Opinion
No. 76-200
Decided December 27, 1976.
Taxation — Personal property tax — R.C. Chapter 5711 — Corporate reorganization — Effect — Tax listing date — R.C. 5711.03 and 5711.101 — Board of Tax Appeals — Review of decisions by Supreme Court — Decision not unreasonable or unlawful, when.
APPEAL from the Board of Tax Appeals.
Prior to August 1, 1969, Gulf + Western Industries, Inc., owned six subsidiary corporations in Ohio: Bonney Forge Foundry, Inc; E.W. Bliss Company, Inc.; Goodroads Machinery Company, Inc.; Universal American Corporation; Young Spring Wire Corporation; and Daybrook Ottawa Corporation. Pursuant to a corporate reorganization on that date, Bonney Forge Foundry, Inc., became Gulf + Western Industrial Products Company, and the E.W. Bliss Company transferred its Ohio assets to Industrial Products and withdrew from Ohio, becoming an inactive holding company whose only asset was the stock of Industrial Products. The Goodroads Machinery Company, Inc., became a division of Industrial Products.
On the same date, August 1, 1969, Daybrook Ottawa Corporation became Gulf + Western Metals Forming Company. Young Spring Wire Corporation was merged into Metals Forming. Universal American Corporation transferred its assets to Metals Forming and withdrew from Ohio, becoming an inactive holding company holding the stock of Metals Forming.
Prior to the corporate reorganization, the six companies paid Ohio personal property taxes, and, in listing their personal property, used a fiscal year basis ending July 31.
As to Gulf + Western Industrial Products Company's tax returns for the years 1970 and 1971, the Tax Commissioner, in a Certificate of Determination dated May 1, 1975, found:
"For the return year 1970, the constituent corporation, E.W. Bliss Company, which merged into the Bonney-Forge Foundry, Inc., never filed an inter-county personal property tax return for its assets located at Salem, in Columbiana County, at Minerva, in Carroll County, at Brecksville in Cuyahoga County, and Dayton in Montgomery County for the reason that it was not a taxpayer within the meaning of Section 5711.01(B), Revised Code. Bonney-Forge Foundry did, however, file an inter-county personal property tax return for the return year 1970, returning its property on the basis of a listing date, of July 31, 1969, and therefore, not listing any of its assets acquired from E.W. Bliss Company. For the return year 1971, the applicant listed its assets, including the property acquired from E.W. Bliss Company, on the basis of the listing date July 31, 1970.
"* * *
"Upon audit and pursuant to the authority of Sections 5711.24 and 5711.27, Revised Code, the Department denied the applicant's use of the listing dates of July 31, 1969 and 1970, for the return years 1970 and 1971, respectively, and required the applicant use the listing dates of December 31, 1969 and 1970 for the return years 1970 and 1971, respectively. The Department, in changing the listing dates of the applicant, also increased the listed values of the appellant's property by ten percent of the value listed as of July 31, 1969 and 1970, for the return years 1970 and 1971, respectively, and assumed such to be the correct listed values as of December 31, 1969 and 1970. For failing to list the applicant's property acquired from E.W. Bliss Company as a result of the merger, for the 1970 return, for each item of property not listed in the return, a penalty of 50% plus additional charges of 11-1/2% were assessed thereon. Other values in the appropriate schedules of the returns were increased as a result of the changes in the listing dates * * *."
As to Gulf + Western Metals Forming Company, the Tax Commissioner, for the tax return years 1970 and 1971, in a Certificate of Determination, also dated May 1, 1975, found:
"For the return year 1970, the applicant failed to file its return and pursuant to Sections 5711.04 and 5711.24, Revised Code, a forced assessment was made under the date of June 28, 1972. In the forced assessment, the Department considered December 31, 1969, as the proper listing date and also assessed thereon a penalty in the amount of 50% plus an additional charge in the amount of 12-1/2%. Subsequently on March 5, 1974, the applicant filed a Wood County personal property tax return using a listing date of July 31, 1969, and therein listing only the assets of the Daybrook-Ottawa Company. For the return year 1971, the applicant did timely file an inter-county corporation return also using July 31, 1970, as the listing date. * * *
"* * *
"Subsequently under the date of June 28, 1972, the Department, under the authority of Section 5711.24, Revised Code, denied the applicant's use of the listing date of July 31, 1970, for the return year 1971, and issued an amended preliminary assessment certificate. The assessment reflected an increase in the list values of the applicant's personal property used in business by 10% of the list values as of the listing date of July 31, 1970. * * *"
Upon appeal to the Board of Tax Appeals, the orders of the Tax Commissioner were affirmed. In its decision, the board stated, in part, as follows:
"The appellants contend that they were authorized to file personal property tax returns on the basis of a fiscal year ending on July 31 of each year. The record reflects that the original six corporations were permitted to use the fiscal year as a basis for listing taxable personal property; but the consequence of the corporate reorganization was a loss of their separate identities and the creation of two new taxpayers.
"The record does not reflect that the two new taxpayers, the appellants herein, ever attempted to secure the necessary authorization to use a fiscal year basis in reporting taxable personal property nor does the record reflect that the Tax Commissioner authorized the appellants to do so. The record clearly shows that the two appellants herein were on a calendar year reporting basis for federal income tax purposes from the very date they became Ohio taxpayers.
"For this board to adopt the appellants' contention that they were authorized to file returns of taxable personal property on the basis of a fiscal year ending July 31, it would be necessary for this board to completely disregard the August 1, 1969, reorganization wherein the appellants became Ohio taxpayers.
"It is the finding of the Board of Tax Appeals that the appellants were not authorized to use a fiscal year end as the date upon which their taxable personal property was to be listed for taxation and that the determination of the Tax Commissioner that the appellants were required to use the listing date for taxable personal property prescribed by Revised Code Section 5711.03 was proper."
The cause is now before this court upon an appeal as a matter of right.
Messrs. Porter, Stanley, Platt Arthur, Mr. Ronald W. Gabriel and Mr. Roger F. Day, for appellants.
Mr. William J. Brown, attorney general, and Mr. Michael L. Moushey, for appellee.
Gulf + Western Metals Forming Company and Gulf + Western Industrial Products Company set forth five propositions of law in their appeal. The first two propositions of law relate to the effect of the corporate reorganization of appellants' subsidiaries and will be considered together.
Appellants assert that the separate corporate existence of the surviving corporation in a merger under R.C. 1701.82 is not extinguished on the date the merger becomes effective (since the surviving corporation continues in existence after the merger, it does not become a new taxpaying entity under R.C. Chapter 5711, and, for the purposes of ascertaining its status as a taxpayer, the merger may be disregarded); and that a change in the name of a corporation affects neither its identity as a corporation nor its rights or obligations.
The basis of appellants' argument under the foregoing propositions of law is that since Metals Forming Company and Industrial Products Company survived the corporate reorganization they did not become new taxpaying entities. Appellants observe that Industrial Products and Metals Forming were both incorporated in the state of Delaware in 1964 and 1965, respectively. They, therefore, maintain that the decision of the board is unreasonable and unlawful because "the probative evidence of record * * * establishes that appellants' corporate existence survived the reorganization."
The syllabus in Citizens Financial Corp. v. Porterfield (1971), 25 Ohio St.2d 53, 266 N.E.2d 828, reads as follows:
"1. The Supreme Court reviews decisions of the Board of Tax Appeals on questions of law. It is not the function of this court to substitute its judgment for that of the Board of Tax Appeals on factual issues, but only to determine from the record whether the decision rendered by the board is unreasonable or unlawful. (Paragraph two of the syllabus in Board of Edn. of Cleveland Hts. City School Dist. v. Evatt, 136 Ohio St. 283, approved and followed; Brennan v. Bd. of Tax Appeals, 175 Ohio St. 263, followed.)
"2. Where a material portion of a Board of Tax Appeals decision is not supported by any probative evidence of record, the decision is unreasonable and unlawful."
The record shows that prior to the 1969 corporate reorganization neither of the two surviving corporations were Ohio taxpayers. The board determined that "to adopt the appellants' contention that they were authorized to file returns of taxable personal property on the basis of a fiscal year ending July 31, it would be necessary * * * to completely disregard the August 1, 1969, reorganization wherein the appellants became Ohio taxpayers."
It is the conclusion of the court that, from the record, the decision of the board that appellants were new Ohio taxpayers is neither unreasonable nor unlawful and is supported by probative evidence.
Appellants' third proposition of law contends that the board's determination that December 31, 1969, and December 31, 1970, are the proper listing dates for their taxable personal property for the tax years 1970 and 1971 is contrary to the provisions of R.C. 5711.03 and 5711.101.
R.C. 5711.03 provides, in part:
"* * * taxable personal property and credits used in business shall be listed as of the close of business of the last day of December, annually * * *."
R.C. 5711.101 allows for a variation from the December 31 date specified in R.C. 5711.03. The former section reads, in part:
"A taxpayer * * * may be authorized or required by the commissioner to list his taxable property as of the close of business at the end of his fiscal year, instead of as of the day otherwise prescribed by section 5711.03 of the Revised Code. The commissioner may adopt regulations to govern the use of the basis of listing authorized by this section * * *."
Pursuant to the authority granted in R.C. 5711.101, the Tax Commissioner adopted Rule TX-41-02 (former Rule No. 202), which reads, in relevant part:
"* * * All taxpayers required to file a balance sheet and required to file a return with the Collector of Internal Revenue for Income Tax purposes on a fiscal year basis shall, except as otherwise herein provided, employ the same fiscal year in providing such balance sheet and in making return of taxable property to the Department of Taxation or a county auditor.
"* * * The Tax Commissioner may by order require a particularly designated taxpayer or taxpayers to make return and set forth a balance sheet on the basis provided by law or a fiscal year basis otherwise used by him.
"A taxpayer may make a written application to the Department of Taxation for permission to employ a fiscal year basis in making return of taxable property other than that used in making return to the Collector of Internal Revenue for Income Tax purposes, setting forth upon such application facts in support of good cause for such application. If a taxpayer be not required to make a return to the Collector of Internal Revenue for Income Tax purposes, such taxpayer may make like written application for permission to employ a fiscal year basis in making return of taxable property other than that provided by law.
"A taxpayer having used for the first time next hereafter the listing day prescribed by law or as herein required or authorized for the purpose of making return of taxable property, shall thereafter employ the same basis, unless upon written application to the Department of Taxation a different basis of listing be authorized, or unless the Department shall by special order otherwise require * * *."
It is appellants' position that since the subsidiary corporations of Gulf + Western operating in Ohio filed their 1969 and pre-1969 returns using a july 31 listing date, appellants were entitled to continue such filing on a fiscal year basis.
This argument is premised upon appellants' contention that the corporate reorganization did not result in the creation of new taxable corporate entities in Ohio. Inasmuch as that contention has been found to be without merit, it follows that the appellants' argument with respect to the tax listing date is also without merit. By force of the provisions of R.C. 5711.03, appellants' property is to be "listed as of the close of business of the last day of December, annually * * *" in the absence of the granting of "* * * permission to employ a fiscal year basis in making return of taxable property other than that provided by law."
Appellants' fourth proposition of law reads as follows:
"The General Assembly amended R.C. 5711.101 to eliminate situations in which personal property could escape taxation in a given tax year or be taxed twice in the same tax year, with a view to avoiding the very result produced in these cases under R.C. 5711.101 before such amendment. (H.B. 260, Laws 1973, effective November 21, 1973.)"
The fact that the General Assembly amended R.C. 5711.101 to correct what was perceived to be a deficiency in its terms has no bearing on the conclusion reached herein that appellants' reorganization resulted in the creation of two new corporate taxpayers.
Appellants' final proposition of law states:
"It is an abuse of discretion for the Tax Commissioner to impose the 50% penalty under R.C. 5711.27, in any case where it is shown that the taxpayer's only failure is due to reasonable cause and not willful neglect."
The 50 percent penalty referred to by appellants was levied against Metals Forming with respect to its 1970 return. The record shows that Metals Forming did not file a 1970 return until 1974 and that the Tax Commissioner adhered to the provisions of R.C. 5711.27 in levying the penalty. The board's determination of the penalty is amply supported by the record.
The decision of the Board of Tax Appeals, being neither unreasonable nor unlawful, is affirmed.
Decision affirmed.
O'NEILL, C.J., HERBERT, CORRIGAN, STERN, CELEBREZZE, W. BROWN and P. BROWN, JJ., concur.