Bill helps businesses benefitting from CARES Act

Written on Nov 19, 2020

OSCPA staff report 

OSCPA this week provided testimony in favor of a bill our members helped to draft that would prevent a cash-flow issue for Ohio businesses that take advantage of pro-taxpayer provisions in the federal CARES Act. 

House Bill 749 temporarily suspends, for taxable years 2020 and 2021, and for taxable years with a federal net operating loss (NOL) carryback from taxable years 2020 and 2021, special provisions relating to Ohio’s “bonus depreciation” adjustments in years when a taxpayer has an NOL. The bill would allow the businesses to depreciate assets quicker over a five-year timeframe (commonly referred to as the 5/6 add back), rather than a provision in current law that forces it over six years (the 6/6 add back). 

Barbara Benton, CAE, OSCPA’s vice president of government relations, on Nov. 18 told members of the Ohio House Ways & Means Committee that the bill would help taxpayers impacted by COVID-19. 

“In some cases, taxpayers are facing state income tax liabilities that are greater than anticipated because of the interplay between recent federal tax changes and existing Ohio tax law provisions,” Benton said. “To correct this inequity, this bill allows Ohio businesses to retain funds as a result of losses caused by the pandemic.” 

Federal income tax law gives “enhanced depreciation allowances” for businesses that invest in certain depreciable business assets, such as tangible personal property and certain real property, Benton said, with the intent to “encourage increased business investment by permitting businesses to accelerate the tax benefit of asset depreciation deductions, moving it into earlier years than customarily allowed under traditional depreciation schedules.” 

Ohio currently decouples from – does not conform to – federal tax laws on certain facets of accelerated depreciation and NOL rules. As a result, several pro-taxpayer provisions of the CARES Act could result in some Ohio businesses being required to add back even more to their Ohio tax returns. 

“In essence, a provision in current law triggers a cash-flow issue for Ohio businesses, so the legislation would instead allow businesses to continue to compute their Ohio tax liability based upon previous methodology – taking the depreciation sooner rather than later and retaining much needed dollars in Ohio’s economy,” Benton said. “Additionally, over a six-year time frame, there is virtually no adverse revenue impact – the State of Ohio still gets the same amount of money but over a longer time period.” 

She said the Ohio Legislative Service Commission found that the eventual result for the state would be increased taxpayer refunds and decreased state tax revenues in the short-term offset by higher state tax revenues in future years. 

“Taxpayers would benefit on a net basis from these changes because of the time value of money – allowing businesses to retain essential cash-flow now when they need it the most,” Benton said. “…The bill proposes to change the law beginning in tax year 2020, so it needs to be enacted soon in order to be effective before taxpayers begin filing their income tax returns during the upcoming 2021 tax season.” 

Read the testimony in its entirety. Plus, be sure to join us on Dec. 4, when you can learn more about the legislative process at OSCPA’s Advocacy in Action event