The battle of Ohio municipal tax is here: Will common sense prevail?

ohio flag

By Adam L. Garn, J.D., CPA, MT – Associate, Zaino Hall & Farrin LLC

Am. Sub. H.B. 49 (the “Bill”), Ohio’s biennial budget bill, enacted significant new features to assist taxpayers in complying with Ohio’s onerous municipal income tax system. As we discussed in a previous SALT Buzz, Major Changes for Ohio Municipal Income Tax in 2018: Centralization and Elimination of Throwback, for taxable years beginning on or after Jan. 1, 2018, the Bill created an elective method of centralized collection and administration for certain net profit taxpayers. The collection and administration of the tax will be overseen by the Ohio Tax Commissioner for those that elect into the system. Some Ohio municipalities have joined together to challenge the new centralized collection and administration system in filing two separate lawsuits. The City of Columbus is also threatening that taxpayers will forfeit eligibility for previously negotiated incentive agreements if the taxpayer elects into the centralized collection and administration system administered by the Ohio Tax Commissioner, while some others are taking such position on future economic development agreements.

Lawsuit #1 – City of Athens, et. al. v. Testa, et. al.

In November 2017, over 130 municipalities joined together to file a civil lawsuit in the Franklin County Court of Common Pleas to challenge the constitutionality of the centralized collection and administration system, as well as challenge certain changes made under Sub. H.B. 5 of the 130th Ohio General Assembly. In this lawsuit, the municipalities have alleged the following:

  • The provisions of the Bill violate the Home Rule Amendment of the Ohio Constitution by diverting net profit tax revenues away from municipalities, requiring municipalities to file reports with the state, and removing the audit and refund review powers of the municipalities.

  • The provisions of Sub. H.B. 5 violate the Home Rule Amendment of the Ohio Constitution by dictating the exercise of administrative, procedural, and enforcement powers rather than the power of taxation.

  • The provisions of the Bill violate the single subject rule of the Ohio Constitution.

  • The provisions of the Bill impair the obligation of contracts which violates the Ohio Constitution.

  • The provisions of the Bill allow the state to illegally convert (i.e., steal) municipal net profit tax away from municipalities.

  • The provisions of the Bill violate a municipality’s property interest in municipal net profit tax without providing just compensation.

  • The provisions of the Bill violate a municipality’s property interest in municipal net profit tax without a remedy by due course of law.

This lawsuit seeks a preliminary and permanent injunction to prohibit the Tax Commissioner from implementing the centralized collection and administration of the municipal net profit tax that was enacted under the Bill. The lawsuit also seeks a preliminary and permanent injunction to prohibit the State of Ohio from taking any actions to enforce certain provisions of Sub. H.B. 5, a law that was signed by Gov. Kasich in 2014.

Thus far, two municipalities have withdrawn from the case. Ohio Treasurer Josh Mandel and the Director of Ohio Office of Budget and Management Timothy Keen have been dismissed as defendants. Currently, the hearing on the temporary injunction is scheduled for Feb. 12-13, 2018.

Lawsuit #2 – City of Elyria, et. al. v. State of Ohio, et. al.

In December 2017, 22 RITA municipalities joined together to file a separate civil lawsuit in the Lorain County Court of Common Pleas to challenge the constitutionality of the centralized collection and administration of the municipal net profit tax adopted by the Bill. Specifically, this lawsuit alleges:

  • The provisions of the Bill violate the Home Rule Amendment of the Ohio Constitution by interfering with a municipality’s local self-government authority to administer, collect, receive, and audit net profit taxes and by requiring reports other than reports of a municipality’s financial condition and transactions.

  • The provisions of the Bill violate the Home Rule Amendment of the Ohio Constitution by usurping local police powers.

The State of Ohio and the Tax Commissioner filed a motion to transfer venue to Franklin County. The court has previously delayed the hearing on the temporary injunction to give it time to rule on the motion to transfer venue. Currently, the hearing for the temporary injunction is scheduled for Jan. 26, 2018.

Threatened Elimination of Incentives

Recently, Columbus has started to send letters to taxpayers that have existing economic incentive contracts for locating or expanding within the municipality. The correspondence indicates that if the taxpayer elects into the centralized collection and administration system, the taxpayer will forfeit eligibility for the previously negotiated economic incentives. Of course, this seems to be violative of those pre-existing contracts. Other municipalities have indicated that they intend to condition future grants of economic development incentives on taxpayers not opting into the statewide system.

Reminder: Registration is Due March 1, 2018 for Calendar Year End Taxpayers

A taxpayer electing into the centralized collection and administration must do so by the first day of the third month after the beginning of the taxpayer’s taxable year (March 1 for calendar year taxpayers). The ability to elect to file on a centralized basis is available at http://www.tax.ohio.gov/MunicipalTax.aspx or by filing Form MNP R. A taxpayer electing into the statewide system must also notify each municipal corporation in which the taxpayer conducted business during the previous taxable year. Notification of the election should be made by filing Form MNP MN with each municipality. New businesses that elect into the centralized collection system are the only taxpayers that are not required to notify any municipal corporations of its election.

Summary

The significant new features that will assist taxpayers in complying with the onerous Ohio municipal tax enacted by the Bill have been threatened by the two lawsuits filed by the municipalities. Based on the lawsuits and other actions of the municipalities, it is clear that the municipalities are attempting to hinder any progress that has been made to simplify the complex and burdensome municipal income tax structure. In any event, registration is due March 1, 2018 for calendar year end taxpayers.

Reprinted from Zaino Hall & Farrin LLC SALT Buzz (Jan. 11, 2018)

Tags: politics

We Want You! Be a part of the Ohio REALTORS’ new political program

ohio flag

By Scott Williams, Vice President of Public Policy

Ohio REALTORS has launched a new political initiative in 2018, one designed to strengthen the industry’s voice in the Ohio Statehouse. The program will pair REALTOR members directly with Ohio Senators to keep them up-to-date on the profession’s issues and concerns.

What happens at the Ohio Statehouse has real world consequences. Our new State Political Coordinator (SPC) program is intended to put a human face on the issues that affect our industry and let our lawmakers know that the choices they make impact the lives of their constituents. The facts, ideas and industry information that our SPC’s will share with state lawmakers will help them make more informed decisions so they can more effectively legislate on REALTOR issues in the General Assembly.

The new SPC program will enhance our already strong grassroots engagement and provide momentum to help achieve the legislative and regulatory goals of the REALTOR community. As an expert on real estate issues, and because of the relationship you foster, lawmakers will want your insight on how various issues will affect their district. SPC’s will become an integral component of the Ohio REALTORS political advocacy efforts.

To learn more about the duties and responsibilities of a SPC, please click here.

Tags: politics

Congratulations to our Round 1 “Board vs. Board” winners…the fight begins anew!

Ohio REALTOR Board vs. Board

Pete Kopf, Ohio REALTORS President

Ohio’s REALTOR community responded to the profession’s most important “Call For Action” ever — one focused on keeping incentives to home ownership in the tax reform package — in a big, big way. Overall, we achieved a record-setting response rate of 24.41 percent.

I would like to extend my personal gratitude the following 18 local Boards/Associations that have surpassed their 20 percent participation goal: Ashland, Coshocton, Delaware County, East Central, Guernsey-Muskingum Valley, Heartland, Knox County, Lake & Geauga Area, Licking County, Marietta, Marion, Midwestern Ohio, Portage County, Springfield, Stark County, Toledo Regional, Wayne-Holmes, and West Central.

Congratulations, as well, to the following “Board vs. Board” category winners in our first-ever internal competition: Toledo Regional (Metro); Stark County (Large); Licking County (Medium); and Ashland (Small).

Our collective voice helped positively influence tax reform in some key areas. Notably, both the House and Senate agreed to maintain deductibilty of state and local property taxes up to $10,000, and to maintain Section 1031 tax-deferred exchanges in their present form for real estate investments. Progress to be sure…but there is still work to do.  That’s why our National Association of REALTORS has launched a new “Call For Action” to continue exerting effort to encourage Congress to help make “tax reform” more favorable to home owners and consumer.

Click here to tell Congress to protect middle-class home owners!

Again, I greatly appreciate the ongoing effort by Ohio’s REALTOR community to protect the American Dream. Our voice has never been strong and I urge you to continue speaking up as we continue the fight for Ohio’s home owners! Below are the final standings for Round 1 of the “Board vs. Board” competition:

Metro Boards (1,200+ members)

  1. Toledo Regional Association — 28.56%
  2. Cincinnati Area Board — 18.85%
  3. Columbus REALTORS — 18.38%
  4. Dayton REALTORS — 16.22%
  5. Akron Cleveland Association — 16.01%

Large Board (450-1,199 members)

  1. Stark County Association — 24.49%
  2. Lake-Geauga Area Association — 23.93%
  3. Firelands Association — 19.71%
  4. Butler-Warren Association — 19.31%
  5. Medina County Board — 19.11%
  6. Youngstown Columbiana Association — 13.0%

Medium Boards (200-449 members)

  1. Licking County Board — 34.96%
  2. East Central Association — 29.75%
  3. Midwestern Ohio Association — 28.35%
  4. Portage County Association — 27.64%
  5. Springfield Board — 26.61%
  6. Wayne-Holmes Association — 22,28%
  7. Guernsey-Muskingum Valley Association — 23.08%
  8. West Central Association — 22.75%
  9. Lorain County Board — 19.54%
  10. Scioto Valley Association — 16.67%
  11. Northwestern Ohio Board — 16.36%
  12. Lancaster Board — 15.32%
  13. Warren Area Board — 14.83%
  14. Southern Ohio Association — 14.36%
  15. Mansfield Association — 12.35%

Small Boards (under 200 members)

  1. Ashland Board — 100%
  2. Marietta Board — 45,24%
  3. Coshocton County Board — 44.83%
  4. Knox County Board — 30.95%
  5. Heartland Board — 26.54%
  6. Marion Board — 26.23%
  7. Delaware County Board — 24.29%
  8. Ashtabula County Board — 19.18%
  9. Beaver Creek Area Association — 18.33%
  10. Athens County Board — 17.31%
  11. Highland County Board — 16.39%
  12. Greater Portsmouth Area — 16.18%
  13. Clinton County Board — 14.81%

Help your Board/Association! Help middle class homeowners! Help save the American Dream! Make your voice heard by clicking here!

 

Tags: Association news, politics

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

Tax reform is an ‘all-out assault on homeownership’…it’s time to act!

Ohio REALTOR Board vs. Board

By Pete Kopf, Ohio REALTORS President

The REALTOR community’s most important “Call For Action” is at a critical stage — as the profession is currently focusing its attention on the Senate to keep incentives to homeownership in the “tax reform” package. It’s imperative that Ohio Senators Sherrod Brown and Rob Portman hear from every REALTOR in the Buckeye State!

Last week the House of Representatives passed H.R. 1, the “Tax Cuts and Jobs Act,” a bill National Association of REALTORS President Elizabeth Mendenhall called an all-out assault on homeownership. The Senate is now looking to pass a measure in the next few weeks that one national columnist, Kenneth Harney, says is even worse for homeowners. Specifically, Harney notes:

“Deductions of state and local property taxes, sales taxes and income taxes — the so-called SALT write-offs heavily used by homeowners — take a heavy hit. The House bill would limit SALT deductions to $10,000 in property taxes. Currently there is no dollar limit, and income and sales taxes can be included. The Senate bill would kill the deduction. For owners in high-tax markets such as Virginia, California, New York, the New England states plus Illinois and Ohio, that could raise federal tax bills.

“The Senate bill would also make a major change in one of the most valuable tax benefits for homeowners — the ability to pocket tax-free capital gains on home sales. Sellers now filing jointly can ‘exclude’ up to $500,000 of gains, provided they have used the property as their principal residence for two years out of five. That’s a big deal for many sellers, especially seniors who need the money for retirement.”

Fortunately, a record number of Ohio REALTORS have already made their voice heard — as we’ve topped 22 percent participation in the “Call for Action” as of today. While this is great and helps us meet our national goal — that leaves plenty of room for improvement. If you haven’t acted…now’s the time!

I would like to extend my personal gratitude the following 18 local Boards/Associations that have surpassed their 20 percent participation goal: Ashland, Coshocton, Delaware County, East Central, Guernsey-Muskingum Valley, Heartland, Knox County, Lake & Geauga Area, Licking County, Marietta, Marion, Midwestern Ohio, Portage County, Springfield, Stark County, Toledo Regional, Wayne-Holmes, and West Central.

Other notable highlights:

  • Ohio’s current participation on 22.17 percent trails that of our peers from Michigan (24.64 percent). It’s “Beat Michigan” week…let’s get to work Buckeyes!
  • Our current category leaders in the Ohio “Board vs. Board” competition include a new #1, with the Stark County Board jumping to the top spot in the “Large Board” category. Other leaders include: “Small Board” pace-setter Ashland Board with a remarkable participation rate of 96.61 percent, Licking County topping the “Medium Board” category, and Toledo Regional Association leading the “Metro Boards.” Here are the current Ohio “Board vs. Board” standings:

Metro Boards (1,200+ members)

  1. Toledo Regional Association — 28.17%
  2. Columbus REALTORS — 17.01%
  3. Cincinnati Area Board — 16.71%
  4. Akron Cleveland Association — 14.97%
  5. Dayton REALTORS — 14.94%

Large Board (450-1,199 members)

  1. Stark County Association — 24.08%
  2. Lake-Geauga Area Association — 22.9%
  3. Butler-Warren Association — 18.58%
  4. Medina County Board — 17.34%
  5. Firelands Association — 16.95%
  6. Youngstown Columbiana Association — 12.97%

Medium Boards (200-449 members)

  1. Licking County Board — 34.43%
  2. East Central Association — 28.48%
  3. Wayne-Holmes Association — 21.74%
  4. Midwestern Ohio Association — 26.69%
  5. Portage County Association — 26.14%
  6. Springfield Board — 25.81%
  7. Guernsey-Muskingum Valley Association — 22.03%
  8. West Central Association — 21.6%
  9. Lorain County Board — 14.43%
  10. Scioto Valley Association — 16.38%
  11. Northwestern Ohio Board — 16.36%
  12. Warren Area Board — 14.83%
  13. Lancaster Board — 14.52%
  14. Southern Ohio Association — 14.06%
  15. Mansfield Association — 11.05%

Small Boards (under 200 members)

  1. Ashland Board — 96.61% (57 of 59 members have responded!!!)
  2. Marietta Board — 50%
  3. Coshocton County Board — 44.83%
  4. Knox County Board — 30.95%
  5. Heartland Board — 26.19%
  6. Marion Board — 25.81%
  7. Delaware County Board — 22,86%
  8. Ashtabula County Board — 18.06%
  9. Beaver Creek Area Association — 16.67%
  10. Highland County Board — 16.39%
  11. Greater Portsmouth Area — 14.49%
  12. Athens County Board — 13.46%
  13. Clinton County Board — 12%

Help your Board/Association! Help middle class homeowners! Help save the American Dream! Make your voice heard by clicking here!

Tags: Association news, politics

View More Articles »