Court Approves Centralized Municipal Income Tax Collection
On February 21st, Franklin County trial judge David Cain entered judgment for the State of Ohio in a case brought by a gaggle of cities upset by the State’s legislative enactment giving businesses the option to file their municipal income tax returns with the Ohio Department of Taxation (ODT). The cities argued that H.B. 49’s municipal income tax reforms infringed on their constitutional home rule powers. Judge Cain, however, note that the Ohio Constitution also empowers the State to enact laws “to limit the power of municipalities to levy taxes . . .”
The cities will undoubtedly appeal to the 10th District Court of Appeals.
According to the State’s brief filed in the litigation, the centralized filing could reduce annual filing costs for corporate taxpayers by up to $1.6 billion per year. That level of savings is unlikely to happen in the first applicable tax preparation season (Jan – April 2019), as many practitioners are advising their clients not to sign up yet. The deadline to do so for the 2019 preparation season is this coming March 1. Practitioners are concerned they won’t be able to use their tax preparation software to file their client’s returns electronically.
The ODT is working on that issue, but there’s no guarantee they’ll be ready on time or there won’t be major bugs.
Stay tuned.
For more information on centralized filing, contact our expert Steve.