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Lame duck digest: Expect action on some key legislative issues

Written on Nov 12, 2020

By Greg Saul, Esq., CAE, OSCPA tax policy director 

Election season is over, and lame duck season has begun! The OSCPA government relations team has been advocating on behalf of members on many issues at the Ohio Statehouse, and there are several that bear watching before new legislators take office: 

Pass-Through Entity (PTE) Withholding. The House Ways & Means Committee on Nov. 10 unanimously passed OSCPA-supported H.B. 467 after its fifth hearing. This legislation sets the rates at which PTEs remit taxes on qualifying nonresident investors’ income equal to the rate on residents’ taxable business income, effectively reducing the withholding rates from the current 5% or 8.5% to 3%. The committee did add an amendment before moving the bill – considering the pandemic and H.B. 467’s one-time revenue impact of $30.5 million: the effective date was moved out to taxable years beginning on or after Jan. 1, 2023. A vote on the House floor will occur next. 

Bonus Depreciation. The House Ways & Means Committee on Nov. 10 also heard sponsor testimony from Rep. Bill Roemer, CPA, R-Richfield on H.B. 749. This bill temporarily suspends, for taxable years 2020 and 2021, and for taxable years with a federal net operating loss carryback from taxable years 2020 and 2021, special provisions relating to Ohio’s “bonus depreciation” adjustments in years when a taxpayer has an NOL. In essence, this legislation attempts to prevent a cash-flow issue for Ohio businesses that take advantage of pro-taxpayer provisions in the federal CARES Act. The bill would allow the businesses to depreciate assets quicker over a five-year timeframe (commonly referred to as the 5/6 add back), rather than a provision in current law that forces it over six years (the 6/6 add back). 

Temporary Amnesty Program. H.B. 609 requires the Tax Commissioner to administer a temporary amnesty program (no penalties and interest) from April 1 to May 31, 2021, with respect to delinquent state taxes and certain fees. At its second hearing before the Senate Ways & Means Committee, the legislation was amended to provide the amnesty during that two-month period – the version passed by the House had originally provided a three-month amnesty, from Jan. 1 to March 31, 2021. 

CPA Exam. After passing in the House in June, H.B. 442 received its first hearing with the Senate Transportation, Commerce & Workforce Committee before Election Day. The bill would allow students in the state of Ohio to sit for the CPA exam after completing 120 semester hours of the required 150 hours of coursework. The 150 hours as well as one year of work experience would still be required to obtain a CPA license. H.B. 442 is anticipated to have its second hearing as early as the week of Nov. 16, so stay tuned for further updates. 

Credit Carryforwards. Beginning with tax year 2017, the Ohio Department of Taxation announced that overpayments for composite, trust and non-resident PTE returns were going to be refunded to the taxpayer or qualifying entity. Therefore, credit balances were no longer carried forward to the next taxable period for IT 1140, 4708, and 1041. OSCPA opposed this move and worked with ODT to restore the prior practice. The Society is happy to announce that ODT has added to the 2020 PTE tax returns the option for taxpayers to complete a credit carryforward to tax year 2021. For a preview, go to the following link and select “Draft Forms” as the tax type in the drop-down list. In addition, ODT plans to send out an alert later this year. To learn more about the legislative process, attend Advocacy in Action on Dec. 4.