Subject: Analysis of Ohio Senate Bill 40, Proposing a Tax Credit for Donations to Certain Pregnancy Resource Centers and Maternity Homes
This briefing document summarizes the key provisions of Ohio Senate Bill 40 (S.B. No. 40), introduced in the 136th General Assembly. The bill aims to incentivize donations to qualifying pregnancy resource centers and maternity homes by establishing a nonrefundable state income and commercial activity tax credit for such contributions.
1. Main Theme:
The central theme of S.B. No. 40 is to provide financial encouragement for individuals and businesses to support organizations that offer assistance to pregnant women in carrying their pregnancies to term. This is achieved through the creation of a targeted tax credit for donations made to certified “qualifying pregnancy resource centers” and certain licensed maternity homes.
2. Key Provisions and Important Ideas:
- Creation of a Nonrefundable Tax Credit: The bill proposes to enact new sections in the Ohio Revised Code (5747.74 and 5751.56) to authorize a nonrefundable tax credit for donations to qualifying pregnancy resource centers and maternity homes.
- Individual Income Tax: Section 5747.74 allows a nonrefundable credit against a taxpayer’s aggregate income tax liability under section 5747.02. The credit amount is equal to the amount stated in a “tax credit certificate” issued to the taxpayer.
- Limitation: The claimed credit cannot exceed 50% of the taxpayer’s aggregate tax liability before applying any other credits.
- Carry-Forward: Any excess credit can be carried forward for five taxable years, subject to the same 50% liability limitation in each carry-forward year.
- Pass-Through Entities: If the donor is a pass-through entity, the credit can be allocated among its equity owners proportionally or as mutually agreed.
- Commercial Activity Tax (CAT): Section 5751.56 (which also defines key terms and the certification process, detailed below) allows a similar nonrefundable credit against the tax imposed under section 5751.02 (CAT), as authorized by the tax credit certificate. The same 50% liability limitation and five-year carry-forward provisions apply.
- Definition of “Qualifying Pregnancy Resource Center”: The bill provides a detailed definition of organizations eligible for receiving donations that qualify for the tax credit. These include:
- Organizations exempt from federal taxation under Internal Revenue Code Section 501(c)(3).
- Organizations maintaining a principal office or presence in Ohio.
- Organizations where at least 50% of clients claim to be Ohio residents.
- Organizations whose principal purpose is to provide free or low-cost assistance to pregnant women for carrying their pregnancies to term, including services like “pregnancy tests, ultrasounds, counseling, material support, and similar services”.
- Licensed maternity homes under Ohio Revised Code Chapter 3711 that meet the above criteria and are not excluded under division (A)(4)(c)(iii).
- Exclusions: The definition explicitly excludes hospitals, nursing homes, residential care facilities, and any organization that:
- Performs nontherapeutic abortions.
- Promotes nontherapeutic abortions.
- Contracts with any person that performs or promotes nontherapeutic abortions.
- Is an affiliate of any person that performs or promotes nontherapeutic abortions.
- Quote: ” ‘Qualifying pregnancy resource center’ does not include any of the following: (I) Performs nontherapeutic abortions; (II) Promotes nontherapeutic abortions; (III) Contracts with any person that performs or promotes nontherapeutic abortions; (IV) Is an affiliate of any person that performs or promotes nontherapeutic abortions.”
- Certification Process: Pregnancy resource centers and maternity homes must be certified by the Tax Commissioner to be considered “certified pregnancy resource centers,” donations to which are eligible for the tax credit.
- Application: Entities must apply to the Tax Commissioner, certifying they meet the requirements of a qualifying pregnancy resource center and providing documentation of their 501(c)(3) status, Ohio presence and client residency, and a statement confirming they do not perform, promote, contract with, or are affiliated with those who perform or promote nontherapeutic abortions.
- Review and Notification: The Tax Commissioner will review applications within 30 days and notify the applicant of the determination.
- Recertification and Revocation: The Commissioner may periodically request recertification. Certified entities must notify the Commissioner of any changes affecting eligibility within 60 days. Certifications can be revoked if an entity no longer qualifies.
- Public List: The Tax Commissioner will maintain a public list of all qualifying pregnancy resource centers on the Department of Taxation’s website.
- Tax Credit Certificate Application: Donors who make cash contributions to certified pregnancy resource centers in a calendar year can apply to the Tax Commissioner for a tax credit certificate within 60 days of the donation.
- Application Requirements: The application must include the donation amount, the tax against which the credit will be claimed, and a copy of a receipt from the pregnancy resource center acknowledging the donation amount and date.
- Commissioner’s Approval: The Commissioner will evaluate applications in the order received and issue a determination within 30 days. Approved applications will receive a tax credit certificate stating the credit amount and the tax against which it can be claimed.
- Limitations on Total Tax Credits: The bill sets limits on the total amount of tax credits that can be approved:
- Annual Cap: The Tax Commissioner cannot approve more than ten million dollars in total tax credits in a calendar year.
- Per-Center Cap: No more than five million dollars in tax credits can be approved based on donations to the same certified pregnancy resource center in a calendar year.
- Quote: “The commissioner may not approve more than ten million dollars in total tax credits in a calendar year and may not approve more than five million dollars in tax credits on the basis of donations to the same certified pregnancy resource center in a calendar year.”
- Order of Credit Claims: The bill amends sections 5747.98 and 5751.98 of the Revised Code to specify the order in which this new tax credit will be claimed relative to other existing tax credits.
- Individual Income Tax: The nonrefundable credit for donations to pregnancy resource centers will be claimed first in the order of nonrefundable credits against individual income tax liability.
- Commercial Activity Tax: The nonrefundable credit for donations to pregnancy resource centers will be claimed first in the order of nonrefundable credits against commercial activity tax liability.
3. Repeal of Existing Sections:
The bill also proposes to repeal the existing sections 5747.98 and 5751.98 of the Revised Code, presumably to be replaced by the amended versions that incorporate the new tax credit.
4. Potential Impact:
This bill, if enacted, could have several potential impacts:
- Increased Donations: The tax credit is intended to incentivize more individuals and businesses to donate to qualifying pregnancy resource centers and maternity homes.
- Financial Support for Targeted Organizations: These organizations could receive increased financial support, potentially allowing them to expand their services.
- State Revenue Implications: The state could experience a reduction in tax revenue due to the claimed tax credits, up to the annual cap of $10 million.
- Administrative Burden: The Tax Commissioner will be responsible for establishing application processes, certifying organizations, and issuing tax credit certificates, which could create an additional administrative burden.
5. Conclusion:
Ohio Senate Bill 40 proposes a significant policy shift by offering a state tax credit for donations to qualifying pregnancy resource centers and maternity homes. The bill outlines specific criteria for eligible organizations, a certification process, and limitations on the total amount of credits that can be claimed. If enacted, this legislation could substantially impact the funding landscape for these types of organizations and have implications for state tax revenue.