Tax and Finance Management

Economic Barometer: March 2023

• U.S. job openings fell in January and employee quits slowed, according to the latest report from the Bureau of Labor Statistics.
  • Year over year, U.S. manufacturing openings declined by more than 100,000 positions, but there were still more than 800,000 openings.
• Federal Reserve Chairman Jerome Powell said this week there’s a risk the Federal Reserve may hike rates by 50 basis points at its March 21-22 meeting.
• The spread between two- and 10-year Treasury yields this week were more than a percentage point for the first time since 1981, signaling potential economic pain.
• The U.S. Financial Conditions Index, published by OMA Connections Partner RSM, remains below neutral levels.
• The Cleveland Fed’s Beige Book, which covers all of Ohio, reports that overall demand for manufactured goods changed little from the prior reporting period, but that softer demand was reported by firms associated with interest rate-sensitive sectors.

Meanwhile, the Consumer Sentiment Index and the Money Anxiety Index have both recently showed year-over-year improvements. 3/9/2023

Study: Ohio 7th Highest Overall Tax Burden

According to a new comparison by WalletHub, Ohio has the seventh highest overall tax burden in the U.S. According to the study, the Buckeye State imposes a 13.2% effective state-local tax rate on the median U.S. household. Ohio had the 44th highest income tax burden (state and local), 39th highest real estate tax, and 32nd highest sales and excise taxes, but also had the lowest vehicle tax. 3/7/2023

IRS Issues Another Warning on ERC Scams

The IRS continues to warn small businesses about Employee Retention Credit (ERC) scams, as the agency plans to audit and pursue criminal investigations into false ERC claims. The IRS’ press release says there continue to be promoters who aggressively mislead businesses into thinking they can claim these credits. 3/8/2023

Webinar: Accounting Automation for Manufacturers

On Thursday, March 16, OMA Connections Partner CliftonLarsonAllen will host a complimentary webinar to explore how finance and accounting teams in manufacturing are leveraging technology to automate processes. Learn more and register. 3/7/2023

Pass-Through Entity Taxes May Require GAAP Considerations

Pass-through entities electing to pay tax at the entity level may need to consider U.S. GAAP implications, according to OMA Connections Partner CliftonLarsonAllen. The firm has published this insight to help businesses understand certain complexities that could surface. 3/9/2023

Tax Commissioner, OBM Director Visit OMA

On March 1, the OMA Tax and Finance Committee held its first 2023 meeting, sponsored by OMA Connections Partners RSM and William Vaughan. More than 50 members attended in person or online. Highlights included:

• Analysis of the DeWine-Husted administration’s proposed budget;
• A briefing from Ohio Office of Budget and Management (OBM) Director Kim Murnieks, who detailed the budget’s economic development and workforce provisions;
• A conversation with Patricia Harris, Ohio’s new tax commissioner, who previewed forthcoming improvements at the Department of Taxation; and
• RSM’s overview of IRS changes impacting Section 174 research and experimental expenses.

The Tax and Finance Committee is slated to meet again June 15. 3/1/2023

Analyzing Ohio’s State and Local Income Taxes

As previously reported, Republicans in the legislature want to reduce Ohio’s income tax, which affects individuals and businesses structured as pass-through entities. (This infographic illustrates Ohioans’ total taxable income by source.)

House Bill 1, which would lower the state’s top income tax rate to 2.75% (and make changes to local property taxes), received its first hearing this week. According to the non-partisan Tax Foundation, Ohio’s top rate (3.99%) is already the fifth lowest of the 43 states that tax personal income.

It’s important to note that 16 states — including Ohio, with its municipal/school district income tax — allow local income taxes, which can significantly add to the tax burden. 3/1/2023

Ohio Supreme Court Hears Muni Income Tax Case

Millions of Ohioans could be eligible for an income tax refund if the state Supreme Court decides that cities unconstitutionally collected commuter taxes during the pandemic, when many individuals were working from home.

This story by The Enquirer examines the case heard by the high court this week. The case is one of five filed statewide on behalf of the Buckeye Institute. Many larger municipalities say that because of Ohio’s tax structure, they would be crippled without the income tax revenue from commuters. 3/1/2023

A Closer Look at Inflation

Despite softening, inflation remains high, as illustrated in last week’s Personal Consumption Expenditures data.

The U.S. Bureau of Labor Statistics has published these graphs showing the Producer Price Index from January 2022 to January 2023. For the year ended January 2023, prices for transportation and warehousing increased 11.3%. Food prices soared 11.6%, and energy prices increased 10.4%.

Meanwhile, Visual Capitalist has published this infographic showing consumer price changes since 2000. 3/1/2023

New Lease Accounting Standard Is Here

OMA Connections Partner CliftonLarsonAllen reports that the new lease standard — the Accounting Standards Codification 842 — is effective for private companies with fiscal years beginning after Dec. 15, 2021. The firm has published this guidance to help implement the new standard.

OMA Connections Partner Schneider Downs also has updated information on this topic. 3/1/2023