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  • Thomas M. Zaino, JD, CPA – Managing Member

Senate Introduces Many New Tax Provisions in Substitute Budget Bill

Senate Introduces Many New Tax Provisions in Substitute Budget Bill

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The Ohio Senate Finance Committee accepted a substitute version of the biennial budget bill, Sub. H.B. 110 on June 1, 2021. The bill included many tax provisions which are bulleted below. Over the next several days, the Finance Committee will take testimony on the provisions and adopt an omnibus amendment next week, prior to passing the budget bill out of the Senate.


Some more significant tax related provisions include:


  • Repeal of the sales and use tax on employment services and employment placement services.

  • Exempts from the sales and use tax memberships to physical fitness facilities or recreational and sports club facilities operated by nonprofit 501(c)(3) organizations.

  • Replacement of the House’s 1% personal income tax cut with a reduction in nonbusiness income tax rates of 3.5% for 2021 and 1.5% for 2022, for a total reduction of 5%.

  • Removes the requirement that taxpayers claiming the business income deduction indicate their NAICS code on their personal income tax return.

  • Authorizes three new education-related nonrefundable income tax credits beginning in 2021:


  • Up to $250 for certain education expenses for one or more of a taxpayer’s dependents who are home schooled;

  • Up to $1,000 for cash donations made to certain scholarship granting organizations for primary and secondary school students that prioritize low-income students; and

  • Up to $2,500 per year for tuition paid for one or more dependents to attend a non-chartered nonpublic school when paid by a taxpayer/spouse whose income does not exceed 300% of the federal poverty level.


  • Eliminates the nonrefundable tax credit for contributions made to campaign committees of certain candidates for state offices.

  • Repeals the CAT exclusion for receipts from the sale of beauty, health, personal care, or aromatic products (including candles) between businesses within an integrated supply chain.

  • Excludes BWC dividends paid to employers beginning in 2022 from CAT.

  • Adds a property tax exemption for certain property owned by a charitable organization and used for federal or state wetland mitigation or water quality improvement projects.

  • Eliminates the Tax Expenditure Review Committee.

  • Adds provisions applying to Section 29 of H.B. 197, the special municipal income tax withholding provision enacted amid the COVID-19 Pandemic, including:


  • Extension of Section 29’s withholding treatment through December 31, 2021;

  • Clarification that an employer may change an employee’s principal place of work (PPW);

  • Clarification that an employer may withhold to the actual workplace location rather than the PPW;

  • Clarification that Section 29 only applies to withholding and net profits taxes (including for the period from March 9, 2020 through December 31, 2021), not the location of where income is actually earned for purposes of determining taxability in the hands of the employee;

  • Exempts certain wages from taxation by a work-from-home (WFH) municipality if those wages are withheld to a PPW municipality, except to the extent a resident municipality has a higher tax rate or does not provide a full credit for taxes paid to other municipalities. In those limited situations, the WFH resident municipality will be able to receive the excess tax.

  • Provides that employers who withheld tax to the PPW during the period from March 9, 2020 through December 31, 2021 may not be subjected to the assessment of tax, penalty or interest from an employee’s WFH municipality; and

  • If an employee requests a refund, limits municipalities to only asking employers to verify the number of days worked by the employee at the PPW location and that the employer did not already refund the tax to the employee.


There are many other tax provisions and changes included in the 2,947-page bill. Our purpose is to highlight some of the more significant changes as the bill continues to be debated in the Senate over the next several days.


Next Steps: We expect an omnibus amendment will be accepted by the Senate on next Tuesday, June 8, 2021, and that the bill will go to the Senate floor by June 10, 2021.


After passage by the Senate, a Conference Committee between both chambers will convene to negotiate provisions to stay in, be taken out, or to be changed. The Governor, who is expected to sign the bill by July 1, 2021, also has the ability to line-item veto any provision in the Budget Bill.


We expect to provide more detail on the Senate proposals once its version of the budget bill is finalized next week.


Whether you are in favor of or opposed to any of these provisions, it is important that you be heard by your state senator or state representative. Please contact Tom Zaino or any of our other ZHF professionals if you need more information or if we can assist you in any way.

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