Ohio Tax Amnesty Bill For Virus Recovery Clears House Panel

By Paul Williams
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Law360 (May 19, 2020, 7:36 PM EDT) -- An Ohio bill seeking to offer a three-month tax amnesty program for a bevy of taxes as the state economy recovers from the novel coronavirus pandemic won approval Tuesday from a key House tax-writing committee.

The Ohio House Ways and Means Committee advanced a bill that would offer a three-month tax amnesty program for paying multiple taxes. Above is the Ohio Statehouse in Columbus. (Getty Images)

The House Ways and Means Committee advanced H.B. 609, teeing the measure up for a vote before the full chamber Wednesday. The bill would run an amnesty program from Jan. 1 to March 31, 2021, during which businesses and individuals could pay any unreported or underreported taxes without incurring penalties or interest, as long as those taxes aren't under audit or have been issued a notice of assessment. No committee member objected to the bill.

After the committee's vote, the bill's primary sponsor, Rep. Thomas West, D-Canton, told Law360 that he offered the legislation to boost the state's tax collections, which have taken an estimated hit of nearly $1 billion during the pandemic, while providing tax relief for businesses and residents amid the economic downturn.

"The state needs money right now, and individuals are struggling," West said. "I think it's a win-win."

Like many states, Ohio is facing a difficult economic landscape as businesses have been closed to curb the spread of COVID-19, the respiratory illness caused by the virus. West said the amnesty program would entice taxpayers to come forward and pay delinquent taxes that they might not otherwise report out of fear of being hit with penalties and interest while the economy is in a downslide.

The amnesty program would be offered for the state's corporate activity tax, sales and use taxes, financial institutions tax, personal income tax, insurance premium tax and a host of other taxes and fees on the telecommunications, gambling, tobacco and gas industries, among others. Local taxes, including school district income taxes and county and transit authority sales and use taxes, would not be included in the program.

Ohio last ran a tax amnesty program for about a month and half in 2018, generating $14.3 million in tax collections, according to a fiscal note on the bill. The state collected $7.2 million in sales and use taxes from the program and $3.3 million in corporate activity taxes, which accounted for more than 75% of the program's collections, according to figures the state Department of Taxation provided to Law360 on Tuesday.

The bill's fiscal note projected that Ohio is likely to see an increase in tax collections from the amnesty program, although it cautioned that "there might be a potential for diminishing returns" in running two amnesty programs just three years apart.

Before the committee approved the legislation, Rep. Gary Scherer, R-Circleville, told the panel that the bill's timing gave him some pause because the last amnesty program wrapped up only a few years ago.

"If we do these too often, then we kind of have a reverse motivation on the part of taxpayers … they'll just wait around for the next tax amnesty program," said Scherer, who is also a tax practitioner. However, he acknowledged that Ohio is facing a difficult economic landscape and voted to pass the bill.

West told Law360 that he agreed with Scherer's statement but said he believes it's important to offer the program during the pandemic.

"If there was ever a time we need an amnesty program, it's now," he said. "This is not a time to be assessing fees on people."

The bill originally would have run the amnesty program this year from Aug. 1 to Dec. 31, but the committee pushed its start date back at the department's request, West said. The tax agency wanted more time to market the program and to prepare to administer it, he said.

The amended bill also earmarks most of the tax collections for the state's budget stabilization fund, or rainy day fund, whereas the original bill would have distributed the taxes among state and local funds under the Ohio's normal tax allocation formula.

Ohio's rainy day fund currently consists of nearly $2.7 billion. Republican Gov. Mike DeWine announced May 5 that he wouldn't tap the fund to balance the current fiscal year 2020 budget, which went from a projected $200 million surplus to a $777 million shortfall from the pandemic.

Instead, DeWine made about $775 million in cuts to the spending plan, mostly to Medicaid and education funding. However, he has said Ohio will likely use the rainy day fund to help balance the budget for future fiscal years. Ohio enacted a biennial budget for fiscal years 2020 and 2021 last year.

Several business organizations in the state support the legislation. In written testimony, the Ohio Council of Retail Merchants, which represents more than 7,000 companies, said the amnesty program would offer relief from business taxes that weren't included in the income tax deadline extensions that were enacted in March.

The National Federation of Independent Business added in written testimony that the program would help small businesses avoid hefty penalties while they are experiencing financial difficulties during the pandemic. The federation represents about 21,000 companies in the state.

However, the Ohio Chamber of Commerce, which represents more than 8,000 businesses in the state, is currently neutral on the legislation and is observing its progress, Tony Long, the organization's director of tax and economic policy, told Law360.

--Editing by Tim Ruel.

For a reprint of this article, please contact reprints@law360.com.

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