August 16, 2019

New Ohio Budget Bill Gives to Many and Takes from Ohio Lawyers & Lobbyists

by Katherine R. Dodson, Terrence A. Grady & Associates Co., LPA

On July 18, the Ohio Legislature just passed and Governor DeWine signed its Budget Bill (H.B. 166) and left out Ohio’s self-employed lawyers and lobbyists from the popular business income deduction.

This Budget Bill included many significant changes to Ohio’s taxes, including an expansion of the nexus standards for Ohio’s sales and use taxes, a reduction of individual income tax rates and changes to Ohio’s business tax credits/deductions. Most surprising, however, was the targeted exclusion of the very popular business tax deduction for Ohio’s lawyers and lobbyists.

Prior to the new Budget Bill, Ohio’s self-employed lawyers and lobbyists could potentially exclude up to $250,000 of their income arising from their business pursuant to Ohio’s business tax deduction. With the passage of H.B. 166, however, and beginning in tax year 2020, these same Ohio lawyers and lobbyists will be left in the cold and no longer able to utilize this popular deduction. This change arises through the revisions to Ohio Revised Code Section 5747.01, which adds a new limitation to the business income deduction for only “eligible business income.” The Bill specifically excludes income arising from businesses that perform specified legal services and/or lobbying services.

In its infancy, this new Budget Bill challenges our protections under the Equal Protection Clause of the U.S. Constitution and calls for a very careful review of the Ohio Legislature’s basis for excluding lawyers and lobbyists from the Ohio business income deduction. Fortunately, this new tax does not take effect until tax year 2020. Accordingly, there is still time to review and potentially challenge the constitutionality of this new provision.


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