Seven cities in Lorain County, Ohio and 15 other municipalities filed suit over House Bill 49 on December 12th. House Bill 49 is set to take effect on January 1, 2018 for businesses that opt-in to filing their net profit municipal income taxes through the Ohio Business Gateway. The provisions of House Bill 49 will enable the Ohio Tax Commissioner to administer and collect municipal net profit taxes from businesses operating in Ohio municipalities. Plaintiffs suggest the practical effect of this provision could result in municipalities being forced to hand over a portion of their general operating budget to the state of Ohio as administration costs. A similar lawsuit also has been filed in Franklin County by a group of more than 100 Ohio cities. Notably the Lorain County lawsuit has the support of the Regional Income Tax Agency, and the Franklin county suit has the support of the Ohio Municipal League.
The plaintiffs in both lawsuits seek injunctive relief from specific amendments to the Ohio Revised Code as adopted in House Bill 49. For example, the plaintiffs in both the Lorain County and Franklin County lawsuits argue certain amendments violate the Municipal Home Rule Amendment of the Ohio Constitution by hindering municipalities’ abilities to self-govern. The plaintiffs also contend certain amendments effectively amount to the State usurping control of the administration of municipal net profit tax while also imposing fees on municipalities to do so.
Clark Schaefer Hackett is monitoring this legislation. As the legislation progresses, we will provide additional updates regarding the potential impact on Ohio taxpayers.
