On April 1st, the Ohio House of Representatives released its substitute version of Ohio’s biennial operating budget, HB 96. House Speaker Matt Huffman (R-Lima) and Finance Chairman Brian Stewart (R-Ashville) held a press conference prior to the substitute bill being accepted by the Finance Committee. Chairman Stewart said of the Ohio House budget process, “We’ve done our own version of DOGE,” referring to the federal government’s efforts within its Department of Government Efficiency. He additionally said the House version of the bill contains “no tax increases.”
As is traditional in Ohio’s operating budget process, this raft of changes will be augmented by a second round of amendments via an omnibus amendment, expected to be floated next week. Chairman Stewart said amendment requests for the omnibus are due at noon on April 3rd with expected bill passage to the Senate on April 9th.
Significant tax-related provisions in the House substitute version of H.B. 96 include the following:
Property Tax –
o Excessive Real Property Tax Increases: Requires public school districts to submit their 5-year projections of revenues and expenditures to their respective county budget commissions. The county budget commission is then required to reduce property tax rates for any school district whose general operating budget carry-over balance (i.e., cash on hand) exceeds 25% of expenditures in the previous fiscal year. The reduction amount shall be made in order to reduce property tax collections by the amount of the excess carry-over balance beyond 25%. Additionally, school districts whose levies have been reduced by this method are exempted from the current law requirement that they levy at least 20 mills to receive state aid.
o School District Property Tax Challenges: Modifies the requirements governing when political subdivisions can file property tax complaints.
o State Community College Levies: Allows for state community colleges to propose tax levies for operating purposes with voter approval.
o Exemption Application Errors: Allows churches, municipal corporations, and townships to apply for abatement of delinquent property taxes without regard to regular limitations of current law.
Marijuana Tax – Eliminates the Governor’s proposed increase of the adult use marijuana excise tax from 10% to 20%, thereby maintaining the voter-approved, current law tax rate. It does apply the 10% tax rate to illegal sales of marijuana by unlicensed sellers, too. Further, the bill earmarks the marijuana tax revenue as follows:
o 80% to the state’s General Revenue Fund (GRF)
o 20%, for five years, to the Host Community Cannabis Fund for municipalities and townships that have adult-use dispensaries
The existing funding stream set-asides in the voter-approved statute of 2024 and the proposed allocations by Gov. DeWine to other specific purposes will not be implemented under the new version of the budget bill.
Cigarette Tax –
o Eliminates the Governor’s proposed cigarette and tobacco products tax Increases.
o Expands the authority to levy a county cigarette tax for arts and cultural districts in Summit County.
Sports Gaming Tax & Sports Facilities – Eliminates the Governor’s proposed increase to the sports gaming tax rate. Rather than funding sports facilities with the sports gaming tax increase proposal, the House instead allows up to 30% of a “major sports facility” to be funded by the state of Ohio, so long as the professional sports franchise using the facility contributes at least 50% of the project cost. The Treasurer of State is authorized to sell up to $600 million in state revenue-backed bonds as a financing mechanism which will, according to the House’s press conference, be paid off with revenues from the major sports facility project itself.
Pass-Through Entity Tax – Allows an electing pass-through entity tax credit to be claimed by a pass-through entity that owns another pass-through entity that has paid the Electing Pass-through Entity tax or the traditional pass-through entity tax.
Commercial Activity Tax – Eliminates the Governor’s proposed change to the commercial activity tax (CAT) credit for net operating losses (NOL) accrued under the now repealed corporate franchise tax from a refundable credit to a nonrefundable credit after calendar year 2029.
Sales & Use Tax –
o Watercraft: Removes the Governor’s proposed requirement for nonresident purchasers of watercraft or outboard motors to remit a 6.0% sales tax to the state.
o Interest on Refunds: Eliminates the interest on refunds of county sales and use tax but continues to allow interest for refunds of sales and use tax for transit authorities.
Municipal Income Tax –
o Space Force: Clarifies that pay to members of the United States Space Force may be deducted from municipal income tax.
o Municipal Tax Refund Period: Allows a taxpayer who got an extension of the return date for the municipal income tax to file a refund claim within three years after the extended due date.
Personal Income Tax Deductions & Credits –
o Pregnancy Resource Center Deduction: Authorizes an up to $750 personal income tax deduction for contributions to certain pregnancy resource centers.
o Teacher’s Deduction: Increases from $250 to $300 per tax year the deduction qualifying Ohio educators use for professional development and classroom material expenses.
o Home School Tax Credit: Modifies the home school expense tax credit from $250 per return to $250 per qualifying student. Also, repeals the personal income tax credit for tuition paid to a nonchartered, nonpublic school beginning in 2026.
o Child Tax Credit: Eliminates the Governor’s proposal creating a refundable income tax credit of up to $1,000 for dependents under the age of 7 for certain Ohio income taxpayers.
School District Income Tax – Maintains the Governor’s proposal to repeal the school district income tax on estates.
Severance Tax – Reduces the severance tax rate on coal from ten cents per ton to eight cents per ton.
Hospital Franchise Fee – Continues to utilize the Governor’s increased Hospital Franchise Fee (sometimes called the “bed tax”) proposal from the current rate of approximately 4.5% to 7.0%.
Administrative Provisions –
o Refund Recovery by the Ohio Department of Taxation: Extends from three to six years the length of time which the Department of Taxation may recover refunded taxes from state-administered taxes levied by local subdivisions.
o Gaming Withholding Rate: Maintains the Governor’s proposed reduction to the income tax withholding rate on gambling winnings from 4.0% to 3.5% to reflect Ohio’s current top marginal rate.
o Penalty & Interest Forgiveness: Retains the Governor’s authorization for the tax commissioner to forgive penalties and interest charged for failure to pay sufficient estimated income taxes. Also grants general authority to the tax commissioner to refund or forgive penalties charged to taxpayers.
o Electronic Filing: Maintains the authorization for the tax commissioner to require electronic tax filings and payments without adopting rules.
Economic Development –
o TMUD: Removes the current-law sunset date for the Transformational Mixed Use Development tax credit program (TMUD) which was set to expire this year. Allows awards of up to $100 million in credits per fiscal year for FY 26 and beyond.
o CRAs: Allows for amendments of community reinvestment area (CRAs) agreements to extend the term of tax exemptions to a total of 30 years with regards to certain megaprojects.
o Historic Building Rehab Credit: Increases the historic building rehabilitation tax credit cap from $60 million to $90 million per fiscal year instead of the Governor’s proposed cap increase of $120 million. Additionally, the House sub bill deletes the Governor’s proposed refundable income tax credit of up to $120,000 per project for certain owner-occupied historic residential properties. The House proposal also prohibits the Department of Development from using building vacancy or underutilization as part of the criteria for awarding historic rehabilitation tax credits.
o Film Credit: Increases the film and theater tax credit award ceiling from $50 million to $75 million per fiscal year and repeals the film and theater capital improvement tax credit. Maintains the Governor’s proposed method for awarding film and theater tax credits by using a rolling basis rather than a ranking process.
Budgetary Provisions -
o Eliminates the school district tangible personal property tax replacement fund and the local government tangible personal property tax replacement fund. Instead, replacement payments are to be made from the state’s GRF, as proposed by the as introduced bill.
o Maintains the Governor’s proposed increase from $10,000 to $50,000 to the maximum amount of the lead abatement tax credit that can be issued by the Ohio Department of Health director.
o Deletes the Governor’s proposed permissive authority for the director of the Ohio Office of Budget and Management to transfer up to $100,000,000 in FY 26 from the expanded sales tax holiday fund to the housing investment program fund in the Ohio Department of Development.
o Maintains the Governor’s proposed Increase to the Local Government Fund share of monthly GRF tax receipts from 1.70% to 1.75%.
o Repeals the existing Public Library Fund and replaces it with direct GRF appropriations of $485 million in FY 26 and $495 million in FY 27 to be disbursed based on a county’s population.
The 4,400+ page House sub bill version will continue to have public hearings prior to the measure being amended again and moving to the Senate. The Senate will likely pass its version of the budget in early June. A joint House-Senate conference committee will then finalize the budget and send it back to the Governor for his signature. And, perhaps, for some line-item vetoes.
A full summation of changes prepared by the state’s nonpartisan legislative Services Commission can be seen here. The sub bill itself may be viewed on the website of the Ohio House Finance Committee under the April 1, 2025 hearing here.
If you would like to further discuss the contents of this post, please reach out to Brian Perera or any of our ZHF Consulting professionals.