On September 26, 2016, Rep. Armstutz introduced two pieces of legislation in the Ohio House that could impact the tax rate of the Ohio financial institutions tax (“FIT”) that is paid by banks and other financial institutions doing business in Ohio. These bills are H.B. 599 and H.B. 600. These bills are alternatives. Both would not be enacted.
The FIT took effect starting in 2014 and replaced the Ohio corporate franchise tax and dealers in intangibles taxes on financial institutions. Sometimes when a new tax is introduced to replace an existing tax, there are tax rate adjuster provisions in the legislation that are designed to “right-size” the tax rate over time to generate approximately the same amount of revenue as the old tax generated, or to generate a certain targeted amount of revenue for budgeting purposes.
H.B. 599 would delete the future rate adjuster provisions entirely that are set to be calculated during 2016 that would either increase or decrease the rates for years 2017 and thereafter. Under H.B. 599, the current rates would continue indefinitely.
H.B. 600, alternatively, would use $212 million as the “2016 target” for the amount of revenue raised by the FIT. It would increase the tax rate for 2017 and thereafter on the largest financial institutions if the total amount collected in 2016 is less than 90% of $212 million. It would decrease the tax rate across-the-board for 2017 and thereafter if the total amount collected in 2016 is more than 110% of $212 million.