Ohio BWC Payments Subject to CAT

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.

About the Author(s)

Cassandra Baubie, JD
Cassandra Baubie is an Associate at HBK CPAs & Consultants and is a member of its Tax Advisory Group (TAG). Cassandra joined HBK in 2017. She works in the firm’s Youngstown, Ohio office. She has experience in tax law research and writing. Prior to joining HBK, she worked for Jurist.org, a global legal news organization, and was a member of the University of Pittsburgh Tax Law Review Journal. Cassandra also worked for the University of Pittsburgh School of Law’s Low-Income Tax Clinic where she performed IRS litigation and Tax Court work and provided compliance work for low income individuals and businesses. Cassandra focuses on issues pertaining to State and Local Taxation (SALT), as well as flow through entity taxation. She has been involved in numerous sales and use tax, franchise tax, and corporate income tax audits, VDA’s, and refund requests. She focuses on complex sales and use tax compliance planning, nexus studies and on-site review and training for all SALT related issues, and has managed various engagements as the in-charge team member and has significant experience in multi-state tax issues.

Hill, Barth & King LLC has prepared this material for informational purposes only. Any tax advice contained in this communication (including any attachments) is not intended or written to be used, and cannot be used, for the purpose of (i) avoiding penalties under the Internal Revenue Code or under any state or local tax law or (ii) promoting, marketing or recommending to another party any transaction or matter addressed herein. Please do not hesitate to contact us if you have any questions regarding the matter.