The Ohio Supreme Court has upheld the State Department of Taxation’s (DOT) ability to create a centralized filing and collection system for Ohio municipal business income taxes. This decision upholds 2014’s House Bill 5 and 2017’s House Bill 49. Municipalities challenged the Ohio General Assembly’s ability to authorize a centralized filing system, administer the net profits taxes imposed by the Ohio municipalities, and retain a 0.5% fee for collection and administration of the taxes. While the Ohio Supreme Court deemed the 0.5% fee unconstitutional and struck down that separate section of the provision, it upheld the centralized filing and collection pieces, paving the way for taxpayers to register for the online filing system.
Uniform Municipal Income Tax Provisions
Passed in 2014, House Bill 5 established several uniform municipal income tax provisions including taxing pass-through entities at the entity level, standardized definition of taxable income, establishing common net operating loss (NOL) carryforward rules (with certain limitations), and an ability to elect in for a consolidated filing, among others. Ohio cities have been and are still free to determine the rate of tax for their municipality.
House Bill 49 provided the Ohio DOT the ability to create a centralized filing and payment system for the collection of Ohio municipal business income taxes. Furthermore, beginning January 1, 2018, businesses were able to opt-in to file a single annual tax return on the Ohio Business Gateway’s (OBG) website covering all Ohio municipalities where tax was due. Estimated payments could also be made electronically on the OBG website.
Reduced Administrative Burden
Using the centralized filing platform on the Ohio Business Gateway’s (Gateway) website could result in reduced time spent on filing and paying for Ohio city income tax returns. For example, consider a taxpayer with 20 Ohio municipal income tax filings. Instead of preparing and mailing 20 returns to 20 separate cities, the taxpayer can elect into the centralized filing system and file one single return online that encompasses all 20 jurisdictions. Additionally, the taxpayer would be able to make electronic estimated payments as well, avoiding the possibility of having to cut possibly 20 separate checks.
Taxpayers must make the election to file using the Gateway’s centralized portal on or before the first day of the third month of their taxable year. As such, it is too late to elect in for tax year 2020, but this election date should be kept in mind for tax year 2021 if this is worth pursuing. Note, to elect into the centralized filing system, the election is made for all Ohio cities the taxpayer is required to file in.
Alternative Option to the Gateway
If dealing with the Gateway’s website for tax filings seems cumbersome, the city returns can be submitted via e-file through tax software. Software products CCH ProSystems, Corptax and Gosystems, among others, are approved vendors for filing the Ohio Municipal Net Profits Tax Form MNP 10.
What to Do Next
Many taxpayers were hesitant to register for online Ohio city filings prior to the court system ruling. With the centralized filing system decision upheld, it’s time to evaluate if filing your Ohio municipal net income tax returns online via the Ohio Business Gateway makes sense for your business and could reduce administrative headache. For registration information, you can access the OBG website via the link here. Please contact us for additional consultation or for any other issues related to your Ohio municipal income tax filings.
We’d be glad to assist and discuss with you the pros and cons of opting into the centralized Ohio city tax filing. Talk to one of our Barnes Dennig tax professionals to ensure you’re ready for any situation. We’re here to help.