Corporation Franchise Tax
Corporate Franchise Tax: Number of Corporations and
Reported Tax Liability, by Tax Base and Industry, Tax Year
Tax year 2007 is the second year of a five-year phase-out of
the corporate franchise tax for most corporations. The
phase-out was enacted in 2005 under landmark Ohio tax reform
legislation (Am. Sub. House Bill 66, 126th General Assembly).
For most corporations, there will be no franchise tax
beginning in tax year 2010. However, the following
types of corporations will continue to be subject to the
franchise tax: banks and other financial institutions (who
remain subject to the 13-mill net worth tax reflected in
Table CF-5); certain affiliates of financial institutions
that are engaged in financial institution-related activities;
certain affiliates of insurance companies that are engaged in
insurance-type activities; and securitization
In tax year 2007, corporations computed their regular
corporation franchise tax liability, and then reduced such
liability by any allowable nonrefundable credits (excluding
the pass-through entity tax credit); the resulting net tax
liability was then reduced by 40 percent. The
pass-through entity tax credit, refundable tax credits, and
manufacturing grant were taken against this amount to yield
final tax liability.
The attached tables show a total reported post-40 percent
phase-out tax liability, net of tax credits and the
manufacturing grant, of $795.5 million. A total of 90,340
corporations were represented on the 2007 returns, with
19,990 corporations paying the tax based on net income and
25,192 paying the tax based on net worth. The number of
corporations paying the $50 or $1,000 minimum tax amounted to
45,158. However, 85 percent of the tax liability before
phase-out, credits, and grants, was based on net income
(compared to 87 percent in 2006) and 14 percent was derived
from the net worth base (compared to 16 percent in 2006). The
remainder of the tax was reported as liability under the
Tables CF-1A and 1B show the number of corporations and the
reported total tax liabilities by tax base for each of 19
broad industrial classifications. The largest total tax
liability after phase-out, credits, and grants, was reported
by manufacturing corporations, which accounted for 36 percent
of the total.
Tables CF-2A and 2B categorize the corporate returns by the
size of the reported tax liability per return. The number of
corporations and total tax liability are shown for each of
the alternative tax bases for 18 tax liability classes.
Returns reporting over $500,000 in tax liability were
responsible for approximately 57 percent of the total
reported liability, even though they covered less than one
percent of total corporations.
The data shown on these tables were compiled from returns
filed for tax year 2007 with the Ohio Department of Taxation.
NOTE: These tables do not include data from the tax returns
of financial institutions. Data from financial institution
returns are shown on a separate table (CF-5).