IT 2008-01 - Announcement of Grace Period for Paying Certain
Ohio Income Tax Amounts and Interest Without Penalties -
Issued Aug. 12, 2008; Revised Nov. 14, 2008; Revised Jan. 14,
2009
The purpose of this information release is to announce a
grace period for paying certain Ohio income tax amounts and
interest without penalties. The revision of Jan. 14, 2009,
extends the grace period to March 2, 2009, instead of Jan.
16, 2009. No other changes have been made to this release.
Inapplicability of the Ohio Resident Credit with
Respect to (i) Kentucky Corporation Income Tax Paid for Years
2005 and 2006; (ii) Other States' Income Taxes Imposed at the
Pass-Through Entity Level; and (iii) Other States' Non-Income
Taxes Imposed at the Pass-Through Entity Level; Grace Period
for Paying Certain Ohio Income Taxes.
Information Release IT
2006-02, issued March 2006, explains why Ohio residents
are not entitled to claim the Ohio Revised Code section
5747.05(B) resident tax credit for taxable years 2005 and
2006 with respect to the Kentucky corporation income tax
imposed on single member limited liability companies (“LLCs”)
disregarded for federal income tax purposes, LLCs treated as
partnerships for federal income tax purposes, LLCs treated as
S corporations for federal income tax purposes, S
corporations, limited liability partnerships, and limited
partnerships. Although the March 2006 information release
only addresses the inapplicability of the Ohio resident
credit with respect to Kentucky corporation income tax paid
by or for pass-through entities in which Ohio residents had
an equity investment, the principles, concepts, and position
set forth in that information release also apply in
connection with the inapplicability of the Ohio resident
credit with respect to every other state’s income tax imposed
on pass-through entities in which the Ohio resident had an
equity investment.
This position is also supported in the April 2006 revision of
Information Release IT 1994-01, which was revised to account
for a change in the law (specifically to Ohio Revised Code
section 5747.05(B) referenced above) which no longer permits
Ohio resident taxpayers to claim resident credits in
connection with other states’ income taxes imposed on
pass-through entities in which the Ohio resident had an
equity investment for taxable years ending on after June 30,
2005.
After March 2, 2009 the Ohio Department of Taxation (ODT)
will issue Ohio income tax bills for tax, interest,
failure-to-pay-timely penalty, interest penalty, and, if
applicable, late filing penalty to those taxpayers who
claimed the resident credit (i) with respect to such Kentucky
corporation income tax imposed on any
pass-through entity which is described above and in which the
taxpayer had an ownership interest and/or (ii) with respect
to income tax imposed by other states on any
pass-through entity in which the taxpayer had an ownership
interest for taxable years ending on or after June
30, 2005 only. However, the Department will be
issuing billing notices and assessments for
all years within the statute of limitations
with respect to resident credits which Ohio taxpayers have
claimed in connection with other states’ non-income
taxes (such as the Michigan single business tax)
imposed on pass-through entities in which the Ohio resident
had an equity investment.
In very few, if any, situations will the tax commissioner
waive any portion of the penalties billed after March 2,
2009. Failure to pay timely all correctly-billed tax,
interest, and penalties will result in the tax commissioner’s
issuing of an assessment for that entire amount.
Post-assessment interest will accrue on the amount assessed.
However, the Tax Commissioner has announced that he
is waiving all related penalties for those taxpayers who by
March 2, 2009 voluntarily pay the Ohio income tax and
interest with respect to such resident credits which these
taxpayers have erroneously claimed. Taxpayers who want
to take advantage of this opportunity to avoid both the
failure-to-pay-timely penalty and the interest penalty with
respect to such resident credits erroneously claimed must use
this payment form to pay all tax and interest
by March 2, 2009.
Making such payment does not indicate that the taxpayer
acquiesces to the tax commissioner’s position regarding the
inapplicability of the credit with respect to the
pass-through entity level-imposed state income tax. As
such, the taxpayer retains the right to challenge the tax
commissioner’s position and can file timely ODT form IT AR to seek a refund of all tax and
interest paid. However, taxpayers who pay the tax and
interest by March 2, 2009 will avoid all penalties otherwise
due on such tax paid.
If you have any questions about this matter, please contact
ODT’s Taxpayer Services Division at (800) 304-3211, or e-mail
questions to ODT via "Contact Us" on the department’s home
page at tax.ohio.gov.