February 2024 state and local tax update

While state income tax is generally the focus for most taxpayers, there are many additional non-income-based taxes imposed at both the state and locality level which can be material, depending on the facts of a taxpayer.

Two significant non-income-based taxes with notable updates include the Ohio Commercial Activity tax and the Washington Capital Gains tax.

Ohio Commercial Activity Tax (OH CAT)

House Bill 33 enacted multiple changes to the OH CAT beginning in 2024. Specifically:

Annual exclusion

• For calendar year 2024, the exclusion amount is increased from $1 million to $3 million.
• For calendar year 2025 and thereafter, the exclusion amount is increased to $6 million.

Annual filings eliminated

• Annual filings are eliminated after the 2023 annual return, which is due May 10, 2024.
• Only quarterly returns may be filed for tax periods beginning on and after Jan. 1, 2024.

Minimum tax eliminated

• Effective for tax periods beginning on and after Jan. 1, 2024, the OH CAT annual minimum tax is eliminated.

Impact to taxpayer’s account/returns

Annual taxpayer’s

• An annual taxpayer that anticipates having $3 million or less in taxable gross receipts in 2024, should cancel its account effective Dec. 31, 2023.
• An annual taxpayer that cancels its OH CAT account must file a final return for 2023 due May 10, 2024.
• If an annual taxpayer expects to exceed the $3 million threshold in 2024, quarterly tax returns will be required.

Quarterly taxpayer’s

• Any quarterly taxpayer that anticipates having $3 million or less in taxable gross receipts during calendar year 2024, should cancel its OH CAT account effective Dec. 31, 2023.
• A quarterly taxpayer that cancels its account as of December 31, 2023, needs to final a final OH CAT return. For a quarterly taxpayer, that is the 2023 fourth quarter return which is due Feb. 12, 2024.