Ohio BWC Payments Subject to CAT

Date January 19, 2021
Article Authors
HBK CPAs & Consultants

The State of Ohio’s Bureau of Workers’ Compensation (BWC) has recently started issuing 1099-G payments to businesses relating to the three rounds of “dividend checks” made in 2020. This is a deviation from past payments that the BWC has made where no 1099’s were issued. The BWC indicated it was compelled to issue Form 1099-G for the 2020 payments pursuant to the IRS.

The state of Ohio is now asserting that these payments are subject to Ohio CAT barring any express statutory exclusion. While the BWC calls these payments “dividends” or “rebates” the state of Ohio is taking the position that the nature of the transaction is more akin to a taxable grant or other taxable gross receipts, which is how the payments are being reported on Form 1099-G (Box 6).

In a webinar issued by the Ohio Department of Taxation (ODT) the state has indicated these BWC payments also will be subject to commercial activity tax (CAT) liability because they are considered taxable gross receipts since no statutory exclusion applies in R.C. 5751.01(F)(2) to the amounts received.

The amount reported on the 1099-G will be for the aggregate amount of all three BWC payments received in the calendar year 2020. According to BWC, the forms will be mailed to employers in March 2021 at the latest and BWC will make every effort to issue them as soon as it is possible to do so – they are still in the process of collecting W-9s from employers.

Form 1099-G’s are expected to be issued throughout January 2021. BWC makes no representation to the IRS or individual employers as to whether or not the dividend payments are taxable. Each employers’ facts and circumstances are different.

If you have received a 1099-G related to BWC payments, please discuss this issue with your HBK representative.

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