Taxes:

Following is an explanation, in general terms, of the tax structure in Ohio and its effect on companies and employees locating in Northwest Ohio. The main taxes that may apply to business in Ohio are as follows: taxes on real property (land, buildings); corporation franchise tax; corporate activity tax (CAT) and municipal income tax.

Businesses in Northwest Ohio may take advantage of various tax incentives to help offset tax burdens. Detailed information on available incentives can be found in the incentive chapter.

Tax Reform in Ohio

Sweeping Tax Reform Makes Ohio Companies More Competitive in Global Economy

Major Components of Tax Reform Plan

On July 1, 2005, the State of Ohio instituted a sweeping change in the state tax code, eliminating all personal property and inventory taxes, in stages, by 2009 for existing Ohio companies.  For companies new to Ohio, the new Commercial Activates Tax will be applied exclusively, with zero personal property or inventory taxes assessed.

Personal Income Tax
The state personal income tax - an adjusted net income tax on individuals, small businesses, estates, and trusts - was first enacted in 1971 as a state revenue source. When first enacted in 1971, the tax had a rate schedule comprised of six brackets, with a bottom rate of 1.0-percent on income under $5,000 and a top rate of 3.5-percent on income over $40,000. By 2005, this rate schedule had grown to encompass nine brackets, with a bottom rate of 0.712-percent on income under $5,000 and a top rate of 7.5-percent on income over $200,000.

The Ohio tax reform plan calls for a reduction and restructuring of the state’s personal income tax. The main feature of the tax reform plan is a 21 percent reduction in the Ohio income tax rate schedule. This reduction, phased-in over five years at 4.2 percent per year, will result in a new top rate of 5.95 percent, which is a 21 percent reduction from the current top rate of 7.5-percent. In addition, the tax reform plan calls for the re-establishment of an accumulated trust income tax, the development of a new higher education grant program and the implementation of a new low-income tax exemption program.

STANDARD PERSONAL EXEMPTION AND CREDIT
Personal exemptions of $650 per person are allowed. Credits against tax due of $20 per personal exemption are allowed.

RECIPROCITY
An individual who is a resident of Ohio or one of the five surrounding states and whose income consists solely of compensation from any of those states need only file with the state of residence.

RESIDENT/NONRESIDENT INCOME CREDITS
Taxpayers who earn income while living in another state or have income taxed by another state receive a credit for that portion of income.

Commercial Activity Tax
The Ohio tax reform plan calls for the implementation of a replacement business tax to help replace forgone state and local revenue resulting from the elimination of the tangible personal property tax on general businesses. This new tax – the commercial activity tax, or CAT– is an annual tax on the net gross receipts of a businesses’ activity within the state of Ohio. The CAT possesses a low rate (0.26 percent of gross receipts), a broad base (corporations and small business), and limited exemptions/credits (only four tax credits). As designed and structured, the CAT will not unfairly shift the tax burden to either businesses or individuals or unduly burden any one business sector or size of business within the state.

Under the tax reform plan, the CAT became effective beginning July 1, 2005. However, the full weight of the tax will be phased-in over a five-year period, at approximately 20 percent per year, with full implementation by April 1, 2009.

Foreign Trade Zone Exemption
If a facility is located in a foreign trade zone that was established prior to January 1, 1990 all inventories in the zone are completely exempt from property taxes. If the foreign trade zone was established after January 1, 1990, only those inventories exempt under federal law are exempt from property taxes. The foreign trade zone for the Toledo area was established in 1960, and is located at the Port of Toledo and at Toledo Express Airport.

Real Property Taxes
All industrial and commercial property owners in Ohio must remit at least 1/2 of the Ohio Real Property Tax on December 31st of each year, with the balance due on June 20th.

Real property, defined as land and buildings, is valued for tax purposes at 35% of market value, where market value is based upon the highest and best use of the property. Market value is reappraised by county officials every six years with updated adjustments every third year.

The tax rates on this real estate vary with each taxing jurisdiction. The total rate includes 10 mills of non-voted property tax and all levies approved by the voters.

Businesses in Ohio benefit from two direct tax credits. These include a 10 percent rollback in the real property tax and a tax-reduction factor designed to eliminate increases in voted taxes caused by inflation, which occur when existing real property is reappraised or updated.

The following table shows actual and effective tax rates which apply to the different taxing districts. The actual rates are used in the computation of tangible personal property taxes (machinery and equipment, inventories, furniture and fixtures). The effective rates are used in the computation of real commercial and industrial property taxes. The rates are expressed in dollars and cents on each one thousand dollars of valuation.

RANGES OF REAL & PERSONAL PROPERTY TAX RATE

2008 Tax Rate Sheets by County