Instructions For Ohio Form Ft 1120fi - Ohio Corporation Franchise Tax Report

A credit card receivable or a loan is presumed to have been

The amount of a loan or advance to a subsidiary corporation at

properly assigned if:

least 51% of whose common stock is owned by the taxpayer to

be included in the numerator of the property factor is determined

• The taxpayer assigned the credit card receivable or loan to a

by multiplying the average value of the loan by a fraction whose

regular place of business and the assignment is consistent

numerator is the net-book value of the subsidiary’s physical

with federal or state regulatory requirements;

assets in Ohio and whose denominator is the net-book value

• The assignment is based upon substantive contacts of the credit

of the subsidiary’s physical assets everywhere. The fraction is

card receivable or loan to such regular place of business; and

determined as of the end of the subsidiary’s taxable year that is

• The taxpayer uses the assignment for ﬁ ling all state and local

included in the taxpayer’s taxable year. If the subsidiary corporation

tax returns for which an assignment of credit card receivables or

owns at least 51% of the common stock of another corporation,

loans is required.

the ratio must be calculated by including the other corporation’s

real property and tangible personal property, too. The calculation

In determining the state in which the preponderance of substantive

of the ratio applies with respect to all lower-tiered subsidiaries, if

contacts relating to a credit card receivable or a loan have occurred,

the immediate parent corporation of the subsidiary owns at least

the facts and circumstances regarding the credit card receivable

51% of the common stock of that subsidiary. As noted above, the

or loan at issue must be reviewed on a case-by-case basis with

average value of a loan is one-half the sum of the outstanding

consideration given to such activities as solicitation (both active and

principal balance of such loan on the ﬁ rst day of the taxable year

passive), investigation, negotiation, approval, and administration.

and the outstanding principal balance of such loan on the last day

of the taxable year.

• “Active solicitation” occurs when an employee of the taxpayer

initiates the contact with the customer. Active solicitation is

Payroll Factor

located at the regular place of business that the employee is

regularly connected with or working out of, regardless of where

Line 22 – Compensation paid to employees. The payroll factor is

the employee’s services were actually performed.

a fraction whose numerator is the taxpayer’s total compensation

• “Passive solicitation” occurs when the customer initiates the

paid in Ohio during the taxable year, and whose denominator is the

contact with the taxpayer. If the customer's initial contact was

taxpayer’s total compensation paid everywhere during the taxable

not at a regular place of business of the taxpayer, the regular

year. Compensation is paid in Ohio if any one of the following three

place of business, if any, where the passive solicitation occurred

tests, applied consecutively, is met:

is determined by the facts in each case.

• “Investigation” is the procedure whereby the taxpayer's

1. The employee’s services are performed entirely within Ohio.

employees determine the credit worthiness of the customer and

2. The employee’s services are performed both within and outside

the degree of risk in making a loan. Investigation is located at the

Ohio, but the service performed outside Ohio is incidental to the

regular place of business that the taxpayer’s employees are

employee’s service within Ohio. The term “incidental” means

regularly connected with or working out of, regardless of where

any service that is temporary or transitory in nature or which is

the services of such employees were actually performed.

rendered in connection with an isolated transaction.

• “Negotiation” is the procedure whereby employees of the

3. The employee’s services are performed both within and outside

taxpayer and its customer determine the terms of the loan

Ohio and:

agreement such as the amount, duration, interest rate, frequency

(a) The employee’s principal base of operations is within Ohio;

of repayment, currency denomination and security required.

Negotiation is located at the regular place of business to which

(b) There is no principal base of operations in any state in which

the taxpayer’s employees are regularly connected or working

some part of the services are performed, but the place from

from, regardless of where the services of such employees were

which the services are directed or controlled is in Ohio; or

actually performed.

• “Approval” is the procedure whereby the taxpayer's employees or

the services are directed or controlled are not in any state

board of directors make the ﬁ nal determination whether to enter

in which some part of the service is performed, but the

the loan agreement. Approval is located at the regular place of

employee’s residence is in Ohio.

business to which the employees are regularly connected or

Alternative Apportionment Methods. If the above apportionment

working from, regardless of where the services of such employees

provisions do not fairly represent the extent of the taxpayer’s

were actually performed. If the board of directors makes the

business activity in Ohio, the taxpayer may request or the tax

ﬁ nal determination, such activity is located at the taxpayer’s

commissioner may require, in respect to all or any part of the

commercial domicile.

taxpayer’s business activity, if reasonable:

• “Administration” is the process of managing the account.

Administration includes bookkeeping, collecting payments,

• Separate accounting;

corresponding with the customer, reporting to management

• The exclusion of any one or more of the factors;

regarding the status of the agreement and proceeding against

• The inclusion of one or more additional factors that will fairly

the borrower or the security interest if the borrower is in default.

represent the extent of the taxpayer's business activity in Ohio;

Administration is located at the regular place of business from

which the taxpayer oversees these activities.

• The employment of any other method to effectuate an equitable

allocation and apportionment of the taxpayer's value.

Absent any change of material fact, a loan (other than a loan or

advance to a subsidiary corporation at least 51% of whose common

Schedule D-2 – Deposits Factor

stock is owned by the taxpayer) that has been properly assigned to a

state shall remain assigned to that state for the length of the original

In lieu of using the property, payroll and sales factors as described

term of the loan. Thereafter, the loan may be properly assigned

above, qualiﬁ ed institutions may elect to use a single deposits

to another state if the loan has a preponderance of substantive

fraction whose numerator is the deposits assigned to branches

contacts to a regular place of business there.

in Ohio and whose denominator is the deposits assigned to

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Instructions For Ohio Form Ft 1120fi - Ohio Corporation Franchise Tax Report - 2012 Page 15

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