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HB197 - How taxes might look for Hudson in the future

In recent months we have discussed the future impact of people working remotely and the potential tax changes were that to occur. Keep in mind, the State of Ohio enacted House Bill 197 at the outset of the pandemic when many of us started working remotely. This taxation portion of this bill essentially says the municipality where you paid taxes before while working in the office will continue to get them, for now.

It was said that this was to help businesses with administrative nightmares. Employees who work remotely outside of a tax district for more than 20 days a year can file paperwork showing the taxes for the place of business should not have been collected, and would then need to file in their local community. Simply stated - Live in Hudson, work in Akron: Akron takes the local taxes normally. Work at home in Hudson for more than 20 days a year and you get to give the money collected by Akron to Hudson (well, you are refunded the Akron taxes and pay the local tax rate in Hudson).

As an employer who manages this paperwork for several coworkers – it is not hard. It is not an administrative nightmare. Most people believe this was passed to protect the tax base of large cities (Cleveland, Akron, Columbus, etc). Hudson has discussed how this might look if residents started paying taxes in Hudson – and Hudson workers took their taxes out of town – it goes both ways. We assumed Hudson might be the beneficiary. It appears to be the case. Our head of finance department investigated projections of 10%, 20% and 30% shifts. So, 10% of Hudson would file in Hudson rather than in the towns they now officially work… and likewise 10% of those who work here but live outside of Hudson took their taxes to their hometowns.

If we saw a 10% shift, Hudson would benefit by an estimated $471,000 per year. At 20% it would be $942,000, and 30% near $1,413,000.

For now, this is all academic. The tax laws would need to change or HB197 would need to be reversed as it related to taxation (it covered a lot more than just taxation). Most of us expect remote employment to continue for some time, likely accelerating remote employment permanently for many businesses. Something to keep an eye on.

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