July 20, 2019

New Ohio Budget Reduces Ohio Income Tax Rates

By Josh Stein, Manager, Tax & Business Services

New Ohio Budget Reduces Ohio Income Tax Rates Tax Advisory Services

Ohio Gov. Mike DeWine has signed into law a state budget bill that was the result of a compromise between the Ohio House and Senate. The bill will reduce personal income taxes by eliminating the bottom two income tax brackets and lowering the remaining brackets by 4%. As a result, taxpayers earning less than $21,750 will not pay Ohio state income taxes. The agreement ends a budget impasse dating to Ohio’s regular July 1 deadline.

Other provisions in the budget agreement include:

  • The Ohio Business Income Deduction will remain largely intact, with pass-through entities, Schedule C and Schedule E business income eligible for a tax deduction of the first $250,000 of income, with income above that amount taxed at a flat 3% rate. However, please note: the deduction will no longer be available to lawyers or lobbyists.  Marcum will provide updates on this topic as the change continues to be analyzed.
  • The legislation requires remittance of sales tax for sellers who have gross receipts of at least $100,000 from sales into Ohio, or that engage in 200 or more separate sales transactions in Ohio. This is a direct response to the Wayfair case, which determined that states could satisfy constitutional requirements with economic nexus provisions based on the amount of business done in a state without any physical presence.
  • As such, the bill will remove Ohio’s definition of “substantial nexus” for out-of-state sellers, which currently requires companies with sales of $500,000 or more in Ohio to collect and remit sales taxes.
  • Ohio will now require marketplace facilitators (such as Amazon or eBay) to collect and remit income taxes for companies selling on their websites.
  • The legislation expands the $40 million film tax credit to include post-production work and Broadway-style productions.
  • The bill allows all state manufacturers to apply for a “job retention” tax credit originally designed to help larger companies retain hundreds of Ohio jobs during economic downturns. To qualify for this credit, manufacturers will need to make a capital investment equal to 5% of the tangible property at their site, or $50 million, whichever is less. Marcum will issue a separate blog concerning this credit and how entities will apply for the credit and what the other requirements are besides the capital investment.
  • The budget bill included provisions for a TechCredit workforce development credit. This program was designed to replace the previous Incumbent Workforce Training Loan program. Marcum will provide additional information on this credit in the future.
  • The bill codifies a ruling by the Ohio Supreme Court to exempt Supplemental Executive Retirement Plans (SERPs) from municipal income taxes, effective January 1, 2020.

The budget is effective July 18, 2019, though some of the provisions will take effect at dates provided in the budget plan. Marcum will keep you informed as we learn more.

Questions about the 2019 Ohio budget bill or other State and Local Tax (SALT) issues? Contact your Marcum representative at (855) MARCUM1.

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