Late Monday night the Ohio General Assembly finalized the state’s next two-year operating budget (House Bill 110). In total, the measure appropriates just under $74.1 billion over Fiscal Years 2022 and 2023 from the General Revenue Fund and $161.9 billion across all funds. The budget contains some major policy changes, including a significant overhaul of the state’s school funding system, a massive personal income tax cut of more than $1.6 billion (3% cut across the board) and money dedicated to expand broadband access and remediate brownfields.
While there are not any insurance-specific issues in the state budget, other issues that have an impact on the industry were included.
Language Included to Delay All Parties from Gaining Access to Telephone Numbers on Accident Reports
Since the last state budget, there has been a great deal of confusion and interference as to which parties may be provided telephone numbers of those involved in a motor vehicle accident. Originally, phone numbers were readily available from accident reports. The last state budget passed in 2019 made telephone numbers unavailable to all parties. Language was then added late last year (in 2020) to a bill to allow insurers and insurance agents access to telephone numbers of the parties involved with a motor vehicle accident. The Senate has once again changed access requirements through language included in the state budget. Under this language, all parties—including plaintiff’s lawyers and chiropractors, in addition to insurers and insurance agents—will be required to wait 30 days to gain access to the telephone numbers. This change will take effect in the fall. OIA will notify members of the exact effective date of this change as soon as it is available.
Municipal Income Tax Changes Could Impact Remote or Hybrid Workers
The state budget includes changes to municipal tax collection. These changes were necessary to address employer withholding changes made in response to the pandemic in 2020. Employers can continue withholding municipal income taxes (but are not required to) based on where the employer is located through the end of 2021, but beginning in 2022 the normal 20-day withholding rule will apply at the location where the employee is working.
Specifically, the temporary rule that treated those working from a location other than their regular place of employment during the pandemic as working in the office for municipal income tax purposes will sunset at the end of 2021. Note that this temporary rule applies only to an employer’s tax withholding obligations and net profit calculation, and not to an employee’s actual tax liability.
The budget language also requires municipalities to approve employees’ requests for a refund of taxes withheld under the rule on and after Jan. 1, 2021. Bottomline: Commuters who paid municipal income taxes to cities where their offices were located during the pandemic can seek refunds for the time they worked from home in 2021. Furthermore, employer withholding changes can be made as well.
Issues That Failed to Be Included in the Budget
Business Income Deduction
In the last state budget there was a push to make changes to the Business Income Deduction (BID) that allows pass-through entities to deduct up to $250,000 of their business income from Ohio income tax liability and to also eliminate the three percent tax on all business income above $250,000. This change would have resulted in a significant tax increase for many OIA members.
In an effort to educate lawmakers, OIA, along with several other business groups, committed financial resources to commission Ernst & Young to do a complete analysis of the BID and to also offer a quantitative assessment of how it helps businesses and the benefits generated from having it in place. This report/study results were sent to all legislators earlier this spring right when budget deliberations started. Fortunately, an attack on the BID failed to surface in this year’s state budget. In fact, the state budget includes language to remove the requirement that took effect in tax year 2020 requiring taxpayers claiming the BID to indicate on their annual return (Ohio Schedule IT BUS) the North American Industry Classification System (NAICS) code of each business or professional activity from which that income is derived.
Coronavirus Immunity Extension for Businesses
Unfortunately, the business community has been unsuccessful so far in extending the time during which businesses are provided qualified immunity from liability related to COVID-19 exposure. We will continue to push for an extension, as the current liability protection expires on Sept. 30, 2020.
Partisan Labels for Judicial Candidates
Prior to its final adoption, the Senate added language to the budget to allow judicial candidates for the Ohio Supreme Court and the 12 courts of appeals to add a partisan label on the general election ballot. Under current Ohio law, judicial candidates run in partisan primaries but are listed on the general election ballot without partisan designation. The language in the budget would have require those nominated in a partisan primary to continue that partisan designation on the general election ballot. Trial court judges in the courts of common pleas, municipal courts, and county courts would still be unable to add a partisan designation on the general election ballot. While this language was ultimately stripped from the budget before it was passed by the entire Ohio General Assembly, another bill (Senate Bill 80) was passed to make these changes and is headed to Gov. DeWine for his approval. Notably, the state budget does earmark $150,000 in each fiscal year from GRF appropriation to be used to promote information about candidates running for Chief Justice, Justice of the Ohio Supreme Court, or judge of a court of appeals who were nominated at a primary election to appear on the ballot at the general election with a political party designation. The funding is prohibited to be used for the endorsement or promotion of any candidate.
Questions? Contact Carolyn Mangas at firstname.lastname@example.org.