How does the phase-out affect the nonrefundable credit for taxes paid by a qualifying pass-through entity?
Beginning with the 2006 report year, franchise taxpayers subject to the phase-out must multiply their franchise tax after nonrefundable credits (other than the nonrefundable credit for tax paid by a qualifying pass-through entity) by the phase-out factor. The nonrefundable credit for taxes paid by a qualifying pass-through entity is not subject to the phase-out factor. Rather than applying the phase-out factor to this credit, the new law phases out the tax that a pass-through entity must pay on its Ohio income passing through to qualifying investors that are subject to the franchise tax phase-out. See table below.
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