Beer Drinkers Rejoice: Buckingham scores victory for Ohio bars confirming that preventative maintenance for draft beers systems is not subject to Ohio sales tax.

2017-04-18 20:17:11

The Ohio Board of Tax Appeals (BTA) ruled in favor of Great Lakes Bar Control, Inc. (“Great Lakes”) that maintaining draft beer dispensing services are not subject to Ohio sales tax. <a href="https://ohio-bta.modria.com/download?BID=753605"><em>Great Lakes Bar Control, Inc. v. Testa</em></a><em>, </em>BTA Case No. 2016-34 (Apr. 14, 2017). Great Lakes was represented by Buckingham attorneys <a href="http://www.bdblaw.com/attorneys/steven-a-dimengo/">Steve Dimengo</a>, <a href="http://www.bdblaw.com/attorneys/matthew-r-duncan/">Matt Duncan</a>, and <a href="http://www.bdblaw.com/attorneys/richard-b-fry-iii/">Rich Fry</a>. The BTA correctly found that preventative maintenance services where the act of removing dirt and contaminants is necessary for the property to continue to operate properly are <strong><em>not</em></strong> taxable building maintenance and janitorial services. Great Lakes maintained draft beer systems for its customers by monitoring and inspecting the system, unclogging lines when necessary, applying cleansing solutions, and other measures to “ensure that the draft system is operating at its optimum performance.” And we applaud Great Lakes for its efforts to keep beer flowing across Ohio! The Ohio Tax Commissioner asserted that Great Lakes’ services constituted taxable building maintenance and janitorial services which include the cleaning of contents of a building. <a href="http://codes.ohio.gov/orc/5739.01v1">R.C. 5739.01(II)</a>. However, since cleaning was only one aspect of Great Lakes’ regular maintenance program, which included much more than simply making the beer lines clean, the BTA held that the services at issue were not taxable. “Any cleaning of the system is only part of the overall maintenance provided, i.e., is incidental to the regular maintenance service provided.” Please <a href="https://www.ohiostatetaxblog.com/contact/">contact us</a> if you have any questions about this decision or other Ohio sales / use tax issues.

Ohio Man Fights Personal Tax Liability For Employer's Buys

2017-02-28 17:22:32

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Crain's Cleveland - Ohio tax changes on the horizon, sales tax to become even more significant. Is your business maximizing available exemptions and incentives?

2017-02-14 18:22:30

Buckingham attorneys Steven A. Dimengo and Richard B. Fry III explain Ohio tax changes on the horizon with sales tax to become even more significant. <p data-emphasis-ord="0" data-emphasis-key="paragraphGKqGKq">Gov. Kasich’s quest to lower the Ohio personal income tax rate continues in his latest proposed biennium budget, even in the face of Ohio’s tax revenue falling short of estimates. If adopted, Ohio’s income tax rates would be reduced 17% and income tax... Click here to read the full article: <a class="twitter-timeline-link" dir="ltr" title="http://crainscleveland.com/article/20170212/CUSTOM/302129998/ohio-tax-changes-on-the-horizon-sales-tax-to-become-even-more" href="https://t.co/24aNHt59Ze" target="_blank" rel="nofollow noopener" data-expanded-url="http://crainscleveland.com/article/20170212/CUSTOM/302129998/ohio-tax-changes-on-the-horizon-sales-tax-to-become-even-more"><span style="color: #0099b9;"><span class="invisible">http://</span><span class="js-display-url">crainscleveland.com/article/201702</span><span class="invisible">12/CUSTOM/302129998/ohio-tax-changes-on-the-horizon-sales-tax-to-become-even-more</span></span><span class="tco-ellipsis"><span class="invisible"><span style="color: #0099b9;"> </span></span><span style="color: #0099b9;">…</span></span></a></p>

Ohio Commercial Activity Tax Bright-line Nexus Constitutional-What to do now?

2017-02-08 20:29:51

The <a href="https://www.supremecourt.ohio.gov/">Ohio Supreme Court</a> recently held that the bright-line presence nexus standard for Ohio Commercial Activity Tax (“CAT”) does not violate the U.S. Constitution. Many taxpayers have pending audits or appeals at the <a href="https://ohio-bta.modria.com/">Board of Tax Appeals</a> regarding this nexus issue. What should these and other CAT taxpayers do now? First, it is expected the taxpayer will appeal the unfavorable decision in <em>Crutchfield</em> v<em>. Testa</em> to the U.S. Supreme Court. The Court has refused to hear other cases concerning economic nexus in the past. But this case is unique because it is the first case involving a true remote e-Commerce retailer whose only contact with the state is through advertising and common carrier. Additionally, the Court could take this case to clarify that <em>Quill</em> does not apply to business activity taxes - or it could conclude that <em>Quill</em> is no longer applicable to any state taxes. In any event, taxpayers with pending audits or appeals may wish to wait to see if the U.S. Supreme Court will hear this case before taking any action to resolve their audit / appeal. Nonetheless, the Ohio Department of Taxation has indicated it will continue to offer settlements at the same level offered before. Agreeing to a settlement, however, requires the taxpayer to forego a refund claim if the U.S. Supreme Court ultimately holds that the CAT’s economic nexus standard is unconstitutional. Many businesses who meet the bright-line presence standard are not yet paying CAT. These businesses could register and begin complying with the CAT, although doing so without addressing past periods could result in an audit by the <a href="http://www.tax.ohio.gov/">Ohio Department of Taxation</a>. Another option is to enter into a voluntary disclosure agreement with the Department. This requires the taxpayer to pay the CAT plus interest for the current year and 3 previous years. <a href="https://www.ohiostatetaxblog.com/contact/">Contact us</a> to find out if applying for a Voluntary Disclosure Agreement anonymously is the best decision for your business.

Ohio Income Tax: Dividends from accumulated C corporation earnings retain their character and are non-taxable to nonresident shareholders.

2017-01-04 16:02:06

The Ohio Supreme Court encountered a relatively unique situation in <a href="http://www.supremecourt.ohio.gov/rod/docs/pdf/0/2016/2016-Ohio-8412.pdf"><em>Giddens v. Testa</em>, 2016-Ohio-8412</a>. The two shareholders of Redneck, Inc., who resided in Missouri, received large dividends in 2008, at which time Redneck was taxed as an S corporation. However, the taxpayers showed the dividends were Redneck’s earnings and profits from when the corporation was a C corporation – Redneck’s S corporation election was effective September 1, 2004. Yet, the Ohio Tax Commissioner contended the dividends were taxable as business income earned by Redneck because it was an S corporation at the time the dividends were distributed and, thus, apportioned to Ohio based upon Redneck’s apportionment ratio. The Supreme Court recognized that the taxability of the income is determined based upon the event that triggers the tax liability. Here, “it was not Redneck’s business activity that made the dividend appear as a taxable item… It was the declaration of the dividend that did so.” <em>Giddens</em>, at ¶32. Accordingly, the dividend from accumulated earnings when Redneck was a C corporation was treated as nonbusiness income, and allocated to the taxpayers’ domicile of Missouri under <a href="http://codes.ohio.gov/orc/5747.20v1">R.C. 5747.20</a>(B)(6). The character of income from a pass-through entity is determined as if the income was received from the source from which the corporation received the income. <a href="http://codes.ohio.gov/orc/5747.231v1">R.C. 5747.231</a>. <a href="http://www.supremecourt.ohio.gov/rod/docs/pdf/0/1999/1999-Ohio-61.pdf"><em>Agley v. Tracy, </em>87 Ohio St.3d 265 (1999)</a>. However, this treatment of S corporation income only applies to the shareholder’s distributive share of the corporation’s income, not to earnings accumulated prior to the corporation’s S corporation election. “[T]he tax commissioner’s argument evaporates, because the income at issue in this case is not the [taxpayers’] distributive share of Redneck’s current income. Instead, the income subject to taxation here is a dividend paid out of earnings that accrued to the corporation during earlier years.” <em>Giddens</em>, at ¶28.

Ohio Sales & Use Tax: Digital Advertising Recognized as Nontaxable, but HB 466 Falls Short of Comprehensive Solution to Taxing on Services Delivered Online.

2016-06-15 12:36:50

As we <a href="https://www.ohiostatetaxblog.com/11070">previously posted</a>, the Ohio Department of Taxation has taken an extremely expansive view of taxable electronic information services (EIS). Per the Department, EIS essentially includes any services delivered via telecommunications equipment, including the Internet. With technological advances, the number of services delivered electronically has grown exponentially, which clearly could not have been anticipated when EIS originally were made taxable decades ago. <a href="https://www.legislature.ohio.gov/legislation/legislation-summary?id=GA131-HB-466">House Bill 466</a> was presented as a solution to limit the extended scope of taxable EIS by specifically excluding digital advertising services. “Digital advertising services” includes services used to electronically display, deliver, place or transfer promotional advertisements to potential customers. <a href="http://codes.ohio.gov/orc/5739.01v1">R.C. 5739.01</a>(RRR). However, we share the opinion of the Ohio Society of CPAs that H.B. 466 does not go far enough as other clearly nontaxable services may now implicitly be considered taxable simply because they are delivered electronically, such as webinars and information reporting (e.g., Carfax, credit reports, etc.). <em>See OSCPA Staff Reports, </em><a href="http://www.ohiocpa.com/news-resources/communities/news/2016/06/02/lawmakers-exempt-digital-advertising-from-sales-tax?utm_source=CPA_Takeaways&utm_medium=email&utm_content=Lawmakers%20exempt%20digital%20advertising%20from%20sales%20tax&utm_campaign=enews&MPPID=15429">Lawmakers exempt digital advertising from sales tax</a> (June 2, 2016) and <a href="http://www.ohiocpa.com/utilities/displaynewsitem/2016/05/05/oscpa-seeks-broader-solution-to-taxation-of-online-services">OSCPA seeks broader solution to taxation of online services</a> (May 5, 2016). Moreover, H.B. 466 does not apply retroactively and is not enacted as clarification of existing law. This confirms that digital advertising services were intended to be taxable in the past and does not relieve taxpayers who are currently under audit or have been assessed tax on such services. Please <a href="https://www.ohiostatetaxblog.com/contact">contact us</a> if you have questions about the taxability of services delivered electronically.

Ohio CAT: BTA Predictably Upholds Ohio’s Bright-Line Nexus Standard in Two Cases Despite Lack of Physical Presence

2015-03-25 12:24:20

<a href="http://bta.ohio.gov/">The Ohio BTA</a> has released two nearly identical opinions upholding commercial activity tax (CAT) assessments on retailers lacking an Ohio physical presence. In <a href="https://ohio-bta.modria.com/casedetails/50116"><em>Newegg Inc. v. Testa</em>, Ohio BTA, No. 2012-234 (2/26/2015)</a> and <a href="https://ohio-bta.modria.com/casedetails/50808"><em>Crutchfield, Inc. v. Testa</em>, Ohio BTA, No. 2012-926, 2012-3068, and 2013-2021 (2/26/2015)</a>, the retailers met the bright-line presence standard by having more than $500,000 in Ohio taxable gross receipts. <a href="http://codes.ohio.gov/orc/5751.01">R.C. 5751.01(I)</a>. These cases are now the lead cases in the <a href="http://www.tax.ohio.gov/commercial_activities.aspx">CAT</a> bright-line nexus dispute, replacing <a href="https://ohio-bta.modria.com/casedetails/44029"><em>L.L. Bean, Inc. v. Levin</em>, Ohio BTA, No. 2010-2853 (3/6/2014)</a> which has been settled. Information about the <em>L.L. Bean</em> case can be found <a href="http://www.bdblaw.com/ohio-cat-bta-predictably-upholds-ohios-bright-line-nexus-standard-despite-lack-of-physical-presence/">here</a>. Both taxpayers, Newegg, Inc. and Crutchfield, Inc., are remote retailers that sell products to customers across the United States, including in Ohio. Each taxpayer contends it lacks substantial nexus with Ohio since it does not own or lease property in Ohio, and exclusively sold its products online and via catalog. Since the taxpayers met the statutory bright-line nexus standard, and the BTA lacks jurisdiction to determine constitutional challenges, the BTA was obligated to uphold the Tax Commissioner’s assessments. The determination as to whether the $500,000 gross receipts standard violates the Constitution must be determined by the Ohio Supreme Court, where both companies are expected to file appeals. The <a href="http://bta.ohio.gov/">BTA’s</a> purpose in these cases was simply to create the factual record for the Supreme Court to consider in its determination. <p style="text-align: left;">Even if the <a href="http://www.tax.ohio.gov/commercial_activities.aspx">CAT</a> can be imposed on businesses without an Ohio physical presence, questions still remain, such as whether the business must take affirmative acts to develop the Ohio market, or is merely making sales into the state sufficient. Stay tuned as the Ohio Supreme Court’s ruling on this issue will be much more important. On <a href="http://www.supremecourt.ohio.gov/Clerk/ecms/resultsbycasenumber.asp?type=3&year=2015&number=0386&myPage=searchbyentityname.asp">March 6, 2015</a>, Crutchfield filed a notice of appeal to the Ohio Supreme Court. Yesterday, <a href="http://www.supremecourt.ohio.gov/Clerk/ecms/resultsbycasenumber.asp?type=3&year=2015&number=0386&myPage=searchbyentityname.asp">March 24, 2015</a>, the Court referred the case to mediation. If you have any questions about your CAT obligations, please contact <a href="http://www.bdblaw.com/cp_people/steven-a-dimengo/">Steve Dimengo</a>, <a href="http://www.bdblaw.com/cp_people/richard-b-fry-iii/">Rich Fry</a>, or <a href="http://www.bdblaw.com/cp_people/casey-j-davis/">Casey Davis</a>.</p> <a href="http://www.bdblaw.com/contact-us/">Contact us</a>.

Will Governor’s Kasich’s Proposed Budget Significantly Increase the Tax Burden on Ohio Businesses?

2015-03-24 09:57:15

<a href="http://www.governor.ohio.gov/">Governor Kasich</a>’s tax policy since taking office has been clear – lowering the income tax burden, especially for small business owners, will increase Ohio’s attractiveness to businesses. So, it is not surprising that the 2016 - 2017 budget proposal includes an over 20% reduction in the Ohio income tax rate and completely exempts income from certain small businesses. However, to replace this tax revenue, the proposed budget would significantly increase the tax burden on business-to-business transactions. Kasich’s budget proposes the following changes to Ohio’s business taxes: (1) increase the state sales tax rate from 5.75% to 6.25%; (2) expand the sales tax base to include a variety of ambiguously-defined services provided to businesses, including management consulting, market research, public relations, debt collection, and lobby services; (3) increase the commercial activity tax rate (CAT) from 0.26% to 0.32%; and (4) imposing a 6.5% severance tax on oil and gas production from horizontal wells, <em>i.e.,</em> fracking wells (a 4.5% rate applies for certain products). Particularly troubling, the sales tax expansion is specifically intended to increase the tax burden on consumption by businesses and ambiguously defines the newly-added taxable services. For example, one might expect lobby service to be defined as those provided by registered lobbyists. Instead, as proposed, lobbying service would include “any activity that serves to influence the behavior or opinion of an individual, an industry, or an organization.” This definition would encompass an incalculable number of services – including potentially legal, accounting, and other professional services – significantly increasing costs incurred by all Ohio businesses in their normal operations. Further, such an expansive sales tax would incentivize businesses to engage out-of-state firms lacking an Ohio presence, and without an obligation to collect Ohio sales tax, to perform such services (although the purchasing business would be required to self-remit use tax on such purchases). <a href="http://www.cost.org/WorkArea/DownloadAsset.aspx?id=89470">Fred Nicely from the Counsel on State Taxation testified</a> that the definitions of the proposed-taxable services “are far from precise, which leads to questions on how the Department of Taxation would audit such services … [and] would certainly lead to protracted litigation.” Likewise, <a href="http://search-prod.lis.state.oh.us/cm_pub_api/api/unwrap/chamber/131st_ga/ready_for_publication/committee_docs/cmte_h_ways_means_1/testimony/cmte_h_ways_means_1_2015-02-25-0300_215/ohio_state_bar_association_kelvin_lawrence.pdf">Kelvin Lawrence, the Taxation Law Committee Chair of the Ohio State Bar Association, testified</a> that “[t]he definitions for the services subjected to Ohio state and use tax in H.B. 64 are so imprecise as to make it difficult or impossible to determine which services are taxable.” Although reducing Ohio’s income tax burden on small-business owners is beneficial in theory, doing so by increasing other taxes is problematic and contradicts the Governor’s overall objective of making Ohio more business friendly. As currently proposed, the overall tax burden on Ohio businesses could actually increase, which would be compounded by the uncertainty and “protracted litigation” taxpayers would encounter regarding the broadened Ohio sales and use tax. <a href="http://www.ohiohouse.gov/">The Ohio General</a> Assembly, which is required by law to approve and sign the budget by June 30, has already begun deliberations on the proposed budget. There will certainly be more to come on over the next several months. If you have any questions regarding <a href="http://www.governor.ohio.gov/">Gov. Kasich’s</a> budget and how it may affect you and your business, please contact <a href="http://www.bdblaw.com/cp_people/steven-a-dimengo/">Steve Dimengo</a>, <a href="http://www.bdblaw.com/cp_people/richard-b-fry-iii/">Rich Fry</a>, or <a href="http://www.bdblaw.com/cp_people/casey-j-davis/">Casey Davis</a>. <a href="http://www.bdblaw.com/contact-us/">Contact us</a>.

Buckingham's SALT Published in Crain's Cleveland Business

2015-03-23 12:47:17

<hr /> This article was originally published in <a href="http://www.crainscleveland.com/"><em>Crain's Cleveland Business</em></a>, available at: <a href="http://www.crainscleveland.com/article/20150322/SPONSORED_BUCKINGHAM/303209999/ohio-tax-incentives-savings-for-small-midsize-businesses-critical">http://www.crainscleveland.com/article/20150322/SPONSORED_BUCKINGHAM/303209999/ohio-tax-incentives-savings-for-small-midsize-businesses-critical</a>. <h1 class="articlehead">Ohio tax incentives, savings for small, midsize businesses: Critical planning opportunities</h1> <div class="gray">By <span style="color: #333333;">STEVEN A. DIMENGO, RICHARD B. FRY III and CASEY J. DAVIS</span> 4:30 am, March 22, 2015</div> Exciting tax savings are immediately available to Ohio businesses and their owners without substantially changing operations. The difficulty, however, is recognizing those opportunities and taking the proper steps to qualify, especially when affirmative action is necessary to trigger the incentive or savings. Many opportunities exist for Ohio businesses, including a few new programs implemented as part of Gov. John Kasich’s goal to lessen the tax burden on Ohio small businesses. This article summarizes some of the common Ohio tax planning opportunities available to small and mid-sized businesses, or their owners. <strong>InvestOhio</strong> InvestOhio provides a 10% Ohio individual income tax credit for investment in a qualifying small business enterprise (SBE). Two transactions are necessary to qualify for the credit: first, the investor must make a cash investment in exchange for an equity interest in the SBE; then, within six months of the investment, the SBE must make qualifying expenditures (described below) at least equal to the investment. The investor claims the credit against his / her Ohio individual income taxes in the second year following the investment, provided the investor continues to hold the equity interest received for the investment, and the SBE retains the property purchased in the qualifying expenditure, for the two-year holding period. Since the credit is non-refundable and taken against Ohio individual income taxes, it is imperative that the investor have a sufficient Ohio income tax liability against which the credit can be claimed. However, the credit may be carried-forward up to seven years. To be a qualifying SBE, the business must have less than $50 million in assets or $10 million in annual sales at the time of the investment. In addition, more than half of the SBE’s employees must work in Ohio, or the SBE must have 50 full-time equivalent Ohio employees. This requires the SBE to have at least one full-time equivalent Ohio employee at the time of the investment. Accordingly, for startup investments, it is critical the SBE have an employee on payroll and open the relevant withholding and worker’s compensation accounts, prior to the investment. The SBE’s qualifying expenditures include property primarily used in Ohio business – real, personal, or intangible property – or compensation paid to new Ohio employees, excluding owners, officers, and managers. The options available to the SBE are very broad and often include expenditures the SBE would be making as part of its normal operations. Thus, when a small business is planning to make a significant purchase, the business owners should consider whether this 10% savings can be obtained through InvestOhio qualification. The InvestOhio credit is limited to $1 million per investor, per fiscal biennium, or $2 million for spouses filing jointly. Certain administration compliance is required to qualify for this credit. Both the investor and SBE must register for InvestOhio through the Ohio Business Gateway. Further, proof of the qualifying investment and qualifying expenditures by the SBE must be submitted to the Ohio Development Services Agency (DSA), along with a progress and final report during and at the end of the holding period. The DSA uses this information to confirm the investor and SBE continue to qualify for the credit, and then issues the investor a small business investment certificate specifying the credit amount. InvestOhio credits are available to the owners of any Ohio small and mid-sized business able to make a cash investment in the business. But critical steps must be taken prior to completing the underlying transaction to comply with the required structure and administrative compliance. InvestOhio is a powerful tool that can provide savings to Ohio business owners for purchases made in the normal course of their businesses. <strong>Bright-Line Residency Safe Harbor</strong> In the early 1990s, Ohio enacted a residency safe harbor where individuals with homes in Ohio and another state, and who spent less than a certain number of days (<em>i.e.,</em> contact periods) in Ohio, are treated as nonresidents for tax purposes by simply filing an affidavit with the Tax Commissioner. Beginning with 2015, the permissible Ohio presence was increased to 212 contact periods. This means individuals can now be present in Ohio for seven months, yet still qualify to be taxed as a nonresident, regardless of their intent. In other words, the individual can be a nonresident for Ohio income tax purposes but still maintain Ohio as the person’s primary home, including operating a business, voting, and using doctors and other professionals in Ohio, as long as the person maintains a home outside Ohio and is in Ohio no more than 212 days. This safe harbor can provide significant state tax savings on investment and business income. Intangible investment income, such as dividends, interest, and gains from the sale of stock, is generally only subject to Ohio tax when the person is an Ohio resident. Further, business income of a nonresident is apportioned to Ohio based upon the business’ Ohio property, payroll, and sales. Since the sales factor is the most heavily-weighted factor, an Ohio business owner whose business has significant sales or operations outside Ohio could avoid Ohio taxes on a substantial portion of income from the business by qualifying as a nonresident under the bright-line residency safe harbor. This safe harbor can provide an especially beneficial planning opportunity when an Ohio resident anticipates selling his/her business or realizing a significant gain from the sale of intangible investments, perhaps even enough to justify purchasing or renting a condominium in Florida, for instance. To meet the bright-line residency safe harbor, the individual must: (1) maintain an abode outside Ohio for the entire year (even if it is rented); (2) have no more than 212 Ohio contact periods; and (3) file an Affidavit of Non-Ohio Residency/Domicile (Form IT DA) with the Ohio Tax Commissioner by April 15<sup><span style="font-size: small;">th</span></sup> of the following year (although this date can be extended). Both the husband and wife must file separate affidavits. If an individual fails to meet these requirements, he or she will be presumed to be an Ohio resident and must meet the more burdensome common-law test, which is focused on one’s subjective intent to remain outside Ohio indefinitely with no plans to permanently return to Ohio. <strong>CAT – Sourcing Gross Receipts from Services</strong> Ohio’s commercial activity tax (CAT) became effective in 2005 as essentially a low rate tax, currently .26%, on gross receipts sourced to Ohio. Although essentially taxing all gross receipts, the CAT implemented a significant shift in tax policy by sourcing receipts from services to the location where the purchaser received the benefit of the service, rather than the location where the services were performed (<em>i.e.,</em> cost of performance). This is referred to as market-based sourcing. Although the Tax Commissioner has promulgated an administrative rule describing 54 different types of services and how they are to be source, practical application has proven difficult in many cases since the CAT was enacted relatively recently and limited authority addressing these issues exists. Besides the Tax Commissioner’s administrative rule, there is a lack of guidance in determining the location where the benefit of services is received. This can be particularly troublesome when services are provided to business customers with locations in multiple states which benefit from the service. For instance, where is the benefit of the service received when consulting or business management services are provided to a large corporation when the service benefits the entire organization? Further, receipts from acting as a sales agent / representative should be sourced to where the principal is located, not necessarily where the sales agent completes the sale (<em>i.e.,</em> where the service is performed). While taxpayers wait for more guidance on these issues through several cases currently pending with the Ohio Board of Tax Appeals, the Department of Taxation is also struggling, often resorting to “it’s taxable” at the audit level, forcing taxpayers to prove the receipts are properly sourced outside Ohio. The Tax Commissioner’s administrative rule provides taxpayers with the ability to source receipts from certain services provided to multistate purchasers to the purchaser’s principal place of business. This election can provide significant CAT savings for businesses providing services when the location where the benefit is received is unclear, such as in the example above. Accordingly, Ohio businesses may benefit from significantly reducing their Ohio taxable receipts by implementing a reasonable, consistent, and uniform method for sourcing receipts from such services based upon the customer’s multistate locations or principal place of business. <strong>Small Business Deduction</strong> The small business investor deduction was first enacted in 2013. It applies to income from Ohio sole proprietorships and pass-through entities. Originally, business owners were entitled to deduct 50% of the first $250,000, or up $125,000, of Ohio small business investor income. The deduction was increased to 75%, or up to $187,500, for the 2014 tax year. “Ohio small business investor income” means the taxpayer’s business income, reduced by deductions, apportioned or allocated to Ohio under R.C. 5747.21 and 5747.22. Therefore, the deduction is based upon net business income as reported on Schedules C, E, and F of the taxpayer’s federal income tax return to the extent sourced to Ohio. The taxpayer must complete Ohio Form IT SBD – Small Business Investor Income Deductions Schedule to receive the deduction on Schedule A of his / her Ohio individual income tax return (Form IT 1040). The Ohio Tax Commissioner released a notice that an unexpectedly low amount of Ohio small business deductions were claimed for 2013, likely resulting from a lack of awareness. Thus, Ohio business owners who are not already taking advantage of this deduction should inform their tax preparer they may be entitled to these savings. The Ohio tax climate for small and mid-sized businesses is very favorable. Although incentives and savings have always been available, Governor Kasich’s administration has made it a priority to significantly lower the Ohio tax burdens on small businesses and their owners. In fact, Governor Kasich’s recently-proposed budget would completely eliminate income tax on Ohio small businesses with less than $2 million in annual gross receipts. It is often imperative that business owners be aware of and implement the proper steps prior to undertaking a transaction to qualify for the tax benefits. We have significant experience in identifying and ensuring our clients receive the tax incentives and savings currently available to Ohio businesses. * About the Authors: Steve, Rich, and Casey each focus their practice on Ohio state tax planning and controversies, as well as multistate tax planning. They co-author the Ohio State Tax Blog (<a href="http://www.bdblaw.com/publications-events/ohio-state-tax-law/"><span style="color: #333333;">http://www.bdblaw.com/publications-events/ohio-state-tax-law/</span></a>) where you can find other helpful commentary and resources concerning Ohio and multistate tax. <em><a href="http://www.bdblaw.com/cp_people/steven-a-dimengo/">Steven A. Dimengo, JD, CPA, MTax </a>is a partner at Buckingham, Doolittle & Burroughs, LLC in Akron, Ohio and serves as chair of the firm’s Taxation Practice Group. Steve has more than 30 years of experience in state and local tax matters, including regularly representing clients before the Ohio Supreme Court and Ohio Board of Tax Appeals. He is also an adjunct professor for The University of Akron’s Masters of Taxation program and the Co-Chair of the Ohio State Bar Association’s Sales and Use Tax Sub-Committee. Steve can be reached at 330-258-6460 or via email at <a href="mailto:[email protected]"><span style="color: #333333;">[email protected]</span></a>.</em> <em><a href="http://www.bdblaw.com/cp_people/richard-b-fry-iii/">Richard B. Fry III, JD, MTax </a>is a partner at Buckingham, Doolittle & Burroughs, LLC in Akron, Ohio. Rich also has substantial experience in state and local tax planning matters and representing clients in Ohio tax audits and controversies. He is the Co-Chair of the Ohio State Bar Association’s Sales and Use Tax Sub-Committee with Steve. Rich can be reached at 330-258-6423 or via email at <a href="mailto:[email protected]"><span style="color: #333333;">[email protected]</span></a>.</em> <em><a href="http://www.bdblaw.com/cp_people/casey-j-davis/">Casey J. Davis, JD</a> is an associate at Buckingham, Doolittle & Burroughs, LLC in Akron, Ohio. He joined Buckingham’s state and local tax group shortly after passing the bar in 2014. Casey can be reached at 330-258-6463 or via email at <a href="mailto:[email protected]"><span style="color: #333333;">[email protected]</span></a>. </em>   <a href="http://www.bdblaw.com/contact-us/">Contact us.</a>

Nexus Around the Nation

2015-02-09 11:53:43

With 2015 underway, here is a review of recent nexus developments around the nation. <ul> <li><strong>New Jersey – </strong><a href="http://www.state.nj.us/treasury/taxation/">The New Jersey Division of Taxation</a> issued a technical bulletin to expound the recent enactment of click-through nexus. <a href="http://law.onecle.com/new-jersey/54-taxation/32b-2.html">J.S.A. 54:32B-2(i)(1)</a> was amended to create a rebuttable presumption that remote sellers are engaged in solicitation in New Jersey, and thus must collect sales tax, if the remote seller enters into an agreement with a New Jersey independent contractor or other representative to refer sales via weblink or otherwise in exchange for commissions based upon completed sales. If the agreement between the two parties does not provide for the seller to compensate the representative for completed sales, the agreement is for advertising and does not constitute solicitation. Moreover, a remote seller can rebut the presumption if the agreement: (1) prohibits the in-state representative from engaging in any solicitation activities including distributing flyers; and (2) the remote seller receives an annual certification from the in-state representative that the in-state representative complied with the no solicitation rules. <em>See </em><a href="http://www.state.nj.us/treasury/taxation/pdf/pubs/tb/tb76.pdf">New Jersey Division of Taxation Technical Bulletin No. TB-76, 12/12/2014</a>.</li> <li><strong>Michigan</strong> – On January 15, 2015, Michigan <a href="http://www.michigan.gov/snyder">Governor Rick Snyder</a> approved legislation that implements click-through nexus and affiliate nexus provisions for establishing substantial nexus for sales tax collection purposes. The click-through nexus provision creates a presumption of nexus for out-of-state sellers that have an agreement to pay Michigan residents commissions in exchange for referring customers via a link to the seller’s Web site. The affiliate nexus provision creates a presumption of nexus for out-of state sellers if an affiliate in Michigan performs certain activities which help the seller establish and maintain an in-state market. The legislation is effective October 1, 2015. <em>See </em><a href="http://www.legislature.mi.gov/(S(4bo4au45tuomchbmeehos545))/mileg.aspx?page=getobject&objectname=2013-SB-0658">Act 553 (S.B. 658)</a> and <a href="http://www.legislature.mi.gov/(S(swishfru3am3c2m5p45usr45))/mileg.aspx?page=GetObject&objectname=2013-SB-0659">Act 554 (S.B. 659)</a>.</li> <li><strong>Indiana – </strong>An Indiana corporate taxpayer’s sales in California were “thrown back” to Indiana because the taxpayer was not “doing business” in California. The <a href="http://www.in.gov/dor/">Indiana Department of Revenue</a> found the company was simply soliciting sales which did not constitute “doing business” in California. Although the taxpayer claimed it employed a salesperson living in California and working from home or at the customers’ locations to perform specialized business activities, including gathering information on the target market and analyzing that target market, the <a href="http://www.in.gov/dor/">Department</a> determined no nexus with California existed. The sales were therefore subject to Indiana’s “throwback” rule. <em>See </em><a href="http://www.in.gov/legislative/iac/20141126-IR-045140457NRA.xml.pdf"><em>Letter of Findings No. 02-20140293</em>, Indiana Department of Revenue, November 26, 2014, P. 402-191.</a></li> <li><strong>Massachusetts – </strong>The <a href="http://www.mass.gov/anf/hearings-and-appeals/oversight-agencies/atb/">Massachusetts Appellate Tax Board</a> ruled that a California-based biotechnology company had substantial nexus with Massachusetts for corporate excise tax purposes. The taxpayer retained title to millions of dollars in bulk drug inventory during production at a third party’s facility in Massachusetts and retained title to drugs being used as part of clinical trials conducted by third parties in Massachusetts. The <a href="http://www.mass.gov/anf/hearings-and-appeals/oversight-agencies/atb/">Board</a> held that the company had substantial nexus because it held inventory and engaged in manufacturing activities in Massachusetts. <em>See </em><a href="http://www.mass.gov/anf/docs/atb/2014/14p877.docx"><em>Genentech, Inc. v. Massachusetts Commissioner of Revenue</em>, Massachusetts Appellate Tax Board, Nos. C282905, C293424, C298502, and C298891, November 17, 2014, P. 401-524</a>.</li> <li><strong>Texas – </strong>A Utah corporation’s sales of licensed software and digital content to Texas users established substantial nexus with Texas. The software and digital content was provided to Texas residents primarily through Internet downloads. Substantial nexus was found because the taxpayer retained title to tangible personal property (software) that was physically present and generating license revenue in Texas. However, the taxpayer’s temporary presence through employees attending two conferences in Texas was <em>de minimis </em>for nexus purposes because the employees did not solicit orders or engage in any sales activities at the conference and were only present to learn about developments in the industry. <em>See </em><a href="http://cpastar2.cpa.state.tx.us/highlight/index.html?url=http%3A//aixtcp.cpa.state.tx.us/opendocs/open32/201409970h.html&charset=iso-8859-1&la=en&fterm=108%2C626&search=../query.html%3Fqt%3D108%252C626"><em>Decision, Hearing No. 108,626</em>, Texas Comptroller of Public Accounts, September 19, 2014, released November 2014, P. 403-996</a>.</li> </ul> Nexus laws can be confusing and cumbersome to comply with for multistate businesses. If you have any questions about potential nexus with other states, please contact <a href="http://www.bdblaw.com/cp_people/steven-a-dimengo/">Steve Dimengo</a>, <a href="http://www.bdblaw.com/cp_people/richard-b-fry-iii/">Rich Fry</a>, or <a href="http://www.bdblaw.com/cp_people/casey-j-davis/">Casey Davis</a>. <a href="http://www.bdblaw.com/contact-us/">Contact us</a>.

Ohio State Bar Association Taxation Committee Sales and Use Tax Subcommittee Report

2015-02-05 09:26:57

As co-chairs of the <a href="https://www.ohiobar.org/Pages/Home.aspx">Ohio State Bar Association</a> Sales / Use Tax Subcommittee, <a href="http://www.bdblaw.com/wp-content/uploads/2014/06/AK3-1187312-v1-January_2015_Ohio_State_Bar_Association_Taxation_Committee_Sales_Use_Tax_Subcommittee_Report.pdf">here</a> is a link to the report <a href="http://www.bdblaw.com/cp_people/steven-a-dimengo/">Steve</a> and <a href="http://www.bdblaw.com/cp_people/richard-b-fry-iii/">Rich</a> presented at the January 22, 2015 Taxation Committee meeting. Of particular interest is the recent <a href="http://www.bdblaw.com/the-abcs-of-ohios-back-to-school-sales-tax-holiday/">Back-to-School Sales Tax holiday</a> that was signed into law by <a href="http://www.governor.ohio.gov/">Gov. Kasich</a>. If you have any question regarding the subcommittee report or any sales / use tax questions, please contact <a href="http://www.bdblaw.com/cp_people/steven-a-dimengo/">Steve Dimengo</a>, <a href="http://www.bdblaw.com/cp_people/richard-b-fry-iii/">Rich Fry</a>, or <a href="http://www.bdblaw.com/cp_people/casey-j-davis/">Casey Davis</a>. <a href="http://www.bdblaw.com/contact-us/">Contact us</a>.

The ABCs of Ohio's Back-to-School Sales Tax Holiday

2015-01-05 09:55:41

Back-to-school shopping just got a little better for Ohio taxpayers due to the recent enactment of <a href="http://www.legislature.state.oh.us/bills.cfm?ID=130_SB_243">Senate Bill 243</a> which exempts the purchase of clothing and school supplies from Ohio sales / use tax for three days in August 2015. Ohio’s “sales tax holiday” will occur on August 7 – 9 and is expected to save Ohio families approximately $78 million pursuant to a <a href="http://www.economicscenter.org/7602.aspx">report by the Economics Center at the University of Cincinnati</a>. This report also estimates that Ohio retail sales will increase by approximately 4.8% during the month of August as a result of the sales tax holiday. <a href="http://www.ohiosenate.gov/senate/index">Ohio Senator</a>, <a href="http://www.google.com/url?sa=t&rct=j&q=&esrc=s&frm=1&source=web&cd=1&ved=0CB4QFjAA&url=http%3A%2F%2Fwww.ohiosenate.gov%2Fbacon&ei=9f2mVM-0OpCVyATZq4CgAw&usg=AFQjCNEAfDZQ0k7advfMg7w88snu7XPktQ&bvm=bv.82001339,d.aWw">Kevin Bacon</a>, the bill’s sponsor, hopes the sales tax holiday will <a href="http://www.ohiosenate.gov/bacon/press/senate-approves-ohio-sales-tax-holiday">“create a ‘black Friday-like’ excitement during those three days.”</a> Those opposed say it is political and represents bad tax policy. The tax exemption applies to items of clothing, up to $75 each, and items of school supplies and instructional materials, up to $20 each. The <a href="http://www.legislature.state.oh.us/bills.cfm?ID=130_SB_243">bill</a> defines “clothing” as all human wearing apparel suitable for general use, but does not include items used in a trade or business, accessories, or sports or protective equipment. “School supplies” means items commonly used by a student in a course of study and includes such items as book bags, crayons, erasers, notebooks, pencils, and pens. Finally, the <a href="http://www.legislature.state.oh.us/bills.cfm?ID=130_SB_243">bill</a> defines “school instructional materials” as reference books, reference maps and globes, textbooks, and workbooks. If a consumer makes a qualifying purchase from an Ohio retailer, the purchase is exempt from Ohio sales tax. Similarly, if the consumer makes a qualifying purchase outside Ohio, for example, over the Internet, but the item is used in Ohio, the sale is exempt from Ohio use tax. This bill is a one-year pilot program that will require future approval for its continuation. If you have any questions regarding Ohio’s sales tax holiday or any other Ohio sales / use tax issues, please contact <a href="http://www.bdblaw.com/cp_people/steven-a-dimengo/">Steve Dimengo</a>, <a href="http://www.bdblaw.com/cp_people/richard-b-fry-iii/">Rich Fry</a>, or <a href="http://www.bdblaw.com/cp_people/casey-j-davis/">Casey Davis</a>. <a href="http://www.bdblaw.com/contact-us/ohio-state-tax-blog-contact-form/">Contact us</a>.

Steve Dimengo Interviewed on WAKR Radio

2014-04-22 18:35:39

Click below to hear Steve's appearance on WAKR Radio on April 15, 2014. [audio:Steve-Dimengo.mp3|titles=Steve Dimengo Interviewed|artists=WAKR Radio]

Ryan, L.L.C. Gets Hand Slapped for Engaging in the Unauthorized Practice of Law Before the Ohio Board of Tax Appeals

2014-01-10 14:03:35

In 2009, Ryan, LLC filed a Notice of Appeal with the <a href="http://www.bta.ohio.gov/">Ohio Board of Tax Appeals</a> (BTA) on behalf of its client, Owens Corning. The Ohio Supreme Court, adopting the proposed consent decree following an investigation by the <a href="https://www.ohiobar.org/Pages/Home.aspx">Ohio State Bar Association</a>, found that Ryan and its employee engaged in the unauthorized practice of law by: (1) preparing and filing a notice of appeal before the BTA; and (2) appearing before the BTA on behalf of its client. <i><a href="http://www.supremecourt.ohio.gov/ROD/docs/pdf/0/2013/2013-Ohio-5500.pdf">Ohio St. Bar Assn. v. Ryan, L.L.C.</a></i>, 2013-Ohio-5500 (Dec. 24, 2013). It seems Ryan accepted blame for its actions, as the appeal before the BTA was quickly withdrawn, and Ryan fully cooperated in the investigation, in exchange for having no civil penalties imposed. This ruling is consistent with previous Ohio authority holding that representing another before a quasi-judicial agency, such as the BTA or Board of Revisions, is the practice of law, as explained in a <a href="http://www.bdblaw.com/real-property-tax-valuation-complaint-filed-under-power-of-attorney-dismissed-for-lack-of-jurisdiction/">previous post</a>. Nonattorneys, and even attorneys employed by nonlawfirms, must be cautious as a notice of appeal or compliant on behalf of their client is ineffective and may be dismissed on jurisdictional grounds, thereby prejudicing the client. <i>See <a href="http://www.supremecourt.ohio.gov/rod/docs/pdf/0/1997/1997-ohio-197.pdf">Sharon Village Ltd. v. Licking Cty. Bd. of Revision, 78 Ohio St.3d 479 (1997)</a></i>. It is also likely that representing a client in an administrative appeal before the Tax Commissioner constitutes the practice of law because it creates a record and could prejudice the client’s future rights on appeal. <i></i>

Republican Leaders Agree on Ohio Tax Plan

2013-06-21 14:27:47

<p style="margin-bottom: 6pt;">With both the House and Senate controlled by Republicans, significant changes to Ohio’s tax landscape were certain to occur after <a href="https://www.ohiostatetaxblog.com/index.php?option=com_content&view=article&id=158:significant-ohio-tax-implications-gov-kasich-proposes-new-budget">Gov. Kasich unveiled his proposed budget</a> for the upcoming biennium beginning July 1, 2013. After yesterday’s <a href="http://www.dispatch.com/content/stories/local/2013/06/20/new-tax-plan.html">announcement that Republican legislatures have reached an agreement</a>, the specifics of those changes are becoming more clear, reflecting a shift towards a consumption-based tax structure. While not as drastic as first proposed by the Governor, here are some of the highlights:</p> <ul> <li>10% reduction in Ohio’s personal income tax to be phased-in over three years;</li> <li>Increase state sales tax rate from 5.5% to 5.75%;</li> <li>Expand sales tax to cover digital goods, such as book and music downloads;</li> <li>Small-business tax break allowing owners of pass-through entities to deduct 50% of the first $250,000 of business income;</li> <li>Commercial activity tax rate (above the $150 minimum tax) will apply to gross receipts above $500,000 (reduced from $1 million);</li> <li>Eliminate 12.5% property tax rollback for future levies; and</li> <li>Eliminate homestead exemption for seniors earning more than $30,000 of income.</li> </ul> <p style="margin-bottom: 6pt;">Focused on creating Ohio jobs, these changes continue Gov. Kasich’s emphasis on reviving Ohio’s economy by creating a more business friendly climate through tax cuts for Ohio residents and small businesses. It is estimated that <a href="http://www.ohiogop.org/ohio-republican-party-chairman-praises-2-6-billion-tax-relief-plan/">Ohioians will save $2.6 billion in taxes</a> under the new budget. The <a href="http://www.legislature.state.oh.us/analyses.cfm?ID=130_HB_59&ACT=As%20Passed%20by%20Senate">Budget Bill</a> must be passed by the legislature and signed by the Governor before July 1, 2013.</p> <p style="margin-bottom: 6pt;">We will have more details about the specifics of these changes and how they will affect Ohio taxpayers in the coming weeks.</p>

Northeast Ohio State and Local Tax Conference

2013-06-17 17:20:06

<span style="font-family: Arial; color: black;">Steve and Rich will be participating in the inaugural <a href="https://store.ohioscpa.com/#!/product/44947">Northeast Ohio State & Local Tax Conference</a> on July 25, 2013 in Independence, Ohio. The Conference, presented by <a href="http://www.uakron.edu/cba/cba-home/dept-cent-inst/accountancy/">The University of Akron's George W. Daverio School of Accountancy</a> and <a href="http://www.ohioscpa.com/">The Ohio Society of CPAs</a>, will be beneficial for a wide variety of professionals, including CPAs, tax attorneys and business owners / executives. The Conference will address Ohio and multistate tax issues, trends and planning techniques, including updates from Ohio’s most recent budget bill to be effective July 1, 2013.</span><span style="font-family: Arial; color: black;"> </span> <span style="font-family: Arial; color: black;"><a href="http://www.bdblaw.com/cp_people/steven-a-dimengo/">Steve</a> will present on Ohio sales tax trends, developments and planning opportunities. <a href="http://www.bdblaw.com/cp_people/richard-b-fry-iii/">Rich</a> and Team NEO’s <a href="http://www.clevelandplusbusiness.com/about-team-neo/meet-our-team.aspx#Stephanie%20Mercado">Stephanie Mercado</a> will discuss the benefits of Ohio’s tax incentives and economic development tools.</span><span style="font-family: Arial; color: black;"> </span> <span style="font-family: Arial; color: black;">Additionally, keynote speaker <strong><em><a href="http://www.tax.ohio.gov/communications/tax_commissioner_bio.aspx">Joseph Testa</a></em></strong><em>,</em> Ohio Tax Commissioner, will give an overview of Ohio’s tax landscape and <strong><em>Margaret Brewer</em></strong><em>,</em> executive director, <a href="http://www.tax.ohio.gov/">Ohio Department of Taxation</a>, will present a thorough review of Ohio tax procedure. Other speakers include: Ray Turk (<a href="http://www.pwc.com/us/en/index.jhtml">Price Waterhouse Coopers</a>); Amy Arrighi (<a href="http://www.ritaohio.com/contact-rita/">Regional Income Tax Authority</a>); William Nolan (<a href="http://www.ey.com/GL/en/Home">Ernst & Young</a>); David Perry (<a href="http://www.kpmg.com/US/en/Pages/default.aspx">KPMG, LLP</a>) and John Slagter (<a href="http://www.bdblaw.com/">Buckingham, Doolittle & Burroughs, LLP</a>).</span><span style="font-family: Arial; color: black;"> </span> <p style="text-align: left;" align="left"><span style="font-family: Arial; color: black;"><a href="http://www.ohioscpa.com/docs/education-training/neohio_statelocaltax_conference_2013_brochure_final.pdf?sfvrsn=2">Click here</a> for more information regarding the conference, including how to register.</span></p>

Last Chance: Ohio Consumer Use Tax Amnesty

2013-03-05 15:38:30

Ohio use tax amnesty ends May 1, 2013. Amnesty is a great opportunity to minimize past liability for a consumer’s untaxed purchases avoiding penalty, and in some cases, interest, while commencing prospective compliance. More details for the program can be found <a href="index.php?option=com_content&view=article&id=111:ohio-use-tax-webinar&catid=54:ohio-state-tax-news&Itemid=59">here</a>. To qualify, the company cannot have received a prior use tax assessment. All applications must be post marked by May 1, 2013 to qualify for amnesty. <a href="index.php?option=com_contact&view=category&catid=12&Itemid=61">Contact us</a> for advice concerning your eligibility for amnesty or the extent of your liability.

Ohio State Bar Association Sales/Use Tax Subcommittee Report For January 17, 2013

2013-01-18 16:21:40

<a href="https://www.ohiobar.org/ForLawyers/Committees/Taxation/Shared%20Documents/2013/Subcommittee%20Reports/OSBA%20Sales%20Use%20Tax%20Subcom%20Report%2012013%20(rev).DOC">Click here</a> to view Steve’s January 17, 2013 report which was presented to the Taxation Section of the Ohio State Bar Association as Chair of the Sales/Use Tax Subcommittee. The <i><a href="index.php?option=com_content&view=article&id=151:ohio-supreme-court-clarifies-the-support-needed-to-claim-the-permanent-assignment-exception-for-taxable-employment-services&catid=47:ohio-sales-and-use-tax&Itemid=59">Bay Mechanical</a></i> Supreme Court decision provides a useful summary of the necessary evidence to support the one-year permanent assignment exemption from an otherwise taxable employment service. Although “permanent assignment” language or its equivalent is strongly suggested, arguably a taxpayer can prevail as long as the contract language is not inconsistent with permanent assignment, while performance is consistent with permanent assignment. Also, the BTA recognized that penalty abatement can be pursued via a refund claim outside a Petition for Reassessment. <i><a href="http://app.bta.ohio.gov/2011-A-760.pdf">See Smedley</a>.</i>

Next Ohio Budget Expected to Include Significant Tax Changes

2013-01-15 15:54:45

<a href="http://governor.ohio.gov/">Ohio Govenor John Kasich</a> will unveil his proposed budget for FY 2014-15 next month. <a href="https://www.ohiostatetaxblog.com/index.php?option=com_content&view=article&id=113:governor-kasich-signs-historic-ohio-budget-bill-&catid=54:ohio-state-tax-news&Itemid=59">During the last budget</a>, Gov. Kasich focused on closing a substantial deficit. This time around, he is expected to propose a significant reduction to Ohio's personal income tax, among other things. It will be interesting to see how Gov. Kasich proposes to offset this revenue reduction. <em>The Plain Dealer </em>discusses several possibilities in a <a href="http://www.cleveland.com/open/index.ssf/2013/01/kasichs_new_state_budget_on_th.html">recent article</a>, including taking the $20 billion available to the state under President Obama's Affordable Care Act. Ohio's next biennium budget will take effect July 1, 2013. We will continue to provide updates on the tax aspects to be included in the upcoming budget.

Protecting Construction Contractors From Erroneous Property Classifications - Real versus Personal

2012-11-13 14:53:15

<p style="margin-bottom: 6pt;">The <a href="https://www.ohiostatetaxblog.com/index.php?option=com_content&view=article&id=80:mr-contractor-are-you-correctly-addressing-ohio-sales-tax-on-your-construction-contracts-part-i&catid=47:ohio-sales-and-use-tax&Itemid=59">rules</a> concerning which components of a construction project become real property upon installation and those that are business fixtures (remaining personal property) are often confusing. Even the Ohio Department of Taxation has taken an inconsistent approach at times – for example, arguing (albeit unsuccessfully) that golf bunkers and tee boxes were personal property in a <a href="http://bta.ohio.gov/04R338.pdf">2007 Board of Tax Appeals decision</a>, while a <a href="http://tax.ohio.gov/divisions/legal/documents/07PPT_Opinion070001_RAL.pdf">2007 Tax Commissioner’s Opinion</a> found that bunkers were land and, thus, real property. Likewise, in the two seminal decisions concerning business fixtures, the Ohio Supreme Court found that <a href="http://www.supremecourt.ohio.gov/rod/docs/pdf/0/2004/2004-ohio-6890.pdf">roller coasters and station houses</a> at Geauga Lake Amusement Park were personal property, while the Board of Tax Appeals later ruled that <a href="http://bta.ohio.gov/04v1294.pdf">Polaris amphitheater and other structures</a> were real property. Suffice it to say, it is often difficult to determine the portions of a construction project representing business fixtures, upon which the contractor must collect sales tax from its customer, versus those which become real property upon which the contractor must pay use tax on its materials.</p> <p style="margin-bottom: 6pt;"><a href="http://codes.ohio.gov/orc/5739.03">Ohio Revised Code Section 5739.03(C)</a> provides a procedure which protects the contractor from misclassification by requesting a certification from its customer – the contractee – as to the real property and personal property components of the project. The request must be sent via certified mail, return receipt requested, <b><i>prior to entering into the contract or agreement</i></b>. The contractor will be protected from a misclassification if it relies upon in good faith, and acts consistent with, the contractee’s certification. And if the contractee fails to provide the requested certification, the contractor may rely upon its good faith determination as to its Ohio sales and use tax obligations. However, since this procedure shifts the exposure of a misclassification to the contractee, it would be prudent to advise the contractee prior to requesting such a certification.</p> <p style="margin: 12pt 0in 6pt;">If you need help complying with the procedures for requesting a certification for your customer, or classifying components of a construction contract as real or personal property, <a href="https://www.ohiostatetaxblog.com/index.php?option=com_contact&view=category&catid=12&Itemid=61">contact us</a> as we have extensive experience in this area. In fact, Steve represented the taxpayer in the controlling Ohio Supreme Court case (<i><a href="http://www.supremecourt.ohio.gov/rod/docs/pdf/0/2004/2004-ohio-6890.pdf">Funtime v. Wilkins</a></i>) governing this area.</p>

Ohio State Bar Association Sales/Use Tax Subcommittee Report For September 21, 2012

2012-09-21 12:28:19

<p style="text-align: left;" align="left"><span style="font-family: Arial;"><a href="https://www.ohiobar.org/ForLawyers/Committees/Taxation/Shared%20Documents/2012/Sales%20and%20Use%20Tax%20Subcommittee/Sales%20and%20Use%20Tax%20Subcommittee%20Report%20Sept.%202012.pdf">Click here</a> to view Steve's September 21, 2012 report which will be presented to the Taxation Section of the Ohio State Bar Association as Chair of the Sales/Use Tax Subcommittee.</span></p>

Ohio Job Creation Credit Expanded To Include Telecommuting Employees

2012-08-06 14:32:40

Ohio has expanded its job creation credit to employers of “home-based employees.” <a href="http://www.legislature.state.oh.us/bills.cfm?ID=129_HB_327">Sub. H.B. 327</a> (effective Sept. 6, 2012). A “home-based employee” is an employee who works primarily from the employee’s Ohio residence exclusively for the benefit of a qualifying project and is paid at least 131% of federal minimum wage. To qualify for the credit for telecommuting employees, the employer must employ 200 more employees than it employed on June 30, 2011. The Director of Development may require employers to make health care benefits and tuition reimbursement available for all employees to receive the credit. Separate applications must be submitted if the employer seeks the credit for both telecommuters and employees working on-site. The credit can be taken against the employer’s Ohio commercial activity tax, franchise tax (for financial institutions) or insurance company premium tax. The job creation credit based upon home-based employees is available for a six-year trial period, with the <a href="http://www.development.ohio.gov/">Director of Development</a> to report to the Ohio Governor, Senate President and Speaker of the House regarding the effect thereof and nationwide trends for telecommuting employees after the trial period. <i>See </i><a href="http://www.lsc.state.oh.us/analyses129/12-hb327-129.pdf">Final Analysis of Sub. H.B. 327</a>.

Ohio Department of Taxation Targeting Quick Service Restaurants

2012-06-29 12:27:12

The Ohio Department of Taxation (the “Department”) has a new initiative to audit quick service (or fast food) restaurants (“QSR”) throughout the state premised on the Department’s perception that QSRs fail to properly record taxable dine in sales. <a href="https://www.legislature.ohio.gov/laws/ohio-constitution">Article XII, Section 3(C) of the Ohio Constitution</a> prohibits a sales tax on food purchased for off premises consumption. Therefore, a consumer’s response to whether an order is “for here or to go” should determine the vendor’s obligation to collect tax on that transaction. However, sales tax must always be collected on certain items excluded from the <a href="http://tax.ohio.gov/divisions/communications/information_releases/sales/st200401.pdf">definition of “food”</a>, such as soft drinks and alcoholic beverages. The Department’s initiative is designed to crack down on QSRs who consistently fail to ask customers whether their orders are for dine in or carry out. Soon after being notified that an audit is being conducted, the QSR is pressured to enter into an agreement with the Department setting forth the guidelines for a sample audit or test check, even before the QSR has retained a professional to represent it. The Department may offer incentives, such as agreeing to waive penalties, or indicate the results from the test check will be used to determine a statewide baseline for QSRs. But, in our experience, these items are not always included in the Department’s initially proposed sample agreement. Before entering into an agreement, the QSR must be aware of the significant rights being given up – such as the ability to challenge the sample as being representative or the statistical calculation used to extrapolate the results from the sample period for the entire audit period. <i>See e.g., <a href="http://www.supremecourt.ohio.gov/rod/docs/pdf/0/2002/2002-ohio-5809.pdf">Shugarman Surgical Supply, Inc. v. Zaino</a></i>, 97 Ohio St.3d 183, 2002-Ohio-5809, at ¶19 (“When [taxpayer] signed the test check agreement it waived any objection covering the test-check period.”); and <i><a href="http://www.leagle.com/xmlResult.aspx?page=1&xmldoc=198613225OhioSt3d107_1105.xml&docbase=CSLWAR2-1986-2006&SizeDisp=7">Akron Home Medical Services, Inc. v. Lindley</a></i>, 25 Ohio St.3d 107 (1986) (taxpayer “waived any objection by entering into an enforceable, written agreement with the commissioner expressly permitting a test check …”). The initially proposed sample agreement is typically very one-sided for the Department’s benefit. Unrepresented QSRs are often shocked by the results of a sample audit or test check as being substantially higher than anticipated. However, by this time, the QSR’s ability to challenge the resulting assessment is severely limited. Therefore, the QSR should give careful and due attention to the parameters of the proposed sample audit or test check to ensure it is conducted in a manner representative of the QSR’s business and does not inflate an otherwise insignificant liability, as many provisions can often be negotiated to produce a fair, more representative result. If you are a QSR in need of help with respect to an Ohio sales tax audit or negotiating a sample agreement with the Department, please feel free to <a href="https://www.ohiostatetaxblog.com/index.php?option=com_contact&view=category&catid=12&Itemid=61">contact us</a>.

Low Tax Rates and Incentives Give Ohio a Business-Friendly Landscape, Spurring Economic Recovery and Growth

2012-06-05 15:35:52

<p style="line-height: normal; margin-bottom: 0pt;"><span style="font-family: Verdana; font-size: 8pt;"><span style="font-family: 'Times New Roman';">This article appears in and is reproduced with the permission of the Journal of Multistate Taxation and Incentives, Vol. 22, No. 3, June 2012. Published by Warren, Gorham & Lamont, an imprint of Thomson Reuters. Copyright (c) 2012 Thomson Reuters/WG&L. All rights reserved.</span></span></p> <p style="line-height: 16.8pt; margin: 12pt 0in;"><span style="font-family: Verdana; font-size: 10pt;"><span style="letter-spacing: 1px;"><b><b style="line-height: 26px;"><i><span style="font-family: Verdana; color: #252525;">By: STEVEN A. DIMENGO AND RICHARD B. FRY III</span></i></b></b></span></span></p> <p style="line-height: 19.8pt;"><i><span style="font-family: Verdana; color: #252525;">After years of seeing jobs and businesses leave the state for friendlier pastures, Ohio began to substantially reform its tax structure to create its own business-friendly environment.</span></i></p> <p style="line-height: 19.8pt; margin: 13.2pt 0in;"><b style="line-height: 19.8pt;"><span style="font-family: Verdana; color: #252525; font-size: 14pt;">U</span></b><span style="font-family: Verdana; color: #252525;">pon taking office in January 2011, Ohio Governor John Kasich's primary goal has been clear. "We're working to create an environment where we're job-friendly" Gov. Kasich told the <i>Cincinnati Enquirer.</i></span><b style="line-height: 19.8pt;"><sup><span style="font-family: Verdana; color: #252525; font-size: 8.5pt;"> <a href="#FN 1"><span style="letter-spacing: 0.1pt; color: #145da4; text-decoration: none;">1</span></a></span></sup></b><span style="font-family: Verdana; color: #252525;"> Although undoubtedly one of the states most decimated by the recession, Ohio's recovery looks promising thanks to a more business-friendly climate providing the incentive for businesses to stay in, or relocate to, Ohio.</span></p> <p style="line-height: 19.8pt; margin: 13.2pt 0in;"><span style="font-family: Verdana; color: #252525;">The transition to a more business-friendly tax climate commenced a few years ago with the elimination of Ohio's personal property and corporate franchise taxes, which had imposed an especially heavy burden on C corporations with significant in-state presence, and replacing these taxes with a commercial activity tax described below. In addition, JobsOhio—a private, nonprofit corporation created by the Kasich administration to attract jobs to Ohio (see <a href="http://jobs-ohio.com/">http://jobs-ohio.com</a>)—has recently struck deals with several large corporations to keep and/or bring jobs to the state, including Ford, American Greetings, Chrysler, Timken, Abercrombie & Fitch, General Motors, Lincoln Electric, and Wendy's, with many of these companies also making significant investments in new or updated facilities. </span></p> <p style="line-height: 19.8pt; margin: 13.2pt 0in;"><span style="font-family: Verdana; color: #252525;">The positive outlook for Ohio's economic recovery is supported by various recent reports. The U.S. Department of Labor recently reported that Ohio added more than 32,000 jobs in January 2012, the third highest increase for the month, behind only Texas and New York.</span><b><sup><span style="font-family: Verdana; color: #252525; font-size: 8.5pt;"> <a href="#FN 2"><span style="letter-spacing: 0.1pt; color: #145da4; text-decoration: none;">2</span></a></span></sup></b><span style="font-family: Verdana; color: #252525;"> This capped a 1.3% decrease in the state's unemployment rate during Gov. Kasich's first year in office.</span><b><sup><span style="font-family: Verdana; color: #252525; font-size: 8.5pt;"> <a href="#FN 3"><span style="letter-spacing: 0.1pt; color: #145da4; text-decoration: none;">3</span></a></span></sup></b><span style="font-family: Verdana; color: #252525;"> Further, a recent Tax Foundation study ranked Ohio as the fifth least burdensome state with regard to local tax costs for established business and the third least burdensome for new business—the only state ranking in the top five for each category, and far better than surrounding Midwestern states with which Ohio often competes for business.</span><b><sup><span style="font-family: Verdana; color: #252525; font-size: 8.5pt;"> <a href="#FN 4"><span style="letter-spacing: 0.1pt; color: #145da4; text-decoration: none;">4</span></a></span></sup></b><span style="font-family: Verdana; color: #252525;"> The Tax Foundation's analysis recognized Ohio's low effective tax rates for businesses with significant in-state presence, especially for C corporations that now pay no Ohio tax on their net income or tangible personal property located in Ohio.</span><b><sup><span style="font-family: Verdana; color: #252525; font-size: 8.5pt;"> <a href="#FN 5"><span style="letter-spacing: 0.1pt; color: #145da4; text-decoration: none;">5</span></a></span></sup></b><span style="font-family: Verdana; color: #252525;"> Again, Ohio laid the foundation for its business-friendly landscape several years earlier, when the state's taxing scheme was significantly overhauled. </span></p> <p style="line-height: 19.8pt; margin: 13.2pt 0in;"><span style="font-family: Verdana; color: #252525;">Needing to reform its out-of-date tax system reflecting early 20th century concepts, starting in 2005 Ohio began phasing out its corporate franchise and personal property taxes, which imposed the largest burden on C corporations with substantial property or workforce in the state, in favor of a new, low-rate, broad-based commercial activity tax (CAT). Ohio's new tax scheme recognizes how doing business has evolved, focusing on a taxpayer's participation in Ohio's economic market instead of the taxpayer's physical presence (i.e., property and employees) in the state, and thereby substantially reducing the tax burden on Ohio-based businesses whose customers are predominantly outside Ohio. This has given Ohio a significant advantage in attracting businesses and jobs to Ohio, allowing the state to more quickly bounce back from the nation's worst recession in decades. The following discussion examines the aspects of the new Ohio tax structure that has created an environment attractive for business, making Ohio sort of a "tax haven." </span></p> <p style="line-height: 16.8pt; margin: 12pt 0in;"><b><span style="font-family: Verdana; letter-spacing: 0.85pt; font-size: 14pt;">The Commercial Activity Tax</span></b></p> <p style="line-height: 19.8pt; margin: 13.2pt 0in;"><span style="font-family: Verdana; color: #252525;">Fully phased-in on 4/1/09, the CAT is a broad-based, low-rate tax imposed on receipts from Ohio sources. Switching from the traditional net-income based tax scheme, where income is apportioned to states based upon the typical three-factor (property, payroll, and sales) formula, the CAT situses to Ohio the taxpayer's gross receipts from the sale of products or services if the customer receives the property or the benefit of the service in Ohio.</span><b><sup><span style="font-family: Verdana; color: #252525; font-size: 8.5pt;"> <a href="#FN 6"><span style="letter-spacing: 0.1pt; color: #145da4; text-decoration: none;">6</span></a></span></sup></b><span style="font-family: Verdana; color: #252525;"> Taxpayers then pay a minimum tax of $150 on their Ohio gross receipts up to $1 million and a tax rate of 0.26% on Ohio gross receipts in excess of $1 million.</span><b><sup><span style="font-family: Verdana; color: #252525; font-size: 8.5pt;"> <a href="#FN 7"><span style="letter-spacing: 0.1pt; color: #145da4; text-decoration: none;">7</span></a></span></sup></b><span style="font-family: Verdana; color: #252525;"> Accordingly, focusing solely on the taxpayer's sales to Ohio customers, rather that its physical presence in the state, Ohio now taxes business activities based upon market participation. </span></p> <p style="line-height: 19.8pt; margin: 13.2pt 0in;"><span style="font-family: Verdana; color: #252525;">Moreover, the CAT employs the Multistate Tax Commission's (MTC's) model factor-presence nexus standard, intending to reach a broader base of taxpayers, including companies that make substantial sales into the state, even if lacking a physical presence.</span><b><sup><span style="font-family: Verdana; color: #252525; font-size: 8.5pt;"> <a href="#FN 8"><span style="letter-spacing: 0.1pt; color: #145da4; text-decoration: none;">8</span></a></span></sup></b><span style="font-family: Verdana; color: #252525;"> Under the CAT's "bright-line presence" standard, all businesses with at least $500,000 of Ohio taxable gross receipts (or 25% of their total sales) during the calendar year are subject to the CAT even if they have no property or employees in the state.</span><b><sup><span style="font-family: Verdana; color: #252525; font-size: 8.5pt;"> <a href="#FN 9"><span style="letter-spacing: 0.1pt; color: #145da4; text-decoration: none;">9</span></a></span></sup></b><span style="font-family: Verdana; color: #252525;"> The rationale is to spread the tax amongst all those benefiting from Ohio's market—even online or remote sellers without an Ohio physical presence that traditionally did not pay Ohio state taxes—while reducing the burden on businesses with in-state facilities and workforce. </span></p> <p style="line-height: 19.8pt; margin: 13.2pt 0in;"><span style="font-family: Verdana; color: #252525;">As a result, Ohio is now a "tax haven" for businesses, especially large C corporations with substantial sales outside Ohio. For example, a company with a $100 million facility and 500 employees in Ohio would only pay tax on its receipts from sales to Ohio customers; no business activity tax would be imposed based upon the company's property or employees in Ohio. This scheme has created an advantageous environment for businesses to locate their corporate headquarters, online retail operations, distribution centers and capital-intensive manufacturing operations in Ohio.</span><b><sup><span style="font-family: Verdana; color: #252525; font-size: 8.5pt;"> <a href="#FN 10"><span style="letter-spacing: 0.1pt; color: #145da4; text-decoration: none;">10</span></a></span></sup></b></p> <p style="line-height: 16.8pt; margin: 12pt 0in;"><b><span style="font-family: Verdana; letter-spacing: 0.85pt; font-size: 14pt;">Tax Incentives for Job Creation and Retention</span></b></p> <p style="line-height: 19.8pt; margin: 13.2pt 0in;"><span style="font-family: Verdana; color: #252525;">As one of only 14 states offering tax credits based upon employer income tax withholding, Ohio provides Job Creation Tax Credits (JCTCs) and Job Retention Tax Credits (JRTCs).</span><b><sup><span style="font-family: Verdana; color: #252525; font-size: 8.5pt;"> <a href="#FN 11"><span style="letter-spacing: 0.1pt; color: #145da4; text-decoration: none;">11</span></a></span></sup></b><span style="font-family: Verdana; color: #252525;"> Although ultimately granted by the Ohio Department of Development, these credits are one of the arrows in JobsOhio's quiver, offered by the organization to entice new business to Ohio and/or existing businesses to undertake new investments in Ohio. The rationale for the JCTC and JRTC is that increasing and maintaining payroll is the most effective way to bring wealth to Ohio. </span></p> <p style="line-height: 19.8pt; margin: 13.2pt 0in;"><b><span style="font-family: Verdana; letter-spacing: 0.85pt; font-size: 12pt;">JCTC.</span></b><b> </b><span style="font-family: Verdana; color: #252525;">The refundable JCTC is available to all businesses that: (1) demonstrate that receipt of the credit is a "major factor" in moving forward with the proposed Ohio project; (2) maintain operations at the project location for at least the greater of (a) seven years or (b) the term of the JCTC plus three years; and (3) maintain a minimum of ten new full-time equivalent employees with an average hourly wage of at least 150% of the federal minimum wage and a total annual Ohio payroll of at least $660,000.</span><b><sup><span style="font-family: Verdana; color: #252525; font-size: 8.5pt;"> <a href="#FN 12"><span style="letter-spacing: 0.1pt; color: #145da4; text-decoration: none;">12</span></a></span></sup></b><span style="font-family: Verdana; color: #252525;"> The credit may be applied against the CAT or the Ohio income or corporate franchise tax (still imposed upon financial institutions and other limited industries), and is based on the increase in Ohio income tax withholdings from the project site over a baseline income tax amount (increased annually for inflation). The JCTC is calculated by multiplying that increase by the tax credit percentage specified in the agreement with the Ohio Department of Development.</span><b><sup><span style="font-family: Verdana; color: #252525; font-size: 8.5pt;"> <a href="#FN 13"><span style="letter-spacing: 0.1pt; color: #145da4; text-decoration: none;">13</span></a></span></sup></b><span style="font-family: Verdana; color: #252525;"> Taxpayers must file an annual report with the Ohio Department of Development disclosing full-time equivalent employees, and payroll withholding and investment information.</span><b><sup><span style="font-family: Verdana; color: #252525; font-size: 8.5pt;"> <a href="#FN 14"><span style="letter-spacing: 0.1pt; color: #145da4; text-decoration: none;">14</span></a></span></sup></b><span style="font-family: Verdana; color: #252525;"> Finally, to claim the JCTC, the Department of Development issues to the taxpayer a Certificate of Verification, which the taxpayer submits with its tax report or within 60 days after the taxing authority requests it.</span><b><sup><span style="font-family: Verdana; color: #252525; font-size: 8.5pt;"> <a href="#FN 15"><span style="letter-spacing: 0.1pt; color: #145da4; text-decoration: none;">15</span></a></span></sup></b></p> <p style="line-height: 19.8pt; margin: 13.2pt 0in;"><b><span style="font-family: Verdana; letter-spacing: 0.85pt; font-size: 12pt;">JCTC.</span></b><b> </b><span style="font-family: Verdana; color: #252525;">The JRTC is generally nonrefundable, unless a business meets certain statutory conditions.</span><b><sup><span style="font-family: Verdana; color: #252525; font-size: 8.5pt;"> <a href="#FN 16"><span style="letter-spacing: 0.1pt; color: #145da4; text-decoration: none;">16</span></a></span></sup></b><span style="font-family: Verdana; color: #252525;"> In contrast to the JCTC, the JRTC is essentially limited to larger companies, as recipients generally are required to: (1) retain at least 500 full-time equivalent employees or maintain an annual payroll of at least $35 million at the project site,</span><b><sup><span style="font-family: Verdana; color: #252525; font-size: 8.5pt;"> <a href="#FN 17"><span style="letter-spacing: 0.1pt; color: #145da4; text-decoration: none;">17</span></a></span></sup></b><span style="font-family: Verdana; color: #252525;"> and (2) invest at least $50 million in a manufacturing facility or $20 million in an administrative facility (e.g., corporate headquarters).</span><b><sup><span style="font-family: Verdana; color: #252525; font-size: 8.5pt;"> <a href="#FN 18"><span style="letter-spacing: 0.1pt; color: #145da4; text-decoration: none;">18</span></a></span></sup></b><span style="font-family: Verdana; color: #252525;"> In addition, the tax credit percentage used in computing the JCTC and the JRTC may not exceed 75%.</span><b><sup><span style="font-family: Verdana; color: #252525; font-size: 8.5pt;"> <a href="#FN 19"><span style="letter-spacing: 0.1pt; color: #145da4; text-decoration: none;">19</span></a></span></sup></b><span style="font-family: Verdana; color: #252525;"> JRTCs are awarded through a competitive process based upon the anticipated benefit to Ohio's economy. </span></p> <p style="line-height: 19.8pt; margin: 13.2pt 0in;"><span style="font-family: Verdana; color: #252525;">Generally, the JCTC and JRTC are available for up to 15 years, although the term may differ at the discretion of the Ohio Department of Development.</span><b><sup><span style="font-family: Verdana; color: #252525; font-size: 8.5pt;"> <a href="#FN 20"><span style="letter-spacing: 0.1pt; color: #145da4; text-decoration: none;">20</span></a></span></sup></b><span style="font-family: Verdana; color: #252525;"> Recipients must be careful, however, as the state is permitted to reclaim, or "clawback," all or a portion of the claimed credits if the taxpayer fails to fulfill its commitments for the project, such as if the project is abandoned prior to the end of the credit term or the required number of jobs is not created or maintained.</span><b><sup><span style="font-family: Verdana; color: #252525; font-size: 8.5pt;"> <a href="#FN 21"><span style="letter-spacing: 0.1pt; color: #145da4; text-decoration: none;">21</span></a></span></sup></b></p> <p style="line-height: 19.8pt; margin: 13.2pt 0in;"><span style="font-family: Verdana; color: #252525;">In addition to the JCTC and JRTC, other tax incentives are available to Ohio businesses, including research and development credits</span><b><sup><span style="font-family: Verdana; color: #252525; font-size: 8.5pt;"> <a href="#FN 22"><span style="letter-spacing: 0.1pt; color: #145da4; text-decoration: none;">22</span></a></span></sup></b><span style="font-family: Verdana; color: #252525;">; real property tax abatements; and sales tax exemptions specifically for certain distribution centers and qualifying computer data center equipment.</span><b><sup><span style="font-family: Verdana; color: #252525; font-size: 8.5pt;"> <a href="#FN 23"><span style="letter-spacing: 0.1pt; color: #145da4; text-decoration: none;">23</span></a></span></sup></b><span style="font-family: Verdana; color: #252525;"> JobsOhio has successfully used these tools, in combination with the JCTC and JRTC, to attract business to Ohio. </span></p> <p style="line-height: 16.8pt; margin: 12pt 0in;"><b><span style="font-family: Verdana; letter-spacing: 0.85pt; font-size: 14pt;">InvestOhio—Incentives for Small Businesses</span></b></p> <p style="line-height: 19.8pt; margin: 13.2pt 0in;"><span style="font-family: Verdana; color: #252525;">While the incentives discussed above primarily benefit "big" business, Ohio recently enacted tax incentives for small business owners as well. InvestOhio, a new program administered by the Ohio Department of Development in collaboration with the Ohio Department of Taxation, provides a nonrefundable personal income tax credit of 10% of the taxpayer's equity investment, made after June 2011, in a qualifying Ohio small business enterprise.</span><b><sup><span style="font-family: Verdana; color: #252525; font-size: 8.5pt;"> <a href="#FN 24"><span style="letter-spacing: 0.1pt; color: #145da4; text-decoration: none;">24</span></a></span></sup></b><span style="font-family: Verdana; color: #252525;"> It is hoped that the InvestOhio program will generate $1 billion of new investments in Ohio small businesses by mid-2013. The small business investor must be an individual, estate, or trust, or a pass-through entity in which an individual, estate, or trust holds an ownership interest. The credit is capped at $1 million per investor, per biennium. </span></p> <p style="line-height: 19.8pt; margin: 13.2pt 0in;"><span style="font-family: Verdana; color: #252525;">To qualify for the credit, the taxpayer must make an investment in an eligible "small business enterprise," which is a corporation, pass-through entity, or other person having: (1) no more than (a) $50 million in total assets, or (b) $10 million in annual sales; and (2) employing in Ohio (a) at least 50 full-time equivalent employees, or (b) more than half of all its U.S. full-time employees.</span><b><sup><span style="font-family: Verdana; color: #252525; font-size: 8.5pt;"> <a href="#FN 25"><span style="letter-spacing: 0.1pt; color: #145da4; text-decoration: none;">25</span></a></span></sup></b><span style="font-family: Verdana; color: #252525;"> Within six months of the qualifying investment, the small business enterprise must expend all the invested funds to purchase certain business property, including tangible personal property used in Ohio, real property located in Ohio, certain motor vehicles, and/or intangible property used primarily in Ohio, or as compensation to employees (excluding increased compensation for owners, officers, or managers) who are subject to Ohio income tax withholding. The purchases must be used in business in Ohio from the time of acquisition by the enterprise until the end of the investor's holding period.</span><b><sup><span style="font-family: Verdana; color: #252525; font-size: 8.5pt;"> <a href="#FN 26"><span style="letter-spacing: 0.1pt; color: #145da4; text-decoration: none;">26</span></a></span></sup></b><span style="font-family: Verdana; color: #252525;"> The taxpayer must continue to hold its investment in the small business enterprise for the "holding period," which is two years for investments made after June 2011 but before July 2013 and five years for investments made after June 2013.</span><b><sup><span style="font-family: Verdana; color: #252525; font-size: 8.5pt;"> <a href="#FN 27"><span style="letter-spacing: 0.1pt; color: #145da4; text-decoration: none;">27</span></a></span></sup></b><span style="font-family: Verdana; color: #252525;"> The InvestOhio tax credit is claimed by the investor in the year during which the holding period ends.</span><b><sup><span style="font-family: Verdana; color: #252525; font-size: 8.5pt;"> <a href="#FN 28"><span style="letter-spacing: 0.1pt; color: #145da4; text-decoration: none;">28</span></a></span></sup></b></p> <p style="line-height: 19.8pt; margin: 13.2pt 0in;"><span style="font-family: Verdana; color: #252525;">The Ohio Department of Development may award up to a total of $100 million of credits to qualified small business investors per fiscal biennium on a first-come, first-served basis.</span><b><sup><span style="font-family: Verdana; color: #252525; font-size: 8.5pt;"> <a href="#FN 29"><span style="letter-spacing: 0.1pt; color: #145da4; text-decoration: none;">29</span></a></span></sup></b><span style="font-family: Verdana; color: #252525;"> As of the writing of this article, approximately $50 million of InvestOhio credits remains available for the current biennium, which runs through June 2013. </span></p> <p style="line-height: 19.8pt; margin: 13.2pt 0in;"><b><span style="font-family: Verdana; letter-spacing: 0.85pt; font-size: 12pt;">Lower tax rates.</span></b><b> </b><span style="font-family: Verdana; color: #252525;">In addition to the InvestOhio personal income tax credit, Ohio has been reducing its personal income tax rate in conjunction with reforming its tax scheme, i.e., phasing in the CAT and phasing out the corporate franchise and personal property taxes. The top personal income tax rate is currently 5.925% (tax years beginning after 2010) for income over $200,000, having been reduced by more than 20% from the top rate of 7.5% prior to 2005.</span><b><sup><span style="font-family: Verdana; color: #252525; font-size: 8.5pt;"> <a href="#FN 30"><span style="letter-spacing: 0.1pt; color: #145da4; text-decoration: none;">30</span></a></span></sup></b><span style="font-family: Verdana; color: #252525;"> Moreover, the Ohio estate tax has been repealed effective 1/1/13.</span><b><sup><span style="font-family: Verdana; color: #252525; font-size: 8.5pt;"> <a href="#FN 31"><span style="letter-spacing: 0.1pt; color: #145da4; text-decoration: none;">31</span></a></span></sup></b><span style="font-family: Verdana; color: #252525;"> These efforts to reduce individual tax burdens were aimed, at least in part, at influencing small business owners and other wealthy individuals to continue residing in Ohio, rather than relocating later in life to states such as Florida, which has minimal tax burdens—and better weather. </span></p> <p style="line-height: 16.8pt; margin: 12pt 0in;"><b><span style="font-family: Verdana; letter-spacing: 0.85pt; font-size: 14pt;">Tax Amnesty</span></b></p> <p style="line-height: 19.8pt; margin: 13.2pt 0in;"><span style="font-family: Verdana; color: #252525;">Not only has Ohio minimized prospective tax burdens for business, the state also is providing an opportunity to resolve past delinquencies on favorable terms, in order to get more taxpayers on the tax rolls and increase future collections. </span></p> <p style="line-height: 19.8pt; margin: 13.2pt 0in;"><b><span style="font-family: Verdana; letter-spacing: 0.85pt; font-size: 12pt;">Use taxes.</span></b><b> </b><span style="font-family: Verdana; color: #252525;">First, in response to the Ohio Tax Commissioner's initiative to pursue businesses for unpaid consumer's use tax (incurred on property purchased out-of-state and brought into Ohio, or where no sales tax is collected), the Ohio General Assembly prohibited the Commissioner from making an assessment of consumer's use tax that was due (1) prior to January 2008 (thereby taking away the Commissioner's threat of a seven-year audit for businesses that failed to file returns under the initiative), and (2) for any period after the expiration of seven years (thus codifying the Commissioner's informal policy limiting audits to seven years even where taxpayers did not file returns).</span><b><sup><span style="font-family: Verdana; color: #252525; font-size: 8.5pt;"> <a href="#FN 32"><span style="letter-spacing: 0.1pt; color: #145da4; text-decoration: none;">32</span></a></span></sup></b></p> <p style="line-height: 19.8pt; margin: 13.2pt 0in;"><span style="font-family: Verdana; color: #252525;">Moreover, delinquent taxpayers can further reduce their past liability by participating in Ohio's consumer's use tax amnesty program running from 10/1/11 through 5/1/13.</span><b><sup><span style="font-family: Verdana; color: #252525; font-size: 8.5pt;"> <a href="#FN 33"><span style="letter-spacing: 0.1pt; color: #145da4; text-decoration: none;">33</span></a></span></sup></b><span style="font-family: Verdana; color: #252525;"> Under this program, for consumer-taxpayers that pay in full their outstanding delinquent use tax liabilities accruing after 2008, the Commissioner will waive or abate all delinquent use tax owed by the consumer before 2009, and all applicable penalties and interest accrued before and after 1/1/09. Interest and penalties will not be waived under the amnesty program, however, for consumers that registered with the Commissioner for the use tax on or before 6/1/11.</span><b><sup><span style="font-family: Verdana; color: #252525; font-size: 8.5pt;"> <a href="#FN 34"><span style="letter-spacing: 0.1pt; color: #145da4; text-decoration: none;">34</span></a></span></sup></b><span style="font-family: Verdana; color: #252525;"> The consumer's use tax amnesty program is also available to taxpayers already contacted by the Tax Commissioner, even if in the midst of an audit, as long as the taxpayer has not been assessed for consumer's use tax on or before 9/29/11, the effective date of the amnesty provisions.</span><b><sup><span style="font-family: Verdana; color: #252525; font-size: 8.5pt;"> <a href="#FN 35"><span style="letter-spacing: 0.1pt; color: #145da4; text-decoration: none;">35</span></a></span></sup></b></p> <p style="line-height: 19.8pt; margin: 13.2pt 0in;"><span style="font-family: Verdana; color: #252525;">(The Ohio Department of Taxation has adopted a final regulation detailing the use tax amnesty program. That regulation, Ohio Admin. Code §5703-9-60 (consumer's use tax amnesty payment plan), is reproduced in its entirety in the sidebar accompanying this article.) </span></p> <p style="line-height: 19.8pt; margin: 13.2pt 0in;"><b><span style="font-family: Verdana; letter-spacing: 0.85pt; font-size: 12pt;">General amnesty.</span></b><b> </b><span style="font-family: Verdana; color: #252525;">Second, Ohio is offering a general tax amnesty program for essentially all other Ohio taxes beginning 5/1/12 through 6/15/12.</span><b><sup><span style="font-family: Verdana; color: #252525; font-size: 8.5pt;"> <a href="#FN 36"><span style="letter-spacing: 0.1pt; color: #145da4; text-decoration: none;">36</span></a></span></sup></b><span style="font-family: Verdana; color: #252525;"> Although the look-back period for this program is unlimited, if a taxpayer pays the full amount of qualifying delinquent taxes owed, plus one-half of any interest that has accrued, the other half of the interest and all penalties are waived.</span><b><sup><span style="font-family: Verdana; color: #252525; font-size: 8.5pt;"> <a href="#FN 37"><span style="letter-spacing: 0.1pt; color: #145da4; text-decoration: none;">37</span></a></span></sup></b><span style="font-family: Verdana; color: #252525;"> In contrast to the use tax amnesty program, taxpayers previously contacted by the Tax Commissioner concerning a delinquent liability are not eligible for the general tax amnesty program.</span><b><sup><span style="font-family: Verdana; color: #252525; font-size: 8.5pt;"> <a href="#FN 38"><span style="letter-spacing: 0.1pt; color: #145da4; text-decoration: none;">38</span></a></span></sup></b><span style="font-family: Verdana; color: #252525;"> Nevertheless, these amnesty programs are appealing for both taxpayers and the state; while taxpayers can resolve their liability on favorable terms, they must register and pay Ohio taxes going forward, creating an increased future revenue stream for the state.</span><b><sup><span style="font-family: Verdana; color: #252525; font-size: 8.5pt;"> <a href="#FN 39"><span style="letter-spacing: 0.1pt; color: #145da4; text-decoration: none;">39</span></a></span></sup></b></p> <p style="line-height: 16.8pt; margin: 12pt 0in;"><b><span style="font-family: Verdana; letter-spacing: 0.85pt; font-size: 14pt;">Conclusion</span></b></p> <p style="line-height: 19.8pt; margin: 13.2pt 0in;"><span style="font-family: Verdana; color: #252525;">After years of seeing jobs and businesses leave the state for friendlier pastures, Ohio began to substantially reform its tax structure to create its own business-friendly landscape. The seeds were planted to attract businesses and jobs to Ohio. Although this substantial overhaul began several years ago, before anyone knew the 2008-2009 recession was on the horizon, Ohio's new-age tax climate has greatly helped the state in its recovery. Now, Ohio is a "tax haven" for businesses due to the elimination of tax burdens based on property and workforce in the state, and focusing instead on market participation. By being ahead of most states in modernizing its tax structure, Ohio has created a more business-friendly tax environment and is starting to reap the benefits by showing signs of a quicker recovery from the nationwide recession and substantial job growth across the state. </span><b><span style="font-family: Verdana; color: #252525; font-size: 11pt;">[]</span></b></p> <p style="line-height: 16.8pt; margin: 12pt 0in;"><b><span style="font-family: Verdana; font-size: 12.5pt;">Sidebar</span></b></p> <p style="line-height: 19.8pt; margin: 13.2pt 0in;"><b><span style="font-family: Verdana; color: #252525; font-size: 12pt;">Practice Note: Regulation Details Ohio Use Tax Amnesty</span></b></p> <p style="line-height: 19.8pt; margin: 13.2pt 0in;"><span style="font-family: Verdana; color: #252525;">Ohio's use tax amnesty program runs from 10/1/11 through 5/1/13. Ohio Admin. Code §5703-9-60 (consumer's use tax amnesty payment plan) was adopted effective 2/13/12 and is reproduced below. </span></p> <p style="line-height: 19.8pt; margin: 13.2pt 0in;"><span style="font-family: Verdana; color: #252525;">(A) House Bill ("H.B.") 153, 129th General Assembly, (uncodified section 757.42) authorizes the Tax Commissioner to enter into a no-interest payment plan with a qualifying taxpayer who elects to participate in the consumer's use tax amnesty established by H.B. 153. </span></p> <p style="line-height: 19.8pt; margin: 13.2pt 0in;"><span style="font-family: Verdana; color: #252525;">(B) The Tax Commissioner may enter into a consumer's use tax amnesty payment plan if the taxpayer satisfies the following conditions: </span></p> <p style="line-height: 19.8pt; margin: 0.05in 0in 0.05in 0.5in;"><span style="font-family: Verdana; color: #252525;">(1) The taxpayer cannot have previously held or currently hold a consumer's use tax account as of June 1, 2011. </span></p> <p style="line-height: 19.8pt; margin: 0.05in 0in 0.05in 0.5in;"><span style="font-family: Verdana; color: #252525;">(2) The amount of consumer's use tax due under the taxpayer's amnesty application must exceed $500. </span></p> <p style="line-height: 19.8pt; margin: 0.05in 0in 0.05in 0.5in;"><span style="font-family: Verdana; color: #252525;">(3) At least one (1) corporate officer, LLC member, general partner or other person authorized to execute contracts on behalf of the taxpayer must agree to the terms of the payment plan on behalf of the taxpayer. </span></p> <p style="line-height: 19.8pt; margin: 0.05in 0in 0.05in 0.5in;"><span style="font-family: Verdana; color: #252525;">(4) The taxpayer must agree to extend the time limit for the Tax Commissioner to assess unpaid consumer's use tax due under amnesty until six (6) months after the end of the payment plan. </span></p> <p style="line-height: 19.8pt; margin: 13.2pt 0in;"><span style="font-family: Verdana; color: #252525;">(C) The consumer's use tax amnesty payment plan terms are as follows: </span></p> <p style="line-height: 19.8pt; margin: 0.05in 0in 0.05in 0.5in;"><span style="font-family: Verdana; color: #252525;">(1) The minimum monthly payment is $500. The initial monthly payment must be submitted with the amnesty application. </span></p> <p style="line-height: 19.8pt; margin: 0.05in 0in 0.05in 0.5in;"><span style="font-family: Verdana; color: #252525;">(2) The maximum term of a consumer's use tax amnesty payment plan is seven (7) years (84 months). </span></p> <p style="line-height: 19.8pt; margin: 0.05in 0in 0.05in 0.5in;"><span style="font-family: Verdana; color: #252525;">(3) The taxpayer must return the fully executed consumer's use tax amnesty payment plan agreement to the Tax Commissioner within 15 days after receipt. </span></p> <p style="line-height: 19.8pt; margin: 0.05in 0in 0.05in 0.5in;"><span style="font-family: Verdana; color: #252525;">(4) The taxpayer must make each payment due under the consumer's use tax amnesty payment plan on or before the first business day of each month. </span></p> <p style="line-height: 19.8pt; margin: 13.2pt 0in;"><span style="font-family: Verdana; color: #252525;">(D) If the taxpayer misses a monthly payment, fails to return a fully executed copy of the consumer's use tax payment plan agreement, or fails to remain current with all of its Ohio tax obligations, the Tax Commissioner will notify the taxpayer of such default ("Default Notice") via U.S. Mail or a similar method of delivery. The taxpayer will have 15 days from the date of the Default Notice to provide documentation supporting that the disputed payment was made, the fully executed Agreement has been returned, or that the taxpayer is current with all of its Ohio tax obligations. If within the 15-day period the taxpayer fails to provide such documentation, the Tax Commissioner may assess the taxpayer for the entire outstanding consumer's use tax balance, including interest. Interest will be calculated from the date the tax was required to be paid. Any assessment issued for amounts due under consumer's use tax amnesty will be immediately certified to the Ohio Attorney General for collection and may be subject to any and all costs and additional fees assessed by the Attorney General.</span></p> <p style="line-height: 19.8pt; margin-bottom: 0pt;"><span style="font-family: Verdana; color: #252525;">_________________________________________________________________________</span></p> <p style="line-height: normal; margin-bottom: 0pt;"><span style="font-family: Verdana; color: #252525;">END NOTES</span></p> <div style="line-height: normal; margin-bottom: 0pt;"> <hr align="left" size="2" width="30%" /> </div> <p style="line-height: 19.8pt; margin-bottom: 0pt;"><b><sup><span style="font-family: Verdana; color: #252525; font-size: 8.5pt;"><a href="#SRC 1"><span style="letter-spacing: 0.1pt; color: #145da4; text-decoration: none;">1</span></a></span></sup></b></p> <p style="line-height: 19.8pt; margin-bottom: 0pt;"><span style="font-family: Verdana; color: #252525;">  Holthaus, "Omnicare Leaving Covington [Ky.], Moving to Cincinnati," Cincinnati Enquirer, 9/20/11, available online via the paper's website at <a href="http://news.cincinnati.com/apps/pbcs.dll/article?AID=/20110919/BIZ01/309190041/Omnicare-leaving-Covington-moving-Cincinnati.">http://news.cincinnati.com/apps/pbcs.dll/article?AID=/20110919/BIZ01/309190041/Omnicare-leaving-Covington-moving-Cincinnati.</a> </span></p> <div style="line-height: 19.8pt; margin-bottom: 0pt;"> <hr align="left" size="2" width="30%" /> </div> <p style="line-height: 19.8pt; margin-bottom: 0pt;"><b><sup><span style="font-family: Verdana; color: #252525; font-size: 8.5pt;"><a href="#SRC 2"><span style="letter-spacing: 0.1pt; color: #145da4; text-decoration: none;">2</span></a></span></sup></b></p> <p style="line-height: 19.8pt; margin-bottom: 0pt;"><span style="font-family: Verdana; color: #252525;">  "Regional and State Employment and Unemployment—January 2012" (U.S. Dept. of Labor, Bureau of Labor Statistics, USDL-12-0448, 3/13/12), available online via the Bureau's website at www.bls.gov/news.release/archives/laus_03132012.htm. </span></p> <div style="line-height: 19.8pt; margin-bottom: 0pt;"> <hr align="left" size="2" width="30%" /> </div> <p style="line-height: 19.8pt; margin-bottom: 0pt;"><b><sup><span style="font-family: Verdana; color: #252525; font-size: 8.5pt;"><a href="#SRC 3"><span style="letter-spacing: 0.1pt; color: #145da4; text-decoration: none;">3</span></a></span></sup></b></p> <p style="line-height: 19.8pt; margin-bottom: 0pt;"><span style="font-family: Verdana; color: #252525;">  <i>Id.,</i> Table C: "States with statistically significant unemployment rate changes from January 2011 to January 2012, seasonally adjusted." </span></p> <div style="line-height: 19.8pt; margin-bottom: 0pt;"> <hr align="left" size="2" width="30%" /> </div> <p style="line-height: 19.8pt; margin-bottom: 0pt;"><b><sup><span style="font-family: Verdana; color: #252525; font-size: 8.5pt;"><a href="#SRC 4"><span style="letter-spacing: 0.1pt; color: #145da4; text-decoration: none;">4</span></a></span></sup></b></p> <p style="line-height: 19.8pt; margin-bottom: 0pt;"><span style="font-family: Verdana; color: #252525;">  <i>Location Matters: A Comparative Analysis of State Tax Costs on Business</i> (Tax Foundation in collaboration with KPMG LLP, 2012), available online via the Foundation's website at <a href="http://taxfoundation.org/files/location%20matters.pdf.">http://taxfoundation.org/files/location%20matters.pdf.</a> </span></p> <div style="line-height: 19.8pt; margin-bottom: 0pt;"> <hr align="left" size="2" width="30%" /> </div> <p style="line-height: 19.8pt; margin-bottom: 0pt;"><b><sup><span style="font-family: Verdana; color: #252525; font-size: 8.5pt;"><a href="#SRC 5"><span style="letter-spacing: 0.1pt; color: #145da4; text-decoration: none;">5</span></a></span></sup></b></p> <p style="line-height: 19.8pt; margin-bottom: 0pt;"><span style="font-family: Verdana; color: #252525;">  As noted herein, Ohio's tangible personal property tax has been repealed for all businesses. </span></p> <div style="line-height: 19.8pt; margin-bottom: 0pt;"> <hr align="left" size="2" width="30%" /> </div> <p style="line-height: 19.8pt; margin-bottom: 0pt;"><b><sup><span style="font-family: Verdana; color: #252525; font-size: 8.5pt;"><a href="#SRC 6"><span style="letter-spacing: 0.1pt; color: #145da4; text-decoration: none;">6</span></a></span></sup></b></p> <p style="line-height: 19.8pt; margin-bottom: 0pt;"><span style="font-family: Verdana; color: #252525;">  Ohio Rev. Code §5751.033. </span></p> <div style="line-height: 19.8pt; margin-bottom: 0pt;"> <hr align="left" size="2" width="30%" /> </div> <p style="line-height: 19.8pt; margin-bottom: 0pt;"><b><sup><span style="font-family: Verdana; color: #252525; font-size: 8.5pt;"><a href="#SRC 7"><span style="letter-spacing: 0.1pt; color: #145da4; text-decoration: none;">7</span></a></span></sup></b></p> <p style="line-height: 19.8pt; margin-bottom: 0pt;"><span style="font-family: Verdana; color: #252525;">  Ohio Rev. Code §5751.03. </span></p> <div style="line-height: 19.8pt; margin-bottom: 0pt;"> <hr align="left" size="2" width="30%" /> </div> <p style="line-height: 19.8pt; margin-bottom: 0pt;"><b><sup><span style="font-family: Verdana; color: #252525; font-size: 8.5pt;"><a href="#SRC 8"><span style="letter-spacing: 0.1pt; color: #145da4; text-decoration: none;">8</span></a></span></sup></b></p> <p style="line-height: 19.8pt; margin-bottom: 0pt;"><span style="font-family: Verdana; color: #252525;">  See "Factor Presence Nexus Standard for Business Activity Taxes" (Multistate Tax Commission, 10/17/02), adopted as part of an amendment to MTC Policy Statement 02-02, "Ensuring the Equity, Integrity and Viability of State Income Tax Systems," and available online via the MTC website at www.mtc.gov (click on "Uniformity" and "Adopted Uniformity Recommendations"). </span></p> <div style="line-height: 19.8pt; margin-bottom: 0pt;"> <hr align="left" size="2" width="30%" /> </div> <p style="line-height: 19.8pt; margin-bottom: 0pt;"><b><sup><span style="font-family: Verdana; color: #252525; font-size: 8.5pt;"><a href="#SRC 9"><span style="letter-spacing: 0.1pt; color: #145da4; text-decoration: none;">9</span></a></span></sup></b></p> <p style="line-height: 19.8pt; margin-bottom: 0pt;"><span style="font-family: Verdana; color: #252525;">  Ohio Rev. Code §5751.01(I). </span></p> <div style="line-height: 19.8pt; margin-bottom: 0pt;"> <hr align="left" size="2" width="30%" /> </div> <p style="line-height: 19.8pt; margin-bottom: 0pt;"><b><sup><span style="font-family: Verdana; color: #252525; font-size: 8.5pt;"><a href="#SRC 10"><span style="letter-spacing: 0.1pt; color: #145da4; text-decoration: none;">10</span></a></span></sup></b></p> <p style="line-height: 19.8pt; margin-bottom: 0pt;"><span style="font-family: Verdana; color: #252525;">  For more on the CAT, see Sutton, Yesnowitz, Ford, Zins, and Conley, "Ohio's New Commercial Activity Tax: What It Means for Business," 15 J. Multistate Tax’n 8 (February 2006). </span></p> <div style="line-height: 19.8pt; margin-bottom: 0pt;"> <hr align="left" size="2" width="30%" /> </div> <p style="line-height: 19.8pt; margin-bottom: 0pt;"><b><sup><span style="font-family: Verdana; color: #252525; font-size: 8.5pt;"><a href="#SRC 11"><span style="letter-spacing: 0.1pt; color: #145da4; text-decoration: none;">11</span></a></span></sup></b></p> <p style="line-height: 19.8pt; margin-bottom: 0pt;"><span style="font-family: Verdana; color: #252525;">  <i>Location Matters,</i> <i>supra</i> note 4, page 51. For more on this type of tax credit generally, see Bowman and Weiss, "Credits Based on Withholding Taxes—Useful Incentives in a Challenging Business Environment," 20 J. Multistate Tax’n 18 (Nov/Dec 2010). </span></p> <div style="line-height: 19.8pt; margin-bottom: 0pt;"> <hr align="left" size="2" width="30%" /> </div> <p style="line-height: 19.8pt; margin-bottom: 0pt;"><b><sup><span style="font-family: Verdana; color: #252525; font-size: 8.5pt;"><a href="#SRC 12"><span style="letter-spacing: 0.1pt; color: #145da4; text-decoration: none;">12</span></a></span></sup></b></p> <p style="line-height: 19.8pt; margin-bottom: 0pt;"><span style="font-family: Verdana; color: #252525;">  Ohio Rev. Code §§122.17(B), (C), and (D); Ohio Admin. Code §122:7-1-05(A). </span></p> <div style="line-height: 19.8pt; margin-bottom: 0pt;"> <hr align="left" size="2" width="30%" /> </div> <p style="line-height: 19.8pt; margin-bottom: 0pt;"><b><sup><span style="font-family: Verdana; color: #252525; font-size: 8.5pt;"><a href="#SRC 13"><span style="letter-spacing: 0.1pt; color: #145da4; text-decoration: none;">13</span></a></span></sup></b></p> <p style="line-height: 19.8pt; margin-bottom: 0pt;"><span style="font-family: Verdana; color: #252525;">  Ohio Rev. Code §122.17(B). </span></p> <div style="line-height: 19.8pt; margin-bottom: 0pt;"> <hr align="left" size="2" width="30%" /> </div> <p style="line-height: 19.8pt; margin-bottom: 0pt;"><b><sup><span style="font-family: Verdana; color: #252525; font-size: 8.5pt;"><a href="#SRC 14"><span style="letter-spacing: 0.1pt; color: #145da4; text-decoration: none;">14</span></a></span></sup></b></p> <p style="line-height: 19.8pt; margin-bottom: 0pt;"><span style="font-family: Verdana; color: #252525;">  Ohio Rev. Code §122.17(D)(6); Ohio Admin. Code §122:7-1-05(D). </span></p> <div style="line-height: 19.8pt; margin-bottom: 0pt;"> <hr align="left" size="2" width="30%" /> </div> <p style="line-height: 19.8pt; margin-bottom: 0pt;"><b><sup><span style="font-family: Verdana; color: #252525; font-size: 8.5pt;"><a href="#SRC 15"><span style="letter-spacing: 0.1pt; color: #145da4; text-decoration: none;">15</span></a></span></sup></b></p> <p style="line-height: 19.8pt; margin-bottom: 0pt;"><span style="font-family: Verdana; color: #252525;">  Ohio Rev. Code §122.17(H). </span></p> <div style="line-height: 19.8pt; margin-bottom: 0pt;"> <hr align="left" size="2" width="30%" /> </div> <p style="line-height: 19.8pt; margin-bottom: 0pt;"><b><sup><span style="font-family: Verdana; color: #252525; font-size: 8.5pt;"><a href="#SRC 16"><span style="letter-spacing: 0.1pt; color: #145da4; text-decoration: none;">16</span></a></span></sup></b></p> <p style="line-height: 19.8pt; margin-bottom: 0pt;"><span style="font-family: Verdana; color: #252525;">  Ohio Rev. Code §122.171(B). </span></p> <div style="line-height: 19.8pt; margin-bottom: 0pt;"> <hr align="left" size="2" width="30%" /> </div> <p style="line-height: 19.8pt; margin-bottom: 0pt;"><b><sup><span style="font-family: Verdana; color: #252525; font-size: 8.5pt;"><a href="#SRC 17"><span style="letter-spacing: 0.1pt; color: #145da4; text-decoration: none;">17</span></a></span></sup></b></p> <p style="line-height: 19.8pt; margin-bottom: 0pt;"><span style="font-family: Verdana; color: #252525;">  Ohio Rev. Code §122.171(E)(4). </span></p> <div style="line-height: 19.8pt; margin-bottom: 0pt;"> <hr align="left" size="2" width="30%" /> </div> <p style="line-height: 19.8pt; margin-bottom: 0pt;"><b><sup><span style="font-family: Verdana; color: #252525; font-size: 8.5pt;"><a href="#SRC 18"><span style="letter-spacing: 0.1pt; color: #145da4; text-decoration: none;">18</span></a></span></sup></b></p> <p style="line-height: 19.8pt; margin-bottom: 0pt;"><span style="font-family: Verdana; color: #252525;">  Ohio Rev. Code §122.171(A)(2)(b). </span></p> <div style="line-height: 19.8pt; margin-bottom: 0pt;"> <hr align="left" size="2" width="30%" /> </div> <p style="line-height: 19.8pt; margin-bottom: 0pt;"><b><sup><span style="font-family: Verdana; color: #252525; font-size: 8.5pt;"><a href="#SRC 19"><span style="letter-spacing: 0.1pt; color: #145da4; text-decoration: none;">19</span></a></span></sup></b></p> <p style="line-height: 19.8pt; margin-bottom: 0pt;"><span style="font-family: Verdana; color: #252525;">  Ohio Rev. Code §122.171(B) (flush language following (B)(3)); Ohio Admin. Code §122:7-1-06(A). </span></p> <div style="line-height: 19.8pt; margin-bottom: 0pt;"> <hr align="left" size="2" width="30%" /> </div> <p style="line-height: 19.8pt; margin-bottom: 0pt;"><b><sup><span style="font-family: Verdana; color: #252525; font-size: 8.5pt;"><a href="#SRC 20"><span style="letter-spacing: 0.1pt; color: #145da4; text-decoration: none;">20</span></a></span></sup></b></p> <p style="line-height: 19.8pt; margin-bottom: 0pt;"><span style="font-family: Verdana; color: #252525;">  Ohio Rev. Code §§122.17(D)(2) and 122.171(B) (flush language following (B)(3)). </span></p> <div style="line-height: 19.8pt; margin-bottom: 0pt;"> <hr align="left" size="2" width="30%" /> </div> <p style="line-height: 19.8pt; margin-bottom: 0pt;"><b><sup><span style="font-family: Verdana; color: #252525; font-size: 8.5pt;"><a href="#SRC 21"><span style="letter-spacing: 0.1pt; color: #145da4; text-decoration: none;">21</span></a></span></sup></b></p> <p style="line-height: 19.8pt; margin-bottom: 0pt;"><span style="font-family: Verdana; color: #252525;">  Ohio Rev. Code §§122.17(K) and 122.171(J). </span></p> <div style="line-height: 19.8pt; margin-bottom: 0pt;"> <hr align="left" size="2" width="30%" /> </div> <p style="line-height: 19.8pt; margin-bottom: 0pt;"><b><sup><span style="font-family: Verdana; color: #252525; font-size: 8.5pt;"><a href="#SRC 22"><span style="letter-spacing: 0.1pt; color: #145da4; text-decoration: none;">22</span></a></span></sup></b></p> <p style="line-height: 19.8pt; margin-bottom: 0pt;"><span style="font-family: Verdana; color: #252525;">  Ohio Rev. Code §§5751.51 (research expenses credit) and 5751.52 (research loan payment credit). </span></p> <div style="line-height: 19.8pt; margin-bottom: 0pt;"> <hr align="left" size="2" width="30%" /> </div> <p style="line-height: 19.8pt; margin-bottom: 0pt;"><b><sup><span style="font-family: Verdana; color: #252525; font-size: 8.5pt;"><a href="#SRC 23"><span style="letter-spacing: 0.1pt; color: #145da4; text-decoration: none;">23</span></a></span></sup></b></p> <p style="line-height: 19.8pt; margin-bottom: 0pt;"><span style="font-family: Verdana; color: #252525;">  Ohio Rev. Code §§5739.02(B)(42)(j) (distribution centers) and 122.175 (computer data centers). </span></p> <div style="line-height: 19.8pt; margin-bottom: 0pt;"> <hr align="left" size="2" width="30%" /> </div> <p style="line-height: 19.8pt; margin-bottom: 0pt;"><b><sup><span style="font-family: Verdana; color: #252525; font-size: 8.5pt;"><a href="#SRC 24"><span style="letter-spacing: 0.1pt; color: #145da4; text-decoration: none;">24</span></a></span></sup></b></p> <p style="line-height: 19.8pt; margin-bottom: 0pt;"><span style="font-family: Verdana; color: #252525;">  Ohio Rev. Code §5747.81 (the "small business investment certificate tax credit"). Also see the InvestOhio website at www.development.ohio.gov/InvestOhio/InvestOhio.htm. </span></p> <div style="line-height: 19.8pt; margin-bottom: 0pt;"> <hr align="left" size="2" width="30%" /> </div> <p style="line-height: 19.8pt; margin-bottom: 0pt;"><b><sup><span style="font-family: Verdana; color: #252525; font-size: 8.5pt;"><a href="#SRC 25"><span style="letter-spacing: 0.1pt; color: #145da4; text-decoration: none;">25</span></a></span></sup></b></p> <p style="line-height: 19.8pt; margin-bottom: 0pt;"><span style="font-family: Verdana; color: #252525;">  Ohio Rev. Code §§122.86(A)(1)(a) and (b). </span></p> <div style="line-height: 19.8pt; margin-bottom: 0pt;"> <hr align="left" size="2" width="30%" /> </div> <p style="line-height: 19.8pt; margin-bottom: 0pt;"><b><sup><span style="font-family: Verdana; color: #252525; font-size: 8.5pt;"><a href="#SRC 26"><span style="letter-spacing: 0.1pt; color: #145da4; text-decoration: none;">26</span></a></span></sup></b></p> <p style="line-height: 19.8pt; margin-bottom: 0pt;"><span style="font-family: Verdana; color: #252525;">  Ohio Rev. Code §122.86(A)(1)(c). </span></p> <div style="line-height: 19.8pt; margin-bottom: 0pt;"> <hr align="left" size="2" width="30%" /> </div> <p style="line-height: 19.8pt; margin-bottom: 0pt;"><b><sup><span style="font-family: Verdana; color: #252525; font-size: 8.5pt;"><a href="#SRC 27"><span style="letter-spacing: 0.1pt; color: #145da4; text-decoration: none;">27</span></a></span></sup></b></p> <p style="line-height: 19.8pt; margin-bottom: 0pt;"><span style="font-family: Verdana; color: #252525;">  Ohio Rev. Code §122.86(A)(4). </span></p> <div style="line-height: 19.8pt; margin-bottom: 0pt;"> <hr align="left" size="2" width="30%" /> </div> <p style="line-height: 19.8pt; margin-bottom: 0pt;"><b><sup><span style="font-family: Verdana; color: #252525; font-size: 8.5pt;"><a href="#SRC 28"><span style="letter-spacing: 0.1pt; color: #145da4; text-decoration: none;">28</span></a></span></sup></b></p> <p style="line-height: 19.8pt; margin-bottom: 0pt;"><span style="font-family: Verdana; color: #252525;">  Ohio Rev. Code §122.86(E). </span></p> <div style="line-height: 19.8pt; margin-bottom: 0pt;"> <hr align="left" size="2" width="30%" /> </div> <p style="line-height: 19.8pt; margin-bottom: 0pt;"><b><sup><span style="font-family: Verdana; color: #252525; font-size: 8.5pt;"><a href="#SRC 29"><span style="letter-spacing: 0.1pt; color: #145da4; text-decoration: none;">29</span></a></span></sup></b></p> <p style="line-height: 19.8pt; margin-bottom: 0pt;"><span style="font-family: Verdana; color: #252525;">  Ohio Rev. Code §§122.86(B) and (C)(3). </span></p> <div style="line-height: 19.8pt; margin-bottom: 0pt;"> <hr align="left" size="2" width="30%" /> </div> <p style="line-height: 19.8pt; margin-bottom: 0pt;"><b><sup><span style="font-family: Verdana; color: #252525; font-size: 8.5pt;"><a href="#SRC 30"><span style="letter-spacing: 0.1pt; color: #145da4; text-decoration: none;">30</span></a></span></sup></b></p> <p style="line-height: 19.8pt; margin-bottom: 0pt;"><span style="font-family: Verdana; color: #252525;">  Ohio Rev. Code §5747.02. </span></p> <div style="line-height: 19.8pt; margin-bottom: 0pt;"> <hr align="left" size="2" width="30%" /> </div> <p style="line-height: 19.8pt; margin-bottom: 0pt;"><b><sup><span style="font-family: Verdana; color: #252525; font-size: 8.5pt;"><a href="#SRC 31"><span style="letter-spacing: 0.1pt; color: #145da4; text-decoration: none;">31</span></a></span></sup></b></p> <p style="line-height: 19.8pt; margin-bottom: 0pt;"><span style="font-family: Verdana; color: #252525;">  Ohio Rev. Code §§5731.02(A) (resident estate tax) and 5731.19(A) (nonresident estate tax). </span></p> <div style="line-height: 19.8pt; margin-bottom: 0pt;"> <hr align="left" size="2" width="30%" /> </div> <p style="line-height: 19.8pt; margin-bottom: 0pt;"><b><sup><span style="font-family: Verdana; color: #252525; font-size: 8.5pt;"><a href="#SRC 32"><span style="letter-spacing: 0.1pt; color: #145da4; text-decoration: none;">32</span></a></span></sup></b></p> <p style="line-height: 19.8pt; margin-bottom: 0pt;"><span style="font-family: Verdana; color: #252525;">  Ohio Rev. Code §5703.58(B). The bar on assessments does not apply to taxes collected by a vendor or in cases of fraud. <i>Id.,</i> §5703.58(C). </span></p> <div style="line-height: 19.8pt; margin-bottom: 0pt;"> <hr align="left" size="2" width="30%" /> </div> <p style="line-height: 19.8pt; margin-bottom: 0pt;"><b><sup><span style="font-family: Verdana; color: #252525; font-size: 8.5pt;"><a href="#SRC 33"><span style="letter-spacing: 0.1pt; color: #145da4; text-decoration: none;">33</span></a></span></sup></b></p> <p style="line-height: 19.8pt; margin-bottom: 0pt;"><span style="font-family: Verdana; color: #252525;">  Ohio H.B. 153, 6/30/11, Session Law No. 2011-28, §757.42 (uncodified). </span></p> <div style="line-height: 19.8pt; margin-bottom: 0pt;"> <hr align="left" size="2" width="30%" /> </div> <p style="line-height: 19.8pt; margin-bottom: 0pt;"><b><sup><span style="font-family: Verdana; color: #252525; font-size: 8.5pt;"><a href="#SRC 34"><span style="letter-spacing: 0.1pt; color: #145da4; text-decoration: none;">34</span></a></span></sup></b></p> <p style="line-height: 19.8pt; margin-bottom: 0pt;"><span style="font-family: Verdana; color: #252525;">  <i>Id.,</i> §§757.42(C) and (F). </span></p> <div style="line-height: 19.8pt; margin-bottom: 0pt;"> <hr align="left" size="2" width="30%" /> </div> <p style="line-height: 19.8pt; margin-bottom: 0pt;"><b><sup><span style="font-family: Verdana; color: #252525; font-size: 8.5pt;"><a href="#SRC 35"><span style="letter-spacing: 0.1pt; color: #145da4; text-decoration: none;">35</span></a></span></sup></b></p> <p style="line-height: 19.8pt; margin-bottom: 0pt;"><span style="font-family: Verdana; color: #252525;">  <i>Id.,</i> §757.42(E). </span></p> <div style="line-height: 19.8pt; margin-bottom: 0pt;"> <hr align="left" size="2" width="30%" /> </div> <p style="line-height: 19.8pt; margin-bottom: 0pt;"><b><sup><span style="font-family: Verdana; color: #252525; font-size: 8.5pt;"><a href="#SRC 36"><span style="letter-spacing: 0.1pt; color: #145da4; text-decoration: none;">36</span></a></span></sup></b></p> <p style="line-height: 19.8pt; margin-bottom: 0pt;"><span style="font-family: Verdana; color: #252525;">  <i>Id.,</i> §757.40 (uncodified). </span></p> <div style="line-height: 19.8pt; margin-bottom: 0pt;"> <hr align="left" size="2" width="30%" /> </div> <p style="line-height: 19.8pt; margin-bottom: 0pt;"><b><sup><span style="font-family: Verdana; color: #252525; font-size: 8.5pt;"><a href="#SRC 37"><span style="letter-spacing: 0.1pt; color: #145da4; text-decoration: none;">37</span></a></span></sup></b></p> <p style="line-height: 19.8pt; margin-bottom: 0pt;"><span style="font-family: Verdana; color: #252525;">  <i>Id.,</i> §757.40(C). </span></p> <div style="line-height: 19.8pt; margin-bottom: 0pt;"> <hr align="left" size="2" width="30%" /> </div> <p style="line-height: 19.8pt; margin-bottom: 0pt;"><b><sup><span style="font-family: Verdana; color: #252525; font-size: 8.5pt;"><a href="#SRC 38"><span style="letter-spacing: 0.1pt; color: #145da4; text-decoration: none;">38</span></a></span></sup></b></p> <p style="line-height: 19.8pt; margin-bottom: 0pt;"><span style="font-family: Verdana; color: #252525;">  <i>Id.,</i> §757.40(A)(2). </span></p> <div style="line-height: 19.8pt; margin-bottom: 0pt;"> <hr align="left" size="2" width="30%" /> </div> <p style="line-height: 19.8pt; margin-bottom: 0pt;"><b><sup><span style="font-family: Verdana; color: #252525; font-size: 8.5pt;"><a href="#SRC 39"><span style="letter-spacing: 0.1pt; color: #145da4; text-decoration: none;">39</span></a></span></sup></b></p> <p style="line-height: 19.8pt; margin-bottom: 0pt;"><span style="font-family: Verdana; color: #252525;">  More information regarding Ohio's Consumer's Use Tax Amnesty Program and General Tax Amnesty Program is available on the Ohio Department of Taxation website at <a href="http://tax.ohio.gov./">http://tax.ohio.gov.</a> END OF DOCUMENT - </span><span style="font-family: Verdana; color: #666666; font-size: 7.5pt;">© 2012 Thomson Reuters/RIA. All rights reserved.</span></p> <span style="font-family: Verdana;"> </span>

Ohio General Tax Amnesty - May 1 through June 15, 2012

2012-05-01 13:23:59

<a href="http://ohiotaxamnesty.gov/">Ohio's General Tax Amnesty program</a> begins today and runs through June 15, 2012. The program allows deliquent taxpayers to self-report essentially all Ohio taxes (except consumer's use tax) that were due on or before May 1, 2011, including sales tax, personal income tax, commercial activity tax, pass-through entity tax and employer withholding tax. Taxes for which an audit has been commenced, or for which an assessment or bill has been issued, do not qualify. In exchange for self-reporting, all penalties and one-half of the interest which would otherwise be charged to the taxpayer are waived. To participate in the amnesty program, the taxpayer must complete an application, file returns for the periods being reported and make full payment of the deliquent taxes. Additionally, if the taxpayer is not already registered with the Ohio Department of Taxation, it must register through the <a href="http://business.ohio.gov/efiling/">Ohio Business Gateway</a> or by calling the Tax Commissioner's office. After submitting the required information and payment to the Tax Commissioner, the taxpayer will be informed within 30 days of whether participation in the program has been approved. During the amnesty program, however, taxpayers may still resolve past Ohio tax liabilities through <a href="https://www.ohiostatetaxblog.com/index.php?option=com_content&view=article&id=56:voluntary-disclosure-a-procedure-to-minimize-delinquent-state-tax-obligations&catid=51:multistate-taxation&Itemid=59">voluntary disclosure</a>, which has a limited look-back period unlike the amnesty program which requires all delinquent taxes to be paid since the taxpayer began doing business in Ohio. Therefore, a taxpayer considering participation in the amnesty program should also consider a voluntary disclosure, which may be more beneficial depending upon the taxpayer's particular situation even though the taxpayer would have to pay the entire interest on the liability being reported. More information concerning Ohio's General Tax Amnesty program can be found in our <a href="https://www.ohiostatetaxblog.com/index.php?option=com_content&view=article&id=114:general-tax-amnesty-program-for-ohio-taxes-to-begin-in-2012&catid=54:ohio-state-tax-news&Itemid=59">previous post</a> and on the Tax Commissioner's website at <a href="http://ohiotaxamnesty.gov/businesses/faq">http://ohiotaxamnesty.gov/businesses/faq</a>.

ALERT: Ohio Use Tax Amnesty Teleconference (December 6, 2011)

2011-11-28 21:34:11

<p class="MsoNormal">Join Steve and Rich to hear their unique perspective on Ohio’s new use tax amnesty program. They are presenting a <a href="http://www.nbi-sems.com/Default.aspx">National Business Institute</a> (NBI) <i>LIVE</i> teleconference on Tuesday, December 6, 2011 at 3:00 p.m. Eastern Standard Time (1.5 CLE). Click <a href="http://www.nbi-sems.com/SemTeleDetails.aspx/Ohio-s-New-Use-Tax-Amnesty-Program/Teleconference/R-58533ER%7C?NavigationDataSource1=Rpp:25,Nrc:id-3-dynrank-disabled,Nra:pEventDate%2bpEventStartTime%2bStates%2bCredits%2bScope+of+Content%2bpLocationCity%2bpDesc">here</a> for more information on the teleconference or to register.</p>

InvestOhio Registration Begins for Qualifying Ohio Small Business Investments

2011-11-21 21:35:01

<p class="MsoNormal" style="margin: 0in 0in 0pt;"><span style="font-family: Times New Roman; font-size: small;"> </span></p> <p class="MsoNormal" style="margin: 0in 0in 0pt;"><span style="font-family: Times New Roman; font-size: small;">Registration for <a href="http://www.development.ohio.gov/InvestOhio/Documents/InvestOhioFactSheet.pdf"><span style="text-decoration: underline;"><span style="font-family: Times New Roman; color: #0000ff; font-size: small;">InvestOhio</span></span></a><span style="font-family: Times New Roman; font-size: small;">, a 10% personal income tax credit for investments into Ohio small businesses, has begun. First, each investor and the small business must register for InvestOhio through the <a href="#MainContainer"><span style="text-decoration: underline;"><span style="font-family: Times New Roman; color: #0000ff; font-size: small;">Ohio Business Gateway</span></span></a><span style="font-family: Times New Roman; font-size: small;">. Each registrant will receive an InvestOhio ID which it will need to apply for the credit. Then, starting the first week of December, responsible parties can begin applying for the InvestOhio credit through the Ohio Business Gateway. In situations with multiple investors applying for the credit (remember, the credit is up to $1 million <span style="text-decoration: underline;">per investor</span>), the small business is able to apply on behalf of all investors for administrative convenience.</span></span></span></p> <p class="MsoNormal" style="margin: 0in 0in 0pt;"><span style="font-family: Times New Roman; font-size: small;"> </span></p> <p class="MsoNormal" style="margin: 0in 0in 0pt;"><span style="font-family: Times New Roman; font-size: small;">Credits will be awarded on a first come, first serve basis, so it is essential for eligible parties to complete the application as soon as possible. Since an application can be made based upon a future investment, eligible taxpayers planning to make a qualifying investment should not wait to apply for the credit. Upon approval, the investor must make the investment on or around the date described in the application and provide evidence thereof to the Ohio Director of Development within 30 days. Then, the small business must make the allowed expenditures and provide evidence thereof to the Director within 30 days of the expenditures or seven months of the qualifying investment, whichever occurs first.</span></p> <p class="MsoNormal" style="margin: 0in 0in 0pt;"><span style="font-family: Times New Roman; font-size: small;"> </span></p> <p class="MsoNormal" style="margin: 0in 0in 0pt;"><span style="font-family: Times New Roman; font-size: small;">Complete details regarding eligibility for the InvestOhio credit, including the two year holding period for qualifying investments, can be found in <a href="index.php?option=com_content&view=article&id=115:investohio-personal-income-tax-credit-for-investors-in-ohio-small-businesses&catid=49:ohio-personal-income-tax&Itemid=59"><span style="text-decoration: underline;"><span style="font-family: Times New Roman; color: #800080; font-size: small;">our previous post</span></span></a><span style="font-family: Times New Roman; font-size: small;"> and the <a href="http://www.development.ohio.gov/InvestOhio/Documents/InvestOhioFAQ110411.pdf"><span style="text-decoration: underline;"><span style="font-family: Times New Roman; color: #800080; font-size: small;">InvestOhio FAQs</span></span></a><span style="font-family: Times New Roman; font-size: small;"> published by the Ohio Department of Development and Ohio Department of Taxation. Additionally, more information concerning applying for the InvestOhio credit, including a helpful tutorial, is available <a href="http://www.development.ohio.gov/InvestOhio/InvestOhio.htm"><span style="text-decoration: underline;"><span style="font-family: Times New Roman; color: #800080; font-size: small;">here</span></span></a><span style="font-family: Times New Roman; font-size: small;">. </span></span></span></span></p> <p class="MsoNormal" style="margin: 0in 0in 0pt;"><span style="font-family: Times New Roman; font-size: small;"> </span></p> <span style="font-family: Times New Roman; font-size: 10pt;"><span style="font-family: 'Times New Roman';">Please <a href="index.php?option=com_contact&view=category&catid=12&Itemid=61"><span style="text-decoration: underline;"><span style="color: #0000ff;">contact us</span></span></a> if you need help determining your eligibility for the InvestOhio personal income tax credit or registering/applying therefor.</span></span>

General Tax Amnesty Program for Ohio taxes to begin in 2012

2011-07-12 20:45:32

<p class="MsoNormal" style="margin: 0in 0in 0pt;"><span style="font-size: small; font-family: Times New Roman;">In addition to the <a href="https://www.ohiostatetaxblog.com/index.php?option=com_content&view=article&id=113:governor-kasich-signs-historic-ohio-budget-bill-&catid=54:ohio-state-tax-news&Itemid=59"><span style="text-decoration: underline;"><span style="font-size: small; color: #800080; font-family: Times New Roman;">Use Tax Amnesty Program</span></span></a><span style="font-size: small; font-family: Times New Roman;"> discussed in previous posts, the Ohio Budget Bill (<a href="http://www.legislature.state.oh.us/bills.cfm?ID=129_HB_153"><span style="text-decoration: underline;"><span style="font-size: small; color: #0000ff; font-family: Times New Roman;">H.B. 153</span></span></a><span style="font-size: small; font-family: Times New Roman;">) also provides for a General Tax Amnesty Program allowing delinquent taxpayers to resolve their Ohio <a href="http://www.tax.ohio.gov/divisions/estate/index.stm"><span style="text-decoration: underline;"><span style="font-size: small; color: #0000ff; font-family: Times New Roman;">Estate Tax</span></span></a><span style="font-size: small; font-family: Times New Roman;">, <a href="http://www.tax.ohio.gov/divisions/corporation_franchise/index.stm"><span style="text-decoration: underline;"><span style="font-size: small; color: #0000ff; font-family: Times New Roman;">Corporate Franchise Tax</span></span></a><span style="font-size: small; font-family: Times New Roman;">, <a href="http://www.tax.ohio.gov/divisions/excise/motor_fuel/index.stm"><span style="text-decoration: underline;"><span style="font-size: small; color: #0000ff; font-family: Times New Roman;">Motor Fuel Tax</span></span></a><span style="font-size: small; font-family: Times New Roman;">, <a href="https://www.ohiostatetaxblog.com/index.php?option=com_content&view=category&id=47:ohio-sales-and-use-tax&Itemid=59&layout=default"><span style="text-decoration: underline;"><span style="font-size: small; color: #0000ff; font-family: Times New Roman;">Sales Tax</span></span></a><span style="font-size: small; font-family: Times New Roman;"> (vendor obligation), <a href="http://www.tax.ohio.gov/divisions/excise/cigarettes/index.stm"><span style="text-decoration: underline;"><span style="font-size: small; color: #0000ff; font-family: Times New Roman;">Cigarette Tax</span></span></a><span style="font-size: small; font-family: Times New Roman;">, <a href="https://www.ohiostatetaxblog.com/index.php?option=com_content&view=category&id=49:ohio-personal-income-tax&Itemid=59&layout=default"><span style="text-decoration: underline;"><span style="font-size: small; color: #0000ff; font-family: Times New Roman;">Individual Income Tax</span></span></a><span style="font-size: small; font-family: Times New Roman;">, <a href="http://www.tax.ohio.gov/divisions/school_district_income/index.stm"><span style="text-decoration: underline;"><span style="font-size: small; color: #0000ff; font-family: Times New Roman;">School District Income Tax</span></span></a><span style="font-size: small; font-family: Times New Roman;"> and <a href="https://www.ohiostatetaxblog.com/index.php?option=com_content&view=category&id=45:ohio-cat&Itemid=59&layout=default"><span style="text-decoration: underline;"><span style="font-size: small; color: #0000ff; font-family: Times New Roman;">Commercial Activity Tax</span></span></a><span style="font-size: small; font-family: Times New Roman;"> 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. </span></span></span></span></span></span></span></span></span></span></span></p> <p class="MsoNormal" style="margin: 0in 0in 0pt;"><span style="font-size: small; font-family: Times New Roman;"> </span></p> <p class="MsoNormal" style="margin: 0in 0in 0pt;"><span style="font-size: small;"><span style="font-family: Times New Roman;">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.   </span></span></p>

Governor Kasich signs historic Ohio Budget Bill

2011-07-01 20:05:20

<p class="MsoNormal" style="margin: 0in 0in 0pt;"><span style="font-size: small; font-family: Times New Roman;">Late Thursday night, <a href="http://www.foxnews.com/politics/2011/07/01/gov-kasich-signs-sweeping-ohio-budget-moments-before-deadline/"><span style="text-decoration: underline;"><span style="font-size: small; color: #0000ff; font-family: Times New Roman;">Governor John Kasich signed the Ohio Budget Bill</span></span></a><span style="font-size: small; font-family: Times New Roman;"> (<a href="http://www.legislature.state.oh.us/bills.cfm?ID=129_HB_153"><span style="text-decoration: underline;"><span style="font-size: small; color: #0000ff; font-family: Times New Roman;">Am. Sub. H.B. 153</span></span></a><span style="font-size: small; font-family: Times New Roman;">) 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 <a href="https://www.ohiostatetaxblog.com/index.php?option=com_content&view=article&id=112:ohio-use-tax-amensty-program-included-in-latest-version-of-the-ohio-budget-bill"><span style="text-decoration: underline;"><span style="font-size: small; color: #0000ff; font-family: Times New Roman;">post earlier this week</span></span></a><span style="font-size: small; font-family: Times New Roman;">. 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. </span></span></span></span></p> <p class="MsoNormal" style="margin: 0in 0in 0pt;"><span style="font-size: small; font-family: Times New Roman;"> </span></p> <p class="MsoNormal" style="margin: 0in 0in 0pt;"><span style="font-size: small; font-family: Times New Roman;">Also on the tax front, the Budget Bill eliminated the Ohio Estate Tax starting in 2013. </span></p> <p class="MsoNormal" style="margin: 0in 0in 0pt;"><span style="font-size: small; font-family: Times New Roman;"> </span></p> <p class="MsoNormal" style="margin: 0in 0in 0pt;"><span style="font-size: small; font-family: Times New Roman;">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. </span></p>

Ohio Use Tax Webinar

2011-06-29 12:30:42

<p class="MsoNormal">Steve and Rich discuss the Ohio Use Tax Amnesty Program contained in the latest version of the Ohio Budget Bill and its effect on the Department of Taxation’s Use Tax Education Program, as well as several Ohio use tax exemptions that may your business may able to take advantage of.</p> <iframe src="http://www.youtube.com/embed/cCRUFk0gMb4" width="560" height="349" frameborder="0" allowfullscreen="allowfullscreen"></iframe> <iframe src="http://www.youtube.com/embed/SytNWQv7oxM" width="560" height="349" frameborder="0" allowfullscreen="allowfullscreen"></iframe> <iframe src="http://www.youtube.com/embed/vPx2g18KEds" width="560" height="349" frameborder="0" allowfullscreen="allowfullscreen"></iframe> <a href="images/stories/Use_Tax_Webinar_Slideshow.pdf">Click here</a> to view the PowerPoint presentation. <p class="MsoNormal"></p>

Join us for Buckingham's Ohio Use Tax Exposure Deadline Approaching: Your Best 30 Minute Investment Webinar

2011-06-15 15:05:40

<p class="MsoNormal" style="text-align: left; margin: 0in 0in 0pt;" align="left"><span style="font-family: 'Trebuchet MS'; color: black; font-size: 10pt;"><a title="blocked::http://www.bdblaw.com/peopledetail.asp?id=21" href="http://www.bdblaw.com/peopledetail.asp?id=21"><span style="text-decoration: underline;"><span style="color: #810081;">Steve Dimengo</span></span></a> and <a title="blocked::http://www.bdblaw.com/peopledetail.asp?id=339" href="http://www.bdblaw.com/peopledetail.asp?id=339"><span style="text-decoration: underline;"><span style="color: #810081;">Rich Fry</span></span></a> invite you to join them on <b><span style="font-family: Arial; color: #002f5d; font-size: 10pt;">Monday, June 24th </span></b><span style="font-family: 'Trebuchet MS'; color: black; font-size: 10pt;">for the Webinar <b><i><span style="font-family: Arial; color: #002f5d; font-size: 10pt;">Ohio Use Tax Exposure Deadline Approaching: Your best 30 minute investment.</span></i></b><span style="font-family: 'Trebuchet MS'; color: black; font-size: 10pt;"> During this Webinar, Steve and Rich will provide up-to-date commentary and answer your questions concerning Ohio use tax and the Department of Taxation’s Use Tax Education Program, while offering suggestions for minimizing your past and future Ohio use tax liability.</span></span></span></p> <p class="MsoNormal" style="text-align: left; margin: 0in 0in 0pt;" align="left"><span style="font-family: 'Trebuchet MS'; color: black; font-size: 10pt;"><a title="blocked::https://www1.gotomeeting.com/register/785104145" href="https://www1.gotomeeting.com/register/785104145"><span style="color: #cc6600; font-size: 15pt;"><span style="text-decoration: underline;">Click here to register.</span></span></a></span></p> <p class="MsoNormal" style="text-align: left; margin: 0in 0in 0pt;" align="left"><span style="font-family: 'Trebuchet MS'; color: black; font-size: 10pt;">Our January 24, 2011 <a title="blocked::http://bdblaw.com/bdbmail/1-21-11TaxAlert.htm" href="http://bdblaw.com/bdbmail/1-21-11TaxAlert.htm"><span style="text-decoration: underline;"><span style="color: #810081;">Tax Alert</span></span></a> advised you that the Ohio Department of Taxation is cracking down on the estimated 300,000-plus Ohio businesses that do not file Ohio use tax returns. In April, we followed up with a <a title="blocked::http://www.lexisnexis.com/community/taxlaw/blogs/podcasts/archive/2011/04/26/lexisnexis_ae00_-tax-law-community-podcast_3a00_-steven-dimengo-and-richard-fry-on-ohio-use-tax-liability_2c00_-reporting_2c00_-compliance-and-enforcement-issues.aspx" href="http://www.lexisnexis.com/community/taxlaw/blogs/podcasts/archive/2011/04/26/lexisnexis_ae00_-tax-law-community-podcast_3a00_-steven-dimengo-and-richard-fry-on-ohio-use-tax-liability_2c00_-reporting_2c00_-compliance-and-enforcement-issues.aspx"><span style="text-decoration: underline;"><span style="color: #810081;">Podcast Interview</span></span></a> sponsored by <a title="blocked::http://www.lexisnexis.com/community/taxlaw/" href="http://www.lexisnexis.com/community/taxlaw/"><span style="text-decoration: underline;"><span style="color: #810081;">LexisNexis® Tax Law Community</span></span></a> discussing Ohio use tax, reporting, compliance and enforcement issues.  </span><span style="font-family: 'Trebuchet MS'; color: black; font-size: 10pt;"><span style="color: #810081;"><span style="color: #810081;"><span style="font-family: Arial; color: #002f5d; font-size: 10pt;"><span style="font-family: 'Trebuchet MS'; color: black; font-size: 10pt;"><span style="font-family: Arial; color: #002f5d; font-size: 10pt;"><span style="font-family: 'Trebuchet MS'; color: black; font-size: 10pt;"><span style="font-family: 'Trebuchet MS'; color: black; font-size: 10pt;">Our cutting edge, news breaking information regarding Ohio state taxes and, specifically, Ohio's Use Tax initiative has already helped many Ohio businesses. However, even after reading our <a title="blocked::http://bdblaw.com/bdbmail/1-21-11TaxAlert.htm" href="http://bdblaw.com/bdbmail/1-21-11TaxAlert.htm"><span style="color: #810081;">Tax Alert</span></a> and listening to our <a title="blocked::http://www.lexisnexis.com/community/taxlaw/blogs/podcasts/archive/2011/04/26/lexisnexis_ae00_-tax-law-community-podcast_3a00_-steven-dimengo-and-richard-fry-on-ohio-use-tax-liability_2c00_-reporting_2c00_-compliance-and-enforcement-issues.aspx" href="http://www.lexisnexis.com/community/taxlaw/blogs/podcasts/archive/2011/04/26/lexisnexis_ae00_-tax-law-community-podcast_3a00_-steven-dimengo-and-richard-fry-on-ohio-use-tax-liability_2c00_-reporting_2c00_-compliance-and-enforcement-issues.aspx"><span style="color: #810081;">Podcast Interview</span></a>, you may still have questions such as, What is subject to Ohio use tax? What caused my Ohio use tax liability? Can my liability be reduced? What are the advantages of participating in Ohio’s voluntary disclosure program? This is the chance to get your questions answered.</span></span></span></span></span></span></span></span></p>

Ohio Use Tax Audits of Unregistered Businesses Temporarily on Hold

2011-06-11 14:01:26

<p dir="ltr" align="justify">The Ohio Department of Taxation, Audit Division recently put purchase audits (i.e., Ohio use tax audits) of unregistered busiinesses temporarily on hold. For these purposes, an unregistered business is a business that did not have an Ohio use tax account at any time during the audit period. Likewise, refund claims for sales tax paid to vendors from such unregistered businesses are also on hold. It is anticipated that this hold will last no more than one month. Ohio use tax audits of registered taxpayes and Ohio sales tax audits are not affected.</p> <p dir="ltr" align="justify">This hold on Ohio use tax audits presumably stems from a provision in the proposed <a href="http://www.legislature.state.oh.us/bills.cfm?ID=129_HB_153">Ohio Budget Bill</a> (<a href="http://www.legislature.state.oh.us/BillText129/129_HB_153_PS_N.html">Sub. H.B. No. 153</a>) that would prohibit the Ohio Tax Commissioner from assessing a consumer for Ohio use tax that was due before January 1, 2008. If enacted, this provision, which would become R.C. 5703.58(B), would put a significant strain on the Ohio Department of Taxation’s <a href="http://tax.ohio.gov/divisions/sales_and_use/index_use.stm">Use Tax Education Program</a> as there would be less incentive for self-reporting Ohio use tax through a <a href="http://www.tax.ohio.gov/divisions/sales_and_use/documents/voluntarydisclosure.pdf">voluntary disclosure agreement</a> ("VDA") since the Department would not be able to assess consumers going back seven years, which is the current practice. There is still some benefit for a consumer to voluntarily disclose its liability, as the VDA would cover only the preceding thirty-six months and penalty would be avoided.</p> <p dir="ltr" align="justify">The Ohio Budget Bill was passed by the Ohio Senate last week and is going to a conference committee next week. The Budget Bill must be passed by the end of June.</p>

IRS Releases Settlement Guidelines on Treatment of Corporate SALT Incentives

2011-03-29 14:53:53

<p class="MsoNormal" style="text-align: center; margin: 0in 0in 0pt;" align="center">By: <a href="http://www.bdblaw.com/peopledetail.asp?id=352"><span style="text-decoration: underline;"><span style="color: #0000ff;">Jon R. Stefanik II</span></span></a></p> <p class="MsoNormal" style="text-align: justify; margin: 0in 0in 0pt;">On March 2, 2011, the Internal Revenue Service released a heavily redacted Appeals Settlement Guidelines document (the “Guidelines”) addressing the federal tax treatment of a corporation’s receipt of state and local tax (“SALT”) incentives to induce it to expand, maintain or relocate its facilities.  The Guidelines are available <a href="http://www.irs.gov/pub/irs-utl/irc-section-118-salt-asg-redacted.pdf"><span style="text-decoration: underline;"><span style="color: #800080;">here</span></span></a>.</p> <p class="MsoNormal" style="text-align: justify; margin: 0in 0in 0pt;">Under Section 118(a) of the Internal Revenue Code, the gross income of a corporation does not include non-shareholder capital contributions.  A threshold question in any case is whether a non-shareholder’s transfer of cash or other property to a corporation is in fact a capital contribution as opposed to another type of payment, such as compensation for services rendered (which clearly would be included in income). The U.S. Supreme Court has identified a number of factors to consider in determining whether a non-shareholder’s transfer of cash or benefits to a corporation constitutes a tax-free non-shareholder capital contribution.  <em>See</em> <em>U.S. v. Chicago, Burlington & Quincy R.R. Co.</em>, 412 US 401 (1973).</p> <p class="MsoNormal" style="text-align: justify; margin: 0in 0in 0pt;">The benefit of Section 118(a) exclusion comes at a cost. In the case of cash contributions, Section 362(c)(2) requires a corporation to reduce the basis of any property acquired with the contributed cash during the 12 months succeeding the contribution. For example, if a corporation receives a non-taxable, non-shareholder capital contribution of $100 on day 1, and on day 2 uses that $100 to acquire a parcel of real estate for $100, the corporation’s basis in the real estate would be zero.</p> <p class="MsoNormal" style="text-align: justify; margin: 0in 0in 0pt;">In isolation, the interaction of Sections 118(a) and 362(c)(2) produce a reasonable result, ignoring timing differences.  So why are the IRS’ Guidelines necessary?  In the context of SALT incentives, some corporate taxpayers have claimed a federal income tax deduction under Section 164 for the full, un-credited amount of their local tax burden.  In a typical scenario, a corporate taxpayer would argue that it paid its state or local tax in full (thus entitling it to a full deduction), and that a portion of the tax paid was merely returned as a non-taxable, non-shareholder capital contribution.</p> <p class="MsoNormal" style="text-align: justify; margin: 0in 0in 0pt;">The Guidelines analyze the factors set forth in <em>Chicago, Burlington & Quincy</em> and its progeny, as well as other authorities relevant to Sections 61(a) and 164, and asserts the IRS’ position as follows:</p> <p class="MsoNormal" style="text-align: justify; text-indent: -0.5in; margin: 0in 0in 0pt 1in;">(i)         SALT incentives do not constitute income under Section 61(a);</p> <p class="MsoNormal" style="text-align: justify; text-indent: -0.5in; margin: 0in 0in 0pt 1in;">(ii)        SALT incentives do not constitute Section 118(a) non-shareholder capital contributions;</p> <p class="MsoNormal" style="text-align: justify; text-indent: -0.5in; margin: 0in 0in 0pt 1in;">(iii)       Because Section 118(a) does not apply, Section 362(c)(2) does not apply and a corporate taxpayer acquires basis in any property purchased with funds attributable to SALT incentives;</p> <p class="MsoNormal" style="text-align: justify; text-indent: -0.5in; margin: 0in 0in 0pt 1in;">(iv)       A corporation is not entitled to a Section 164 deduction for that portion of its state or local tax liability that it does not actually pay.</p> <p class="MsoNormal" style="text-align: justify; margin: 0in 0in 0pt;">The difference between the Service’s position and that asserted by many taxpayers is essentially a timing difference but, as demonstrated by the following example, that timing difference can be significant in the case of non-depreciable property.</p> <p class="MsoNormal" style="text-align: justify; margin: 0in 0in 0pt;">Assume a corporate taxpayer has a SALT burden of $500 and receives a SALT credit of $100 to induce it to stay in its present location.  The corporation uses the $100 credit to purchase non-depreciable real estate for $100.  The consequences of each party’s position is set forth below:</p> <div align="center"> <table class="MsoTableGrid" style="border-collapse: collapse;" border="0" cellspacing="0" cellpadding="0"> <tbody> <tr> <td style="background-color: transparent; border: #ece9d8; padding: 0in 5.4pt 0in 5.4pt;" valign="top"></td> <td style="background-color: transparent; border: #ece9d8; padding: 0in 5.4pt 0in 5.4pt;" valign="top"> <p class="MsoNormal" style="text-align: justify; margin: 0in 0in 0pt;"><span style="text-decoration: underline;">Taxpayer’s Position</span></p> </td> <td style="background-color: transparent; border: #ece9d8; padding: 0in 5.4pt 0in 5.4pt;" valign="top"> <p class="MsoNormal" style="text-align: justify; margin: 0in 0in 0pt;"><span style="text-decoration: underline;">Services’ Position</span></p> </td> </tr> <tr> <td style="background-color: transparent; border: #ece9d8; padding: 0in 5.4pt 0in 5.4pt;" valign="top"></td> <td style="background-color: transparent; border: #ece9d8; padding: 0in 5.4pt 0in 5.4pt;" valign="top"></td> <td style="background-color: transparent; border: #ece9d8; padding: 0in 5.4pt 0in 5.4pt;" valign="top"></td> </tr> <tr> <td style="background-color: transparent; border: #ece9d8; padding: 0in 5.4pt 0in 5.4pt;" valign="top"> <p class="MsoNormal" style="text-align: justify; margin: 0in 0in 0pt;">$100 Credit</p> </td> <td style="background-color: transparent; border: #ece9d8; padding: 0in 5.4pt 0in 5.4pt;" valign="top"> <p class="MsoNormal" style="text-align: justify; margin: 0in 0in 0pt;">Non-taxable (§ 118(a))</p> </td> <td style="background-color: transparent; border: #ece9d8; padding: 0in 5.4pt 0in 5.4pt;" valign="top"> <p class="MsoNormal" style="text-align: justify; margin: 0in 0in 0pt;">Non-taxable (§ 61(a))</p> </td> </tr> <tr> <td style="background-color: transparent; border: #ece9d8; padding: 0in 5.4pt 0in 5.4pt;" valign="top"> <p class="MsoNormal" style="text-align: justify; margin: 0in 0in 0pt;">Property Basis</p> </td> <td style="background-color: transparent; border: #ece9d8; padding: 0in 5.4pt 0in 5.4pt;" valign="top"> <p class="MsoNormal" style="text-align: justify; margin: 0in 0in 0pt;">Zero (§ 362(c))</p> </td> <td style="background-color: transparent; border: #ece9d8; padding: 0in 5.4pt 0in 5.4pt;" valign="top"> <p class="MsoNormal" style="text-align: justify; margin: 0in 0in 0pt;">$100 (§ 1012)</p> </td> </tr> <tr> <td style="background-color: transparent; border: #ece9d8; padding: 0in 5.4pt 0in 5.4pt;" valign="top"> <p class="MsoNormal" style="text-align: justify; margin: 0in 0in 0pt;">SALT Deduction</p> </td> <td style="background-color: transparent; border: #ece9d8; padding: 0in 5.4pt 0in 5.4pt;" valign="top"> <p class="MsoNormal" style="text-align: justify; margin: 0in 0in 0pt;">$500 (§ 164)</p> </td> <td style="background-color: transparent; border: #ece9d8; padding: 0in 5.4pt 0in 5.4pt;" valign="top"> <p class="MsoNormal" style="text-align: justify; margin: 0in 0in 0pt;">$400 (§ 164)</p> </td> </tr> </tbody> </table> </div> <p class="MsoNormal" style="text-align: justify; margin: 0in 0in 0pt;">Under the taxpayer’s position, there is no current income attributable to the SALT incentive, and a $500 current deduction against other ordinary income.  The property will have a zero basis, but the impact of that basis adjustment will not be realized until the corporation sells the property.  Under the IRS’ position, there is no current income attributable to the SALT incentive, and there is only a $400 current deduction against other income. The taxpayer acquires full cost basis in the property, but the impact thereof will not be realized until the taxpayer sells the property (and offsets any amount realized with the basis).</p> <p class="MsoNormal" style="text-align: justify; margin: 0in 0in 0pt;">The difference in approaches essentially centers on the timing and nature of the tax benefit related to the SALT incentive.  The taxpayer will ultimately receive a tax benefit; the only issue is when that benefit will be realized (currently as a deduction under Section 164 or in later years, either in the form of cost recovery deductions or as an offset against amount realized).  The approach set forth in the Guidelines  is most beneficial to the IRS.</p> The actual “settlement guidelines” portion of the Guidelines is completely redacted, so it is not clear how the IRS is going to approach settlement of this issue.  What is clear, however, is that taxpayers taking the position described above and claiming a full, un-credited SALT deduction will be challenged.

Ohio Department of Taxation Announces "Use Tax Education Program"

2011-01-28 19:11:44

  <span style="font-family: arial,helvetica,sans-serif;">Click </span><a href="http://tax.ohio.gov/divisions/sales_and_use/index_use.stm"><span style="font-family: arial,helvetica,sans-serif;">here</span></a><span style="font-family: arial,helvetica,sans-serif;"> for the Department's announcement.  For more information regarding why it is critical to act now, please see our prior post regarding the </span><a href="index.php?option=com_content&view=article&id=64:are-you-filing-an-ohio-use-tax-return&catid=47&Itemid=59"><span style="font-family: arial,helvetica,sans-serif;">Department's Use Tax Initiative</span></a><span style="font-family: arial,helvetica,sans-serif;">.</span>  

ACTION REQUIRED / LIMIT OHIO USE TAX EXPOSURE

2011-01-24 14:28:29

Any Ohio business not consistently filing an <a href="http://www.tax.ohio.gov/divisions/communications/news_releases/news_release_020401.stm">Ohio use tax</a> return is exposed to an Ohio Department of Taxation (“Department”) investigation. If any of the following apply, and you do not regularly file an Ohio use tax return, immediate action is required: <ul> <li>Purchases from non-Ohio vendors that do not collect Ohio sales tax;</li> <li>Taxable purchases from a vendor holding a <a href="http://tax.ohio.gov/documents/forms/fill-in/sales_and_use/exemption_certificates/ST_STEC_B_FI.pdf">blanket exemption certificate</a>;</li> <li>Inventory withdrawn for demonstrations, advertising or other taxable uses;</li> <li>Erroneously concluding purchases are exempt from tax, such as within the <a href="https://www.ohiostatetaxblog.com/archives/47-ohio-sales-and-use-tax/77-maximizing-the-manufacturing-exemption-from-ohio-salesuse-tax-part-1--the-commitment-of-raw-materials-.html">manufacturing exemption</a> or the exception for leased employees; or</li> <li>Using/storing property in a higher taxing county than the county of purchase (at least pre-2010 purchases).</li> </ul> Only a small fraction of the more than 380,000 registered Ohio businesses have a use tax account. The Department is finally addressing this great discrepancy by planning to contact and investigate all Ohio businesses without an <a href="https://www.ohiostatetaxblog.com/resources.html">Ohio use tax account</a>. Furthermore, the general four-year statute of limitations will <span style="text-decoration: underline;">not</span> apply if a use tax return has not been filed, meaning the potential liability for tax, interest and penalty (15%) is substantial, as the audit period is unlimited (although the Department’s policy is to only review the prior seven years).  On the other hand, by requesting a <a href="https://www.ohiostatetaxblog.com/archives/51/56-voluntary-disclosure-a-procedure-to-minimize-delinquent-state-tax-obligations.html">voluntary disclosure agreement</a> (“VDA”), a taxpayer can <strong><em>limit exposure to the previous three years (tax and interest) and avoid penalties</em></strong>. Our Department sources have advised that they will begin contacting Ohio businesses in the coming months concerning their Ohio use tax liability. So, there is no better time to address your potential use tax liability because the limited three-year look back of a VDA is not available after being contacted by the Department.  The Department’s communication is expected to demand payment of all tax and interest due for the previous four years.  Unresponsive taxpayers will be assessed for the prior seven years (tax, interest and full penalty). Thus, Ohio businesses not filing Ohio use tax returns have a unique opportunity to limit their liability through a VDA before being contacted by the Department. By requesting a VDA, which can be done anonymously through the taxpayer’s representative, taxpayers will benefit from: <ol> <li>Limited three year look back (save at least one year);</li> <li>No penalty;</li> <li>Avoiding inquiries into other potential tax liabilities, as the Department may investigate compliance with other Ohio taxes, including <a href="https://www.ohiostatetaxblog.com/archives/45-ohio-cat/71-ohio-cat-identifying-businesses-with-qbright-lineq-nexus.html">Ohio’s Commercial Activity tax</a>;</li> <li>Directing and controlling presentation of the delinquency in a favorable light; and</li> <li>Considering planning to minimize, or even eliminate, future tax liability.</li> </ol> Our expertise and experience in representing clients in all aspects of Ohio sales and use tax matters, from planning through audits and appeals, can minimize your liability.  Do not hesitate to <a href="https://www.ohiostatetaxblog.com/contact-us.html">contact us</a> today to help evaluate your Ohio use tax exposure.

Ohio's Business Tax Climate Ranked In the Bottom Five by The Tax Foundation

2010-12-21 13:57:35

Annually, The Tax Foundation ranks the 50 states according to how friendly their tax climate is to businesses. A friendly tax climate can be especially beneficial in difficult economic times, like the present, by attracting new business to the state thereby creating economic and job growth. “<em>Taxes matter to business. Business taxes affect business decisions, job creation and retention, plant location, competitiveness, the transparency of the tax system and the long-term health of a state’s economy</em>,” advised <a href="http://www.taxfoundation.org/">The Tax Foundation</a>. Too many Ohioans have experienced this first hand, while watching business expand or relocate to neighboring states with a friendlier tax climate. Unfortunately, Ohio has ranked at the bottom of this list for several years now. The Tax Foundation ranked Ohio as the 46<sup>th</sup> most friendly business tax climate for 2011; one spot up from its 2010 ranking. This has been the status quo for Ohio, as the state’s tax climate has ranked between 46<sup>th</sup> and 48<sup>th</sup> for each of the last 5 years. On a positive note, Ohio has been proactive in improving its tax climate by undertaking a five year phase-in of the Commercial Activity Tax, while phasing-out the Corporate Franchise, Personal Property and Individual Income Taxes. However, the legislature postponed the final phase-out of Ohio’s Individual Income Tax last year. Completion of this phase-out will further improve Ohio’s business tax climate ranking in the future. Click <a href="http://www.taxfoundation.org/files/bp60.pdf">here</a> for The Tax Foundation’s entire rankings and report.

Caution: Appealing to the Ohio Board of Tax Appeals

2009-12-16 14:43:01

Again and again, we see taxpayers lose their right to appeal assessments issued by the Ohio Department of Taxation due to clerical and administrative errors.  The requirements to perfect an appeal to the Ohio Board of Tax Appeals (BTA) are “finicky” to say the least, and taxpayers are not afforded any leniency in this regard.  The Ohio Supreme Court has stated that “Manifestly, strict compliance with the tax laws of this state is essential to vest jurisdiction upon the [BTA].” Just last month, the BTA dismissed a case because the notice of appeal was sent to the BTA only, not the Tax Commissioner, and the notice was directed “To whom it may concern”, not the Tax Commissioner.  The appeal was dismissed due to the failure to comply with the statutory requirement that a notice of appeal be filed with BTA <strong><em>and</em></strong> the Tax Commissioner.  The BTA could not even consider the merits of the taxpayer’s appeal due to this seemingly trivial requirement.  This is a prime example of why it is imperative to retain an attorney familiar with Ohio’s state tax laws to handle matters before the Ohio Tax Commissioner and Board of Tax Appeals. As a taxpayer, you are entitled to certain rights -- be sure not to waste your rights. Click here for a copy of the BTA decision referenced above: <em><a href="http://bta.ohio.gov/2009-M-696.pdf">Austintown Ambulatory v. Levin</a></em>, B.T.A. No. 2009-M-696 (November 10, 2009).

Ohio Board of Tax Appeals Budget Cut By 42%

2009-12-08 19:17:03

In the budget enacted by Ohio’s General Assembly for the 2010 and 2011 biennium, the amount appropriated to the Ohio Board of Tax Appeals (“BTA”) was reduced by 41.9% from the BTA’s actual FY 2009 expenditures.  As a result, the BTA was forced to reduce its staff, including cutting its attorney examiners in half.  The reduction in its staff could not come at a worse time, as the number of cases appealed to the BTA is increasing due, in part, to the growing number of real property valuation challenges.  The BTA has stated it expects that appeals will now take 2-3 years for a final resolution, if not longer.  We believe BTA appeals will take even longer than 3 years if the BTA does not receive additional funding.  Additionally, this may result in the misuse of BTA appeals to delay paying the liability, taking advantage of Ohio’s simple interest accrual (currently at 5% and decreasing to 4% in 2010), thereby increasing the BTA’s case load even more.

Ohio Department of Taxation Increasing Audit Staff

2009-12-07 19:13:02

As provided for in the current state budget, the Department is hiring approximately 100 “revenue producing employees,” most of which are expected to be auditors.  The Department’s goal is to have these new employees largely in place and trained by mid-2010, hopefully resulting in an increase in revenue for fiscal year 2011.  This influx of new employees is expected to specifically cause a ramp up in the Department’s enforcement of sales and use tax and the CAT.  As these new employees are being trained, now is an excellent time for businesses with an Ohio presence to assess and minimize their Ohio tax liability before being contacted by the Department.

Gov. Kasich Discusses Significant Tax Reform Potentially on the Horizon for Ohio

2012-08-03 17:49:27

<a href="http://www.dispatch.com/content/stories/local/2012/08/01/kasich-aims-for-sales-tax-reform-to-pay-for-income-tax-cut.html">As reported by the Columbus Dispatch</a>, Gov. Kasich is strongly considering reforming Ohio taxes, again. Over the last decade, <a href="https://www.ohiostatetaxblog.com/index.php?option=com_content&view=article&id=140:low-tax-rates-and-incentives-give-ohio-a-business-friendly-landscape-spurring-economic-recovery-and-growth&catid=54:ohio-state-tax-news&Itemid=59">Ohio’s tax structure dramatically changed</a> due to the advent of the <a href="https://www.ohiostatetaxblog.com/index.php?option=com_content&view=category&id=45:ohio-cat&Itemid=59&layout=default">commercial activity tax</a>, while Ohio corporate franchise and personal property taxes were eliminated and the <a href="https://www.ohiostatetaxblog.com/index.php?option=com_content&view=category&id=49:ohio-personal-income-tax&Itemid=59&layout=default">Ohio personal income tax</a> rate reduced. Gov. Kasich now seeks to further cut <a href="http://tax.ohio.gov/divisions/ohio_individual/individual/annual_tax_rates.stm">Ohio’s personal income tax rate</a>, which he described as “ridiculously high for our state.” To fund this tax cut, Ohio sales and use tax would undergo substantial changes, including the elimination of several exemptions, referred to by the Governor as “loopholes.” Stay tuned as there will certainly be much debate and controversy to come over Gov. Kasich’s proposals. In the meantime, review <a href="https://www.ohiostatetaxblog.com/index.php?option=com_content&view=article&id=123:maximizing-ohios-salesuse-tax-exemptions&catid=47:ohio-sales-and-use-tax&Itemid=59">our posts</a> and <a href="https://www.ohiostatetaxblog.com/index.php?option=com_content&view=article&id=73&Itemid=64">outline</a> describing how to maximize Ohio’s sales and use tax exemptions.