Tax and Finance Management

Update on Sales Tax Compliance in the Wayfair Era

To address manufacturers’ ongoing questions regarding sales tax collections following the U.S. Supreme Court’s landmark Wayfair v. South Dakota ruling in 2018, OMA Connections Partner HBK has published this insight. The update addresses sales tax compliance, exemptions, and economic nexus as they apply to manufacturing. 8/16/2022

Infographic: New Lease Accounting Standard

As previously reported, the Financial Accounting Standards Board’s new lease standard will impact many manufacturers. OMA Connections Partner Clark Schaefer Hackett has published this infographic to highlight four steps to implementing the new ASC 842. 8/15/2022

Manufacturers Remain Opposed to Reconciliation Bill

On Aug. 7, U.S. Senate Democrats voted 51-50 to pass a $740 billion reconciliation package that includes a 15% corporate minimum tax on businesses, as well as government price controls for prescription drugs. Ohio’s federal delegation is split along party lines in its support for the legislation.

According to reports, the bill is expected to pass the House before heading to President Biden’s desk for his signature. (See this summary by OMA Connections Partner Plante Moran.)

Despite last-minute changes that preserve manufacturers’ ability to utilize accelerated depreciation — which has been in the federal tax code in some form since at least 1958 — the National Association of Manufacturers and the OMA remain opposed to the reconciliation bill.

NAM President and CEO Jay Timmons says the new taxes will “deliver a blow to our industry’s ability to raise wages, hire workers, and invest in our communities,” while also “threatening future innovation and cures.” 8/8/2022

Adding Automation May Lead to a Lucrative Tax Credit

While adding automation comes with an upfront cost, much of those costs may be eligible for an R&D tax credit, according to this guidance from OMA Connections Partner GBQ Partners. The firm notes that manufacturers have the ability to claim a federal credit that is up to 9% of their annual R&D expenditures, as long as their costs qualify for the R&D tax credit. 8/9/2022

OMA, NAM Oppose Federal Reconciliation Bill

More details are emerging regarding the recently announced federal budget reconciliation deal, known as the Inflation Reduction Act of 2022. (CNN reports the bill would do little to curb inflation, and the Congressional Budget Office says it could increase federal deficits by $3 trillion over 10 years.)

The OMA and the National Association of Manufacturers oppose the reconciliation bill. The NAM says the plan’s proposed “book tax” — a 15% minimum corporate levy — would overwhelmingly impact manufacturers, according to non-partisan analysis. The provision would raise taxes by an estimated $313 billion, and manufacturers would be responsible for nearly half that amount.

NAM research shows this tax will reduce real GDP by $68.5 billion and cut labor income by $17.1 billion — translating to more than a quarter million fewer manufacturing jobs in 2023 alone.

Meanwhile, OMA Connections Partner Plante Moran has published this summary of the reconciliation bill and what’s coming next. 8/1/2022

Coming Soon: Tax Credit Forums for Small Businesses

Later this month, the Ohio Department of Job and Family Services will co-host five forums throughout the state to explain how small businesses can earn tax credits through the federal Work Opportunity Tax Credit (WOTC) program.

The WOTC program offers tax credits — ranging from $2,400 to $9,600 — to employers that hire individuals from targeted groups, including veterans, public assistance recipients, restored citizens, individuals with disabilities, and others. 8/3/2022

New R&D Expense Rule Impacts Manufacturers

Manufacturers with significant R&D expenditures will likely face higher taxable income and tax liability, according to this insight from OMA Connections Partner Schneider Downs.

Previously, taxpayers could either deduct R&D expenses or amortize them over five years. The 2017 tax law eliminates this choice for the current tax year, requiring taxpayers to amortize expenses over five years for R&D performed in the U.S. (and for 15 years if conducted abroad). 8/2/2022

Federal Budget Bill Contains Massive Business Tax Hike

U.S. Senate Majority Leader Chuck Schumer (D-NY) recently announced that he and U.S. Sen. Joe Manchin (D-WV) have reached an agreement on a budget reconciliation package that includes major spending for climate change; large tax hikes on businesses; and more health care subsidies. (Reconciliation allows the U.S. Senate to bypass filibuster rules so that only 51 votes are needed to pass major tax and/or spending bills.)

The plan’s biggest revenue-raiser would be a new 15% minimum tax on businesses that earn more than $1 billion in annual profits, according to this summary from the AP. The bill would also impose government price controls on pharmaceutical manufacturers.

The National Association of Manufacturers has issued this statement, saying lawmakers who support manufacturing should oppose the reconciliation plan. (Other key business groups also oppose the plan.) Use NAM’s “Manufacturers United” platform to urge your federal lawmakers to oppose tax hikes on manufacturers. 7/28/2022

Ohio’s Rainy Day Fund Sits at Record $2.7 Billion

Ohio’s Budget Stabilization Fund (BSF) — also known as the rainy day fund — is the state’s reserve balance, set aside during good economic times to protect the state budget from revenue shortfalls during recessions.

According to this information from the Ohio Office of Budget and Management, the BSF cash balance currently sits at $2.71 billion — a record high for the rainy day fund. House Bill 110, enacted last year, requires the BSF to retain its investment earnings. 7/26/2022

Ohio’s State-Local Sales Tax Burden Is 20th Highest

An updated comparison by the Tax Foundation shows Ohio’s average combined state and local sales tax rate of 7.24% is 20th highest in the U.S. — and higher than any neighboring state. Ohio’s state sales tax rate is 5.75%, which is 27th highest. The state’s average local sales tax rate is 1.49%. 7/20/2022