CAT changes will impact upcoming tax filings

By Greg Saul, Esq., CAE, director of tax policy 

House Bill 33 enacted the first major changes to the Commercial Activity Tax (CAT) exemption amounts since its inception in 2005. For tax periods beginning in 2024, the new law exempts from CAT all taxable gross receipts of $3 million or less, and then for tax periods beginning in 2025, taxable gross receipts of $6 million or less are exempted.  Businesses with taxable gross receipts exceeding the exemption amounts will pay the current existing CAT rate of 0.26% only on the excess.  

The new exemptions apply to all businesses and are a substantial increase in contrast to the current exemption for taxable gross receipts of $150,000 or less, which has remained unchanged for the past 18 years. After the two-year phase-in, nearly 90% of all Ohio-based businesses will no longer pay CAT – estimated to be 145,000 of the current 163,000 CAT payers.  

Included in the Governor’s vetoes of H.B. 33 was one impacting the CAT as he struck the inflationary adjustment to those thresholds, and he also vetoed the provision enabling businesses with over $150,000 but less than $6 million in annual gross receipts to avoid filing tax returns.  

As a result of these changes, the annual filing and annual minimum tax (AMT) will be eliminated. This means that while a large majority of taxpayers will not owe CAT, those taxpayers having more than $150,000 of gross receipts may need to file quarterly zero-dollar tax returns UNLESS they take action to cancel their accounts.   

The Ohio Department of Taxation (ODT) released its “official” guidance on August 21, and ODT held its Ohio Virtual Tax Academy (OVTA) on August 9 and offered the following advice on slides 8–10.  

2024 – Taxpayers with taxable gross receipts not exceeding $3 million: 

• Generally, taxpayers may cancel their account effective 12/31/2023. 

• File a final return for 2023: 

    • For annual filers, the deadline is 5/10/2024. 

    • For quarterly filers, the deadline is 2/10/2024. 

2025 – Taxpayers with taxable gross receipts not exceeding $6 million: 

• Generally, taxpayers may cancel their account effective 12/31/2024. 

• File a final return for 2024: 

    • For quarterly filers, the deadline is 2/10/2025.  

ODT has indicated most taxpayers should cancel their accounts unless they are close to the $3 million threshold in 2024 or the $6 million threshold in 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 account if they need to file to claim a tax credit, especially refundable credits.  

A recording of the OVTA webinar will be made available by August 30 and can be found here. OSCPA also will be discussing these requirements with legislators to further explore filing relief for taxpayers who will not owe any tax.

ODT released its “official” guidance on August 21 here: https://bit.ly/3R5ySkz