to halt all work by the State of Ohio to implement centralized net profits filings through the Ohio Business Gateway along with other state-administered municipal tax operations.

This new, optional filing feature, part of H.B. 49 provisions, is due to launch for the 2018 tax filing season. ODT has said centralized filing could save Ohio businesses an estimated $800 million in compliance costs if they all participate. Registration has already been available since Oct. 20 on ODT’s website.

In addition, the plaintiffs — represented by 136 cities and villages including Columbus, Cleveland and Cincinnati — seek the repeal of several municipal tax provisions passed into law by H.B. 5, which took effect in 2016. Many of these municipalities would actually save money if their businesses file net profits returns through the state. Yet they are choosing to spend precious taxpayer resources in an attempt to roll back the clock on progress, and force the state to waste even more taxpayer money to defend it.

The lawsuit and comments made recently in the press by cities assert numerous falsehoods that OSCPA and our partners in the Municipal Tax Reform Coalition (note: Ohio REALTORS is a member of the coalition) will work hard to refute.

Among the most egregious, the cities claim no third parties will be unjustifiably harmed and the public interest will be served if the requested injunction is granted. In fact, businesses and their employees who travel for work will be significantly harmed if they must revert to tedious and costly practices of withholding and paying income tax for working very short periods in every city where they do business, with potentially all cities once again adopting different filing due dates, definitions of income, penalties and more.

“We have re-engaged our partners in the Municipal Tax Reform Coalition to ensure the improvements we fought so hard to win, alongside legislators who stepped up to improve our tax climate, do not become a casualty of misinterpreted constitutional language,” said Scott Wiley, OSCPA’s president and CEO.

“We will continue to work hard to move Ohio forward, and that means fighting for a competitive and fair tax structure for all taxpayers.”

You can read the full complaint here.

Tags: politics