The House Finance Committee accepted Substitute House Bill 49 on April 25 as part of the budget bill’s movement through the Ohio House of Representatives. Testimony is being accepted this week with omnibus amendments due on April 28. If things go as planned, the Finance Committee will finish its work, and the full House will pass the budget by the end of next week.
Conditions have changed since HB 49 was considered in the House. Gov. Kasich, House Speaker Rosenberger and Senate President Obhof held a press conference several weeks ago to bring attention to the fact that state revenues were coming in below estimates. They announced that a projected shortfall of $400 million for each fiscal year was to be considered immediately.
The House acted on the news by enacting a 1.5 percent reduction in across the board budget cuts. The adjustments reduced spending by $1 billion in fiscal 2018 and $1.5 billion in fiscal 2019. Even with these reductions, they were able to increase funding by $170 million for opioid issues and $80 million for K-12 education spending. There will be continued discussions about the final result over the next few months as the budget process continues.
So what has been added or taken out of the budget as originally proposed? The major concern for Ohio businesses in the governor’s budget was in the area of taxes. The House made significant changes to the tax package. The following is a short recap of some of the changes in the tax area that are of interest to the business community.
- The proposed tax reforms include collapsing personal income brackets from 9 to 7 by eliminating the bottom two individual brackets. The new lowest bracket begins at $10,000 at $74.25 plus 1.980 percent of the amount above $10,000.The low income tax credit of $10,000 is repealed as unnecessary.
- The governor’s entire proposed tax reform plan, which included income, sales, severance, commercial activity, tobacco, vapor and alcohol was removed. This proposal was opposed by the Ohio Chamber of Commerce and its removal is greatly appreciated.
- Centralized collection for municipal income taxes was removed and the sub bill allows a business to file a single annual return through the Ohio Business Gateway. It also allows the tax commissioner to collect a fee of one percent of the tax due or $1,000 whichever is less from the filer. (There are ongoing discussions which may lead to further changes in these or other provisions of the budget, including the repeal of the “Throwback Rule.”)
- A political subdivision will be required to pay owners fees when the subdivision appeals a property tax assessment case and loses.
- Two new factors were added to be considered in calculating the current agricultural use value (CAUV) “typical cropping and land use patterns” and “typical production costs.” The use of “market value” was deleted.
- Sales of automatic data processing, computer services, electronic information services and electronic publishing are not the true object of the transaction and not taxable under the sales tax when they are provided primarily for the delivery, receipt or use of another nontaxable service.
- Clarification on the base on which a hotel intermediary must collect and remit the sales and use tax and absolves the hotel of liability for unpaid sales and use tax.
Once the Senate receives the bill, they will have about six weeks to complete their review and passage. History shows that a committee of conference will need to be formed to work out differences between the chambers with a final vote sometime in late June. Ohio’s Constitution requires a balanced budget adopted before July 1st.