The early 2014 legislative priorities for the Ohio General Assembly include the mid-biennium review (MBR), the state’s capital budget, the Public Works Commission bond fund reauthorization and the municipal income tax uniformity bill (House Bill 5).
“House Bill 5 will be front and center because it is a top priority of the business community and affects all municipalities,” says Lloyd Pierre-Louis, a director at Kegler, Brown, Hill + Ritter.
While everyone agrees with the concept of uniformity, changes in tax rules create winners and losers, and thus, controversy, Pierre-Louis says.
Smart Business spoke with Pierre-Louis about HB 5 and other major Ohio legislative changes that may affect businesses in 2014. HB 5 passed the House late last year and is now in the Senate.
Why are some groups and cities opposing uniform municipal tax rules?
I have never talked to anyone who outright opposes reform. Everyone agrees that there should be uniform forms and filing dates. The average businessperson would be interested to know that the greatest threat to getting a municipal tax uniformity bill passed in 2014 is not the lobbying efforts of cities, but the overreaching efforts by a group of trade associations that are using the guise of uniformity to mask municipal income tax cuts that are targeted to suit selected industries, clients and taxpayers.
For example, there has been an effort to alter the currently uniform ‘casual entrant’ rule that determines how many days a non-resident may work in a city before tax liability attaches. The current rule requires 12 days of work, but the business groups want to expand it to 20 days.
There has also been an attempt to exempt supplemental executive retirement plans from municipal taxation even though they are taxable under federal law. Legislators who we talk to are increasingly uneasy that the advocates of HB 5 are asking to cut funding for municipalities rather than really trying to achieve uniformity.
What else will state legislators be working on that will affect businesses?
Gov. John Kasich is expected to introduce his MBR in February. In essence, it’s a revisit to the state budget one year into the two-year cycle to make adjustments and, as has been the case with this governor, to make significant public policy reforms.
The MBR’s tax treatment of hydraulic fracturing (aka fracking) will be interesting because there are competing viewpoints between the governor, who wants the drillers to pay higher rates to fund an income tax cut, and House Republicans, who introduced a bill that would phase-in higher rates over the next five years.
A number of proposals will be brought forward as to how to use the state’s $400 million in savings from Medicaid expansion. Some legislators suggest additional tax cuts, and others want to address Ohio’s increasing unemployment debt.
Ohio has borrowed more than $1 billion from the federal government to pay unemployment benefits and the debt service alone causes annual unemployment insurance premium increases. A pending bill aims to use Medicaid savings to pay down the principal, decrease the debt and stop the premium increase.
The capital appropriations bill, which will be introduced in February, will impact the construction industry since it will fund state-supported capital projects. Construction of and improvements to university buildings, arts facilities and community projects all will be funded by this legislation.
The construction industry, local government and ancillary businesses will also closely watch the public works reauthorization bills, Senate Joint Resolution 6 and House Joint Resolution 2, which will place an infrastructure bond package on the May primary ballot if it is passed by both legislative chambers. If approved by the voters, the proposal would provide about $1.9 billion of funding for public works projects over the next 10 years.
Those are the primary legislative issues statewide that will affect businesses in the first half of 2014. ●
Lloyd Pierre-Louis is a director at Kegler Brown Hill + Ritter. Reach him at (614) 462-5477 or [email protected].
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