Manufacturing-Related Tax Provisions in State Budget

The Ohio House and Senate this week settled their differences on tax issues in the two-year operating budget, House Bill 166. Included in the final language were two priorities of the OMA Tax Committee, as well as a provision that was a priority for Ohio’s general business community. Thank you to the members who worked on these efforts.

Key tax provisions affecting manufacturers include:

• EXEMPTION FOR FOOD MANUFACTURERS: Expands the sales-and-use tax exemption for cleaning equipment and supplies used to clean equipment that produces or processes food. The exemption, which had applied only to dairy food processors, will now be afforded to the makers of any food for human consumption.
• CREDITS FOR CAPITAL INVESTMENT: Expands eligibility for the state’s Job Retention Tax Credit. Aimed at manufacturers, the provision expands eligibility based on new capital investment, as opposed to payroll or employee count.
• BUSINESS INCOME TAX DEDUCTION: Retains the business income tax deduction at the current level of $250,000 for pass-through entities, as well as the 3% special flat tax rate for income above that threshold. Provides an across-the-board state income tax cut of 4%. The OMA worked with business allies to save the existing deduction, which at times seemed doomed during the process.

The budget does eliminate lawyers and lobbyists from taking advantage of the income tax deduction — a provision that could have unintended consequences for manufacturers, especially those who employ in-house counsel. The OMA will continue to study the issue to determine the impacts on manufacturers. 7/17/2019