Tax Relief

Ohio provides tax breaks on PPP loans and unemployment advantages

“href =” https://www.law360.com/tax-authority/articles/1371021/# “> Paul Williams ·

Ohio will comply with a number of recent changes to federal tax law, including adjusting federal lending to paycheck protection loans and excluding part of unemployment benefits from income tax, under a bill the governor signed on Wednesday.

Republican Governor Mike DeWine approved SB 18, a bill requiring Ohio to comply with federal tax rules for certain coronavirus aids. The law provides a commercial tax exclusion for second-drawing PPP loans under the December Consolidated Funds Act and clarifies that expenses paid with covered loans can be deductible. The state has already offered this tax break for PPP loans granted under the Coronavirus Aid, Relief and Economic Security Act .

Under the new law, which goes into effect immediately, Ohio will adhere to the temporary federal income tax exclusion for the first $ 10,200 in unemployment benefits taxpayers with adjusted gross income less than $ 150,000, or $ 300,000 for joint applicants receive. The law also corresponds to the federal allowance of a 30-year depreciation period for certain rental residential properties and the temporary full deduction for business meals.

The law also allows the Ohio Tax Commissioner to temporarily waive interest or penalties if a taxpayer fails to pay the state and school district income tax due on 2020 unemployment benefits in full and in a timely manner, provided that they do so in a timely manner Submit tax return. It also provides a commercial tax exclusion for dividends from the Ohio Bureau of Workers’ Compensation paid to employers for 2020 and 2021.

From January 1, 2022, the law allows taxpayers to withhold state income tax from unemployment benefits. Starting January 1, 2023, the law will also lower the withholding tax rate for certain pass-through companies with non-resident investors to 3%, which is the individual tax rate on business income. Currently, Ohio corporate taxes are 5% for qualified investors who are individuals and 8.5% for qualified investors who are not individuals to help reduce tax avoidance. This is evident from a tax assessment on the invoice.

Lowering the withholding tax rate will not change the state’s tax revenue, as taxpayers who withhold excess taxes will be able to claim refunds. However, the lower tax rate will result in a one-time reduction in revenue after the final refunds for the higher tax rates are paid retrospectively for the previous tax year, the tax return states.

Overall, the bill is estimated to provide over $ 200 million in tax relief for Ohio residents and businesses.

The statement Adopted unanimously by the general assembly. The measure’s main sponsor, Senator Kristina Roegner, R-Hudson, was not immediately available to comment on the passage of the law.

But Roegner had said when the bill was finally passed that the legislation was important to simplify tax rules and ease the burden on taxpayers amid the ongoing spread of the coronavirus.

“With an already complex tax season, compounded by the pandemic, it is important that we make these adjustments to ensure the interests of Ohio taxpayers are safeguarded,” Roegner said in a statement after lawmakers passed the bill on March 24th.

Ohio does not levy corporation tax, but corporations are subject to business tax, a gross income tax. BakerHostler’s David Ebersole told Law360 that the law will simplify tax returns for companies that have received PPP loans, as excluding gross receipts from loans made is tantamount to non-recognition as income for federal tax purposes. He also noted that the law equates the state’s tax treatment of PPP loans with first and second drawing.

Ebersole says that removing the differences in withholding tax rates for certain transit businesses and aligning them with the tax rate on business income for individuals is also a significant change for businesses.

“This has been a problem for a while,” he said, adding that the provision could reduce the number of refund claims taxpayers may have to file.

Representatives from DeWine and the Democratic minority leadership in the House and Senate did not immediately respond to requests for comment.

– Additional coverage from Asha Glover. Adaptation by Neil Cohen.

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