The Ohio General Assembly continues to focus on campaigns while the OML continues to meet with our members and the General Assembly's members during this period. The Ohio Senate will be back at the Statehouse for a quick session day with the real legislative action resuming after the General Election when the Lame Duck session begins. Executive Director Kent Scarrett was on the road again this week meeting with the members of the Lake County Mayors and Managers Association and later with the Northwest Ohio Mayors and Managers Association. We appreciate the hospitality and opportunity to be around the state to talk with league members about issues they are confronting, the new direction of our organization and initiatives being put into place.
NOL IMPACT REVIEW COMMITTEE ADOPTS NEW DATA COLLECTION METHOD
On Thursday, September 22, the Municipal Income Tax Net Operating Loss Review Committee met to vote on the adoption of a method of collecting data that will aid the understanding the impact that the newly instituted 5-year carryforward will have on municipalities. The committee had originally proposed a method that required a full review of each business and individual filing (or a "full pull") from 2012-2018 in order to project what kind of loss the municipality would have incurred had net operating losses in 2011-2013 been carried forward for five years.
Due to the incredible financial and administrative burden this would place on municipalities, coupled with the fact that much of the needed data simply does not exist (those who would have incurred an NOL did not file as such since there was no carry forward), the Ohio Municipal League proposed the Representative Illustration Method as an alternative. This method only applied to participating municipalities and relied on samples rather than a full pull.
After deliberation, the Department of Taxation proposed two alternative methods. Option #1 still required a full pull from 2011 and onwards and would have left only approximately a 90-day window for compliance. Option #2 still required a full pull, but only for taxable years going forward until 2020. As this would somewhat ease the burden on local tax administrators and ensure the data submitted was substantially more accurate, it was agreed that Option #2 was the preferred method.
Included in our most recent Legislative Bulletin dated September 16th, we provided a link to a copy of the correspondence from Tax Commissioner Testa which includes the detailed explanation of each of the options proposed and the specifics of Option #2. One of the most important aspects of Option #2 is that the data collection will be accumulated on a prospective basis by those communities most impacted by the unfunded mandate included in HB5, requiring a 5 year NOL carry forward to be part of all municipal tax ordinances.
OML Executive Director Kent Scarrett testified before the committee reiterating the fact that accumulating the information through a sampling system would be more beneficial for cities and villages but from the alternatives being advanced by the committee, the preference would be for Option #2, but with an extended deadline. A copy of his testimony can be found HERE. After brief questioning from the committee, the decision was made to extend the submission deadline from August 31, 2020 to August 31, 2021, and the method prescribed in Option #2 was adopted by the committee as the new guidelines for the data collection exercise.
Each municipality that administers an income tax will receive a letter from Commissioner Testa explaining the action taken by the committee yesterday and the details of the new data collection methodology.
We appreciate Chairman Testa's consideration of the concerns expressed by the league to the original methodology proposed and adopted for this important legislative review of the impact of the NOL mandate and the willingness to change course and work with the challenges expressed. The League is also grateful to the committee members and especially Rep. Kirk Schuring for his leadership in working with League staff and the Department of Taxation, on an ongoing basis, to facilitate a better collection procedure for all parties involved.
LEAGUE STAFF GROWS WITH NEW HIRE
The Ohio Municipal League is proud to announce the hiring of Kari Straub to the position of Administrative Assistant. Members can expect to get to know Kari as she will be assisting with multiple tasks at the OML including administrative assistant work and assistance with planning our events. Kari graduated from the Ohio State University with a degree in hospitality management and a minor in Business. She has experience as an administrative assistant and office manager for a prominent CPA firm in Columbus, Ohio. She also has three years' experience as an event planner at The Ohio State University.
Also, Chrissy Blake, the league's former administrative assistant, will now be acting as the league's Member Services Director. Chrissy will be tasked with introducing new opportunities for league members and exploring service programs new to the league.
2020 TAX POLICY STUDY COMMISSION MEETING
Co-Chairmen Senator Bob Peterson (R-Washington Court House) and Representative Tim Schafer (R-Lancaster) have announced that the Ohio 2020 Tax Policy Study Commission will be meeting on Monday September 26 at 2:30 p.m. in the Ohio Senate South Hearing Room. The Committee's purpose is to review the state's tax structure and policies and make recommendations to the General Assembly on how to maximize Ohio's competitiveness by the year 2020.
OHIO SENATE SCHEDULES SESSION FOR NEXT WEEK
Last week we informed you that the Senate had scheduled several sessions over the coming months. The Ohio Senate cancelled all sessions except the one scheduled for 1:30 p.m. Wednesday September 28, 2016. No legislation has been scheduled for that session at this time.
REPRESENTATIVE McCLAIN RESIGNS AND BEGINS NEW CHAPTER
Representative Jeff McClain (R-Upper Sandusky) has resigned from his position as the Representative of the 87th Ohio House District and has accepted position with the Ohio Chamber of Commerce as the Director of Tax and Economic Policy. Jeff has held Chairmanships and Vice-Chairmanships of several important committees such as Finance and Ways and Means. Representative McClain has been a friend of the League and we look forward to working with him in his new position.
LEAGUE LAUNCHING GRANTFINDER PROGRAM
The OML is pleased to introduce our partnership with EfficientGov, an information service that tracks innovative solutions to fiscal and operational challenges facing cities and villages across the country.
EfficientGov provides local government leaders with unlimited access to information and tools that help reduce the cost and improve the efficiency of government. One of those tools is GrantFinder, which is a real-time, online searchable database of almost every federal, state, foundation and corporate grant available to your community. For more information about EfficientGov and GrantFinder, visit: efficientgov.com
Through our new partnership, the OML is able to offer 50 of our members a one-year trial membership of the GrantFinder tool at no charge to the municipality. This opportunity is available on a first come, first serve basis to the first 50 municipalities that contact us.
If you are interested in having access to the largest searchable database of private,
state and federal grants available to municipalities and local non-profits, please send an email with your name, title, email address and phone number to: Chrissy Blake, Director of OML Member Services, at email address firstname.lastname@example.org.
A LETTER FROM THE STATE AND LOCAL LEGAL CENTER ABOUT NEW OVERTIME RULE/FAIR LABOR STANDARDS ACT (FLSA)
Twenty-one states are suing the Department of Labor over new overtime rules which make it more likely states will have to pay more employees overtime. They are seeking an injunction which will prevent the new rules from going into effect on December 1, 2016.
Per the Fair Labor Standards Act (FLSA), "white collar" employees do not have to be paid overtime if they work more than 40 hours a week. Per Department of Labor regulations, adopted shortly after the FLSA was adopted in 1938, employees must perform specific duties and earn a certain salary to be exempt from overtime as white collar employees.
On May 23, 2016, the Department of Labor (DOL) issued final rules nearly doubling the previous salary level test for white collar employees from $455 per week, or $23,660 per year to $913 per week, or $47,476 per year.
DOL also raised the salary threshold for highly compensated employees (who aren't eligible for overtime no matter their job duties) from $100,000 per year to $134,004 per year. The rules automatically update the salary level every three years for white collar and highly compensated employees.
As a practical matter the states object to these rules because they will cost more money and states "cannot reasonably rely upon a corresponding increase in revenue, [so] they will have to reduce or eliminate some essential government services and functions."
In its complaint the states make five arguments for why the Texas federal district court should grant their injunction. Its first and most ambitious argument is that the Court overturn Garcia v. San Antonio Metropolitan Transit Authority (1985), where the Court held that the FLSA applies to the states.
The states also argue that DOL has exceed its authority under the FLSA in issuing these rules by ignoring the duties an employee performs and making salary a litmus test.
By automatically increasing the salary basis test DOL is violating the FLSA's requirement to "define and delimit from time to time" the white collar exception, the states claim.
As in almost any lawsuit objecting to federal rules, the states argue the rules are "arbitrary, capricious, an abuse of discretion, or otherwise not in accordance with law."
Finally, the states claim that Congress improperly delegated congressional legislative power by conferring "unlimited legislative authority on DOL" in the FLSA.
State & Local Legal Center
444 North Capitol Street, N.W., Suite 515
Washington, D.C. 20001
Phone: (202) 434-4845
Fax: (202) 737-1069
COMMITTEE SCHEDULE FOR NEXT WEEK
Since the Ohio Senate will be back in Columbus next week, there is one hearing that has been added to the committee schedule, in addition to the 2020 Tax Policy Study Commission.
Have a pleasant first weekend of Autumn.~