Ohio Corporation Franchise Tax Report Instructions For Financial Institutions

ends on the date immediately preceding the date of com-

• 5703-5-02 – Date as of Which the Value of a Taxpayer’s

mencement of the corporation’s annual accounting period that

Issued and Outstanding Shares of Stock Is

includes the first day of January of the tax year. If a corpora-

Determined

tion’s taxable year is changed for federal income tax purpos-

• 5703-5-03 – Dates on Which a Taxpayer’s Taxable Year Be-

es, the corporation’s franchise tax taxable year is changed

gins and Ends

accordingly. A franchise tax taxable year may consist of an

• 5703-5-04 – Changes of a Taxpayer’s Annual Accounting

aggregation of more than one federal taxable year. Thus, a

Period

taxable year can exceed one year in length. The tax commis-

sioner has statutory authority to write rules prescribing an ap-

Note: The Department of Taxation recently amended Rule

propriate period as the taxable year for the following: (i) a cor-

5703-5-04 to clarify when a taxpayer’s annual accounting

poration that has changed its taxable year for federal income

period changes and to eliminate proration of periods in

tax purposes, (ii) a corporation that as a result of a change of

excess of one year in length.

ownership has two or more short federal taxable years, and

(iii) a new taxpayer that would otherwise not have a taxable

Important features of these rules are as follows:

year. See O.R.C. sections 5733.031(A) and 5733.04(E).

• Generally, a taxpayer’s taxable year begins on the date im-

mediately following the end of the taxpayer’s prior taxable

Except for taxpayers that have changed their accounting peri-

year and ends on the date immediately preceding the be-

od and for taxpayers that have two or more federal taxable

ginning of the taxpayer’s annual accounting period that in-

years that ended in calendar year 2003, taxpayers must de-

cludes the first day of January of the tax year.

termine the value of their issued and outstanding shares of

• If a taxpayer changes its annual accounting period, there is

stock as follows:

(i) no period that is not subject to tax, (ii) no period that is

• For report year 2004 taxpayers that have a calendar year

subject to tax in more than one tax year, and (iii) no choice

end must use the period ending December 31, 2003.

of accounting periods.

• A franchise tax “taxable year” under certain circumstances

• For report year 2004 taxpayers that have a fiscal year

may be more than or less than one year in length.

end must use the fiscal period ending in 2003. However,

taxpayers filing their first report should see below.

If the corporation changed its taxable year in 2002 or 2003,

• For report year 2004 taxpayers that are filing their first

please contact the Department of Taxation for a copy of the

franchise tax first report must use the applicable period

rules and time line illustrations of the rules. Send your request

set forth below:

to the Ohio Department of Taxation, Attn: Rules, P.O. Box 2476,

A. If the taxpayer incorporated in Ohio during 2003 and

Columbus, Ohio 43216-2476. The rules are also available on

adopted a fiscal period ending in 2003, then the taxpay-

the Department of Taxation’s Web site.

er must use the accounting period commencing on the

date of incorporation and concluding with the last day of

7. TAX RATE AND MINIMUM FEE

the fiscal period ending in 2003.

A financial institutions is subject to the franchise tax at the

B. If the taxpayer is a foreign corporation and first became

rate of .013 on its net value of stock apportioned to Ohio.

an Ohio taxpayer during 2003 (that is, during 2003 the

However, the tax is not less than the minimum fee (see

corporation began doing business in Ohio, began own-

below).

ing or using part or all of its capital or property in Ohio,

obtained a license authorizing it to do business in Ohio

Caution: Minimum fee increased to $1,000 for larger cor-

or otherwise established nexus with Ohio under the Con-

porations. For taxable years ending on or after June 26, 2003

stitution of the United States) and after it became an Ohio

the minimum franchise tax fee is $1,000 if (i) the sum of the

taxpayer its fiscal year ended in 2003, then the taxpayer

taxpayer’s gross receipts from its activities within and without

must use the accounting period commencing on the ear-

Ohio during the taxable year equal or exceed $5 million or (ii)

liest of the following: (i) the date that it began doing busi-

the total number of the taxpayer’s employees within and with-

ness in Ohio, (ii) the date that it began owning or using a

out Ohio at any time during the taxable year equals or ex-

part or all of its capital or property in Ohio, (iii) the date

ceeds 300. In determining whether or not the taxpayer’s gross

that it obtained a license authorizing it to do business in

receipts and number of employees equal or exceed those

Ohio, or (iv) the date that it established nexus with Ohio

thresholds, the taxpayer must include its proportionate share

under the Constitution of the United States. The account-

of the gross receipts of any pass-through entity in which the

ing period will end on the taxpayer’s fiscal year ending in

taxpayer has a direct or indirect ownership interest and its pro-

2003.

portionate share of the number of employees of the pass-

C. All other new taxpayers will use the accounting period

through entity. Furthermore, the term, gross receipts, as used

commencing with the earliest of the four dates set forth

here, includes receipts that generate nonbusiness income and

in B, above, and concluding with December 31, 2003.

receipts from the sale of capital assets and IRC section 1231

See paragraphs (E)(2) and (E)(4) of Tax Commission-

assets whether those sales generate business income or non-

er’s Rule 5703-5-03.

business income.

Taxpayers that have changed their accounting period and

For taxpayers whose taxable year ended before June 26, 2003

and for taxpayers whose taxable year ended on or after June

taxpayers that have two or more short federal taxable years

– The Department of Taxation has adopted the following rules

26, 2003 but whose gross receipts and whose number of em-

regarding franchise taxpayers’ taxable year and changes of

ployees do not equal or exceed the thresholds discussed

above, the minimum fee is $50. See O.R.C. section 5733.06(E)

taxable year:

• 5703-5-01 – Definitions Applicable to Rules 5703-5-01 to

as amended by Amended Substitute House Bill 95, 125

Gen-

5703-5-05 of the Administrative Code

eral Assembly.

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Ohio Corporation Franchise Tax Report Instructions For Financial Institutions - 2004 Page 5

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