This week, the Ohio General Assembly passed Senate Bill 18, which conforms Ohio law with certain federal tax provisions under the CARES Act, the Consolidated Appropriations Act of 2020 and the American Rescue Plan Act of 2021. Under this bill, which Governor Dewine is expected to sign shortly, there are a number of changes to Ohio tax law to conform with recent federal tax legislation.
Under Ohio tax law, taxpayers determine their Ohio taxable income by first determining their federal adjusted gross income (FAGI). However, only certain parts of the Internal Revenue Code are incorporated into Ohio tax law. Therefore, Senate Bill 18 allows recent federal tax law changes to be incorporated into Ohio tax law. If this did not occur, the taxpayer would be required to adjust their FAGI in order to calculate their Ohio taxable income.
Here are some highlights of major tax revisions impacting Ohio taxpayers.
Ohio Tax Law Changes
Paycheck Protection Program
Under the Consolidated Appropriations Act, Congress excluded from gross income any indebtedness forgiveness received by way of the Paycheck Protection Program (PPP). In addition, the provisions allowed a taxpayer to take an ordinary and necessary business deduction for expenses that were paid with PPP funds, even if the PPP loan was forgiven.
Under Senate Bill 18, Ohio now conforms with the federal treatment of the PPP expenses. In addition, under Senate Bill 18, the forgiveness of PPP is not included into taxable gross receipts for purposes of the Commercial Activity Tax.
Bureau of Workers’ Compensation Dividends
Last year, the Bureau of Workers’ Compensation distributed more than $5 billion of dividends to employers to help stem losses from the pandemic. Earlier this year, BWC started sending tax statements using Form 1099-G, Certain Government Payments, to employers that received a dividend.
Under Ohio tax law, these dividend payments are considered to be taxable gross receipts for purposes of Commercial Activity Tax. However, under Senate Bill 18, BWC dividend payments for 2020 and 2021 are exempt from inclusion in taxable gross receipts for purposes of Commercial Activity Tax.
Exclusion From Income for Certain Grants to Businesses and Individuals
Generally, grants are includible in income, for federal tax purposes, unless an exception applies. Under limited circumstances, a business can qualify for exclusion under the qualified disaster relief exception. However, under the American Rescue Plan Act, grants from the Restaurant Revitalization Fund and EIDL advances are expressly excluded from inclusion in gross income.
Under the recent tax law changes, Ohio now conforms with this classification.
Tax Filing Deadline
On March 17, 2021, the US Department of Treasury announced that it was postponing the tax filing deadline from April 15, 2021, to May 17, 2021. On March 24, 2021, the Ohio Tax Commissioner announced, through the authority previously granted under section 28 of Am. Sub. H.B. 197, passed last year by the General Assembly, that he was postponing the Ohio tax filing deadline to May 17, 2021, to align the tax filing deadline with the federal tax deadline.
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