City Watching State-Level Income Tax Proposals

Stow officials are watching a conversation in Columbus closely about proposals to change the way communities in Ohio collect income tax.

Stow Mayor Sara Drew and Stow Finance Director John Baranek also are providing input about Ohio House Bill 5. The proposed legislation would change the way communities collect income tax and also effects business owners.

"What we’re trying to do is we’re trying to enlighten some of the legislators through the Ohio Municipal League and meetings with our local representatives, Rep. Roegner and State Sen. LaRose," Baranek said. "They propose this as being a revenue neutral legislation for the municipalities. And it really isn’t, depending on how your local income tax ordinances are set up."

Ohio legislators are in the midst of hearings on the proposed legislation.

Some changes the legislation, if adopted, would make include changing the occasional entry rule — the time period when municipalities start collecting income tax for temporary workers — from 12 days to 20 days.

That change alone could cost Stow thousands each year, Baranek said.

"Right now there’s a 12-day period that if they come in and they’re in Stow working for eight days (the state) considers that a casual time period, so (workers) don’t have to pay Stow local tax for those eight days," Baranek said. "But if we have a construction company that comes in … and they work 12 days, maybe 15 days, then we’re allowed to tax those 12 or 15 days of wages for city tax purposes and they have to pay us for those days that they’re in here."

The proposed legislation also would mandate that Stow sends notices to taxpayers regarding liability via certified mail.

"Where before we could send things out … by regular mail," Baranek said. "So we’d have a lot of postage costs involved in sending a lot of letters out."

Another proposed change would be to create a uniform net operating loss carry-forward period of five years.

"Many communities in the state of Ohio don’t recognize the state has a five-year carry forward," Baranek said. "So if I have a loss this year I can carry it forward and use it up over the next five years against that income I have. Many municipalities have a shorter term.

"That one alone will effect a lot of communities," he said. "If they have to extend that out, they’ll lose tax revenue over that."

That proposal is one change that wouldn't hinder Stow, as it already adheres to the state's five-year period.

The first hearing in Columbus on the proposed legislation was held Feb. 13. Stow officials may travel to the state capital to testify on the proposed legislation.

Drew said their hope is that whatever final version of the legislation is adopted includes no mandates that increase income tax collection costs for cities.

"We're really working hard to make sure it's a revenue-neutral program," she said.