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A taxpayer may not deduct as exempt appreciation the increase in

of the sales factor if more than 50% of the fair market value of the

the cash surrender values of whole life insurance policies of which

real property is located in Ohio. If more than 50% of the fair market

the taxpayer was both owner and beneﬁ ciary. See National City

value of the real property is not located within any one state, then

Bank v. Wilkins, 111 Ohio St. 3d 485, 2006-Ohio-6110.

such receipts are included in the numerator of the sales factor if the

borrower is located in Ohio. The determination of whether the real

Line 5 – Other. The following qualify as exempted assets but

property securing a loan is located in Ohio is made at the time the

generally do not apply to ﬁ nancial institutions: (1) the net book value

original loan agreement was made and all subsequent substitutions

of qualifying improvements to land or tangible personal property in

of collateral are disregarded.

an enterprise zone for which the ODSA has issued a Tax Incentive

Qualiﬁ cation Certiﬁ cate, (2) the net book value of property within

Line 4 – Interest (and fees or penalties in the nature of interest)

Ohio that is used exclusively during the taxable year for qualiﬁ ed

from loans not secured by real property. The numerator of

research and (3) the book value of land in Ohio that pursuant to

the factor includes interest (and fees or penalties in the nature of

R.C. 5713.31 the county auditor of the county in which such land is

interest) from loans not secured by real property if the borrower

located has determined is devoted exclusively to agricultural use.

is located in Ohio.

Schedule D – Apportionment Formula

Line 5 – Net gains from the sale of loans (including income

recorded under the coupon stripping rules of section 1286

Am. Sub. House Bill 508, 129th General Assembly, allows certain

of the Internal Revenue Code) secured by real property. The

ﬁ nancial institutions (“qualiﬁ ed ﬁ nancial institutions” as deﬁ ned in

amount of net gain from the sale of loans secured by real property

R.C. 5733.056(A)(21)) to use a single sales factor, instead of the

included in the numerator of the factor is determined by multiplying

currently required three-factor apportionment formula, to calculate

such net gains by a fraction whose numerator is interest (and fees

taxable net worth. To qualify to use the single sales factor, a ﬁ nancial

or penalties in the nature of interest) from loans secured by real

institution must be at least 80% owned by a “grandfathered” unitary

property located in Ohio and whose denominator is the total amount

savings and loan company described in 12 U.S.C. 1467a(c)(9)(C).

of interest (and fees or penalties in the nature of interest) from loans

See R.C. 5733.056(A)(21), (C) and (I).

secured by real property.

Note: Terms appearing in italics are deﬁ ned in the law. The

Line 6 – Net gains from the sale of loans (including income

deﬁ nitions of the terms begin on page 14 of these instructions.

recorded under the coupon stripping rules of section 1286

of the Internal Revenue Code) not secured by real property.

Sales Factor

The amount of net gain from the sale of loans not secured by real

property included in the numerator of the factor is determined by

The sales factor is a fraction whose numerator is the taxpayer’s

multiplying such net gains by a fraction whose numerator is interest

Ohio receipts during the taxable year and whose denominator is

from loans not secured by real property to borrowers located in

the taxpayer’s everywhere receipts during the taxable year. The

Ohio and whose denominator is interest from loans not secured by

method of calculating receipts for purposes of the denominator is

real property to borrowers everywhere.

the same as the method used in determining receipts for purposes

of the numerator. The sales factor includes the taxpayer’s receipts

Line 7 – Interest (and fees or penalties in the nature of interest)

from the following sources:

from credit card receivables and receipts from fees charged

to credit cardholders, such as annual fees. The numerator of

Line 1 – Receipts from the lease or rental of real property owned

the factor includes interest (and fees or penalties in the nature of

by the taxpayer and receipts from the sublease of real property.

interest) from credit card receivables and receipts from fees charged

The numerator of the factor (within Ohio) includes receipts from the

to credit cardholders, such as annual fees, if the billing address

lease, rental or sublease of real property located in Ohio.

of the cardholder is in Ohio.

Line 2 – Receipts from the lease or rental of tangible personal

Line 8 – Net gains from the sale of credit card receivables.

property owned by the taxpayer. The numerator of the factor

The amount of such net gains included in the numerator of the

includes receipts from the lease or rental of tangible personal

factor is determined by multiplying such net gains by a fraction

property other than transportation property if the property is

whose numerator is the sum of (1) interest (and fees or penalties

located in Ohio when ﬁ rst placed in service by the lessee. The

in the nature of interest) from credit card receivables if the billing

numerator of the factor also includes receipts from the lease or

address of the cardholder is in Ohio and (2) fees charged to credit

rental of transportation property owned by the taxpayer to the

cardholders, such as annual fees, if the billing address of the

extent that the property is used in Ohio. The extent an aircraft is

cardholder is in Ohio. The denominator of the fraction is the sum

deemed to be used in Ohio and the amount of receipts included

of such amounts for credit cardholders everywhere.

in the numerator of the factor is determined by multiplying all the

receipts from the lease or rental of the aircraft by a fraction whose

Line 9 – Credit card issuer’s reimbursement fees. The amount of

numerator is the number of landings of the aircraft in Ohio and

credit card issuer’s reimbursement fees included in the numerator

whose denominator is the total number of landings of the aircraft.

of the factor is determined by multiplying such fees by the fraction

If the extent of use within Ohio of any transportation property

determined in the instructions for line #8, above.

cannot be determined, the property will be deemed to be used

wholly in the state in which the property has its principal base of

Line 10 – Receipts from merchant discount. Such receipts are

operations. A motor vehicle is deemed to be used wholly in the

computed net of any card holder charge backs but are not reduced by

state in which it is registered.

any interchange transaction fees or by any issuer’s reimbursement

fees paid to another for charges made by its cardholders. The

Line 3 – Interest (and fees or penalties in the nature of interest)

numerator of the factor includes receipts from merchant discounts

from loans secured by real property. The numerator of the factor

if the commercial domicile of the merchant is in Ohio.

includes interest (and fees or penalties in the nature of interest)

from loans secured by real property located in Ohio. If the real

Line 11 – Loan-servicing fees derived from loans secured by

property that secures the loan is located both within Ohio and one

real property. The amount of such loan servicing fees included

or more other states, such amounts are included in the numerator

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Form Ft 1120fi - Ohio Corporation Franchise Tax Instructions For Financial Institutions - 2013 Page 11

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