Tracked Senate Bills – January 2017
Bricker & Eckler LLP
Federal Tax Cuts and Jobs Act: On December 22, 2017, H.R. 1, the “Tax Cuts and Jobs Act”, was signed into law. During consideration by the House and Senate, the bill caused great concern for economic development professionals due to proposed negative treatment of Private Activity Bonds (PABs), Advance Refunding Bonds (ARBs), Historic Preservation Tax Credits (HPTC) and New Markets Tax Credits. Luckily, in the final law, the main provisions of PABs and the HPTC program 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.
Unfortunately, as to ARBs, the Act repealed tax-exemption for advance refunding bonds issued after December 31, 2017. Refunding bonds are obligations issued to pay debt service on, and typically to retire, outstanding bonds; under federal tax law, a transaction is characterized as an advance refunding if the refunded bonds remain outstanding for more than ninety days after the date on which the refunding bonds are issued. Before passage of the Act, state and local governmental issuers and 501(c)(3) borrowers have been eligible to use tax-exempt advance refunding bonds as a debt management tool, most often to capture interest rate savings. This tool will no longer be available under the new law.
The Act also repealed qualified tax credit and direct-pay subsidy bonds such as new clean renewable energy bonds, qualified energy conservation bonds, qualified zone academy bonds and qualified school construction bonds. This provision of the Act also is effective for bonds issued after December 31, 2017.
Finally, the Act preserved the low-income housing tax credit (LIHTC) as well as the 2018 and 2019 new markets tax credit (NMTC) allocation application rounds.
State Legislative Activity:
Right-to-Work Constitutional Amendments: Rep. John Becker (R-Cincinnati) and Rep. Craig Riedel (R-Defiance) announced on December 18 that they were introducing six separate constitutional amendments that address right-to-work issues. The proposals could each appear on the November 3, 2020 ballot, but a long process has to occur first. House leadership would first have to move them out of committee for a floor vote, where a supermajority passage of three-fifths is required. The process would then repeat for the Senate. Then, Gov. John Kasich would have to sign the resolutions. While the chances of that process being accomplished are slim, interesting dialogue should occur along the way.
State legislative activity resumed January 9.
On January 10, House Republican screening panels selected a former member and a former member’s son to fill two vacant seats. Jim Hoops, who served in the House from 1999-2006, was chosen to represent the 81st District, which was left open when Sen. Rob McColley (R-Napoleon) was appointed to the Senate. Riordan McClain, son of former Rep. Jeff McClain, was chosen to replace Wes Goodman in the 87th District in the seat previously held by his father. Mr. Hoops, of Napoleon, is currently associate vice president for Strategic Initiatives at Northwest State Community College. He also previously served as Henry County auditor. Mr. McClain, of Upper Sandusky, is director of Finance and Customer Service at Doc Investments LLC. He holds degrees from Bluffton University and the University of Findlay. The two new lawmakers are expected to be sworn in on Wednesday, January 17.
Bills Being Tracked: Changes from last month are noted below in bold
SB 8 BUDGET UPDATE (Gardner, R., Terhar, L.) This bill, another so-called “Christmas Tree” bill was signed by the Governor December 22 and becomes effective in 90 days. It would accomplish a number of initiatives, including: establish the 1:1 School Facilities Option Program, revise the law regarding applied bachelor’s degree programs offered at two-year state institutions of higher education, modify the schedule for phasing down tangible personal property tax reimbursement payments to school districts, to modify the payment cap in the school funding formula, modify the law governing the establishment and operation of transportation financing districts, modify county funding sources for a tourism development district, modify the veterans organizations grant program, allow county sheriffs to contract with municipal courts and county courts for the transportation of persons between the county jail and a county court or municipal court, make deputy sheriffs ex officio bailiffs of county courts and municipal courts, revise eligibility for School Employees Retirement System pension and benefit recipients’ annual cost-of-living adjustments, repeal a provision regarding acceptance of prior college courses by state institutions of higher education, authorize a tax credit for insurance companies that provide capital to investment funds investing in businesses in rural areas, exempt corrective eyeglasses and contact lenses from sales and use tax beginning July 1, 2019, provide that wages and guaranteed payments paid by a professional employer organization to the owner of a pass-through entity that has contracted with the organization may be considered business income, make appropriations, to modify earmarks, and make changes to reappropriations for grants related to the Lakes in Economic Distress Revolving Loan Program.
SB 43 BUILDING CODES (Bacon, K.) This bill was introduced February 9 and would enable limited home rule townships to adopt building codes regardless of any similar codes adopted by the county in which the township resides. In introducing the bill, sponsor Representative Bacon said his proposal would let residents and businesses in certain limited home rule townships obtain building permits at the township level, which would be more convenient than seeking permits from county departments. The bill was referred to the Local Government, Public Safety & Veterans Affairs Committee, where several hearings have occurred.
SB 51 LAKE ERIE (Skindell, M., Eklund, J.) This bill, introduced February 14, would authorize the creation of a special improvement district to facilitate Lake Erie shoreline improvement. The definition of “public improvement” would be expanded to include shoreline improvement projects, and funds from special assessments on property within the district could be used to pay for such improvement projects. It has been referred to the Senate Energy and Natural Resources Committee where several hearings have occurred. A third hearing occurred September 20, where two amendments were offered. The first, from ODNR was intended to ensure any property held in trust by the state is not taxed due to the creation of the district, and the second was to ensure that property owners impacted by the district are 100% on board with forming the district. It also modifies the bill to address instances when dealing with parcels controlled by homeowner or condominium associations.
SB 97 ECONOMIC DEVELOPMENT (LaRose, F., Yuko, K.) This is a companion bill to HB 122 and would establish a Regional Economic Development Alliance Study Committee to study the benefits and challenges involved in creating regional economic development alliances. It has been referred to the Senate Government Oversight & Reform Committee. A first hearing with sponsor’s testimony occurred June 21. Senator Frank LaRose (R-Hudson) said the idea behind the bill is that “our economic futures are tied together.” Collaborative regional economic development has been shown to benefit all participating entities.” The bill was referred to the Senate Government Oversight & Reform Committee on September 27, 2017. It has not yet had a hearing in this committee.
SB 113 FUEL TAX (Coley, W) Introduced in March and referred to the Senate Ways and Means Committee, this bill would levy an additional registration tax on passenger cars, noncommercial motor vehicles, and commercial cars and trucks beginning on January 1, 2020; authorize a per-gallon motor fuel retail price reduction for consumers that is equal to the state per-gallon motor fuel tax of $.28; and exempt each gallon of motor fuel that is sold at the reduced retail price from the state motor fuel tax. Sponsor’s testimony occurred on June 7, at which Senator Coley stated said his bill would “alter transportation infrastructure funding at the state level” by increasing registration costs and concurrently reducing the gas tax for consumers who pay those fees. A second hearing occurred September 20 with no testimony.
SB 114 COMMERCIAL VEHICLE TAX CREDIT (Hite, C.) Introduced in March, this bill was referred to the Ways and Means Committee where a first hearing occurred May 3. Bill sponsor Senator Hite said the state has between 7,000-8,000 transportation jobs unfilled due to challenges finding qualified drivers. His bill would create a business tax credit to cover some costs for training workers to fill those positions.
SB 123 PROPERTY TAX COMPLAINTS (Coley, B.) Introduced in April, this bill would limit the right to initiate most types of property tax complaints to the property owner and the county recorder of the county in which the property is located. It was referred to the Ways and Means Committee, where Senator Coley advised during sponsor’s testimony May 3 that the proposal is identical to his prior bill (SB85, 131st General Assembly) in that it would allow property tax complaints to be initiated only by property owners or county recorders. Senator Coley advised that school boards and other government entities file claims only to drive up property values. According to the sponsor, filings show that challenges resulting in lower valuations typically originate from property owners rather than those government entities. He said the bill would also help alleviate a current backlog of cases facing the Board of Tax Appeals.
SB 128 NUCLEAR ENERGY (Eklund, J., LaRose, F.) This bill was introduced April 6 and would establish the Zero Emission Nuclear Resource Program, which would create the zero-emissions credits, or ZECs, to be priced by the Public Utilities Commission of Ohio and purchased by distribution utilities with nuclear plants. Utilities would recover that cost through rate increases on consumers in areas with nuclear plants with the increase capped at 5% of June 2015 rates. The program would sunset in 16 years and run in two year cycles. Under the bill, should those two plants be sold or transferred the value of ZECs received is to be reduced by an amount equal to one-half the dollar amount of any net proceeds of the sale. That provision would not be in effect in the event of bankruptcy, according to the bill. The measure would require any company subject to the bill’s provisions with a headquarters in Ohio to maintain that headquarters and require plants receiving credits to maintain employment levels similar to that of nuclear energy resources constructed prior to 1990 in the United States with the same reactor type, similar nameplate capacity, and single-unit location. This is a companion bill to HB 178, and bill sponsor Senator John Eklund said sponsors in both chambers will continue their efforts to enlist more support both inside and outside of their caucus. The most recent hearing in the Public Utilities Committee occurred October 24, 2017.
SB 131 TAX CREDITS (Dolan, M.) This is a companion bill to HB 173 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. The bill passed in the Senate May 24 and was introduced in the House May 25, where a hearing occurred June 6.
SB 132 TAX CREDIT (Dolan, M.) This bill would establish a five-year pilot program whereby taxpayers with facilities in this state with activated foreign trade zone status may claim a nonrefundable commercial activity tax credit equal to the amount redeployed by the taxpayer to job creation and renewable energy resources. It was referred to the Ways and Means Committee, where a hearing occurred June 7.
SB 147 RURAL JOBS (Hite, C.) This bill would enact the “Ohio Rural Jobs Act” which would authorize a nonrefundable tax credit for insurance companies that invest in rural business growth funds, which are certified to provide capital to rural and agricultural businesses. A similar provision inserted into the state budget bill was vetoed by Governor Kasich. SB 147 was referred to the Ways and Means Committee, where a first hearing with sponsor’s testimony occurred September 6. A second hearing with proponent testimony occurred September 27.
SB 176 MUNICIPAL TAXES (Jordan, K.) Introduced August 7, this bill would prohibit municipal corporations from levying an income tax on nonresidents’ compensation for personal services or on net profits from a sole proprietorship owned by a nonresident. It was referred to the Ways and Means Committee.
SB 184 WIND SETBACKS (Skindell, M.) Introduced August 31, this bill would return the minimum setback requirement for wind farms of five or more megawatts to the pre-HB 483 (130th General Assembly) 2014 requirements (1,125 feet from the blade tip to the property line). It was referred to the Energy & Natural Resources Committee where a first hearing occurred September 27.
SB 188 WIND TURBINE SETBACKS (Hite, C.) Introduced September 14 and labeled as a compromise measure, the bill would increase the setback requirements to a minimum of one and two-tenths times the total height of the turbine compared to the currently required one and one-tenth, but it would decrease overall setbacks by requiring a distance of at least 1,225 feet in horizontal distance from the exterior – rather than the property line as under current law – of the nearest, habitable residential structure. It would also strengthen notice requirements by requiring the Ohio Power Siting Board to create rules requiring public information meetings and public notice involving owners and tenants on property adjacent to a potential wind farm. It was referred to the Energy & Natural Resources Committee where two hearings have occurred.
SB 203 MUNICIPAL TAXATION (Dolan, M.) Introduced September 28, this bill would reinstate the municipal income tax “throw-back rule” used in apportioning business income among municipalities. The rule was only recently eliminated in HB 49 (the Budget Bill). The bill has been referred to the Senate Finance Committee.
SB 209 TAX EXEMPTIONS (Coley, B.) Introduced October 3, this bill would modify the conditions that determine the relative priority of property tax exemptions when a parcel subject to a tax increment financing arrangement concurrently qualifies for another exemption. It has been referred to the Senate Ways and Means Committee where a first hearing occurred November 8.
SB 224 SALES TAX (Eklund, J.) This bill would exempt from sales and use tax goods purchased by a foreign citizen or entity if the goods are in Ohio only temporarily for package consolidation before being delivered to a foreign address, and to declare an emergency. It was referred in Senate to the Finance Committee.
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