Local Leaders Fight Proposed Change To 2020 Ohio Municipal Tax Rule

Jun 14, 2021

As state lawmakers are working on a final budget agreement to send to the governor by the end of the month, one provision of the bill is a change to the way employees who worked from home were taxed last year.

In 2020, workers still paid income taxes to the cities where their companies were located even if the employees were working from home in other communities.  

The taxes are typically collected by companies that are located within the jurisdiction of that city by withholding money on paychecks.

The policy changed approved by state leaders through an pandemic emergency rule last year said employees did not have the ability to file for a refund on those taxes if they primarily worked from home. That rule would remain in place until the state of emergency in Ohio is lifted.

However, an amendment added by the Senate to the state budget bill, HB110, would discard that rule and allow workers to request a refund for taxes withheld in 2020 and for 2021.

Keary McCarthy, Ohio Mayors Alliance executive director, says local officials have already collected the revenue from these taxes for 2020 and based their spending knowing, through the rule change last year, that they could still collect these withholdings.

"There is no question that this has been a difficult year and we're almost at the point where we can really focus on economic recovery," McCarthy says. "But to go back in time, two years, and move the goal posts on our local leaders before the game is finished is patently unfair."

Jay Carson with The Buckeye Institute, is fighting for the ability to request tax refunds related to this matter in appeals court. He supports the change made in the Senate's version of the budget saying it reflects the new realities of work culture.

"Working from home has turned out to work for a lot of employers and a lot of employees and they're happy with and they're happy with the situation as it is. And cities are going to have to adapt and the legislature is going to have to help them adapt," says Carson.

Members of the Senate and House now meet for conference committee to pass a final version of the budget. Opponents of the municipal tax amendment hope it would be eliminated in that process. There has been support from House Republicans to allow workers to seek a refund on their 2020 withholdings, reflected in HB157, which already passed the House.