OSCPA staff report
The Ohio Society of CPAs this week offered proponent testimony in support of Senate Bill 246 and Senate Bill 247 – two OSCPA legislative priorities that were introduced earlier this month in the Ohio Senate.
Both bills address challenges faced by Ohio pass-through entity owners.
SALT deduction parity: OSCPA Tax Policy Director Greg Saul, Esq., CAE, told the Senate Ways & Means Committee on Oct. 26 that “S.B. 246 is a win-win for the state of Ohio and for Ohio business owners.”
The legislation levies a tax on a pass-through entities' income at a rate of 5% for taxable years beginning in 2022 and 3% for taxable years thereafter, but only if that entity elects to become subject to the tax. All tax revenue would enter the GRF. The bill authorizes an 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. Similar bills have passed in 19 other states.
“This unique and revenue-neutral change to Ohio’s tax code will provide a tool for Ohio business owners to obtain a federal tax benefit with no loss of Ohio or municipal tax revenue,” Saul said, adding that the bill will make Ohio more competitive.
“The sooner this legislation is enacted, the sooner it can level the playing field and benefit Ohio’s business owners and job creators.”
Saul was joined by OSCPA member Tom Zaino, CPA, JD, managing member and founder of Zaino Hall & Farrin LLC. Committee Vice Chair Kristina Roegner, R-Hudson, asked whether there are any other taxes that are elective. Zaino said this involves choosing to be taxed one way instead of another and that is present in nearly 20 other states. It will provide a federal tax benefit.
Business income deduction and business sales: SB247 provides clarifying guidance to the Ohio Department of Taxation and taxpayers that BID treatment applies to both a sale by a person who was actively involved in managing a business during the year of sale or previous five years, and a sale that is treated as an asset sale for federal tax purposes.
Doing double duty Oct. 26 before the Senate Ways & Means Committee, Saul was again the proponent:
“As currently drafted, S.B. 247 is a remedial measure intended to clarify existing law,” he said. “It also 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 so it can be applied to currently pending audits.”
Sen. Jerry Cirino, R-Kirtland, asked whether Saul was suggesting there be different treatment in gain recognition for various asset classes. Saul answered that he was not, but just trying to ensure if federal law treats a sale as a sale of assets, then Ohio will also treat the sale the same way.