New Ohio Tax Law May Alter Municipal Income Tax

HB 197 went into effect on March 27, 2020. This is a new Ohio law that may alter the way municipalities collect income tax as a result of the COVID-19 emergency.

The Ohio Legislative Service Commission stated in its Final Analysis that the new law redefines “principal place of work” as the city where homebound workers live.

This means that many employees whose taxes are normally withheld in the city where they work may be entitled to a refund next fiscal year for the time they spent working from home. The cities where homebound workers live may also be entitled to reimbursement from the cities where the employees normally work.

According to a recent article, the new law will most likely result in mass tax refunds and cities losing significant municipal tax revenue. In Cleveland, for example, more than 85% of the city’s income tax is generated from withholdings collected from employees commuting into the city.

Municipalities may wonder what they can do to avoid mass refunds, class action lawsuits, and other litigation. It is too early to speak in general terms of the consequences of this law. The issues it presents are so complex that no two cases will be alike.

Continue following Mazanec, Raskin & Ryder for updates on this and other changes in the law. For advice that is specific to your circumstances, please contact one of our attorneys.

This update is not intended to constitute legal advice or form an attorney-client relationship.