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

same as the ﬁ gures at the end of the taxable year that concludes

Note 3: The R.C. 122.173 grant for purchases of new manufacturing

before Jan. 1 of the tax year (in this example, June 30, 2011).

machinery and equipment does not apply to a lessor that purchases

new manufacturing machinery and equipment and leases that

Line 1 – Excludable Investment. If the taxpayer owns the

equipment to a manufacturer (other than a manufacturer that is

applicable percentage of the common stock of a public utility,

a member of the lessor’s qualifying controlled group – see the

insurance company or another ﬁ nancial institution, as set forth

consolidated grant provision in R.C. 122.173(I)). See Duramed

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

Pharmaceuticals, Inc. v. Zaino, BTA No. 2002-V-164 (3-7-03).

insurance company, or other ﬁ nancial institution net of goodwill and

appreciation included in such investment. Appreciation does not

In Duramed the Board of Tax Appeals held that Duramed could claim

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

the R.C. 5733.33 manufacturer’s credit on manufacturing equipment

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

that it leased from Ortho-McNeil Pharmaceuticals in 1994 (prior to

the qualifying purchase period) and purchased during the qualifying

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

purchase period by exercising an option in the lease agreement.

by the books of the corporation net of all appreciation and goodwill.

Finding nothing in the record to suggest that the lease was treated

as a purchase for federal income tax purposes or under Generally

Schedule A-1

Accepted Accounting Principles, the board held that the existence of

Nonrefundable Credits

the lease does not operate to defeat the credit. The board found that

the deﬁ nition of “new” machinery is unambiguous and requires only

The nonrefundable credits generally available to ﬁ nancial institu-

that the original use in Ohio begin with the taxpayer and such original

tions are summarized below in the order in which taxpayers must

use is not restricted or limited to the qualifying purchase period.

claim them as set out in R.C. 5733.98. In addition, the table on

page 22 lists (i) all currently available nonrefundable franchise tax

Because the Board of Tax Appeals held that the original use in Ohio

credits in the order in which taxpayers (whether general taxpayers

of equipment that Ortho-McNeil purchased and leased to Duramed

or ﬁ nancial institutions) must claim them, (ii) the carryforward period

began with Duramed, the original use of the equipment in Ohio

of each credit and (iii) the section of the Ohio Revised Code that

could not have begun with Ortho-McNeil, the original purchaser and

authorizes each credit.

lessor. As such, the equipment was not “new” as to Ortho-McNeil.

Accordingly, a lessor that purchases manufacturing machinery

Although several credits listed in the table are available, they gener-

and equipment and leases that equipment to a manufacturer is not

ally do not apply to ﬁ nancial institutions. For information regarding

entitled to the credit or to the grant on such equipment because,

the credits listed in the table but not summarized in these instruc-

as to the lessor, the manufacturing machinery and equipment is

tions, please see the franchise tax instructions for general taxpayers.

not “new manufacturing machinery and equipment” as deﬁ ned in

Those instructions are available in another ﬁ le on the department’s

R.C. 5733.33(A)(2).

Web site. If a credit listed in the table applies to the taxpayer but is

not shown on schedule A-1 of Ohio franchise tax form FT 1120FI,

Nonrefundable Credits Available to Financial Institutions

then in completing the form please line out a credit that the taxpayer

does not claim and enter the credit and the amount that the taxpayer

1. Credit for dealer in intangibles tax paid by member of qualify-

is claiming consistent with the order set out in R.C. 5733.98.

ing controlled group (R.C. 5733.45). If on Jan. 1 of the franchise

tax year a ﬁ nancial institution is a member of a qualifying controlled

The order of the credits is important if the taxpayer is entitled to more

group of which a dealer in intangibles is also a member, the ﬁ nan-

than one nonrefundable credit and the taxpayer is unable to use

cial institution is allowed a nonrefundable franchise tax credit. (A

some portion of the total credit amount in the year the credits were

“qualifying controlled group” is deﬁ ned in R.C. 5733.04(M) as two

generated (because the total credit amount exceeds the tax due

or more corporations that meet the R.C. 5733.052(A) ownership

before credits). Nonrefundable credits not used in the year gener-

and control requirements to ﬁ le a combined report, whether or not

ated can generally be carried forward to future years. However, the

the corporations actually ﬁ le a combined report and whether or not

carryforward period is limited and varies from credit to credit. The

the corporations are subject to the franchise tax). The franchise tax

unused amount of a particular credit carried forward to a later year

credit equals the lesser of the amounts described in (a) or (b) below:

must be used after any lower numbered credit listed in R.C. 5733.98

but prior to the same credit generated in the later year and prior

(a) The amount of the dealer in intangibles tax paid by the dealer

to any higher numbered credit listed. Any credit amount remaining

during the calendar year preceding the ﬁ nancial institution’s

unused after the carryforward period for that credit expires is lost.

tax year (reduced by any refund of such tax received), or

(b) The product of the amounts described in (i) to (iii) below:

A nonrefundable credit may be used to reduce the tax liability (before

(i) The cost of the ﬁ nancial institution’s direct investment

considering any payments) to the minimum fee, but a nonrefund-

in capital stock of the dealer in intangibles (exclusive of

able credit may not reduce the tax liability (before considering any

goodwill and appreciation associated with such invest-

payments) below the minimum fee.

ment) as of the last day of the ﬁ nancial institution’s taxable

year ending immediately preceding the franchise tax year

Note 1: The new jobs credit, the credit for tax withheld by the Ohio

for which the ﬁ nancial institution is claiming the credit.

Lottery Commission, the historical building preservation tax credit,

(ii) The dealer in intangibles’ “percentage allocable to Ohio”

the credit for losses on loans made to the Ohio Venture Capital

ratio included in Exhibit B or C of dealers in intangibles

(OVC) Program, and the recently enacted motion picture credit are

Ohio form 980 for the calendar year immediately preced-

not included below because these credits are refundable credits

ing the franchise tax year for which the ﬁ nancial institution

which are considered payments of the tax. See the line instructions

is claiming the credit.

for Schedule A, line 9.

(iii) The dealer in intangible tax rate for the calendar year

Note 2: Unless otherwise stated, all credit computations under

immediately preceding the franchise tax year for which

Chapter 5733 must include the taxpayer’s proportionate share

the ﬁ nancial institution is claiming the credit.

amounts from any pass-through entity in which the taxpayer has a

direct or indirect interest. See R.C. 5733.057.

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Instructions For Ohio Form Ft 1120fi - Ohio Corporation Franchise Tax Report - 2012 Page 18

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