FAQs - Corporation Franchise Tax

When are interest and penalty charged and how are they computed?

Interest on Underpayments and Overpayments:

If a corporation fails to pay the tax due by the due date, interest accrues on the unpaid tax. The period of the underpayment runs from the date the payment was due to the date the payment is made. There is no safe-harbor from interest on the underpayment of the estimated tax.

Interest on franchise tax overpayments runs from whichever of the following dates is the latest until the date the refund is paid:

  • the date of payment,
  • the ninetieth day after the date the franchise tax report was required to be filed, or
  • the ninetieth day after the date the franchise tax report was filed.

Interest on an overpayment resulting from a net capital loss carry back is payable from the due date plus extensions for the report in which the loss arises (rather than from the report year to which the loss is carried back).

Penalties for Late Payment, Failure to File or Late Filing:

  • Penalty may be imposed for failure to timely pay the tax (including estimated tax). The penalty imposed may not exceed 15 percent of the delinquent payment.
  • Penalty may be imposed for failure to file or to timely file a report. The penalty imposed may not exceed the greater of (i) $50 per month up to $500, or (ii) 5 percent per month of the tax due shown on the report up to 50 percent.
  • Additional penalties may be imposed for filing a fraudulent report and/or for filing a fraudulent refund claim.

Penalty Safe-Harbor for Estimated Payments:

The following safe-harbor applies to penalty (but not interest) on underpayment of estimated tax.

  • With respect to estimated payments, the R.C. 5733.28(A)(2) failure to pay penalty applies to two periods: (i) “any period of delinquency ending prior to the first day of June of the tax year” and (ii) “any period of delinquency commencing the first day of June of the tax year and concluding on the extended due date.” See R.C. 5733.021.
  • For purposes of determining the R.C. 5733.28(A)(2) failure to pay penalty for any period of delinquency ending prior to the first day of June of the tax year, the commissioner may charge penalty on the delinquent portion of the estimated tax. “Estimated tax” for this purpose means the lesser of 100 percent of last year’s tax or 90 percent of this year’s tax. See R.C. 5733.021(C)(1).
  • For purposes of determining the R.C. 5733.28(A)(2) failure to pay penalty for a period of delinquency commencing the first day of June of the tax year and concluding on the extended due date, the commissioner may charge penalty on the delinquent portion of the estimated tax. “Estimated tax” for this purpose means 90 percent of this year’s tax. See R.C. 5733.021(C)(2).