Industry Insights

Refund Opportunity for Ohio Taxpayers

March 2018
Author:  Ken Taylor

Ken Taylor

Senior Managing Consultant

SALT Services

201 N. Illinois Street, Suite 700
P.O. Box 44998
Indianapolis, IN 46244-0998 (46204)


New Ohio legislation may provide refund opportunities to Ohio taxpayers who own 20 percent or more of a pass-through entity.

Ohio Senate Bill 8, signed into law December 22, 2017, amended Ohio Revised Code Section 5733.40 to include, as deductible, payments constituting distributive share of income for purposes of Ohio small business income deduction compensation, along with guaranteed payments made by a professional employer organization (PEO) on behalf of a pass-through entity (PTE) within the PEO. This change is retroactively applied to any tax year beginning on or after January 1, 2013. There’s no change to the ownership requirements under Revised Code §5733.40(A)(7). An investor must own 20 percent of the PTE that either makes the payment or uses a PEO to make the payment on its behalf.

Prior to the amendment, Ohio Revised Code §5733.40 permitted individuals who own 20 percent or more of a business organized as a sole proprietorship or PTE, i.e., S corporation, partnership or multimember limited liability company, to deduct business income, wages or guaranteed payments from the business. Business owners who used a PEO for payment of wages were not permitted to include those wages in the Ohio business income deduction.

The deadline to file amended returns for the 2013 tax year is April 15, 2018.

BKD can assist taxpayers affected by the amended code. Specifically, BKD can assist with filing the appropriate Ohio tax forms for tax years 2013 through 2016 by:

  • Preparing amended Ohio tax returns if tax was overpaid on an original return
  • Preparing refund claims if the tax was paid after receiving an Ohio notice
  • Preparing and filing petitions for reassessment for taxpayers that received a notice of assessment within the appropriate period of limitations stated in the notice of assessment

If you are affected, contact your trusted BKD advisor or Partner Bob Johnson.

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