Fix OH refundable EITC reform zero-refund and lost-credit bugs

changelog.d/fix-oh-refundable-eitc-reform-zero-refund.fixed.md

@@ -0,0 +1 @@
+Fixed the Ohio refundable EITC contrib reform, which paid no refundable credit to filers with no Ohio tax liability and zeroed out Ohio's other six non-refundable credits.

policyengine_us/reforms/states/oh/eitc/oh_refundable_eitc_reform.py

@@ -1,13 +1,26 @@
 from policyengine_us.model_api import *
 from policyengine_core.periods import period as period_
+from policyengine_us.variables.gov.states.tax.income.non_refundable_credit_cap import (
+    ordered_capped_state_non_refundable_credits,
+)
 
 
 def create_oh_refundable_eitc() -> Reform:
     """
     Ohio Refundable EITC Reform
 
-    Converts the Ohio Earned Income Credit from a nonrefundable credit
-    to a refundable credit. By default, OH EITC is nonrefundable.
+    Hypothetical reform that pays the Ohio EITC as a fully refundable
+    credit. ORC § 5747.71 currently makes the credit nonrefundable; this
+    contrib module is used for what-if analysis only and does not reflect
+    enacted Ohio law.
+
+    Reading ``oh_eitc_potential`` (uncapped 30% of the federal EITC) yields
+    the full refundable amount for the modeled era (2020+): Ohio's pre-2019
+    "50% of tax when OH taxable income exceeds $20,000" limitation was
+    repealed by HB 62 (eff. 2019-07-03), so the only remaining limit on the
+    nonrefundable ``oh_eitc`` is the ordinary tax-liability cap — exactly
+    what refundability lifts.
+    https://codes.ohio.gov/ohio-revised-code/section-5747.71
     """
 
     class oh_refundable_eitc(Variable):
@@ -19,7 +32,11 @@ class oh_refundable_eitc(Variable):
         defined_for = StateCode.OH
 
         def formula(tax_unit, period, parameters):
-            return tax_unit("oh_eitc", period)
+            # Use the potential (uncapped) OH EITC so the full credit is paid
+            # as a refund; `oh_eitc` is capped at remaining tax liability via
+            # the ordered nonrefundable cap and would zero out the credit for
+            # the low-liability filers refundability is meant to help.
+            return tax_unit("oh_eitc_potential", period)
 
     class oh_non_refundable_eitc(Variable):
         value_type = float
@@ -34,8 +51,6 @@ def formula(tax_unit, period, parameters):
             return 0
 
     class oh_non_refundable_credits(Variable):
-        # NOTE: When reform is active, OH EITC moves from nonrefundable to refundable.
-        # This formula returns the nonrefundable EITC amount (0 under reform).
         value_type = float
         entity = TaxUnit
         label = "Ohio non-refundable credits"
@@ -44,12 +59,32 @@ class oh_non_refundable_credits(Variable):
         reference = (
             "https://tax.ohio.gov/static/forms/ohio_individual/individual/2021/sch-cre.pdf",
             "https://tax.ohio.gov/static/forms/ohio_individual/individual/2022/itschedule-credits.pdf",
+            "https://dam.assets.ohio.gov/image/upload/tax.ohio.gov/forms/ohio_individual/individual/2023/1040-bundle-original.pdf#page=7",
+            "https://tax.ohio.gov/static/webview/view1/UIExtension/1/pdf-view.html?filename=forms/ohio_individual/individual/2024/1040-bundle-original-fi.pdf",
+            "https://dam.assets.ohio.gov/image/upload/v1767095693/tax.ohio.gov/forms/ohio_individual/individual/2025/it1040-booklet.pdf#page=28",
         )
         defined_for = StateCode.OH
 
         def formula(tax_unit, period, parameters):
-            # When reform is active, EITC is refundable, so nonrefundable EITC is 0
-            return tax_unit("oh_non_refundable_eitc", period)
+            # Mirror the baseline's ordered-cap logic but drop oh_eitc from
+            # the non-refundable bucket — it's paid as refundable under this
+            # reform. The previous formula returned only oh_non_refundable_eitc
+            # (= 0 under the reform), which silently zeroed out every other
+            # entry in Ohio's ordered non-refundable list (CDCC, senior,
+            # retirement, non-public school, exemption, joint filing — plus the
+            # adoption credit for pre-2023 years).
+            ordered_credits = parameters(
+                period
+            ).gov.states.oh.tax.income.credits.non_refundable
+            filtered_credits = [
+                credit for credit in list(ordered_credits) if credit != "oh_eitc"
+            ]
+            return ordered_capped_state_non_refundable_credits(
+                tax_unit,
+                period,
+                filtered_credits,
+                "oh_income_tax_before_non_refundable_credits",
+            )
 
     class oh_refundable_credits(Variable):
         value_type = float
@@ -60,6 +95,9 @@ class oh_refundable_credits(Variable):
         reference = (
             "https://tax.ohio.gov/static/forms/ohio_individual/individual/2021/sch-cre.pdf",
             "https://tax.ohio.gov/static/forms/ohio_individual/individual/2022/itschedule-credits.pdf",
+            "https://dam.assets.ohio.gov/image/upload/tax.ohio.gov/forms/ohio_individual/individual/2023/1040-bundle-original.pdf#page=7",
+            "https://tax.ohio.gov/static/webview/view1/UIExtension/1/pdf-view.html?filename=forms/ohio_individual/individual/2024/1040-bundle-original-fi.pdf",
+            "https://dam.assets.ohio.gov/image/upload/v1767095693/tax.ohio.gov/forms/ohio_individual/individual/2025/it1040-booklet.pdf#page=28",
         )
         defined_for = StateCode.OH
 

policyengine_us/tests/policy/contrib/states/oh/child_poverty_impact_dashboard/eitc/oh_refundable_eitc.yaml

@@ -1,28 +1,38 @@
-- name: Case 1 - OH EITC is refundable when reform active
+# The reform makes the Ohio EITC fully refundable. It pays the uncapped
+# potential credit (oh_eitc_potential = rate * federal_eitc), so these tests
+# drive the credit from the federal EITC rather than injecting the capped
+# oh_eitc. The OH EITC rate is 30% of the federal EITC (constant since 2020).
+
+- name: Case 1 - OH EITC is fully refundable (uncapped) when reform active
   period: 2024
   reforms: policyengine_us.reforms.states.oh.eitc.oh_refundable_eitc
   input:
     state_code: OH
-    oh_eitc: 500
+    eitc: 2_000
+    oh_income_tax_before_non_refundable_credits: 0
   output:
-    oh_refundable_eitc: 500
+    oh_eitc_potential: 600  # 2,000 * 0.3
+    oh_eitc: 0  # capped at zero tax liability
+    oh_refundable_eitc: 600  # full potential paid as a refund
     oh_non_refundable_eitc: 0
 
 - name: Case 2 - OH refundable credits include EITC when reform active
   period: 2024
   reforms: policyengine_us.reforms.states.oh.eitc.oh_refundable_eitc
   input:
     state_code: OH
-    oh_eitc: 1_000
+    eitc: 3_000
+    oh_income_tax_before_non_refundable_credits: 0
   output:
-    oh_refundable_credits: 1_000
+    oh_refundable_eitc: 900  # 3,000 * 0.3
+    oh_refundable_credits: 900
 
-- name: Case 3 - OH EITC is 0 when EITC is 0
+- name: Case 3 - OH refundable EITC is 0 when the federal EITC is 0
   period: 2024
   reforms: policyengine_us.reforms.states.oh.eitc.oh_refundable_eitc
   input:
     state_code: OH
-    oh_eitc: 0
+    eitc: 0
   output:
     oh_refundable_eitc: 0
     oh_non_refundable_eitc: 0
@@ -31,17 +41,8 @@
   period: 2024
   reforms: policyengine_us.reforms.states.oh.eitc.oh_refundable_eitc
   input:
-    state_code: CA
-    oh_eitc: 500
+    state_code: TX
+    eitc: 2_000
   output:
     oh_refundable_eitc: 0
     oh_non_refundable_eitc: 0
-
-- name: Case 5 - OH non-refundable credits exclude EITC when reform active
-  period: 2024
-  reforms: policyengine_us.reforms.states.oh.eitc.oh_refundable_eitc
-  input:
-    state_code: OH
-    oh_eitc: 500
-  output:
-    oh_non_refundable_credits: 0

policyengine_us/tests/policy/reform/oh_refundable_eitc.yaml

@@ -0,0 +1,87 @@
+# Tests for the Ohio refundable EITC contrib reform.
+# Regression coverage for https://github.com/PolicyEngine/policyengine-us/issues/8656
+# (the reform previously paid no refundable credit to zero-liability filers and
+# discarded all of Ohio's other non-refundable credits — six in 2023+, seven in
+# 2021-2022 with the adoption credit).
+
+- name: Reform pays the full potential OH EITC as a refundable credit at zero liability
+  period: 2026
+  reforms: policyengine_us.reforms.states.oh.eitc.oh_refundable_eitc_reform.oh_refundable_eitc
+  input:
+    state_code: OH
+    eitc: 5_000
+    # Pin OH tax liability to zero so the nonrefundable cap binds at $0 —
+    # the test is whether the reform pays the credit despite the cap.
+    oh_income_tax_before_non_refundable_credits: 0
+  output:
+    # 2026 OH EITC rate is 30% of the federal EITC: 5,000 * 0.3 = 1,500.
+    oh_eitc_potential: 1_500
+    # The capped credit is 0 at zero liability; the fix pays the uncapped
+    # potential instead, so this contrast is the whole point of the reform.
+    oh_eitc: 0
+    # EITC is moved out of the nonrefundable bucket...
+    oh_non_refundable_eitc: 0
+    # ...and paid in full as refundable, even with no Ohio tax liability.
+    oh_refundable_eitc: 1_500
+    oh_refundable_credits: 1_500
+    # End-to-end: the refund flows through to a negative oh_income_tax
+    # (liability 0 − refundable 1,500 = −1,500), i.e. an actual payout.
+    oh_income_tax: -1_500
+
+- name: Reform preserves other Ohio non-refundable credits (does not discard them)
+  period: 2026
+  reforms: policyengine_us.reforms.states.oh.eitc.oh_refundable_eitc_reform.oh_refundable_eitc
+  input:
+    state_code: OH
+    eitc: 5_000
+    oh_income_tax_before_non_refundable_credits: 800
+    # Force a non-EITC OH non-refundable credit to a positive value to prove
+    # the reform's oh_non_refundable_credits formula does not zero it out.
+    # The bug returned `oh_non_refundable_eitc` (= 0), zeroing out every
+    # other credit in the ordered list.
+    oh_joint_filing_credit: 500
+  output:
+    # Joint-filing credit still applies (capped at liability via the ordered
+    # walk, which has $800 remaining when joint-filing's turn comes).
+    oh_non_refundable_credits: 500
+    # EITC is paid as refundable in full.
+    oh_refundable_eitc: 1_500
+    oh_refundable_credits: 1_500
+
+- name: Reform does not double count when liability partially absorbs other credits
+  period: 2026
+  reforms: policyengine_us.reforms.states.oh.eitc.oh_refundable_eitc_reform.oh_refundable_eitc
+  input:
+    state_code: OH
+    eitc: 2_000
+    # Liability lower than the potential EITC. After EITC is moved to the
+    # refundable bucket, the remaining $300 of liability is consumed by
+    # oh_cdcc (first surviving entry in the filtered ordered list).
+    oh_income_tax_before_non_refundable_credits: 300
+    oh_cdcc: 200
+  output:
+    # 0.3 * 2,000 federal EITC = 600 — paid as refundable regardless of
+    # liability, not capped at the 300 of OH tax remaining.
+    oh_refundable_eitc: 600
+    oh_refundable_credits: 600
+    # CDCC consumes 200 of the 300 remaining liability; no double-counting
+    # against the refundable EITC.
+    oh_non_refundable_credits: 200
+
+- name: Filtered ordered walk caps multiple non-EITC credits at remaining liability
+  period: 2026
+  reforms: policyengine_us.reforms.states.oh.eitc.oh_refundable_eitc_reform.oh_refundable_eitc
+  input:
+    state_code: OH
+    eitc: 0
+    # Multiple OH non-refundable credits compete for the cap; total = 1,200
+    # but only $600 of liability is available, so the ordered walk must
+    # cap the bucket at exactly $600.
+    oh_income_tax_before_non_refundable_credits: 600
+    oh_cdcc: 400
+    oh_exemption_credit: 400
+    oh_joint_filing_credit: 400
+  output:
+    # CDCC fills $400, exemption fills the remaining $200, joint-filing
+    # gets $0 (later in the order). Total caps at the liability of $600.
+    oh_non_refundable_credits: 600