2016 OSCPA Tax Reform Task Force report remains invaluable

2016 OSCPA Tax Reform Task Force report remains invaluable

By Gary Hunt, OSCPA director of content strategy & media

In January, OSCPA Tax Policy Director Greg Saul, Esq., CAE, testified before state lawmakers. As he often has over the past six years, he came prepared with a document that has served as both a visual reminder and an educational tool about the influence of CPAs.

Lawmakers were discussing House Bill 234, which would repeal the state’s commercial activity tax. Saul told them that CPAs have studied the issue closely and determined that eliminating the tax without a replacement could lead to unintended consequences for Ohio’s business environment.

“OSCPA has a longstanding position that the CAT is effective if the following criteria remain intact: the rate is low, the base is broad, the exemptions are few, and compliance is simple,” he said, holding up a copy of the Society’s 2016 Ohio Tax Reform Task Force report.

Six years after its publication, the report remains an influential guiding force, both for legislators and for the direction of accounting profession advocacy in Ohio.

“As I held it up, I told them, ‘I know many of you have seen our report over the years and it's been a guidebook,’” Saul said later. “Some of the legislators were looking at it as I testified.”

OSCPA in 2015 formed the Ohio Tax Reform Task Force, a group of seasoned CPA tax professionals who advised or worked for businesses across every sector in the state. The group spent a year studying Ohio’s tax policies before bringing their collective knowledge together into key recommendations.

As OSCPA President & CEO Scott Wiley, CAE, wrote at the time, the initial goal of the resulting report was to inform the state government’s 2020 Tax Policy Study Commission via OSCPA’s “recommended approach of moving toward a simpler, more competitive tax structure while minimizing the effects or pain on any particular segment.

“We are pleased to present these recommendations to the Ohio 2020 Tax Policy Study Commission and stand ready to assist Ohio in making our state a model for excellent tax policy,” Wiley wrote in the introduction.

Lawmakers have adopted – in part or in full – several of the recommendations in the report:

Reduce the income tax brackets from nine to preferably three, but no more than five. Such a move, the task force wrote, would bring greater simplicity to the personal income tax structure and make Ohio more competitive with surrounding states. The state’s 2021 budget bill continued a reduction trend begun in 2017 when Ohio had nine brackets by consolidating further from five to four, bringing Ohio’s top rate down to 3.99% on 2021 income greater than $110,650; and increasing the income level at which the first tax bracket begins, from $22,150 to $25,000. These steps have saved Ohio taxpayers an estimated $2.7 billion, Saul said.

Streamline sales and use tax on employment services. Ohio’s biennial budget bill passed last year exempted employment and employment placement services from Ohio tax beginning Oct. 1. Employers’ projected savings are $300 million through June 30, 2023.

Collecting tax from remote sellers. The U.S. Supreme Court agreed with this rationale with its 2018 decision in South Dakota v. Wayfair, which found that states can generally require an outof-state seller to collect and remit sales/ use tax on sales to in-state consumers even if the seller has no physical presence in the consumer’s state. Ohio lawmakers in 2019 updated state law to be consistent with that decision.

Municipal income tax reforms. The 2017 budget bill enacted, effective as of Jan. 1, 2018, both the option for business filers to have their net profits tax administered by the Ohio Department of Taxation, and the elimination of the throwback rule for the sales apportionment factor.

Of course, some battles are never truly over. Another idea that surfaces periodically at the Statehouse is expanding the sales tax base to additional professional services. On that issue the report is clear: such a move will drive away business.

“That's something that we continue to defend against,” Saul said, “and in fact other states are considering it, including our neighbors Kentucky and Indiana. You can chalk it up as a victory for us for now, but it’s always a potential threat.”

The full impact of the Ohio Tax Reform Task Force report is hard to measure, because many of its recommendations are healthy accounting practices that lawmakers should do in perpetuity.

“Some are not accomplishments so much as they are habits,” Saul said.

However, for that reason – plus the continuing turnover in the legislature – the report continues to be a valuable and effective tool for encouraging good financial practices in state government, and for educating new legislators about the history and impact of Ohio’s major taxes.

“It was a huge undertaking, and many of the remaining recommendations we are still pursuing to get enacted,” Saul said. “I think there's an appetite to still do some of these things.

“With term limits, it’s challenging because there are several new legislators every year that we need to get familiar with it. But it’s helpful to get it in front of them and get them to focus on some of these issues.”