On February 4, 2013 Ohio Governor John Kasich issued his Executive Budget proposal for fiscal years 2014-2015 to the Ohio General Assembly. Governor Kasich is proposing wide ranging tax reform to shift Ohio from a predominately income tax state to that of a consumption tax based state. The highlights of his budget proposal are as follows:
• Across the board 20% reduction in the personal income tax rates to be phased in over three tax years as follows:
o 2013 – 7.5% reduction to the pre-2013 rates
o 2014 – 15% reduction to the pre-2013 rates
o 2015 – 20% reduction to the pre-2013 rates
• Provide a 50% deduction of up to $750,000 of Pass Thru Entity (PTE) income, meaning the deduction is capped at $375,000.
• Reduce the state sales tax rate from 5.5% to 5%.
• Reduce the local sales tax rates by 11-35% of current rates varying by local jurisdiction.
• Expand the sales tax to all services, with limited exemptions for purchases used for medical care and education.
• Under the proposal, vertical wells will be taxed at a different rate than horizontal wells. (See below.)
• Create a small-volume gas well exemption (gas wells with average daily production of under 10 MCF)
• Funds collected from vertical wells will be used within the Ohio Department of Natural Resources
• Funds collected from horizontal wells will go directly to the General Revenue Fund to help offset income tax cuts
• Gas – Lesser of 1% of value or $0.03 per MCF
• Oil - $0.20 per barrel
• NGL – No separate tax
• Condensate - $0.20 per barrel
• Gas – 1% of value
• Oil – 1.5% of value during 1-year recovery; 4% of value thereafter
• NGL - 1.5% of value during 1-year recovery; 4% of value thereafter
• Condensate - 1.5% of value during 1-year recovery; 4% of value thereafter
Please note that this is only the Governor’s proposed budget for fiscal years 2014-2015, and we do anticipate some changes being made as it makes its way through the House and Senate. Once legislation has been approved, Schneider Downs will keep you updated on the final tax reform as enacted.
If you have questions about how the Governor’s tax reform will affect your business, please contact Mark Rossetti in the SALT group at (614)586-7234.
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This advice is not intended or written to be used for, and it cannot be used for, the purpose of avoiding any federal tax penalties that may be imposed, or for promoting, marketing or recommending to another person, any tax related matter.