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The taxpayer's excludable investment, total assets and net value

Note 1: The job creation credit, the credit for tax withheld by the Ohio

of stock are determined from the books of the taxpayer as of the

Lottery Commission, the historical building preservation tax credit,

beginning of the taxpayer's annual accounting period that includes

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

the ﬁ rst day of January of the tax year. See R.C. 5733.056(B). For

(OVC) Program, and the motion picture credit are not included below

example, assume that an Ohio franchise taxpayer has a taxable year

because these credits are refundable credits which are considered

beginning July 1, 2011 and ending June 30, 2012. For tax year 2013

payments of the tax. See the line instructions for Schedule A, line 9.

the taxpayer's franchise tax excludable investment, total assets and

Note 2: Unless otherwise stated, all credit computations under

net value of stock are determined as of July 1, 2012 the beginning

Chapter 5733 must include the taxpayer’s proportionate share

of the taxpayer's annual accounting period that includes the ﬁ rst day

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

of January of tax year 2013. Generally, the ﬁ gures at the beginning

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

of the taxpayer's annual accounting period that includes the ﬁ rst day

of January of the tax year (in this example, July 1, 2012) will be the

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

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

machinery and equipment does not apply to a lessor that purchases

before Jan. 1 of the tax year (in this example, June 30, 2012).

new manufacturing machinery and equipment and leases that

equipment to a manufacturer (other than a manufacturer that is

Line 1 – Excludable Investment. If the taxpayer owns the

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

applicable percentage of the common stock of a public utility,

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

insurance company or another ﬁ nancial institution, as set forth

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

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

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

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

appreciation included in such investment. Appreciation does not

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

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

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

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

the qualifying purchase period) and purchased during the qualifying

purchase period by exercising an option in the lease agreement.

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

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

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

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 21 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

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

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

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

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

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

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

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

during the calendar year preceding the ﬁ nancial institution’s

to any higher numbered credit listed. Any credit amount remaining

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

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

(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

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Form Ft 1120fi - Ohio Corporation Franchise Tax Instructions For Financial Institutions - 2013 Page 17

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