News and Analysis
OMA Defends CAT Against Road Builders' Court Challenge
May 11, 2012Again acting to defend business tax reforms enacted in 2005, the OMA this week filed an amicus brief in an Ohio Supreme Court case to defend the state’s commercial activities tax (CAT).
In the current case, Beaver Excavating Company v. Joseph Testa (Ohio Tax Commission), CAT challengers say that receipts generated by motor fuel sales are “related to” gas taxes, and thus trigger a constitutional violation (Section 5a). The lower courts have ruled there is no violation, but gas stations and road building interests are now appealing to the Supreme Court. The Ohio Tax Department is defending the tax.
The OMA joined with the Ohio Society of CPAs in filing an amicus brief in support of the state’s defense of the CAT. “There is no justification for creating a favored class of taxpayers who will no longer pay any general business tax,” writes OMA tax counsel, Mark Engel of Bricker & Eckler LLP, in the brief.
In a similar case two years ago the grocery store industry claimed that the CAT was a “tax on food,” because some gross receipts were generated by food sales. Link to case docket.
Tax Credits for Movie Making Expanded
May 11, 2012The Ohio House and Senate are poised to complete an expansion of a tax credit program to incentivize filming motion pictures in Ohio. Dubbed the "movie tax credit bill," HB 521 (Dovilla, R-Berea) modifies the tax credit which can be taken against the personal income tax or the corporation franchise tax.
A northeast Ohio business priority, the legislation increases the maximum total amount of tax credits allowed for completion of motion pictures certified as tax credit-eligible productions from $20 million to $40 million every two years.
Proponents of the legislation point to a study conducted by Cleveland State University that found the incentive has yielded a positive return on investment for Ohio.
Because the corporation franchise tax no longer applies to nonfinancial corporations, in effect the credit against that tax is not subtracted from any tax liability; it is essentially a means of awarding the credit amount in the form in which a refundable tax credit would be paid if the tax still applied to all corporations.
Identical legislation, sponsored by Senator Tom Patton (R-Strongsville), has passed the Ohio Senate.
Are Your State Taxes in Arrears?
April 27, 2012The Ohio Department of Taxation announced a general tax amnesty program to allow individuals and businesses to pay back taxes without penalties or interest. Payments need to be made during the program time limits which runs from May 1 through June 15.
Amnesty programs can be good opportunities to correct unreported or underreported taxes. Click to learn more or talk to your tax advisors.
Tax Credit Changes Contemplated
April 27, 2012Among Governor Kasich’s priority mid-biennium review (MBR) legislation is HB 511 to revamp some business tax credit programs. The bill will sunset the Industrial Technology and Enterprise Advisory Council and transfer functions to the Third Frontier Commission and Development Department.
The ceiling for available Technology Investment Tax Credits is boosted in the bill from $45 million to $51 million. Other provisions of the bill would alter the Ohio Venture Capital Authority and the New Markets Tax Credit.
The Ohio Department of Development and other witnesses told the panel of state senators considering the bill that the Governor’s proposal will boost economic investment.
OMA Tax Policy Committee will review these and other tax policy changes at the July 19 meeting. Save the date.
Senators Introduce Business Tax Credit Legislation
April 20, 2012Two tax bills of interest were recently introduced in the Senate.
SB 320 (J. Eklund – Geauga & Lake County) proposes to extend the enterprise zone program another year, to October 15, 2013. Currently, the program is scheduled to sunset October 15, 2012. Existing incentives will remain in force, but local jurisdictions will no longer be able to grant new incentives. The main incentive available under this program is real property tax abatement, quite useful for manufacturers. Read Senator Eklund’s press release.
SB 322 (L. Gentile – Jefferson County) creates a new income tax credit for manufacturers who either expand production at a facility, or restart production at a facility that has been idle for at least 12 months; and increase payroll by $750,000 within 6 months. Senator Gentile has requested OMA support for his legislation; the bill will be discussed at the OMA Tax Committee summer meeting on July 19. Save the date.
House Majority Whip Adams Calls for CAT Change
April 20, 2012The chairman of the Ohio House Tax Structure Study Committee issued a report proposing alteration of Ohio’s business taxes. The report reflects the recommendations of Rep. John Adams (R-Sidney), the House majority whip and chairman of the committee. The recommendations “could serve as a springboard for legislative initiatives,” said Adams in a House press release. The OMA presented testimony to the panel in September.
The full report references testimony of special interests, such as petroleum dealers, grocers and grain industries, who used the study committee process to lobby for exemption from the commercial activities tax (CAT). The chairman recommended modifying the CAT to establish a tax liability of the lesser of two calculations: the tax on gross receipts, as established by the current CAT law, or a tax on net income.
“That recommendation defeats the entire purpose of the very positive package of tax reforms enacted in 2005 and phased-in through 2011, which eliminated a dysfunctional corporate income tax and repealed the punitive tangible personal property taxes,” commented the OMA’s Ryan Augsburger.
Due to legislative term limits most lawmakers now serving were not around the General Assembly in 2005.
Board of Tax Appeals Reform Proposed (Finally)
April 20, 2012As part of the mid-biennum review (MBR) process underway in the General Assembly this month, HB 505 was introduced to respond to the backlog and generally inefficient case management at the Ohio Board of Tax Appeals. The backlog has gotten even worse in recent years.
Click to view a summary of the bill by OMA Tax Counsel Mark Engel of Bricker & Eckler. The need for system reforms has been discussed at OMA Tax Committee meetings for some time.
A Progressive’s View of the “Mid-Biennial Review”
April 13, 2012The progressive Policy Matters Ohio last week produced a study of Governor Kasich’s “mid-biennial review” legislation, House Bill 487.
Its editorial view: “Even though there is no budget shortfall, Ohio Gov. John Kasich and House Republicans propose squeezing $95 million out of Ohio’s current budget without using the money to restore critical services. The bill does not include a defined plan for use of the funds cut from various agencies."
Separately, in response to the mid-biennial review, a coalition of 150 organizations, One Ohio Now, is calling for corporations and wealthy Ohioans to pay “their fair share” of taxes. It is not clear just exactly what the group's definition of "fair" is.
Manufacturers to President: Reauthorize Ex-Im Bank
April 06, 2012The OMA joined NAM and more than 300 other organizations in a letter to U.S. House and Senate leaders urging passage of legislation reauthorizing the charter of the U.S. Export-Import Bank (Ex-Im).
The organizations wrote: “The Ex-Im Bank is the only tool American manufacturers have to counter the huge sums of export financing – many hundreds of billions of dollars – that other governments provide their exporters. If American manufacturers lose access to the Ex-Im Bank, our ability to compete globally will be severely curtailed. Companies large and small will be disadvantaged, and their customers may turn to foreign competitors that have support from aggressive foreign export credit agencies. America’s manufacturers cannot afford to be defenseless in today’s global marketplace.”
During FY2011, Ex-Im Bank supported more than $40 billion in export sales from more than 3,600 U.S. companies, supporting approximately 290,000 export-related American jobs. The Bank also set a record in its support of small business. More than 85 percent of the Bank’s transactions last year directly supported small businesses.
The Ex-Im Bank’s charter expired on September 30, 2011, and the Bank is currently operating under an extension that expires on May 31. Ex-Im Bank generates enough fees to offset its costs and contributes the remaining surplus to the U.S. Treasury.
Take action through this NAM Alert.
Home-Based Employer Tax Credits Created
March 23, 2012A house panel this week voted to advance HB 327 to allow home-based business employers to qualify for the Job Creation Tax Credit and Job Retention Tax Credit. Traditionally, the JCTC and the JRTC have been most often utilized by larger employers. Representative Anne Gonzales’ (R – Columbus) legislation creates a pilot program allowing home-based employers to also claim the credit against the business’ Commercial Activity Tax (CAT).
Uniformity of Municipal Income Tax Sought
March 23, 2012The OMA this week participated in a kick-off of the Municipal Income Tax Uniformity Coalition which was formed to advocate for a single, uniform municipal income tax code that all Ohio municipalities would be required to follow.
A uniform municipal income tax code would include a uniform definition of income, withholding, penalties and interest and all related rules and regulations other than tax rate and reciprocity credit rate.
Municipalities have historically opposed efforts to centralize tax codes.
Shale Tax Hikes, Income Tax Reduction Shelved
March 23, 2012As reported last week, a package of bills dubbed the “mid-biennium (budget) review" (MBR) were introduced. This week, opposition to some of the governor’s proposals hardened.
The proposal to hike severance tax rates and broaden the severance tax base has drawn fire from House Republicans. The additional revenue from the severance tax would fund personal income tax reductions starting in a few years.
Members of the Republican-controlled House are balking at the combined tax proposals and have removed the severance tax increases from the bill, at least for now. A Columbus Dispatch article reporting on the development highlighted anti-tax pledges signed by numerous Ohio lawmakers.
Separately, the proposal to alleviate backlogs at the Board of Tax Appeals is being withdrawn at the request of the tax department, citing additional agency concerns about provisions that “need more work.”
Read the tax commissioner’s testimony which addresses all of the administration's MBR tax proposals.
Ten Reasons to Sell Your Business in 2012
March 23, 2012The refrain of Kenny Rodgers' popular song "The Gambler" may hold a smattering of advice for business owners who have been thinking about selling their businesses: You got to now when to hold' em, know when to fold 'em, Know when to walk away and know when to run. In this article I will present ten reasonw why 2012 might be the very best year for you to cash in your chips and walk away. From OMA Connections Partner: Grove Rutter, CPA, ABV, CVA, BVAL, CBI, Mergers, Acquisitions and Valuations.
Income Tax Reductions Would Be Fueled by Severance Taxes
March 16, 2012In his “mid-biennial review,” Governor Kasich proposed personal income tax cuts that would be funded by increases in the state severance taxes on crude oil and natural gas liquids produced by the high-volume horizontal wells like those used in Ohio’s Utica and Marcellus shale formations. When Ohio reaches peak production, income tax cuts could reach $500 million annually, according to the administration.
Here is how it would work: “New revenue will be deposited in a special income tax reduction fund and be used to reduce all Ohio income tax brackets the following tax year. As oil and gas production and prices increase, so will the amount of the income tax cut for Ohioans. The opposite is, of course, also true. Production from high-volume horizontal wells is expected to ramp up gradually, generating modest revenue initially, but then increase dramatically in the following years to produce significant income tax cuts.”
Currently, Ohio levies no severance tax on natural gas liquids; the proposal would set a rate of 1.5% (price x production) in the first year, and 4% after that. The same rate would apply to crude oil from these wells. Tax rates on natural gas from conventional wells would be reduced under the proposal.
Ohio Ranks High in Tax Competitiveness
March 09, 2012In Location Matters, A Comparative Analysis of State Tax Costs on Business, produced by the Tax Foundation in collaboration with KPMG, Ohio is reported to be more competitive than most states. In fact, Ohio ranks fifth with respect to state tax costs on mature firms and third for costs on new firms. Ohio outpaces it’s five bordering neighbor states in business tax competitiveness, which are, in order of tax attractiveness: Kentucky, Michigan, Indiana, West Virginia and Pennsylvania.
The study set out to develop and publish a landmark, apples-to-apples comparison of corporate tax costs in the 50 states. Tax Foundation economists designed seven model firms, and KPMG modeling experts calculated each firm’s tax bill in each state. The study accounts for all business taxes: corporate income taxes, property taxes, sales taxes, unemployment insurance taxes, capital stock taxes, inventory taxes, and gross receipts taxes. Additionally, each firm was modeled twice in each state: once as a new firm eligible for tax incentives, and once as a mature firm not eligible for such incentives.
“The appropriate conclusion is that Ohio’s brave tax reforms of the last decade are paying big dividends,” said OMA president, Eric Burkland.
House Democrats Call for Taxes on Shale
March 02, 2012Two Ohio House members, Mike Foley (D-Cleveland) and Bob Hagan (D-Youngstown), are pushing to have the state increase its severance tax on natural gas. They suggest the state modify its severance tax from a per-unit tax (3 cents per thousand cubic feet) to percentage of the market value of the gas (7-percent of the market value).
The representatives also suggest dedicating 1.5% of the tax to the Local Impact Protection Fund and .5 percent to the Advanced Energy Fund. More can be found here. No legislation has yet been introduced.
Governor Kasich noted earlier this year that he would propose an “impact fee” to cover the cost of infrastructure damage caused by oil and gas extraction and an expansion of the state’s severance tax so that it includes natural-gas liquids, such as propane.
Economic Development: Manufacturing Site Certifications
March 02, 2012Proposed as an additional tool in the state’s economic development toolbox, HB 436 would create a state program that “certifies” industrial sites as ready-for-development. The certification process is intended to shorten the search for suitable sites for firms looking to land operations in Ohio.
The measure is sponsored by Representatives Cheryl Grossman (R – Grove City) and Marlene Anielski (R – Walton Hills).
This week a Columbus area economic development organization testified in support of the measure, likening it to a similar program in the Carolinas that has improved state competitiveness. OMA member feedback is invited.
Ohio Molder's Lien Holders Do Not Violate Bankruptcy Code's Automatic Stay by Retaining the Debtors' Tools, Dies and More
February 29, 2012The key to enforcing an Ohio Molder's Lien is to retain possession of the customer's tooling, dies, and/or molds until payment is received. Surrender possession and both the lien and the right to payment priority it provides evaporates. When a customer files for bankruptcy, however, the customer – now a "debtor" – usually demands the immediate turnover of its property. Read More. From OMA Connections Partner, Walter & Haverfield, LLP
Ohio Jobs Creation Tax Credit Reporting Deadline Delayed
February 24, 2012OMA Connections Partner, GBQ Partners, reports that the Ohio Jobs Creation Tax Credit (JCTC) 2011 annual report filing deadline has been extended. Historically, the Ohio Department of Development (ODOD) has sent program participants information in order to complete their annual reporting requirements.
However, as reported here in recent weeks, the Ohio Attorney General undertook an inspection of incentive awards compliance; this activity has delayed the ODOD’s issuance of annual progress report instructions to employers.
The state reportedly has sent two email communications stating the current deadline will be extended and all late fees will be waived. To date, the extended filing deadline has yet to be determined, and the company-specific instruction letters have yet to be sent.
According to the ODOD, companies awarded incentives have an 80 percent error rate in incentive reporting compliance. Compliance errors mean incentives may be jeopardized or underutilized and potentially lead to "claw backs."
GBQ Partners offers a complimentary on-site preliminary review of your incentive compliance filings. To schedule your review or if you have reporting questions, call (614) 221-1120.
OMA Tax Committee Meeting Materials - 02-16-2012
February 22, 2012Here are the OMA Tax Committee meeting materials from February 16, 2012.
Ohio Ranks 27th in State and Local Sales Tax Rates
February 17, 2012The D.C.-based Tax Foundation released its annual state rankings of combined state and local sales tax rates. Ohio ranked 27th with an average combined rate of 6.75%.
The five highest combined rates are Tennessee (9.45 %), Arizona (9.12 %), Louisiana (8.85 %), Washington (8.80 %), and Oklahoma (8.66 %).
Five states do not have a statewide sales tax: Alaska, Delaware, Montana, New Hampshire and Oregon. Of these, Alaska and Montana allow localities to charge local sales taxes.
IRS Announces New Taxes on Medical Devices
February 10, 2012On February 8, 2012, the IRS issued new regulations to implement a 2.3% excise tax on medical devices. This new tax was created by the Patient Protection and Affordable Care Act to raise revenues to pay for health benefits established by the law.
U.S. medical device manufacturers are the world market leaders; the imposition of this new tax will impede U.S. industry's capital capacity to invest in research and development, new technologies and new employees.
The OMA is asking Ohio members of Congress to pass HR 436 (Paulsen, R – MN). The bill would repeal the new tax. For more, read this Advanced Medical Technology Association (AdvaMed) press release.
New Economic Development Details Announced
January 27, 2012..The Kasich administration this week released a series of fact sheets about how JobsOhio will operate its economic development functions.
Earlier this year, the governor won support to use state liquor sales revenue to create a dedicated economic development investment fund. About $100 million will be available each year for job creation and retention.
Citing figures by the U.S. International Economic Development Council, Bloomberg News Reports this amount “would be larger than similar arrangements in Michigan, Kentucky and California and would be one of the biggest such dedicated funding sources in the United States”.
