Ohio House Proposes Major Income Tax Changes

Last week the Ohio House of Representatives passed its version of the Biennial Budget (HB 166) proposing several changes to the Ohio personal income tax.  The two most notable changes were:

  • Reduction of the business income deduction from $250,000 to $100,000
  • Elimination of the 3% tax rate applicable to business income, subjecting the income to Ohio’s bracketed rates

These two changes are tempered by a 6.6% across-the-board income tax rate reduction but will nonetheless result in a tax increase for taxpayers with more than $100,000 in business income.  The House-passed bill also eliminates the $100 campaign contribution credit.

As a result of the U.S. Supreme Court case, Wayfair v. South Dakota, the bill proposes new collection and reporting requirements for remote sellers and marketplace facilitators with Ohio sales over $100,000 or more than 200 Ohio transactions.  Additionally, the “cookies nexus,” “content distribution network nexus,” and “click-through nexus” laws are proposed to be repealed.

The bill proposes the expansion of the manufacturing exemption to include equipment, supplies, and building and janitorial services used to clean or maintain exempt manufacturing equipment.  Historically, this exemption was limited to dairy processing operations.

The bill contains other provisions relating to the personal income tax, partnership audit and assessment procedures, sales and use taxes, property tax exemptions, and the financial institutions tax.  Clark Schaefer Hackett’s State and Local Tax Advisors will be monitoring this legislation and will be issuing more guidance as it becomes available. If you would like to discuss or have questions relating to how this potentially impacts your business, please reach out to one of our State and Local Tax Advisors.

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