On July 3, 2023, Ohio Governor Mike DeWine signed House Bill 33, the state operating budget for fiscal years 2024 and 2025. This most recent budget bill made major changes to the Commercial Activity Tax (CAT).
For tax periods beginning after December 31, 2023, the CAT annual minimum tax is eliminated. The law also eliminates the annual CAT filing and requires all CAT returns to be filed on a quarterly basis.
The budget bill increased the CAT Ohio taxable gross receipts exclusion for tax years 2024 and 2025. The annual CAT exclusion has been increased from $1 to $3 million for tax years beginning January 1, 2024, and again from $3 to $6 million for tax years beginning January 1, 2025. The CAT rate remains 0.26%, but this flat tax will only be imposed on Ohio CAT taxable gross receipts in excess of the increased annual exclusions.
The law doesn’t exempt a taxpayer that meets the CAT exclusion from filing quarterly returns unless the CAT account has been properly closed. If the taxpayer expects Ohio taxable gross receipts to be less than the $3 million exclusion amount for 2024, the taxpayer should file a final CAT return for 2023 and also cancel their CAT account with an effective date of 12/31/2023. Ohio has indicated that a box to mark the 2023 return final will be available when filing this return in early 2024. Marking this return final will cancel the account. As an alternative, the taxpayer may file an account closure form with the state with an effective date of 12/31/23. This can be done through the Ohio Business Gateway, or by mailing Form BA-UF. In either case the taxpayer will be required to file a 2023 return.
If you have questions as to how these changes impact your business, we are happy to discuss in more detail.