Daily Court Reporter - News Bill modifying Ohio residency test clears House
Bill modifying Ohio residency test clears House
KEITH ARNOLD, Daily Reporter Staff Writer
The Ohio House of Representatives recently passed House Bill 292 to adjust the criteria in determining whether an individual is considered an Ohio resident for state income tax purposes.
Sponsored by Rep. Gary Scherer, R-Circleville - a CPA by trade, the bill would add four criteria to the bright-line test in order to be considered a non-resident.
Specifically, the individual would not have claimed a federal depreciation deduction with respect to an out-of-state residence being considered as the primary domicile.
Nor would such an individual have held a valid Ohio driver's license or identification card, received the benefit of an Ohio homestead exemption for real estate tax purposes or received a tuition discount based on residency for attending an Ohio institution of higher education.
"These criteria, in addition to the existing criteria of having fewer than 213 'contact periods' (i.e., overnight stays), having a non-Ohio abode for the entire taxable year, and filing a truthful statement attesting to such those specific facts, creates an irrebuttable presumption of non-Ohio domicile," Scherer told lawmakers during sponsor testimony.
HB 292 is intended to address issues arising from Cunningham v. Testa, an Ohio Supreme Court case ruling that incorporated the common law of domicile into Ohio's bright-line residency statute.
"This bill would modify the test for determining an individual's state of residence for income tax purposes by replacing the nebulous common law standard that currently applies by adding to the existing test several explicit criteria for establishing that an individual is not domiciled in Ohio, and therefore not an Ohio resident for tax purposes," the lawmaker said.
According to analysis of the bill provided by the Ohio Legislative Service Commission, HB 292 would limit the factors used by the state tax commissioner to rebut this presumption of nonresident status to an individual's number of contact periods, the possession of a full-year abode outside the state, and any of the new objective criteria prescribed by the bill.
"Currently, the commissioner may rebut such a presumption with evidence that an individual is 'domiciled' in this state under the common law definition of the term, and that the individual's affirmation of nondomicile is therefore false, even though the individual satisfies the contact period and non-Ohio abode criteria and files the affirmation statement on time," commission analyst Joe McDaniels wrote. "Current administrative rules specify 18 circumstances that may not be considered in rebutting or confirming the presumption, including such things as where a person's banks, medical providers, attorneys, accountants, lenders, relatives, and political contributees are located."
The Ohio Society of CPA's, Ohio State Bar Association and Ohio Department of Taxation worked in conjunction on the legislation to remedy the problem posed by the high court ruling.
"This bill, if passed by the Ohio Senate, will provide much-needed clarity to factors that can be examined by the Ohio Department of Taxation," said Greg Saul, OSCPA's director of tax policy. "Right now, snowbirds and other non-Ohio residents are open to literally dozens of common law factors that can cause their out-of-state residency - for state income tax purposes - to be questioned, making it challenging for these individuals to know how to comply."
HB 292 passed with bipartisan support and now awaits further consideration from the Ohio Senate.
Date Published: November 24, 2017