LEGISLATURE FINALIZES BUDGET BILL

On Tuesday, what’s called the Conference Committee met to hammer out more than 600 differences between the House- and Senate-passed versions of House Bill 49, the state budget. Yesterday, a majority of both the Senate and House voted to accept this Conference Committee report, marking the final legislative step in the process that began in February.

Now the fate of the bill is in the hands of Gov. John Kasich, who has until midnight tomorrow – the official end of the current fiscal year – to sign the legislation into law.

All in all, employers should be pleased with the $65.4 billion budget package that lays out where and how Ohio will spend its resources over the next two years. No budget is perfect, but HB 49 contains several provisions that benefit Ohio employers.

Most importantly, businesses that struggle to comply with Ohio’s complicated municipal income tax system will benefit from two common-sense reforms: the elimination of the “throwback” rule – wherein cities unfairly tax businesses on sales made to customers not located in that or any other Ohio city – and the establishment of an option to have your municipal business net profit tax administered by the Ohio Department of Taxation.

Beyond municipal income tax, a new process for how the Ohio Environmental Protection Agency handles discharge permitting appeals and several new workforce development initiatives are other highlights.

Also important to consider when evaluating HB 49 is what’s not in the legislation. When it was introduced, the bill included a tax reform package comprised of increases in the sales, oil and gas severance, tobacco products, and beer and wine taxes, along with a plan to expand the sales tax to several services not currently subject to it. These tax changes would have resulted in an estimated $1.2 billion dollars of new taxes on Ohio employers. None of them are in the final version of HB 49.

Along the way, the bill picked up a new health insurance mandate; it was removed.

The provision that created a new civil penalty for violation of the law passed last year allowing individuals to store firearms in their privately-owned vehicles on employer property was modified to make it much less troublesome. While plaintiffs can still pursue injunctive relief from employers, the language permitting compensatory damages, attorneys’ fees, and court costs was removed.

Unfortunately, two other provisions we alerted you to last week remain in HB 49 – despite the action many Ohio Chamber members took to communicate to your lawmakers how these changes could negatively affect your business. The first of these was a provision that eliminates the important taxpayer right to make a direct appeal to the Ohio Supreme Court from a decision of the Board of Tax Appeals. If the direct appeal is eliminated, the costs of tax appeals will increase and tax law could be applied differently across Ohio.

The other was a provision that allows up to 2 percent of the Bureau of Workers’ Compensation and Industrial Commission budgets to be transferred to the General Revenue Fund. It would set an extremely dangerous precedent to allow the state to raid the budgets of these exclusively employer-funded agencies in order to fund general government operations.

The Ohio Chamber has already asked Gov. Kasich to exercise his line-item veto powers to remove these two provisions. Whether these provisions – or anything else contained in the nearly 5,000 pages of HB 49 – should be vetoed is a decision the governor and his administration have less than 36 hours to make. Whatever Gov. Kasich decides, however, doesn’t automatically put an end to the budget deliberations, as both the House and Senate have set aside one day next week to return to Columbus to consider veto overrides if necessary.

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