News and Analysis
According to OMA Connections Partner, GBQ Partners, this week the U.S. Senate approved H.R. 5771, the Tax Increase Prevention Act. The bill expires on December 31, 2014, which means that the new Congress will need to address provisions related to 2015 in 2015.
According to GBQ, this bill has been a long time coming. The process was delayed throughout the year by debate over whether to extend the provisions beyond 2014 or to make permanent certain items such as the research tax credit, state sales tax credit and tuition tax credit.
As recently as late November, a tentative deal fell apart after a veto threat from the White House, which changed the tide of the conversation from looking long-term to simply extending the provisions to the end of the year. The bill is expected to cost $41.6 billion over 10 years according to the Joint Committee on Taxation.
GBQ has cataloged here the bill’s three main tax extender areas: 1) individual, 2) business, and 3) energy.
This week HB 5 cleared the last legislative hurdle and now goes to Governor Kasich’s desk, where it is expected to be signed. When signed into law, HB 5 will bring needed uniformity to Ohio’s municipal income tax system.
OMA tax counsel, Mark Engel of Bricker & Eckler LLP, prepared this summary of the bill’s final provisions.
OMA Connections Partner, GBQ Partners, briefly summarizes the legislation here.
This week the Senate voted out House Bill 5, the municipal income tax uniformity bill, 23-8. The House is expected to concur with the Senate amendments next week. Concurrence will wrap up a two year legislative process that will benefit Ohio manufacturers. House Bill 5 addresses some of the myriad of problems with the municipal income tax.
The bill creates a consistent rule on net operating loss carry-forwards. It improves uniformity of filing dates, estimated payment dates, statutes of limitations, penalties and interest, and a number of other compliance issues. And, the bill clarifies occasional entrant rules.
This good bill of tax improvement for Ohio businesses was tagged by the OMA as a legislative key vote. Hats off to the members who helped their elected officials understand the impacts on their companies.
OMA tax counsel Mark Engle of Bricker & Eckler LLP testified on behalf of the OMA in Senate committee in support of HB 5, a bill that would bring needed reforms to the municipal income tax system in Ohio.
Engle noted: “(I)n in 2009, the latest year for which figures were available, 577 municipal corporations (236 cities, 341 villages) in Ohio imposed a tax on income. The tax rates varied from 0.4% to 3.0%. Together, almost $4 billion in revenue was raised. While the amount of revenue is significant, it isn’t just the amount that garners criticism. It is the myriad of rules that vary from jurisdiction to jurisdiction that creates problems.”
While noting that the bill “isn’t perfect,” Engle said, “(T)here are three advantages of HB 5 in particular that we highlight for your consideration. First, a consistent rule regarding some consideration of net operating loss carryforwards is imperative…
Second, uniformity on filing dates, estimated payment dates, statutes of limitations, penalties and interest, and a myriad of other compliance issues is important…
Finally, the occasional entrant rules need to be addressed. Employees may be in multiple jurisdictions, however, briefly, during the course of a day. Under current law, potential liability exists in every jurisdiction. Clarifying the rules, and providing a small business exception, would go a long way towards simplifying this issue.”
Use the easy, quick tools at OMA’s Manufacturing Advocacy Center to contact your state senator to urge support of HB 5.
This week the OMA Tax Committee heard from Jim Williamson, Chairman of the Ohio Board of Tax Appeals (BTA), and staff about the many changes taking place at the BTA, including adding a small claims division, online filing, and telephonic hearings.
The BTA, through process re-engineering and implementation of a ‘Resolution Center,’ has reduced the time it takes to decide an appeal to fewer than 270 days. One of the biggest complaints manufacturers had with the BTA was the time it took for cases to travel the system; this is an improvement.
Committee members were also visited by Ohio Department of Taxation Deputy Administrator, Marj Kruse, and Chief Legal Counsel, Matt Chafin, who briefed members on department policies, CAT, sales and use tax, and lame duck legislation.
The OMA 2015 Tax Committee calendar is set. To make sure you receive meeting invitations and materials, go to My OMA and subscribe to the Tax community. With a new state budget to be written in 2015, it’s a good time to plug in.
The OMA joined the National Association of Manufacturers and more than 500 other organizations in letters to members of the U.S. House and Senate urging Congress to act in the lame duck session to “extend seamlessly, enhance or make permanent the expired and expiring tax provisions.”
The organizations wrote: “These tax provisions are critically important to U.S. jobs and the broader economy. Failure to extend these provisions is a tax increase. It will inject instability and uncertainty into the economy and weaken confidence in the employment marketplace. Acting promptly on this matter in lame duck will provide important predictability necessary for economic growth.”
Municipal tax reform legislation, Sub. HB 5, was voted out of the House and is due for a vote by the Senate in this lame duck session. This is an important and common sense measure for Ohio.
Ohio has the most complicated local income tax system in the U.S. And, Ohio is the only state where each city/village makes its own rules and regulations; businesses must keep track of and comply with as many as 600 different sets of tax ordinances.
Sub. HB 5 corrects many of the deficiencies of the current system and makes Ohio’s municipal income tax system simpler, fairer and more predictable.
Here is a one-page recap.
You can help push this good legislation to the finish line by using the easy email tool at OMA’s Manufacturing Advocacy Center to send a note to your state senator.
There are opportunities for manufacturers to testify in support of this bill. If you’re willing to share your company’s story, please contact OMA’s Rob Brundrett. It is important for lawmakers to hear directly from the business community.
All members are welcome to join the OMA Tax Committee meeting on Wednesday, November 19 from 10:00 a.m. until 1:00 p.m. at the OMA offices, with a tasty lunch provided by OMA. (A call-in option is also available at: 866-362-9768, 552-970-8972#.) The agenda includes:
- A presentation from the Ohio Board of Tax Appeals;
- A presentation from the Ohio Department of Tax on the Commercial Activity Tax and Sales and Use Tax;
- Discussion of tax issues likely to arise during the lame duck session this quarter; and
- Preview of tax policy changes likely to be entertained during the next state budget.
Please register for in-person or call-in attendance, or call (800) 662-4463.
The Tax Foundation has just released its 2015 State Business Tax Climate Index. According to the foundation. the Index is designed to show how well states structure their tax systems.
While Ohio ranks more favorably in other tax studies, the Tax Foundation ranked Ohio 44th, worse by two positions than in 2014.
Owners of pass through entities had until October 15 to file their 2013 income tax returns under extensions. This was the first year these business owners could take advantage of the 50% deduction on the first $250,000 of income, created by Governor Kasich and the General Assembly through a tax reform bill in June 2013.
The result? Only a bit more than half of the expected number of taxpayers took advantage of the tax cut.
According to the state tax department, 379,000 business filers claimed the tax deduction. That’s about half of the 717,000 filers the department estimated. The deductions totaled $287 million in income tax, much less than the $533 million in projected savings.