Ohio State and Local Tax Updates September 2019

Church’s request for partial tax exemption denied

September 25, 2019

A church used the first floor of a residential building for office space, Bible study and outreach dinners. The second and third floors were the pastor’s residence. An office and a guest prayer room were on the fourth floor. The church sought a partial tax exemption. It argued that the property should be split and the parts viewed as separate entities, because the first and fourth floors were used for charitable purposes. However, the OH Board of Tax Appeals ruled that the church be denied a property tax exemption. It said that it hadn’t established that the property was open to the public, and its main use was merely supportive of public worship. (Dkt. No. 2018-571, 9/10/19)

A filing deadline is fast approaching for some Ohio business taxpayers

September 25, 2019

The OH Department of Taxation announces that businesses with a taxable year starting Aug. 1, who want to file and pay their 2019 municipal net profit tax with the department, have until Oct. 1 to register on the Ohio Business Gateway: http://bit.ly/2msE6dA. Registering and filing taxes on the Gateway is much faster than filing with each municipality in which income was earned. The general rule is that such registration must take place by the first day of the third month after the start of a business’s taxable year.

Ohio taxpayer not allowed maximum small business investor income deduction

September 18, 2019

An Ohio taxpayer isn’t allowed the maximum small business investor income deduction (SBD) on his individual OH returns. After assessment, the tax commissioner ruled that the taxpayer hadn’t included his capital loss carryforward in his SBD calculation. On appeal, the taxpayer argued that capital gains losses from previous years shouldn’t have been deducted from his current-year investor income. The OH Board of Tax Appeals disagreed, noting that capital losses are included in the business income calculation. Thus, it found that the taxpayer’s SBD exceeded the amount of his OH adjusted gross income. And he’d failed to prove that the commissioner had erred. (Dkt. No. 2018-1254, 09/05/2019)

A decision granting a charitable use tax exemption to an Ohio for-profit is reversed

September 18, 2019

The taxpayer had leased property to a nonprofit while developing the parcels into a “residential facility for low-to-moderate-income individuals with no viable home address.” On appeal, the Columbus Board of Education argued that the land hadn’t qualified for exemption because the taxpayer had used the property to lease. The OH Board of Tax Appeals agreed, noting that the OH Supreme Court has held that, “when an owner holds property to rent to others, it generally does not qualify for the exemption even if the lessee uses the property for charitable purposes.” (Dkt. No. 2018-293, 09/05/2019)

Partnerships engaged in federal filing review have options

September 11, 2019

Partnerships engaged in a federal review of their filings can now elect to either 1) report the adjustments at the entity level and pay all taxes due on behalf of their partners or 2) report the adjustments at the entity level, but instead require their investors to file and pay all taxes due. The partnership must issue OH “IT K-1” forms to its investors to report the federal adjustments made at the partnership level. The partnership must provide information on both nonresident and resident investors. This new process is effective for reviews finalized on or after Oct. 1, 2019. The requirements apply to any audited partnership. Contact us for more information.


Ohio PTEs to experience changes involving tax credits

September 11, 2019

Ohio pass-through entities (PTEs) will experience some changes involving tax credits for tax years starting on or after Jan. 1, 2019. The changes will be reported on PTE returns filed in calendar year 2020. The OH campaign contribution credit and the OH financial institutions tax credit are no longer available. This is true even if you’ve already contributed to an eligible campaign or paid OH financial institution taxes in calendar year 2019. The credits will be removed from all future versions of Ohio Schedule E, IT 1041 and IT 4708.


Ohio denies an exemption for public worship

August 28, 2019

The Ohio taxpayer used the first floor of the building as a church and kept the second floor “as an empty space.” The commissioner granted the exemption for the entire first floor and the second-floor furnace room but denied the request for the unused second-floor space. On appeal, the taxpayer argued that the second-floor space should be exempt because it was part of the church’s sanctuary. However, the OH Board of Tax Appeals disagreed, noting that the taxpayer had failed to provide any evidence to support its assertion.

Info about changes to Ohio’s “substantial nexus” law available

August 28, 2019

Information about recent changes to Ohio’s “substantial nexus” law is available on the OH Dept. of Taxation website. There, you can link to information on out-of-state sellers and “marketplace facilitators.” By law, there’s substantial nexus if, in the current or previous calendar year, these parties 1) have gross receipts exceeding $100,000 from sales in OH, or 2) have 200 or more separate sales transactions in OH. Among other requirements, the sellers and facilitators must collect and remit applicable sales tax to the state. The website has information on licensing and registration, collection, filing, and remittance for businesses with substantial nexus.


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