Ohio Drafts Rule Limiting Retroactive Consolidated Filing Elections
The Ohio Department of Taxation has proposed a regulation change that would prevent taxpayers from making a retroactive consolidated filing election for Ohio Commercial Activity Tax purposes (CAT). The rule change appears to be an attempt to limit the application of a recent BTA decision where a taxpayer was permitted to make a retroactive consolidated filing election even after an audit had commenced. See our post about Nissan North America, Inc. v. McClain, Ohio BTA Case No. 2016-1076 (October 9, 2019).
The proposed change to OAC 5739-29-02 effectively limits the Tax Commissioner’s authority to approve a taxpayer’s request for a retroactive consolidated filing election. Under the rule, a taxpayer may only be granted retroactive consolidated filing status if it has not been contacted for audit, criminal investigation, or by a compliance program, and either 1) made a “clerical error,” or 2) requested consolidated status as part of the voluntary disclosure program. A “clerical error” essentially means that the originally filed returns reflected the intent to file on a consolidated basis, but the taxpayer merely failed to make the election (i.e. the election would not affect the original tax liability).
A consolidated election is essential for commonly-owned taxpayer groups with significant intercompany transactions. Such businesses should review their current CAT registration status and determine if they should elect a consolidated filing, especially if they have already been contacted for audit. Alternatively, if businesses have not been filing the CAT but have business activity in Ohio mandating a filing, voluntary disclosure is another option for pursuing consolidated filing status.
We will continue to monitor this development and other changes proposed by the Department. If you have questions about consolidated election for commonly-owned taxpayers or Ohio’s Commercial Activity Tax, please do not hesitate to contact us.
Attorney Steven A. Dimengo is Managing Partner of Buckingham, Doolittle & Burroughs, LLC. He helps clients with complicated tax challenges including Ohio sales/use, income, commercial activity and federal taxes and has represented clients before the Ohio Supreme Court. Steve can be reached at [email protected] or 330.258.6460.
Richard B. Fry III is a partner and Buckingham’s Taxation Practice Group Chair. He focuses on state and local tax compliance and controversies, including Ohio and multistate sales/use tax, commercial activity tax, and personal income tax issues. Rich can be reached at [email protected] or 330.258.6423.
Nathan M. Fulmer is an associate in Buckingham’s Taxation Practice Group. He represents clients on a broad range of tax planning and controversy matters. His joint degree in taxation allows him to provide unique solutions when assisting clients on business matters. Nate can be reached at [email protected] or 330.258.6464.
About Buckingham, Doolittle & Burroughs:
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