Big changes to BID, other tax provisions on the table

Written on May 02, 2019

The Ohio House Finance Committee on May 2 accepted several tax changes to the amended version of Ohio’s biennial budget, now Sub. House Bill 166. Chief among them is to significantly cut the benefits from Ohio’s Business Income Deduction (BID) by:

  • Lowering the current $250,000 pass-through entity owners can earn without paying state income tax to $100,000; and
  • Applying the changes retroactively to taxable years beginning on or after Jan. 1, 2019.

Legislators are also giving serious consideration to eliminating the flat 3% rate for PTE income over $250,000. (The Legislative Service Commission has reported that the 3% rate represents between 34% and 41% of the BID’s over $1.2B cost).

Some of the money raised will be used for $300 million in personal income tax cuts. The current language eliminates the bottom two brackets, taking Ohio from seven brackets to five. As proposed, all earnings below $22,500 will not be taxed. For income between $22,500 and $88,800, the tax rate would be cut by 4.7%. The marginal rates on the top three brackets remain the same.

Ohio Taxable Income

Proposed Marginal Rate

> $22,250 < $44,400

$315.41 plus 2.829% > $22,250

> $44,400 < $88,800

$942.14 plus 3.302% > $44,400

> $88,800 < $111,100

$2,408.31 plus 3.960% > $88,800

> 111,100 < $222,200

$3,291.39 plus 4.597% > $111,100

> $222,200

$8,398.66 plus 4.997% > $222,200

 

Other tax changes that were included in Sub. H.B. 166 include:

  • Addressing the Wayfair decision by changing Ohio law to force remote sellers – online out-of-state retailers – to collect sales/use tax. The bill adds a presumption of substantial nexus for sellers that have gross receipts greater than $100,000 from sales into Ohio or engage in 200 or more separate sales transactions into Ohio during the current or preceding calendar year.
  • Requiring ride-sharing services such as Uber and Lyft to start collecting sales tax on behalf of drivers.
  • Repealing the sales and use tax exemptions for:
    • Sales of investment bullion and coins;
    • Fractional shares in private aircraft;
    • Sales of qualified property to motor racing teams, among others.

A tax credit of $40 million for motion picture productions filmed in Ohio is also on the chopping block, as is a tax credit for political contributions.

House Republicans say the overall tax plan provides a net $100 million reduction in taxes over two years. H.B. 166 will undergo more changes early next week before a likely House vote mid-week. OSCPA is closely monitoring all these issues and more and will provide updates as details are unveiled.

Members who have concerns about any of these provisions are encouraged to contact OSCPA, and to quickly share their views directly with the Ohio state representative. (Click here to find out how to do so.)

9 comments

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  1. Tom Burns | May 07, 2019
    Thanks for the updates Greg and Barb.
  2. Barb Benton, OSCPA VP of Government Relations | May 06, 2019

    Louise:  So far, (to the best of my knowledge) the only group to testify in favor of the BID changes now in Sub. HB 166 is Policy Matters, an Ohio think tank.  OSCPA and a handful of other business groups are advocating that the House remove the changes from the bill, as recommended in our  testimony.  (See Greg Saul's comment to read it - the link is in aqua.)  Major changes to this BID will impact thousands of Ohio business owners and merit detailed analysis and the opportunity for input by all interested parties.    

     

  3. Greg Saul, OSCPA's Director of Tax Policy | May 06, 2019
  4. Louise Jackson | May 06, 2019
    Who is lobbying for these BID and other tax law changes?
  5. Tom Burns | May 06, 2019
    Would like to see the society's comment on the proposed adjustments to the BID. This is a great benefit to many small businesses and would hate to see it go away. It seems this administration is bent on raising taxes for all Ohioans.
  6. Jacob | May 05, 2019
    Combine this BID change with the Federal changes and C-corp is starting to look more favorable for many businesses.
  7. Russ | May 05, 2019
    One of the reason for the BID was because Ohio started a CAT tax on all businesses whether profitable or not .    This is very unfair 
  8. Douglas Fox | May 03, 2019

    I  would drop the limit to 50,000. We want to help small business. Many owners  have multipale Sub S. Especially real estate holdings.

    I believe the base should be 15,800. With the 24,000 exclusion, that would be 39,800 gross.

  9. Douglas C Yaecker | May 02, 2019
    Regarding Ohio gas tax increase relating to infrastructure, are you aware Trump yesterday met with Dems re: $2 tril national infrastructure bill, which seems needed to be considered B4 any Oh state gas tax increase.

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