Ohio lawmakers agree to tax breaks for PPP loans and unemployment
Ohio would offer a tax exemption for Paycheck Protection Program loans remitted under the federal coronavirus relief act of December and provide relief for late payments of income tax on unemployment benefits under a bill the state legislature approved on Wednesday.
The State Senate gave the final vote to SB 18 by a vote of 33-0, shortly after the State House of Representatives voted to pass Bill 96-0 and accept the amendments. that the House Ways and Means Committee brought to legislation Tuesday. The bill provides for an exemption from the business activity tax for the amounts of PPP loans canceled under the December Consolidated Credit Act. , and specify that expenses paid with covered loans may be deductible.
The legislation will now go to Republican Governor Mike DeWine. A governor representative did not immediately respond to a request for comment. However, one of the bill’s main sponsors, Senator Kristina Roegner, R-Hudson, said in a statement shared with Law360 that she expects the bill to “become law soon.”
Under the bill, Ohio will comply with the temporary exclusion from federal income tax for the first $ 10,200 in unemployment benefits received by taxpayers whose federal adjusted gross income is less than 150 $ 000, or $ 300,000 for common filers.
The bill would also allow the state tax commissioner to temporarily waive any interest or penalty if a taxpayer fails to pay state and school district income taxes in full and on time because of the allowances. unemployment benefits received in 2020. Taxpayers should file a tax return in a timely manner. return to qualify for relief. Additionally, the bill would provide a business activity tax exclusion for Ohio Bureau of Workers’ Compensation dividends paid to employers for 2020 and 2021.
If passed, the bill would come into force immediately. Roegner told the Senate that the emergency clause was necessary because the state’s usual 90-day waiting period for legislation would bring the measure’s provisions into effect after the state’s tax deadline. , which was extended on Wednesday to match the federal date of May 17.
“With an already complex tax season, further complicated by the pandemic, it is critical that we make these adjustments to ensure the best interests of Ohio taxpayers are protected,” Roegner said in his statement after the passage of the law Project.
The bill also complies with the federal allowance of a 30-year amortization period for certain residential rental properties and the temporary total deduction for business meals. As of January 1, 2022, the bill will allow taxpayers to elect to have state income tax withheld from unemployment benefits.
In total, the bill is expected to cost the state more than $ 200 million in tax revenue for the 2022-2023 biennium. Zach Schiller, research director at the progressive research group Policy Matters Ohio, told Law360 that the legislation is “a mixed bag” that offers tax relief to low-income taxpayers receiving unemployment benefits and to high-income homeowners. ‘intermediary companies that have received PPP loans.
Current Ohio law allows a personal income tax exclusion of the first $ 250,000 of business income, meaning that additional P3 tax relief will be given to mid-size business owners. who may not have been as financially affected by the coronavirus pandemic as low-income taxpayers, Schiller said.
“We are throwing what could be tens of millions of dollars in income to people who don’t need it and in a way you can’t expect them to have much economic impact. positive, ”he said.
Schiller also asked whether the exclusion of workers’ compensation dividends, which the tax note said could result in millions of dollars in lost revenue, would violate US bailout law. the requirement that states cannot use federal pandemic assistance to pay tax cuts.
Schiller noted that states are still awaiting advice from the US Treasury Department on policy and that the question remains open as to whether compliance with the federal code would constitute a tax cut under the wording of the law. But he said the exclusion of dividends from the bill was unrelated to federal compliance and could potentially be problematic for the state, according to department guidelines.
Treasury Secretary Janet Yellen responded to 21 Republican attorneys general on Tuesday who asked the department interpret narrowly the tax cut restriction provision of the law. Yellen said the law does not hamper the ability of states to completely reduce taxes and that states can cut taxes as long as they don’t use the federal relief to offset the tax cuts.
Ohio Republican Attorney General Dave Yost sued the Treasury in federal court last week and is ask for an injunction on the provision of the law that restricts state tax cuts.
–Additional reports by Asha Glover and Abraham Gross. Editing by Neil Cohen.
For a reprints of this article, please contact [email protected]