Ohio Repeals Estate Tax

The Ohio Biennial Budget Bill signed into law on June 30, 2011 by Governor John Kasich included a number of tax changes.  Among them are the following:

ESTATE TAX

The bill repeals the Ohio estate tax for persons dying on or after January 1, 2013.  The Ohio estate tax is currently levied on the value of the taxable estates in excess of $338,333.  The tax is levied at gradual rates, through six tax brackets, ranging from 2% for taxable estates of $40,000 or less, to $23,600 plus 7% of the excess over $500,000 for estates of more than $500,000.

PERSONAL INCOME TAX

The bill authorizes a nonrefundable, small business investment credit against the personal income tax for persons investing in a “small business enterprise” with an operating presence in Ohio.  A “small business enterprise” is generally defined as (a) having at least 50 employees in Ohio or a majority of all its U.S.-based employees in Ohio, and (b) either having assets of $50 million or less or having sales of $10 million or less. 

Eligible investments must be made after July 1, 2011.  The credit is equal to 10% of the qualifying investment, and that unused credits can be carried forward for up to seven succeeding tax years.  The credits may be claimed for either direct or indirect investments made by the taxpayer or by a pass-through entity in which the taxpayer owns an equity interest.  Issuance of the credit certificates is to be administered by the Department of Development in consultation with the Department of Taxation. 

The bill limits the value of credits granted by the Department of Development to $100 million in any fiscal biennium, and limits to $1 million the amount of credit any one taxpayer may receive in any fiscal biennium.  A taxpayer may not claim the credit until the conclusion of the applicable “holding period.”  The “holding period” is defined as at least two years beginning on the day the qualifying investment is made between July 1, 2011 and June 30, 2013 or five years if the qualifying investment is made after June 30, 2013.

TEMPORARY TAX AMNESTY PROGRAM 

The bill requires the Tax Commissioner to administer a temporary tax amnesty program from May 1, 2012 to June 15, 2012 with respect to the following:

• Personal income tax
• Estate tax
• Corporate franchise tax
• Motor fuel tax
• Sales tax
• Cigarette tax
• Commercial activity tax
• School district taxes
• Dealers in intangibles tax

The program applies only to taxes that were due and payable as of May 1, 2011, which were unreported or underreported and which remain unpaid when the program commences.  If during the program, a person pays the full amount of the delinquent taxes owed plus one-half of the interest that has accrued on the taxes, the Commissioner is required to waive or abate all applicable penalties and the other one-half of any interest that accrued on the taxes.  In addition to the waiver of the penalties and one-half of the accrued interest, a person who participates in the program is immune from criminal prosecution or any civil action with respect to the taxes paid through the program. 

USE TAX AMNESTY PROGRAM

The bill requires the Commissioner to administer a temporary use tax amnesty program specifically for consumers owing outstanding use tax.  The use tax program will begin on October 1, 2011 and runs until May 1, 2013.  Under the program, a consumer with outstanding use tax liability is required to self-report and remit the amount of use tax owed from January 1, 2009 forward.  The Tax Commissioner is prohibited from waiving interest or penalties due on use tax paid under the amnesty program by a consumer who registered for payment of the use tax on or before June 1, 2011. The payment plan period may be up to 7 years.  A consumer that makes the required payments pursuant to the program may not be the subject of a criminal or civil action with regard to the remitted tax.  The Tax Commissioner is prohibited from assessing any consumer for use tax liability incurred before 2008.