On June 16, 2014, Ohio Governor John Kasich signed Am. Sub. H.B. 483. H.B. 483 was originally part of the administration’s Mid-Biennium Budget Review, and it contained many of the substantive tax provisions that were proposed by the governor with the exception of the administration’s proposal to increase the severance tax (which was the subject of Sub. H.B. 375). H.B. 483 contains a variety of tax changes; however, the governor exercised his line-item veto authority to delete two tax provisions.
Personal Income Tax
The bill makes a number of changes in the personal income tax. Those changes include:
- Accelerating the phase-in of income tax rates reduced in Am. Sub. H.B. 59. Under that bill, rates were reduced 8.5 percent in taxable year 2013, with additional reductions in 2014 and 2015 totaling 10 percent for all three years. The amendment accelerates the remainder of the 10 percent reduction into 2014 and thereafter.
- Increasing the personal exemption amounts, depending on the taxpayer’s Ohio adjusted gross income (OAGI):
- $2,200 for taxpayers with OAGI less than or equal to $40,000;
- $1,950 for taxpayers with OAGI greater than $40,000, but less than or equal to $80,000; and
- $1,700 for taxpayers with OAGI greater than $80,000.
This change is effective for taxable years beginning in 2014 and 2015, and is indexed for inflation beginning with taxable years that begin in 2016 and thereafter.
- For tax years beginning in 2014 and thereafter, increasing the earned income tax credit from 5 percent of the federal credit amount to 10 percent. The credit remains nonrefundable.
- For taxable years beginning in 2014, temporarily increasing the Ohio small business income deduction from 50 percent of the first $250,000 in Ohio business income to up to 75 percent of that amount, depending on state revenues at the end of the current year. The limit reverts to 50 percent for taxable years beginning in 2015 and after.
Several changes to the property tax laws are made by the bill including:
- Exempting the property of a charitable organization that is used exclusively for receiving, processing, distributing, researching or developing human blood, tissue, eyes or organs. This exemption is effective for tax years beginning with 2014.
- Amending an existing real property tax exemption for property owned by fraternal organizations having no more than $36,000 in annual rental income associated with the property to fraternal organizations. The change reduces the number of years that an organization must operate in Ohio to qualify as a fraternal organization from 100 to 85.
A number of other tax provisions were also included in the bill, including:
- Extending the historic rehabilitation tax credit to the commercial activity tax for certificates with effective dates between December 31, 2013 and June 30, 2015.
- Easing some limitations on the ability of the tax commissioner and vendors to enter into prearranged agreements for the remission of sales tax to the state.
- Making minor changes to the provisions of the bill dealing with historic building rehabilitation tax credit certificates for owners of “catalytic projects.”
- Allowing counties of specified populations that impose a tax on lodgings to use up to $500,000 annually to improve and maintain a sports stadium located in the county.
- Extending from 24 to 36 months the period in which the tax commissioner may spread the recovery of refund amounts from distributions to local governments, thereby easing the impact of such refunds on distributions.
The governor did veto two tax provisions that were contained in the bill:
- Reducing the assessment percentage for new tangible personal property belonging to a water-works company first subject to taxation in tax year 2014 or later to 25 percent of its capitalized cost less allowance for depreciation.
- Authorizing the disclosure of sales and use tax return and audit information to boards of county commissioners as necessary for vendor compliance purposes.
The governor characterized the former provision as an unwarranted special tax break that picks winners and losers. The second provision was characterized as burdensome and overly bureaucratic for taxpayers, essentially adding a second layer of oversight.
A controversial provision limiting the right to file property tax complaints to the property owner or his or her spouse, to designated agents of the property owner, and to the county recorder was deleted from the bill during the conference committee meetings on the bill. The provision would have prevented school districts from filing original complaints.