Senate Passes Budget; House Fails to Concur; Conference Committee Begins Work

The second of four major actions of the budget process was completed on June 21 with the passage of Sub. HB49 by the Senate.  Since the House did not concur with the Senate’s version, the Conference Committee will spend the next week or so, going through their differences in the budget.

A surprise amendment with no prior discussion was included in the Senate’s omnibus bill. It eliminates the right to make a direct appeal to the Ohio Supreme Court from decisions of the Board of Tax Appeals. Under current law, taxpayers and taxing authorities may appeal a decision to either the Ohio Supreme Court or the local Court of Appeals in which the taxpayer resides. If enacted, this change would negatively impact business taxpayers by increasing cost for both taxpayers and government, eliminate uniformity across the state, allow the Department of Taxation to not follow a result in the other districts and create venue challenges. We are very concerned about the issue and are working to resolve it.

There are many provisions that we support and thank the House and Senate for their efforts to move Ohio forward. These are the issues dealing with the taxation of business.

Importantly, the Senate version still includes allowing businesses the option to file a single annual municipal net profit tax return with the state of Ohio through the Ohio Business Gateway, with the Ohio Department of Taxation administering those municipal business taxes and returns. This election would renew every year until termination by the taxpayer. An administrative fee of 1% of collected tax would be assessed on the municipalities to cover the department’s administrative expenses.

The removal of the throwback provision that was part of the governor’s original budget proposal is still in the Senate’s version of the budget, moving the effective date forward one year to 2018. Throwback is the name of the practice by which cities unfairly tax businesses on sales made to customers not located in that or any other Ohio city. These two changes will improve Ohio’s convoluted municipal income tax system, and lessen compliance costs to business.

A proposal to prohibit political subdivisions from filing a complaint unless they first adopt a resolution and two other pieces dealing with Board of Revision complaints was removed from the bill.

The Senate also retained language that specifies that sales of automatic data processing, computer services, electronic information services and electronic publishing are not taxable under the sales tax when they are being provided primarily to deliver, receive, or use another, nontaxable service. The Department of Taxation had recently determined that these services were taxable and were auditing and going back years for collection.

The tax amnesty program, to be effective from January 1, 2018 to February 15, 2018 remains. Only state taxes are eligible. It would apply only to taxes that were due on May 1, 2017, and does not apply to any tax which notice of assessment or for which an audit is pending. The Senate enacted for another year the sales tax holiday that allows school supplies costing less than $20 and clothing items less than $75 to be exempt from sales tax for a brief period in early August. The first of these holidays occurred in 2015, and previous legislation had extended them through 2017.

The Conference Committee is made up of six legislators which include three from the House and three from the Senate with one member from each chamber being from the minority party and the other two from the majority party. Members of this year’s Conference Committee are Reps. Smith, Ryan and Cera and Sens. Oelslager, Manning and Skindell.  A hearing to receive testimony from the Office of Budget Management and the Legislative Service Commission will be held on June 22. They will then spend the ensuing days poring through the Budget Comparison Document until they can agree on whether the House, Senate or amended version of the item is to be adopted. There can be hundreds of items of difference to be worked out. Eventually, there will be a formal hearing where the final version is adopted. Both the Senate and the House will then have a simple up or down vote on the Conference Report, no amendments allowed.  With passage by both chambers, Gov. Kasich’s signature, with any line-item vetoes, will put the state budget into law.

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