Taxability of Ohio Workers' Compensation Dividend Stimulus Payments

Ohio’s state-run insurer issued more in dividends in 2020 than were paid into the system. These $8 billion in dividend payments could be nearly 400% of premiums paid by businesses. The payments are expected to be taxable as dividends for Ohio Commercial Activity Tax (CAT) purposes and for federal income tax purposes, but there’s some uncertainty.

Sarah O’Leary, Deputy Tax Commissioner and Chief Legal Officer of the Ohio Department of Taxation, said that “You are getting a fairly large benefit from the payments”, and “We believe it’s taxable for CAT purposes”. There has been disagreement on the treatment of these payments for CAT purposes with some expecting intervention from the governor’s office, but the budget recently issued by Governor DeWine didn’t address the matter. The Ohio Department of taxation has since issued 1099-DIV’s and has taken the position that barring contrary guidance from the governor they will be treating these payments as income taxable as dividends.