BID changes still debated
OSCPA staff report
The Ohio Senate on June 20 unanimously voted 33-0 to pass their version of Ohio’s biennial budget bill, which largely restores important existing tax deductions for small business owners and increases across-the-board income tax cuts for all brackets from 6.6% to 8%. The Senate Finance Committee last night unanimously sent the bill to the Senate floor today.
As announced last week, the moves address concerns raised by OSCPA about the House version of Ohio’s biennial budget, which would have reduced the threshold for the business income deduction (BID) from $250,000 to $100,000 and repealed a special flat 3% standard rate on income above that threshold. The House version also made both changes retroactive back to January 1, 2019.
The Senate restored the deduction back to the full $250,000 amount and moved the effective date for the 3% rate repeal out to January 1, 2020. Therefore – as it stands today – there are now no changes to the BID and 3% flat rate for tax year 2019. The Ohio Society applauds the Senate for their leadership in tangibly recognizing the important role Ohio’s small businesses play in Ohio’s economy.
The restoration of the BID to $250,000 and the prospective effective date of 2020 are positive developments, but the eventual repeal of the 3% flat rate will impact future business investment, according to feedback from member CPAs. An OSCPA member poll in May revealed concerns about the cuts, and OSCPA has also been advocating for restoration of the 3% flat rate.
The Senate changes to Substitute House Bill 166 include an across the board 8% reduction in income tax rates phased in over two years, while maintaining House plans to eliminate the bottom two brackets, moves that OSCPA also supports. Here are the proposed income tax brackets, which are based on a 4% cut in both tax year 2019 and tax year 2020:
The bill now moves to a joint House-Senate conference committee where even more changes will take place as the Legislature and DeWine Administration negotiate differences. The six conference committee members are Sens. Matt Dolan (R-Chagrin Falls), Dave Burke (R-Marysville) and Sean O'Brien (D-Cortland), and Reps. Scott Oelslager (R-North Canton), Jim Butler (R-Dayton) and Jack Cera (D-Bellaire).
By Ohio law, the biennial budget bill must be signed into law prior to the July 1 deadline. Nothing in the bill is final until Gov. DeWine has concluded his review and signature of the bill, along with any line-item vetoes he may choose to exercise. The Ohio Legislative Service Commission has published a comparison document of all the Senate’s proposed tax changes.
Members who have concerns about any budget proposals in H.B. 166 are encouraged to contact OSCPA, and to share their views with their state legislators. Click here to find out how to do so or to contact OSCPA for help.