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Society secures introduction of BID, SALT deduction bills

Written on Oct 7, 2021

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:

  1. The sale is treated for federal income tax purposes as the sale of assets; or,
  2. The seller was involved in the day-to-day management of the business during the taxable year in which the sale occurred or during any of the five preceding years.

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:

Clarify applicability of the BID to the sale of a business [PDF]

SALT deduction to Ohio’s Main Street business communitY [PDF]