There have been quite a few changes to Ohio’s Municipal Tax over the last few years. With the passage of Municipal Income Tax Reform bill, Amended Substitute House Bill 49 (“Am. Sub. H.B. 49”) in June 2017, there are several significant changes that taxpayers should be made aware of with respect to the use of municipal tax loss carryforwards.

Sub. H.B. 5 provides a uniform and mandatory 5-year carryforward for all municipalities to apply to NOLs first incurred in the tax year 2016. The NOL carryforward provision is phased-in over a six-year period and is limited to 50% per year beginning in 2017 and delays full utilization of the credit until tax year 2022. The NOL carryforwards may be applied to annual net profit returns and resident individual returns that report net profits, due in April 2018 (for the 2017 tax year).

An Ohio legislative bill was passed to bring uniformity to the municipal taxing authorities regarding the NOL carryforward. However, by “phasing in” this legislation in municipalities that did NOT have an NOL carryforward it had the reverse effect on taxpayers in municipalities that had allowed 100% carryforward; limiting the NOL to 50% until 2023.  Prior to Sub. H.B. 5 some municipalities in Ohio did NOT allow the carryforward of a NOL at all, while other municipalities, many in this area allowed for a 100% carryforward of the NOL.

If you have other questions, please contact our office to discuss.