Ohio Municipal League Legislative Bulletin
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July 24 , 2014
OML HOLDS ANNUAL INCOME TAX CONFERENCE IN DUBLIN
Municipal officials from across the state descended upon the city of Dublin two weeks ago to once again participate in OML’s annual Income Tax Conference. The two day conference which focused largely on many aspects of sub.HB5, the municipal tax uniformity bill currently being considered by the Senate Finance committee, was attended by nearly 200 municipal tax and finance officials.
Attendees were presented with a wide range of topics which experts in varying fields of municipal government anticipate to be impacted by changes included in the current version of the bill. Such areas that were addressed included how the issue of the Ohio Constitution Home Rule provision may come into play concerning the significant changes being proposed to the administration of the local tax, perspectives by Certified Public Accountant (CPA’s) who serve in leadership roles in different municipalities and concerns they have and the concerns they have heard from clients, and technical and policy changes that may be experienced by cities and villages when it is time to implement whatever law is passed affecting already financially strapped communities.
Our local officials at the conference were also presented with timely information from a statewide economic development firm that specializes in working with national and international clients to identify best markets for new business growth and the factors considered by business decision makers when determining a host community to develop or expand their commercial operations. The sponsors of HB5 have always represented that the municipal tax of a city or village is one of the “Top 3” factors a business considers when determining a site selection. The information that we have understood to be true and what was presented at our Tax conference completely contradicts that claim. Other workshops part of the conference concentrated on different auditing and enforcement procedures and in-depth explanations of various filing forms and methods.
The municipal league would like to extend a sincere thank you to all of the presenters who took time out of their busy schedules to join our attendees at the tax conference and for sharing with them the very timely and expert information. We also want to thank the venders who participated in the exhibit show for joining us again this year. We hope it was another great opportunity for them to be with current clients and to introduce their services to new officials. And finally, the conference wouldn’t occur without our dedicated and passionate local officials who attended the two day program to learn the newest state and local tax information, to share “best practices” with other communities in administering the tax and to remain current on efficiencies and client service that will maximize the ability of cities and villages across the state to deliver the level service residents and businesses expect.
Thank you to everyone who was part and we will see everyone again next year!
HB5 PROPONENT WITNESS SUGGESTS MUNICIPALITIES “TWEAK” TAX RATES TO MAKE UP REVENUE SHORTFALLS
As we had previously alerted our members and legislative bulletin subscribers, because we know there are a large number of individuals who were unable to attend the May 27th Sponsor’s Hearing in the Senate Finance committee for sub.HB5, nor the hearing held June 3rd for proponents of the bill, before the legislature recessed, we have been requested to share what information was presented to the committee on this critical legislation.
To that end, we will be featuring segments of the testimony provided to the Senate Finance committee members by the sponsors and the bill supporters, beginning today. We are providing our members with this information that was presented through testimony so that some of the more “troubling” information presented as representing the truth can be identified and where we feel needed, any clarifications can be made for our members in an attempt to minimize the blatant or mistaken misrepresentations to what the effects of the bill will be and to “set the record straight”.
We would like to start this exercise in sharing a little greater detail of testimony that our members may not be aware of with information that was presented through Proponent testimony on June 3 rd. The witness was Mr. Tom Zaino, past state Tax Commissioner for the state of Ohio, managing member of the law firm Zaino, Hall & Farrin LLC, chief architect of HB5 and lead representative for the Ohio Society of Certified Public Accountants (OSCPA). Following Mr. Zaino’s prepared testimony, we was presented with questions from many members of the legislative committee. One question that we felt was especially pertinent came from Senator Shirley Smith (D-Cleveland) who asked the question everyone seems to have as their top concern:
How will municipalities retain the revenue needed to provide services once the changes are made in the bill that will obviously significantly reduce municipal revenues?
Mr. Zaino's response:
"Mr. Chairman, Senator Smith, my advice would be to the cities to keep doing what they are doing. And the reason I say that, Senator, is because you know the beauty we have in Ohio possibly also a cost but also a benefit is home rule. And under home rule and under this bill, nothing in this bill prevents a city from raising the revenue that it needs. There's nothing that stands in the way of them doing that because there's nothing that stands in the way of a city official going to their citizens and saying, hey, we need more money because we need more firemen and we need more police power. Nothing prevents that. They can go to the voters to do that...they can go to their voters...so in other words, raise their rate. If they in fact first of all have a loss (inaudible). Then the second piece is the other thing the law also allows and many cities do this is they don't provide full credit and that would not need to go to the voters."
Speaking through the committee chairman which is standard committee protocol, Senator Smith followed- up with the question:
"Mr. Chairman, I just want some clarity. You're saying that the cities could go to the people that live in those cities and ask them to raise the taxes? Is that what you are saying?"
Speaking through the chair and in response to the Senator, Mr. Zaino responded:
“Mr. Chairman, Senator Smith, I am saying that, if this bill were to impact actual revenues in the city, the city leaders could go and say we’re not raising taxes, we’re gonna…we want to raise the same amount of taxes we raised last year, so we have to tweak the rate, yes.”
So, the lead spokesman and drafter of the dramatic changes included in sub.HB5 advocates that the 592 municipalities who will experience revenue loss by the changes he is seeking merely need to “tweak” their tax rates to make-up for any budget shortfalls.
TAX OFFICIALS CONTINUE MEETINGS TO DIGEST AND IDENTIFY UNFORSEEN CONSEQUENCES TO SUB.HB5
Although the legislature is on their summer recess and will not be at the Ohio Statehouse holding session or committee hearings until sometime later this fall, we want to share with our members that work continues unabated on many levels concerning sub.HB5.
Recently, a group of tax administration officials participated in a meeting with representatives of the municipal tax reform coalition who are responsible for drafting the significant municipal tax administration changes being proposed in sub.HB5, to identify “drafting & technical” errors that are problematic through-out the legislation passed by the Ohio House of Representatives, and to work on clean-up language to resolve the language conflicts. The group has two additional meetings scheduled.
As a result of the first meeting, what municipal officials thought were “errors” in drafting have been clarified by the individual writing the bill as actually reflecting the intended method of change the reform coalition is seeking, even though the degree of financial impact to municipalities will be even greater than first projected by municipal tax officials who have been studying sub.HB5. These new issues and what before were considered to be significant “unintended consequences” are being identified by our municipal tax experts.
In the very near future and through our legislative bulletin, we will share with our members the first very large “loop hole” identified that has been incorporated in the as passed by the House version of HB5. As these discussions progress and what we once thought were innocent technical drafting errors are determined to be intentional “loopholes” affording greater tax avoidance to certain municipal filers, we will make these areas are known to our members and the members of the Ohio Senate.
In the meantime, attached HERE is a document we have previously assembled and distributed to league members and members of the legislature, identifying the areas of subHB5 municipalities have “common ground” with the admonition that the list does not include all details or technical components including serious drafting errors that remain in the as “passed by the House” version of the bill, requiring legislative action before those areas are fully embraced by municipalities. The document also lists the seven areas of sub.HB5 that we fully oppose and our justification for our position.