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Ohio city wage withholding issues when emergency declaration lifted

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September 2020


Enacted on March 27, H.B. 197 provides that, during the emergency period declared by Executive Order 2020-01D, and for 30 days after the conclusion of that period, for employee municipal income tax purposes an employee generally is deemed to perform services at the employee’s principal place of work regardless of where the employee actually works. 

The Executive Order has no stated expiration date and currently is in effect. However, employers should consider their withholding obligations when the Order is lifted. Employers continuing some version of work-from-home will be faced with additional municipal wage withholding requirements and complexity, additional net profits filings, and potential reduction or elimination of existing hiring-based incentives. 

After the Order is lifted, certain employees could experience a modest tax benefit working from home if the resident city has a lower tax rate than the rate in the city where they previously had worked.

The takeaway

The pandemic has changed many employers’ views on employees working from home. For Ohio companies embracing work-from-home initiatives, this will have significant implications for both the employer and employee. Employers have a window prior to Ohio’s Executive Order being lifted to implement systems to capture employee time reporting, municipal nexus considerations, and HR policy changes, and to resolve incentive hiring commitment shortfalls that may be caused by a remote workforce.

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Peter Michalowski

State and Local Tax Leader, PwC US

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