Information Release

CF 1993-01 - New Legislation Requires Certain Corporations to Pay Corporate Franchise Tax by Electronic Funds Transfer (EFT) October 29, 1993

Amended Substitute Senate Bill 740 (effective March 19, 1993) as amended by Amended Substitute House Bill 782 (effective January 8, 1993) requires certain Ohio franchise taxpayers paying large amounts of Ohio franchise tax to remit their tax payments electronically beginning in 1994. Set forth below is a summary of (i) the Ohio franchise tax provisions of the new law and (ii) the Treasurer of State's, responsibilities regarding EFT.

Summary of Ohio Franchise Tax Provisions

  • Dollar Thresholds: Who must pay by EFT
    • For tax year 1994 a taxpayer must submit all Ohio franchise tax payments by EFT if the taxpayer's total franchise tax liability after reduction for nonrefundable credits exceeded $100,000 for either tax year 1992 or tax year 1993. ORC section 5733.022 (A).
    • For tax years 1995 and thereafter a taxpayer must submit all Ohio franchise tax payments by EFT if the taxpayer's total franchise tax liability after reduction for nonrefundable credits exceeded $50,000 for either of the two immediately preceding tax years. ORC section 5733.022(A).
    • A taxpayer is relieved of an earlier requirement to remit franchise tax payments by EFT if for each of the two preceding tax years its total franchise tax liability after reduction for all nonrefundable credits was $50,000 or less. However, a taxpayer so relieved of its requirement to remit franchise tax payments by EFT is required to resume EFT Ohio franchise tax payments for a subsequent franchise tax year when the corporation's franchise tax liability exceeds $50,000 for either of the two immediately preceding tax years. ORC section 5733.022(A).
    • Corporations which are members of a combined franchise tax report must aggregate their tax liabilities after reduction for nonrefundable credits for each of the two immediately preceding tax years (regardless of whether the members were included in a combined report for either of the two immediately preceding tax years). If the aggregate tax liability after reduction for all nonrefundable credits for either of the two immediately preceding tax years exceeds the applicable dollar threshold (discussed above), then each member is required to submit its payments for the current tax year by EFT. This provision applies both to taxpayers who elect to combine and to taxpayers who are required by the Tax Commissioner to combine. ORC section 5733.022(C).

      Note: The above is a summary of ORC section 5733.022(C) as amended by Amended Substitute House Bill 782 (effective January 8, 1993). ORC section 5733.022(C) as originally enacted by Senate Bill 740 would also have extended the above provision to taxpayers who were eligible to combine but did not elect to combine or were not required to combine.
  • Any franchise taxpayer required to remit payments by EFT must do so in the manner prescribed by rules adopted by the Treasurer of State. ORC sections 5733.02 and 5733.022(B).
  • The Tax Commissioner must maintain an updated list of those franchise taxpayers required to remit taxes by EFT and must provide that list to the Treasurer of State. ORC section 5733.022(A).
  • Franchise tax payments submitted by EFT are considered to be made when the payment is received by the Treasurer of State or credited to an account designated by the Treasurer of State for the receipt of such payments. ORC section 5733.30
  • A franchise taxpayer must request from the Treasurer of State that it be excused from its requirement to submit tax payments by EFT. The Treasurer of State may grant that request for good cause. The Treasurer must notify both the franchise taxpayer and the Tax Commissioner of its decision with respect to the taxpayer's request. ORC section 5733.022(D).
  • The Tax Commissioner must notify each franchise taxpayer required to submit taxes by EFT of its obligation to do so. Nevertheless, a taxpayer not so notified is not excused from its obligation to remit taxes by EFT. ORC section 5733.022(A).
  • Even if the taxpayer must use the EFT method to remit estimated 1994 franchise tax payments, the taxpayer is not relieved from filing the related 1994 paper documents (Forms FT-1120E, FT-1120ER, and FT-1120EX).
  • The EFT method can not be used for payments of assessed amounts.
  • EFT Penalty
    • In addition to all other applicable penalties, the Tax Commissioner may assess a penalty for failure to remit payments by EFT if (i) the taxpayer was required to remit payment by EFT but remitted the payment by another means, and (ii) the Treasurer of State determines that the taxpayer's failure to remit the payment by EFT was not due to reasonable cause. ORC section 5733.022(E).
    • The Tax Commissioner may not assess EFT penalty on any franchise tax payment made before the date the Tax Commissioner notified the taxpayer of its obligation to remit tax payments by EFT. After such notification the Tax Commissioner may not assess penalty on the first two payments made by some means other than EFT. Subsequent tax payments remitted by a means other than EFT are subject to penalty (if the Treasurer determines that the failure to remit by EFT was not due to reasonable cause). ORC section 5733.022(E).
    • The Ohio franchise tax EFT penalty is 5% of the payment required to be paid by EFT, but may not exceed $5,000. ORC section 5733.022(E).
    • The Tax Commissioner may abate all or a portion of the assessed EFT penalty and may adopt rules governing such abatement. ORC section 5733.022(E).
    • The Ohio franchise tax EFT penalties are to be considered as revenue arising from the tax imposed by ORC Chapter 5733. ORC section 5733.022(E).

Treasurer of State's Responsibilities (ORC section 113.061)

  • The Treasurer of State may adopt rules to facilitate payment by EFT. The rules may:
    • establish the mode, content, and format of EFT payments;
    • coordinate EFT payment with the filing of the associated tax return; and
    • govern the remittance of taxes by persons excused from their requirement to submit tax payments by EFT.
  • The Treasurer of State, not the Tax Commissioner, is responsible for resolving any problems involving EFT transmissions.
  • The Treasurer of State may acknowledge receipt of an EFT payment, if requested to do so. The Treasurer of State may charge the taxpayer a fee for acknowledging an EFT payment.
  • If a taxpayer is required to remit taxes by EFT and fails to do so, the Treasurer of State must determine whether that failure was due to reasonable cause. If the Treasurer determines that such failure was not due to reasonable cause, the Treasurer must notify the Tax Commissioner and provide the Tax Commissioner with the information used in making that determination. The Tax Commissioner may then assess the taxpayer a penalty for failure to submit payments by EFT.

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Tax Information Releases are not "Opinions of the Tax Commissioner" within the meaning of ORC section 5703.53. Accordingly, the Tax Commissioner is not bound by this release. Nevertheless, the above discussion does reflect the Income Tax Audit Division's interpretation of the law.

For more information about the EFT payment program, call the Treasurer of State's office at any of the numbers listed below:

1-800-228-1102 (Ohio only)
1-614-644-1270 or 1-614-466-8063 (Columbus, Ohio area and out-of-state)
Ohio Relay Service: 1-800-750-0750

For more information about franchise tax requirements, call the Ohio Department of Taxation at any of the numbers listed below:

1-800-282-1780 (Ohio only)
1-614-846-6712 (Columbus, Ohio area and out-of-state)
Ohio Relay Service: 1-800-750-0750