Important Changes to Ohio Commercial Activity Tax (CAT) Exclusion and Annual Minimum Tax

Ohio’s 2023 budget bill contains significant changes to the Ohio Commercial Activity Tax (CAT), which will soon take effect. These changes mainly affect the CAT exclusion and annual minimum tax, and could have significant implications for businesses in Ohio.

Key Highlights of the CAT Changes

1. Elimination of Annual Minimum Tax: Effective for tax periods beginning on and after January 1, 2024, the CAT annual minimum tax is eliminated.
2. Increased Exclusion Amount: For calendar year 2024, the exclusion amount is increased from $1 million to $3 million. Furthermore, for calendar year 2025 and thereafter, the exclusion amount is increased to $6 million. Businesses with taxable gross receipts below these thresholds will not be required to file a CAT return.
3. Continued CAT Rate: The CAT rate of 0.26% remains unchanged and applies to taxpayers with taxable gross receipts over $3 million in 2024 and over $6 million in 2025 and thereafter. Calculating your taxable gross receipts accurately is important to determine the applicable tax rate.
4. Transition to Quarterly Filing: After the 2023 annual CAT returns are filed, annual filing is eliminated. Starting from tax periods beginning on and after January 1, 2024, all remaining CAT taxpayers must file quarterly returns. This change aims to simplify the filing process and improve compliance.

Next Steps for CAT Compliance

To ensure compliance with the updated CAT regulations, we recommend taking the following actions:

1. Cancel CAT Account (if applicable): If you anticipate having $3 million or less in taxable gross receipts during calendar year 2024, you may cancel your CAT account effective December 31, 2023. Follow the instructions provided in the Information Release to cancel your CAT account.
2. Taxpayers with estimated receipts of less than $6 million could cancel their CAT account before the 2025 tax year begins.
3. Review Ohio CAT receipts to make sure you are properly reporting receipts for the Ohio CAT.

If you have any questions or need help analyzing the impact on your tax position, please reach out to your Marcum advisor today.