OHIO LEGISLATIVE SERVICE COMMISSION
Office of Research Legislative Budget
www.lsc.ohio.gov and Drafting Office
H.B. 546 Bill Analysis
134th General Assembly
Click here for H.B. 546’s Fiscal Note
Version: As Introduced
Primary Sponsor: Rep. Grendell
Effective Date:
Joe McDaniels, Attorney
SUMMARY
 Authorizes a county, township, or municipal corporation to partially exempt certain
homes occupied by persons who are at least 65 years of age from taxes and special
assessments.
 Bases the exemption amount on the increase in taxes and special assessments on the
home from (generally) the first year in which the occupant occupied the home while
over age 64.
 Requires that improvements to the home after that tax year be taxed and assessed at
the tax rate and value that applied the first year the improvements were completed.
 Requires a subdivision that opts to allow the exemption to reimburse taxing units for
the resulting decrease in tax and assessment receipts, and that no exemption be
allowed until such reimbursements can be fully funded.
 Requires a subdivision that seeks to allow the exemption to establish funds to make
investments and hold required taxing unit reimbursements.
 Requires those funds to be managed by the township fiscal officer or the board of
trustees of the county’s or municipal corporation’s sinking fund, as applicable.
 Penalizes a fund manager found to have misused the funds by removal from office and,
potentially, forfeiture of a surety bond.
 Requires a subdivision that opts to allow the exemption to contribute 1% of its eligible
receipts to an investment fund until it generates enough interest revenue from
government bonds to fully fund taxing unit reimbursements.
 Requires the county budget commission to annually verify that the subdivision has met
this 1% contribution requirement and notify the Tax Commissioner of any deficiency.
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 Requires the Commissioner to divert local government fund (LGF) payments that would
otherwise be deposited to the subdivision’s general fund to remedy that deficiency.
 Authorizes interest income from the investment fund’s bond investments to either be
reinvested in more bonds or allocated to a separate fund to cover taxing units’
reimbursements, but requires principal income to be reinvested.
 Allows money saved or invested in connection with the exemption to be used for other
purposes if the subdivision is determined to be in a fiscal crisis.
TABLE OF CONTENTS
Overview ......................................................................................................................................... 2
Establishment and administration of funds.................................................................................... 3
Adopting the ordinance or resolution ......................................................................................... 3
Fund manager ............................................................................................................................. 3
Misuse of funds ........................................................................................................................... 4
Investment fund .............................................................................................................................. 4
Purpose........................................................................................................................................ 4
Minimum deposit ........................................................................................................................ 4
Investment in bonds .................................................................................................................... 5
Report to county budget commission ......................................................................................... 5
Local Government Fund penalties .............................................................................................. 6
Tax relief fund ................................................................................................................................. 7
Purpose........................................................................................................................................ 7
Annual certification of exemption .............................................................................................. 8
Reimbursement of taxing units ................................................................................................... 8
Senior citizen exemption ................................................................................................................ 9
Timing of exemption ................................................................................................................... 9
Eligibility ...................................................................................................................................... 9
Exemption amount ...................................................................................................................... 9
Financial crises .............................................................................................................................. 10
DETAILED ANALYSIS
Overview
The bill authorizes a county, township, or municipal corporation to partially exempt
from taxes and special assessments certain homes occupied by persons who are 65 years of age
or older. The amount of the exemption is based on the increase in taxes and assessments on
the homestead following the occupant’s “base tax year,” i.e., the first tax year ending after the
bill’s 90-day effective date in which the occupant both lives in their current homestead and
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meets the minimum age requirement. Improvements to the homestead made after the
occupant’s base tax year are taxed and assessed at the value and rates that apply for the first
tax year that the improvements appear on the tax list. In essence, the bill allows subdivisions to
freeze taxes and special assessments on senior-occupied homesteads.
The exemption is triggered only if the subdivision is able to allocate enough revenue to
fully reimburse taxing units for tax or assessment revenue forgone as a result of the exemption.
To accrue this revenue, the subdivision must create two funds – a senior citizen investment
fund and a senior citizen tax relief fund (referred to in this analysis, respectively, as the
“investment fund” and “tax relief fund”). The subdivision must annually contribute 1% of its
eligible receipts, i.e., all moneys that can lawfully be contributed for such purposes, to the
investment fund. A fund manager then invests the deposits in government bonds to generate
interest revenue for the tax relief fund. Revenue in the tax relief fund is used to reimburse
taxing units. The exemption applies in a taxable year only if the fund manager determines that
the balance of the tax relief fund is sufficient to cover the reimbursement for that year.
A subdivision must continue to make annual deposits to the investment fund until the
balance of the tax relief fund is sufficient to fully reimburse taxing units for the cost of the
exemption. The objective of the two-fund arrangement is to build an investment portfolio large
enough to generate annual interest revenue sufficient to fully fund these reimbursements
without further contributions to the subdivision’s investment fund.
Establishment and administration of funds
Adopting the ordinance or resolution
To initiate the process of granting the exemption, a county, municipality, or township
must establish, by ordinance or resolution, an investment fund and a tax relief fund. Before
doing so, the subdivision’s board or legislative authority must hold at least one public hearing
to accept public comments and recommendations. The board or authority must provide 30-day
public notice of the time and place of the hearing and, during that 30-day period, publish the
proposed ordinance or resolution on the subdivision’s website. In addition, the board or
authority must make a physical copy available for public examination in the office of the county
auditor, township fiscal officer, or clerk of the legislative authority of the municipal corporation,
as applicable to the subdivision.1
Fund manager
Once a subdivision establishes both funds, they are administered by a fund manager.
Funds established by a township are administered by the township’s fiscal officer, while those
established by a county or municipal corporation are administered by the board of trustees of
the subdivision’s sinking fund, i.e., the board responsible, under continuing law, for paying the
debt charges on bonds issued by the county or municipal corporation. A county’s board consists
of the prosecuting attorney, county auditor, and county treasurer; a city’s (>5,000 population)
1 R.C. 5705.76(A) and (B).
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board consists of four residents appointed by the mayor; and a village’s (<5,000 population)
board consists of the mayor, clerk, and chairperson of the finance committee of the village’s
legislative authority.2
Misuse of funds
If the fund manager misuses funds deposited to the subdivision’s investment fund or tax
relief fund, the fund manager may be found guilty of misconduct in office. The bill specifies
that, upon conviction, the fund manager must forfeit their public office and may be required to
surrender any surety bond furnished upon their election or appointment to that office. 3
Investment fund
Purpose
A subdivision’s investment fund consists of funds received by the subdivision that may
lawfully be used to reimburse taxing authorities for the bill’s senior citizen tax exemption
(referred to in this analysis as “eligible receipts”). Money in the investment fund must be
invested in government bonds that, in turn, generate interest revenue for the subdivision’s tax
relief fund. The basic functions of an investment fund are illustrated in the graphic below. 4
Minimum deposit
Starting the first fiscal year after a subdivision establishes an investment fund, the
subdivision must deposit an amount equal to at least 1% of its eligible receipts for the last fiscal
2 R.C. 5705.75(C), 5705.76(C), 327.01, 327.02, 327.04, 507.081, 739.02, 739.07, 739.08, and 739.15;
R.C. 703.01, not in the bill.
3 R.C. 5705.78(C).
4 R.C. 5705.75(A) and 5705.78(A).
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year. The subdivision may make one annual deposit or a series of deposits throughout the year
as long as total deposits meet this 1% threshold.
Deposits to the investment fund must continue each fiscal year until the fund manager
certifies that enough money is available in the subdivision’s tax relief fund to cover the cost of a
senior citizen tax exemption (see “Tax relief fund,” below). The subdivision is not required
to make deposits to the investment fund in any fiscal year that the fund manager certifies such
an exemption, or for either of the following two fiscal years. The subdivision may continue
making deposits to the fund during those years, but there is no minimum deposit requirement.
If the fund manager does not certify a tax exemption in two consecutive fiscal years, the
minimum deposit requirement recommences after the second such year.5
Investment in bonds
The fund manager must invest all amounts deposited to the investment fund in United
States government bonds, Ohio bonds, or bonds of Ohio municipal corporations, schools,
townships, or counties. Upon maturity of the bonds, the amount of the principal investment
must be returned to the investment fund for reinvestment by the fund manager. Interest
earnings may, at the discretion of the fund manager, be returned to the investment fund for
reinvestment or transferred to the subdivision’s tax relief fund.6
Report to county budget commission
A subdivision that establishes an investment fund must annually report to the county
budget commission the subdivision’s eligible receipts for the second preceding fiscal year and
the subdivision’s deposits to its investment fund for the preceding fiscal year. The report must
be submitted by July 15 or, in the case of Cincinnati (whose fiscal year aligns with the calendar
year), January 15. The report may be incorporated into the subdivision’s tax budget which,
under continuing law, must be submitted to the county budget commission by the same date.
Within 30 days after receiving the report, the county budget commission must
determine whether the subdivision complied with the bill’s deposit requirements and notify the
subdivision of its determination. If the county budget commission determines that the
subdivision’s deposits were less than the amount required, the subdivision has a 30-day period
to correct the deficiency. If the subdivision does not deposit the required amount within the
grace period, the commission must certify the name of the subdivision and the amount of the
deficiency to the Tax Commissioner.7
In general, a county budget commission is comprised of county officials and charged
with reviewing local budgets and tax levies.8
5 R.C. 5705.76(D) and (E).
6 R.C. 5705.76(F).
7 R.C. 5705.76(G) and (H).
8 R.C. 5705.27, not in the bill.
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Local Government Fund penalties
The bill requires the Tax Commissioner to withhold a subdivision’s Local Government
Fund (LGF) payments upon receiving notice from a county budget commission that the
subdivision failed to meet the bill’s deposit requirements. The Commissioner must then deposit
an amount equal to the LGF withholdings to the subdivision’s investment fund. LGF payments
to the subdivision resume once deposited amounts equal or exceed the deficiency reported by
the county budget commission.9
Under continuing law, 1.66% of GRF tax receipts are credited monthly to the LGF to
provide revenue to political subdivisions and other local taxing units.10 About 92% of that
money is divided between the undivided local government funds of each county (CULGFs) and
distributed to the county and subdivisions in that county under a formula either prescribed in
state law or adopted by the county budget commission (county CULGF payments). The
remaining money is distributed directly, generally on a per capita basis, to municipalities with a
population of over 1,000 (direct municipal payments) and through supplemental payments to
municipalities below that population threshold and townships based in part on the road miles
in that municipality or township (supplemental township and village payments). Distributions
are made monthly.
The LGF penalties required by the bill are administered similarly to the LGF penalties
imposed under continuing law on subdivisions that collect traffic camera fines. The
Commissioner first withholds any direct municipal payments or supplemental township and
village payments that the subdivision would have otherwise received. Then the Commissioner
notifies the county auditor and county treasurer that county CULGF payments to the
subdivision must stop until further notice. In the case of a county, the Commissioner must
notify the county auditor and county treasurer of that county. In the case of a municipal
corporation or township, the Commissioner notifies the county auditor and county treasurer of
each county within the territory of which the municipal corporation or township is located. The
state’s monthly distributions to the CULGF of each such county are reduced by the amount of
payment the subdivision would have otherwise received from that fund.
Once the Commissioner deposits an amount to the subdivision’s investment fund that
equals or exceeds the deficiency reported by the county budget commission, the Commissioner
must reinstate standard direct payments, supplemental payments, and state CULGF
distributions, as applicable to