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June 21, 2021

Ohio Governor lifts COVID-19 emergency order and starts clock on sunset of employer withholding relief for city income taxes

Temporary withholding relief for Ohio city taxes under Ohio House Bill 197 (HB 197) will sunset on July 18, 2021 unless otherwise extended. Once these provisions sunset, employers must withhold Ohio city income taxes from wages based on where their employees actually work (home vs. office), subject to a 20-day safe harbor in the existing Ohio municipal income tax withholding law.


In March 2020, Ohio Governor Mike DeWine issued Executive Order 2020-01D (EO 2020-01D), declaring a state of emergency due to the COVID-19 pandemic and imposing social distancing restrictions, including orders for most employees to work from their homes rather than their pre-pandemic principal place of work. Following the Governor's executive order, the Ohio General Assembly passed HB 197, providing emergency relief to Ohioans during the pandemic. Section 29 of HB 197 (Section 29) temporarily allowed employers to continue withholding Ohio city income taxes based on the employee's principal place of work, even though they were working from their homes due to the COVID-19 emergency restrictions. This provision was intended to relieve employers of the administrative burden of withholding and remitting Ohio municipal taxes during the COVID-19 emergency based on each employee's place of residence instead of their office location.

Executive order lifted

On June 18, 2021, Governor DeWine lifted EO 2020-01D. As provided in HB 197, the temporary withholding provision in Section 29 expires 30 days after the emergency declared in EO 2020-01D is lifted, which is July 18, 2021.

Numerous proposals have been introduced in the Ohio legislature on this complex matter ranging from immediate repeal to a delayed sunsetting of the Section 29 provisions (See Tax Alerts 2021-1011 and 2021-0912). Language from one of those prior proposals has been incorporated into House Bill 110 (HB 110), which is the biennial budget bill. The Senate version of this bill would extend the temporary relief in Section 29 from having to adjust city income tax withholding until December 31, 2021. Extending these provisions would give employers more time to implement the process and systems changes that will be necessary to withhold city income taxes for those employees who continue working from their residences, even after the lifting of the COVID-19 restrictions. Related provisions in the Senate version of HB 110 affecting Section 29 are also intended to clarify that the temporary rule only applied for purposes of an employer's city income tax withholding obligations and its own city net profits tax computation, and was not intended to actually affect the employee's city income tax liability.

These changes could prompt more employees who live in one community, but whose primary work location may have been in another, to seek refunds from primary workplace cities for work performed remotely due to COVID-19; they could also resolve outstanding litigation on this issue (Tax Alert 2021-0912). HB 110 would also provide a more relaxed employer substantiation requirement, limiting a city's request for documentation to a statement verifying that the employer has not refunded any city income tax withholding to the employee and the number of days the employee worked at the employee's principal place of work.

The Ohio budget bill, HB 110 would need to be approved by the legislature and signed by the Governor by June 30, 2021, the end of Ohio's fiscal year.


Now that Governor DeWine has lifted the COVID-19 restrictions set forth in EO 2020-01D, employers only have 30 days to implement process and systems changes so they can withhold city income taxes on their employees' wages based upon where they actually perform their work (whether that be from home or at the primary work location). While this sunset date may be extended by pending legislation, employers should immediately consider the impact of these changes on their businesses and employees and make the necessary processes and systems updates to properly locate and assess city income tax withholding based upon where the employees actually work. Employees who were working from home due to the COVID-19 orders will be entitled to refunds to the extent municipal tax was withheld based on the primary workplace, even under Section 29. The more relaxed substantiation requirements of HB 110, if adopted, will ease the burden on employers assisting employees with such claims.

Certain Ohio cities may face significant revenue losses for calendar years 2020 and 2021 due to these complex city tax relocation issues. Such losses may result in even more calls for legislative and city tax administrative actions, including possibly more Ohio city tax litigation.

EY will continue to monitor and report on these developments.


Contact Information
For additional information concerning this Alert, please contact:
State and Local Taxation Group
   • Bill Nolan (
Workforce Tax Services – Employment Tax Advisory Services
   • Fred Branditz (