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Alert: Ohio municipal income tax reform

January 20, 2015 / 5 min read

When Governor Kasich signed Am. Sub. House Bill 5 it provided significant reform to income taxes levied by Ohio municipalities. House Bill 5 requires municipal corporations that levy an income tax as of January 1, 2016, to amend existing income tax ordinances to comply with the changes set forth in the legislation. The bill requires uniformity in the tax base (with some exceptions) and also intends to simplify what has been a very complex local tax structure. The following provides a high level summary of some of the key provisions of the legislation:

Computation of taxable income

Net Operating Losses (NOLs)

Consolidated tax returns

Pass-through entities

Occasional entrant exemption

Current law allows an exemption that generally prevents compensation earned by a nonresident on 12 or fewer days within a municipality in a calendar year from being subject to tax and withholding in that municipality. The following highlights some of the significant changes applicable to the “casual” entrant exemption:

Administrative items

House Bill 5 provides major changes in Ohio municipal income taxation that can be quite complex and will greatly impact businesses and individuals. This high-level overview of some of the significant changes is not all-inclusive. Because the law changes are first effective for taxable years beginning on or after January 1, 2016, there is a possibility for further changes during 2015.

If you have any questions, please contact your tax advisor.

The information provided in this alert is only a general summary and is being distributed with the understanding that Plante & Moran, PLLC, is not rendering legal, tax, accounting, or other professional advice, position, or opinions on specific facts or matters and, accordingly, assumes no liability whatsoever in connection with its use.

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