New opportunity available to Ohio businesses on municipal net profit tax

By: Tom Cooney and Crystal Faulkner

This article was originally published on Dec. 14, 2017 on cincinnati.com.

I’ve heard that the Ohio Department of Taxation is offering a new filing option for the municipal net profit tax for 2018. Will you explain what this means and why they are making this option available?

In effort to save businesses an estimated $800 million, the Ohio Department of Taxation is urging business taxpayers to sign-up for a major new, streamlined tax filing service. Registration is now available online (www.tax.ohio.gov) for businesses to ‘opt-in’ for centralized filing and state administration of the municipal net profit tax for the 2018 tax year.  

For corporations and pass-through entities that are required to report in multiple municipalities—and there are more than 500 in Ohio—the new option will likely not only save time, but also money by allowing businesses to file a single return, rather than one in each municipality. The Department of Taxation will process all of the centrally filed returns and distribute tax payments appropriate to each of the municipalities. They will also handle all administrative functions, from appeals to audits.

The ultimate goal of this effort is to reduce compliance costs for businesses.  The Department of Taxation is estimating there will be up to $800 million in savings for businesses. This new process will allow for more efficiency and better economies of scale, and be less costly than going through third party administrators. The centralized filing will also allow for improved compliance by providing more expansive data sources to verify filing and payment accuracy, which should increase revenue for the individual municipalities, who will still be in control of their own tax rates and the awarding of their own tax credits.

As CPAs and tax professionals, we can certainly attest to the financial burden that many businesses operating in multiple municipalities face simply to remain compliant.  Ohio’s municipal income tax system has been an excessive burden for businesses for too long. This reform allows businesses to choose whether to file only one municipal net profit tax return with the state or continue to file with each and every municipality in which they do business.

If you believe opting-in will be beneficial to your business from an efficiency and expense standpoint, you should get registered. When making the election, you will need to notify the commissioner and each of the municipalities in which you did business during the previous tax year.

Keep in mind that businesses that choose to opt-in will commit to the new process for a full year, with renewal automatic unless cancelled by the taxpayer. There will be no changes in quarterly estimates or tax return due dates due to this process change. Tax returns are due on the 15th day of the 4th month following the end of the taxpayer’s taxable year.  You should note that the new system is not available for any other taxes administered by a municipality, such as employee withholding or individual income tax returns. 

You should consult with a tax professional familiar with these issues to assist you in making the best decision for your business. To sign up or for more information, visit the Ohio Department of Taxation’s website at www.tax.ohio.gov or give them a call to request a paper form at 1-844-238-0403.

Tom Cooney and Crystal Faulkner are partners with MCM CPAs & Advisors, a CPA and advisory firm offering expert guidance and beyond the bottom line thinking for today’s public and private businesses large and small, not-for-profits, governmental entities and individuals. For additional information, call 513-768-6796 or visit us online at www.mcmcpa.com.