Information Release

PIT 2001-03 - Pass-Through Entity Tax: Certain Estimated Tax Payments Due September 16, 2002 — July 3, 2002

Disregarded entity limited liability companies ("LLC’s") and qualified subchapter S subsidiaries now subject to the Ohio’s pass-through entity tax as a result of the recent enactment of Ohio Revised Code section 5733.40(S) contained in Amended Substitute Senate Bill 261, 124^th General Assembly ("Budget Corrective Bill") need not make any estimated quarterly pass-through entity tax payments before September 16, 2002.

This September 16, 2002 due date generally affects disregarded entity "LLC’s" and qualified subchapter S subsidiaries with a taxable year beginning in the period between January 1 and May l, 2002. Any and all estimated pass-through entity quarterly payments for single member LLC’s and qualified subchapter S subsidiaries that otherwise would have been due prior to September 16, 2002 are now not due until September 16, 2002.

Amended Substitute Senate Bill 261, passed during the 124^th General Assembly and effective immediately, now requires that disregarded entity LLC’s and qualified subchapter S subsidiaries having nexus with Ohio must pay the pass-through entity tax on their income. The law first applies to disregarded entity LLC’s and qualified subchapter S subsidiaries with any taxable year ending after June 4, 2002.

The various exemptions applying to other pass-through entities also apply to disregarded entity LLC’s and qualified subchapter S subsidiaries. For example, a disregarded entity LLC owned by a corporation is not subject to the pass-through entity tax if the corporate owner/member is either an Ohio corporation franchise taxpayer or a corporation exempt from the Ohio corporation franchise tax under ORC section 5733.09. See the last sentence of the third paragraph of ORC section 5733.41.

Similarly, a qualified subchapter S subsidiary is not subject to the pass-through entity tax if the S corporation owner/shareholder irrevocably acknowledges that the S corporation has nexus with Ohio and makes a good faith and reasonable effort to comply with Ohio’s pass-through entity tax. See ORC section 5733.402.

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Relevant law: Ohio Revised Code ("ORC") sections 5733.40(I), 5733.40(S), 5733.402, 5733.41, and 5747.43.

If you have any questions regarding this matter, please call 614-438-5317 (Ohio Relay Services for the Hearing or Speech Impaired: 1-800-750-0750), or access the Department’s web site (http://tax.ohio.gov/) and e-mail your questions to us.