Ohio Department of Taxation Corporation Franchise Tax

Voluntary Disclosure of Corporation Franchise Tax Liabilities

 

The Business Tax Division, in seeking to increase the level and ease of compliance with Ohio's tax laws, makes available a Voluntary Disclosure Program. This program is designed for corporations who believe they have franchise tax liabilities and wish to resolve them. By voluntarily disclosing the liabilities, the corporation can avoid the consequences normally associated with a nexus investigation, audit or assessment. Any corporation is eligible for the program if they enter into and have executed an Ohio Franchise Tax Agreement prior to any contact from the Ohio Department of Taxation. If you would like to establish an agreement, please note the following requirements: 

Voluntary Disclosure Steps

1. The corporation’s representative shall send a letter explaining in detail the following: (i) the corporation’s activities in Ohio, (ii) how long these activities have been performed by the corporation in Ohio, (iii) a brief history of the corporation, (iv) what type of corporation it is organized as, (v) the corporation’s fiscal year accounting period, and any other pertinent information.  If the corporation believes it is not liable for the net income basis of the Ohio franchise tax because its activities in Ohio are protected by Public Law 86-272 and, therefore, only liable for the net worth basis, please indicate such in this letter. Send the letter to:
   
   

   Ohio Department of Taxation Business Tax Division Voluntary Disclosure Program 4485 Northland Ridge Blvd Columbus, OH 43229

2. Upon receipt of this letter, an Ohio Franchise Tax Agreement will be prepared in duplicate and sent to the corporation’s representative.  An officer of the corporation should sign the agreement and sent it back to the address shown in #1, above, along with the completed Ohio franchise tax reports and payment of the tax and interest (see example of our interest computation in #2 of "Other Information", below).
   
3. Upon receipt of the agreement, a designee of the tax commissioner will sign the original and return a copy to the corporation's representative.

General Terms of the Ohio Franchise Tax Voluntary Disclosure Agreement (subject to certain limitations):

1. The corporation must file the Ohio franchise tax report form FT 1120 (FT 1120FI for a financial institution) for the current franchise tax year and each of the three "back" years (4 years total) and pay the tax due plus interest.  The corporation waives its right for refund for the three "back" years (not the current year).  The tax commissioner shall waive all penalties generally associated with the four years covered by the agreement and for all tax years prior to the years covered by the agreement.  The tax commissioner is precluded from assessing the corporation or requiring it to file Ohio franchise tax reports for tax years prior to the years covered by the agreement if the corporation or its related members have not been previously contacted by the Ohio Department of Taxation.
2. The tax commissioner may audit the franchise tax reports filed by the corporation for the years covered by the agreement.
   

Other Information

1. Ohio Corporation Franchise Tax  forms and instructions are available on our Web site.
   
2. Interest is computed on the net tax due for each calendar year as follows:
   
   

   # of days	interest	tax	interest due for
   365         X	rate         X	due      =	a calendar year

Example: Interest on a $500 Ohio tax due for report year 2006 would be computed as follows (assume tax was due 1/31/06 and paid on 1/31/09):

2006: 1/31/06  to 12/31/06   334/365  x  6% x 500 = $  27
2007: 1/01/07  to 12/31/07   365/365  x  8% x 500 =     40
2008: 1/01/08  to 12/31/08  366/366  x   8% x 500 =     40
2009: 1/01/06  to 01/31/09     31/365  x  5% x 500 =       2
$   109                                                                                 ===	Total interest for tax year 2006

We have provided an Excel spreadsheet ^(XLS)to help you compute Ohio corporate franchise tax interest due.

     3.  Make checks payable to: Treasurer, State of Ohio.

If you have any questions, please call the Business Tax Division at (614) 387-0232. If you have questions concerning the department’s Sales and Use Tax Voluntary Disclosure program, please call (614) 466-4810.