Sept. 21, 2017
This week, the Ohio House Ways and Means Committee held a hearing on House Bill 292
– an OSBA priority bill that would restore much-needed clarity to Ohio tax law. We thought we'd use this opportunity to provide you a quick primer on the proposal.
Fixing the Not-So-Bright-Line Residency Test
The whole purpose of a "bright-line" rule or test is to set a clear standard, leaving little or no room for varying interpretation. Since 1993, Ohio legislators and most attorneys who regularly practice before the Ohio Department of Taxation and the Board of Tax Appeals believed Ohio had one when it came to determining an individual's residence for income tax purposes. However, a 2015 Ohio Supreme Court decision in Cunningham v. Testa
effectively dimmed the bright-line by injecting the common law of domicile into the bright-line residency statute.
Enter the OSBA Taxation Law Committee, which worked with the Ohio Department of Taxation and the Ohio Association of CPAs on a proposal to modify the existing test and restore clarity. Should HB 292 become law, an individual could establish that they are not a resident of Ohio for income tax purposes if they meet the following criteria and file a truthful statement attesting to them:
- They have had fewer than 213 "contact periods" (i.e., overnight stays) in Ohio;
- They have a residence outside of Ohio for the entire taxable year;
- They did not claim a federal depreciation deduction (for property used in business or held for the production of income, i.e., a rental property) for a residence outside the state;
- They did not hold a valid Ohio driver's license or identification card;
- They did not receive the benefit of an Ohio homestead exemption; and
- They did not receive a tuition discount based on residency for attending an Ohio institution of higher education.
House Bill 292 would also extend the deadline for filing the statement from the 15th day of the fourth month following the close of the taxable year to the 15th day of the 10th month following the close of the taxable year. This bill is important for reestablishing the General Assembly's intent to have such a bright-line residency test and would alleviate significant confusion arising from the Supreme Court decision.
The OSBA is pleased to be working with Representative Gary Scherer (R-Circleville) to see this proposal passed into law. You can download Representative Scherer's sponsor testimony from the House Ways and Means Committee website (Sept. 19, 2017 hearing
) and we'll keep you posted on its progress.
Potential New Paulding County Municipal Court
In other business, the Ohio House passed legislation
this week that would allow the part-time Paulding County Court to become the full-time Paulding County Municipal Court. House Bill 215
was introduced by Representative Craig Riedel (R-Defiance) to address increased caseloads in the jurisdiction. Having passed the House, HB 215 will now go to the Senate for further consideration.
Tracking OSBA Legislation
As always, you can track OSBA priority bills via the Legislative
section at www.OhioBar.org
The Ohio Senate has a voting session scheduled for Wednesday, Sept. 27.