OHIO ASSOCIATION OF PUBLIC TREASURERS Hot Topics Seminar April 2 nd, 2014

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1 OHIO ASSOCIATION OF PUBLIC TREASURERS Hot Topics Seminar April 2 nd, 2014 Presented by Sara Donnersbach, Esq. Managing Partner Government Collections

2 WWR Full-Service Capabilities Our range of services allows for the complete handling of files and matters through each step of the collection, legal and recovery process, utilizing one or more of our specialty practice groups or a combination of our services. Skip Tracing Loan Workouts Loss Mitigation Consumer Compliance Litigation Asset Searches Demand Letters Home Preservation Commercial Consumer Leasing Pre-suit Collections B2B Collections Foreclosures Reaffirmations Federal Court Collateral Recovery Pre-suit Collections Evictions Relief from Stay Lending Issues Demand Letters Collection Litigation Title & REO Proof of Claim Loan Review Complex Collections Arbitration/Mediation Fannie / Freddie Adversary Claims Intl. Collections 2 OAPT Hot Topics Seminar WELTMAN, WEINBERG & REIS CO., LPA

3 Introduction The future of Municipal Income Tax Collection in Ohio What are the changes and how the changes effects Local Governments How House Bill 5 substitute bill will affect cities: Forcing a five year Net Operating Loss Causing a significant revenue loss for 40% of Ohio s municipalities It changes occasional entrant withholding requirements from 12 to 20 days, with no look back to day one for the worksite city (tax free days ) It allows pass-through entity losses to offset unlike income, regardless of where or how that income was earned It institutes an assessment policy rife with bureaucratic red tape and certified letters (for potentially every piece of correspondence), costing municipalities in postage and staff hours. 3 OAPT Hot Topics Seminar WELTMAN, WEINBERG & REIS CO., LPA

4 Income Tax Collections the Past General authority to levy an income tax is found in Article XII, Section 3(B) of the Ohio Constitution. laws may be passed providing for [t]he taxation of incomes, and the rates of such taxation may be either uniform or graduated, and may be applied to such incomes and with such exemptions as may be provided by law. Article XII, Section 5 of the Ohio Constitution requires That every law imposing a tax must distinctly state the purpose of the tax and provides that the proceeds of the tax may only be used for that stated purpose. The Ohio Constitution grants the authority to the General Assembly to Pass laws providing for income taxes ORC sections apply to charter and noncharter municipal corporations 4 OAPT Hot Topics Seminar WELTMAN, WEINBERG & REIS CO., LPA

5 Income Tax Collections the Past House Bill Introduced by Ohio House Assistant Majority Whip Cheryl Grossman (R- Grove City) and Representative Michael Henne (R- Clayton). proposed sweeping changes to the manner in which municipal income taxes are imposed in Ohio, in an effort to provide more uniformity and simplicity. Would have required any municipal corporation that wanted to impose an income tax to incorporate the provisions of the new Ohio Revised Code Chapter 718 by reference. intended to ensure that municipal corporations do not change the definitions or procedures that would be imposed if the bill is enacted. Each municipal corporation would have been permitted to determine its own tax rate, decide the credit it would permit to residents for taxes paid to other municipal corporations, and administer, collect and enforce its own tax. The bill did not impose any type of centralized collection for municipal income taxes. 5 OAPT Hot Topics Seminar WELTMAN, WEINBERG & REIS CO., LPA

6 Income Tax Collections the Past Had a municipal corporation enacted an ordinance by January 1, 2014 to adopt an income tax pursuant to the new Chapter 718, then the municipality would not have had to go back to voters for rates above one percent if the rate is already imposed under current ordinances. Of course, future rate increases that would have resulted in a cumulative municipal income tax rate above one percent would have needed approval. 6 OAPT Hot Topics Seminar WELTMAN, WEINBERG & REIS CO., LPA

7 Income Tax Collections the Past Administrative provisions Problem resolution officer: proposed that municipal corporations with a population of 30,000 or more be required to appoint a problem resolution officer. that taxpayers could look to in order to address problems for which they have been unable to resolve by other means. Statute of limitations: proposed a three year statute of limitations for the assessment or refund of tax. to commence on the day the return was required to be filed or the day the return was filed, whichever is later. proposed adoption of a provision that would prevent a tax administrator from assessing tax after 10 years if no return was filed and no tax was paid. Interest: proposed that interest charged on delinquent or assessed tax, as well as refund tax, be the same rate used for state tax purposes. 7 OAPT Hot Topics Seminar WELTMAN, WEINBERG & REIS CO., LPA

8 Income Tax Collections the Past Administrative provisions Jeopardy assessments: proposed that a tax administrator could issue jeopardy assessments against taxpayers if concerns exist as to the taxpayer inappropriately departing the state or hiding assets to avoid collection of taxes. This is similar to the jeopardy assessment powers that exist at the state level. Attorney fees: proposed that municipal corporations could request reimbursement from taxpayers for reasonable attorney fees related to collection and appeal costs. proposed that taxpayers appealing assessments or refund denials could request reimbursement for reasonable attorney fees if successful upon appeal. 8 OAPT Hot Topics Seminar WELTMAN, WEINBERG & REIS CO., LPA

9 Income Tax Collections the Future Designed to [s]ignificantly reduce the municipal tax compliance costs of businesses that operate in Ohio by establishing one set of tax requirements among all of the nearly 600 cities and villages that impose a municipal income tax on individuals and businesses. Ohio Chamber believes it makes our municipal tax system less burdensome for businesses in terms of compliance time and costs making it more competitive and less of an impediment for new business investment and jobs. Ohio Chamber feels it is a good substantive municipal tax revision bill [that] would improve our state and local communities ability to grow their economies. 9 OAPT Hot Topics Seminar WELTMAN, WEINBERG & REIS CO., LPA

10 Income Tax Collections the Future As it pertains to collections Requires municipal corporations to collect estimated taxes from all taxpayers whose estimated annual tax liability, after subtracting for amounts to be withheld from the taxpayer s compensation, will be more than $ Prohibits a municipal corporation from issuing a penalty where a taxpayer s estimated payments underpay the actual liability, if the estimated payments are at least 90% of the liability Imposes rules and procedures for issuing tax liability for failures to pay or failures to file; as written determinations; including appealing such written determinations Bars civil actions from being filed for non-payment after 3 years, or if an appeal as filed, one year and 60 days after the appeal is decided Can prohibits a civil action from being filed during an appeal By mutual consent, in writing, a taxpayer and tax administrator may extend the time limits which applies to all related refunds 10 OAPT Hot Topics Seminar WELTMAN, WEINBERG & REIS CO., LPA

11 Income Tax Collections the Future As it pertains to collections Prescribes how and under what circumstances a tax administrator may compromise a claim or agree to a pay-over-time arrangement to, for example, provide relief to an innocent spouse Requires a municipality to deliver written determinations to taxpayers via certified mail (or alternative means such as ) Limits the amount of penalties and interest that may be assessed for failure to pay or file timely Applies to those due after 1/1/15 The rate of interest that must be charged on unpaid taxes is the average yield on marketable securities issued by the United States government that mature within three years, plus 5%, which must be published annually For unpaid taxes and estimated taxes, a penalty of 15% of the unpaid amount For unremitted withholding taxes, a penalty of 50% of the unpaid amount For each late return of an individual, $25.00 For each late return of other taxpayers, $25.00 per month, up to $ OAPT Hot Topics Seminar WELTMAN, WEINBERG & REIS CO., LPA

12 Income Tax Collections the Future As it pertains to collections ORC (G) IT DOES NOT PROHIBIT A MUNICIPAL CORPORATION FROM CHARGING THE POST-JUDGMENT COSTS OF COLLECTING TAXES, INTEREST, AND PENALTIES, INCLUDING ATTORNEY FEES Note post-judgment detail Attorney fees rare 12 OAPT Hot Topics Seminar WELTMAN, WEINBERG & REIS CO., LPA

13 Income Tax Collections the Future Collection options In-house Law department Outsource Agency versus attorney Combination Vendor support Legal specialty Ohio Attorney General Collections Enforcement 13 OAPT Hot Topics Seminar WELTMAN, WEINBERG & REIS CO., LPA

14 Questions Thank you for your time. Sara Donnersbach, Esq. Weltman, Weinberg & Reis Co., LPA OAPT Hot Topics Seminar WELTMAN, WEINBERG & REIS CO., LPA