Information Release

CAT 2013-05 - Commercial Activity Tax: Annual Minimum Tax Tiered Structure- Issued October, 2013

This information release is to provide notification to commercial activity tax (CAT) taxpayers of the recent legislative change in Am. Sub. H.B. 59 of the 130th General Assembly to the structure of the annual minimum tax (AMT). It is important to note that, in general, persons with $150,000 or less in taxable gross receipts are not subject to the CAT. Also note that the CAT rate of 0.26% remains unchanged and continues to apply to those taxpayer’s with taxable gross receipts over $1 million (the first $1 million in taxable gross receipts are excluded from the calculation of a taxpayer’s CAT liability with respect to the 0.26% rate component).

All CAT taxpayers pay an AMT which is due with calendar year taxpayers’ annual returns and with quarterly taxpayers’ first quarter returns, due on or before May 10th of each year. Currently, the AMT is $150. For tax periods beginning on January 1, 2014 and thereafter, the AMT will become a tiered structure, and taxpayers will pay an amount that corresponds with their overall commercial activity. The taxpayer will utilize its previous calendar year’s taxable gross receipts to determine the current year’s AMT. Those taxpayers with $1 million or less in taxable gross receipts will pay $150 AMT (no change). The AMT for taxpayers with total taxable gross receipts of more than $1 million but less than or equal to $2 million will be $800; AMT for taxpayers with taxable gross receipts more than $2 million but less than or equal to $4 million, $2,100; and AMT for taxpayers with taxable gross receipts in excess of $4 million, $2,600. Please refer to the chart below.

 

Taxable Gross Receipts

Annual Minimum Tax

CAT

$1 Million or less

$150

No Additional Tax

More than $1 Million but less than or equal to $2 Million

$800

0.26% x (Taxable Gross Receipts - $1 Million)

More than $2 Million but less than or equal to $4 Million

$2,100

0.26% x (Taxable Gross Receipts - $1 Million)

More than $4 Million

$2,600

0.26% x (Taxable Gross Receipts - $1 Million)

Example: ABC, LLC (ABC) is an annual taxpayer. ABC reports taxable gross receipts of $900,000 for the reporting period of January 1, 2013 to December 31, 2013 on its annual return in May, 2014. ABC will pay an annual minimum tax for 2014 of $150 with the 2013 annual return filed in May, 2014.

Example: DEF Corp. (DEF) is a quarterly taxpayer. DEF reports cumulative taxable gross receipts of $3 million for the reporting period of January 1, 2013 to December 31, 2013 (all four quarters of 2013). When DEF files its first quarter 2014 return in May, 2014, the annual minimum tax associated with DEF for 2014 will be $2,100. Assume that on its first quarter 2014 return, DEF reports taxable gross receipts of $1,300,000 for the first quarter of 2014. DEF’s total tax due with that return is $2,880, which includes the $2,100 AMT plus $780 CAT (0.26% x ($1,300,000 - $1,000,000 Exclusion)).

Please contact the CAT Division at 1-888-722-8829 with questions regarding this release or any other CAT matter.