Tax Alert

Ohio Bill Replaces One Financial Institutions Tax, Eliminates Another

(Jan. 9, 2013)


On Dec. 20, 2012, Governor John Kasich signed into law Ohio House Bill 510, known as the Bank Tax Reform Bill. The legislation replaces the existing Ohio Franchise Tax for financial institutions with a new so-called business privilege tax, which will be based on consolidated equity reported for regulatory filing purposes.

Highlights of the bill include the following:

  • The Ohio business privilege tax will be effective for tax year 2014. The tax will be imposed on a financial institution’s regulatory balance sheet as of the end of the prior calendar year without regard to the bank’s fiscal year end.
  • The business privilege tax will be imposed on a combined basis. The combined group, for purposes of the tax, is tied to the group that is included in consolidated regulatory reports.
  • The business privilege tax will apply to S-corporation banks and will provide the S-corporation shareholders an individual Ohio income tax credit for their share of the tax paid by the S-corporation bank.
  • The bill requires financial institutions to adopt a single receipts factor apportionment with market sourcing of receipts. Special rules will apply to sourcing receipts from investment securities.
  • Tax rates for 2014 will be:
    • 8 mills (.8 percent) on apportioned Ohio capital up to $200 million
    • 4 mills (.4 percent) on apportioned Ohio capital more than $200 million and up to $1.3 billion
    • 2.5 mills (.25 percent) on apportioned Ohio capital in excess of $1.3 billion
     
  • The legislation provides for rate-change mechanisms based on levels of revenue that will be collected from the business privilege tax.
  • The minimum tax will be $1,000.
  • Ohio’s Dealer in Intangibles Tax will be eliminated at the end of the 2013 tax year. Businesses subject to this tax that are included in a financial institution’s regulatory consolidation will be subject to the new business privilege tax on financial institutions. All other businesses that have been paying the Dealer in Intangibles Tax will become subject to the Ohio Commercial Activity Tax (CAT) on Jan. 1, 2014.
  • In certain situations, nonbank affiliates not subject to the new business privilege tax will become subject to the CAT. These entities have not been subject to the CAT under the existing Ohio Franchise Tax.

 

For More Information
Dave Thornton
212.572.5588
david.thornton@crowehorwath.com

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