Article originally published January 28, 2021
Last updated February 11, 2021

Update: SB 18, an Internal Revenue Code conformity bill, was amended and passed by the Ohio Senate on February 10, 2021. The bill creates exclusions from Ohio Commercial Activity Tax for BWC dividends and PPP2 forgiven loans. GBQ will provide additional updates as they become available.


In December 2020, the Ohio Bureau of Workers’ Compensation (BWC) issued $5 billion in dividends to Ohio employers in an effort to ease the financial impacts of COVID-19. These payments were in response to Ohio Governor DeWine’s October 2020 request to all Ohio agencies to identify ways to help Ohio businesses stay open and keep people employed during the Coronavirus pandemic.

The Private Employer Dividend Defined

The BWC defined the private employer dividend as 372% of billed premium for eligible employers for the period of July 1, 2019 through June 30, 2020. The BWC will apply the percentage to the blended premium amount. The checks range from hundreds of dollars to millions of dollars for employers covered by the BWC program.

Tax Implications of the Dividend

It is our understanding that companies will receive a 1099-G from the BWC in 2021 to document the benefit received. For federal tax purposes, the tax impact is rather simple: the premium dividend will be treated as ordinary income.

For purposes of the Ohio Commercial Activity Tax (CAT), however, the tax treatment is not clear. The current position of the Ohio Department of Taxation (ODT) (as of the date of this alert) is that the premium dividends are subject to CAT as a taxable gross receipt.  The rationale being: 1) the premium dividend is not just a refund of the premiums paid over time, but it reimburses the company 372% of the billed premium; and 2) there is currently no statutory CAT exclusion.

In 2005, the CAT was implemented as a broad-based, low rate gross receipts tax to generate revenues in order to eliminate the tangible property and corporate franchise taxes. From inception, the ODT has limited CAT exemptions in order to maintain the integrity of the tax base. However, in this situation, there appears to be several exemptions that could apply to exempt the BWC premium dividend from CAT. Pursuant to Ohio Rev. Code §5751.01(F)(2), exclusions from “gross receipts” may include interest income, dividends and distributions from corporations, tax refunds, and other tax benefit recoveries and proceeds received on the account of payments from insurance policies. Therefore, how the premium dividend is classified will determine the CAT treatment. In addition to the above, it can also be argued that the premium dividend is just a return of an expense amount. This argument loses some merit, however, because the payments are based on 372% of the billed premiums. Finally, there is a position to argue that the premium dividend does not “contribute to the production of gross income.”

We can help

If there are additional comments or guidance from the Ohio Tax Commissioner on this matter, GBQ will provide updates as warranted. Please contact your GBQ representative if you have questions, or if you would like to discuss any of this information in further detail.


Article written by:
Matt Stamp, JD, LLM
Director of State & Local Tax Services



Material discussed in this article is meant to provide general information regarding a time-sensitive development in state and local tax. GBQ advises those who read this article to seek professional advice before taking any action based on the information presented. Any tax advice that may be contained in this communication is not intended or written to be used, and cannot be used for the purpose of (i) avoiding tax-related penalties under the Internal Revenue Code or applicable state or local tax law provisions or (ii) promoting, marketing or recommending to another party any tax-related matters addressed herein.

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