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.
* * * * *
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