News and Analysis
Ohio Refunding Overpaid CAT
Earlier this week, Governor Kasich and Tax Commissioner Joe Testa held a press conference to announce a new policy whereby the Ohio Department of Taxation (ODOT) is proactively identifying business tax refunds and contacting taxpayers so that they may request those funds back from the State of Ohio. The initial focus is on overpaid commercial activity tax (CAT).
OMA Connections Partner, GBQ Partners, offers this summary of the potential opportunity.
Legislature Doles Out More CAT Exemptions for Christmas
As the General Assembly was winding down late last week, the Senate slipped an amendment into House Bill 472 that exempts precious metal smelters from the commercial activity tax (CAT). The amendment apparently is targeted to benefit a smelter in southeast Ohio.
This latest carve-out emphasizes the importance of defending the CAT during the budget process next year.
Tangible Property Regulation Delayed – Taxpayers May Benefit from Early Adoption
OMA Connections Partner, Plante Moran, reports that the IRS has deferred the effective date of new tangible property regulations from tax years beginning on or after January 1, 2012, to tax years beginning on or after January 1, 2014. The new regulations were issued in late December 2011 to guide taxpayers on how to account for amounts paid to acquire, produce, or improve tangible property.
With the announced delay in the effective date, taxpayers may benefit from the early adoption of either the entire regulations or select provisions. Plante Moran offers a summary of the new guidance and potential planning opportunities and a comprehensive article covering the tangible property regulations.
Beaver Attacks CAT
Late last week the Ohio Supreme Court issued its ruling on Beaver Excavating Co. v. Testa. In a 6-1 decision the Court ruled that the state could no longer use the money generated by the commercial activity tax (CAT) on sale of motor vehicle fuel. The court found that the state was violating the constitution’s ban on using gas tax revenues for non highway purposes.
Going forward the state must use this revenue for road projects. The ruling is estimated to shift $140 million a year to road projects. Here’s a summary by OMA tax counsel Bricker & Eckler LLP.
OMA Calls on Congress to Hold the Line on Federal Payroll Taxes
On December 10, the OMA and other national and state business organizations urged leaders in Congress not to increase the Federal Unemployment Tax (FUTA). The letter asked congressional leadership to maintain current FUTA rates and base, protect employer financed federal unemployment trust fund accounts, and eliminate restrictions on state solvency measures. The business coalition urged Congress to prevent any further increases to the tax burden and provide states the flexibility to address state unemployment trust fund solvency issues.
Uniform Municipal Income Taxes? . . . Not so Fast
This week the Ohio House of Representatives heard sponsor testimonies on House Bill 601, which would create more uniformity throughout Ohio’s various municipal income tax codes. While the bill has the support of a broad coalition of business groups including the OMA, cities continue to oppose the bill arguing that the bill erodes home-rule and reduces local income tax revenues.
The sponsors of the bill indicated that they are not seeking passage of the legislation in the lame duck session, but instead want to engage all stakeholders in a public forum in the hope that they can pass the bill in the next General Assembly. The House has shown interest in continuing hearings through the lame duck session to hear from the various stakeholders.
Thompson Takes the Reins
Allan Thompson, Manager, Corporate Taxes, AK Steel Corporation, was installed as chairman of the OMA Tax Committee this week. Allan takes over from Anthony Long, Assistant Counsel, Honda of America Manufacturing. Before passing the gavel to Allan, Tony recounted the momentous period that saw the elimination of personal property tax, elimination of corporate franchise tax, 21% reduction of personal income tax, elimination of estate tax, and defense of the broad-base, low-rate commercial activity tax.
“OMA members owe Tony a debt of gratitude for his decade of tax policy leadership and I look forward to working with committee members to build on the strong foundation,” said Chairman Thompson.
The committee discussed: a proposal to make municipal income tax collection practices more uniform; a proposal to revise to the Board of Tax Appeals processes; and principles for potential restructuring of severance taxes on “fracked” oil and gas production.
Employee Social Security Tax Likely to Increase in 2013
OMA Connections Partner, GBQ Partners, updates us on social security taxing for 2013:
The Tax Relief, Unemployment Insurance Reauthorization, and Job Creation Act of 2010 made a two-percentage-point temporary cut to the Social Security payroll tax rate on the portion paid by employees from 6.2 to 4.2 percent; extension of the 4.2 percent rate appears to be in doubt.
In 2013, the Social Security wage base will increase to $113,700 from the current $110,100 taxable minimum, meaning approximately ten million people will pay higher taxes. While the employer tax rate will remain at 6.2 percent, the employee rate is yet to be determined, as the temporary cut expires.
With regard to Medicare tax, the employer’s share will remain at the current 1.45 percent of compensation in 2013, while the employee’s share will be subject to an additional .9 percent for individuals’ wages exceeding $200,000 ($250,000 if married filing jointly).
A Snapshot of the New Auditing Clarity Standards
According to OMA Connections Partner, GBQ Partners LLC, the auditing world has been abuzz lately with the Clarity Standards, an initiative the American Institute of CPAs has been working on since 2004; the new standards are finally effective for December 31, 2012 year-ends. The goal is to converge the U.S. generally accepted auditing standards (GAAS) with the international standards on auditing, making GAAS easier to apply for nonpublic companies and making the standards more consistent throughout the world
There are two significant differences under the new standards that will be clearly visible to management of an audited entity. They relate to the auditor’s opinion report and the management representation letter. These differences are designed to help the auditor better communicate with management. Read more.