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Ohio: New bill would incentivize hiring recent graduates, give graduates tax breaks

A newly introduced Ohio bill (H.B. 246) would allow college graduates to claim an income tax deduction for qualified higher education expenses and allow an employer of recent college graduates to deduct the employer's costs of employing the graduate from the employer's gross receipts subject to the commercial activities tax. This may be a win on multiple grounds as employers seek new talent in an improving but uncertain economy, recent graduates struggle with unemployment and underemployment and unprecedented debt loads, and there is evidence that Ohio may just have begun to buck its “brain drain” trend. This bill may also be the push some businesses need to ramp up their hiring, as employee costs would be reduced in the first years of the recent college graduate’s service.

Under H.B. 246, employers would be able to deduct an amount equal to a percentage of the eligible costs of employing a qualifying recent graduate from their taxable gross receipts. The deduction would be halved each year, starting at a 100 percent rate, for five years of the employee’s tenure. The deduction is illustrated in the chart below:

 Employment Year 

 Percent of Employee Costs Deductible 

100%  

2

50%  

3

25%  

4

12.5% 

5

6.25%

The categories of deductible “eligible costs” are broadly construed under the bill and include the employee’s wages, health care and workers' compensation premiums. Also, recent graduates would include those who have received a degree within the last two years, not just those directly entering the workforce after graduation.

As for the graduates themselves, individuals who graduate with a bachelor’s degree or higher would be eligible to deduct one-tenth of his or her qualified education costs from their federal adjusted gross income (AGI) so long as such costs have not otherwise already been deducted or excluded from AGI. The recent graduate would be able to deduct one-tenth of such costs for the following nine years. The bill would also incentivize those who graduate with an associates or technical degree in similar fashion, except these graduates would be able to deduct one-fifth in the first year and a fifth in each of the following four years. However, if you are a recent graduate, there is no reason to rejoice. As currently drafted, the bill would only allow graduates who graduated on or after the effective date of the bill to be able to take this deduction.

Critics of this bill believe it incentivizes further displacement of unemployed Ohio workers by giving preference to recent graduates over other classes of unemployed workers. These critics believe there is no real economic reason for giving a preference to recent graduates. Proponents claim this bill will help businesses add additional employees, retain and attract recent graduates and help Ohio’s economy modernize through an educated workforce. Regardless of which side of the fence you are on, it certainly will spark some interesting debates about Ohio’s economy and the direction Ohio’s legislature aims to take as it maneuvers to spur recovery from the recent recession.

Click here to read the text of H.B. 246.

New Jersey: State revises rules for Technology Business Tax Certificate Transfer Program

The New Jersey Economic Development Authority (EDA) has adopted amendments to the rules implementing the Technology Business Tax Certificate Transfer Program (Program) in order to clarify certain terms and provisions related to Program eligibility.

The Program allows approved, unprofitable New Jersey-based technology and biotechnology businesses with fewer than 225 employees to sell their unused net operating loss carryovers and unused research and development tax credits to unaffiliated, profitable corporate taxpayers in New Jersey for at least 80 percent of the value of the tax benefits (subject to certain other limitations). In addition, among other requirements, a technology or biotechnology business must own, have filed for or have a license to use protected proprietary intellectual property.

The amendments to the Program’s rules modify the definition of “full-time employee” to include persons employed on a permanent or indefinite basis and to include persons who are employed under a formal written agreement with an institution of higher education under which the institution’s students are employed on a permanent basis in a single position that complies with all other requirements for qualifying as a full-time employee. This definition was further amended to exclude interns, temporary employees and persons employed in temporary positions from the definition of “full-time employee.”

Also modified under the amendments are the definitions of “license” and “protected proprietary intellectual property” to clarify that the license of protected proprietary intellectual property must be an exclusive license and that the protected proprietary intellectual property must be intellectual property that is the technology of the applicant’s primary business. However, the applicant’s primary business must be either technology or biotechnology.

Additionally, the amended rules add a requirement that the application for the Program must be filed with the EDA on or before June 30 of the program cycle year.

The amendments took effect on August 5, 2013.

Click here for the text of the amendments.

North Carolina: State adopts legislation to substantially conform with SSUTA

On July 30, 2013, Lyons Gray, the North Carolina Secretary of Revenue, sent a letter to the Streamlined Sales Tax Governing Board (Board) certifying that North Carolina was in substantial compliance with the provisions of the Streamlined Sales and Use Tax Agreement (SSUTA), except for certain provisions included in H.B. 14, the bill that was ratified by the legislature and not yet signed by the governor as of the date of the letter.

North Carolina Governor Pat McCrory signed H.B. 14 on August 23, 2013. The purpose of H.B. 14 is to make sure North Carolina tax law substantially conforms to the provisions of the SSUTA.

This bill includes definitions for “advertising and promotional direct mail” and “other direct mail” and related language clarifying the sourcing provisions for advertising and promotional direct mail and other direct mail. The bill also provides certain relief from liability for sellers of direct mail.

In addition to these provisions, the bill also includes many other technical, clarifying and administrative changes to North Carolina’s tax provisions, including, among many other changes, language providing for certain adjustments resulting from the state’s decoupling from the federal accelerated depreciation, and language providing for an extension of time to request a refund of overpayment under certain circumstances.

The bill’s provisions have several different effective dates, some of which affect the 2012 tax year.

Click here to read the letter sent to the Board.

Click here to read the text of the changes to the North Carolina tax provisions.

For additional information regarding these subjects or any other multistate tax issues, please contact:

David M. Kall
216.348.5812
dkall@mcdonaldhopkins.com

Susan Millradt McGlone
216.430.2022
smcglone@mcdonaldhopkins.com

Jeremy J. Schirra
216.348.5444
jschirra@mcdonaldhopkins.com

 

 

Businesses must be vigilant and careful in managing their state and local tax liabilities and exposures. We understand this can be a daunting task. McDonald Hopkins Multistate Tax Services provides a broad range of state and local tax services including tax controversy, tax evaluation, tax planning, and tax policy. With professionals who have worked both inside and outside government agencies, our multistate tax team leverages its knowledge and experience to help clients control their complex multistate taxes.

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