HB 197 Works to Clarify Tax Code Language

Earlier this week, the Ohio Senate Ways and Means Committee favorably reported House Bill 197. HB 197 makes quite a few technical changes to Ohio’s tax code.

In over 675 pages, HB 197 corrects obsolete language, fixes cross references, eliminates typographical errors and reorganizes language to clarify the law.  During the deliberation of the bill in the House, a few substantive issues were identified and corrected. Those substantive changes remedied oversights from previous legislation. For example, HB 197 corrects a notification for homestead exemption applications. A recent law moved the deadline to apply for a homestead exemption from early June to December 31, but the notification of approval or denial of the exemption references an October date. HB 197 removes the October date and now requires a notification to applicants within 30 days after a decision on the application is made.   

The Senate Ways and Means Committee also added language to incorporate into Ohio income tax law changes to federal income tax law taking effect since March 20, 2018, including the recently enacted “Further Consolidated Appropriations Act, 2020.”  This amendment to HB 197 is necessary because amendments to the federal tax law do not become part of Ohio law unless they are incorporated by an act of the General Assembly. This requirement for incorporation is also time sensitive due to tax return filing dates or other events, so HB 197 now includes an emergency clause.

Many of these changes will apply first to taxable years beginning January 1, 2020, or thereafter, but some apply beginning in 2019 or, retrospectively, in 2018. As outlined in the accompanying bill analysis, this is a partial list of some of the more substantial federal tax changes affecting Ohio taxpayers:  

  • The extension of the deduction for qualified tuition and related expenses (applies to taxable years beginning in or after 2018).
  • An increase in the age of required beginning date for required minimum distributions from tax-advantaged “qualified” retirement plans, e.g., IRA and 401(k) retirement plans, from 70.5 to 72 (taxable years beginning in or after 2020).
  • A requirement for a non-spouse beneficiary of a qualified retirement plan to withdraw all money from an inherited account within ten years (taxable years beginning in or after 2020).
  • The allowance of penalty-free distributions from qualified retirement plans for births and adoptions (taxable years beginning in or after 2020).
  • An expansion of section 529 education plans to allow distributions for expenses associated with apprenticeship programs and up to $10,000 in student loan repayments (taxable years beginning in or after 2019).

HB 197 also includes a couple of other amendments. One is technical in nature and the other narrows a sales tax exemption for prescription incontinence products that was created in Senate Bill 26. HB 197 now goes to the full Senate. If approved by the Ohio Senate, HB 197 goes back to the Ohio House for concurrence with the Ohio Senate changes. Although HB 197 does not address one of the Ohio Chamber of Commerce Tax Committee public priority policies, it importantly addresses an issue for tax practitioners. HB 197 clarifies the language in the tax code, which in turn makes it easier to understand and administer.