Navigating Change & Opportunity After The One Big Beautiful Bill Act
As the year came to a close, Ohio taxpayers and advisors faced a rapidly evolving landscape in state and local taxes. The SALTrends Q4 webinar, led by Sara Goldhardt and John Petzinger, provided an expert review of the latest legislative changes, court cases, and planning opportunities, especially in light of the sweeping One Big Beautiful Bill Act (OBBBA). This article distills the webinar's key insights, focusing on Ohio tax updates and practical tax planning strategies for 2026 and beyond.
Read Also: Major Changes To The SALT Cap: What Taxpayers Need To Know For 2025 & Beyond
The One Big Beautiful Bill Act: Catalyst For Change
The One Big Beautiful Bill Act (OBBBA), passed in July 2025, is reshaping the tax landscape at the federal and state levels. The OBBBA's provisions have prompted a wave of state legislative responses, with some states choosing to decouple from several federal tax benefits to protect their revenue base.
Key Federal Provisions Affecting State Income Taxes
- Bonus Depreciation: While the OBBBA restored 100% bonus depreciation at the federal level, many states have opted out, citing concerns about budgetary impact and timing. This means businesses must carefully track differences between federal and state depreciation rules when planning investments.
- R&D Expenditures: The treatment of research and development expenses remains a hot topic. Although the federal changes are favorable, many states do not conform, requiring taxpayers to review state-specific guidance for deductions and add-backs.
- Business Interest Expense (Section 163J): States are also decoupling from the more generous federal limits on business interest deductions, impacting the calculation of taxable income for many companies.
Multistate Income Tax Trends
A number of states have reduced both individual and corporate income tax rates in recent years, including a number of states that have moved or will move to a flat tax rate (e.g., Arizona, Iowa, Mississippi, Georgia, Idaho, Louisiana, and Kansas).
In addition, a number of states have continued to implement bright-line nexus standards and attempted to “update” their interpretations of Public Law 86-272 to designate many common internet activities (e.g., interactive chats) as falling outside the protections of that law and therefore subjecting an out-of-state company to the state's income tax. These updates have sparked litigation in a number of states that bears watching.
States continue to refine their elective pass-through entity taxes in order for business owners to take advantage of IRS guidance that allows such taxes to avoid the federal limitation on itemized state and local tax deductions (the “SALT Cap”). While the OBBBA loosened the SALT Cap in ways that will help many individuals, many business owners will still be able to maximize their SALT deduction only by electing into these regimes.
Ohio's Flat Tax Revolution: Simplifying State Local Taxes
One of the most significant changes found in Ohio's most recent budget bill is Ohio's move to a flat income tax rate. In 2025, the top rate decreased to 3.125%, and in 2026, the rate on all income over $26,500 is 2.75%. This change streamlines tax calculations for most residents and businesses, making Ohio one of eight states to adopt a flat tax in recent years. The budget bill made other income tax changes as described below.
- Business Income: The Ohio business income tax rate remains at 3.0% in 2026, slightly higher than the new flat rate for non-business income, although the business income deduction is unchanged.
- Inflation Indexing: Annual inflation indexing for tax brackets and exemption amounts is frozen for 2025 and 2026.
- Exemption Limits: For taxpayers with modified AGI exceeding $750,000 in 2025 (and $500,000 going forward), personal, spousal, and dependent exemptions are disallowed, as is the joint filing credit.
- School District Income Tax: Estates will no longer be subject to the tax beginning in 2026, which is the case under prior law in districts with a traditional tax base.
- Municipal Income Tax: The statute of limitations for refunds is updated to align taxpayers with city limitations on audits and assessments.
Watch The On-Demand Webinar: Multistate Income Tax: Year In Review & 2026 Outlook
New Legislative Proposals
There are additional bills that have been introduced in the Ohio legislature that could further alter the income tax landscape. This includes bills that would:
- Exempt overtime wages from state income tax.
- Exempt tips from state, school district, and local income tax.
- Allow a refundable credit for hiring certain veterans and their spouses.
- Exempt capital gains from state income tax.
Hemp & Sports Gaming Taxes
Bills have been introduced to regulate and tax intoxicating hemp products and to increase the sports gaming tax rate from 20% to 36% for operators.
Appeal Procedures
House Bill 613 would reform tax appeal procedures before the Ohio Department of Taxation and the Board of Tax Appeals, introducing deadlines and formalized settlement processes. The Board would be required to issue decisions within one year of a hearing.
Notable Ohio Tax Cases
Commercial Activity Tax (CAT)
There are two cases pending at the Ohio Supreme Court (Straub Nissan and Perrigo) that could provide important guidance to taxpayers about the sourcing of sales and the definition of gross receipts. In Straub Nissan, the Ohio Tax Commissioner seeks to tax the sale of cars by a West Virginia dealership to Ohio resident customers. In Perrigo, the Ohio Tax Commissioner seeks to treat certain charge backs between a manufacturer and wholesaler as a non-deductible expense rather than a price adjustment.
Board of Tax Appeals
Issues to watch at the Ohio Board of Tax Appeals include disputes about business income (including whether the status of a business as a C corporation disqualifies the owner's gain from business income treatment), individual Ohio residency, the Tax Commissioner's audits of CAT credits for qualified research expenses, and the scope of “gross receipts” for CAT purposes similar to the Perrigo case.
For a deeper dive into these changes and their implications, the SALTrends Q4 webinar recording is an invaluable resource for Ohio taxpayers and advisors.
Final Thoughts: Optimizing State Local Taxes After The One Big Beautiful Bill Act
The passage of the One Big Beautiful Bill Act and the ever-changing Ohio legislative landscape make it imperative that taxpayers and advisors be informed and proactive. By leveraging the latest insights and tax planning strategies, Ohio businesses can navigate complexity, seize opportunities, and ensure compliance in the dynamic world of state and local taxes.
Don't miss your chance to catch up. Watch the on-demand SALTrends Q4 webinar and stay ahead when it comes to state and local taxes in Ohio. Contact GBQ's state and local tax professionals for additional insights and assistance.
Want to learn more about how the One Big Beautiful Bill is impacting businesses? Check out these resources:
Understanding The 163(j) Limitation In The Context Of The One Big Beautiful Bill
Opportunity Zones Evolve: Comparing TCJA & OBBBA Legislation For Investors & Communities
