As Introduced
134th General Assembly
Regular Session S. B. No. 327
2021-2022
Senator Huffman, S.
Cosponsors: Senators Roegner, Cirino, Romanchuk, Lang, Wilson, Antani,
Manning
A BILL
To amend sections 122.17, 122.66, 323.151, 1
3317.021, 3318.011, 5747.02, and 5748.01 of the 2
Revised Code to repeal the state income tax on 3
nonbusiness income with a ten-year phase-out. 4
BE IT ENACTED BY THE GENERAL ASSEMBLY OF THE STATE OF OHIO:
Section 1. That sections 122.17, 122.66, 323.151, 5
3317.021, 3318.011, 5747.02, and 5748.01 of the Revised Code be 6
amended to read as follows: 7
Sec. 122.17. (A) As used in this section: 8
(1) "Payroll" means the total taxable income, or total 9
income that would be taxable if the tax levied under section 10
5747.02 of the Revised Code was still imposed on such 11
compensation, paid by the employer during the employer's taxable 12
year, or during the calendar year that includes the employer's 13
tax period, to each employee or each home-based employee 14
employed in the project to the extent such payroll is not used 15
to determine the credit under section 122.171 of the Revised 16
Code. "Payroll" excludes amounts paid before the day the 17
S. B. No. 327 Page 2
As Introduced
taxpayer becomes eligible for the credit and retirement or other 18
benefits paid or contributed by the employer to or on behalf of 19
employees. 20
(2) "Baseline payroll" means Ohio employee payroll, except 21
that the applicable measurement period is the twelve months 22
immediately preceding the date the tax credit authority approves 23
the taxpayer's application or the date the tax credit authority 24
receives the recommendation described in division (C)(2)(a) of 25
this section, whichever occurs first, multiplied by the sum of 26
one plus an annual pay increase factor to be determined by the 27
tax credit authority. 28
(3) "Ohio employee payroll" means the amount of 29
compensation that is used, or would have been used if the tax 30
levied under section 5747.02 of the Revised Code was still 31
imposed on such compensation, to determine the withholding 32
obligations in division (A) of section 5747.06 of the Revised 33
Code and paid by the employer during the employer's taxable 34
year, or during the calendar year that includes the employer's 35
tax period, to the following: 36
(a) An employee employed in the project who is a resident 37
of this state including a qualifying work-from-home employee not 38
designated as a home-based employee by an applicant under 39
division (C)(1) of this section; 40
(b) An employee employed at the project location who is 41
not a resident and whose compensation is not exempt from the tax 42
imposed under section 5747.02 of the Revised Code, or would not 43
be exempt if that tax was still imposed on such compensation, 44
pursuant to a reciprocity agreement with another state under 45
division (A)(3) of section 5747.05 of the Revised Code; 46
S. B. No. 327 Page 3
As Introduced
(c) A home-based employee employed in the project. 47
"Ohio employee payroll" excludes any such compensation to 48
the extent it is used to determine the credit under section 49
122.171 of the Revised Code, and excludes amounts paid before 50
the day the taxpayer becomes eligible for the credit under this 51
section. 52
(4) "Excess payroll" means Ohio employee payroll minus 53
baseline payroll. 54
(5) "Home-based employee" means an employee whose services 55
are performed primarily from the employee's residence in this 56
state exclusively for the benefit of the project and whose rate 57
of pay is at least one hundred thirty-one per cent of the 58
federal minimum wage under 29 U.S.C. 206. 59
(6) "Full-time equivalent employees" means the quotient 60
obtained by dividing the total number of hours for which 61
employees were compensated for employment in the project by two 62
thousand eighty. "Full-time equivalent employees" excludes hours 63
that are counted for a credit under section 122.171 of the 64
Revised Code. 65
(7) "Metric evaluation date" means the date by which the 66
taxpayer must meet all of the commitments included in the 67
agreement. 68
(8) "Qualifying work-from-home employee" means an employee 69
who is a resident of this state and whose services are 70
supervised from the employer's project location and performed 71
primarily from a residence of the employee located in this 72
state. 73
(9) "Resident" or "resident of this state" means an 74
individual who is a resident as defined in section 5747.01 of 75
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As Introduced
the Revised Code. 76
(10) "Reporting period" means a period corresponding to 77
the annual report required under division (D)(6) of this 78
section. 79
(11) "Megaproject" means a project in this state that 80
meets all of the following requirements: 81
(a) The project requires unique sites, extremely robust 82
utility service, and a technically skilled workforce. 83
(b) The megaproject operator of the project compensates 84
the project's employees at an average hourly wage of at least 85
three hundred per cent of the federal minimum wage under 29 86
U.S.C. 206, exclusive of employee benefits, at the time the tax 87
credit authority approves the project for a credit under this 88
section. 89
(c) The project satisfies either of the following by the 90
metric evaluation date applicable to the project: 91
(i) The megaproject operator makes at least one billion 92
dollars, as adjusted under division (V)(1) of this section, in 93
fixed-asset investments in the project. 94
(ii) The megaproject operator creates at least seventy- 95
five million dollars, as adjusted under division (V)(1) of this 96
section, in Ohio employee payroll at the project. 97
(d) If the project satisfies division (A)(11)(c)(ii) of 98
this section, then, on and after the metric evaluation date and 99
until the end of the last year for which the megaproject 100
qualifies for the credit authorized under this section, the 101
megaproject operator maintains at least the amount in Ohio 102
employee payroll at the project required under that division for 103
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As Introduced
each year in that period. 104
(12) "Megaproject operator" means a taxpayer that 105
undertakes and operates a megaproject. 106
(13) "Megaproject supplier" means a supplier in this state 107
that sells tangible personal property directly to a megaproject 108
operator and meets all of the following requirements: 109
(a) Satisfies both of the following by the metric 110
evaluation date applicable to the megaproject supplier: 111
(i) Makes at least one hundred million dollars, as 112
adjusted under division (V)(2) of this section, in fixed-asset 113
investments in this state; 114
(ii) Creates at least ten million dollars, as adjusted 115
under division (V)(2) of this section, in Ohio employee payroll. 116
(b) On and after the metric evaluation date, until the end 117
of the last year for which the megaproject supplier qualifies 118
for the credit authorized under this section, maintains at least 119
the amount in Ohio employee payroll required under division (A) 120
(13)(a)(ii) of this section for each year in that period. 121
(B) The tax credit authority may make grants under this 122
section to foster job creation in this state. Such a grant shall 123
take the form of a refundable credit allowed against the tax 124
imposed by section 5725.18, 5726.02, 5729.03, 5733.06, 5736.02, 125
or 5747.02 or levied under Chapter 5751. of the Revised Code. 126
The credit shall be claimed for the taxable years or tax periods 127
specified in the taxpayer's agreement with the tax credit 128
authority under division (D) of this section. With respect to 129
taxes imposed under section 5726.02, 5733.06, or 5747.02 or 130
Chapter 5751. of the Revised Code, the credit shall be claimed 131
in the order required under section 5726.98, 5733.98, 5747.98, 132
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As Introduced
or 5751.98 of the Revised Code. The amount of the credit 133
available for a taxable year or for a calendar year that 134
includes a tax period equals the excess payroll for that year 135
multiplied by the percentage specified in the agreement with the 136
tax credit authority. 137
(C)(1) A taxpayer or potential taxpayer who proposes a 138
project to create new jobs in this state may apply to the tax 139
credit authority to enter into an agreement for a tax credit 140
under this section. 141
An application shall not propose to include both home- 142
based employees and employees who are not home-based employees 143
in the computation of Ohio employee payroll for the purposes of 144
the same tax credit agreement, except that a qualifying work- 145
from-home employee shall not be considered to be a home-based 146
employee unless so designated by the applicant. If a taxpayer or 147
potential taxpayer employs both home-based employees and 148
employees who are not home-based employees in a project, the 149
taxpayer shall submit separate applications for separate tax 150
credit agreements for the project, one of which shall include 151
home-based employees in the computation of Ohio employee payroll 152
and one of which shall include all other employees in the 153
computation of Ohio employee payroll. 154
The director of development shall prescribe the form of 155
the application. After receipt of an application, the authority 156
may enter into an agreement with the taxpayer for a credit under 157
this section if it determines all of the following: 158
(a) The taxpayer's project will increase payroll; 159
(b) The taxpayer's project is economically sound and will 160
benefit the people of this state by increasing opportunities for 161
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As Introduced
employment and strengthening the economy of this state; 162
(c) Receiving the tax credit is a major factor in the 163
taxpayer's decision to go forward with the project. 164
(2)(a) A taxpayer that chooses to begin the project prior 165
to receiving the determination of the authority may, upon 166
submitting the taxpayer's application to the authority, request 167
that the chief investment officer of the nonprofit corporation 168
formed under section 187.01 of the Revised Code and the director 169
review the taxpayer's application and recommend to the authority 170
that the taxpayer's application be considered. As soon as 171
possible after receiving such a request, the chief investment 172
officer and the director shall review the taxpayer's application 173
and, if they determine that the application warrants 174
consideration by the authority, make that recommendation to the 175
authority not later than six months after the application is 176
received by the authority. 177
(b) The authority shall consider any taxpayer's 178
application for which it receives a recommendation under 179
division (C)(2)(a) of this section. If the authority determines 180
that the taxpayer does not meet all of the criteria set forth in 181
division (C)(1) of this section, the authority and the 182
department of development shall proceed in accordance with rules 183
adopted by the director pursuant to division (I) of this 184
section. 185
(D) An agreement under this section shall include all of 186
the following: 187
(1) A detailed description of the project that is the 188
subject of the agreement; 189
(2)(a) The term of the tax credit, which, except as 190
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As Introduced
provided in division (D)(2)(b) or (C) of this section, shall not 191
exceed fifteen years, and the first taxable year, or first 192
calendar year that includes a tax period, for which the credit 193
may be claimed; 194
(b) If the tax credit is computed on the basis of home- 195
based employees, the term of the credit shall expire on or 196
before the last day of the taxable or calendar year ending 197
before the beginning of the seventh year after September 6, 198
2012, the effective date of H.B. 327 of the 129th general 199
assembly. 200
(c) If the taxpayer is a megaproject operator or a 201
megaproject supplier, the term of the tax credit shall not 202
exceed thirty years. 203
(3) A requirement that the taxpayer shall maintain 204
operations at the project location for at least the greater of 205
seven years or the term of the credit plus three years; 206
(4) The percentage, as determined by the tax credit 207
authority, of excess payroll that will be allowed as the amount 208
of the credit for each taxable year or for each calendar year 209
that includes a tax period; 210
(5) The pay increase factor to be applied to the 211
taxpayer's baseline payroll; 212
(6) A requirement that the taxpayer annually shall report 213
to the director of development full-time equivalent employees, 214
payroll, Ohio employee payroll, investment, the provision of 215
health care benefits and tuition reimbursement if required in 216
the agreement, and other information the director needs to 217
perform the director's duties under this section; 218
(7) A requirement that the director of development 219