Practice Spotlight

Many of our clients maintain homes in both Ohio and in another state, such as Florida...

Practice Spotlight
Snowbird Bill
Many of our clients maintain homes in both Ohio and in another state, such as Florida. A frequent question is how they can be a “resident” of that other state for personal income tax purposes and still maintain property and physical contact with family, friends, doctors, and religious and charitable organizations in Ohio by spending time in Ohio? In legal terms the place where you are a resident is your “domicile”.

For income tax purposes you can only have a “domicile” in one state at a time. That state is the place where you maintain your principal home, where you are registered to vote, have a drivers license, register your cars, and have your primary legal connections such as the address shown on your bank account and on your income tax returns.

Ohio has a “bright line” test for determining whether or not an individual’s domicile for personal income tax purposes is within or without the State of Ohio. This test is based on the amount of time spent in the State of Ohio, and is measured by a “contact period”, which occurs when an individual is away overnight from the individual’s abode located outside of Ohio and, while overnight, spends at least some portion of the time, however minimal, of each of two consecutive days, in Ohio.

For purposes of applying the domicile rule in 2007, a new Ohio law provides two categories for classification of potential Ohio taxpayers:

A. Safe Harbor - An individual who has no more than 182 contact periods in Ohio during a taxable year, and who has at least one abode outside of Ohio during the entire taxable year, is not domiciled in Ohio for State income tax purposes.

B. Taxed as Ohio Resident - An individual who has at least 183 contact periods in Ohio during a taxable year, which need not be consecutive, is presumed to be domiciled in Ohio for the entire taxable year. The individual can rebut this presumption for any portion of the taxable year only with clear and convincing evidence to the contrary.

Ohio law mandates that non-residents wanting an irrebuttable presumption of non-residency must file an affidavit with the Ohio Department of Taxation by April 15 of each year. The affidavit for the 2007 tax year (using the new 182 contact period standard) will be due by April 15, 2008. If you have questions on the application of the Ohio rules on domicile, please contact Roger Stewart of our office.

Ohio Commercial Activity Tax (CAT)
Newly enacted tax on the privilege of doing business in Ohio - the Ohio Commercial Activity Tax.
  1. CAT was effective as of July 1, 2005 with the first year's return due February 10, 2006.

  2. CAT is a tax on the privilege of doing business in Ohio - not an income tax and not a sales or other transactional tax.

    1. CAT is computed based upon 'gross receipts' as defined in the statute.

      1. Examples of gross receipts includes rents, sales and performance of services

    2. Certain receipts are specifically excluded from gross receipts

      1. Examples of receipts specifically excluded include employee compensation, interest, dividends, proceeds from loans, stock, bonds, mutual funds, trusts, pension plans, or certificates of deposit, and sales and use taxes collected by a vendor on behalf of the taxing jurisdiction from a consumer.

    3. There are also limited deductions and credits available.

  3. CAT is applicable to persons whose taxable gross receipts exceed $150,000 per year.

    1. 'Persons' includes most types of businesses including, but not limited to, individuals, corporations, S corporations, partnerships, limited liability companies, limited liability partnerships, trusts, estates, disregarded entities, associations, joint ventures, societies and clubs.

    2. CAT is not applicable to nonprofit organizations.

    3. Certain groups of persons subject to CAT are required to file as a Combined Taxpayer or may file as a Consolidated Elected Taxpayer.

    4. Non-resident persons doing business in Ohio are potentially subject to CAT.

  4. Persons and groups subject to CAT are required to register with the Department of Taxation by November 15, 2005, or within 30 days of becoming subject to the CAT. If you have not registered, you should register late to minimize the imposition of any penalties.

  5. For details, please contact E. Roger Stewart or Eric C. Powell , or contact your accountant.


101 West Prospect Avenue, Suite 1800Cleveland, OH 44115Ph: 216.696.1422Fx: 216.696.1210
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