It could’ve been worse, say accounting experts about recent Ohio state tax law changes.
“Originally when the government released the bill, it included some big increases,” says Michael Petracca, managing partner of the PricewaterhouseCoopers office in Columbus. “When the final bill was issued, only a part of the increases were there.”
The increases are due to a large tax deficit the state government is working to reduce, and some changes may significantly affect businesses. The biggest change will have an impact on companies that lease business equipment, says Rich Lundy, tax partner with GBQ.
“Basically the change, which is effective Feb. 1, means that businesses will need to pay sales tax up front on a lease, instead of over the life of the lease,” says Lundy. “That includes machinery used for manufacturing,” as well as cars, boats, planes and other business equipment.
To minimize the impact, Lundy advises companies to look at the risks and benefits of leasing and purchasing; leasing may not always be the most cost-effective option.
Another major change, which goes into effect in 2003, primarily affects Ohio financial institutions. Banks with subsidiaries that are considered brokers or dealers will no longer receive a tax exemption, and will be taxed like other businesses.
“It’s all about planning,” says Petracca. “Nothing short of good planning is more effective with this kind of change.”
To effectively plan, build the extra costs into the 2003 budget. Look for ways to reduce costs in other areas or raise the costs of financial products to cover the expense.
Also in the bill is a tax credit associated with job retention. A company must have a capital investment project in Ohio at which it has had an average of 1,000 or more full-time employees for at least a year and for which it pays at least $200 million over a three-year period that includes the year the credit is claimed.
Investments must be made from Jan. 1, 2002, to Dec. 31, 2006.