Cleveland Law Library Weblog

Time Period for Determining Residency for Ohio Tax Purposes Increased

Some snowbirds and others who stay in Ohio for less than an entire year may no longer be subject to Ohio tax.  Governor Taft signed Sub. HB 73, which allows 182 contact periods before a person is subject to tax, instead of the prior 120 contact periods.  A contact period  means the person stayed overnight, and part of two consecutive days in Ohio.  The act also requires the person claiming nonresidency file a form with the Ohio Deparment of Taxation.  For insights into the purpose of this legislation see Proposed Income Tax Residency Standard Legislation Faces Uncertain Future by Amy Mignogna, Ohio Society of CPAs, 5/30/2006.  Also see “It’s No Longer ‘Out of Sight, Out of Mind’ in Ohio: House Bill 73, A First Step Toward Relaxing Ohio’s Residency Requirements While Strengthening Ohio’s Nonprofits and Bolstering Ohio’s Coffers”  by Pat Saccogna and Bob West, Probate Law Journal of Ohio July/August 2006.

The Act also exempts  military pay and allowances from taxation, if they are received during active duty and not while the military member is stationed in this state.   See Governor's News Release, Jan. 2, 2007

The act is effective for tax years beginning with Jan. 1, 2007.  For a discussion of the current residency rules, see Ohio Dept of Taxation Information Release IT 2007-01.

Historic Preservation Tax Credit Approved

The Ohio General Assembly passed a two year pilot program for historic preservation tax credits.  The bill awaits the governor's signature.  See  HB 149.  Source: Cuyahoga Planning Commission Weblog, Dec. 19, 2006.

Impact of Daimler Chrysler Corp. v. Cuno on Grants and Credits for Machinery

In Information Release CFT 2006-01, the Ohio Department of Taxation addresses the impact of DaimlerChrysler Corp. v. Cuno 547 U.S. ____(2006) and H.B. 66 on Ohio’s tax credit and grant for pre-July 1, 2005 purchases of new manufacturing machinery and equipment for use in Ohio.

Proposed Rules on Ohio CAT Tax Record Retention

To see the Ohio Department of Taxation's proposed rules on records retention for CAT tax, go to: Information Release CAT 2006-09.

Changes to Charitable Tax Deductions

Beside making changes to pension laws, the Pension Protection Act of 2006 also made changes to charitable tax deductions.  People over 70 1/2 can make a direct charitable contribution from their IRA, shielding some of the income tax effects of an IRA distribution.  Stricter rules for noncash charitable donations are imposed, such as requiring the items donated to be in good condition. Appraisals are required for items valued at over $500.  No deduction for cash donations are allowed unless the taxpayer can show a letter from the charity or a bank record.  Previously, records were only required for donations over $250.  New Law Changes Charitable Contributions by Eileen Alt Powell, Findlaw, Sept 20, 2006. 

Source:  For You and Your Clients - "New Law Changes Charitable Contributions", Stark County Law Library Blog, Sept. 26, 2006. 

CAT Tax Qualified Distribution Center Regulation Now Final

The Ohio Department of Taxation regulations concerning CAT tax and qualified distribution centers are now final.  See Information Release CAT 2006-07.

Two New CAT Tax Final Regulations

New OAC 5703-29-15 deliniates when a highway transportation service has a presence in the state, and is thus subject to the CAT tax. See Information Release CAT 2006-05.  New OAC 5703-29-14 clarifies that cash discounts are excluded from gross receipts.  Information Release CAT 2006-04.  For all the latest CAT tax developments, go to CAT and other HB 66 Tax Law Changes at the Ohio Department of Taxation's website. 

New Employer Withholding Tables From Ohio Dept of Taxation

To see the new withholding tables, effective Oct 1, 2006, go to Ohio Department of Taxation Information Release IT2006-03.  According to the release, "The reductions in the rates take into consideration the changes to Ohio individual income tax rates enacted in House Bill 66."

CAT Tax One Year Later

The purpose of the CAT tax, which went into effect on July 1, 2005, was to replace the corporate franchise tax and the tangible personal property tax with one, less burdensome tax.   The elimination of the tangible personal property tax was intended to benefit manufacturers, who no longer have to pay tax on inventory and equipment.  However, the CAT tax has a negative impact on businesses with slim profit margins and high volumes, such as grocery stores.   The CAT tax is based on revenue, not profits.  The Ohio Grocers Association sued, saying the CAT tax violates the Ohio Constitution's prohibition against taxing food that will be consumed off-premises.  See Ohio Gocers Association v. Ohio Tax Commissioner, Franklin County Common Pleas Court Case No. 06 cv 002278 on the Franklin County Docket. The Tax Foundation also feels the CAT tax is unconstitutional because of the way it taxes out of state businesses.   A Year Later, Ohio Commercial Activity Tax Still Debated by Alexander Coolidge, Cincinnati Enquirer, July 6, 2006, reprinted in the Zanesville Times Recorder, July 6, 2006.  Also see: Marketing Tax Nexus? by Chris Atkins, Tax Foundation Blog, Nov. 2, 2005; Companies Tally New Tax's Cost by Roger Metzger, The Plain Dealer, Sept. 25, 2005 via the Greater Cleveland Automobile Dealers Website.

New Statute of Limitations for Collecting Ohio CAT, Corporate and Sales Tax

Governor Taft signed HB 390, which  establishes time limits for assessing certain unpaid state taxes and time limits for judicial proceedings after an assessment.  The act restores a prior time limit for the state to take action on a debt due to it, but the time limit is lengthened to twelve years.  The act also "Provides for relieving "innocent spouses" from joint and several liability for income taxes under a compromise of claim or payment-over-time agreement."  See Final LSC Analysis; Governor Taft News Release, dated June 28, 2006.