Tax and Finance Management

An Interesting Pro-Taxpayer Decision Against IRS

The Sixth Circuit recently ruled that Roth IRAs that purchase shares of a Domestic International Sales Corporation (DISC) and have dividends returned to it cannot have those transactions recharacterized as excess contributions by the IRS. This is a significant win for taxpayers.

Read more about this case from OMA Connections Partner, MCM CPAs & Advisors.  2/22/2017

OMA Tax Committee Hears Briefing on State Budget

Pictured: Ohio Tax Commissioner Joe Testa

This week Ohio Department of Taxation Commissioner Joe Testa, House Finance Committee Chairman Ryan Smith and House Ways and Means Committee Chairman Tim Schaffer met with the OMA Tax Committee to discuss HB 49, the state operating budget, and more specifically, the tax proposals in the budget.

The governor’s budget proposal is focused on driving down the income tax. The reduction in income tax would be paid for through a variety of other tax increases including the sales tax, cigarette taxes, beer and wine taxes, and a new severance tax.

The budget also proposes centralized collection for business municipal taxes, something the OMA has long advocated.

The budget wrangling must conclude in time for it to be signed into law no later than June 30.

For a front row seat regarding the state’s tax developments, join the OMA Tax Committee at My OMA, select My Communities.  2/16/2017  

OMA Supports Kasich Proposal to Centralize Municipal Tax Collection

Governor Kasich’s 2017/18 biennial budget proposes to modernize the municipal tax system by centralizing administration at the state level: “To save businesses the extra cost of computing and then filing “net profit” taxes with multiple municipalities, Ohio seeks to streamline the process by having businesses file just one form and a single payment online through the Ohio Business Gateway, with the Ohio Department of Taxation processing payments and distributing revenues back to the appropriate local government, just as it does for county sales taxes and school district income taxes.”

In a memo of support to the administration, OMA wrote: “This will relieve the current complicated and burdensome system of municipal income tax collection for businesses. It would be one more important step in advancing Ohio’s business-friendliness. The OMA supports the governor’s proposal to centralize municipal income tax collection administration.”  2/9/2017

Kasich Wants Additional Income Tax Reductions

Governor Kasich is going after additional income tax reductions in his last biennial budget.

He proposed a nearly $3.2 billion, 17% cut in income taxes over the two years beginning July 1. The number of income tax brackets would be reduced from nine to five. The top tax rate would drop to 4.33%.

The budget would increase personal income tax exemptions for those earning less than $80,000. The administration said these changes would mean an additional 350,000 low-income Ohioans will pay no income tax.

Personal income taxes have been reduced in Ohio by 30% since 2005.  1/30/2017

Governor Proposes Increases in Sales and Other Taxes

Governor Kasich would pay for his proposed personal income tax decrease with a concomitant increase in sales and other taxes.

The increases in the sales and other taxes would total about $3.1 million. The sales tax rate would increase by 1/2% to 6.25%.

The sales tax base would expand to additional services such as television subscriptions, elective cosmetic surgery, lobbying, landscape design, interior design and decorating, travel package and tours and repossession services.

The budget proposes to increase the state’s severance tax on oil and gas and raise taxes on cigarettes, beer and wine.

Speaker Cliff Rosenberger stated that he is not keen on any “tax shifting.”  1/30/2017

Budget Would Simplify Municipal Income Tax Payment

As every business taxpayer knows, Ohio has an administratively burdensome, and costly, municipal tax system. Governor Kasich proposes to simplify its payment process.

He would streamline the process by having businesses file just one form for municipal taxes and make a single payment through the Ohio Business Gateway. The Ohio Department of Taxation would process payments and distribute revenues back to the appropriate local governments, just as it does for county sales taxes and school district income taxes.

This reform has been advocated by the OMA and its business allies, and opposed by the municipal lobby.  1/30/2017

2016 Tax Return Due Date Changes

Tax season has arrived and this year’s season comes with some due dates changes and new e-filing information disclosure requirements. OMA Connections Partner, GBQ, summarizes some of them.  1/31/2017

New Report on Merger & Acquisition Activity in the Manufacturing & Distribution Sector

OMA Connections Partner, BDO, has just published its Q1 2017 review and outlook for merger and acquisition (M&A) activity among the manufacturing & distribution (M&D) sector.

BDO reports that: “M&A activity in the … sector was down approximately 15 percent in 2016. A decline was expected after a record 2015, and amplified by the sluggish economy and a brutal election season, which delayed sale decisions.”

And concludes: “… Valuations remain high at 9.0x EBITDA on average. Business owners are smart to invest in their employee base through apprenticeship programs, which will ultimately add value to their businesses when the time is right for a sale. The U.S. economy appears to be gaining steam, based on key measures such as GDP, the Institute for Supply Management (ISM) Index, unemployment, wage growth, and consumer confidence. All things considered, 2017 is ripe for an active year in terms of M&A activity in the M&D sector.”

Read BDO’s full 4-page report here.  1/18/2017

FAQ about Asset Based Loans

OMA Connections Partner, Bank of America Merrill Lynch, posts that asset-based lenders have generally found that, over time, the valuation of a borrower’s assets remains stable over a variety of business and economic cycles. This makes calculating a borrower’s credit capacity based on asset values a highly predictable way of providing capital. For these reasons, asset based loans are often viewed by lenders, for certain types of borrowers, as a more reliable form of lending than cash flow-based loans.

You can read the full FAQ about asset based loans here.

For more information, contact Mike D’Arienzo, Vice President, Sr. Business Relationship Manager, Bank of America Merrill Lynch, at (614) 918-7551.  1/9/2017

R&D Tax Credit Predictions for 2017

From OMA Connections Partner, Tax Credits Group, a prediction that the Research and Development Tax Credit will continue to be considered a primary tool for helping U.S. businesses stay competitive against global competition, and therefore favorable changes will continue.  Read more from TCG here.  1/4/2017