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Ohio bill expands municipal income tax requirements for temporary agricultural workers

Greenhouse with tulips
Ohio bill addresses issue for H-2A workers set to work in a northeast Ohio greenhouse.

A lawmaker wants to address a potential gap in Ohio’s municipal tax code that would allow employers to not pay municipal income taxes if their temporary agricultural workers live in one city but work in another.

Rep. Dick Stein (R-Norwalk) has proposed a bill to require municipal income tax withholdings on employees who have H-2A status in the U.S. These are workers who come to the U.S. with a temporary work status to work agricultural jobs.

As Stein explained, there’s a specific issue in his district where there’s a plan for more than 300 H-2A workers to live in Norwalk but work in a township the next county over.

“This group of people at this point would be paying nothing towards that contribution to pay for the city services that everyone else is required to pay. So it is absolutely simply about fairness,” said Stein, who noted that H-2A workers are already required to pay federal, state, and municipal income taxes under typical circumstances.

Stein emphasized that the bill is not meant to be punitive towards temporary agricultural workers.

“Those are important folks in our community. They do contribute with sales tax and add to the community in many ways. No one is trying to stop them from participating in our economy or being here,” said Stein.

The Ohio Farm Bureau said it is evaluating the details of Stein’s bill and added that policymakers need to consider the “broader impact” of the proposal on employer administrative burdens.

"The legislature should avoid setting precedent that could negatively impact employers who are now increasingly offering employees many different and unique workplace arrangements," said Brandon Kern, Ohio Farm Bureau’s senior director of state and national policy.

The bill comes at a time when local governments are trying to adjustto the “new normal” brought on by the COVID-19 pandemic and a spike in employees working from home.

A report from the U.S. Bureau of Labor Statistics showed that 11.1% of employees continued to work from home — because of the COVID-19 pandemic — at the end of 2021.

Kent Scarrett, executive director of the Ohio Municipal League, said employers of many remote workers are no longer withholding municipal income taxes for the cities in which they used to perform their work. That means some cities are trying to adapt to new budgetary conditions based on a decrease in tax revenue and other issues, such as an increase in empty office buildings.

Scarrett has called the situation a “snowballing effect” for cities trying to keep up with funding for services like police and fire.

Stein said the issues discussed in his bill could be part of the larger conversations local governments are having around municipal taxes, however, that was not his original plan and said he intended to address a “fairly unique” situation happening in Norwalk.

Stein said it’s possible other municipalities are facing similar situations when it comes to withholdings for H-2A workers, which is something that could be explored further during the committee process.

The bill, HB706, was introduced last week and has yet to be assigned to a House committee.

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