The deadline for opting into the centralized Ohio municipal net profits tax returns for tax years ending December 31, 2019, is March 1, 2019. The centralized system was enacted in 2017 as part of Am. Sub. HB 49 (HB 49), the Ohio biennial budget legislation (see Tax Alert 2017-0758). Businesses that elect into the centralized system will be able to file a single municipal net profits tax return with the Ohio Department of Taxation (Department) that will encompass every municipality in which they are required to file returns. The Department will be responsible for all administrative functions including audits and appeals. The centralized system will be limited to municipal net profits (e.g., business) taxes and will not apply to individual taxation or employee withholding. Those elements of Ohio municipal income taxation will continue to be administered at the local level.

The election is made by filing Form MNP R, which can be filed electronically or in paper form. Once made, the election is binding on the taxpayer for the tax year for which it is made and for all subsequent tax years until terminated. There is no fee to make the election.

In a related development, a number of legal challenges to the centralized system have been brought by coalitions of Ohio municipalities opposed to the system. On January 29, 2019, the 10th District Court of Appeals ruled that the centralized system was constitutional. It is unknown at this time whether the municipalities will appeal this decision to the Supreme Court of Ohio.

Implications

EY will continue to monitor developments in this area. Taxpayers should consider the ramifications of electing into the centralized system.

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