(A)
(1) Division (B)(1) of section
5725.01 of the Revised Code
defines "dealer in intangibles." Paragraphs (B) to (D) of this rule define
"primarily" as used in section
5725.01 of the Revised Code. In
addition to the primarily requirement defined in this rule, a person
must
needs to
meet all other legal requirements in order to meet the definition of "dealer in
intangibles."
(2) As used in this
rule:
(a) "Affiliated group" means two or more
persons related in such a way that one person owns or controls the business
operation of another member of the group. In the case of corporations with
stock, one corporation owns or controls another if it owns more than fifty per
cent of the other corporation's common stock with voting rights.
(b) "Dealer activities" means lending money,
or discounting, buying, or selling bills of exchange, drafts, acceptances,
notes, mortgages, or other evidences of indebtedness, or buying or selling
bonds, stocks, or other investment securities, whether on the person's own
account with a view to profit, or as agent or broker for others, with a view to
profit or personal earnings. "Dealer activities" includes the servicing of
loans originated or purchased by or on behalf of the person or another member
of the person's affiliated group.
(c) "Gross income," except as otherwise
provided in this rule, has the same meaning as in section
61 of the Internal Revenue Code, as amended.
In no event
shall
will "gross income" include the recovery of basis from
the sale, exchange, or other disposition of an asset.
(d) "Hedging transactions" means transactions
engaged in for the purpose of reducing exposure to risk from market
fluctuations in price or availability.
(B)
(1) As
used in division (B)(1) of section
5725.01 of the Revised Code, and
except as otherwise provided in this rule, a person's business consists
primarily of dealer activities if either paragraph (B)(1)(a) or (B)(1)(b) of
this rule applies:
(a) For a person that had
an office or other place of business in Ohio at the end of each of the three
preceding calendar years, such person's gross income from one or more dealer
activities exceeds fifty per cent of the person's total gross income in at
least two of the three preceding calendar years; or
(b) For a person that had an office or other
place of business in Ohio at the end of the immediately preceding calendar year
but did not have an office or other place of business in Ohio at the end of one
or both of the other two of the three preceding calendar years, such person's
gross income from one or more dealer activities exceeds fifty per cent of the
person's total gross income in the immediately preceding calendar
year.
(2) For purposes of
paragraph (B)(1) of this rule, the computation of the applicable percentages
shall
will not
include, in the numerator or the denominator, any gross income from hedging
transactions.
(C)
(1) A person whose business does not meet the
percentage test in paragraph (B) of this rule may show that such person's
business nonetheless consists primarily of dealer activities. Paragraph (C)(1)
of this rule applies only if the person files a written notice with the tax
commissioner, in person or by certified mail, of the person's intent to apply
such paragraph to the tax year no later than the later of the following:
(a) The due date, without extension, for
filing the dealer in intangibles tax return for that tax year;
(b) Sixty days from the date the person
receives written notice from the tax commissioner that it appears that the
person does not meet the percentage test in paragraph (B) of this rule for that
tax year.
(2) The tax
commissioner may show that a person's business that meets the percentage test
in paragraph (B) of this rule nonetheless does not consist primarily of dealer
activities. Paragraph (C)(2) of this rule applies only if the tax commissioner
sends to the person a written notice, in person or by certified mail, of the
tax commissioner's intent to apply such paragraph no later than two years after
the date the person files a dealer in intangibles tax return for the tax year
to which the commissioner seeks to apply such paragraph.
(3) Whoever seeks to apply paragraph (C) of
this rule bears the burden of showing, based on the totality of the
circumstances, that the person's business consists primarily of activities
other than as shown by the percentage test in paragraph (B) of this rule.
Factors to consider in addition to the person's gross income from dealer
activities include, but are not limited to, the proportion of the person's
assets related to dealer activities, the proportion of time the person or the
person's employees spend engaging in dealer activities, the proportion of costs
incurred in performing dealer activities, and substantial changes in the
character of the person's business.
(D) As used in division (B)(1) of section
5725.01 of the Revised Code, the
determination of whether a person winding up a dealer business conducted on the
person's own account remains in business primarily for the purpose of realizing
upon the assets of the business is based on the totality of the
circumstances.
(E)
This rule is not intended to address whether a person
meeting the definition of "dealer in intangibles" may be a "dual capacity"
enterprise in accordance with Gen. American Transp. Corp. v. Limbach (1984), 15
Ohio St.3d 302.
(1) In accordance with division
(A)(1) of section 5733.09 of the Revised Code, a corporation is exempt from the
corporation franchise tax for a tax year if it is a dealer in intangibles for
that tax year. The commissioner will waive any penalty for late filing or
payment of the corporation franchise tax for a tax year if the corporation
files all delinquent corporation franchise tax reports, including estimated
reports, and pays all delinquent corporation franchise taxes, including
estimated taxes, together with any applicable interest thereon, not later than
sixty days after it learns or should have learned that it did not qualify as a
dealer in intangibles for the tax year.
(2) In accordance with division
(E)(4) of section 5751.01 of the Revised Code, a person is exempt from the
commercial activity tax levied under Chapter 5751. of the Revised Code for a
tax period if it is a dealer in intangibles based on one or more measurement
periods that include that entire tax period. The commissioner will waive any
penalty for late filing or payment of the commercial activity tax for a tax
period if the person files all delinquent commercial activity tax returns, and
pays all delinquent commercial activity taxes, including estimated taxes,
together with any applicable interest thereon, not later than sixty days after
it learns or should have learned that it did not qualify as a dealer in
intangibles based on one or more measurement periods included in whole or part
in the tax period.
(3) The commissioner will waive any
penalty for late filing or payment of the dealer in intangibles tax for a tax
period if a person having in error filed a corporation franchise tax report or
commercial activity tax return files all delinquent dealer in intangibles tax
returns and pays all delinquent dealer in intangibles taxes, together with any
applicable interest thereon, not later than sixty days after it learns or
should have learned that it qualified as a dealer in intangibles for the tax
year.
(F) This rule is not intended to
address whether a person meeting the definition of "dealer in intangibles" may
be a "dual capacity" enterprise in accordance with Gen. American Transp. Corp.
v. Limbach (1984), 15 Ohio St.3d 302.
Notes
Ohio Admin. Code
5703-3-32
Effective:
1/7/2024
Five Year Review (FYR) Dates:
10/23/2023 and
01/07/2029
Promulgated
Under: 119
Statutory Authority:
5703.05
Rule
Amplifies: 5725.01(B)(1)
Prior Effective Dates: 12/30/1984, 12/28/2005 (Emer.), 04/06/2006,
08/01/2006 (Temp.)
