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Bill would make income tax credit partially refundable for Ohioans
KEITH ARNOLD
Special to the Legal News
Published: June 16, 2021
A Democratic bill in the Ohio House of Representatives would make the state’s earned income tax credit, or EITC, partially refundable in an effort to assist working Ohioans who are in poverty.
The impact of making 10 percent of the state’s tax credit also encourages work, said Lakewood Rep. Michael Skindell, one of two joint sponsors of House Bill 59.
“A 10 percent refundable state EITC would have a significant impact on the long-term economic well-being of our low- and moderate-income wage earners and our local and state economies,” he said, citing partisan Policy Matters Ohio. “Research has found that EITCs increase workforce participation among eligible families and that the refunds help asset building in that families use the refunds to pay off debt, educational expenses and securing decent housing.
Additionally, he cited a recent study that found that a refundable credit would significantly help families in rural counties.
“The fact that Ohio’s EITC is not refundable makes it benefit a relatively small portion of working-poor families in the state,” Skindell continued. “Two significant tax credits that go to businesses in Ohio are refundable ones––the historic building rehabilitation credit and the job retention tax credit, yet the state’s EITC is not.
He said 26 states have credits that are refundable.
The Ohio Legislature first enacted an EITC in 2015. At the time, the state credit equaled 10 percent of the federal EITC and was applied to the state’s adjusted gross income. It was non-refundable and resulted in only a reduction or elimination of tax liability.
Skindell explained that in 2019 under the State Transportation Budget, lawmakers made some updates to the state EITC––increasing it from 10 percent to 30 percent and eliminating the income cap.
“The legislature kept the non-refundability of the credit (however),” he said. “Despite these changes, Ohio’s EITC remains one of the weakest in the nation.”
The bill makes the state EITC partially refundable, such that if the credit amount exceeds
the taxpayer’s liability, the taxpayer receives 10 percent of the federal EITC as a refund from the state, analysis by the Ohio Legislative Service Commission found.
The remaining portion of the state EITC, equal to 20 percent of the federal EITC, remains nonrefundable, and the modified credit applies to taxable years ending on or after the modification’s effective date.
To qualify for the federal credit, the taxpayer’s earned income and adjusted gross income must fall below a specified threshold. For 2021, those thresholds are $15,980 for taxpayers without qualifying children and $21,920 if married filing jointly; $42,158 for taxpayers with one qualifying child and $48,108 if married filing jointly; $47,915 for taxpayers with two qualifying children and $53,865 if married filing jointly; or $51,464 for taxpayers with three or more qualifying children and $57,414 if married filing jointly.
Analysis found that the credit amount is phased out as a person’s income increases. Additionally, the taxpayer must also meet various other eligibility requirements, including limits on investment income, minimum and maximum ages if qualifying without children and qualifications for qualifying children.
Columbus Rep. Erica C. Crawley is Skindell’s fellow joint sponsor of the bill, which awaits further consideration by Ways and Means Committee members.
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