Ohio Senate Bill 22 proposes to create a refundable income tax credit or rebate for eligible Ohio homeowners and renters whose property taxes or a portion of their rent exceed five percent of their total household resources. This bill aims to provide financial relief to individuals and families facing a significant burden from housing costs. The bill outlines eligibility criteria, defines key terms, sets credit/rebate limits, and specifies the application process. It also amends existing sections of the Ohio Revised Code to integrate this new credit into the state’s tax structure.
II. Main Themes and Important Ideas:
- Establishment of a Refundable Tax Credit/Rebate: The central theme of the bill is the creation of a new financial assistance mechanism for Ohio residents struggling with property tax or rent burdens. It introduces Section 5747.87 of the Revised Code to authorize this credit or rebate.
- For income tax filers, it will be a refundable credit against their state income tax liability under Section 5747.02.
- For those not required to file an income tax return, it will be a rebate claimed through a separate application process.
- Eligibility Criteria: The bill defines specific criteria for an “eligible claimant”:
- Occupancy: Must have occupied a homestead as an owner or lessee for at least six months of the “claim year.” The “claim year” is the individual’s taxable year for income tax filers and the preceding calendar year for non-filers.
- Homestead: The dwelling must be in Ohio, not fully exempt from property taxation, and be the individual’s primary residence.
- For owners, the property’s true value must not exceed a “home value limit.”
- For renters, the gross rent paid during the claim year must not exceed a “rent limit.” These limits are tied to the median home value and gross rent in the highest-cost county in Ohio based on American Community Survey data. The Tax Commissioner will determine and publish these limits annually.
- Household Resources: “Total household resources” must not exceed a specified threshold, initially $60,000, which will be adjusted annually based on the percentage increase in the Gross Domestic Product deflator. “Total household resources” includes all income received by all household members, with specific additions for certain deductions from federal gross income (net operating loss, net rental/royalty loss, loss carrybacks/forwards).
- Definition of Household: “Household” is defined as an individual and their spouse.
- Calculation of the Credit/Rebate: The amount of the credit or rebate is determined by the excess of property tax due (for owners) or 15% of gross rent (“rent-equivalent tax paid” for renters) over five percent of the eligible claimant’s total household resources.
- Owners: “the amount by which the eligible claimant’s property tax due exceeds five per cent of the eligible claimant’s total household resources for that claim year.” (Section 5747.87(B)(1))
- Renters: “the amount by which the eligible claimant’s rent-equivalent tax paid in the claim year exceeds five per cent of the eligible claimant’s total household resources for that year.” (Section 5747.87(B)(2))
- Credit/Rebate Limits: The credit or rebate is subject to a maximum limit, initially $1,000 for the first claim year after the bill’s effective date. This limit will also be adjusted annually based on the GDP deflator.
- “For the first claim year ending on or after the effective date of this section, the limit equals one thousand dollars. For each succeeding claim year, the limit shall be adjusted as provided in division (G) of this section.” (Section 5747.87(C))
- Application Process:
- Income tax filers will claim the credit on their annual income tax return in the order specified in amended Section 5747.98. If the credit exceeds their tax liability after other credits, they will receive a refund.
- Non-income tax filers will apply for the rebate on a form prescribed by the Tax Commissioner, between January 1st and the 15th day of the fourth month following the end of the claim year. Extensions for filing the rebate application are possible.
- Integration into Existing Tax Structure: The bill amends Section 5747.08 regarding annual income tax returns to reflect the new credit in the list of potential credits that could reduce tax liability to zero, thus not requiring a return. It also amends Section 5747.98 to specify the order in which this new “refundable credit for property taxes or rent-equivalent taxes paid under section 5747.87 of the Revised Code” is to be claimed, placing it last in the order of credits.
- Adjustments and Administration: The Tax Commissioner is responsible for:
- Prescribing forms for the rebate application.
- Adjusting the total household resources limit and the credit/rebate limit annually based on the GDP deflator.
- Determining and publishing the “home value limit” and “rent limit” annually.
- Potentially requiring adjustments in subsequent years if the initial credit/rebate was based on an inaccurate property tax amount.
- Adopting rules to administer Section 5747.87.
III. Key Definitions:
The bill provides clear definitions for several crucial terms, including:
- Claim year
- Eligible claimant
- Gross rent
- Qualifying homestead
- Household
- Income (specifying inclusions and exclusions)
- Property tax due (excluding prior year taxes, penalties, interest, and special assessments)
- Rent-equivalent tax paid (defined as 15% of gross rent)
- Total household resources
- Home value limit
- Rent limit
- American community survey
IV. Potential Impact and Considerations:
- Financial Relief: This bill could provide significant financial relief to lower and middle-income homeowners and renters facing high housing costs relative to their income.
- Economic Impact: The refundable nature of the credit/rebate could inject money back into the local economy.
- Administrative Burden: The Tax Commissioner will face increased administrative responsibilities in implementing and managing this new program, including developing forms, setting limits, and processing applications.
- Complexity: The eligibility criteria and calculation methods, while aiming for targeted relief, could introduce complexity for taxpayers and administrators.
- Interaction with Other Credits: The placement of this credit at the end of the credit order in Section 5747.98 means taxpayers will need to utilize other available credits first before potentially receiving a refund under this new provision.
V. Conclusion:
Ohio Senate Bill 22 represents a significant legislative effort to address the financial burden of property taxes and rent for Ohio residents. By establishing a refundable income tax credit and rebate program tied to income levels and housing costs, the bill aims to provide targeted relief. The specific details regarding eligibility, calculation, limits, and administration outlined in the bill will be crucial in determining its overall effectiveness and impact.