The economic impacts of COVID-19 are expected to be significant. Not only have businesses and workers been impacted, but also local governments that rely on the economy for revenue. The impact of the coronavirus pandemic on local governments will be driven, in at least part, by those segments of the economy where income is generated, including taxation on income and wages.
In March of 2020, the Ohio Governor issued a stay-at-home order
that resulted in many workers doing their jobs remotely during the coronavirus pandemic. Subsequently, questions arose regarding the payment of municipal taxes for those who live in one city but work in another.
The Ohio legislature then passed Section 29 of H.B.197
. This temporary law sought to limit the uncertainty and disruption that the stay-at-home order would have on municipalities as it relates to taxation. The emergency law allowed businesses to continue to withhold income taxes from the paychecks of their commuting employees, even if those employees were now working from home. In essence, employees working from home because of the coronavirus pandemic would be deemed to be working at their typical work location. This allowed cities to receive the income that was budgeted for, and needed, to sustain the services they provide until the stay-at-home order was lifted and the state returned to normal.
More recently, on May 26, 2021, the Ohio House passed H.B.157
that would let those commuting employees working from home, as a direct result of the coronavirus pandemic, in a different city than their employer’s office was located, to seek refunds for the income taxes they were required to pay in 2021.
Going one step further, the Ohio Senate Finance Committee has now inserted language into a proposed budget bill
that would likewise allow workers to seek refunds for the income taxes paid to cities where they did not live or perform their jobs. The Senate Finance Committee proposal, however, extends the refundable taxable period to cover both tax years 2020 and 2021.
While not yet law, these bills each will significantly impact municipalities if signed into law. Municipalities face concerns with the potential impact on local budgets that have been set based upon expected income tax revenue. On top of that, municipalities face revenue losses that will result from the potential refunds that may need to be made if these bills become law. Municipalities should be monitoring these bills as they make their way through the legislative process.
This blog is not a solicitation for business and it is not intended to constitute legal advice on specific matters, create an attorney-client relationship or be legally binding in any way.