Ohio Corporation Franchise Tax Report Instructions For Financial Institutions

2004 Franchise Tax Instructions

plies (see general instruction #2), a corporation is subject to

for Financial Institutions

the franchise tax for each calendar year (tax year) that on the

first day of January of that calendar year the corporation holds

This Ohio franchise tax instruction booklet applies only to

an Ohio charter, does business in Ohio, owns or uses a part

financial institutions. Financial institutions must file Ohio form

or all of its capital or property in Ohio, holds a certificate of

FT 1120 FI. A financial institution is any of the following:

compliance authorizing the corporation to do business in Ohio,

•

A national bank organized and existing as a national bank as-

or otherwise has nexus with Ohio under the Constitution of

sociation pursuant to the “National Bank Act,” 12 U.S.C. 21;

the United States.

•

A federal savings association or federal savings bank that is

chartered under 12 U.S.C. 1464;

The calendar year in and for which the tax is paid is called the

•

A bank, banking association, trust company, savings and loan

“tax year.” The tax year is also referred to as the “report year.”

association, savings bank, or other banking institution that is

The franchise tax for tax year 2004 is paid for the privilege of

incorporated or organized under the laws of any state;

doing business in Ohio during the calendar year 2004. The

•

Any corporation organized under 12 U.S.C. 611 to 631;

accounting period on which the tax is based is called the “tax-

•

Any agency or branch of a foreign depository as defined in 12

able year” and is defined as “. . . a period ending on the date

U.S.C. 3101;

immediately preceding the date of commencement of the cor-

•

A company licensed as a small business investment company

poration’s annual accounting period that includes the first day

under the “Small Business Investment Act of 1958,” 72 Stat.

of January of the tax year.” A taxable year may consist of an

689, 15 U.S.C. 661, as amended; or

aggregation of more than one federal taxable year and can

•

A company chartered under the “Farm Credit Act of 1933,” 48

exceed one year in length. The franchise tax for tax year 2004

Stat. 257, 12 U.S.C. 1131(d), as amended.

is based upon the taxpayer’s activity during its taxable year

ending in 2003. (O.R.C. sections 5733.031(A) and 5733.04(E)).

Specifically excluded from the definition of a “financial institution”

(and from the definition of a “dealer in intangibles”) are insurance

The franchise tax is levied on the value of a corporation’s is-

companies, credit unions and corporations or institutions orga-

sued and outstanding shares of stock. Taxpayers other than

nized under the “Federal Farm Loan Act” and amendments there-

financial institutions (and certain high-tech start-up companies)

to. In addition, for franchise tax purposes a production credit as-

must determine the value of their issued and outstanding

sociation is not a financial institution.

shares of stock under both the net income base and the net

worth base and pay the tax on the base that produces the

In our continuing effort to serve Ohio taxpayers in a more

greater tax. Financial institutions are not subject to the tax on

cost effective manner with limited resources the Department

the net income base but are subject to the tax on the net worth

of Taxation did not mail this franchise tax instruction booklet

base at a higher rate than other taxpayers. Financial institu-

with the tax form. Instead, this booklet is available on the

tions must file form FT 1120 FI.

Department of Taxation’s Web site: For

those taxpayers that do not have access to the Internet we

2. ENTITIES GENERALLY NOT SUBJECT TO

printed a limited number of instruction booklets. Printed in-

FRANCHISE TAX

structions can be obtained by calling toll free 1-800-282-1782.

A. Financial Institutions That Are S Corporations

If a financial institution is an S corporation, it generally is not

If any of the preprinted information on the form (i.e. the cor-

subject to the franchise tax. However, if the S corporation fi-

poration’s legal name, Ohio license/charter number or feder-

nancial institution was a C corporation during any portion of a

al employer identification number) is incorrect, please con-

taxable year ending in 2003, the S corporation is subject to

tact us with the correct information at any of the telephone

the franchise tax for tax year 2004 and must file an Ohio cor-

numbers listed in the back of this booklet.

poration franchise tax report (form FT 1120 FI). See Sanders

Unless otherwise stated, all references are to the Ohio Re-

Health & Fitness Inc. v. Limbach, B.T.A. Case No. 88-E-559,

vised Code (O.R.C.). Links to the Ohio Revised Code, Admin-

June 21, 1991. If a corporation is an S corporation for a tax-

istrative (Tax Commissioner) Rules, the Department’s infor-

able year that ended in 2003, the S corporation must file a

mation releases, tax forms, and other information are avail-

Notice of S Corporation Status (form FT 1120 S) by June 30,

able on our Web site. We encourage you to visit our Web site

2004.

at:

Although an S corporation financial institution is not subject to

For a summary of legislation enacted within the last year that

the franchise tax, the S corporation may be subject to the tax

affects the franchise tax and for a summary of the franchise

on pass-through entities. For taxable years beginning after

tax cases decided within the last year, please see the fran-

1997 an S corporation that has nexus with Ohio is subject to

chise tax instruction booklet for corporations that are not fi-

the tax on pass-through entities enacted by Am. Sub. H.B. No.

nancial institutions. Those instructions are also available on

215, 122nd General Assembly if one or more shareholders of

the Department of Taxation’s Web site.

the S corporation are nonresidents for any portion of the S

corporation’s taxable year and the S corporation does not file

GENERAL INSTRUCTIONS

a composite Ohio income tax return on behalf of the nonresi-

AND INFORMATION

dent shareholders. For a further explanation of the tax on pass-

though entities see the instructions for Ohio form IT 1140, Tax

1. WHO MUST FILE

Return for Pass-through Entities.

The Ohio corporation franchise tax is an excise tax imposed

on both domestic and foreign corporations for the privilege of

B. Qualified Subchapter S Subsidiaries

doing business in Ohio, owning capital or property in Ohio,

A financial institution that is a “qualified Subchapter S subsid-

holding a charter or certificate of compliance authorizing the

iary” (QSSS) is exempt from the franchise tax that is based on

corporation to do business in Ohio, or otherwise having nexus

the taxable year for which the parent S corporation makes the

with Ohio during a calendar year. Unless an exemption ap-

election under I.R.C. section 1361(b)(3)(B)(ii). A QSSS is ex-

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Ohio Corporation Franchise Tax Report Instructions For Financial Institutions - 2004 Page 3

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