In our previous post, we explained the Ohio Department of Taxation proposed a regulation change to limit a taxpayer’s ability to make a retroactive consolidated filing election for Ohio Commercial Activity Tax purposes (CAT). The rule change is in response to a 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). Ohio has revived the proposed rule change, but no hearing date has been set.

The proposed change to OAC 5739-29-02 would allow the taxpayer to make a retroactive consolidated filing application as long the taxpayer was previously registered for the CAT, had not been previously contacted for audit or investigation, and its originally filed returns reflected the intent to file on a consolidated basis (i.e., the election would not affect the original tax liability). A taxpayer would also be able to make the election through Ohio’s Voluntary Disclosure Program.

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.