Tax Relief

Ohio Legislators OK Tax Break For PPP Loans, Unemployment

“href =” https://www.law360.com/tax-authority/articles/1368186/# “> Paul Williams ·

Ohio would provide tax exemption for Paycheck Protection Program loans granted under the December Coronavirus Relief Act and relief for late income tax payments on unemployment benefits under a bill passed by lawmakers on Wednesday.

The state Senate gave SB 18 a 33-0 final decision shortly after the state House of Representatives voted 96-0 to pass the bill and accept changes made by the House Ways and Means Committee made legislation Tuesday. The bill would provide a commercial tax exemption for PPP loan amounts issued under the December Consolidated Funds Act and clarify that expenses paid with covered loans may be deductible.

Legislation will now go to Republican Governor Mike DeWine. A governor’s 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 meet the temporary federal income tax exclusion for the first $ 10,200 in unemployment benefits received by taxpayers with adjusted gross income less than $ 150,000 or $ 300,000 for joint applicants.

The bill would also allow the state tax commissioner to temporarily waive interest or penalties if a taxpayer fails to pay state and school district income taxes in full and on time due to unemployment benefits received in 2020. Taxpayers would need to file returns in time for 2020 to be eligible for the relief. Additionally, the bill would provide for a commercial activity tax exclusion for dividends from the Ohio Bureau of Workers’ Compensation paid to employers for 2020 and 2021.

In the event of an entry into force, the invoice would take effect immediately. Roegner said in the Senate that the contingency clause was necessary because the measure’s provisions would take effect after the state’s customary 90-day waiting period for legislation after the state’s tax deadline, which extended Wednesday to the federal May 17 date has been.

“With an already complex tax season, made even more complicated by the pandemic, it is important that we make these adjustments to ensure that the interests of Ohio taxpayers are safeguarded,” Roegner said in her statement after the bill was passed.

The bill also corresponds to the federal allowance for a 30-year depreciation period for certain rental residential properties and the full temporary allowance for business lunches. From January 1, 2022, the law allows taxpayers to choose whether state income taxes should be withheld from unemployment benefits.

Overall, the bill is expected to cost the state more than $ 200 million in tax revenue for the 2022-23 biennium. Zach Schiller, director of research for Progressive Research Group Policy Matters Ohio, told Law360 that the legislation is “a mixed bag” providing tax breaks for lower-income taxpayers receiving unemployment benefits and for higher-income pass-through business owners. Those who receive unemployment benefits are offering PPP loans.

Current Ohio law allows personal income tax exclusion on the first $ 250,000 of business income, meaning the extra PPP tax relief goes to pass-through business owners who may not have been as financially damaged by the coronavirus pandemic like lower-income taxpayers, Schiller said.

“We’re throwing tens of millions of dollars in revenue to people who don’t need it and who in some ways are not expected to have a positive economic impact,” he said.

Schiller also asked whether the exclusion of employee compensation dividends, which according to the tax bill could lead to a loss of income of several million dollars, would violate the American rescue plan law ‘s demand that states not be able to use federal pandemic aid pay for tax cuts.

Schiller noted that states are still awaiting guidance from the US Treasury Department on this policy and that it is an open question whether compliance with the federal code would qualify as a tax cut in the language of the law. However, he said the law’s dividend exclusion had nothing to do with federal compliance and could potentially be problematic for the state, depending on the ministry’s guidance.

Treasury Secretary Janet Yellen responded Tuesday to 21 Republican attorneys general who asked the department interpret closely the tax reduction restriction provision of the law. Yellen said the law does not, and does not, affect states’ ability to lower taxes overall States can lower taxes as long as they do not use the federal relief to compensate for the tax cuts.

Ohio Republican Attorney General Dave Yost sued the Treasury Department in federal court last week and is seek an injunction on the provision of the law restricting government tax cuts.

– Additional reporting from Asha Glover and Abraham Gross. Adaptation by Neil Cohen.

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