On Tuesday, June 30, 2015, Ohio Governor Kasich signed into law Substitute House Bill 64 (“HB 64”), the Executive Budget for Fiscal Years 2016-2017. HB 64 contains numerous tax provisions, most of which are effective beginning January 1, 2015, including significant income tax cuts. The following are some of the significant highlights of HB 64: Personal Income Tax
- A 6.3 percent reduction of all personal income tax rates.
- The elimination of state income tax on the first $250,000 of Ohio-sourced income earned by small businesses. A flat tax of 3 percent will be imposed on small business income in excess of $250,000. This tax cut will be phased-in, as only 75 percent of the first $250,000 of small business income earned during the 2015 calendar year will be exempt from taxation. The full $250,000 exemption is effective January 1, 2016.
- Applies means testing for the retirement income credit, the lump-sum retirement credit, the lump-sum distribution credit, and the senior citizen credit such that the credits will no longer be available to taxpayers earning more than $100,000.
- Changes to sales/use tax nexus standards aimed at out of state sellers. These include additional affiliate/agency provisions and the establishment of a “click-through” nexus standard.
- Exempts sanitation services provided to meat slaughterers and processers for the purposes of complying with Federal meat safety regulations.
- Establishes exemption for rental vehicles provided to someone whose vehicle is undergoing repair/maintenance if such cost is reimbursed by the manufacturer, warrantor, or other provider of a maintenance/service contract.
Commercial Activity Tax/Petroleum Activity Tax
- Revision of certain petroleum activity tax provisions.
- Exemption for certain manufacturers, suppliers or distributors of personal care, health, beauty, or aromatic products from the CAT. Limited to vendors in a specific area of New Albany, Ohio who are part of an integrated supply chain. The exempted gross receipts must be from sales to another qualified vendor in the same area of New Albany. The provision is retroactive to July 1, 2011.
- An increase of the cigarette tax by $0.35 per pack, effective July 1, 2015.
- Restoration of the income tax credit for contributions to political campaigns.
- Retention of the historic preservation tax credit.
- Establishment of the Ohio 2020 Tax Policy Study Commission to make recommendations to the General Assembly on Ohio’s tax structure and competitiveness. Focus areas will include, transitioning Ohio’s personal income tax to a flat tax by 2018, severance tax reform and state tax credits.
- Changes to job creation and job retention tax credit calculations to offset the impact of income tax cuts that would otherwise reduce the amount of benefit received.
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