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On March 27, 2020, Governor Mike DeWine signed House Bill 197 (HB 197) into law. Originally intended as legislation to make technical corrections to Ohio's tax law, HB 197 was used as a vehicle to enact tax relief provisions in response to the COVID-19 national health emergency. HB 197 declares a state of emergency, so many of the provisions, unless otherwise specified, take immediate effect.

HB 197 authorizes the Ohio Tax Commissioner (Commissioner), for the duration of the declared COVID-19 state of emergency, to do the following:

• Extend state filing and payment deadlines on state taxes and fees administered by the Commissioner and suspend penalties on those delayed filings and payments
• Waive the accrual of interest on extended tax payments
• Extend filing and payment deadlines, suspend penalties, and waive interest for municipal income taxes on the net profits of businesses that file those taxes via the centralized compliance system administered by the Ohio Department of Taxation

Neither HB 197 nor guidance from the Commissioner extend the time for filing returns for or paying Ohio's Commercial Activity Tax or sales/use tax.

For Ohio municipal income tax purposes, HB 197 treats income earned by an employee required to work at a temporary worksite because of the emergency as earned at the employee's principal place of work during the duration of the declared COVID-19 emergency. The COVID-19 emergency-related tax changes are discussed in Tax Alert 2020-0873.

The non-COVID-19-related tax provisions of HB 197 are summarized below.

Internal Revenue Code conformity

HB 197 amends Ohio Rev. Code Section 5701.11 to adopt the Internal Revenue Code of 1986 (IRC), as amended, in effect as of March 27, 2020. HB 197 thus incorporates several changes to the federal tax law into Ohio's tax law. Many of these changes will apply to tax years beginning on or after January 1, 2020. Some apply beginning in 2019 or, retroactively, in 2018. These changes include the following:

• Extending the deduction for qualified tuition and related expenses (applies to tax years beginning in or after 2018)
• Extending an exclusion from gross income of the discharge of indebtedness on a qualified principal residence (tax years beginning in or after 2018)
• Increasing the age of at which individuals must receive required minimum distributions from tax-advantaged "qualified" retirement plans (e.g., IRA and 401(k) retirement plans), from 70½ to 72 (tax years beginning in or after 2020)
• Requiring a non-spouse beneficiary of a qualified retirement plan to withdraw all money from an inherited account within 10 years (tax years beginning in or after 2020)
• Allowing penalty-free distributions from qualified retirement plans for births and adoptions (tax years beginning in or after 2020)
• Expanding IRC Section 529 education plans to allow distributions for expenses associated with apprenticeship programs and up to $10,000 in student loan repayments (tax years beginning in or after 2019)

Ohio Rev. Code Section 5701.11(B)(1) allows a taxpayer, for a tax year ending after March 30, 2018 and before March 27, 2020, to irrevocably elect to incorporate the IRC provisions in effect for federal income tax purposes for that tax year if those provisions differ from the provisions that would otherwise apply. The filing of a return that incorporates such IRC provisions constitutes the making of the irrevocable election.

Technical corrections and substantive changes

HB 197 makes technical corrections to address obsolete provisions, typographical or syntactical errors, incorrect cross-references, organization, and effective dates.

Budget Stabilization Fund

The uncodified provisions in HB 197 allow the Ohio Director of Budget and Management to request, prior to the end of fiscal year 2020, approval for a transfer of cash from the Ohio Budget Stabilization (Rainy Day) Fund to the Ohio General Revenue Fund to help ensure that the available revenue receipts and balances in the Ohio General Revenue Fund are not less than the expenditures for fiscal year 2020.

Implications

Ohio is a fixed date IRC conformity state. HB 197 updates Ohio's IRC conformity to cover a large portion of the IRC changes, including those in the Coronavirus Aid, Relief and Economic Security (CARES) Act, P.L. 116-136. Taxpayers should consider these provisions in preparing their Ohio 2019 individual income tax returns, including the irrevocable election to incorporate IRC changes made for tax years beginning after March 30, 2018, and before March 27, 2020, because many of the federal provisions enacted by the CARES Act have retroactive effect. EY will continue to monitor Ohio's tax law responses to the COVID-19 emergency.

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