TUESDAY, DECEMBER 12, 2017 --- Twenty-two Ohio cities and villages filed suit on Tuesday in Lorain County Common Pleas Court against the State of Ohio and Ohio Tax Commissioner Joe Testa. These municipalities are standing together to challenge newly enacted state laws that interfere with the authority of Ohio municipalities to administer, collect, audit and receive critical municipal tax dollars.
City of Avon
City of Avon Lake
City of Beachwood
City of Brecksville
City of Elyria
Village of Glenwillow
City of Hudson
City of Lyndhurst
Village of Moreland Hills
City of North Ridgeville
City of North Royalton
City of Oberlin
Village of Orange
City of Pepper Pike
City of Richmond Heights
City of Shaker Heights
City of Sheffield Lake
City of Strongsville
City of Vermillion
City of Westlake
City of Willoughby
City of Youngstown
The controversial provisions were adopted as part of Ohio House Bill 49 (H.B. 49) and will allow the Ohio Tax Commissioner to administer and collect municipal net profit tax from businesses operating in Ohio municipalities. The municipalities are asking the Court to declare these provisions of H.B. 49 to be unconstitutional and to prevent these provisions from being implemented.
According to the lawsuit, Ohio’s long-standing principles of local self-government authority are directly violated by the State’s imposition of new regulations, administrative fees and compliance requirements – compromising the ability of municipalities to maintain funding for essential services like police and fire protection, as well as control over those funds. The challenged provisions of H.B. 49 would effectively amount to the State seizing control of municipal net profit tax administration and imposing fees on municipalities to do so, while subjecting municipal net profit taxpayers to new regulations and compliance requirements.
The municipalities' lawsuit, filed by Walter Haverfield LLP and with the full support of the Regional Income Tax Agency, comes on the heels of a similar suit filed in Franklin County in November by a number of other Ohio municipalities. Both suits are seeking temporary and permanent injunctions to block the State and Ohio Tax Commissioner from implementing the municipal net profit tax provisions of H.B. 49.
The filing of this latest lawsuit adds to the growing uncertainty looming over the State’s efforts to centralize municipal net profit tax collection and administration. As these and other rapidly evolving Ohio municipal tax policy and compliance issues unfold, regularly updated news, insight and analysis from industry and government resources will be made available at RITAperspectives.com.
In October, the Ohio Department of Taxation (ODT) opened registration for businesses electing to participate in the new state-administered municipal net profit tax system for the 2018 tax year (to be filed in 2019). The controversial option was recently enacted as part of House Bill 49, but the future and efficacy of its implementation are already entangled in a web of uncertainty.
As litigation to challenge the constitutionality of the state-controlled administration unfolds, there exists the potential for injunctions, recalled directives and other uncertainties for businesses and their tax and financial professionals considering this option.
Additionally, questions have been raised in legislative hearings and elsewhere regarding the readiness of the ODT to handle the processing and collection of a large volume of municipal net profit filings. Businesses and tax professionals alike need to weigh whether or not it is advisable to opt-in at this time and assume the risk associated with the State’s beta test.
By contrast, RITA has a 45-year track record collecting and administering municipal taxes. The Agency currently processes more than 112,000 business net profit forms each year, while maintaining an average customer support call wait time of 30 seconds. RITA has both the technological infrastructure and experienced human capital to meet Ohio taxpayer expectations.
RITA is not providing legal, accounting or other professional advice. Any action taken based on this information should be taken only after reviewing your specific facts and circumstances.
45 years experience, and serving over 2 million taxpayers in 300 municipalities.
Full service tax administration agency providing the most comprehensive municipal tax collection and administration services in the State of Ohio.
Advanced technological capabilities allowing premium user accessibility and electronic filing.
MeF filing for municipal net profit taxes available for tax year 2018 filed in 2019.