Ohio Code 5733.058 – Adjusting for equity investment in an exempted investment
(A) As used in this section, an “exempted investment” is a direct or indirect investment in the equity of, or the direct or indirect ownership of, a person satisfying divisions (A)(1) and (2) of this section for the person’s entire fiscal or calendar year ending within or with the corporation‘s taxable year ending immediately prior to the tax year.
Terms Used In Ohio Code 5733.058
- Corporation: A legal entity owned by the holders of shares of stock that have been issued, and that can own, receive, and transfer property, and carry on business in its own name.
- Federal income tax: means the income tax imposed by the Internal Revenue Code. See Ohio Code 5733.04
- Limited liability company: means any limited liability company formed under Chapter 1705. See Ohio Code 5733.04
- net income: means the taxpayer's taxable income before operating loss deduction and special deductions, as required to be reported for the taxpayer's taxable year under the Internal Revenue Code, subject to the following adjustments:
(1)(a) Deduct any net operating loss incurred in any taxable years ending in 1971 or thereafter, but exclusive of any net operating loss incurred in taxable years ending prior to January 1, 1971. See Ohio Code 5733.04
- Pass-through entity: means any entity that is eligible to make and that has made an election under subchapter S of Chapter 1 of Subtitle A of the Internal Revenue Code for its taxable year under that code, or a partnership, limited liability company, or any other person, other than an individual, trust, or estate, if the partnership, limited liability company, or other person is not classified for federal income tax purposes as an association taxed as a corporation. See Ohio Code 5733.04
- Person: includes an individual, corporation, business trust, estate, trust, partnership, and association. See Ohio Code 1.59
- Property: means real and personal property. See Ohio Code 1.59
- public utility: means a public utility as defined in Chapter 5727 of the Revised Code, whether or not the public utility is doing business in the state. See Ohio Code 5733.04
- state: means the state of Ohio. See Ohio Code 1.59
- Tax year: means the calendar year in and for which the tax imposed by section 5733. See Ohio Code 5733.04
- Taxable year: means the period prescribed by division (A) of section 5733. See Ohio Code 5733.04
(1) The person is a limited liability company not treated as a separate C corporation for federal income tax purposes, or the person is a pass-through entity.
(2) The person owns and operates a public utility in this state and as such is required by law to file reports with the tax commissioner and pay an excise tax upon its gross receipts.
(B) Except as provided in division (C) of this section, each corporation directly or indirectly owning or directly or indirectly having an equity investment in an exempted investment shall make the adjustments required by divisions (B)(1) to (4) of this section.
(1) The corporation shall deduct from its net income the distributive share of net income and gain attributable to the corporation’s exempted investment, but only to the extent such net income and gain are included in the corporation’s net income without regard to this section.
(2) The corporation shall add to its net income the distributive share of expenses and losses attributable to the exempted investment, but only to the extent such expenses and losses have been deducted in calculating the corporation’s net income without regard to this section.
(3)(a) The corporation shall exclude from the calculation of its property, payroll, and sales factors, as defined in divisions (B)(2)(a) to (c) of section 5733.05 of the Revised Code, the corporation’s proportionate share of the property, payroll, and sales attributable to the exempted investment, but only to the extent the corporation’s proportionate share of the property, payroll, and sales attributable to the exempted investment would be included in the calculation of the corporation’s property, payroll, and sales factors under section 5733.057 of the Revised Code without regard to this section.
(b) Division (B)(3)(a) of this section does not apply to division (B)(2)(d) of section 5733.05 of the Revised Code.
(4) Notwithstanding section 5733.98 of the Revised Code to the contrary, a corporation shall not be allowed any nonrefundable credit or nonrefundable credit carryforward listed in that section to the extent the credit is attributable to the corporation’s direct or indirect ownership of or equity investment in an exempted investment and such credit directly relates to the owning and operating of a public utility in this state by a person described in divisions (A)(1) and (2) of this section.
(C)(1) The adjustments provided by division (B) of this section shall be allowed and required only to the extent that such adjustments directly relate to the owning and operating of a public utility in this state by a person described in divisions (A)(1) and (2) of this section.
(2) To the extent that any gross receipts of a person described in divisions (A)(1) and (2) of this section are not for business done by such person from the direct or indirect operation of, or the direct or indirect ownership of, a public utility in this state, then such gross receipts and related property and payroll shall not be subject to the adjustment otherwise provided by division (B) of this section.
(3) Division (B) of this section does not apply to the corporation, and section 5733.057 of the Revised Code shall apply to the corporation’s computation of its net income, its property, payroll, and sales factors, and its credits to the extent that the person described in divisions (A)(1) and (2) of this section directly or indirectly owns or directly or indirectly has an equity investment in any other person described in division (A)(1) of this section but not described in division (A)(2) of this section.
(D) Section 5733.057 of the Revised Code applies for purposes of the ownership and investment criteria set forth in this section.
(E) This section is effective for taxable years ending after September 28, 1997.