Daily Court Reporter - News Ohio may give taxpayers option of getting refunds via bank cards
Ohio may give taxpayers option of getting refunds via bank cards
KEITH ARNOLD, Daily Reporter Staff Writer
A little less than a month after the 2017 state income tax filing deadline, a committee in the Ohio House of Representatives has taken up a measure to allow electronic tax filers the option to receive their refunds by prepaid bank cards.
Lawmakers seated for the Government Accountability and Oversight Committee heard testimony from the bill's sponsors, who want to make taxpayers' funds available to them in any manner they wish.
"Approximately 23 percent of Ohio's households are unbanked or under-banked," Rep. Laura Lanese, R-Grove City, said of House Bill 441, a bill which she cosponsored with fellow Republican Rep. Jonathan Dever of Cincinnati. "These families would greatly benefit from this bill.
"Currently they likely receive a paper check that they take to a location that charges check-cashing fees."
The duo believes the bill would save the state tax department on costly checks. Whether that is the case, however, was questionable, according to fiscal analysis by the Ohio Legislative Service Commission.
"The total cost to the state of issuing refunds on prepaid cards would depend on the share of the cards' costs paid by the state and by the taxpayers receiving the cards, on how many taxpayers participate in the program, and on how many file electronically who would otherwise have filed on paper," Philip Cummins wrote for the commission.
Sponsors, otherwise, were content that the permissive nature of HB 441 would modernize the state's income tax refund system, providing proven benefits for the state and taxpayers alike by allowing Ohio tax returns to be issued on prepaid debit cards.
"The Treasurer of State's office said in February 2018 that a bank would issue prepaid cards for $2 per card," Cummins noted. "The Department of Taxation indicated in February 2018 that mailed refund warrants cost $0.53 each, and direct deposited tax refunds cost around $0.02 each.
"If the Department paid part or all of the card program's cost, some taxpayers who otherwise would file on paper might be induced to file electronically. Any additional electronic filing would reduce the Department's costs to process those returns."
With sufficient switching from paper to electronic filing, the state might realize a net gain from the program, he continued.
If few taxpayers were induced to switch to electronic filing from paper, analysis found, passing the cost of the prepaid bank card onto taxpayers electing to do so may be another option.
"Some taxpayers might prefer to receive refunds on prepaid cards even if they pay most or all of the cost of the program," Cummins wrote.
Lanese also suggested that taxpayers have become familiar with card use through other programs.
"Ohio already uses prepaid cards to issue payments for workers' compensation benefits, SNAP benefits, and unemployment compensation benefits," she said. "HB 441 is a logical continuation of this trend."
Another additional benefit of prepaid cards is protection against fraud.
"Prepaid cards may be better protected from fraud than paper warrants mailed to taxpayers' street addresses, if each taxpayer receiving a prepaid card has to call a designated telephone number and provide some personal information in order to activate the card," Cummins wrote for the commission. "The state often loses money if someone succeeds in cashing a warrant fraudulently, though a claim can be filed against the person who committed the fraud if the fraud is discovered.
"If the fraud is detected soon enough, the check casher may bear the loss."
Dever again highlighted the convenience of the measure.
"This legislation will allow these individuals to receive their returns on prepaid cards that are able to be used directly with merchants, at ATMs, or on the internet for electronic purchases," the lawmaker told his peers. "Truly, we will be empowering our citizens to receive their tax returns any way they wish."
Finally, Cummins noted a value-added characteristic of the prepaid cards.
"Prepaid cards may be reloadable ...," he wrote in the analysis. "Taxpayers might be encouraged to retain their cards, and efficiencies might be realized, if the card is kept and reloaded with state payments to the same taxpayer or taxpayers, such as the next tax year's income tax refund, or payments from other state programs."
HB 441 had not been scheduled a second hearing at time of publication.
Date Published: May 30, 2018