Governor John Kasich signed into law Ohio’s 2012-2013 budget bill, House Bill 153 (“HB 153”), which amends Ohio’s estate, corporate franchise, personal income, and sales and use taxes.
HB 153 provides for a tax amnesty program (“Program”) from May 1, 2012 through June 15, 2012. The Program will be available for unreported or underreported taxes due and payable as of May 1, 2011, including personal income tax, sales and use tax, corporate franchise tax, commercial activities tax (CAT), and motor fuels taxes. The Program provides that taxpayers who pay the full amount of delinquent taxes owed, in addition to one-half of the applicable accrued interest, are entitled to a waiver or abatement of the other half of the accrued interest and any associated penalties.
The Program is not available for any tax for which the Ohio Department of Taxation (“Department”) has sent a notice of assessment or audit or a tax bill. In addition, the Program does not apply to taxes for periods that have been audited or that are currently being audited.
In addition, HB 153 provides a consumer amnesty program for unpaid consumer use tax. The consumer amnesty program begins October 1, 2011 and ends May 1, 2013. The Department will waive penalties and interest on use tax paid in full for periods beginning on or after January 1, 2009. In addition, the Department will waive any consumer use tax and associated penalties and interest owed by participating taxpayers for periods prior to January 1, 2009.
HB 153 adds a refundable job retention tax credit that may be granted on or after July 1, 2011 and before January 1, 2014 to an eligible business with a total annual payroll of at least $20 million. To be eligible for the credit, a business must make a capital investment of at least $5 million in the aggregate at its project site during three consecutive calendar years. Further, the business must retain at least 500 full-time employees at the project site and a payroll of at least $20 million or maintain an annual payroll of at least $35 million for the entire term of the credit. Subject to the terms of individual tax credit agreements, the credits may be claimed for a period of up to 15 years.
A new small business investment credit has also been created for personal income tax purposes. Beginning July 1, 2011, taxpayers who invest up to $10 million in an Ohio small business and hold that investment for two years are eligible for a nonrefundable credit equal to 10% of their investment. The investment must be made in a business with $50 million or less in assets or $10 million or less in annual sales. The business must also employ at least 50 full-time employees in Ohio or employ more than one-half of its total number of full-time United States employees in Ohio. Any unused credits are eligible to be carried forward for a maximum of seven years. A computer data center business may be eligible for a sales tax exemption or partial exemption for certain purchases. The data center must invest at least $100 million to acquire, construct, renovate, or expand a computer data center or replace or repair computer data center equipment during a three-year period. In addition, the business must pay annual compensation of at least $5 million to data center employees.
Qualifying purchases include tangible personal property used
- To conduct a computer data center business, including equipment cooling systems to manage the performance of computer data center equipment;
- To generate, transform, transmit, distribute, or manage electricity necessary to operate the personal property used in conducting a computer data center business; and
- As building and construction materials sold to construction contractors for incorporation into a computer data center.
The exemption also includes charges for the delivery, installation, or repair of the exempt equipment.
Farmers and ranchers may claim an exemption on personal property used primarily in agriculture. Prior to this change, farmers and ranchers were allowed to claim an exemption on personal property used directly in agriculture.
HB 153 provides that no tax is due on the redemption of a gift card that is not sold by the vendor, provided the vendor is not reimbursed by a third party to cover all or part of the value of the card. For example, a card given to a customer as part of an awards or loyalty program is not “sold by a vendor” or “purchased by a consumer”; therefore, no tax is due for its value when redeemed.
Further, HB 153 limits the look-back period for use tax liabilities. HB 153 provides that the Department is prohibited from making a use tax assessment for periods before January 1, 2008.
Effective for the estates of individuals who die on or after January 1, 2013, HB 153 repeals the Ohio estate tax. Currently, a 6% tax is imposed on estates with a net taxable value of $338,333 to $500,000, and a 7% tax applies to estates valued for more than $500,000. HB 153 also requires that all claims and inquiries regarding inheritance tax must be received by the Department by December 31, 2012. In addition, all inheritance files that have not been finalized will be considered closed as of January 1, 2013.
The Department is expected to provide more information and further clarification regarding the provisions of HB 153 over the next several months.
TECHNICAL INFORMATION CONTACT:
Leslie S. Hahn
Principal
Ryan
313.230.0104
leslie.hahn@ryan.com