There are more than 600 municipalities with an income tax in Ohio, and all business entities and individuals are required to file and pay taxes in each one in which any income has been earned. To say that the administrative burden this places on real estate professionals is onerous would be a vast understatement, according to Scott Williams, Vice President of Public Policy at Ohio REALTORS®.
But all that is about to change: thanks to a recent legislative dual-victory supported by a REALTOR® Party Issues Mobilization Grant, these filing requirements will be significantly streamlined the next time tax season rolls around. It also helped to shut down a proposed expansion of the sales tax on professional services.
The income tax issue affected nearly all of the association’s 30,000 members, most of whom had been required to file multiple tax returns because of sales activity in multiple jurisdictions, explains Williams. “It was not unusual for members to have to file a dozen returns,” he notes. “In one extreme case, in the metropolitan Cleveland area, where numerous suburbs and bedroom communities are all incorporated as their own jurisdictions, one member told me he’d filed 22 separate returns last year!” Because no consumer or commercial software was available to handle this filing requirement, multiple returns had to be prepared by hand, a service for which CPAs would typically up-charge REALTORS® by an average of 25%. For years, Ohio REALTORS® has been at the head of a coalition of business groups supporting a transition to a centralized tax-collection system; this past session, with a newly business-friendly legislature and the support of the governor, was the first time the reform had a chance of passing.
In a separate issue in the same tax bill, Ohio’s governor was seeking to expand the state sales tax to include professional services due to a revenue shortfall exceeding $1 billion. Although the attempt didn’t have much support in the General Assembly, it still posed a threat to the real estate industry and the broader state economy, and the REALTORS® actively monitored and opposed the proposal.
An Issues Mobilization Grant allowed the state association to retain the services of an expert consultant to help develop policy, draft legislative language, and assist with the lobbying effort to secure centralized tax collection. The consultant, who happens to be a former Tax Commissioner of the State of Ohio, had just the expertise that Ohio REALTORS® needed. “We don’t have an in-house tax attorney,” explains Williams, “and during deliberations, there were sometimes multiple drafts to review in a single day. There’s no way we could have done it without an outside expert.” The consultant’s depth of experience working with the REALTORS® over the years also gave him valuable insight, and a significant base of actual data from which to draw arguments for tax-collection reform. “He was able to run real world scenarios, stating, for example, that Mrs. X had sold three properties in three different jurisdictions last year, and so her actual compliance cost to file a $32 return was exorbitant,” notes Williams. “These facts were clear and compelling, and made the necessary impression on our lawmakers.”
Ohio REALTORS® also issued several strategic Calls For Action during the course of the session, which Williams points out had the double benefit of applying pressure to the legislature and educating and engaging the membership. “The new law, which goes in to effect next year, will streamline tax filing for all business net-profit filers who file in more than one municipality,” he says. “It’s going to make life much easier and less costly for most of our members at tax time, and we wouldn’t have been able to achieve this without the REALTOR® Party.”
To learn more about how Ohio REALTORS® has helped to simplify income tax filing and prevent the taxation of professional services in the state, contact Scott Williams, Vice President of Public Policy, at 614-226-3423.