Ohio Department of Taxation News Releases

News Release

 

Oct. 14, 2009 – Effort to reform Ohio's tax climate reaches new milestone: Last corporation franchise tax returns due Oct. 15

 

COLUMBUS, Ohio – An ongoing, five-year effort to improve Ohio’s business tax climate reaches another milestone this week when the century-old corporation franchise tax comes to an end for the vast majority of Ohio corporations.

The final deadline to file 2009 corporation franchise tax returns is Thursday, Oct. 15. This deadline applies to corporations whose taxable year ended Dec. 31, 2008 that sought and received an extension from the Internal Revenue Service, a common practice by large businesses.

Once corporations file 2009 franchise tax returns (along with a check for any balance due, if necessary), the vast majority of them will be done with the tax for good.

“Two governors and three general assemblies have helped get us to this place,” Ohio Tax Commissioner Richard A. Levin said. “This deadline represents another milestone in the effort to improve the business climate in Ohio.”

The corporation franchise tax dates back to 1902. For most corporations, it represents a tax of either 0.4 percent on the net worth of the corporation or a tax of up to 8.5 percent on net income (profits). The calculation that applies is the one that produces the greater tax.

The tax is being phased out as part of a larger package of reforms contained within House Bill 66, enacted by the Ohio General Assembly in 2005. Other components include:

• The elimination of property taxes on business machinery, equipment and inventory.
• A new commercial activity tax (CAT), measured by gross receipts.
• Five annual 4.2 percent reductions in state income tax rates.

Overall, these and other tax changes contained within House Bill 66 represent a net annual tax cut of about $1.8 billion annually starting in fiscal year 2010. This estimate assumes the General Assembly follows through on Governor Strickland’s proposal to prevent deep cuts to education by temporarily postponing the fifth and final 4.2 percent income tax rate reduction originally planned for 2009.

The phase out of the corporation franchise tax does not apply to a small number of corporations – primarily financial institutions, which will continue to pay a 13 mill tax on their net worth.

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Note: For more detailed information on the ongoing effort to phase in tax changes contained within House Bill 66, a fact sheet is available at: Fact sheet: Tax reform in Ohio.

Members of the news media with further questions should contact John Kohlstrand at (614) 644-3858. Taxpayers with business tax questions should call (888) 405-4039.