OHIO — Cities around the state must amend its income tax ordinances due to passage of House Bill 49.
House Bill 49 allows businesses to file taxes through the Ohio Business Gateway for taxes assessed by various cities. At this time no business is required to file with the state. Any business can still file with any city’s tax department without penalty. Many businesses file multiple city returns for every city they conduct business in.
Some businesses must file more than 50 different city tax returns, so they can save money in processing and filing costs by filing one return through the Ohio Business Gateway. The state disburses the taxes owed back to each city, but assesses a small fee to each city for doing so.
Cities don’t care for this new option and claim it violates ‘home rule.’
Home rule cities are those cities which have adopted a home rule charter for their local self-governance. The citizens of a home rule city are free to choose their own form of municipal government, choose between a large or small city council, fix the terms of office of council members, decide on the method of election of the Mayor, provide for creation of more boards and commissions which they feel is essential for proper city functioning, etc. In US, most of the states have home rule cities.
Home rule cities are not burdened by the limitations of Dillon’s rule which is a doctrine that says that a unit of local government may exercise only those powers that the state expressly grants to it.
The new income tax ordinances cities are approving are being adopted to comply with H.B. 49.
“This is the third time we’ve had to make changes to our income tax ordinance because the state is making changes on our behalf,” said Clayton Finance Director Kevin Schweitzer.
The state, according to city officials, is mandating that municipalities adopt municipal income tax provisions included in H.B. 49. If not adopted, the state would not disperse business tax profits back to the municipality. As a result cities statewide have filed a joint lawsuit to fight the change.
Schweitzer added that Clayton’s adoption of the provisions does not mean the city agrees with the legislation, but rather is a measure to protect the city so it can still collect taxes from business profits until the court proceeding reaches a ruling.
The parties to the lawsuit filed in Franklin County Common Pleas Court by the law firm Frost Brown Todd, LLC on behalf of municipalities statewide fighting the changes mandated by H.B. 49 is costing each city approximately $4,000 each.
The cities of Union, Clayton and many others already pay a fee for another agency (Central Collection Agency) to collect the taxes from residential tax filers paying their city income tax. The CCA charges about 3 percent for personal income tax collection to the City of Clayton. Schweitzer said the city does not have enough staff to handle and process all its residences’ city income tax returns.
“The difference is we will not have access to review any of the business taxes filed through the Ohio Business Gateway so we have to take the state at their word that the correct amount is being collected,” Schweitzer said. “I can get on the CCA system any time to review city income tax filings.”
Schweitzer also said that the Ohio Business Gateway has major issues, such as information disappearing once it is entered. This fact was confirmed by Englewood-based accounting firm S.J. Meyer Financial Advisory Services, LLC.
According to Steven J. Meyer, CPA-PFS, founder of S.J. Meyer Financial Advisory Services, none of his firm’s approximately 140 to 150 business clients have signed up to use the Ohio Business Gateway portal.
Businesses for years have argued that allowing each municipality in the state to make its own tax rules and regulations has created administrative costs in time and money and has put Ohio at a disadvantage compared to other states while diverting business resources from productive activity.
With the option of using Ohio Business Gateway, not all businesses are flocking to use it as of yet.