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Changes on the Horizon for Ohio’s Municipal Income Tax Law

01.26.15 written by

On December 19, 2014, House Bill 5—the Ohio Municipal Income Tax Reform Bill (the “Bill”)—was signed into law. The Bill reflects significant changes to Ohio’s Municipal Income Tax Law codified at O.R.C. §718 et seq., as it attempts to streamline and simplify the current municipal income tax system.

Although the Bill was met with much contention—with opponents citing revenue loss to Ohio’s municipalities and proponents looking to standardize taxation by Ohio’s roughly 600 municipalities—what is not in dispute is Bill’s wide-ranging impact on municipal ordinances throughout Ohio. The Bill implements a number of statewide standards with which local governments will have to comply—the provisions of the Bill will take effect on January 1, 2016. What follows are some, but not all, of the provisions with which municipal ordinances would have to confirm: 

  • Adopt a uniform definition of “taxable income”, with exemptions for intangible income, social security benefits, alimony and child support payments, and more;
  • Allow a five-year net operating loss carryforward deduction for such losses incurred in tax years beginning after 2016;
  • Provide for a casual entrant exemption for nonresident employees who only work up to 20 days within the municipality—but this exemption does not apply for certain employees, including, among other exceptions, employees with a “base of operation” within the municipality;
  • Adopt a 25-factor test to determine whether an individual is domiciled in the municipality; and
  • Permit a tax administrator to require in some cases a corporation to file a consolidated municipal income tax return.

Again, the above list of changes is a small testament to the sweeping reforms that the Bill will cause in 2016. It is critical to acknowledge these changes and determine how the Bill will affect individual and business municipal tax obligations. If you have any questions or concerns as to how the Bill might affect you or your business, please contact Krugliak, Wilkins, Griffiths & Dougherty Co., LPA, and Attorney David J. Lewis at 330-535-4830 to discuss your municipal tax obligations.

NOTE: This general summary of the law should not be used to solve individual problems since slight changes in the fact situation may require a material variance in the applicable legal advice.