Ohio Governor Mike DeWine recently signed the fiscal year 2022-23 budget bill, which contains several tax provisions and changes that will affect businesses and their owners. The bill’s general effective date is the 91st day after being filed with the Ohio Secretary of State. Some of the bill’s highlights are as follows:
- An income tax deduction for investors in certified, Ohio-based venture capital operating companies (“VCOC”). The deduction will be 100% of the capital gain received by the taxpayer-investor during the taxable year attributable to a VCOC’s investment in Ohio businesses, and 50% of capital gain received from a VCOC’s investment in all other businesses. The deduction will be available for taxable years beginning in 2026.
- A sales and use tax exemption for employment services and employment placement services, set to go into effect the month following the legislation’s general effective date.
- A requirement that taxpayers use their preceding year’s taxable gross receipts, rather than the current year’s gross receipts, to calculate the commercial activity tax (“CAT”) owed on their first $1 million in gross receipts.
- In computing the CAT, taxpayers can exclude from gross receipts any excess surplus of the State Insurance Fund received by the taxpayer from the Ohio Bureau of Workers’ Compensation. The exclusion is set to go into effect in the taxable year 2022, continuing and making permanent the temporary exclusion currently in place for tax years 2020 and 2021.
- An income tax deduction for certain qualifying taxpayers for capital gain attributable to the sale of an ownership interest in a business, capped at the lesser of the capital gain from the sale or an amount calculated using the business’s payroll during a certain period. The deduction is set to go into effect for taxable years beginning in 2026.
- For tax years beginning on or after January 1, 2021, there is no longer a requirement that taxpayers report each business or professional activity from which their business income was derived when claiming the business income deduction.
If you have questions regarding the tax provisions in the new legislation, please contact Brian P. Bunner at 614-744-2573, or any one of the attorneys in our Tax Group.