On December 7, 2012, the Supreme Court of Ohio decided Beaver Excavating v. Testa in favor of the plaintiff, Beaver Excavating. The case involved whether the Ohio CAT violated Article XII, Section 5a of the Ohio Constitution, which states in relevant part, “No moneys derived from fees, excises, or license taxes relating to registration, operation, or use of vehicles on public highways, or to fuels used for propelling such vehicles, shall be expended for other than costs of administering such laws, statutory refunds and adjustments provided therein, payment of highway obligations, costs for construction, reconstruction, maintenance and repair of public highways and bridges and other statutory highway purposes, expense of state enforcement of traffic laws, and expenditures authorized for hospitalization of indigent persons injured in motor vehicle accidents on the public highways.”
The decision mandates that all CAT monies collected on the sales of motor fuels be earmarked for road construction projects as intended in Article XII, Section 5a. Although the court found in the plaintiff’s favor, it applied its decision prospectively to avoid putting Ohio in detriment for those monies collected in prior periods. Ohio has not yet acted legislatively to address the collection of the CAT monies related to motor fuels, but we do expect them to do so in the very near future. This decision creates an approximate funding shortfall of $140 million in the Ohio general revenue fund. Ohio will most likely have to look for other revenue sources to make up the shortfall, and Schneider Downs will keep you posted of any changes to the tax statute that might occur as a result of this case.
If you have questions about using your CAT exclusion, please contact Mark Rossetti in Schneider Downs’ 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.