1. HB49 How The Budget Bill Changed Municipal Income Tax

2. New Opt-In Filing Language Added by the State in HB49
Was passed by the House and Senate in June Law becomes effective January 1, 2018, unless a injunction is filed and legal action is pending.
How would this opt in process work?
Taxpayers, other than individuals, may opt to file their net profit municipal income tax through the State of Ohio Department of Taxation.
Once the taxpayer has opted in they can file using the OBG or file directly with the ODT either by paper or electronically.
The tax commissioner shall serve as the sole administrator of each municipal income tax for which the taxpayer is liable for the term of the election.

3. Tax Commissioner Authorities
The tax commissioner shall enforce and administer the 15 new sections of code ORC to , and shall:
Have the powers to prescribe all forms necessary to administer those sections.
Adopt rules as the tax commissioner finds necessary to carry out those sections.
Appoint and employ such personnel as are necessary to carry out the duties imposed upon the tax commissioner by those sections.
NO TAX ADMINISTRATOR shall utilize sections to of the Revised Code in the administration of municipal income tax. Those sections shall not be applied to any taxpayer that has not made the election under

4. What are the Most Impactful Changes
You will no longer have the ability to review returns for accuracy.
You will no longer have access to taxpayers documents period.
You will have no authority to have a return corrected, reviewed or audited.
Even if you have evidence that the taxpayer was working in your municipality or made more than was reported on the allocation.
There is no way to verify rental income on partnerships or corporations filing with the ODT. They could of filed for 1 or 5 rentals you will never have the appropriate paperwork to be able to verify.
Refunds will be approved by the Ohio Department of Taxation-No prior approval needed from the municipality.
If there was a error made on the return, you will never know, because you will never see it.
Municipalities deny refunds routinely due to mistakes and errors on the return.
The tax commissioner will be allowed to approve any alternative apportionment formula, even if it doesn't represent a businesses activity in your community.
The State can take 50% of our monthly distribution if you don’t comply timely with an unreasonable deadline.

5. Audit
If a municipality discovers that it has additional information in its possession that could result in a change to a taxpayer’s tax liability, the municipality may refer the taxpayer to the tax commissioner for an audit.
Upon receipt of a referral, the commissioner shall review the referral and MAY conduct an audit of the taxpayer that is the subject of the referral.
There is no language that forces the tax commissioner to preform the audit. Even if you have a 1099 showing that the taxpayer made a substantial amount more then their allocation showed in your municipality, you cannot force an audit.
It is still the tax commissioners decision whether an audit/review will be preformed on the business or not.
Language provides filing a Writ of Mandamus as a remedy against the tax commissioner; however, municipalities would have no case since the tax commissioner has no obligation to preform these duties.
Writ of Mandamus is a judicial remedy in the form of an order from a superior court, to any government subordinate court, corporation, or public authority, to do (or forbear from doing) some specific act which that body is obliged under law to do (or refrain from doing), and which is in the nature of public duty ...

6. 718.80(C)(2)- If any municipality fails to timely comply with the requirements listed below, the tax commissioner shall have 50% of each monthly payment made to the municipality withheld, until they comply:
Within ninety days of receiving a taxpayer’s notification of election, the municipality shall submit to the tax commissioner, on a form prescribed by the tax commissioner, the following information regarding the taxpayer:
The amount of any net operating loss that the taxpayer is entitled to carry forward to a future tax year.
The amount of any net operating loss carryforward utilized by the taxpayer in prior years. (Note: Number of prior years is not specified.)
Any credits granted by the municipality to which the taxpayer is entitled, the amounts of the credits, whether the credits may be carried forward, and the duration of any such carryforward.
Any overpayments of tax that the taxpayer has elected to carryforward to a subsequent tax year.
Any other information the municipality deems relevant.
What happens if the municipality IS NOT notified by the taxpayer? What if the taxpayer is under extension? Will the State still withhold 50% of their monthly distribution?

7. On or before the 31st day of January each year, each municipality imposing a tax shall certify to the tax commissioner the rate of the tax in effect on the first day of January of that year.
If, after the 31st day of January of any year, the electors of a municipality approve an increase in the rate of tax that takes effect within that year, the municipality shall certify to the tax commissioner the new rate of tax not less than 60 days before the effective date of the increase.
This may effect any tax increases that are held during special elections.

8. Monthly Distributions How Can You Post the Payments?
Estimated Payments + Payments from Annual Returns – Audit Adjustments – Refunds – ½% fee = Monthly Distribution
You will receive the money distribution on the 5th day of the month.
No later than 30 days after the payment is made you will receive a listing of the estimated payments made.
In May and November of each year you will receive the name, federal ID number, apportionment ration, NOL (Net Operating Loss), Carryforward and credit claimed on the return. However, nowhere are they required to provide you how much money was paid with the return.
Since refunds are taken directly from the monthly revenue and returns are only reported twice a year and have no revenue amounts, we would have no way to post payments to accounts. Therefore all money received from the state could never be posted to individual accounts. Meaning you would have no way to track estimated payments, profit or loss for businesses who choose to opt to file with the ODT.

9. Differences in the Law
The definitions in section and the new section are different. Even the explanation of what should be the determining law for a definition is different between the two.
The tax commissioner has no special rules with regard to conducting audits as municipalities do.
When issuing an assessment the municipalities are required to have ASSESSMENT printed in all caps in at least 18 point font at the top of the page. It must include the tax payer’s rights to appeal and must be sent by certified mail. These requirements are not required of the tax commissioner when issuing a assessment.
There are different collection and letter processes between the municipalities and the State.
The tax commissioner can prescribe whatever rules he feels necessary.

10. Is This a Home Rule Violation?
Before HB49 the State had no authority with regard to the administration or collection of municipal income tax. All local income taxes are administered through our local ordinances. By passing the new language in HB49, the legislators may have encroached on our police powers by giving the State tax commissioner the authority to collect and administer local municipal income tax.
We are being forced to change our ordinance to allow the State tax commissioner to collect the tax on our behalf. By forcing us to adopt sections the State is giving itself the authority to collect and administer our local municipal income tax.

11. Home Rule Violation (continued)
We do not have the right to force a audit or review of a company’s return.
Even filing a Writ of Mandamus cannot force an audit. Since there is no law which requires the tax commissioner to conduct the audit at the request of a municipality, the tax commissioner may not be ordered by the Court to do an act which is not required under law.
For companies who have opted to file with the State, all enforcement of the municipal income tax will now be administered by the tax commissioner to the specific exclusion of local administration
We do not have the right to review refunds before they are issued. Many times a refund will be changed and can even result in a balance due. If a return is entered as filed and not reviewed for accuracy, a invalid refund could be issued.
A quick example would be if a partnership forgot to add guaranteed payments back in the taxable income. If the return was entered as filed and the guaranteed payments were missed in the review by the State, the refund would incorrectly be issued and could cost us a substantial amount of tax revenue. Don’t forget, there is no language that allows our municipality to review the returns to verify they were processed correctly.
This eroding of our home rule is a continued assault on our revenue and must stop in order for us to be able to maintain services for our municipalities and residents.

12. Questions? Comments?
Tina Timberman City of Athens Income Tax Administrator 8 E Washington Street Athens, OH ext 2 Michelle Jordan City of Cleveland (CCA) Tax Manager 371 W Second Street, Suite 110 Dayton OH