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CPA poll: Lawmakers should remove, take time to study BID changes

Written on May 1, 2020

OSCPA staff report

CPAs say Ohio lawmakers should either remove changes to the state’s Business Income Deduction (BID) to study the impact they could have on the state’s economy or eliminate them to one degree or another because they’re likely to be harmful to our state’s economic growth.

That was the position suggested by about two thirds of respondents to an OSCPA poll this past week of its 17,000+ CPA members.

At issue are proposals in Substitute House Bill 166, the state’s biennial budget. The House on May 9 passed its version of the bill, 85-9, sending it to the Senate for further consideration. In its current form, the bill includes these significant BID changes:

  • Lowering the current $250,000 pass-through entity owners can earn without paying state income tax to $100,000;
  • Eliminating the flat 3% rate for PTE income over $250,000, and instead taxes business income exceeding $100,000 at the same graduated rates as nonbusiness income — the reduced graduated rates would apply to the sum of a taxpayer’s business and nonbusiness income; and
  • Applying the changes retroactively to taxable years beginning on or after Jan. 1, 2019.

The House’s omnibus amendment to the budget also includes an across-the-board cut of 6.6% from current rates on the remaining five graduated brackets.

Around 1,400 CPAs as of press time participated in OSCPA’s member poll on the bill, which began May 10. About a third of respondents urged that the BID changes come out of the bill to allow time to  study the impact of these proposed changes , which is what OSCPA advised when testimony was given in the House.  Nearly 20% more said the Society should simply oppose all the changes. A little more than 10% each said the Society should only oppose either the retroactive effective date, or the retroactive date and lowering the current $250,000 pass-through entity owners can earn without paying state income tax to $100,000

About 12% said OSCPA should support the BID changes.

Rates are reduced to the same degree for trusts and estates, but the rates apply to all their taxable income, including the first $22,250 being taxed at 1.389%. Another change requires that, for purposes of school district income taxes that use “earned income” as the tax base, amounts subject to the state business income deduction must be added back when computing a taxpayer’s taxable income.

The cuts are intended to fund reductions in individual income taxes, including eliminatingthe bottom two brackets – meaning all with income under $22,250 will owe no tax – and reducing all other brackets by 6.6%.

Members who have concerns about any of these provisions are encouraged to contact OSCPA, and to share their views with your state senator. Click here to find out how to do so or to contact OSCPA for help.