Judge: Ohio Can Collect Municipal Taxes For Cities And Villages

Feb 21, 2018

A Franklin County, Ohio Common Pleas Court judge ruled Wednesday the state of Ohio can setup a centralized collection system for municipal income taxes.

Cincinnati and several other Ohio cities and villages filed a lawsuit challenging a recent state law on the issue.

Judge David Cain wrote "this entire matter comes down to the resolution of one question: Does the general assembly have the constitutional authority to enact the collections provision?"

His decision is yes, it does. The cities and villages argued it violated the "home rule amendment" of the Ohio Constitution. Cain ruled that amendment is not absolute.

He pointed to two other articles of the constitution "that all taxes must be levied in pursuant to the law," and "the general assembly has the power to pass laws to limit the power of municipalities to levy taxes."

"It is undisputed that the collection provisions deal with Ohio municipalities' ability to administer taxes, i.e. their ability to levy taxes," Cain wrote in the opinion. "Plaintiffs can argue the definition of the word 'levy' until they're blue in the face, but using common sense the court can only find that the collections deal with the levying of taxes. Since this is so, the court must find that the general assembly has the authority to enact the collection provisions."

A Cincinnati spokesman says the cities and villages who filed the lawsuit will appeal the ruling to the Ohio 10th District Court of Appeals.

The major change is that businesses subject to Cincinnati's, or another municipal income tax, may choose to file their taxes through the state rather than directly with those cities or villages. The state will then distribute that revenue on a monthly basis while keeping a one-half percent fee to cover its costs.  

Cincinnati officials say they don't know how many businesses will do this, but they anticipate the program will cost the city about $135,000 a year.

Cincinnati Council will vote Thursday to make changes to its income tax ordinance to comply with the new state law.