06/29/2022

Ohio Bill May Provide Tax Relief to Small Business Owners

The new legislation will let Ohio reestablish state and local tax parity

On June 14, 2022, Governor Mike DeWine signed into law legislation that will give tax relief to small business owners that are structured as pass-through entities (PTEs), such as S corporations, partnerships and limited liability companies (LLCs). Ohio Senate Bill 246 creates a new R.C. Sec. 5747.38 election for business owners to pay income tax by opting to directly impose an Ohio state income tax on the pass-through entity (PTET) in lieu of paying Ohio state income tax at the individual level. The legislation is effective for PTEs with tax years beginning on or after Jan. 1, 2022.

This new option would allow owners of a PTE to claim a refundable credit on their individual income tax returns, ensuring they are not double taxed at the state level, thereby reducing their total federal income tax liability. The tax rate for 2022 for the Ohio PTET is 5 percent and for 2023 forward, the tax rate will match the individual business income tax rate (currently 3 percent). Further, the Ohio PTET allows business owners to retain the benefits of the business income deduction (BID). The election may be made annually and is irrevocable for the year once it is made.

The new legislation will let Ohio reestablish state and local tax parity so small and mid-size businesses can remain competitive in relation to other businesses throughout the country.

Please select this link to read the complete blog post from OSAP Strategic Partner Clark Schaefer Hackett (CSH).