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Legislature unveils major budget tax changes

On June 20, 2013, with just over a week until the governor must sign the state’s two year spending plan, the Ohio House and Senate leadership announced significant tax changes for inclusion in the biennial budget. The plan includes a 50 percent small business tax cut on the first $250,000 in net business income and phases in a 10 percent personal income tax cut over the next three years.

In order to offset the revenue loss resulting from the cuts, the proposal would increase the state sales tax from 5.5 percent to 5.75 percent beginning January 1, 2014. Additionally, the plan includes the following proposals:

CAT reduction of annual exclusion amount: Lowers the Commercial Activity Tax (CAT) annual exclusion amount from $1 million to $500,000. The language allows taxpayers with annual taxable gross receipts of between $500,000 and $1 million to continue to file annual returns instead of quarterly returns.

Homestead exemption means testing: Restricts the availability of the homestead exemption for elderly and disabled homeowners who apply for the exemption to only those that have a total income of less than $30,000. Under current law, the exemption is available to all elderly and disabled homeowners, regardless of income, allowing them to shield up to $25,000 of the market value of their homestead or manufactured home from property taxation upon application to the county auditor. Taxpayers currently claiming the exemption may continue to do so.

Property tax rollback limitations: Limits the application of the 2.5 percent and 10 percent property tax rollbacks by specifying that the rollbacks may not be applied to reduce the taxes due on new or replacement levies that become effective in or after tax year 2014. Property tax levies effective in tax year 2013 and a renewal or substitute of that levy remain subject to the rollbacks. Under continuing law, the 10 percent rollback applies to all real property not intended primarily for use in a business activity, and the 2.5 percent rollback applies to all owner-occupied homesteads. The state reimburses local governments and schools for the revenue lost due to both rollbacks.

Tax rate on little cigars: Equalizes the excise tax rate on little cigars, or cigarillos, to that of cigarettes. A "little cigar" is defined as a smoking roll that does not satisfy the excise tax law's definition of a cigarette, that contains an integrated cellulose acetate filter or similar filter and that is not wrapped in natural leaf tobacco.

Digital products: Subjects the sale or use of electronically transferred digital goods to the state sales and use tax. The language specifies the provision does not subject cable service or video programming to the tax.

Magazine subscriptions: Eliminates the sales and use tax exemption for sales of magazine subscriptions. Magazines purchased at a newsstand are currently subject to the sales tax. The language retains the exemption for charitable non-profit publications.

Repeal $20 personal exemption credit: Repeals current law's income tax credit that allows a taxpayer to claim a $20 credit for each personal exemption the taxpayer claims.

Repeal income tax deduction for gambling losses: Repeals the Ohio income tax deduction on any loss from wagering transactions that is allowed as an itemized deduction for federal income tax purposes.

The conference committee will meet June 24 and 25 to finalize the committee report. The report will then be voted on by each chamber and go to the governor who may exercise line item veto authority on the bill by the June 30 deadline.

Legislation to watch

The legislature is expected to wrap up activity prior to breaking for summer recess next week. The following bills are among those scheduled for votes in committee next week:

Dental services: Sponsored by Representative Bob Hackett (R- London) and Representative Kirk Schuring (R- Canton), House Bill 159 would prohibit a health insurer from establishing a fee schedule for dental providers for services not covered by any contract or participating provider agreement between the health insurer and the dental provider. The bill is scheduled for a possible vote in the House Insurance Committee on June 25, 2013.

Call locations: Sponsored by Senators Edna Brown (D- Toledo) and Gayle Manning (R- North Ridgeville), Senate Bill 5 would require wireless service providers to provide device location information to law enforcement officers in certain emergency situations. The bill is scheduled for a possible vote June 25, 2013 in the House Transportation Committee.

Traffic cameras: Sponsored by Representative Ron Maag (R- Lebanon), House Bill 69 would prohibit the use of traffic law photo-monitoring devices by municipal corporations, counties, townships, and the State Highway Patrol to detect traffic signal light and speed limit violations. The bill is scheduled for a possible vote in the House Transportation Committee on June 25, 2013.

Boiler safety: Sponsored by Kristina Roegner (R- Hudson), House Bill 12 would eliminate the licensed operator requirement for boilers directly fired with gas, oil, gas-oil, electricity, or stationary steam engines that comply with standards established by the Board of Building Standards. The bill is scheduled for a possible vote in the Senate Commerce and Labor Committee on June 26, 2013.

For more information, please contact:

Michael Caputo
(non-attorney professional)

Rebecca M. Kuhns
(non-attorney professional)

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