Chipping Away at the Municipal Income Tax; Act Now.

Though the General Assembly is out of session until November 12, it is important that we continue to work on a number of issues during this brief recess. With your help, we can make progress on some of these issues through our work in Columbus and your contact with your legislators while they are home.

Of critical importance is contact with your legislators on HB 127, specifically a rider amendment added in the House that would further restrict the ability of municipalities to tax income from subchapter S corporations, even if a municipality places their current practice of such taxation on the ballot in November, as required by the General Assembly last year.

HB 127, in its original form, was a good bill. Its gist was to allow municipalities, in cooperation with their school districts, to acquire certain abandoned properties, free of tax liens, for redevelopment. Ironically, it became a bill that would, on the one hand, help municipalities redevelop, while on the other hand, diminish a municipality’s ability to afford redevelopment programs.

Proponents of this amendment, and its many forms in the past, have said this change will cost municipalities little or nothing. While that is true for communities which may not have current S Corporation income earners in their community, it not true of the many, many communities which do. Supporters of this and other amendments to exempt S Corporation income from the municipal income tax have spent large sums of money going to the Ohio Supreme Court and sending paid lobbyists to the legislature three times to get every scrap of tax exemption they can.

Why spend that kind of money if no monetary gain is really there? The spending of the proponents of the HB 127 amendment is the clearest proof that millions of dollars are involved. Further, if such corporations gain this tax advantage, at the expense of municipal services, why won’t other forms of business rush to morph into such municipal tax-free entities, resulting in the loss of future municipal tax dollars that are incalculable? This "tax some folks, but not others," something we have seen before in this General Assembly, will eventually lead to more and more people who live on a weekly paycheck wonder why they are the only ones still paying the municipal income tax. No municipality in Ohio, which has a municipal income tax or may need one in the future, will be untouched by that belief that the tax is no longer fair.

HB 127 is in the Senate Ways and Means Committee currently. It could easily come out of that committee and onto the Senate floor for final passage in November. We need your help now. Please, contact your members of the House and Senate and members of the Senate Ways and Means Committee on this issue soon. Ask them to delete the S Corporation language from HB 127. If this is good policy, the amendment and the whole question of S Corporation taxation ought to stand alone as a separate bill, something which has never happened.

Be prepared. There may be a hearing on HB 127 in the Senate Ways and Means Committee on October 29.

No Bulletin Until the General Assembly Returns; E-Bulletin still Available.

With the General Assembly in recess, we do not expect to publish a Legislative Bulletin for the next couple of weeks. If something changes, that schedule will, of course, change. That is especially good news, if you are a tree. If you are not a tree, but worry that someday, in another life, you might be, you should sign up for the League’s paperless e-mail version of the Legislative Bulletin.

During the Interim.

While the General Assembly is in recess, staff at the League will be working on several issues that we have highlighted in past Bulletins.
Those bills include: