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March 8, 2023
2023-0435

Ohio revisits Internal Revenue Code conformity

On March 1, 2023, the Ohio General Assembly passed Senate Bill 10 (SB 10), which would update Ohio's Internal Revenue Code (IRC) conformity. Governor Mike DeWine is expected to sign SB 10 in the coming days, with the legislation having immediate effect.

Ohio Rev. Code 5701.11 is Ohio's IRC conformity provision and is typically updated annually. SB 10 would update Ohio's IRC conformity to the effective date of the legislation.

SB 10 also would update a provision allowing a taxpayer, whose tax year ends after February 17, 2022, to irrevocably elect to incorporate IRC provisions that were in effect for that tax year. The election would allow taxpayers to incorporate provisions from two federal laws enacted in 2022. The first is the Inflation Reduction Act of 2022 (P.L. 117-169), which:

  • Extended the limitations on excess business losses and farm losses from January 1, 2027 to January 1, 2029
  • Increased the maximum deduction per square foot for energy-efficient commercial buildings

The second is the Consolidated Appropriations Act, 2023 (P.L.117-328), which made the following changes to the tax treatment of certain retirement distributions and contributions:

  • Authorized tax-free rollovers of up to $35,000 from 529 education savings plans to Roth IRAs
  • Authorized up to $1,000 in withdrawals from tax-preferred retirement plans for certain emergency expenses without triggering the standard 10% penalty
  • Required automatic enrollment and yearly escalation of employee contributions into retirement plans started after December 29, 2022
  • Increased the age of the required beginning date for mandatory retirement account distributions from 72 to 73 in 2023, and then to 75 in 2033

Taxpayers would make this election by filing the Ohio income tax return, which incorporates those IRC provisions. Similar elections made under prior versions of Ohio Rev. Code 5701.11 remain effective for the tax years to which those elections applied.

Implications

SB 10 has been declared an emergency measure so that taxpayers can avoid having to adjust their 2022 income tax returns. The legislation will take immediate effect upon Governor DeWine's signature.

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Contact Information
For additional information concerning this Alert, please contact:
 
State and Local Taxation Group
   • Bill Nolan (william.nolan@ey.com)

Published by NTD’s Tax Technical Knowledge Services group; Jennifer A Brittenham, legal editor

 

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