Ohio Corporation Franchise Tax Report Instructions For Financial Institutions

value of stock. See Kroger v. Bowers (1965), 3 Ohio St. 2d 76;

enter the taxpayer’s investment in such public utility, insurance

Baldwin Piano and Organ Company v. Kosydar (April 7, 1975)

company, or other financial institution net of goodwill and appre-

First District Court of Appeals Hamilton County, Case No. 7425500;

ciation included in such investment. Appreciation does not include

and Allied Stores of Penn-Ohio, Inc. v. Limbach, B.T.A. Case No.

“negative appreciation”. See SHV North American Corp. v. Tracy

85-B-484, February 19, 1988. The debit balance of the taxpay-

(1994), 70 Ohio St.3d 395.

er’s deferred income tax account (that is, the excess of de-

ferred tax benefits over deferred tax liability) accounted for in

Line 2 – Total Assets. Enter the taxpayer’s total assets as shown

accordance with generally accepted accounting principles is

by the books of the corporation net of all appreciation and good-

deductible from net worth as a negative reserve, thereby de-

will.

creasing taxable net worth. See USX v. Tracy, BTA Nos. 92-

1479, 92-1480 (1-22-99).

SCHEDULE A-1

NONREFUNDABLE CREDITS

The gross profit portion of income received but not yet earned is

includable in the net value of stock. For example, the gross profit

O.R.C. section 5733.98 sets forth the order in which franchise

portion of unearned subscription revenue received by a maga-

tax nonrefundable credits and unused credit carryforward

zine publisher is includable in the net worth computation.

amounts must be used. A nonrefundable credit may be used

Contingent liabilities are includable in the net worth computation

to reduce the tax liability (before considering any payments)

if:

to the minimum fee, but a nonrefundable credit may not re-

• The taxpayer cannot reasonably estimate the amount of the

duce the tax liability (before considering any payments) be-

liability; or

low the minimum fee. A lower ranking credit must be used

• The taxpayer cannot establish from information available

before any higher-ranking credit is used. The order is impor-

prior to the issuance of the financial statements that it is

tant if the corporation is entitled to more than one nonrefund-

probable that a liability had been incurred at the balance

able credit and the corporation is unable to utilize some por-

sheet date.

tion of the total credit amount in the year the credits were

generated (because the total credit amount exceeds the tax

A taxpayer is not required to add to its net worth as a reserve any

due before the credit). Nonrefundable credits that are not used

account, whether shown on the taxpayer’s books as a liability or a

in the year generated can generally be carried forward to fu-

reserve, if that account results from and is maintained in accor-

ture years. However, the carryforward period is limited and

dance with FASB Statement No. 106 (see Tax Commissioner’s

varies from credit to credit. Any unused credit amount that

Rule 5703-5-10). Deferred income that is neither earned nor re-

remains after the carryforward period for that credit has ex-

ceived is not generally includable in the net worth computation.

pired is lost. The unused amount of a particular credit that is

However, the gross profit portion of income from an installment

carried forward to a later year is used prior to the same credit

sale is includable in the net worth computation.

generated in the later year and prior to any higher numbered

credit listed in O.R.C. section 5733.98.

SCHEDULE F – ADJUSTED NET VALUE OF STOCK

FOR HOLDING COMPANIES

Note 1: The new jobs credit is not summarized below because

the new jobs credit is a refundable credit which is considered a

This schedule applies to:

payment of the tax. See line instructions for Schedule A, line 9.

• Financial institutions that own at least 25 percent of the is-

sued and outstanding shares of common stock of another

Note 2: The credit for employers that enter into agreements with

financial institution,

child day-care centers (O.R.C. section 5733.36) and the credit for

• Financial institutions that own at least 80 percent of the is-

employers that reimburse employee child day-care expenses

sued and outstanding shares of common stock of a public

(O.R.C. section 5733.38) do not appear on the 2004 franchise tax

utility as defined in O.R.C. section 5727.01, and

report because these credits expired in 2003 and have no un-

• Financial institutions that own at least 80 percent of the is-

used credit carryforward provision.

sued and outstanding shares of common stock of an insur-

Note 3: Amended Substitute House Bill 180, 124

Ohio General

ance company as defined in O.R.C. section 5725.01.

Assembly recently enacted the Ohio Venture Capital (OVC) Pro-

The taxpayer’s excludable investment, total assets and net value

gram the purpose of which is to increase the amount of private

of stock are determined from the books of the taxpayer as of the

investment capital available to both (i) Ohio-based business en-

beginning of the taxpayer’s annual accounting period that includes

terprises in the seed or early stages of business development

the first day of January of the tax year. See O.R.C. section

that require initial or early stage funding, and (ii) established Ohio-

5733.056(B). For example, assume that an Ohio franchise tax-

based business enterprises that require funding for developing

payer has a taxable year beginning July 1, 2002 and ending June

new methods or technologies. In addition, the General Assembly

30, 2003. For tax year 2004 the taxpayer’s franchise tax exclud-

enacted a new franchise tax and individual income tax credit –

able investment, total assets and net value of stock are deter-

the Credit for Losses on Loans Made to the Ohio Venture

mined as of July 1, 2003 the beginning of the taxpayer’s annual

Capital Program. The purpose of the credit is to provide OVC

accounting period that includes the first day of January of tax year

lenders and investors some security against losses on their loans

2004. Generally, the figures at the beginning of the taxpayer’s

to the OVC program. Although the OVC Authority may authorize

annual accounting period that includes the first day of January of

tax credits any time after the Authority establishes its investment

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

policy, the law specifically provides that taxpayers may not claim

figures at the end of the taxable year that concludes prior to Jan-

the credits during the first four years of the Ohio Venture Capital

uary 1 of the tax year (in this example, June 30, 2003).

program (measured from the date the Authority establishes its

investment policy). So, this new credit does not appear on the

Line 1 – Excludable Investment. If the taxpayer owns the appli-

2004 Ohio franchise tax report or the 2003 individual income tax

cable percentage of the common stock of a public utility, insur-

return. See O.R.C. sections 150.01 to 150.10, 5733.49, 5733.98,

ance company or another financial institution, as set forth above,

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Ohio Corporation Franchise Tax Report Instructions For Financial Institutions - 2004 Page 18

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