The Senate Ways and Means Committee started hearings Wednesday on tax-law cleanup from the biennial budget and plans to pass the measure soon, according to Sen. Bob Peterson (R-Sabina), the committee chairman. 

The final version of HB64 (R. Smith) inadvertently turned an intended tax cut into a temporary tax increase for some small firms under the state’s small business exemption. Lawmakers created a 3 percent, flat-rate tax for small business income above $250,000, the threshold for the small business exemption. But in 2015, taxpayers can only exempt 75 percent of income up to $250,000, and application of the 3 percent rate on the last 25 percent could represent a tax increase versus application of the usual graduated rates. 

Sen. Bill Beagle’s (R-Tipp City) SB208 fixes this error by applying the graduated rates to the final 25 percent of income up to $250,000. The problem goes away in 2016, when a full 100 percent of small business income up to $250,000 is deductible. 

Beagle told Sen. Larry Obhof (R-Medina) that the bill also should simplify the filing process, meaning there’ll be greater participation among business owners in claiming the deduction, leading to greater tax relief. 

Peterson said after the hearing he expects a vote on the bill in two weeks.