News and Analysis
OMA Connections Partner, GBQ Partners, tells us there are new rules that affect all businesses that acquire, produce or improve property. The final regulations adopt a significant portion of the temporary regulations issued in December 2011, while also expanding and clarifying certain aspects of those regulations.
The regulations could result in tax savings under some accounting methods and exposure in other areas, all depending on each company’s unique facts and circumstances. More from GBQ.
This week the House Ways and Means Committee heard sponsor testimony from Rep. Matt Huffman (R-Lima) on House Bill 375, which would decrease severance taxes paid by small traditional drillers and increase severance taxes on horizontal drillers. The bill would also exclude from the commercial activity tax the gross receipts from the sale of oil or natural gas severed through a horizontal well. See bill summary.
The House Finance Committee heard sponsor testimony last week on House Bill 336, a bill that is intended to encourage the acquisition and use of motor vehicles propelled by alternative forms of motor fuel.
House Bill 336 provides for the treatment of compressed natural gas used to propel motor vehicles on the public highways as motor fuel for purposes of the motor fuel tax, the motor fuel gross receipts tax, and the commercial activity tax. It also creates a number of credits and exclusions related to the purchase of, or conversion of existing vehicles to, alternative fuel vehicles, including the income tax, the commercial activity tax, and the sales tax. It also provides for a grant program to encourage public and nonprofit organizations to encourage the use of such vehicles.
According to OMA tax counsel, Mark Engel, the bill would: “… reduce the severance tax rate on persons extracting oil and natural gas by means other than horizontal wells; impose a tax on the net proceeds of oil and natural gas produced through horizontal wells; provide a credit against the state income tax equal to the amount of tax paid by taxpayers using horizontal wells; and provide an exclusion from the commercial activity tax for proceeds of the sale of oil and gas by persons paying the severance tax applicable to the use of horizontal wells.”
You can read a full analysis of the bill that Mark Engel prepared.
This week the OMA submitted a letter to the House Ways and Means Chairman, Rep. Peter Beck (R-Mason), outlining concerns with House Bill 219. The bill creates a nonrefundable commercial activity tax (CAT) credit for certain economic development contributions.
In his letter OMA Director, Public Policy Services, Rob Brundrett, said, “Some of the most important aspects of the CAT are its broad base, its low rate, and its broad application to business entities. Those attributes can only be maintained when the state stands firm against individual carve-outs and exemptions.”
The OMA previously issued a similar letter of concern to senators regarding companion legislation, Senate Bill 149.
Almost a year after it was introduced, House Bill 5, the municipal income tax uniformity bill, was voted out of the House of Representatives yesterday by a vote of 56-39. The bill includes numerous changes to local income taxes that should reduce administrative time and cost to manufacturers.
The bill continues to receive fierce opposition from city leaders. The most controversial aspect of the bill is a provision that would require city tax systems to allow businesses to carry forward net operating losses for five years. While some cities already allow some type of carry forward, the law would require all cities to fully implement this practice by 2017.
Due to the importance of this legislation to manufacturing competitiveness, the OMA marked it a “key vote” bill. Key vote bills are tracked by the OMA and used in candidate endorsement processes.
House Bill 5 now moves to the Senate. Contact your state senator to urge passage of House Bill 5.
This week the OMA submitted a letter to Senate Ways and Means Committee Chairman Tim Schaffer (R-Lancaster) asking the Senate to resist bills that create commercial activity tax (CAT) credits. The committee had a hearing on Senate Bill 149, sponsored by Bill Beagle (R-Tipp City), which creates a credit against the CAT for businesses that contribute to economic development projects.
The OMA wrote, “Manufacturers are concerned that any new carve-outs, exemptions, or credits could provide strain on the CAT forcing an increase in its rate.” Ohio manufacturers pay the largest proportionate share of CAT. The renewed push for more credits coming from the General Assembly continues to be a concern among manufacturers.
Here are the meeting materials for the November 12, 2013 Tax Committee meeting.
After months of negotiations, House Bill 5 was finally reported out of the House Ways and Means Committee this week. Only Rep. Stephen Slesnick (D-Canton) crossed party lines to vote in the affirmative. The bill would make Ohio’s municipal income tax system simpler and more predictable.
The committee accepted an omnibus technical amendment and a second amendment that requires the Net Operating Loss study committee, created by the bill, to make recommendations to mitigate any fiscal impacts to local governments created by the net operating loss provisions.
The OMA submitted this letter in support of the bill. Although the bill received strong support in committee, numerous legislators have yet to determine whether or not to support the bill.
Manufacturers should contact OMA’s Rob Brundrett to learn how to help this beneficial measure, House Bill 5, to cross the finish line.
With an average tax rate of 28.0 cents per gallon, Ohio ranks 22nd among the states in gasoline tax rates, according to the Tax Foundation. Ohio’s rate is lower than its five contiguous neighbors: PA (32.3 cents), IN (38.2 cents), WV (34.7 cents), KY (32.3 cents), and MI (39.3 cents).
The highest rate in the nation comes in California at 53.2 cents per gallon. The lowest rate is in Alaska at 12.4 cents.
The foundation used a methodology of the American Petroleum Institute to calculate the average rates.