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Tax Talk - OH HOUSE BILL 166

Ohio House Bill 166 Highlights

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After much anticipation and delay, Ohio House Bill 166 was signed into law on July 18th. The bill includes key changes to income and sales tax provisions as well as tax credits. Below is a recap of the highlights of the new legislation.

Income Tax:

  • Effective January 1, 2019, individuals with Ohio adjusted gross income less personal exemptions of $21,750 or under are exempt from tax. The new law repealed the two lowest income tax brackets imposing tax on individual non-business income.
  • The legislation reduces the individual tax rates across the remaining tax brackets by 8% ratably over the next two years beginning in 2019. At the end of the phase-in period the tax rates will range from 2.731% – 4.597%.
  • The maximum deduction for business income will remain at $250,000. However, lawyers and lobbyists are prohibited from benefiting from the $250,000 deduction and are also not eligible for the 3% tax rate on business income. This exception is likely to be challenged by those affected.
  • Effective January 1, 2020, the 3% flat tax on business income is eliminated.
  • Effective January 1, 2019, the credit on individual tax returns for contributions made to the campaign committee for candidates of Ohio offices has been repealed.

Sales and Use Tax:

  • The legislation updated the Ohio nexus definition based on the U.S. Supreme Court’s decision in South Dakota v. Wayfair, Inc. An out-of-state retailer will have substantial nexus with Ohio if in the current or previous calendar year it has:
    • Gross receipts from Ohio sales exceeding $100,000 or
    • 200 or more separate sales transactions in Ohio

Tax Credits and Incentives:

  • Motion Picture Tax Credit
    • The motion picture tax credit is now extended to Broadway theatrical productions.
    • The list of eligible expenses which qualify for the credit now include post-production, advertising and promotional expenses.
    • The awarded certificates are no longer transferable.
  • Opportunity Zone Credit
    •  The legislation provides for a 10% transferable, nonrefundable income tax credit to taxpayers that invest in Ohio’s opportunity zones.
    • Individuals, taxable trusts and taxable estates will qualify for the credit.
    • The credit is equal to 10% of the taxpayer’s investment in an Ohio qualified opportunity zone investment fund.

Other Tax Related Provisions:

  • The legislation provides for partnership audit rules similar to the Federal provisions.
  • Income from any retirement benefit plan, including a nonqualified plan that is not eligible for favorable federal tax treatment, is exempt from municipal income tax.
  • Teachers will benefit from a personal income tax deduction of up to $250 for out-of-pocket expenses for professional development and classroom supplies.

Please contact Pease & Associates, CPA’s for further details on the legislation.