Tax Data Series

Corporation Franchise Tax

Corporate Franchise Tax: Number of Corporations and Reported Tax Liability, by Tax Base and Industry, Tax Year 2007

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 companies. 

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 minimum tax.

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).