Ohio — Corporate Income / Franchise Tax

Ohio does not impose a corporate income tax or franchise tax for tax years 2014 and after. The state fully phased out its corporate franchise tax, which was codified in Ohio Revised Code Chapter 5733, with the last franchise tax returns filed for the 2013 tax year (based on taxable years ending in 2012).

Source: Ohio Rev. Code § 5733.01(B)

The franchise tax was replaced by the Commercial Activity Tax (CAT), a gross receipts tax that applies to most businesses regardless of legal structure. The CAT became effective July 1, 2005, under House Bill 66 of the 126th General Assembly and was phased in as the corporate franchise tax was phased out through 20-percentage-point annual increments over five years beginning in tax year 2006.

Source: Ohio Department of Taxation, Corporation Franchise Tax Publication

## What the franchise tax applied to (historical)

For tax years prior to 2014, the Ohio corporate franchise tax was imposed on domestic corporations organized for profit under Ohio law for the privilege of exercising their franchise, and on foreign corporations for the privilege of doing business in Ohio, owning or using capital or property in Ohio, holding a certificate of compliance, or otherwise having nexus with Ohio under the U.S. Constitution. A corporation was subject to the tax for each calendar year prior to 2014 that it met these criteria on the first day of January of that calendar year.

Source: Ohio Rev. Code § 5733.01(A), (B)

The franchise tax was measured on the value of a corporation's issued and outstanding shares of stock, calculated under both a net income base and a net worth base, with taxpayers (other than financial institutions and qualifying holding companies) paying on the base that produced the greater tax. Financial institutions paid tax based on net worth only.

Source: Ohio Department of Taxation, Corporation Franchise Tax Publication

## What replaced it

Ohio replaced the corporate franchise tax with the Commercial Activity Tax (CAT), a 0.26% gross receipts tax imposed on business activities conducted in Ohio. Unlike the franchise tax, the CAT applies broadly to all entity types—corporations, S corporations, LLCs, partnerships, and sole proprietorships—with limited exceptions for financial institutions subject to the Financial Institutions Tax and certain other exempt entities.

For tax years beginning in 2025 and after, businesses with Ohio taxable gross receipts exceeding $6 million per calendar year are generally subject to the CAT. The threshold was $3 million in 2024 and $1 million (with a $150,000 registration threshold) in prior years.

Source: Ohio Rev. Code Chapter 5751 (CAT statute) Source: BradyWare, Ohio CAT Updates (September 2025)

Practitioners researching Ohio corporate-level taxation for current or recent tax years should consult the Commercial Activity Tax guide (to be published separately under the gross-receipts tax type) rather than the franchise tax statute, which remains codified but applies only to pre-2014 tax years and related audits, refunds, or carryforward items.

For tax years prior to 2014, Ohio imposed a corporate franchise tax on domestic and foreign corporations that met certain nexus standards on January 1 of each calendar year. Understanding these historical nexus rules remains important for practitioners handling audits, amended returns, refund claims, or carryforward items from the franchise tax period.

## Domestic corporations

Domestic corporations — those organized for profit under Ohio law — were subject to franchise tax for the privilege of exercising their franchise in Ohio. A domestic corporation had nexus and owed franchise tax for a calendar year if it was so organized on January 1 of that year.

Source: Ohio Rev. Code § 5733.01(A), (B)

## Foreign corporations

Foreign corporations — those organized under the laws of another state or country — were subject to Ohio franchise tax if they met any of the following conditions on January 1 of the calendar year:

• Doing business in Ohio
• Owning or using a part or all of their capital or property in Ohio
• Holding a certificate of compliance with Ohio law authorizing them to do business in the state
• Otherwise having nexus in or with Ohio under the U.S. Constitution

Source: Ohio Rev. Code § 5733.01(A), (B)

The statute did not define "doing business" with specificity, instead relying on a disjunctive list of activities. A foreign corporation holding a valid certificate of compliance (certificate of authority) as of January 1 was subject to franchise tax for that calendar year regardless of whether it conducted any Ohio activities during the year.

Source: Ohio Rev. Code § 5733.01(A)

## January 1 measurement date

The franchise tax nexus determination was made on January 1 of each calendar year. If a corporation met the nexus standard on that date, it owed tax for the entire calendar year. A corporation that ceased operations in Ohio or withdrew its certificate of authority during the year remained liable for the full year's tax if it had nexus on January 1.

Source: Ohio Rev. Code § 5733.01(B)

## Constitutional nexus standard

The fourth prong — "otherwise having nexus in or with this state under the Constitution of the United States" — extended franchise tax liability to foreign corporations with sufficient connection to Ohio to satisfy federal constitutional due process and Commerce Clause requirements, even if they did not hold a certificate of authority or formally "do business" in Ohio.

Source: Ohio Rev. Code § 5733.01(A), (B)

## Application to historical matters

These nexus standards remain relevant for:

• Audits of pre-2014 franchise tax returns
• Amended returns triggered by federal adjustments to pre-2014 taxable years
• Refund claims for pre-2014 overpayments
• Determining whether net operating loss carryforwards or credit carryforwards from franchise tax years were properly calculated

Practitioners should apply the January 1 nexus measurement date when analyzing whether a corporation was subject to franchise tax for a given year, and should distinguish franchise tax nexus from the different nexus standards that apply to Ohio's Commercial Activity Tax (CAT), which replaced the franchise tax in 2014.

Source: Ohio Department of Taxation, Corporation Franchise Tax Publication

For tax years prior to 2014, Ohio's corporate franchise tax was calculated using two alternative bases: a net income base and a net worth base. Non-financial corporations (except qualifying holding companies) paid the greater of the tax computed under either base. Financial institutions paid only on the net worth base at thirteen mills (1.3 percent). For other corporations, the net worth base rate was four mills (0.4 percent). Both bases applied Ohio apportionment using a three-factor formula weighted 20% property, 20% payroll, and 60% sales. The tax began phasing out for most corporations in 2005 under House Bill 66, with the phase-out completed after tax year 2013.

Source: Ohio Rev. Code § 5733.05 Source: Ohio Department of Taxation, Corporation Franchise Tax Publication

Ohio does not impose a corporate income tax. Corporations and other business entities are instead subject to the Commercial Activity Tax (CAT), a gross receipts tax levied on the privilege of doing business in the state. The CAT is not a transactional tax and is not subject to Public Law 86-272. For calendar years 2025 and after, businesses with Ohio taxable gross receipts exceeding $6 million are subject to CAT at a rate of 0.26 percent (2.6 mills per dollar). The CAT applies broadly to all entity types—corporations, S corporations, LLCs, partnerships, and sole proprietorships—with exceptions for certain excluded persons including most nonprofit organizations and financial institutions subject to the Financial Institutions Tax.

Source: Ohio Rev. Code § 5751.02 Source: Ohio Rev. Code § 5751.03

Ohio imposes a Financial Institutions Tax (FIT) on bank organizations, holding companies of bank organizations, and nonbank financial organizations engaged primarily as small dollar lenders. The FIT became effective for tax year 2014 under House Bill 510 of the 129th General Assembly, replacing the dealer in intangibles tax and serving as the corporate-level tax for financial institutions after the franchise tax was eliminated.

The FIT is an annual privilege tax imposed on each financial institution doing business in Ohio or otherwise having nexus under the U.S. Constitution. The tax base is the financial institution's total Ohio equity capital, calculated by apportioning total equity capital (as reported on the FR Y-9, call report, or in accordance with GAAP) using a single-factor gross receipts apportionment formula. For tax years beginning in 2020 and after, total Ohio equity capital is limited to 14% of the financial institution's total assets.

The annual tax is the greater of $1,000 (minimum tax) or the following tiered rates: 8 mills on the first $200 million of total Ohio equity capital; 4 mills on capital between $200 million and $1.3 billion; and 2.5 mills on capital exceeding $1.3 billion. Financial institutions subject to FIT are excluded from the Commercial Activity Tax (CAT).

Source: Ohio Rev. Code Chapter 5726 Source: Ohio Department of Taxation, Financial Institutions Tax

Ohio's Commercial Activity Tax (CAT) applies to persons with taxable gross receipts for the privilege of doing business in Ohio. The CAT is imposed at a rate of 2.6 mills per dollar (0.26 percent) on taxable gross receipts after subtracting an exclusion amount that is set for each calendar year by statute.

Statutory framework

Ohio Revised Code § 5751.02 imposes the CAT "on each person with taxable gross receipts for the privilege of doing business in this state." "Doing business" is defined broadly to mean "engaging in any activity, whether legal or illegal, that is conducted for, or results in, gain, profit, or income, at any time during a calendar year." The CAT is not a transactional tax and is not subject to Public Law 86-272.

Ohio Revised Code § 5751.03 sets the tax rate at 2.6 mills per dollar of the taxpayer's taxable gross receipts for the tax period "after subtracting the exclusion amount for the calendar year." The statute provides that each taxpayer applies the full exclusion amount to the first calendar quarter return the taxpayer files that calendar year and may carry forward any unused exclusion amount to subsequent calendar quarters within that same calendar year.

Exclusion amount — current levels

For calendar year 2025 and after, multiple authoritative sources report that the exclusion amount is $6 million. Taxpayers with $6 million or less in taxable gross receipts for the calendar year are not required to file a CAT return or pay CAT. Taxpayers with taxable gross receipts exceeding $6 million pay the 0.26 percent rate on the amount above $6 million. For example, a taxpayer with $8 million in taxable gross receipts for 2025 would subtract the $6 million exclusion and pay 0.26 percent on $2 million, for a CAT liability of $5,200.

For calendar year 2024, the exclusion amount was $3 million. The increase from $3 million to $6 million was enacted by House Bill 96 of the 136th General Assembly, which became effective June 30, 2025.

The specific dollar amounts of the exclusion by year are not visible in the version of Ohio Revised Code § 5751.03 available on the Legislative Service Commission website as of May 28, 2026; the statute cross-references other definitions or contains year-specific amounts that are updated by amendment. Practitioners should confirm the current exclusion amount with the Ohio Department of Taxation or by reviewing the full text of § 5751.03 as amended by House Bill 96.

Earlier thresholds

For calendar years 2019–2023, the exclusion amount was $1 million, with a separate $150,000 registration threshold that required taxpayers to register even if their gross receipts did not exceed the filing threshold.

Elimination of annual minimum tax and annual filing

House Bill 96 also eliminated the annual minimum tax that previously applied to registered CAT taxpayers and eliminated the option to file annual returns. All taxpayers subject to CAT for calendar year 2025 and after must file quarterly returns, due on the 10th day of the second month after the end of each calendar quarter. Taxpayers that no longer meet the threshold should cancel their CAT account to avoid receiving delinquency notices for returns they are not required to file.

Substantial nexus and excluded persons

The CAT applies to persons with substantial nexus with Ohio, which includes but is not limited to physical presence (such as owning property in Ohio worth $50,000 or more, or paying $50,000 or more in Ohio wages) or sufficient economic connection through Ohio-situs receipts. The CAT is not subject to Public Law 86-272 and applies broadly to all entity types — corporations, S corporations, LLCs, partnerships, and sole proprietorships — with limited exceptions.

Certain persons are excluded from CAT even if they have taxable gross receipts exceeding the exclusion amount. Excluded persons include financial institutions subject to the Financial Institutions Tax (Ohio Rev. Code Chapter 5726), certain insurance companies, nonprofit organizations, and the state and its political subdivisions.

Source: Ohio Rev. Code § 5751.02 (imposition) Source: Ohio Rev. Code § 5751.03 (rate and exclusion) Source: Ohio Rev. Code § 5751.01 (definitions and exclusions)