OFDA Legislative Update
State Budget Enacted
Governor Taft signed into law the state's biennial budget, H.B. 66, which will fund state government from July 1, 2005 through June 30, 2007. There were several provisions included in the budget which affect funeral service. These changes are:
1. Tax Changes
Business Taxes received a major overhaul in the budget with the Corporate Franchise Tax being phased-out over five years at a rate of approximately 20% per year and the Tangible Personal Property Tax being phased-out over a four year period starting in tax year 2006, ending with no tax due in 2009. This phase-out includes furniture and fixtures, machinery and equipment, and inventory. The Corporate Franchise Tax and Tangible Personal Property Tax are replaced by a new Commercial Activity Tax (CAT). The CAT will be fully phased-in over five years. When fully phased-in, the rate will be .26% on gross receipts in excess of $1,000,000. Businesses with gross receipts of $150,000 $1,000,000 will pay a minimum tax of $150 and businesses with receipts of less than $150,000 are not subject to the CAT. Ohio businesses (including sole proprietors with taxable gross receipts of $150,000 or more) must register with the Ohio Department of Taxation by November 15, 2005 and pay a one-time fee of $15 or $20 for most taxpayers.
Individual income tax rates will be cut 4.2% for all tax brackets for tax year 2005 and an additional 4.2% in each of the years 2006-2009 for a total rate cut of 21%. The tax on trust income has been made permanent.
Two years ago as part of the state budget, the state sales tax was increased from 5% to 6%. It was scheduled to expire on June 30, 2005. However, the new state budget sets the sales tax at 5.5%. The vendor discount will remain at .9% for timely filed and paid returns.
2. Consolidation of State Boards
The budget consolidates 19 state boards within the Ohio Department of Commerce and the Ohio Department of Health. The Board of Embalmers and Funeral Directors is one of seven boards to be consolidated within the Department of Commerce not later than July 1, 2006. The stated reason for the consolidation relates to problems that have occurred with certain boards over the last couple of years and a desire by the Taft Administration and the Legislature to streamline the management and oversight of the boards. The legislation does not change the make-up of the seven member Board of Embalmers & Funeral Directors.
The budget establishes a transition team to develop a plan to ensure the smooth and timely consolidation of the boards into the respective departments. The transition team is required to address the details of the consolidations, identifying necessary statutory changes and working with the Office of Budget and Management to develop budgets for the respective departments and the consolidated boards and commissions. The transition team shall submit a report containing recommendations and the details for the consolidations not later than December 31, 2005.
3. Birth Certificate/Death Certificate Increase
The budget includes a provision authorizing the Ohio Department of Health to increase the cost of birth and death certificates from $15 to $16.50. This increase applies to copies of these documents from the state which may be different than that charged by local departments of health.
Other Issues Affecting Funeral Service
1. S.B. 26 (Phase-in of Destination-Based Sourcing of Sales Tax Collection)
On June 2, 2005 Governor Taft signed into law S.B. 26 which phases in the destination-based sourcing of sales for small businesses. The new sales tax sourcing provision require Ohio retailers that sell and then ship their goods across county lines in Ohio to charge the sales tax rate that exist in the county where the merchandise will be delivered, not the rate where it is sold. The change will not effect the vast majority of retailers that sale merchandise that is carried away by customers (over the counter sales), or delivered to customers at a location in the same county as the retailer's place of business.
Previously, July 1, 2005 was the date retailers were required to implement the sourcing change. However, S.B. 26 phases in the destination sourcing requirements as follows:
a. If the vendor has taxable delivery sales in excess of $30 million in 2005, the vendor must change to destination sourcing on May 1, 2006.
b. If the vendor has taxable delivery sales in excess of $5 million in 2006, the vendor must change to destination sourcing on May 1, 2007.
c. All other vendors must convert to destination sourcing no later than January 1, 2008.
Any vendor may change to destination sourcing prior to the date on which they are required to do so, but once a vendor changes, it can not go back to the previous sourcing method. Ohio vendors are eligible for partial compensation for their costs associated with converting to destination sourcing.
The reason for the destination sourcing change is to bring Ohio into compliance with the terms of the Streamlined Sales Tax Project. The project is a multi-state initiative to make sales tax laws, rules, and systems more uniform across the states. The ultimate goal of the project is to encourage out-of-state retailers, primarily catalogue and internet companies, to collect the sales tax of Ohio and other states. The State estimates it will reduce the estimated $600 million per year that Ohio's state and local governments lose in uncollected tax revenue on these types of sales. In an effort to assist businesses in implementing the new system, the Ohio Department of Taxation has developed a free, web-based system (www.tax.ohio.gov) that will enable retailers to inquire on-line about an address and/or zip code and obtain the correct sales tax rate to charge.
Another benefit of the small business phase-in is it gives the State of Ohio the opportunity to continue discussions with members of the Streamlined Sales Tax Project to advocate for a small business exemption. While it is uncertain whether a full exemption will happen, the phase-in period provides additional time for this matter to be discussed among the states that are members of the project. The Ohio Funeral Directors Association (OFDA) would like to thank Senator Ron Amstutz (R-Wooster) and Representative Bob Gibbs (R-Lakeville) for their hard work in protecting small businesses.
On June 6, 2005 the Ohio Department of Taxation sent out a notice to Ohio vendors which outlined the destination sourcing sales tax collection method as required by S.B. 26. The OFDA will continue to keep you advised of any further developments with respect to the issue.
2. Funeral Escort Rulemaking
The OFDA has been working with the Ohio Department of Public Safety to update rules relating to funeral escort vehicles. The rules are required to be consistent with Ohio Revised Code Section 4511.451. The revised rules are contained in Ohio Administrative Code Sections 4501-1-01 thru 07. In general, the rules update the terminology with respect to the types of lights that may be used on funeral escort vehicles and motorcycles to facilitate the movement of the funeral procession. Motor vehicles are now authorized to use flashing, rotating, oscillating and/or strobe-type lights. Amber flashing, rotating, oscillating and/or strobe-type lights installed by the manufacturer on all combination cars, funeral hearses and other special funeral escort vehicles will be recognized as being in compliance with Ohio law. All other escort vehicles may be equipped with not less than one nor more than three amber flashing, rotating, oscillating and/or strobe-type lights. Each light shall be amber in color when illuminated, and shall not be less than 21 candle power and shall be visible from a distance of at least 500 hundred feet, and at least one light shall be visible from all sides of the vehicle.
Motorcycles used as funeral escort vehicles, except motorcycles used by public law enforcement officers or other persons sworn to enforce the criminal and traffic laws of the State, shall be equipped with a minimum of two flashing, rotating, oscillating and/or strobe-type lights. The lights shall be placed one on each side of the headlight. Each light shall be amber in color when illuminated and shall not be less than 21 candle power and should be visible from a distance of at least 500 hundred feet from the front of the motorcycle. Additional flashing, rotating, oscillating and/or strobe-type lights may be installed to the side and rear of the motorcycle. The additional lights shall be amber in color when illuminated.
Flashing, rotating, oscillating and/or strobe-type lights on funeral escort vehicles shall not be in operation, except when in actual performance of duty as a funeral escort vehicle to facilitate the movement of a funeral procession.
3. H.B. 235 (Updating of Coroner's Law)
H.B. 235 makes changes to the Coroner's Law and associated provisions of the Death and Fetal Death Certificate Law to require that the rules of the State
Medical Board allow a coroner's investigator who is not a physician to recite facts permitting a physician to pronounce a person dead without a personal examination, and to allow a coroner to practice as an attorney at law in a court except under specified circumstances. The bill requires that the coroner must review the circumstances of a fetal death when a person dies as a result of criminal or other violent means, by suicide, or in any suspicious or unusual manner. Coroners are still required, as physicians are, to complete and sign the medical certificate of death within 48 hours after the death or fetal death. H.B. 235 passed out of the House Judiciary Committee on June 14, 2005, but has not been voted on by the full House.
4. Proposed Revisions to Ohio Law concerning the Instructions for Funerals and Burials
Late last year, the Ohio State Bar Association (OSBA) contacted the OFDA with respect to draft legislation they were preparing concerning instructions for funerals and burials. The OSBA feels there is a trend of more controversies arising relating to funerals and burials and Ohio Law is not adequate to address these issues that can be anticipated to arise. The OFDA has made comments to the OSBA with respect to authorizing a person to provide written instructions concerning the person's funeral and burial. The bill is drafted to make it clear that if no person has been designated to make funeral and burial arrangements, a list of persons prioritized by family relationship will be used to determine who will make funeral and burial arrangements. The draft bill also increases the reimbursement for funeral and burial expenses so that the priority claims are increased from $2,000 to $5,000 and $1,000 to $2,000, respectively.
Recently, there were articles in both The Columbus Dispatch and The Cleveland Plain Dealer that raised the issue of whether Ohio law is adequate in dealing with controversies surrounding the funeral and burial of a deceased. The Ohio State Bar Association is going through its approval process of the draft legislation and has expressed a desire to have the legislation introduced by the time the Legislature comes back in session after Labor Day.
5. Hadley and Cheney Reappointed to State Board
Governor Taft has reappointed John Hadley, a funeral director from Marietta, and Virginia Cheney, a public member from Columbus to the Board of Embalmers & Funeral Directors for terms ending on June 30, 2010.