Key small business provisions in Ohio's newly passed state operating budget

Date: June 30, 2021

The Ohio General Assembly just passed House Bill 110, the state operating budget, which will fund government operations and programs for the next two years.  The new fiscal year starts July 1, 2021, and ends June 30, 2023.  The proposal appropriates over $75 billion.  We applaud Governor Mike DeWine, Senate President Huffman, and Speaker of the House Cupp for continuing to make small businesses a priority.  NFIB was a strong advocate for the following key small business provisions listed below.

First and foremost, NFIB sought a commitment early on in the process from both the administration and legislature that the Business Investor Deduction (BID) would remain in place at its current level, and we were assured that those significant small business tax reforms would continue to be in place.  This important tax policy allows pass-through entities to deduct the first $250,000 of business income from their state tax liability.  The commitment was upheld, and the BID remains intact under House Bill 110. 

House Bill 110 maintains a focus on workforce development.  The TechCred program, which allows employers to seek reimbursement for upskilling their employees with technology-related credentials and certificates, is funded with over $58 million. Additionally, the budget invests $41 million to provide free industry-recognized credential assessments for 70,000 high-school students helping to make them job-ready when they graduate.  Finally, the legislature appropriated $250 million to provide broadband to under and unserved areas.  Broadband is crucial to helping employers and their workers compete in a global marketplace.  Workforce needs continue to be a top concern amongst our members.  These programs will assist in fulfilling this need.

The operating budget also addressed numerous tax issues including several important to small businesses.  First, sales tax on employment services has been eliminated.  Complimenting the workforce shortage, Ohio will no longer add 7.5 percent or more to the cost of utilizing such services. Ohio is one of only a few states that impose sales tax on the contract of staffing provided to meet the temporary workforce needs of businesses, putting our state at a competitive disadvantage. 

Second, the Bureau of Workers’ Compensation dividends will now be exempt from the Commercial Activity Tax (CAT) in perpetuity.  This positive provision extends previous law that exempted these dividends for tax years 2020 and 2021. 

Next, Ohio employers will have certainty on their municipal income tax obligations through the end of the calendar (tax) year 2021.  Employers may continue to withhold employee municipal income taxes to the principal place of work.  This provision also makes clear that the municipal net profit obligation remains sitused at the principal place of work.  This law change ensures employers have adequate time to adjust their systems and adapt to their changing work landscapes. 

Finally, Ohio’s income tax structure has been significantly changed.  Income taxes have been reduced by 3 percent, the top bracket has been eliminated bringing Ohio down to four brackets, and further reduced the highest bracket to bring the top marginal rate to 3.99%, making us more competitive with our bordering states.  Additionally, it increases the income level for the lowest tax bracket to $25,000.  Total tax cuts in House Bill 110 are $1.64 billion, keeping more of Ohioans’ own money in their pockets.

House Bill 110 also made permanent the prohibition on local governments enacting bans or taxes on auxiliary containers like plastic bags.  Small employers have a particularly challenging time navigating a patchwork of local laws.  This positive change ensures the law will be uniform across the state.

Finally, the administration and legislature continued to make available business grants totaling $155 million in FY 2022.  These grants are targeted to bars and restaurants, entertainment venues, lodging establishments, and new businesses (those that started after January 1, 2020).  Click here to apply for current grant programs which opened June 29, 2021.

Unfortunately, much to our disappointment, the extension of qualified immunity from COVID-related lawsuits was not included in the operating budget.  As employers continue to rebound from the pandemic, the last thing they need is the specter of a lawsuit hanging over them.  Qualified immunity expires on September 30, 2021.  We will continue to advocate for the extension of this important protection.

House Bill 110 contains many positive, pro-small business policies.  We appreciate the recognition of the importance of our members to the economic rebound and vibrancy of Ohio.  We look forward to continuing our work with the legislative and executive leaders to build on the many successes of the first six months of the 134th General Assembly.  Please visit our Ohio NFIB Legislative Page to find all the bills on which we offered testimony and issued key votes.  Please contact Ohio Legislative Director Chris Ferruso at [email protected] with any questions.   

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