Ohio Franchise Tax

The Ohio budget bill HB66 phases out the Ohio franchise tax for corporations subject to the Commercial Activities Tax over five years beginning in 2006. In 2006 corporations will owe 80% of the calculated tax or 100% of the minimum tax, which ever is greater. If a nonrefundable credit is available. the carryover is calculated before the 80% is applied. If a refundable credit is available, the credit is not included in the 80% calculation. In 2007 corporations will use 60%. In 2008 corporations will use 40%. In 2009 corporations will use 20%. In 2010 and thereafter, corporations subject to the commercial activities tax will be exempt from the franchise tax. A credit for unused net operating losses in excess of $50,000,000 after 2010. Any entity that elects to be taxed as a corporation for federal purposes is a corporation for franchise tax purposes.

The credit for purchases of new equipment is changed. The equipment must be purchased prior to June 30, 2005 and installed no later than June 30, 2006. The budget bill requires that taxpayers file a notice to claim this credit by September 30, 2005 with the Department of Development. No credit or carryover may be claims for any taxable year ending after June 30, 2006. Any unused credit may be converted to a grant administered by the Department of Development. Taxpayers must apply this grant against tax liabilities after allowing for all nonrefundable credits but prior to refundable credits.