By Greg Saul, Esq., CAE, OSCPA tax policy director
Two OSCPA legislative priorities were introduced this week in the Ohio Senate. First, Senate Bill 247 was introduced by Senators George Lang, R-West Chester, and Kristina Roegner, R-Hudson, and addresses the Business Income Deduction and sales of businesses’ ownership interests. The second, Senate Bill 246, was introduced by Senators Lang and Michael Rulli, R-Salem, and creates a state-level solution for Ohio taxpayers to the current $10,000 state and local tax limitation at the federal level.
BID and business sales: The Ohio Department of Taxation began auditing resident business sales in 2019 because of the Ohio Supreme Court’s decision in Corrigan v. Testa (2016), which is beneficial to only non-residents. OSCPA worked to secure the introduction of Senate Bill 247 to clarify that gains from the sale of an ownership interest in a business is considered business income for Ohio income tax purposes, provided the sale satisfies either of the following:
As currently drafted, the bill is a remedial measure intended to clarify existing law. It applies to any petition for reassessment or any appeal thereof; to any application for refund or any appeal thereof pending on or after the effective date; and to any transaction that is subject to an ODT audit on or after the effective date. The goal is to clarify the law but also to achieve a retroactive clarification so it can be applied to currently pending audits.
SALT deduction parity: Pursuant to IRS Notice 2020-75 issued in November 2020, states are permitted to enact legislation to clarify that taxes paid by a pass-through entity do not count towards an owner’s $10,000 state and local tax limitation deduction for federal income tax purposes. As a result, OSCPA worked to secure the introduction of Senate Bill 246 to authorize a PTE owner to claim a refundable credit against the owner’s Ohio income tax liability equal to the owner’s proportionate share of the tax paid by the PTE. To date, nearly 20 states have already adopted a similar approach.
Both S.B. 246 and S.B. 247 have been assigned to the Senate Ways & Means Committee and await hearings. For more background information, please see the following two co-sponsor requests from the legislators who introduced these two bills.
Read the official memos: