Ohio Update: Budget Bill Passed; Relief for Storm Victims

On July 18, 2019, Ohio Governor Mike DeWine signed a new two-year state budget that includes lowering personal income taxes and retaining key business tax provisions. While the biennial budget period began July 1, 2019, most of the tax provisions have 1/1/2019 or 10/1/2019 effective dates.

We’ve highlighted some of the key tax law changes below.

Income Taxes – effective for tax year beginning 1/1/2019

  • Tax rates reduced by 4%. The top bracketed rate reduced from 4.997% to 4.797%.
  • The lowest two income tax brackets will be eliminated, so Ohioans making less than $21,750 per year will pay no state income taxes.
  • Retain the business income deduction for the first $250,000 in qualified business income and the preferential 3% tax rate for business income exceeding $250,000.
  • Precludes law firms and lobbyists from taking advantage of both the business income deduction and the 3% preferential rate.

Opportunity Zone Tax Credits

  • Provides a nonrefundable income tax credit equal to 10% of a taxpayer’s investment in an opportunity zone investment fund.
  • Eligible taxpayers include individuals, taxable trusts, or taxable estates.
  • Taxpayer may claim the credit in the year the fund invests the taxpayer’s investment in opportunity zone property.
  • There is no minimum holding period for the investment.
  • Allows excess credits to be carryforward up to five years.

Sales and Use Tax

  • Repeals exemptions for sales of investment bullion and coins and for sales of qualified property to qualified motor racing teams.
  • Implements Wayfair nexus thresholds for sellers that have $100,000 or more of sales to Ohio customers or 200 or more separate sales transactions.
  • Provision to allow counties or transit authorities to levy a sales and use tax in increments of 0.05% – effective 10/1/2019.

Vape Tax

  • A new vape tax at a rate of 10 cents per milliliter or gram of product containing nicotine, effective October 1, 2019. Additionally, the new bill also raises the legal age from 18 to 21 for the purchases of cigarettes, cigars, vape pens and other tobacco-related products.

Ohio Storm Victim Relief

The IRS announced that victims of the May 27th storms in Ohio may qualify for additional time to file certain federal tax filings. If you reside or have a business located in a disaster area, the IRS is extending the time to file certain returns with deadlines falling between May 27 and September 30 until September 30, 2019. In addition to extending the deadlines for filing returns, the IRS is allowing taxpayers in the disaster area to claim disaster-related casualty losses not covered by insurance or other reimbursements on either their 2018 or 2019 tax returns. Taxpayers wishing to claim storm-related casualty losses as a result of the Ohio storms should indicate “Ohio, severe storms, straight-line winds, tornadoes, flooding and landslides” along with “FEMA 4441” on any return filed.

About the Authors

Theodore A. Wagner
Theodore A. Wagner
Partner and Executive Committee Member, Taxation Services


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