Recent Change in the Law Creates Dissolution Delay
In September 2013, the Ohio legislature amended the Revised Code sections governing the voluntary dissolution of for-profit Ohio corporations. Prior to the amendment, a for-profit could file dissolution paperwork with the Ohio Secretary of State after certifying that the corporation had notified certain governmental agencies – Department of Job and Family Services (“ODJFS”), Bureau of Workers’ Compensation (“BWC”), County Treasurer (“Treasurer”), and the Ohio Department of Taxation (“Ohio Tax”) – of the scheduled effective date of the dissolution.
This notification customarily occurred via a simple letter to the agencies. Thus, corporations could easily and timely dissolve by preparing and mailing letters to the required agencies, including Ohio Tax, and then certifying to the Secretary of State that notice was sent. Typically, corporations tend to consider dissolution by end of the fiscal year. Prior to the amendment, only a moderate amount of foresight was necessary to timely dissolve a corporation by the end of the fiscal year. However, the 2013 amendment significantly changed the amount of time necessary to complete a for profit corporate dissolution.
The 2013 amendment modified the notification and certification requirements discussed above as related to Ohio Tax. A simple notification letter is adequate for ODJFS, BWC and Treasurer; however, a letter to Ohio Tax is no longer sufficient under the Revised Code. See R.C. 1701.86(I). Instead, corporations are now required to obtain a “Tax Clearance Certificate” from Ohio Tax:
“showing that the corporation has paid all taxes administered by and required to be paid to the tax commissioner that are or will be due from the corporation on the date of the dissolution, or that the department has received an adequate guarantee for the payment of all such taxes”
See R.C. 1701.86(H)(2). Any dissolution paperwork “filed with the secretary of state, shall be accompanied by” a Tax Clearance Certificate. R.C. 1701.86(H).
To obtain a Tax Clearance Certificate, a corporation must file a Form D5 “Notification of Dissolution or Surrender” with Ohio Tax. If represented by a third party, the corporation must also file a Form TBOR 1 “Declaration of Tax Representative.” Both forms are available on Ohio Tax’s website. After receipt of these forms and a review of the corporation’s accounts, Ohio Tax will issue a Tax Clearance Certificate if there is no tax due and owing. If Ohio Tax questions the corporation’s tax status, it will require explanation and evidence from the corporation that all taxes are current.
This process has added significant delay to the dissolution process. What customarily took 2 weeks can now drag out for months. Accordingly, any Ohio for profit corporation must plan months in advance when considering voluntary dissolution. If your corporation is considering voluntary dissolution, contact the business planning attorneys at Williams, Kratcoski & Can, LLC to discuss your plans.