House Bill 5 Municipal Tax Reform Passes Ohio House and Senate
COSE supported HB 5 and joined the Ohio Municipal Tax Reform Coalition based on the initiative’s ability to simplify and create uniformity to the current system, allowing businesses to more easily comply and focus their time and money on what really matters - running a successful business. On December 9, the Ohio House passed HB 5 by a 60-32 margin.
For well over a year now, House Bill 5 (HB5), municipal tax reform, has been one of the most contentious pieces of legislation in the General Assembly. Ohio has one of the most complex municipal tax systems in the country, with hundreds of local jurisdictions that all have their own unique tax requirements creating a burden for those that work in numerous municipalities on a regular basis. COSE supported HB 5 and joined the Ohio Municipal Tax Reform Coalition based on the initiative’s ability to simplify and create uniformity to the current system, allowing businesses to more easily comply and focus their time and money on what really matters - running a successful business. On December 9, the Ohio House passed HB 5 by a 60-32 margin.
After much deliberation and argument over several provisions, the 130th General Assembly approved and came to an agreement upon four main policy priorities. The bill establishes a five-year net operating loss carry forward phase-in beginning in 2017. This provision will unify current Ohio municipal tax laws addressing an “NOL” and allow business owners in municipalities to offset losses and gains for in five year increments. HB 5 also extends the occasional entrant rule from twelve days of business to twenty days of business.
Rob Myers, President of RHM Homes Corp is pleased to see HB 5 pass, “The book keeping and paperwork burden of tracking few hours in many municipalities has long been a drag on our business. The passage of HB5 will help alleviate some of that burden so we can concentrate on pleasing our customers and running our business!”
The occasional entrant provision also prevents a municipality from forcing a business to pay income tax from the first day they conducted business in the city, and instead begins counting, for tax purposes, day twenty-one as the first taxable day.
Small business owner, Kathy Skettle (Skettle Electric) told COSE, “We are a very small company registered in approximately 30 municipalities each year. The cost of paying someone to do the paperwork for filing taxes (both payroll and net profit) is outrageous. The passage of House Bill 5 is a positive step by our state government towards understanding the workings of small businesses. Its passage will save our company thousands of dollars."
This change will provide businesses with more flexibility as to when they need to begin paying municipal income taxes. Lastly, HB 5 was also amended to include a de minimus clause, which will not require a business to pay its tax if the tax is less than ten dollars.
Governor Kasich is expected to sign HB 5 sometime before Christmas. Following the governor’s signature, HB 5 will be effective in March 2015; however, the bill’s provisions will apply to tax year 2015 and years going forward.
For more information on HB 5: COSE Supports Municipal Tax Reform