Significant Changes Coming With Ohio’s Biennial FYE 2015 Budget
The state’s biennial budget, effective July 1, 2013, plans to cut $2.7 billion in taxes to individuals and businesses over the coming three years. Key highlights include:
- The state’s sales tax rate increases .25% to 5.75% on Sept. 1, 2013. Also, products delivered digitally (music, books, etc) and magazine subscriptions will now be subject to sales tax.
- Individual income tax rates will decrease by 10% over the three-year budget period
- Investors in Ohio pass-through entities will be entitled to a deduction of up to $125,000 (if married filing separate, $62,500 each) or 50% of the first $250,000 of Ohio small business income passed through to them.
- The annual minimum Commercial Activity Tax will be modified to a teired structure based on taxable gross reciepts (TGR). Taxpayers with TGR between $1 million and $2 million will pay a minimum tax of $800 plus the usual .26% on TGR over $1 million. Taxpayers with TGR between $2 million and $4 million pay a minimum of $2,100 plus the usual .26% on TGR over $1 million. Taxpayer with more than $4 million in TGR will pay a minimum tax of $2,600 plus the .26% on TGR over $1 million. For example, a taxpayer that usually has $1.5 million in TGR per year will see an increase of $650 per year in CAT over the previous law’s calculation.
- The Homestead exemption for Real Property Tax will revert to being means-tested, limiting the exemption for many Ohioans. Currently eligible participants are not impacted. Also, the 10% and 2.5% “roll backs” (reductions) will be eliminated for levies passed in Nov. 2013 and beyond.
Ohio’s news release on the above can be read here, and a summary of the evolution and enacted version of the bill prepared by Ohio’s Legislative Service Commission can be found here.
IRS seeks to accelerate matching of external information to refund returns
The IRS wants to move closer to a ‘real-time’ tax system that would allow them to identify matching discrepancies between individual tax returns and the information reported to the IRS from third parties. Such a system would require W-2’s, 1099’s and other information returns normally reported to the IRS in February or March to be reported earlier. For instance, 50% of individual refunds for the filing season had been issued by the end of Feb. 2011, at that time only 3% of the third party information had been received by the Service. As the IRS continues to think in this direction, changes in information reporting would be necessary, possibly even moving 1099 and W-2 reporting to a real-time system. Changes here are expected to be a long way off however. The full story and comments can be read here.
Ecomonic uncertainty and regulatory compliance and enforcement top list of organizational threats
In a recent in-house counsel Grant Thornton LLP survey conducted by ALM Marketing Services, economic uncertainty and regulatory compliance and enforcement came in first and second place, respectively, as threats to organizational growth. The full story and the survey report can be found here.
Ohio Bureau of Workers’ Compensation announces proposed $1B in rebates
On May 2, 2013, Ohio’s BWC announced a proposal to provide a $1 billion rebate to both private and public sector employers. A reduction of premiums (2% for private employers) was also announced as part of the proposal. More info, including a fact sheet and news release, can be read here.
2014 HSA contribution limits announced
The Health Savings Account contribution limits for 2014 were recently announced. The maximum contribution will be $3,300 for individuals and $6,550 for a family. More details are available in the Revenue Procedure.
IRS will now obtain a warrant before requesting emails from ISPs
It appears that the IRS’ position that a search warrant is not necessary if they want to obtain emails in a criminal investigation is a thing of the past. A new policy statement dated May 3, 2013 says that a search warrant will be obtained before requesting email correspondence in future investigations. The statement also indicates that the IRS will not seek this kind of information in civil cases. The statement can be read here.
