News and Analysis
On June 12, 2017, the U.S. Supreme Court refused to entertain an appeal from the U.S. Court of Appeals for the Eighth Circuit that upheld the dismissal of an action by Diversified Ingredients, Inc. in U.S. District Court in Missouri seeking declaratory and injunctive relief against the imposition of the commercial activity tax (CAT).
OMA’s tax counsel, Mark Engel, of Bricker & Eckler, wrote this brief analysis of the case and summed it up this way: “The decision does not reach the merits of whether the CAT may be imposed upon a taxpayer who does not have a physical presence in Ohio. However, it is noteworthy for some other reasons. First, the trial and appellate courts both recognized that Ohio provides a plain, speedy and efficient remedy with respect to assessments of CAT. … Second, and in some respect more important, it reflects the willingness of federal courts to refrain from interfering with state tax matters. … Third, it represents yet another failed attempt to bring the question of economic nexus in the realm of state taxation before the Supreme Court.”
All good news for the integrity of the Ohio CAT. 6/13/2017
This week Senator Rob Portman visited the OMA to discuss tax reform with OMA members. The senator, who is a leader on the tax reform issue, talked about the chances of reform and asked for input from members.
Portman said that the “perfect is the enemy of the good” with tax reform, and that passage will depend on all parties being willing to compromise. He emphasized the tremendous disadvantage the current tax regime places on American manufacturers relative to European and Asian competitors.
He invited OMA members to work with him and his staff to help move reform forward. 6/1/2017
According to OMA Connections Partner, Clark Schaefer Hackett (CSH), few accounting standards updates will impact as many entities as ASU 2014-09, “Revenue from Contracts with Customers.”
CSH wrote: “The goal of the new standard is to eliminate issues of inconsistency with companies’ application of the previous methods of reporting contract activity and create one set of revenue recognition principles that can be applied across all industries. The new standard also aims to provide more useful financial statement disclosures, and consideration of individual performance obligations within contracts and how revenue with those obligations is recognized.”
Here are the six most important things to know about ASU 2014-09 according to CSH. 5/23/2017
This week the House Ways and Means Committee heard sponsor testimony from Reps. Robert Sprague (R-Findlay) and Stephanie Howse (D-Cleveland) on House Bill 155, a bill that would make employers eligible for up to a 50% match of up to $50,000 in an annual tax credit against the commercial activity tax (CAT) to train new drivers. Statewide, the tax credit would be limited to $3,000,000 per year.
The bill is just another in a long line of CAT credit proposals that the General Assembly has considered since the inception of the CAT in 2005. All new carve outs or credits to the tax strain its low rate and increase the likelihood of a rate increase.
The OMA continues to work with allies to protect the broad base and low rate of the current tax structure. 5/18/2017
Among the topics on the Tax Committee agenda will be an in depth discussion about the Manufacturing Sales and Use Exemption, which is due for a review by the Ohio Department of Taxation. We’ll have a presentation from Matthew H. Chafin, Chief Counsel & Chief Ethics Officer, Ohio Department of Taxation, plus an action plan for achieving our proposed reforms.
Please note there is a change of location for the meeting on Tuesday, May 16 from 10:00 a.m. until 1:00 p.m. We will meet at the following location:
Athletic Club of Columbus (directions and parking)
136 E. Broad St.
Columbus, OH 43215
We’ll have a nice lunch provided by OMA.
The call-in option is available at: 866-362-9768, 552-970-8972#
Please register here for in-person or call-in attendance.
Last week, U.S. National Economic Director Gary Cohn and Treasury Secretary Steven Mnuchin, on behalf of the Trump Administration, revealed “core principles” of the president’s tax reform plan. Many of the proposals were similar to those he made on the campaign trail, including a cut in the tax rate for businesses to 15%.
Director Cohn and Secretary Mnuchin emphasized throughout the briefing that many details
were still being negotiated.
This week OMA submitted initial comments to the Ohio Department of Taxation regarding revisions to OAC 5703-9-21, the manufacturing sales tax rule. OMA requested in the comments that the department reconvene the working process initiated in the late 1980s that drafted the original rule. The rule itself has not been reviewed in almost 30 years.
This rule review provides a golden opportunity for manufacturers to work together to improve upon the original success of the rule and to ensure that the tax department fairly treats the manufacturing process.
On May 16 the OMA Tax Committee will focus on the rule and the process the association will take to ensure manufacturing’s voice is heard during the review. We will have a presentation from the tax department, as well as analysis from our subject matter experts. Register for the committee meeting here.
OMA will be creating a working group to help steer the association as discussions begin with the department. All members who would like to work through the OMA to review this very important rule please contact OMA’s Rob Brundrett. 4/27/2017
As part of the required review of its rules, Ohio Department of Taxation has proposed revisions to OAC 5703-9-21, the manufacturing sales tax rule. This is the first time since the rule was promulgated in 1989 that changes have been proposed. A memorandum from OMA tax counsel Mark Engel of Bricker & Eckler provides background and details of the rule and the proposed changes.
In 1989 the legislature enacted a sweeping revision to the manufacturing sales tax exemption to provide more certainty and reduce the amount of litigation associated with the tax exemption. At the same time, the Department of Taxation promulgated a rule providing guidance, including examples, regarding the application of the new rule. The rule revisions were the result of a lengthy process in which both industry and the department worked out provisions acceptable to both parties.
OMA and its members were heavily involved in the creation of this rule. Now for the first time since the rule was first enacted, the department is preparing for a required rule review. This is an opportunity for manufacturers to work together to revise portions of the rule that have been troublesome over the past two decades.
All members who would like to work through the OMA to review this very important and impactful rule please contact OMA’s Rob Brundrett. 4/20/2017
This week the OMA submitted testimony to the House Finance Committee in support of a provision in the governor’s budget proposal (HB 49) that would streamline and centralize the administration of the net business tax.
Despite recent progress Ohio has one of the country’s most administratively burdensome tax structures, mostly attributable to Ohio’s local income tax system. Ohio is one of a handful of states that taxes both individuals and businesses at the local level and the only state in which each municipal corporation makes its own rules and regulations.
The administrative costs of the system disadvantage Ohio compared to its peer states. The governor’s proposal seeks to minimize compliance costs associated with filing in multiple jurisdictions.
The proposal in the state budget bill to centralize collection and administration for business filers would significantly reduce the time and cost associated with multiple net profit return filings. 4/6/2017
The bill makes a variety of changes to the state’s tax system including cutting personal income taxes, reducing the number of personal income tax brackets, centralizing municipal business tax collections, and expanding the base and increasing the rate of the sales tax.
The OMA testimony highlighted support for centralizing municipal tax collections and reducing the income tax and brackets, but cautioned against increasing the sales tax rate in order to offset personal income tax reductions.
The bill is scheduled to be voted out of the House in mid-April. 3/23/2017