Tracked House Bills – December 2017
Bricker & Eckler LLP
Federal Tax Cuts and Jobs Act (HR 1): While efforts to cut taxes and encourage job growth are generally applauded, the Tax Cuts and Jobs Act caused great concern for economic development professionals due to proposed negative treatment of Private Activity Bonds, Advance Refunding Bonds, Historic Preservation Tax Credits (HPTC) and New Markets Tax Credits. The bill was finalized December 20 and sent to President Trump for signature. Luckily, the main provisions of these programs were preserved but slight revisions were made that will be further studied. For example, a tweak to HPTC in the final bill repeals the 10% non-historic rehabilitation tax credit for non-residential pre-1936 properties, subject to transition rules. Credits from the HPTC program also apparently will now have to be used over 5 years. The centerpiece of the tax bill is a permanent 40% tax cut for corporations. Small businesses will also see their taxes shrink. The bill also lowers tax rates for individuals temporarily, while increasing the standard deduction and the child tax credit. However, because the bill also limits key tax deductions (example: reduction in deductions for state and local taxes), the impact on individuals will vary.
State Legislative Activity:
Oh Christmas Tree, Oh Christmas Tree: The final day of legislative session in Ohio was Wednesday, December 13, and true to form, the legislature chose several bills to serve as year-end “Christmas Tree” bills, so-called due to their being loaded with amendments (versus ornaments). HB 69, which mainly deals with amendments to Ohio’s TIF program (see below) was heavily loaded and passed through the full Senate early Wednesday. Later in the day, the House concurred in the amendments and approved the bill, and has been sent to Governor Kasich for signature. Major amendments added to HB 69 included the following:
- Funding for counties and local transit authorities of up to $80 million to make up for some of the funding lost due to the elimination of the Medicaid managed care organization (MCO) sales tax. Funding of $50 million will be disbursed in FY18, and up to $30 million in FY19;
- A change that clarifies biennial budget language on local sales tax levies by allowing for increments of 0.1 mills as well as 0.25 mills;
- A provision adding townships to the list of approved entities (counties and municipalities) which can enter into enterprise zone agreements with retail enterprises if a waiver from the applicable local school board is obtained, and
- The removal of a requirement that local governments seeking additional property tax revenue certify a resolution pertaining to the levy to their County Auditor. Certification will only be needed to the County Board of Elections.
Right-to-Work Constitutional Amendments: Rep. John Becker (R-Cincinnati) announced on December 18 that he was introducing six separate constitutional amendments that address right-to-work. More information will be provided once available.
Bills Being Tracked: Changes from last month are noted below in bold
HB 10 CROWDFUNDING (Arndt, S.) This bill was introduced in the House February 1 and would permit intrastate equity crowdfunding under certain circumstances. The bill would provide an exemption from registration under the Ohio Securities Law for certain crowdfunding initiatives. The bill passed in the House on June 21 and was referred in Senate (6/28/2017) to the Transportation, Commerce & Workforce Committee. The Committee held its first hearing with sponsor testimony September 6. A second hearing with proponent testimony occurred October 11. A third hearing occurred December 13.
HB 53 UNION DUES/RIGHT TO WORK (Becker, J.) This bill was introduced in mid-February by Representative Pete Becker from Clermont County. Co-sponsors include Representatives Hood, Brinkman, Dean, Thompson, Vitale, Goodman, Riedel, Roegner, Merrin, Antani, Zeltwanger and Keller. It would remove any requirement under the Public Employees Collective Bargaining Law that public employees join or pay dues to any employee organization, prohibit public employers from requiring public employees to join or pay dues to any employee organization and prohibit an employee organization from being required to represent public employees who are not members of the employee organization. The bill was referred Feb. 14 to the House Finance Committee. No hearings have yet occurred.
HB 69 TIF DISTRICTS (Cupp, R.) This bill would require reimbursement of certain township fire and emergency medical service levy revenue forgone because of the creation of a municipal incentive district tax increment financing district. The board of township trustees may, by resolution, waive the application of the reimbursement or negotiate with the municipal corporation that created the district for a lesser amount of payments in lieu of taxes. The reimbursement requirement only applies if:
- An incentive district TIF is being created;
- The affected township provides fire and emergency medical services to the territory of the TIF;
- The TIF is being created by a municipality by legislation adopted after the effective date of H.B. 69, and
- The levy in question was approved by voters on or after January 1, 2006.
Under the bill, the board of township trustees may, by resolution, waive the reimbursement or negotiate with the municipality that created the district for a lesser amount of payments in lieu of taxes.
A “TIF” refers to Tax Increment Financing, a mechanism that exempts some portion of increases in property value from property taxation. Instead, property owners make service payments in place of taxation that are directed to pay public infrastructure costs.
Incentive district TIFs (the kind affected by this bill) are generally used for projects that involve single-family residential development, including condos. Commercial TIFs, on the other hand, are usually formed as what is known as a Parcel TIF, in which the territory includes specified, defined parcels. Most future commercial TIFs are therefore unlikely to be affected by HB 69.
The bill passed in the House June 21, passed in the Senate Ways and Means Committee December 13, and the House concurred in the Senate’s amendments also on December 13. The bill now will head to the Governor’s office for signature.
HB 102 SCHOOL FUNDING (Brenner, A.) This bill, introduced March 1 and referred to the House Finance Committee, would replace locally levied school district property taxes with a statewide property tax and require recipients of certain tax exemptions to reimburse the state for such levy revenue lost due to those exemptions. It would also increase the state sales and use tax rates and allocate additional revenue to state education purposes; to repeal school district income taxes; require the Treasurer of State to issue general obligation bonds to refund certain school district debt obligations; create a new system of funding schools where the state pays a specified amount per student that each student may use to attend the public or chartered nonpublic school of the student’s choice, without the requirement of a local contribution; eliminate the School Facilities Commission; eliminate the Educational Choice Scholarship Pilot Program, Pilot Project Scholarship Program, Autism Scholarship Program, and Jon Peterson Special Needs Scholarship Program; eliminate interdistrict open enrollment; require educational service centers to transport students on a countywide basis, and permit school districts to enter into a memoranda of understanding for one district to manage another. It was referred to the House Finance Committee, and a June 20 hearing was continued. A second hearing occurred December 12.
HB 114 RENEWABLE ENERGY (Blessing, L.) This bill, introduced March 8, is very similar to last year’s HB 554 except it would: convert the renewable energy standards to goals indefinitely, rather than for a two year period; permit residential customers of a distribution utility or electric services company to opt out of any rider, charge or other recovery mechanism designed to recoup the cost of renewable energy; clarify that renewables are bypassable charges, rather than nonbypassable charges, and specify that the 12.5% renewable energy goal to be attained by 2027 will end at that time and not continue indefinitely. The bill passed in the House March 30 and moved to the Senate, where it was referred to the Energy and Natural Resources Committee. A third hearing with opponents’ testimony occurred October 14.
HB 122 ECONOMIC DEVELOPMENT (Hambley, S., Rogers, J.) Introduced March 9, this bill would establish a Regional Economic Development Alliance Study Committee to study the benefits and challenges involved in creating regional economic development alliances. Senate Bill 97 is a companion to this bill and is the more likely bill to be approved by both chambers of the legislature. The bill is relatively simple in that it creates a study committee to look at the pros and cons to establishing regional economic development alliances. The committee is made up of 3 members of the House; 3 members of the Senate; the Governor, or his designee; 2 persons from academia engaged in a relevant field of study (appointed by the co-chairs of the committee); 2 economic development professionals (appointed by co-chairs of the committee); and the chair of the Regional Prosperity Initiative (or their designee) as a nonvoting member. Specifically the committee is charged with studying enhancing collaboration for successful regional economic development; shared services; and also the mobilization of resources among alliance members. The committee is directed to consult with county commissioners, township trustees, city councils and mayors, members of statewide and regional organizations that represent political subdivision, and members of chambers of commerce. The bill was reported out of House Committee May 10 and passed in the House September 13. It was referred to the Senate Government Oversight & Reform Committee on September 27, 2017, and a first hearing occurred December 12, 2017.
HB 155 COMMERCIAL VEHICLE TRAINING (Sprague, R., Howse, S.) This bill was introduced March 23 and would authorize a nonrefundable tax credit to be taken against either personal income tax or commercial activity tax liability for expenses incurred by an employer to train a commercial vehicle operator. Under the proposed program, employers would submit to the Director of the Development Services Agency, by December 1, eligible training expenses expected to be incurred during the next calendar year. The ODSA Director would then certify up to $50,000 per employer of such expenses as being eligible for tax credits. After incurring eligible training expenses, employers could then apply to ODSA for tax credits in amounts equal to one-half of the incurred eligible expenses. On May 1, it was referred to the House Ways & Means Committee, where a hearing with sponsor’s testimony occurred May 16.
HB 166 WORKFORCE DEVELOPMENT (Reineke, B., Cupp, R.) This bill would revise the laws governing the state’s workforce development system, programs that may be offered by primary and secondary schools, certificates of qualification for employment, and the Opportunities for Ohioans with Disabilities Agency, and to designate the first week of May as In-Demand Jobs Week. The next hearing, still to be scheduled, may be the 6th Hearing-All testimony- with a possible vote.
HB 173 TAX CREDITS (LaTourette, S., Patton, T.) This bill was introduced April 5 and would provide that compensation paid to certain home-based employees may be counted for purposes of an employer qualifying for and complying with the terms of a Job Creation Tax Credit. It was referred on May 1 to the House Ways & Means Committee, and a first hearing with Sponsor’s testimony occurred May 9.
HB 178 NUCLEAR ENERGY (Devitis, T.) This is a companion bill to SB 128 (see explanation there) and was introduced April 10. It was referred to the House Public Utilities Committee, where several hearings have occurred. Sponsors in both chambers are continuing conversations with interested parties in order to earn support for these bills. Representative Robert Cupp recently assumed the role as Chair of the House Public Utilities Committee and confirmed that talks are still ongoing. Additionally, House Speaker Rosenberg recently appointed members to an ad hoc House task force charged with studying this bill and other energy issues in the coming months (Speaker’s Task Force on Energy Policy).
HB 203 SUMMER JOBS (Barnes, J.) This bill was introduced May 9 and would require the Director of Development Services to establish a youth summer jobs pledging initiative to increase access to summer employment opportunities for high school and college youth. It was referred to the Higher Education and Workforce Development Committee, where the second hearing with proponents’ testimony occurred September 20.
HB 281 BROADBAND EXPANSION (Carfagna, R.) This bill, introduced June 20, would establish the residential broadband expansion program within the Development Services Agency to award matching grants for last mile broadband expansion in municipal corporations and townships and to make an appropriation. It was referred to the House Finance Committee, where the first hearing with sponsor’s testimony occurred September 20, 2017. Committee hearings also occurred November 28 and December 12, with a comprehensive substitute bill accepted December 12 that would offer more ways to fund the projects and remove funding ratio requirements. It also would reduce the speed of internet that must be available for an area to be considered “underserved” from 25 MBbs upload speed to 10 MBbs.
HB 292 OHIO RESIDENCY (Scherer, G.) Introduced June 27, this bill would modify the test for determining an individual’s state of residence for income tax purposes. The bill would add to the requirements to prove out-of-state residency by requiring a showing that the applicant did not: 1) claim a federal depreciation deduction (which is available only for property used in business or held for the production of income — e.g., as rental property) for an abode located outside the state, which the person was required to have for the entire taxable year under current law; 2) hold a valid Ohio driver’s license or identification card; 3) receive the benefit of an Ohio homestead exemption or 4. receive a tuition discount based on residency for attending an Ohio institution of higher education. The bill passed in the House November 1 and now moves to the Senate, where it was referred to the Ways and Means Committee.
HB 371 PROPERTY TAX (Merrin, D.) This bill, introduced October 4 would exempt from property taxation the increased value of land subdivided for residential development until construction commences or the land is sold. The bill would benchmark an “ascribed taxable value” of the newly subdivided parcel, and any increase in taxable value would be exempt from taxation until either (1) Construction of a residential building on that property commences, or (2) Title to the property is transferred for consideration by a qualifying owner to another person. The construction of streets, sidewalks, curbs, or driveways or the installation of water, sewer, or other utility lines on a subdivided parcel would not cause construction of a residential building to commence for purposes of the bill. A fifth hearing in the Ways and Means Committee occurred December 12, and amendments were offered that would place a 10-year cap on the exemptions; clarify that the frozen property value is based on “fair market value” as determined by county auditors and not current agricultural use value; replace wording to describe unexempted value versus ascribed value and state that nothing in the bill should be construed to run counter to normal appraisal principles.
HB 381 ZERO EMISSIONS (DeVitis, A.). This is a third bill to propose the creation of a zero-emission nuclear credit program to benefit Ohio’s nuclear plants and is very similar to HB 178. However, one of the major differences is new language capping a residential customer’s monthly nonbypassable charge at $2.50 and capping a nonresidential customer’s monthly charge to be the lesser of $3,500 or 5% of the total bill. It also downsizes the lifespan of the ZEN program – terminating the credits after 12 years on Dec. 31, 2030, unless extended by the General Assembly. HB178 would terminate the program after 16 years. Other changes include requiring the Public Utilities Commission to conduct an inquiry in 2029 to determine if continuing the program is in the public interest, and removing language from HB178 requiring a PUCO evaluation during years six and 11 of the program. It has been referred to the House Public Utilities Committee, where a first hearing occurred December 12.
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