Ohio Tax Update Related to House Bill 515
Sale of a business may qualify for Ohio business income deduction treatment
Governor Mike DeWine signed 2022 House Bill 515 (“law” or “law change”) on June 24, 2022, clarifying the sale of an equity or ownership interest in a business qualifies for the Ohio Business Income Deduction (BID). The bill’s changes apply to any transactions, refund applications, audits, petitions for reassessments and appeals pending on or after the bill’s 90-day effective date. To qualify as business income, certain requirements must be met including either a) the sale must be treated for federal tax purposes as the sale of assets or b) the seller materially participated in the activities of the business during the taxable year in which the sale occurs or during any of the five preceding taxable years.
Sale of a Business Interest
Ohio HB 515 added a new qualifying gain exclusion for the sale of an interest in a business by adding ORC Sec. 5747.01(B)(1) and (B)(2). Section 3 of HB 515 states it is a “remedial measure intended to clarify existing law.”
A qualifying gain or loss is defined in new ORC Sec. 5747.01(B) as the gain or loss on the sale of an equity or ownership interest in a business to which either or both of the following apply (1) The sale is treated for federal income tax purposes as the sale of assets or 2) The seller materially participated, as described in 26 C.F.R. 1.469-5T, in the activities of the business during the taxable year in which the sale occurs or during any of the five preceding taxable years.
Please select this link to read the complete article from OSAP Strategic Partner Clark Schaefer Hackett (CSH).