A new joint legislative committee charged with periodically reviewing state tax expenditures has been appointed. The Tax Expenditure Review Committee includes Sens. John Eklund (R-Chardon), Scott Oelslager (R-North Canton) and Vernon Sykes (D-Akron), according to the Senate Journal. Representing the House on the panel are Reps. Tim Schaffer (R-Lancaster), Gary Scherer (R-Circleville) and John Rogers (D-Mentor-on-the-Lake).
The permanent committee, created in 131-HB9 (Boose), will also include the tax commissioner or the commissioner’s designee. The representative from the Ohio Department of Taxation (ODT) will serve as a non-voting member.
Tax expenditures are provisions like the Historic Preservation Tax Credit that grant deductions, exemptions and credits to specific activities or groups of taxpayers. Under the act, a provision qualifies as a tax expenditure only if all of the following apply, according to the Legislative Service Commission (LSC) analysis of the bill:
- It could reduce revenue to the state’s General Revenue Fund.
- It may be legislatively changed or repealed.
- The attribute exempted from tax would otherwise be included as part of that tax’s defined base.
- It is not subject to an alternate tax.
There are 128 tax expenditures that satisfy this definition. The committee must establish a schedule for reviewing every tax expenditure at least once every eight years.
According to the Ohio Revised Code, the committee will review multiple factors to determine the effectiveness of a tax expenditure, including the following:
- The number and classes of persons, organizations, businesses or types of industries that are benefiting from a tax expenditure.
- The fiscal impact of the tax expenditure on state and local taxing authorities.
- Public policy objectives that might support the tax expenditure, which include the sponsor’s intent in proposing the tax expenditure, effects on economic development and growth or retention of high-wage jobs in the state, or aiding community stabilization.
- Whether the objective of a tax expenditure could have been accomplished through the use of appropriations.
- The extent to which the tax expenditure is more expansive than intended and creates negative effects or an unfair competitive advantage for its recipient.
- Potential negative effects on a population when terminating a tax expenditure.
The Tax Expenditure Review Committee must prepare a report by July 1 of every even-numbered year while in existence, detailing its findings and recommendations.