New Option for Filing Ohio Municipal Net Profit Tax
Author: Rich Boer
Beginning with the 2018 tax year, taxpayers have the option to file a single, multijurisdictional municipal net profit tax return in Ohio through the Ohio Business Gateway (the Gateway). Previously, taxpayers were required to file a separate net profit tax return in each municipality in which they maintained a taxable presence. The Ohio Tax Commissioner will be responsible for administering all centrally filed returns and the distribution of tax payments to the appropriate municipalities, and it will retain a half percent of the tax collected for its efforts.
Taxpayers that wish to take advantage of the new centralized filing option must register with the Ohio Department of Taxation (the Department) on or before the first day of the third month of their taxable year. Thus, calendar-year taxpayers wanting to make the election for the 2018 tax year must register on or before March 1, 2018. Taxpayers may register online through the Gateway or by submitting a paper registration form. Sole proprietors and single-member limited liability companies are not eligible to opt in to centralized filing and should continue to file with individual municipalities as they have in the past. Taxpayers making the election must file all annual returns, extensions and estimated tax payments through the Gateway. Taxpayers that previously elected to file on a consolidated return basis in certain municipalities and on a separate return basis in other municipalities may continue to file as such.
A taxpayer making the election also must, by the election due date, notify all municipalities in which it filed a return during the previous tax year of its election to file centrally, unless the taxpayer is a new business. Notification to the municipalities may be made by filing Form MNP MN, Municipal Net Profit Tax Municipality Notification. Alternatively, a taxpayer may provide either a copy of the registration form filed with the Department or the registration confirmation letter the taxpayer received from the Department. It should be noted that taxpayers that opt in to centralized filing must do so for all municipalities where they file.
The election to opt in to centralized filing is an annual election; however, the election will automatically renew unless the taxpayer notifies the Department and municipalities in which it is subject to tax that it is terminating the election. Similar to the timing related to making the election, a taxpayer must terminate the election by the first day of the third month of the taxpayer’s taxable year.
In addition to filing a single annual return for all municipalities, the benefits of electing centralized filing include:
- Centralized quarterly payments of estimated taxes
- Audits conducted by a single entity (the Department)
- Uniform application/interpretation of the law
- Elimination of multiple notices and communications from multiple municipalities
It should be noted approximately 25 percent of Ohio municipalities that impose a net profit tax have joined one of two lawsuits challenging the constitutionality of the centralized filing program. The municipalities seek a preliminary and permanent injunction against the enforcement of these provisions, alleging that—among other things—they violate the home rule amendment of the Ohio Constitution and constitute a conversion of municipal net profit tax revenues.
To learn more about this opportunity, contact Rich or your trusted BKD advisor.