Ohio ~ Corporate Income Tax: Tax Commissioner Complied by Journalizing Final Determination by Deadline

CCH Tax Day Report

The Ohio Supreme Court has issued an opinion regarding the commercial activity tax (CAT) credit for unused net operating losses (NOLs) created under the former corporate franchise tax. The Court has ruled that the Ohio Tax Commissioner was required to journalize, but not mail, the final determination of the taxpayer’s amortizable amount by June 30, 2010 deadline.

Taxpayers are required to file a report to establish the total amount of credit that they may claim. The report proposes the amortizable amount, which is then subject to the Tax Commissioner’s review. In the instant case, the Tax Commissioner reduced the amortizable amount claimed from nearly $17 million to $927,513. The Tax Commissioner entered this final determination in its journal on June 8, 2010, prior to the June 30, 2010 deadline. However, the Commissioner did not notify the taxpayer by mail until July 12, 2010. The taxpayer opposed the reduction by appealing to the Board of Tax Appeals (BTA). The BTA determined that the Tax Commissioner violated R.C. 5751.53(D) by not notifying the taxpayer of its assessment by June 30, 2010, and reinstated the taxpayer’s amortizable amount. The Tax Commissioner appealed.

The Ohio Supreme Court held that R.C. 5751.53(D) does require that a reduction in the amortizable amount be embodied in a timely issued final determination and that a failure to comply with that requirement means that the taxpayer is entitled to claim the NOL credit in accordance with its originally reported amortizable amount. As a result, the amortizable amount depends upon whether a final determination adjusted that amount by the June 30 deadline.

However, the Court also determined that R.C. 5751.53(D) merely requires that the determination be journalized by June 30, and that the determination does not need to be mailed by that date to be effective. Therefore, the BTA erred by finding the Tax Commissioner’s final determination void and it should have considered the taxpayer’s substantive challenge to the Tax Commissioner’s determination.

The Ohio Supreme Court also determined that the taxpayer did not forfeit any right to a remand for consideration of its substantive claim because it failed to preserve that right by filing a protective cross-appeal. The taxpayer was not required to file a protective cross-appeal because it was not seeking review of the merits issue by the court and because the BTA had not addressed the merits issue in its previous decision. Accordingly, the BTA’s decision is reversed and remanded for consideration of the taxpayer’s substantive challenge to the Tax Commissioner’s determination.

Three justices dissented and argued that the Tax Commissioner did not issue its final determination to the taxpayer in a timely fashion by mailing it after the June 30 deadline.

International Paper Co. v. Testa, Tax Commissioner, Ohio Supreme Court, No. 2016-Ohio-7454, October 26, 2016, ¶404-545



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