House updates BID exemptions, adds back lawyers, lobbyists

Written on Oct 12, 2019

Lawyers and lobbyists are close to once again being eligible in 2020 to collect the small business deduction after the Ohio House on Oct. 10 approved a budget cleanup measure. The Senate must still concur with House changes.

Those two professions join CPAs and all other qualified PTE owners as again being eligible for the BID, addressing questions that remained from this summer’s biennial budget bill.

Barbara Benton, CAE, OSCPA’s vice president of government relations, said the move makes sense.

“The changes made not only add back the BID for lawyers and lobbyists, but also eliminates the lack of clarity regarding the impact on businesses beyond law firms caused by unclear bill drafting,” she said.

Ahead of the full chamber's vote on Senate Bill Senate Bill 2626, the House Finance Committee adopted six amendments to the legislation, originally written to allow teachers to deduct up to $250 from their income taxes per year for money they spend on professional development or classroom supplies.

One amendment repeals language adopted in the budget bill, House Bill House Bill 166, that prohibited attorneys and lobbyists from claiming the state's business income deduction. The BID allows pass-through entities to avoid paying income tax on the first $250,000 and pay a flat 3% rate on qualified income above that amount. In place of the exclusion, a requirement was added that requires filers claiming the BID to report their occupations using North American Industry Classification System codes.

House leaders said the change was adopted because of their inability to track occupations, and therefore also do a fiscal analysis of the lobbyist-lawyer exclusions; collecting that information will help them plan for future reforms.

“It’s important for PTE owners to note that this addition of occupational coding was done to allow legislators to better understand what specific services are being provided and how much these PTE owners are benefiting from the BID. This data undoubtedly will be used by legislators during the 2021 biennial budget discussions to see if and how the BID benefits should be adjusted,” Benton said.

Other amendments made the following changes:

  • Delaying until 2020 repeal of income tax credits for campaign contributions and for pass-through entity investors' shares of Financial Institutions Tax.
  • Adding a sales tax break for feminine hygiene products.
  • Exempting from sales tax incontinence products that are prescribed by a doctor and paid for or reimbursed by Medicaid.

Leave a comment