What is the franchise tax phase-out?
For most taxpayers the franchise tax was ratably phased out over the franchise tax years 2006 through 2010 (taxable years ending 2005 through 2009). During this same period Ohio’s new commercial activity tax (CAT) was ratably phased in for most franchise taxpayers. For those taxpayers subjected to the franchise tax phase-out, the phase-out applied to the 2006 report even if the taxpayer’s taxable year ended prior to the June 30, 2005 effective date of the new law.
For report years 2006, 2007, 2008, 2009 and 2010 franchise taxpayers subject to the phase-out paid 80 percent, 60 percent, 40 percent, 20 percent and 0 percent, respectively, of the franchise tax due after nonrefundable credits but not less than the minimum fee of either $50 or $1,000.
Corporations not subject to the franchise tax for tax years 2010 (based on the taxable year ending in 2009) and thereafter were not subject to the minimum fee and had no franchise tax payment or filing obligation for those report years. Please refer to our informational release CFT 2010-01 which can be located on our Web site.
Credits for taxes paid by qualifying pass-through entities was not subject to the phase-out factor pursuant to R.C. 5733.0611. Please refer to FAQ #5 regarding how the phase-out affected the nonrefundable credit for taxes paid by qualifying pass-through entities.
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