Ohio Corporation Franchise Tax Report Instructions For Financial Institutions

items in the process of collection; federal funds sold; securities

purposes, or could claim depreciation if subject to federal income

purchased under agreements to resell; assets held in a trading

tax. Real property and tangible personal property do not include

account; securities; interests in a real estate mortgage investment

coin, currency, or property acquired in lieu of or pursuant to a

conduit or other mortgage-backed or asset-backed security; and

foreclosure. Federal income tax treatment (not book treatment) of

other similar items.

a lease governs whether property is considered “owned” or “rent-

ed” by the lessee. Property is rented by the lessee if a transaction

Loan secured by real property means that 50 percent or more

between lessor and lessee is considered a lease or rent for feder-

of the aggregate value of the collateral used to secure a loan or

al income tax purposes; property is owned by the lessee if the

other obligation, when valued at fair market value as of the time

transaction is considered a purchase for federal income tax pur-

the original loan or obligation was incurred, was real property.

poses.

Merchant discount means the fee, or negotiated discount,

Regular place of business means an office at which the taxpay-

charged to a merchant by the taxpayer for the privilege of partic-

er carries on its business in a regular and systematic manner and

ipating in a program whereby a credit card is accepted in pay-

which is continuously maintained, occupied, and used by employ-

ment for merchandise or services sold to the cardholder.

ees of the taxpayer.

Participation means an extension of credit in which an undivided

State means a state of the United States, the District of Colum-

ownership interest is held on a pro-rata basis in single loan or

bia, the commonwealth of Puerto Rico, or any territory or posses-

pool of loans and related collateral. In a loan participation, the

sion of the United States.

credit originator initially makes the loan and then subsequently

resells all or a portion of it to other lenders. The participation may

Syndication means an extension of credit in which two or more

or may not be known to the borrower.

persons fund and each person is at risk only up to a specified

percentage of the total extension of credit or up to a specified

Principal base of operations

dollar amount.

With respect to an employee, the “principal base of operations”

means the place of more or less permanent nature from which

Transportation property means vehicles and vessels capable of

the employee regularly (a) starts work and to which the employee

moving under their own power as well as any equipment or con-

customarily returns in order to receive instructions from the em-

tainers attached to such property.

ployer, or (b) communicates with the employee’s customers or

other persons, or (c) performs any other functions necessary to

SCHEDULE E – NET VALUE OF STOCK

the exercise of the trade or profession at some other point or points.

Note: Qualifying Amount Debt to Equity Adjustment. For fran-

With respect to transportation property, “principal base of oper-

chise tax years 2002 and thereafter, a financial institution that

ations” means the place of more or less permanent nature from

is a related member to a company that makes the qualifying

which the transportation property is regularly directed or controlled.

holding company election is not required (nor is it permitted)

to make the schedule E “qualifying amount” debt to equity

Qualified institution means a financial institution that has at least

adjustment set forth in O.R.C. section 5733.05(C).

9 percent of its deposits in Ohio as of the last day of June prior to

the beginning of the tax year and meets one of the following three

The value of issued and outstanding shares of stock is determined

tests:

from the books of the taxpayer as of the beginning of the taxpay-

1. On or after June 1, 1997, the financial institution has con-

er’s annual accounting period that includes the first day of Janu-

summated one or more approved transactions with insured

ary of the tax year. See O.R.C. section 5733.056(B). For exam-

banks with different home states that would qualify under

ple, assume that an Ohio franchise taxpayer has a taxable year

section 102 of the “Riegle-Neal Interstate Banking and

beginning July 1, 2002 and ending June 30, 2003. The taxpayer’s

Branching Efficiency Act of 1994,” Public Law 103-328, 108

franchise tax net value of stock for tax year 2004 is determined as

Stat. 2338; or

of July 1, 2003 the beginning of the taxpayer’s annual accounting

2. The financial institution is a federal savings association or

period that includes the first day of January of tax year 2004. Gen-

federal savings bank that on or after June 1, 1997 has con-

erally, the figures at the beginning of the taxpayer’s annual ac-

summated one or more interstate acquisitions that result in

counting period that includes the first day of January of the tax

a financial institution that has branches in more than one

year (in this example, July 1, 2003) will be the same as the figures

state; or

at the end of the taxable year that concludes prior to January 1 of

3. On or after June 1, 1997 the financial institution has con-

the tax year (in this example, June 30, 2003).

summated one or more approved interstate acquisitions

under authority of Title Xl of the Ohio Revised Code that

Line 2 – Ownership interest of depositors. With respect to a

result in a financial institution that has branches in more

financial institution that does not have capital stock “issued and

than one state.

outstanding shares of stock” includes, but is not limited to owner-

ship interests of depositors in the capital employed in such an

The definition of “qualified institution,” as set forth above, reflects

institution (see O.R.C. section 5733.04(A)). Except for the amounts

the change to that definition made by Amended Substitute House

determined under the instructions for line 4 below, ownership in-

Bill 405, 124

General Assembly, effective December 13, 2001.

terest of depositors does not include any amount which is treated

as a liability in accordance with generally accepted accounting

Real property owned and tangible personal property owned

principles.

means real property and tangible personal property, respectively,

on which the taxpayer can claim depreciation for federal income

Line 4 – Reserves and net deferred tax liabilities. Reserves

tax purposes or to which the taxpayer holds legal title and on which

and net deferred tax liabilities (that is, deferred tax liabilities less

no other person can claim depreciation for federal income tax

deferred tax benefits) are includable in the computation of net

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Ohio Corporation Franchise Tax Report Instructions For Financial Institutions - 2004 Page 17

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