To provide some taxpayer relief in the wake of COVID-19, Ohio is excluding forgiven PPP loan amounts from Ohio’s commercial activity tax (CAT). While generally debt forgiveness is treated as taxable gross receipts for CAT purposes under R.C. 5751.01(F), forgiven PPP loans will be specifically excluded under recently passed H.B. 481. The Ohio General Assembly modified the definition of “gross receipts” for Ohio CAT purposes to specifically exclude from the CAT base all forgiven loans that are excluded from federal gross income under §1106(i) of the CARES Act. Accordingly, the forgiveness of PPP loan principal will be excluded from the tax base for federal income tax purposes and Ohio commercial activity tax.

Any amount excluded from gross income for federal income tax purposes is similarly excluded from the Ohio CAT.

If you have questions as to how your PPP loan affects commercial activity tax, or other ways to minimize your Ohio tax obligations, 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 sdimengo@bdblaw.com 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 rfry@bdblaw.com 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 nfulmer@bdblaw.com or 330.258.6464.