Ohio (OH) Corporate Tax Rate, Economic Nexus, Apportionment & IRC §174 Conformity Guide (2025/2026)

1. How Ohio Apportionment & Economic Nexus Impact ASC 740 Tax Provisions

For multi-state C-Corporations and SaaS companies selling into Ohio (OH), exceeding $6,000,000 in annual OH-sourced receipts (or maintaining remote W-2 employees inside the state) establishes nexus under Ohio's Commercial Activity Tax (CAT). Under 100% OH Gross Receipts (> $6M) apportionment and Market-Based rules, SaaS subscription revenue is sourced to Ohio based on where the customer receives the benefit of the software.

2. Ohio Federal-to-State Tax Base Modifications (§174 R&D & §168(k) Bonus Depreciation)

• IRC §174 R&D Capitalization Rule in Ohio: Ohio DECOUPLES from federal TCJA IRC §174 capitalization! Taxpayers filing in Ohio may deduct 100% of current-year domestic R&D expenses on their OH return via a state subtraction modification—dramatically lowering OH taxable income compared to Federal Form 1120.
• IRC §168(k) Bonus Depreciation Rule in Ohio: Ohio decouples from federal IRC §168(k) bonus depreciation. Corporate taxpayers must add back federal bonus depreciation on the OH return and track a separate state depreciation basis rollforward.
• Pass-Through Entity Tax (PTET) Election: Ohio offers an elective Pass-Through Entity Tax (PTET) at an effective rate of 3.50% for S-Corporations and Partnerships (1065/1120-S) looking to bypass the $10,000 federal SALT deduction cap.