Ohio Senate Bill 28 proposes to create a new tax, the “housing market impact tax,” on individuals and entities owning fifty or more taxable houses (defined as single-family, two-family, or three-family dwellings) in any single county within Ohio. The bill outlines the tax levy, collection mechanisms, distribution of revenue, and related administrative procedures. It also amends several existing sections of the Ohio Revised Code to integrate this new tax into the state’s tax administration framework and to ensure consistency across different chapters.
Main Themes and Important Ideas/Facts:
- Creation of a New Tax on High-Volume Landlords:
- The central tenet of SB 28 is the enactment of sections 5755.01 through 5755.99 of the Revised Code, which establish a “housing market impact tax.”
- The tax is levied on each “person” or “combined taxpayer group” owning fifty or more “taxable houses” in any county.
- “Taxable house” is explicitly defined as a “single-family, two-family, or three-family dwelling.”
- “Person” encompasses a broad range of entities, including individuals, corporations, partnerships, trusts, and limited liability companies.
- A “combined taxpayer group” is defined as two or more persons treated as a single taxpayer under section 5755.011, particularly targeting limited liability companies and their series under common control.
- The tax amount is set at two thousand dollars ($2,000) for each taxable house owned on the first day of each tax period.
- The stated purpose of the tax is “for the purpose of funding the needs of this state and its local governments.”
- “For the purpose of funding the needs of this state and its local governments, there is hereby levied a housing market impact tax on each person or combined taxpayer group owning fifty or more taxable houses in any county. The tax levied under this section shall equal two thousand dollars for each taxable house owned on the first day of each tax period.” (Sec. 5755.02)
- Taxpayer Registration, Filing, and Payment:
- Taxpayers (or the reporting person for combined groups) are required to file a return and pay the tax monthly, by the twenty-first day of each month for the preceding tax period, on a form prescribed by the Tax Commissioner.
- Electronic filing and payment may be mandated through the Ohio business gateway or other means.
- A process for applying for exemption from electronic filing/payment for good cause is included.
- “(A) A taxpayer or, in the case of a combined taxpayer group, the reporting person, on or before the twenty-first day of each month, shall make and file a return for the preceding tax period on a form prescribed by the tax commissioner and shall pay the tax shown on the return to be due.” (Sec. 5755.03)
- Revenue Allocation:
- The bill creates the “housing market impact tax revenue fund” in the state treasury to hold all collected tax revenue.
- A portion of the fund will be used for refunds.
- The remaining balance will be split fifty percent (50%) to the “low- and moderate-income housing trust fund” and fifty percent (50%) to the “local government fund.”
- “(3) After making any transfers required by division (C)(2) of this section, but not later than the twenty-eighth day of each month, the director of budget and management shall transfer fifty per cent of the balance of the housing market impact tax revenue fund tax fund to the low- and moderate-income housing trust fund created under section 174.02 of the Revised Code and the remaining fifty per cent to the local government fund.” (Sec. 5755.03)
- Enforcement, Penalties, and Interest:
- Penalties are established for failure to file a timely return or pay the tax. A penalty of the greater of fifty dollars or five percent of the unpaid tax per month (up to a maximum of fifty percent) can be imposed.
- Interest on unpaid tax will accrue at the rate prescribed in section 5703.47 of the Revised Code.
- The Tax Commissioner has the authority to issue assessments for unpaid tax, penalties, and interest, and to file judgments in court for collection. Jeopardy assessments are also предусмотрены for cases where collection is believed to be in jeopardy.
- There is a four-year statute of limitations for issuing assessments, with exceptions for failure to file, fraudulent returns, or written waivers.
- Knowingly filing false or fraudulent reports or documents related to this tax is classified as a felony of the fifth degree, with a potential additional fine of up to $750,000.
- “(A)(1) If a taxpayer fails to file a return under section 5755.03 of the Revised Code or to pay the full amount of the tax due under section 5755.02 of the Revised Code on or before the date prescribed for filing the return, the taxpayer shall be liable for a penalty of the greater of fifty dollars or an amount equal to five per cent of the tax due for each month or fraction of a month, from the date prescribed for filing the return, determined without regard to any extension of time for filing, until the return is filed or the tax is paid, or until the penalty equals fifty per cent of the tax due.” (Sec. 5755.04)
- “(A) Whoever violates section 5755.052 of the Revised Code is guilty of a felony of the fifth degree and the court may impose upon the offender an additional fine of not more than seven hundred fifty thousand dollars.” (Sec. 5755.99)
- Refunds and Overpayments:
- Taxpayers can apply for refunds of overpaid, illegally, or erroneously paid tax within four years of the payment date (unless a waiver is in place).
- The Tax Commissioner will determine the refund amount and may hold a hearing if the amount is less than claimed.
- Interest will be paid on approved refunds.
- Refunds may be offset against other debts owed to the state by the taxpayer.
- “(A) A taxpayer may apply to the tax commissioner for a refund of any amount imposed under this chapter that was overpaid, paid illegally or erroneously, or paid on an illegal or erroneous assessment.” (Sec. 5755.05)
- Tax Administration by the Tax Commissioner:
- The Tax Commissioner is responsible for administering and enforcing the new tax, including prescribing forms, appointing necessary personnel, and adopting rules.
- Rules adopted under this chapter are explicitly exempted from certain regulatory restrictions outlined in section 121.95 of the Revised Code.
- “The tax commissioner shall administer and enforce this chapter. In addition to any other powers conferred upon the tax commissioner by law, the tax commissioner may do any of the following: (A) Prescribe all forms that are required to be filed under this chapter; (B) Appoint professional, technical, and clerical employees as are necessary to carry out the tax commissioner’s duties under this chapter; (C) Adopt rules that are necessary and proper to carry out this chapter.” (Sec. 5755.07)
- Amendments to Existing Ohio Revised Code Sections:
- The bill amends numerous existing sections of the Ohio Revised Code to include the “housing market impact tax” in the list of taxes administered by the state. These amendments primarily relate to:
- Collection of overdue payments by the Attorney General (Sec. 131.02).
- Real property conveyance statements requiring information related to taxable houses owned by pass-through entities (Sec. 319.202).
- Prohibition of municipal corporations from levying similar taxes (Sec. 715.013).
- Notifications related to liquor permit applications and tax delinquencies (Sec. 4303.26).
- Establishment and use of the tax refund fund (Sec. 5703.052).
- Timely filing of refund applications (Sec. 5703.053).
- Tax Commissioner’s investigative powers (Sec. 5703.19).
- Regulation of tax return preparers (Sec. 5703.263).
- Definitions related to tax administration (Sec. 5703.50).
- Procedures for handling tax refund applications (Sec. 5703.70).
- Notification of credit account balances to taxpayers (Sec. 5703.77).
- Issuance of tax assessments (Sec. 5703.90).
- In lieu of tax provisions for financial institutions and dealers in intangibles (Sec. 5725.26).
- Reporting of taxable house ownership on income tax and commercial activity tax returns (Secs. 5747.081 and 5751.051).
- Transitional Provision:
- Within twelve months of the bill’s effective date, pass-through entities owning taxable houses are required to file a statement with the county auditor detailing the entity’s information and the address/parcel identification number of each taxable house owned.
- “Section 3. Within twelve months after the effective date of this section, a pass-through entity, as defined in section 5733.04 of the Revised Code, that owns a taxable house, as defined in section 5755.01 of the Revised Code, shall file a statement with the county auditor of the county in which the taxable house is located that includes both of the following: (A) The name, address, telephone number, and electronic mail address of the entity and an owner, member, manager, officer, partner, or associate, as applicable, of the entity; (B) The address and parcel identification number of the taxable house or houses owned by the entity.” (Section 3)
- Effective Date:
- The tax levied under the bill will apply on and after the first day of January following the bill’s effective date.
- “Section 4. The tax levied under section 5755.02 of the Revised Code, as enacted by this act, applies on and after the first day of January following the effective date of this section.” (Section 4)
Potential Implications:
- This bill could significantly impact individuals and entities owning large numbers of single-family to three-family rental properties in Ohio.
- The increased cost of ownership due to the tax may lead to changes in rental rates or investment strategies.
- The revenue generated is intended to support affordable housing initiatives and local government funding.
- The administrative burden on the Tax Commissioner’s office will increase due to the implementation and enforcement of this new tax.
- The requirement for pass-through entities to report their taxable house ownership to county auditors will create a new data collection responsibility.
This briefing document provides an overview of the main provisions of Ohio Senate Bill 28 as introduced. Further analysis may be required to fully understand the potential economic and social impacts of this proposed legislation.