Overview
Ohio Governor Mike DeWine signed 2022 H.B. 33 (law or law change) on July 4, 2023. The law change increased the Ohio Commercial Activity Tax (CAT) exclusion to $3 million in taxable gross receipts for tax periods beginning in 2024 and $6 million for tax periods beginning in 2025.
Ohio CAT Exclusion
The new exclusion amounts apply to all business and represents a substantial increase compared to the current $150,000 sales threshold. The current threshold has been in place since 2005. After the two-year phase of the CAT exclusion in 2024 and 2025 nearly 90% of all businesses will no longer pay CAT – estimated to be 145,000 of the current 163,000 CAT taxpayers.
Included in the Governor’s vetoes of H.B. 33 was one impacting the CAT as he struck the inflationary adjustments to those thresholds, and he vetoed the provision enabling business with over $150,000 but less than $6 million in annual gross receipts to avoid filing CAT returns.
As a result of these changes, the annual filing and annual minimum tax (AMT) will be eliminated. [1] This means that while a large majority of taxpayers will not owe CAT, those taxpayers having more than $150,000 of taxable gross receipts may need to file quarterly zero-dollar tax returns UNLESS they take action to cancel their CAT accounts.[2] The Ohio Department of Taxation recommends taxpayers consider the following actions:
2024 – Taxpayers with taxable gross receipts not exceeding $3 million
Generally, taxpayers may cancel their CAT account effective 12/31/2023. Taxpayers should file a final CAT return for 2023 for the following:
- Annual CAT filers, the deadline is 5/10/2024
- Quarterly CAT filers, the deadline is 2/12/2024
2025 – Taxpayers with taxable gross receipts not exceeding $6 million
Generally, taxpayers may cancel their CAT account effective 12/31/2024. Taxpayers should file a final CAT return for 2023 for the following:
- Annual CAT filers, the deadline is 5/10/2025
- Quarterly CAT filers, the deadline is 2/10/2025
The Ohio Department of Taxation recommends most taxpayers should cancel accounts unless they are close to the $3 million threshold in 2024 or the $6 million threshold for 2025. For example, taxpayers who previously were close to $1 million in gross receipts typically filed quarterly instead of annually. In addition, taxpayers may not want to cancel their CAT account if they need to file to claim a tax credit, especially refundable credits.
Group Taxpayers
The exclusion amount applies to a taxpayer’s gross receipts. The combined taxpayers (CT) and consolidated elected taxpayers (CET) are treated by Ohio as one taxpayer. CT and CET filers must consider the taxable receipts of all members of the group to determine whether the group will exceed the exclusion amount of $3 million in 2024 and $6 million in 2025 and after. Intermember receipts excluded by CET taxpayers are not considered when determining if the taxpayer has exceeded the exclusion amount for the year.
Ohio CAT Account Cancellation
A taxpayer can cancel their CAT account by filling out the Business Account Update Form or logging into the Ohio Business Gateway and selecting the CAT Cancel Account transaction. The Business Account Update Form is available on the Ohio Department of Taxation’s website. Taxpayers may cancel their CAT account effective for up to one year in the future. Taxpayers wishing to cancel their CAT accounts upon filing a final return in 2024 can back date their cancellation effective date to December 31, 2023.[3]
For more information or to file a final Ohio CAT return or to cancel a CAT account, please contact a member of the CSH SALT Team.
[1] Ohio Department of Taxation notice CAT 2023-1 at https://tax.ohio.gov/static/commercial_activities/information_releases/CAT_2023-01_info_release.pdf
[2] Ohio Department of Taxation notice CAT 2023-1 at https://tax.ohio.gov/static/commercial_activities/information_releases/CAT_2023-01_info_release.pdf
[3] Ohio Department of Taxation notice CAT 2023-1 at https://tax.ohio.gov/static/commercial_activities/information_releases/CAT_2023-01_info_release.pdf
