The Ohio Biennial Budget Bill for fiscal years 2024–2025 was signed into law on July 4, 2023. House Bill 33, Laws 2023, included significant taxpayer-friendly tax changes for several different tax types. Below are highlights of the various tax revisions, as impacted by Gov. Mike DeWine’s line-item vetoes.
Commercial Activity Tax (CAT)
- The existing CAT exemption of $150,000 in total taxable gross receipts is increased to $3 million for 2024 and $6 million for 2025.
- The governor’s line-item veto removed language that would have defined “excluded persons” as those who do not exceed the exclusion amount, instead of those with not more than $150,000 of taxable gross receipts.
- The $150 minimum CAT is repealed.
- The annual CAT filing requirement is repealed, i.e., the CAT will become a quarterly filed return only.
Sales/Use & Excise Tax
- Effective October 1, 2023, certain baby-related items will be exempt, including diapers, wipes, skin creams/ointments, car seats, booster seats, cribs, and strollers designed for newborns to 36 months old.
- Permits an “expanded” sales tax holiday in 2024, but the governor vetoed the original 14-day holiday to better estimate the initial revenue loss from this policy.
- Sales or rentals of traffic control items and services by construction contractors to governments will be exempt.
- The sports gaming tax is increased to 20% from 10%, effective July 1, 2023.
Municipal Income Tax
- The late fees and penalties imposed on taxpayers for failing to timely file municipal income tax returns is now limited to $25, instead of the previous $150. Further, any late filing penalty imposed on a taxpayer’s first late-filed return is required to be refunded or abated once the overdue return is filed. This change is retroactively effective back to January 1, 2023.
- The annual due date for filing municipal net profits tax returns is extended from October 15 to November 15 for taxpayers with a federal income tax extension. This change is retroactively effective back to January 1, 2023.
- Starting in 2024, businesses with remote or hybrid employees or owners will have the option to use a modified apportionment formula for municipal net profits tax, which would attribute property, payroll, and sales related to the remote or hybrid workers to a designated location owned or controlled by the business or one of its customers.
- Effective January 1, 2024, individuals under the age of 18 are exempt from Ohio municipal income tax.
Personal Income Tax
- The legislation establishes a two-year phasedown of individual income tax rates and reduces the number of tax brackets from five to three.
| 2023 Brackets | 2023 Rate | 2024 Brackets | 2024 Rate | 2025 Brackets | 2025 Rate |
|---|---|---|---|---|---|
| $0–$26,050 | 0% | $0–$26,050 | 0% | $0–$26,050 | 0% |
| $26,051–$46,100 | 2.76% | $26,051–$100,000 | 2.75% | $26,051–$100,000 | 2.75% |
| $46,101–$92,150 | 3.22% | $100,001–$115,300 | 3.688% | > $100,000 | 3.688% |
| $92,151–$115,300 | 3.68% | > $115,300 | 3.75% | ||
| > $115,301 | 3.99% |
Pass-Through Entity (PTE) Tax
- Modifies the PTE tax regime by creating an addback for any similar taxes deducted for federal purposes and modifying the Ohio resident credit to include similar PTE taxes paid to other states. This provision is retroactively effective back to January 1, 2023, but also may be applied to tax year 2022 via an amended or original return.
To learn more about these issues and how they could affect your organization or for assistance with these taxes related to a remote workforce, please reach out to a professional at Forvis Mazars.