 |
|
This information release sets forth several examples of the Division's interpretation of Ohio Revised Code ("ORC") sections 5733.33 and 5747.31, "Second Credit for Purchases of New Manufacturing Machinery and Equipment."1 In addition, attached to this information release are (i) the Ohio Department of Development's 1996 Notice of Intent to Claim the Credit, (ii) an Ohio map setting forth the 1996 eligible areas for which the higher 13.5% credit rate applies, and (iii) a chart which reflects the Ohio individual income tax returns and franchise tax reports on which taxpayers may claim the credit generated from purchases of qualifying equipment in the second half of 1995 and in each of the calendar years 1996, 1997 and 1998.
Example #1
DEF Corporation, a June 30 fiscal year C corporation, is a manufacturer subject to Ohio's corporation franchise tax. DEF Corporation purchases new manufacturing machinery and equipment during the second half of calendar year 1995 and during calendar years 1996 and 1997 for its facilities in three Ohio counties.2 For each county for each year the taxpayer files with the Ohio Department of Development the prescribed notice of intent to claim the credit.3 Set forth below is pertinent data necessary to calculate the ORC section 5733.33 credit:
- Cost4 of new manufacturing machinery and equipment purchased for cash (without trade-in) and immediately installed:5
| Year6 |
County A |
County B |
County C |
| 1992 |
$10,000 |
- 0 - |
N/A7 |
| 1993 |
$15,000 |
$ 9,000 |
N/A |
| 1994 |
$20,000 |
$12,000 |
$15,000 |
1995
(2nd half) |
$40,000 |
$50,000 |
$60,000 |
1996 |
$70,000 |
$80,000 |
$90,000 |
1997 |
$ 7,000 |
$81,000 |
$91,000 |
1998 |
- 0 - |
- 0 - |
- 0 - |
- During calendar year 1998 the DEF Corporation disposes of its machinery and equipment which it had acquired in 1995 and had located in Ohio County A. Except for the 1998 disposition of the 1995 Ohio County A qualifying property, at no time prior to January 1, 2003 does DEF dispose of any remaining qualifying property purchased during the second half of 1995, and at no time prior to the end of the six year period beginning on January 1 following the date of purchase of post-1995 qualifying property does DEF dispose of such property. For purposes of this credit, dispositions include moving the equipment out of the county or eligible area for which the equipment was purchased.
- During 1995 through 1998 Ohio Counties A, B, and C are not and do not contain within their boundaries "eligible areas" as defined in ORC section 5733.33(A)(9).
- During the period July 1, 1995 through December 31, 1998 the DEF Corporation has no investments in any pass-through entities.8
- DEF Corporation's franchise tax for each of tax years 1997 through and including 2005 after reduction for all credits allowed prior to claiming the 7.5%/13.5% credit is greater than the 7.5%/13.5% credit which the taxpayer will claim.9
- The corporation claims neither the original 20% credit (ORC section 5733.31) nor the alternative 20% credit (ORC section 5733.311) with respect to the purchased property.10
Set forth below is the computation of DEF's 7.5% credit:
Part I: Calculation of Base Investment
("County Average New Manufacturing Machinery and Equipment Investment") |
|
|
Ohio County A Base Investment:
|
|
|
- Cost of new manufacturing machinery and equipment purchased for use in Ohio County A during the 1992 calendar year
|
|
$ 10,000 |
- Cost of new manufacturing machinery and equipment purchased for use in County A during the 1993 calendar year
|
|
$15,000 |
- Cost of new manufacturing machinery and equipment purchased for use in County A during the 1994 calendar year
|
|
$20,000 |
Total
Averaging Factor
|
|
$45,000
÷ 3 |
Ohio County A base investment
|
|
$15,000 |
Ohio County B Base Investment:
|
|
|
- Cost of new manufacturing machinery and equipment purchased for use in County B during the 1992 calendar year
|
|
-0- |
- Cost of new manufacturing machinery and equipment purchased for use in County B during the 1993 calendar year
|
|
$9,000 |
- Cost of new manufacturing machinery and equipment purchased for use in County B during the 1994 calendar year
|
|
$12,000 |
Total
Averaging Factor
|
|
$21,000
÷ 3 |
Ohio County B base investment
|
|
$7,000 |
Ohio County C Base Investment:
|
|
|
Since the taxpayer was not present in Ohio County C as a manufacturer for more than one year during calendar years 1992, 1993 and 1994, then even though during 1994 the taxpayer purchased $15,000 of new manufacturing machinery and equipment for use in County C, the Ohio County C base investment is . . .
|
|
$ -0-11 |
| Part II: Calculation of Yearly Credit Generated by 1995 (second half) Purchases |
|
|
| |
|
|
Cost of new manufacturing machinery and equipment purchased during the second half of 1995 for use in Ohio County A12
|
$40,000 |
|
Less: Ohio County A base investment (from Part I, page 4)
|
<$15,000> |
|
Ohio County A. 1995 (second half) excess qualifying purchases
|
|
$25,000 |
Cost of new manufacturing machinery and equipment purchased during the second half of 1995 for use in Ohio County B
|
$50,000 |
|
Less: Ohio County B base investment (from Part I, page 4)
|
<$7,000> |
|
Ohio County B 1995 (second half) excess qualifying purchases
|
|
$43,000 |
Cost of new manufacturing machinery and equipment purchased during the second half of 1995 for use in Ohio County C
|
$60,000 |
|
Less: Ohio County C base investment (from Part I, page 4)
|
< -0- > |
|
Ohio County C 1995 (second half) excess qualifying purchases
|
|
$60,000 |
Total 1995 (second half) excess qualifying purchases
Credit rate
Credit generated
Yearly adjustment factor
|
$128,00013
x.075
$9,600
x 1/7 |
Yearly credit attributable to 1995 (second half) purchases
|
$1,371 |
Note #1: DEF Corporation cannot claim any of this credit on its 1996 Ohio corporation franchise tax report but can begin claiming this amount on the 1997 report. See noncodified section 5 of Am. Sub. S. B. No. 188, 121st General Assembly.
Note #2: With respect to the 1995 (second half) purchases the DEF Corporation can also claim a $1,371 credit on its Ohio corporation franchise tax reports filed for each of tax years 1998 through and including 2003 only if, for each of those tax years, at no time during the calendar year immediately prior to the first day of the respective tax year does the DEF Corporation either sell the 1995 qualifying manufacturing machinery and equipment or transfer the 1995 machinery and equipment out of the Ohio county in which DEF installed the machinery and equipment. However, in this example during 1998 the DEF Corporation did sell all $40,000 of its Ohio County A 1995 new manufacturing machinery equipment which had generated a yearly credit of $268 (1995 County A excess qualifying purchases of $25,000 x credit rate of 7.5% x yearly adjustment factor of 1/7); so, on each of the corporation's 1999, 2000, 2001, 2002, and 2003 reports the DEF Corporation will be able to claim a credit of only $1,103 ($1,371 original yearly credit (for all three counties) less $268 reduction in yearly credit).14
| Part III: Calculation of Yearly Credit Generated by 1996 Purchases |
|
| |
|
Cost of new manufacturing machinery and equipment purchased in 1996 for use in Ohio County A
|
$ 70,000 |
|
Less: Ohio County A base investment (from Part I, page 4)
|
<$ 15,000> |
|
Ohio County A 1996 excess qualifying purchases
|
|
$55,000 |
Cost of new manufacturing machinery and equipment purchased in 1996 for use in Ohio County B
|
$80,000 |
|
Less: Ohio County B base investment (from Part I, page 4)
|
<$ 7,000> |
|
Ohio County B 1996 excess qualifying purchases
|
|
$73,000 |
Cost of new manufacturing machinery and equipment purchased in 1996 for use in Ohio County C
|
$90,000 |
|
Less: Ohio County C base investment (from Part I, page 4)
|
<$ - 0 - > |
|
Ohio County C 1996 excess qualifying purchases
|
|
$90,000 |
Total 1996 excess qualifying purchases
Credit rate
Credit generated
Yearly adjustment factor
|
|
$218,000
x .075
$16,350
x 1/7 |
Yearly credit attributable to 1996 purchases
|
|
$2,236 |
Note: The DEF Corporation can claim this $2,336 credit on each of its Ohio corporation franchise tax reports for tax years 1997 through and including 2003 because at no time during the calendar year immediately prior to the first day of the respective tax year did the DEF Corporation either sell the 1996 qualifying manufacturing machinery and equipment or transfer the 1996 machinery and equipment out of the Ohio County in which the machinery and equipment was installed. If DEF Corporation were to sell or transfer such property, then for those tax years following the date of such sale or transfer the DEF Corporation could not claim any credit relating to such machinery and equipment (see footnote 14 on page 6).
| Part IV: Calculation of Yearly Credit Generated by 1997 Purchases |
| |
|
Cost of new manufacturing machinery and equipment purchased in 1997 for use in Ohio County A
|
$ 7,000 |
|
Less: Ohio County A base investment (from Part I, page 4)
|
<$ 15,000> |
|
Ohio County A 1997 excess qualifying purchases
|
|
$ - 0 - |
Cost of new manufacturing machinery and equipment purchased in 1997 for use in Ohio County B
|
$81,000 |
|
Less: Ohio County B base investment (from Part I, page 4)
|
<$ 7,000> |
|
Ohio County B 1997 excess qualifying purchases
|
|
$74,000 |
Cost of new manufacturing machinery and equipment purchased in 1997 for use in Ohio County C
|
$91,000 |
|
Less: Ohio County C base investment (from Part I, page 4)
|
<$ - 0 - > |
|
Ohio County C 1997 excess qualifying purchases
|
|
$91,000 |
Total 1997 excess qualifying purchases
Credit rate
Credit generated
Yearly adjustment factor
|
|
$165,000
x .075
$12,375
x 1/7 |
Yearly credit attributable to 1997 purchases
|
|
$1,768 |
Note #1: The DEF Corporation can claim the $1,768 credit on each of its Ohio corporation franchise tax reports for tax years 1998 through and including 2004 because at no time during the calendar year immediately prior to the first day of the respective tax year did the DEF Corporation either sell the 1997 qualifying manufacturing machinery and equipment or transfer the 1997 machinery and equipment out of the Ohio County in which the machinery and equipment was installed. If DEF Corporation were to sell or transfer such property, then for those tax years following the date of such sale or transfer the DEF Corporation could not claim any credit relating to such machinery and equipment.
Note #2: Had DEF Corporation accelerated into the 1996 calendar year the company's $7,000 of 1997 Ohio County A purchases, the entire $7,000 would have qualified for the credit since other 1996 Ohio County A purchases exceeded the $15,000 Ohio County A base investment. Thus, in order to maximize the credit, it is important for taxpayers to consider purchasing in one year all of the qualifying equipment for a particular county or for a particular eligible area.
| Part V: Calculation of Yearly Credit Generated by 1998 Purchases |
| |
|
| Since DEF Corporation did not purchase any new manufacturing machinery and equipment during 1998, DEF generated no credit during the 1998 calendar year. |
|
|
| |
|
|
| Part VI: Summary of Credits Claimed (refer to table on page 22) |
|
$ - 0 -15 |
| |
|
|
| 1996 Ohio Corporation Franchise Tax Report |
|
|
| 1997 Ohio Corporation Franchise Tax Report |
|
|
1/7 of the credit generated from 1995 purchases
1/7 of the credit generated from 1996 purchases
|
$1,371
$2,336 |
|
Total ORC section 5733.33 credit claimed on 1997 report.
|
$3,707 |
| 1998 Ohio Corporation Franchise Tax Report |
|
|
| |
|
|
1/7 of the credit generated from 1995 purchases
1/7 of the credit generated from 1996 purchases
1/7 of the credit generated from 1997 purchases
|
$1,371
$2,336
$1,768 |
|
Total ORC section 5733.33 credit claimed on 1998 report.
|
$5,475 |
| 1999 through and including 2003 Ohio Corporation Franchise Tax Reports16 |
|
|
| |
|
|
1/7 of the remaining credit generated from 1995 purchases
1/7 of the credit generated from 1996 purchases
1/7 of the credit generated from 1997 purchases
1/7 of the credit generated from 1998 purchases
|
$1,01317
$2,336 $1,768
$ - 0 -18 |
|
Total ORC section 5733.33 credit claimed on each of the 1999 through and including 2003 reports
|
|
$5,207 |
| 2004 Ohio Corporation Franchise Tax Report |
|
|
| |
|
|
1/7 of the credit generated from 1997 purchases
1/7 of the credit generated from 1998 purchases
|
$1,768
$ - 0 - |
|
Total ORC section 5733.33 credit claimed on the 2004 report
|
|
$1,768 |
| 2005 Ohio Corporation Franchise Tax Report |
|
|
| |
|
|
1/7 of the credit generated from 1998 purchases
|
|
$ - 0 - |
| Post-2005 Ohio Corporation Franchise Tax Report |
|
N/A |
Example #2
Same facts as in Example #1 except that the DEF Corporation is also a partner in the XYZ Partnership which is an Ohio manufacturer only in County A. Set forth below is information about DEF Corporation's investment in the XYZ partnership:
- XYZ Partnership's cost of new manufacturing machinery and equipment purchased for cash for use in Ohio County A during calendar years 1992, 1993, and 1994: $70,000, $79,000, and $91,000, respectively.
- XYZ Partnership's purchases for cash of new manufacturing machinery and equipment during (i) the second half of calendar year 1995 (ii) calendar year 1996, and (iii) calendar year 1997: $57,000, $58,000, and $59,000, respectively.19 XYZ made no such purchases during 1998. The new manufacturing machinery and equipment was installed in Ohio County A by December 31, 1999.
- The DEF Corporation claims neither the original 2% credit (ORC section 5733.31) nor the alternative 20% credit (ORC section 5733.311) with respect to the property purchased by the XYZ Partnership.
- DEF Corporation's ownership interest in XYZ Partnership during each of calendar years 1992, 1993 and 1994: irrelevant.20
- DEF Corporation's ownership interest in the XYZ Partnership during calendar years 1995, 1996, and 1997: 10%, 20%, and 30%, respectively.
Set forth below is the computation of the ORC section 5733.33 credit
| Part I: Calculation of XYZ Partnership's Base Investment ("County Average New Manufacturing Machinery and Equipment Investment") |
| |
|
- XYZ Partnership's cost of new manufacturing machinery and equipment purchased for use in County A during the 1992 calendar year
|
$70,000 |
- XYZ Partnership's cost of new manufacturing machinery and equipment purchased for use in County A during the 1993 calendar year
|
$79,000 |
- XYZ Partnership's cost of new manufacturing machinery and equipment purchased for use in County A during the 1994 calendar year
|
$91,000 |
| Total |
$240,000 |
Averaging Factor
XYZ Partnership's Ohio County A base investment |
÷ 3
$80,000 |
| Part II: Calculation of Yearly Credit Generated by 1995 Purchases |
| |
|
DEF's cost of new manufacturing machinery and equipment purchased during the second half of 1995 for use in Ohio County A (from Example #1, page 2).
|
$40,000 |
|
DEF's distributive share of XYZ's cost of new manufacturing machinery and equipment purchased during the second half of 1995 for use in Ohio County A (DEF's 10% interest in the XYZ Partnership during the last six months of 1995 X $57,000)
|
$5,700 |
|
Less: DEF's stand-alone Ohio County A base investment (From Example #1, Part I, page 4)
|
<$ 15,000> |
|
Less: DEF's Distributive share of XYZ Partnership's Ohio County A base investment (DEF's 10% interest in the XYZ Partnership during the last six months of 1995 X $80,000)
|
<$8,000>21 |
|
Ohio County A 1995 (second half) excess qualifying purchases
|
|
$22,700 |
Ohio County B 1995 (second half) excess qualifying purchases (from Part II of Example #1, page 5)
|
|
$43,000 |
Ohio County C 1995 excess qualifying purchases (from Example #1, Part II, page 5)
|
|
$60,000 |
Total 1995 (second half) excess qualifying purchases
Credit rate
Yearly adjustment factor
|
$125,700
x .75
x 1/7 |
Yearly credit attributable to 1995 (second half) purchases (see Part VI on pages 13, 14, and 15 which sets forth when the taxpayer can claim the credit amounts)
|
|
$1,347 |
| Part III: Calculation of Yearly Credit Generated by 1996 Purchases |
| |
|
|
DEF's cost of new manufacturing machinery and equipment purchased in 1996 for use in Ohio County A (from Example #1, Page 2)
|
$ 70,000 |
|
DEF's distributive share of XYZ's cost of new manufacturing machinery and equipment purchased in 1996 for use in Ohio County A (DEF's 20% interest in the XYZ Partnership during 1996 X $58,000)
|
$ 11,600 |
|
Less: DEF's stand-alone Ohio County A base investment (from Example #1, Part I, page 4)
|
<$15,000> |
|
Less: DEF's distributive share of XYZ Partnership's Ohio County A base investment (DEF's 20% interest in the XYZ Partnership during 1996 x $80,000)
|
<$16, 000> |
|
Ohio County A 1996 excess qualifying purchases
|
|
$ 50,600 |
Ohio County B 1996 excess qualifying purchases (same as Example #1, Part III, on page 6)
|
|
$ 73,000 |
Ohio County C 1996 excess qualifying purchases (same as Example #1, Part III, on page 7)
|
|
$ 90,000 |
Total 1996 excess qualifying purchases
Credit rate
Yearly adjustment factor
|
$213,600
x .075
X 1/7 |
Yearly credit attributable to 1996 purchases (see Part VI on pages 13, 14, and 15 which sets forth when the taxpayer can claim the credit amounts)
|
|
$2,289 |
| Part IV: Calculation of Yearly Credit Generated by 1997 Purchases |
| |
|
DEF's cost of new manufacturing machinery and equipment purchased in 1997 for use in Ohio County A (from Example #1, page 2)
|
$7,000 |
|
DEF's distributive share of XYZ's cost of new manufacturing machinery and equipment purchased in 1997 for use in Ohio County A (DEF's 30% interest in the XYZ Partnership during 1997 X $59,000)
|
$17,700 |
|
Less: DEF's stand-alone Ohio County A base investment (from Part I, Example #1, page 4)
|
<$15,000> |
|
Less: DEF's Distributive Share of XYZ Partnership's Ohio County A base investment (DEF's 30% interest in the XYZ Partnership during 1997 X $80,000)
|
<$24,000> |
|
Ohio County A 1997 excess qualifying purchases
|
|
$ -0- |
Ohio County B 1997 excess qualifying purchases (same as Example #1 Part IV, on page 7)
|
|
$ 74,000 |
Ohio County C 1997 excess qualifying purchases (same as Example #1 Part IV, on page 7)
|
|
$ 91,000 |
Total 1997 excess qualifying purchases
Credit rate
Yearly adjustment factor
|
$165,600
x .075
X 1/7 |
Yearly credit attributable to 1997 purchases (see Part VI on pages 13, 14, and 15 which sets forth when the taxpayer can claim the credit amounts)
|
|
$ 1,768 |
| Part V: Calculation of Yearly Credit Generated by 1998 Purchases |
Since neither the DEF Corporation nor the XYZ Partnership purchased any new manufacturing machinery and equipment during 1998, there is no credit generated during the 1998 calendar year.
|
|
|
| Part VI: Summary of Credits Claimed (refer to table on page 22) |
| 1996 Ohio Corporation Franchise Tax Report |
|
$ -0-22 |
| 1997 Ohio Corporation Franchise Tax Report |
|
|
| |
|
|
1/7 of the credit generated from 1995 purchases
1/7 of the credit generated from 1996 purchases
|
$1,347
$2,289 |
|
Total ORC section 5733.33 credit claimed on the 1997 report.
|
|
$ 3,636 |
| 1998 Ohio Corporation Franchise Tax Report |
|
|
| |
|
|
1/7 of the credit generated from 1995 purchases
1/7 of the credit generated from 1996 purchases
1/7 of the credit generated from 1997 purchases
|
$1,347
$2,289
$1,768 |
|
Total ORC section 5733.33 credit claimed on the 1998 report
|
|
$ 5,404 |
| 1999 through and including 2003 Ohio Corporation Franchise Tax Reports |
|
|
| |
|
|
1/7 of the revised credit generated from 1995 purchases23
1/7 of the credit generated from 1996 purchases
1/7 of the credit generated from 1997 purchases
1/7 of the credit generated from 1998 purchases
|
$1,104
$2,289
$1,768
$ -0- 24 |
|
Total ORC section 5733.33 credit claimed on each of the 1999 through and including 2003 reports
|
|
$ 5,161 |
| 2004 Ohio Corporation Franchise Tax Report |
|
|
| |
|
|
1/7 of the credit generated from 1997 purchases
1/7 of the credit generated from 1998 purchases
|
$1,768
$ -0- |
|
Total ORC section 5733.33 credit claimed on the 2004 report
|
|
$ 1,768 |
| 2005 Ohio Corporation Franchise Tax Report |
|
|
| |
|
|
1/7 of the credit generated from 1998 purchases
|
$ -0- |
|
Total ORC section 5733.33 credit claimed on the 2005 report
|
|
$ -0- |
| Post-2005 Ohio Corporation Franchise Tax Reports |
|
N/A |
|
|
|
Example #3
Lee is the sole proprietor of a small manufacturing business in Ohio County E. Lee also has an investment in S Inc., an S corporation with manufacturing operations in Ohio County E. Each year the taxpayer and the S corporation separately file with the Ohio Department of Development the prescribed notice of intent to claim the credit. Lee claims neither the original 20% credit (ORC section 5747.26) nor the alternative 20% credit (ORC section 5747.261) with respect to the purchased property (detailed below). Set forth below is the information necessary to calculate Lee's ORC section 5747.31 credit:
- Lee's cost of new manufacturing machinery and equipment purchased through the sole proprietorship for use in Ohio County E during calendar years 1992, 1993, and 1994: $10,000, $15,000, and $20,000, respectively.
- Lee's cost of new manufacturing machinery and equipment purchased through the sole proprietorship during the second half of calendar year 1995, (ii) calendar year 1996, (iii) calendar year 1997, and iv) calendar year 1998: $40,000, $70,000, $7,000, and -0- respectively. All new manufacturing machinery and equipment was installed in Ohio County E by December 31, 1999.
- During 1995 through 1998 Ohio County E is not and does not contain within its boundaries an eligible area as defined in ORC section 5733.33(A)(9).
- Lee's individual income tax for each of the years 1996 through and including 2004 after reduction for all credits allowed prior to claiming the ORC section 5747.31 credit is greater than any 7.5%/13.5% credit (see footnote 9 on page 3).
Set forth below is information about Lee's investment in S Inc., an S corporation:
- S Inc.'s cost of new manufacturing machinery and equipment purchased for use in Ohio County E during calendar years 1992, 1993, and 1994: $70,000, $79,000, and $91,000, respectively.
- S Inc.'s purchases of new manufacturing machinery and equipment during (i) the second half of calendar year 1995 (ii) calendar year 1996, (iii) calendar year 1997, and (iv) calendar year 1998: $57,000, $58,000, $154,333, and -0-, respectively. All new manufacturing machinery and equipment was installed in Ohio County E by December 31, 1999.
- Lee's ownership interest in S Inc. during each of calendar years 1992, 1993 and 1994: irrelevant.25
- Lee's ownership interest in S Inc. during calendar years 1995, 1996 and 1997: 10%, 20%, and 30%, respectively.
Set forth below is the computation of Lee's ORC section 5747.31 credit:
| Part I: Calculation of County E Base Investment: |
|
| |
|
Lee's stand-alone Ohio County E Base Investment:
|
|
- Lee's cost of new manufacturing machinery and equipment which Lee purchased for use in Ohio County E during the 1992 calendar year
|
$10,000 |
- Lee's cost of new manufacturing machinery and equipment which Lee purchased for use in County E during the 1993 calendar year
|
$15,000 |
- Lee's cost of new manufacturing machinery and equipment which Lee purchased for use in County E during the 1994 calendar year
|
$20,000 |
Total
Averaging Factor
|
$45,000
÷ 3 |
Lee's stand-alone Ohio County E base investment
|
$15,000 |
S Inc.'s Ohio County E Base Investment:
|
|
- S Inc.'s cost of new manufacturing machinery and equipment which S Inc. purchased for use in County E during the 1992 calendar year
|
$70,000 |
- S Inc.'s cost of new manufacturing machinery and equipment which S Inc. purchased for use in County E during the 1993 calendar year
|
$79,000 |
- S Inc.'s cost of new manufacturing machinery and equipment which S Inc. purchased for use in County E during the 1994 calendar year
|
$91,000 |
Total
Averaging Factor
S Inc's Ohio County E base investment
|
$240,000
÷ 3
80,000 |
| Part II: Calculation of Lee's Yearly Credit Generated by 1995 Purchases |
| |
|
Lee's cost of new manufacturing machinery and equipment purchased in 1995 (second half) for use in Ohio County E
|
$40,000 |
Lee's distributive share of S Inc.'s cost of new manufacturing machinery and equipment purchased in 1995 for use in Ohio County E (10% x $57,000)
|
$ 5,700 |
Less: Lee's stand-alone Ohio County E base investment
|
<$15, 000> |
Less: Lee's distributive share of S Inc.'s County E base investment: Lee's 1995 ownership interest in S Inc. times S Inc.'s Ohio County E base investment (10% x $80,000)
|
<$ 8, 000> |
Total 1995 (second half) excess qualifying purchases
Credit rate
Yearly adjustment factor
|
$22,700
x .075
x 1/7 |
Yearly credit attributable to 1995 (second half) purchases (see Part VI on pages 19 and 20 which sets forth when the taxpayer can claim the credit amounts)
|
$ 243 |
| Part III: Calculation of Lee's Yearly Credit Generated by 1996 Purchases |
| |
|
Lee's cost of new manufacturing machinery and equipment purchased in 1996 for use in Ohio County E
|
$70,000 |
Lee's distributive share of S Inc.'s cost of new manufacturing machinery and equipment purchased in 1996 for use in Ohio County (20% x $58,000)
|
$11,600 |
Less: Lee's stand-alone Ohio County E base investment
|
<$15, 000> |
Less: Lee's distributive share of S Inc.'s County E base investment: Lee's 1996 ownership interest in S Inc. times S Inc.'s Ohio County E base investment (20% x $80,000)
|
<$16 , 000> |
Total 1996 excess qualifying purchases
Credit rate
Yearly adjustment factor
|
$50,600
x .075
x 1/7 |
Yearly credit attributable to 1996 purchases (see Part VI on pages 19 and 20 which sets forth when the taxpayer can claim the credit amounts)
|
$ 542 |
| Part IV: Calculation of Lee's Yearly Credit Generated by 1997 Purchases |
| |
|
Lee's cost of new manufacturing machinery and equipment purchased in 1997 for use in Ohio County E
|
$ 7,000 |
Lee's distributive share of S Inc.'s cost of new manufacturing machinery and equipment purchased in 1997 for use in Ohio County E (30% x $154,333)
|
$46,300 |
Less: Lee's stand-alone Ohio County E base investment for Lee's own purchases
|
<$15, 000> |
Less: Lee's distributive share of S Inc.'s County E base investment: Lee's 1997 ownership interest in S Inc. times S Inc.'s Ohio County E base investment (30% x $80,000)
|
<$24 , 000> |
Total 1997 excess qualifying purchases
Credit rate
Yearly adjustment factor
|
$14,300
x .075
x 1/7 |
Yearly credit attributable to 1997 purchases (see Part VI on pages 19 and 20 which sets forth when the taxpayer can claim the credit amounts)
|
$ 153 |
| Part V: Calculation of Lee's Yearly Credit Generated by 1998 Purchases |
| |
|
Since neither Lee nor S Inc. purchased any new manufacturing machinery and equipment during 1998, there is no credit generated in 1998.
|
|
| Part VI: Summary of Lee's Credits Claimed26 (refer to the table on page 22) |
| |
|
|
| 1995 Ohio Individual Income Tax Return |
|
$ -0-27 |
| |
|
|
| 1996 Ohio Individual Income Tax Return |
|
|
| |
|
|
1/7 of the credit generated from 1995 purchases
1/7 of the credit generated from 1996 purchases
|
$ 243
$ 542 |
|
Total ORC section 5747.31 credit claimed on 1996 return
|
|
$ 785 |
| 1997 Ohio Individual Income Tax Return |
|
|
| |
|
|
1/7 of the credit generated from 1995 purchases
1/7 of the credit generated from 1996 purchases
1/7 of the credit generated from 1997 purchases
|
$ 243
$ 542
$ 153 |
|
Total ORC section 5747.31 credit claimed on the 1997 return
|
|
$ 938 |
| 1998 through and including 2002 Ohio Individual Income Tax Returns |
|
|
| |
|
|
1/7 of the credit generated from 1995 purchases
1/7 of the credit generated from 1996 purchases
1/7 of the credit generated from 1997 purchases
1/7 of the credit generated from 1998 purchases
|
$ 243
$ 542
$ 153
$ -0-28 |
|
Total ORC section 5747.31 credit claimed on each of the 1998 through 2002 returns
|
|
$ 938 |
| 2003 Ohio Individual Income Tax Return |
|
|
| |
|
|
1/7 of the credit generated from 1997 purchases
1/7 of the credit generated from 1998 purchases
|
$ 153
$ -0- |
|
Total ORC section 5733.33 credit claimed on the 2003 return
|
|
$ 153 |
| 2004 Ohio Individual Income Tax Return |
|
|
| |
|
|
1/7 of the credit generated from 1998 purchases
|
$ -0- |
|
Total ORC section 5747.31 credit claimed on the 2004 return
|
|
$ -0- |
| Post-2004 Ohio Individual Income Tax Returns |
|
N/A |
Example #4
During 1996 a taxpayer purchased for use in Ohio County E new manufacturing machinery and equipment costing $201. The taxpayer located $99 of the new equipment at its facility in an eligible area within the county; the taxpayer located $102 at another facility not in the eligible area. The taxpayer's base investment for the county is $100.
The total amount eligible for the 7.5%/13.5% credit is $101:
| Purchases of qualifying equipment for entire county |
$201 |
| Base investment for the county |
$100 |
| Excess amount eligible for credit |
$101 |
In determining the amount eligible for the 13.5% credit, the taxpayer's purchases of $99 for the eligible area must be reduced by the taxpayer's $100 base investment (see ORC 5733.33(C)(2)). Under current law there is no concept of a separate "base investment" for an eligible area. Since eligible area purchases do not exceed the base investment, no amount is eligible for the 13.5% credit rate.29 As such, the entire $101 is subject to the 7.5%. credit rate:
|
Entire County (including
eligible area) |
Eligible Area
Within County |
Purchases of qualifying equipment
Base investment for the county
Excess
|
$201
- $100
$101 |
|
$ 99
- $100
$ 0 |
|
Excess subject to 13.5% rate
|
|
|
$ 0 |
|
Less: excess subject to 13.5%
|
$ 0 |
|
|
|
| Amount subject to 7.5% rate |
|
