Proposed Ohio Legislation to Retroactively Amend the Definition of ‘Business Income’
Senate Bill 247 was recently introduced in the Ohio General Assembly and would retroactively amend the definition of “business income” to specifically include income on the sale of a business if either:
- The sale is treated as an asset sale for federal income tax purposes, e.g., if a Section 338(h)(10) election is made; or
- The seller materially participated in the activities of the business during the year of the sale or during any of the five preceding years. Material participation would be determined by reference to the federal tax regulations that are used to determine whether a taxpayer materially participates in an active trade or business such that he or she is not subject to the passive activity loss limitations on deductions.
The legislation is intended to be a remedial measure to clarify existing law. If enacted, the updated definition of business income will apply to any petition for reassessment or other appeal, and to any transaction currently under audit by the Ohio Department of Taxation. The bill was referred to the Senate Ways and Means Committee on October 6, 2021. BKD will be tracking the bill and how it may affect clients now and in the future.
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