BWC Dividend Tax Issues | Federal Tax Exclusions | OH IN KY

Tax Issues | OSCPA and Others Push for Federal-Level Relief on BWC Dividends

Published on by Nick Scerbo in COVID-19, Tax Services

Tax Issues | OSCPA and Others Push for Federal-Level Relief on BWC Dividends

Recently, businesses and trade associations led by the Ohio Society of CPAs (OSCPA) sent a letter to Ohio’s Congressional Delegation regarding the issues surrounding 2020 Ohio Bureau of Workers Compensation (BWC) Dividends, expressing concerns about their potential unintended impact on businesses.

Requested Exclusion for PPP Loan and ERTC

The letter urged the U.S. Small Business Administration and Treasury to exclude the recent BWC dividends/refunds from businesses’ federal gross receipts when taxpayers apply for PPP loans and the Employee Retention Credit (ERC).

In mid-February, the Ohio Senate amended Senate Bill 18 to exclude BWC refunds from the Commercial Activity Tax (CAT) – a win for Ohio taxpayers at the state level. A companion bill, House Bill 48, also has been introduced in the Ohio House.  Once the differences are reconciled and approved by the Senate and the House, the emergency bill will be sent to the Governor for signature and would be enacted immediately. At the federal level, there is still uncertainty whether these dividends will be included in federal gross receipts, which affects taxpayers applying for the second draw of PPP loans and the ERC.

Implications for Ohio Taxpayers

During 2020, the Ohio BWC issued three rounds of “dividend” checks, totaling around $8 billion. In prior years, the Bureau has issued these dividends or rebates but did not issue 1099 tax forms along with these payments. However, the BWC announced that the IRS is requiring that the 1099s be issued, and the income will be reported in box 6, taxable grants, on Form 1099-G.

This is important to Ohio taxpayers, because to qualify for the second draw of PPP loans, the business must show a 25% decline in gross receipts from any quarter in 2020 to the corresponding quarter in 2019. The expanded ERC also has a similar gross receipts test for eligibility.

This issue is unique because the treatment of these BWC dividends is specific to Ohio taxpayers. Since applications for the PPP loans are only accepted until March 31 and the ERC is scheduled to expire June 30, guidance for these rules is time-sensitive.

We will continue to follow up on this issue and will provide updates as necessary.

Have a Question?

If you have questions about PPP Loan 2nd Draw or ERC eligibility, take our free PPP Loan 2.0 Quick Test and ERC Quick Test, and a member of our COVID-19 team will contact you with recommendations. Or, you can contact us to talk with one of our COVID-19 Advisory Team members. We’re here to help.

Barnes Dennig COVID-19 Advisory Team


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