Ohio House bill fixes small biz tax issue

By Marc Kovac | October 28, 2015 at 12:00a.m.

COLUMBUS

The Ohio House made quick work of legislation that would fix a small-business tax issue and provide increased funding for about 75 school districts hit by a line-item veto from the governor earlier this year.

Senate Bill 208 passed the House on a vote of 84-6 Tuesday, less than a week after initial passage in the Ohio Senate. The latter signed off on minor changes to the bill later in the afternoon, sending the final package to Gov. John Kasich for his signature.

The initial focus of SB 208 was to clarify tax cuts enacted as part of the biennial budget bill to ensure that small businesses will not face a higher-than-expected tax bill this year.

The two-year spending plan included a phase out of taxes on small-business income up to $250,000, with a 75 percent exemption allowed during the current tax year and 100 percent in 2016. The legislation also calls for a flat 3 percent tax on business income of more than $250,000.

But the way tax changes were enacted potentially poses a problem for some small businesses, which could end up having a bigger tax bill under the flat 3 percent rate this year.

SB 208 still would provide the 75 percent exemption on the first $250,000 of small-business income for the current tax year but would clarify that the other 25 percent would be taxed using the current graduated tax rates, with a 3 percent cap.

“This clarifying language ensures Ohio’s business owners will receive the full tax relief ... and will allow the small-business income-tax exemption to smoothly transition Ohio’s small businesses from today’s tax structure to this flatter tax,” said Rep. Ron Amstutz, R-Wooster. “This bill will result in additional tax relief for small businesses of about ... $84 million over the biennium.”

Lawmakers also added language to restore a portion of the tangible personal property tax supplement that was included in the Ohio House and Senate version of the biennial budget but was cut, via a line-item veto, by the governor.

The veto meant a loss of about $84 million in funding for affected districts. The TPP supplement included in SB 208 would restore a portion of those funds.