Tax Data Series

Corporation Franchise Tax

Corporate Franchise Tax Tables
Refundable and Nonrefundable Tax Credits Claimed, Tax Year 2006

The attached corporate franchise tax table is a supplement to the CF1-5 tax data series for tax year 2006.  It provides detail on the tax credits claimed by general (non-financial institution) corporate franchise taxpayers.

Due to tax reform legislation enacted in 2005, the corporate franchise tax phases out for most corporations, in 20 percent increments, over a five-year period starting in tax year 2006. The phase-out worked as follows in tax year 2006. 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 20 percent.  This means that, for all intents and purposes, just 80 percent of the full, claimable nonrefundable tax credits (other than the pass-through entity tax credit) could be realized in tax year 2006, which is fully consistent with the fact that just 80 percent of the full, pre-credit tax liability was payable in tax year 2006. In addition, the manufacturing grant was subject to the 20 percent phase-out factor for tax year 2006. This manufacturing grant replaces the former credit for purchases of new manufacturing machinery and equipment (the new manufacturing grant and concomitant repeal of the manufacturing tax credit were enacted in 2005 by Am. Sub. House Bill 66). Finally, note that the pass-through entity tax credit and the refundable job creation tax credit were not subject to the 20 percent phase-out factor.

Both refundable and nonrefundable credits are shown in the table, as is the manufacturing grant. Values are shown on both a pre phase-out factor and a post phase-out factor basis. The job creation tax credit is the only refundable credit in tax year 2006; there were 223 corporate franchise taxpayers claiming this credit, amounting to $43.6 million. 

The nonrefundable tax credits shown include the manufacturing investment credit (this is the final year of the tax credit, consisting of those taxpayers whose taxable year ended prior to July 1, 2005), the coal credit for electric companies, the job training credit, the research credit, the small telephone company credit, and other miscellaneous credits (see the table for a complete list).  There were 1,507 nonrefundable credits claimed amounting to $81.3 million (after the phase-out factor). 

The data shown on these tables were compiled from returns filed for tax year 2006 with the Ohio Department of Taxation.