Ohio CAT Tax

[Jason Barnett]

For those of you that operate in the state of Ohio you need to talk to your tax advisor about the new CAT tax:

http://www.ohioscpa.com/advocacy/article.asp?article=3976-1

This new bill is a major change in Ohio tax law and can put a hurt on your bottom line if you are a major player in the state of Ohio. Consult with your tax advisor, but as I see it there are several important impacts for RE investors:

- The CAT tax applies to all entities, regardless of how they file taxes with the IRS. This means the CAT tax applies to C Corps, S Corps, LLC's, basically any business structure.
- The CAT tax applies to rents received in the normal course of business although it does not apply to the disposition of capital assets. So if I buy a rental property and sell it a year later then I pay CAT tax on the rents I receive, but I don't pay the CAT tax on the sale of the property itself.
- The CAT tax applies to your gross receipts, regardless of net income. So it doesn't matter that my rental property shows a tax loss on paper; I still pay the CAT tax as a percentage of my rents.