Bill could help Goodyear; Company calls proposed extension of tax credit `equitable solution' to problem created in '05 change

BYLINE: Dennis J. Willard, Beacon Journal Columbus Bureau

A provision in the $52 billion two-year state budget passed Tuesday by the Ohio House could provide a financial incentive to help keep Goodyear in Akron.

In the next 90 days, the Ohio General Assembly will look at a tax credit extended to about 50 large companies in Ohio that reduces their Commercial Activities Tax (CAT) based on net operating losses beginning in 2010.

Goodyear Tire & Rubber Co. did not make the list in 2005, and now lawmakers will consider extending the credit to the company.

The credit lets companies partially reclaim unused net operating loss deductions against the CAT they pay to the state.

The 50 companies on the current list will receive about $950 million over 20 years in tax credits starting in 2010. The cost to the state to extend the credits to companies like Goodyear could be $1 billion during the same period, according to the Ohio Department of Taxation.

The issue was worked out during negotiations between Pari Sabety, Gov. Ted Strickland's budget director; state Rep. Matthew Dolan, R-Novelty, the House finance chairman; state Rep. Michael Skindell, D-Lakewood, top ranking Democrat on the finance committee; and Scott Borgamenke, the House Republicans' chief of staff.

But the parties involved may have different takes on what revisiting the tax credit means.

Borgamenke said companies use different accounting methods to track operating losses and as a result the criteria established in 2005 mean some corporations like Goodyear did not qualify for the credit.

``This problem surfaced two years ago, late in the process,'' Borgamenke said. ``We put in temporary language in the current budget bill to send the right signals to the right people to acknowledge there is a problem.''

Keith Dailey, a Strickland spokesman, said the administration agrees with lawmakers that a discussion is needed.

``There is some concern that certain companies may have an unfair advantage through this exemption and that's why the legislative leadership and the administration agreed to take a look at the situation and talk about it,'' Dailey said.

Skindell said prior to the CAT being enacted in 2005 many large companies could carry net operating losses forward as a writeoff against the corporate franchise tax, which was eliminated under the tax reform.

``This sends a message to Goodyear at a time when the company is making corporate decisions that the Ohio General Assembly is serious about addressing the issue,'' Skindell said.

Goodyear spokesman Keith Price said: ``When legislators replaced the franchise tax with a CAT tax they inadvertently eliminated the ability of a few companies from taking the tax credits. Goodyear, due to technical accounting procedures, was one of these companies.''

He added: ``This legislation is an equitable solution and would restore the ability of these companies, including Goodyear, to take the inadvertently eliminated tax credits that they had previously used.''

Local lawmakers have been working with House leaders and the administration to revisit the tax credits for Goodyear.

State Rep. John Widowfield, R-Cuyahoga Falls, said lawmakers want to ensure all companies are being treated fairly.

``Anything we can do to support a major employer in our area. Anything we can do to help Goodyear in Summit County and remain in Akron, I support 100 percent,'' Widowfield said.

The timing may be right for a quick agreement.

On Tuesday, Ohio's bipartisan government got downright chummy as Republicans and Democrats in the Ohio House regaled one another for more than an hour before voting 97-0 to pass Strickland's budget to the Ohio Senate for further hearings.

Representatives from each party stood and spoke about the spirit of cooperation that dominated budget talks this year in comparison to the acrimonious debates of years past.

In reality, the narrow divide in the Ohio House, where the GOP holds a 53-46 voting margin -- along with the first Democratic governor in 16 years -- created a situation where the parties had to either find common ground or allow the process to degenerate into gridlock.

Common ground won.

Democrats, particularly Strickland, were able for the first time in more than a decade to address some of their core constituent needs, including increasing eligibility for uninsured children to receive health coverage in families up to 300 percent of the federal poverty line.

The governor was also able to push through a plan to securitize the tobacco settlement money, meaning cash in on a lump sum payment rather than receiving installments for years.

Strickland wants to use the cash to pay for the state's contributions to the school facility construction program and use the money that would have been spent on debt retirement to pay for a property tax reduction for senior citizen homeowners.

Republicans were not about to oppose a tax break for the elderly, but they were able to put their signature on the idea.

Dolan said Republicans took steps to ensure fiscal responsibility in the plan by mandating the tax break would not begin until the state cashed out the tobacco settlement.

At the same time, Republicans were able to restore funding for EdChoice, the statewide voucher program, and curb efforts to place a moratorium on new charter schools in the state -- both issues near and dear to House Speaker Jon Husted, R-Kettering.

Husted was also successful in earmarking $100 million in state funds to provide college scholarships to students pursuing careers in the STEM (Science, Technology, Engineering and Mathematics and Medicine) fields and an additional $20 million for similar high school academies.

Republicans and Strickland compromised by placing a freeze on public university tuitions in the 2009-2010 school year.

Husted and his colleagues also passed Strickland's budget for primary and secondary education with few changes, noting they believed the governor's funding plan was constitutional.

One provision in the bill affects Summit County by changing the qualifying criteria for counties eligible to issue securities to operate and maintain an arena or convention center, but it is unclear whether the new law could be used to help finance a soccer arena.

State Rep. Peter Ujvagi, D-Toledo, said he was told language he created to give Toledo the authority to use a bed tax on hotels and motels to build a multipurpose building downtown was too narrow and potentially unconstitutional so he extended the qualifications to all large counties in Ohio, including Summit and Cuyahoga.

A number of local state lawmakers, including state Rep. Brian Williams, D-Akron, contacted by the Beacon Journal said they were not aware the change included Summit County.

Borgamenke, the House chief of staff, said ``no one talked to us about this affecting Summit County. But we did talk to Toledo.''

Dennis J. Willard can be reached at 614-224-1613 or dwillard@thebeaconjournal.com.