Testimony presented before the Senate Ways & Means Committee on Tuesday, April 11, 2000 by Daniel Navin, Ohio Chamber director of taxation and public finance.

Mr. Chairman and Members of the Committee,

My name is Daniel Navin and I am the director of taxation & public finance for the Ohio Chamber of Commerce. I come before you for the second time this year to testify as a proponent of municipal income tax legislation that we believe strikes a fair balance between the concerns of business taxpayers and those of municipal governments. We support HB 483 as a reasonable way to newly implement the municipal income tax on electric utilities that earn income in multiple jurisdictions throughout Ohio.

The Chamber has long been an advocate of greater uniformity among municipalities that impose an income tax in terms of the wage base used for employee withholding, the tax base imposed for individual and business taxes, and the procedures and forms used to monitor and enforce compliance with the tax. This is because the more municipal tax bases, tax forms and filing & appeal procedures can be made to apply equally among all taxpayers doing business in the state, overall tax compliance will increase and municipalities should thereby be able to reduce their administrative costs.

Each municipal corporation may define its method of determining taxable income, so an electric company doing business in a number of municipalities has to compute its tax liability to each one in a different manner. To alleviate company concerns in this regard, the General Assembly signaled in SB 3 its intent that uniform procedures for electric light companies to remit their municipal income taxes should be prescribed. HB 483 makes substantial progress toward that goal.

The bill establishes the net income base under the corporation franchise tax as the starting point for calculating the tax due by an electric light company to each municipality in which it does business. It sets the apportionment formula by which the taxpayerõs net income in each municipality is determined, based 50% on payroll and 50% on property. It fixes the rule as to the minimum amount of estimated tax that must be paid prior to submission of the franchise tax report for any particular year. Also, once the report is filed, the bill delineates the process by which the electric companyõs estimated tax payments are reconciled with its actual tax liability.