On June 5, the state passed a bill that affects how you claim depreciation on certain assets. As a result, some businesses may need to amend their 2002 tax returns, says Kathy Petrucci, tax manager at Schneider Downs' Columbus office.
"The federal government offers all corporations and businesses a 30 percent credit on depreciation of business assets and tangible property," says Petrucci.
This Depreciation Bonus Act reduces your federal taxable income, which is the base number normally used for state returns. But thanks to a new Ohio law, corporations must add back one-sixth of this depreciation credit to their state taxable income. The remainder is added back in equal parts over the next five years.
"A lot of businesses already took the full 30 percent credit in 2002," says Petrucci. "And now they will have to amend their 2002 returns," or they could face penalties.
Another change in the tax law is designed to help tech companies. According to Paul Naumoff, state and local tax partner with Ernst & Young, Columbus, House Bill 405 will help fledgling tech companies in the product development stage.
"Prior to the bill, a company paid taxes on its actual income or its net worth," says Naumoff.
Tech companies often receive venture capital to keep them running while in the R&D phase, making their net worth and corresponding taxes higher than if they paid taxes on their income. Thanks to House Bill 405 companies that have been in business for at least one year but fewer than three and are conducting research and development will now pay taxes on business income rather than net worth.