Added at the last minute, the recently enacted Ohio Budget Bill (Am. Sub. H.B. 153) included a tax credit for individuals against their Ohio personal income taxes for investments in qualifying Ohio small business enterprises. An eligible small business enterprises must have: (1) less than $50 million in total assets or less than $10 in annual sales; and (2) 50 full-time equivalent Ohio based employees, or half of all its full-time equivalent employees located in Ohio. The credit equals 10% of the qualifying investment, limited to $1 million per individual investor ($2 million for spouses filing jointly).

An eligible investor is an individual, estate or trust subject to Ohio personal income tax making a cash investment in a qualifying small business enterprise. Within six months of the investment, the small business enterprise must invest in or incur the cost of tangible personal property, motor vehicles, real property or intangible personal property used in business primarily in Ohio, or compensation for newly-hired or retained employees for whom the enterprise must withhold Ohio income tax (excluding increased compensation for owners, officers and managers). The investor may not sell or dispose of the investment until the end of the applicable holding period, which is two years for investments made between July 1, 2011 and June 30, 2013 and five years for investments made on or after July 1, 2013.

The nonrefundable credit is claimed in the tax year that includes the last day of the holding period and may be carried forward up to seven years. To qualify for the InvestOhio small business credit, the investor (or the qualifying enterprise on behalf of the investor) must apply to the Ohio Director of Development for a small business investment certificate. Certificates will be issued in the order in which the applications are received.

For more information on whether you may qualify for the InvestOhio small business credit, or how to apply for the credit, please contact us.

In addition to the Use Tax Amnesty Program discussed in previous posts, the Ohio Budget Bill (H.B. 153) also provides for a General Tax Amnesty Program allowing delinquent taxpayers to resolve their Ohio Estate Tax, Corporate Franchise Tax, Motor Fuel Tax, Sales Tax (vendor obligation), Cigarette Tax, Individual Income Tax, School District Income Tax and Commercial Activity Tax liabilities. Unlike the Use Tax Amnesty Program which lasts over 18 months, this general amnesty program will last only a month and a half, commencing on May 1, 2012 and ending on June 15, 2012. The program will allow delinquent taxpayers to resolve their entire liability by paying all the tax due as of May 1, 2011, plus one-half interest, with penalties and the other half of interest being waived.

The General Tax Amnesty Program limits eligibility by excluding any taxes for which a notice of assessment or audit has been issued, for which a bill has been issued, which relates to a tax period that ends after September 29, 2011 or for which an audit has been commenced. This differs significantly from the Use Tax Amnesty Program, which allowed taxpayers currently under audit to participate provided an assessment is not issued prior to September 29, 2011. Further details regarding the Ohio General Tax Amnesty Program will be provided as the Tax Commissioner releases rules, forms and instructions regarding the program.  

Late Thursday night, Governor John Kasich signed the Ohio Budget Bill (Am. Sub. H.B. 153) setting forth the state’s nearly $56 billion budget for the next two fiscal years. As expected, the bill included two significant provisions with respect to Ohio consumer use tax. First, Section 757.42 of the bill requires the Tax Commissioner to establish the Use Tax Amnesty Program allowing unregistered consumers to resolve their Ohio consumer use tax liability by paying the taxes owed from January 1, 2009 forward. Consumers registered to pay use tax prior to June 1, 2011 may take advantage of this program as well, but they may be required to pay interest and penalties. This amnesty program is more fully described in our post earlier this week. Additionally, the bill amends Section 5703.58(B) of the Revised Code to prohibit the issuance of a consumer use tax assessment for taxes owed prior to January 1, 2008, in all cases, even if the company is currently being audited. As both provisions are effective ninety days after the bill is filed with the Secretary of State, these protections are contingent on the Department of Taxation not issuing an assessment against the particular taxpayer prior to approximately September 29, 2011.

Also on the tax front, the Budget Bill eliminated the Ohio Estate Tax starting in 2013.

We will be provide further information and planning ideas with respect to these developments and other changes to Ohio state taxes contained in the Budget Bill in the near future, including details on the General Amnesty Program contained in Section 757.40 of the bill applicable to all Ohio taxes.

On Monday night, a special conference committee approved changes to the Ohio Budget Bill (House Bill 153) reconciling differences between the versions approved by the Ohio House and Senate. The Use Tax Amnesty Program – a historic pro-business legislative action – survived this committee’s report, but with some modifications. This version of the Budget Bill was approved by the Senate yesterday, and is expected to be voted on in the House today and signed into law by Governor Kasich by the end of Thursday, June 30, 2011. If enacted in its current form, the parameters of the Ohio Use Tax Amnesty Program would be as follows:

• The Use Tax Amnesty Program will last from October 1, 2011 to May 1, 2013. The Tax Commissioner will adopt rules and issue forms and instructions concerning the program shortly.
• Any consumer, as defined in R.C. 5741.01, can resolve its Ohio use tax liability by paying all consumer use tax owed on and after January 1, 2009 during the program.
• If the consumer did not have a consumer use tax account with the Ohio Department of Taxation prior to June 1, 2011, all penalties and interest will be waived.
• If the consumer did register to pay Ohio use tax on or before June 1, 2011, interest and penalties will not be waived.
• The Tax Commissioner may enter into payment plans allowing the consumer to pay its use tax liability over a period of up to seven years.
• If an assessment has been issued prior to the effective date of the section, the consumer will be ineligible to participate in the Use Tax Amnesty Program.
• Consumer who do not participate in the Use Tax Amnesty Program will be subject to an audit for Ohio use tax due on and after January 1, 2008, plus applicable penalties and interest.

Notably, taxpayers who are currently under audit are not precluded from participating in the Use Tax Amnesty Program, provided an assessment is not issued against the taxpayer prior to October 1, 2011. The Department of Taxation is not expected to accelerate assessments on current audits prior to the program’s October 1, 2011 commencement date. Thus, this program will surely provide an extremely favorable benefit to many consumers currently under audit by the Department of Taxation.

Update: For more information from the Ohio Department of Taxation regarding the Use Tax Amesty Program, click here.