A debate-provoking Ohio House bill to standardize local income tax procedures across the state expired at year’s end, but not for long.

Mike Henne, a first-term Republican from Clayton who co-sponsored the tax-uniformity measure with assistant majority whip Cheryl Grossman (R-Grove City), said the legislation will be re-introduced in late January or early February.

Henne said he “would be surprised if there aren’t some changes” in the next piece of legislation, but could not specify what they might be “until it moves through committee and completes the process.”

Although nine other states allow local income taxes to be collected, proponents of the bill say the wide range of regulations and variations required by almost 600 Ohio cities and villages means businesses that operate in several communities can spend more on complying and filing the forms than they owe in taxes.

They say a simpler system would attract businesses and lead to job creation.

Opponents of the expired Grossman-Henne bill say that while they support making local tax provisions more uniform, the proposal would reduce their local tax revenue collections by significant amounts even though some individuals might pay more in taxes.

They say the bill needs to be revenue neutral for municipalities.

“When I ran for office more than two years ago, the need to simplify local withholding taxes was one of the main concerns I kept hearing from businesses,” Henne said. “It’s an important bill. We want to hear from everyone. We want to get it right.”

And though HB 601 died at the end of the last legislative session, Henne said it was always meant to be “a starting point.”

“I don’t think the cities have completely analyzed what’s in it,” said Daniel Navin, the Ohio Chamber of Commerce’s assistant vice president for tax and economic policy of the upcoming bill. But he wouldn’t rule out changes in the new version.

“Discussions on the bill that will be introduced next are ongoing. Some things were left out that don’t reflect the agreement that was reached between the business and government sides while we were negotiating it,” he said.

A coalition led by the Ohio Society of Certified Public Accountants, National Federation of Independent Business and 17 other organizations and statewide associations have lobbied for the measure.

The Ohio Municipal League condemned the bill introduced in November 2012, saying it would further reduce revenues for city governments already dealing with the loss of estate tax revenues and cuts in the state’s local government fund.

An analysis by the non-partisan Ohio Legislative Service Commission found that the expired House Bill 601 would create “total revenue losses to municipalities. They may be significant, potentially millions of dollars annually.”

Led by Dayton city manager Tim Riordan, a partnership of more than 20 cities in southwest Ohio submitted an alternative proposal they said would make local tax collection more uniform without reducing local tax revenues.

Riordan said HB 601 would cost the City of Dayton more than $2.5 million per year. Centerville city manager Greg Horn said it would result in “a $690,000 hit for us.” Other members of the Southwest Ohio Collaboration/Consensus Project including city managers Eric Smith of Englewood, Mark Schwieterman of Kettering, Patrick Titterington of Troy, John Applegate of Union, Rob Anderson of Vandalia and Brad Townsend of West Carrollton say the impact for their cities also would be in the six figures.

Managers and officeholders representing Dayton, Kettering, Centerville and Oakwood recently met with Jim Butler (R-Oakwood) to ask him to consider sponsoring an alternate bill.

Butler said making local taxes more uniform “would help our business climate and create jobs,” but added that the two provisions in the bill “that would cost municipalities the most are more about tax reform than they are about tax uniformity. Mixing those two goals in the same bill is a bad idea. We need tax reform in Ohio, but in a much broader way than the issues that HB 601 deals with.”

The bill sought to standardize at five years how long a business would be able to carry forward a net operating loss as a deduction. Area communities currently allow a range including zero, three and five years. “I would favor a more flexible approach than requiring all of them to go to five,” Butler said.

Another change would increase from the current 12 to 20 the number of days a company’s employee could work in a different municipality before that city could withhold payroll tax.

In the case of a Dayton company whose employee works up to 20 days in Springboro, for example, all of the tax would go to Dayton, until the 21st day.

“Everyone has 12 days now. Changing it to 20 is not about uniformity,” Butler said.

Henne said a 20-day rule “would not create a tax holiday. People have to pay taxes on that income now and would have to pay it in the future. It would somewhat redistribute where the tax is paid. Bedroom communities might lose some revenue in that case.”

City manager Norbert Klopsch said that would be true for Oakwood. “We don’t believe there’s a practical way to achieve uniformity without some revenue loss to our city. We do believe an alternate bill can be crafted that does much less harm.”

Oakwood Mayor Bill Duncan said cities expect the bill introduced in 2013 to be “virtually the same as 601.”

“We’re trying to cut down on the number of cities we have to withhold for, not the amount of tax that’s withheld,” Navin said. “Companies hire CPAs to complete all of these forms. CPAs don’t do that for free.”

Henne suggested that cities “may be overlooking the economic development aspect. The current situation with our multiple levels of taxation presents a hurdle for businesses coming to Ohio. The Tax Foundation ranks Ohio 46th among the states for how friendly we are to business.”

Some aspects of 601 might result in local tax revenue increases.

“One would eliminate deductions for non-reimbursed employee expenses, which is hard for the cities to verify now,” Navin said.

The Legislative Service Commission analysis found that conforming to some changes required by the legislation also might cost cities and villages money. “Fiscal impact on the state is expected to be minimal.”

The Municipal Tax Policy Board would be made up of seven governor-appointed city tax administrators.

“The board would include no state officials and no business people, only municipal tax people,” Navin said. “We don’t understand why cities have a problem with that.”

Sterling Abernathy, a Kettering tax preparer who protested Kettering City Council’s vote to oppose the state bill, said that “when cities say they are all for uniformity, in my opinion, what they mean is procedural uniformity — forms, due dates, etc. The cities don’t want to lose control over how they write their rules.”