 | ¾ of jobs in Ohio are found in municipalities |
| of Ohio’s population is in municipalities |
| Ohio cities and villages occupy only 11% of the land mass |
| 525 municipal water systems |
| 74,000 lane miles of streets in cities and villages |
| 16,000 police officers in cities and villages |
| 12,000 firefighters |
| 541 cities and villages levy the municipal income tax |
| 84.3% of total municipal revenues generated locally |
TAX REFORM PROPOSALS OF THE COMMITTEE TO STUDY STATE AND LOCAL TAXES
COMMENTS
1) Create a Uniform Base and Definition for Net Profits
The Ohio Municipal League could support this recommendation if the
definition provided 1) an expanded base and 2) elimination of the numerous exemptions. The
anti PIC recommendation is a positive feature, but to be helpful it should not be
cluttered with exemptions, overlapping responsibilities, and vague language. Further
revenue loss is a major concern for municipalities currently. No dollar figures have been
provided.
2) Create a Uniform Withholding Base
The Ohio Municipal League could support establishing a uniform
withholding base and actually has in the past. The simplest would be to take the medicare
wage base as reported in Box 5 of Form W-2 as a starting point and include other
appropriate income as suggested in the report. The anti-PIC provisions will only result in
additional revenues to make up for losses resulting from changes described above if it is
not overburdened with exemptions and exclusions. No dollar figures have been provided.
3) Provide for Appeals to the Board of Tax Appeals and the Ohio
Supreme Court
The current procedure is to appeal actions of the local tax
administrator to the local courts then proceed through the court systems as with other
types of litigation. This does provide the individual taxpayer with a forum at the local
level. There is some concern that utilization of the State Board of Tax Appeals and the
appeal of right to the Ohio Supreme Court could be burdensome for the high court, the
municipality and the taxpayer.
This particular recommendation has generated both positive and negative
reactions with municipalities.
4) Create Uniform Net Operating Loss Carryover Treatment
This provision has the potential of creating the largest revenue loss
for municipalities. Some municipalities already allow a 5 year NOL carry forward; others
allow a lesser number of years NOL carry forward; while about _ of cities and villages do
not allow NOL’s. The Ohio Municipal League would support uniformity in this area if
the negative revenue implications can be overcome and reliable offsets could be put in
place.
5) Provide Uniform Treatment of Pass-Through Entities
Current law (only recently changed as a rider to SB 180 at the end of
last session) clearly encourages different treatment of pass-through entities, especially
if municipalities choose the ballot option. HB 477 enacted in 2000 was a collaborative
effort and provided a reasonable alternative. There was no question as to how a
municipality would be taxing such entities and it prohibited "double" taxation.
6) Centralized, Web-Based Filing and Payment Option
This recommendation has probably generated the most discussion. As with
other recommendations, dollar figures and operational details are elusive. Before
embracing or dismissing this interesting concept municipalities need more information from
the state on the following:
a) Given Ohio’s budgetary woes, will the state be able to fund the
development and ongoing operation of this added feature of the Ohio Business Gateway as
recommended by the Commission?
b) What would be the turnaround time on filings and the appropriate
forms, document and tax payments getting to the cities and villages?
c) How long until the system is operational?
d) Will municipalities be consulted on the development of such a
program?
Municipalities are already recognizing that E-filing is the future as
evidenced by those that have instituted such programs or have such programs in the
development stage. How would their efforts be accommodated by the Ohio Business Gateway?
7) Provide a Centralized Web-Based "Extension"
This is an interesting concept and should be explored. It will be
important to preserve privacy of taxpayer information at the same time ensuring that each
municipality receive the full data on taxpayers subject to their individual tax.
8) Revised Due Date of Municipal Income Tax Returns and
Extensions
April 15th is a well known date in the U.S. Municipalities
are more than willing to accept this as the filing date for municipal returns. The other
provisions in this particular recommendation are workable.
9) Eliminate 3-Year Requirement for Reporting for Withholding Tax
Purposes
This requirement came about as a result of HB 477 enacted in 2000. It
is confusing and not widely used. It might be best to just eliminate the entire provision
rather than just part of it.
Other Issues Directly or Indirectly Related to the Municipal
Income Tax and/or Municipal Revenues
1) Expanding the base would be welcome. Including additional taxable
entities such as telephone companies and dealers in intangibles could possibly boost
collections (although not significantly, we suspect). Another way to expand the base,
which is not included in the report but which should be considered, is to eliminate the
existing statutory exemptions - samples would include, intangible income, capital gains,
S-Corps.
2) Restructure the corporate franchise tax to reverse its decline as a
state revenue source. The report recommends increasing the minimum tax, increasing net
worth tax, and broadening the base. We concur; and it could result in increased dollars to
LGF.
We will be more than happy to work with the Senate Ways and Means
Committee Chairman and members of the committee to explore further the recommendations of
the Committee to Study State and Local Taxes. Cities and villages can make a meaningful
contribution toward refining these recommendations - some of which we see as potentially
having real benefit to the taxpayers and the municipalities.
