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receipts received during the period of May 1, 2000 through

Supplemental Schedule B – Valuation Limitation

April 30, 2001;

Adjustment

(b) any taxpayer not described in division (A)(1)(a) [see the

Lines 1(a) and 2(b) – Valuation limitation on losses and

paragraph above] of this section if a person described in

gains from capital assets and 1231 assets. Make no valu-

division (A)(1)(a) of this section transfers all or a portion

ation limitation entry on schedule B, lines 1(a) or 2(b). The

of its assets or equity directly or indirectly to the taxpay-

O.R.C. section 5733.04(I)(3) “valuation limitation” adjustment

er, the transfer occurred as part of an entity organization

applicable to I.R.C. section 1231 assets and capital assets

or reorganization, or subsequent entity organization or

does not apply to “qualifying assets.” That is, in determining

reorganization, and the gain or loss with respect to the

its net income, an electric company may not deduct that

transfer is not recognized in whole or in part for federal

portion of the gain (and is not required to add-back that por-

income tax purposes under the Internal Revenue Code

tion of a loss) from the sale of qualifying assets that are 1231

(I.R.C.) on account of a transfer as part of an equity orga-

assets and capital assets. (Valuation limitation is that por-

nization or reorganization, or subsequent organization or

tion of a gain or loss from the sale of 1231 assets and capital

reorganization. See O.R.C. section 5733.0510(A)(1).

assets occurring prior to the first taxable year on which the

tax provided for in O.R.C. section 5733.06 is computed on

“Qualifying asset” means any asset shown on the qualify-

the corporation’s net income.) Furthermore, the valuation lim-

ing taxpayer’s books and records on December 31, 2000, in

itation adjustment does not apply to an electric company’s

accordance with generally accepted accounting principles,

assets that are not qualifying assets because those assets

including the cost of, or any portion of the cost of, any asset

will not have been acquired “. . . prior to the first taxable year

acquired after December 31, 2000, where such asset was

on which the tax provided for in O.R.C. section 5733.06 is

acquired as a result of a tax-free or tax-deferred exchange of

computed on the corporation’s net income” (the taxable year

a qualifying asset. See O.R.C. section 5733.0510(A)(3).

ending in 2001). See O.R.C. section 5733.04(I)(3).

“Qualifying taxable event” means any event resulting in

Schedule D Apportionment

the recognition for federal income tax purposes of gain or

loss in connection with any direct or indirect sale, direct or

Sales factor. Although the supplemental schedules for elec-

indirect exchange, direct or indirect transfer, or direct or indi-

tric companies do not include a supplemental Schedule D

rect retirement of any qualifying asset. See O.R.C. section

apportionment schedule, there are special sales factor situsing

5733.0510(A)(2).

provisions applicable to sales of electricity and to sales of

transmission and distribution services (see O.R.C. section

“Book-tax differential” means the difference, if any, between

5733.059). Please use the instructions below, to situs on

an asset’s net book value shown on the qualifying taxpayer’s

schedule D the company’s receipts from sales of electricity

books and records on December 31, 2000, in accordance

and from sales of transmission and distribution services.

with generally accepted accounting principles, and such as-

set’s adjusted basis on December 31, 2000. The book-tax

1. Electricity sales:

differential may be a negative number. See O.R.C. section

5733.0510(A)(5).

Sales of electricity are sitused within and without Ohio

•

based on where the customer consumes the electricity.

“Qualifying regulatory asset” means those qualifying as-

That is, sales of electricity are sitused to Ohio to the

sets that, as of December 31, 2000, are no longer included in

extent that the customer consumes the electricity in

federal energy regulatory commission uniform system of ac-

Ohio.

counts 101 through 106 or are deferred expenses for opera-

tion or maintenance, or deferred costs associated with lease-

If the taxpayer sells the electricity to a related member

•

back transactions on generating units, that have been autho-

and the related member sells the electricity to a cus-

rized by a regulatory agency for recovery from customers in a

tomer, the taxpayer’s sale to the related member is

future period and that, as of December 31, 2000, are subject

sitused to Ohio to the extent that the related member’s

to transition cost recovery under O.R.C. chapter 4928 or sim-

customer consumes the electricity in Ohio.

ilar laws of another state. See O.R.C. section 5733.0510(A)(6).

Sales of electricity are sitused to Ohio if the seller or

•

Note: The “qualifying regulatory assets” associated with a

the seller’s related member delivers the electricity to a

qualifying asset are consider disposed of on the same date

location in Ohio or delivers the electricity exactly to the

that the “qualifying asset” is disposed of. Thus, the book-tax

border of Ohio and another state.

differential for qualifying regulatory assets is recognized for

Sales of electricity are sitused to Ohio if the seller or

•

franchise tax purposes on the same date that the book-tax

the seller’s related member directs the delivery of the

differential is recognized for the associated qualifying assets

electricity to a location in Ohio or directs the delivery of

even though the qualifying regulatory assets may not have

the electricity exactly to the border of Ohio and another

been sold or disposed of in a taxable transaction.

state.

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Instructions For Form Ft-1120 - Electric Companies And Combined Electric Companies Tax - Ohio Corporation Franchise Tax - 2005 Page 3

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