Updated Mon, Nov 11, 2013 10:08 am
A piece of state legislation that is said to bring uniformity and simplicity to municipal tax income collection could be put to a vote before the Ohio House of Representatives this week. However, the city of Athens’ tax administrator said the bill is bad news for the city and many other municipalities around the state.
After years of discussion, House Bill 5 was moved out of committee last week and could be put to a vote this week, according to Athens Tax Administrator Tina Timberman. She testified before the House’s Ways and Means Committee about the dangers of the bill more than once and says, if passed, the city of Athens could lose over $100,000 in revenue.
House Bill 5 would establish a state Municipal Tax Policy Board and municipalities would have to repeal any local income tax policies that don’t conform to rules set by the newly formed state board.
Timberman said that most other municipalities she’s talked to about the bill said that they also stand to lose significant revenue if the law is passed. The Ohio Municipal League is also opposed to the legislation.
The Ohio Municipal League states that the bill would eliminate local control and make “all local tax ordinances obsolete.”
According to Timberman, those who are in praise of the legislation tout that it’s business friendly and helps make tax code easier to understand for business owners. However, Timberman said the legislation takes a 23-page portion of the Ohio Revised Code and turns it into a 145-page document.
“Simplicity is not what they accomplished,” she said, noting that a group of tax administrators had two or three different interpretations of the same document.
“The information is so complex and scattered throughout the document,” Timberman said. “Small business owners won’t be able to figure it out.”
According to the Ohio Municipal League, the legislation would require all municipalities to allow a five-year Net Operating Loss carry forward policy.
“For the 174 municipalities in Ohio which currently offer no such business tax deferment policy, this unfunded mandate would represent a significant loss of revenue…” states information on the League’s website. Athens is one of those 174 municipalities without a NOL.
Timberman said the mandate would allow those who live in Athens but own rental property in Nelsonville to carry over those business losses on their Athens income taxes.
“They can now offset anything (if the law passes),” Timberman said.
Additionally, the bill would require municipalities to send more certified mail, thus increasing costs.
The law would also extend the number of days a non-city resident could work in a municipality without having to pay income taxes from 12 to 20 days. Timberman said this change alone could be a loss of $20,000 a year to the city of Athens.
Under the current law, if a non-resident works 13 days or more in the city limits, that worker is liable to pay income taxes for the entire length of time they worked in the city. Under the proposed legislation, the worker would only have to pay income taxes for anything after 20 days.
“The bill eliminates the ability of a municipality to go back and collect from day one, as is the current treatment, compensation due when a worker has been in an community for the full tracking period thus allowing communities to only collect on tax obligations after the 20th day,” the League’s website states.
According to the Ohio Municipal League, House Bill 5 would also require municipalities to have a “problem resolution officer” to oversee the actions of tax administrators. If cities are unable to hire an additional employee to meet the new mandate, a community must reassign a current staff member to perform the duties.
The city’s administration, city council and auditor’s office have all expressed their discontent with House Bill 5. Last November, Council unanimously passed a resolution stating the city’s opposition to the proposed legislation.
Coupled with the loss of local government funds, tangible personal property taxes and estate taxes, Timberman said the city could see a loss of $1 million in revenue from the state if this new legislation moves forward. She said larger municipalities would see an even bigger loss in revenue.
While proponents of the house bill say that it’s good for business, Timberman said if the city has to cut services like street repair, police and fire due to revenue loss, businesses aren’t going to want to be located in the city.
“That’s the point we can’t seem to get across,” she said.