Summary
affirming decision of Ohio Board of Tax Appeals and agreeing that "[t]o hold otherwise would allow form to control over substance"
Summary of this case from Tricarichi v. Comm'rOpinion
No. 81-11
Decided December 2, 1981.
Taxation — Personal property — Amendment of return — Modification of type of return filed — Authorized, when.
APPEAL from the Board of Tax Appeals.
Appellee, First Banc Group of Ohio, Inc. (presently Banc One Corporation), is a registered bank holding company which owns and operates, in Ohio, 17 bank and several non-bank affiliates. First Banc Group Realty Corporation ("Realty Corp.") is one of appellee's wholly owned, non-bank affiliates.
In 1969, a computer and service center was constructed for use by one of appellee's bank affiliates — City National Bank and Trust Company of Columbus. The title to the real estate on which the center was built was held by Realty Corp. and the financing for the construction thereof was provided directly to Realty Corp. by The Chemical Bank of New York and by City National.
In 1972, appellee issued $15,000,000 in public notes, bearing an interest rate of seven percent per annum and maturing eight years from the date of issue. In order to liquidate the outstanding construction loans, appellee loaned to Realty Corp. a portion of the proceeds received from the sale of its notes. As evidence of this indebtedness, Realty Corp. executed and delivered to appellee demand notes bearing an interest rate of seven and one-half percent per annum. In 1975 and 1976, the tax years at issue herein, the balance due on Realty Corp's notes was $3,445,000 and the annual interest charge was $258,375.
Although appellee showed these demand notes as account receivables on its balance sheet, it did not list them on its personal property tax returns. Appellee's rationale for this omission was that the interest received was no more than a reimbursement to appellee of the cost, including underwriting expenses, of the money which it had loaned to Realty Corp. According to appellee, the transaction had no independent, economic substance. Appellant, the Tax Commissioner of Ohio, disagreed with appellee's treatment of these notes and issued preliminary assessments based upon the income yield of the omitted notes.
A hearing was scheduled upon appellee's application for review and redetermination. At the time of the hearing, appellee filed an application to amend its personal property tax returns for the tax years 1975 and 1976. The amended returns submitted by appellee would have changed the type of returns filed from independent to consolidated returns. The consolidated returns sought to combine appellee's personal property tax returns with the returns of its non-bank affiliates, including Realty Corp. If allowed, the effect of these attempted amendments would have been to eliminate the inter-company indebtedness and, a fortiori, the basis for the Tax Commissioner's assessments.
The Tax Commissioner denied appellee's request to file amended returns and affirmed his preliminary assessments. Upon appeal, the Board of Tax Appeals reversed the determination.
This cause is now before this court upon an appeal as of right.
Messrs. Baker Hostetler and Mr. Kiehner Johnson, for appellee.
Mr. William J. Brown, attorney general, and Mr. Mark A. Engel, for appellant.
Appellant contends that amendments to personal property tax returns are limited to correcting "items, numbers and computations [as] made on the [original] return." This court has not held such a restrictive view of the function of an amended return. See Procter Gamble Co. v. Evatt (1943), 142 Ohio St. 373. Accord Seiberling Rubber Co. v. Evatt (1944), 43 Ohio Law Abs. 500; Welsh v. Kosydar (1973), 37 Ohio App.2d 115.
Appellant also argues that appellee has failed to comply with the requirements of R.C. 5711.14 and the regulation promulgated thereunder.
In pertinent part, R.C. 5711.14 provides that: "A corporation which owns or controls at least fifty-one percent of the common stock of another corporation may, under uniform regulations prescribed by the tax commissioner, make a consolidated return for the purpose of sections 5711.01 to 5711.36, inclusive, of the Revised Code. In such case all the taxable property mentioned in section 5709.01 of the Revised Code, belonging to the corporation making the return and to each of its subsidiaries shall be listed and assessed in the name of the separate owners thereof; but the parent corporation making such return shall not be required to list any of its investments in the stocks, securities, and other obligations of its subsidiaries, and in computing the amount of taxable credits intercompany accounts shall be eliminated. * * *"
The regulation is found in Ohio Adm. Code 5703-3-05, the relevant portion of which states: "Commencing with the 1960 Personal Property Tax return, any corporation desiring to file a consolidated tax return must file notice thereof with the Tax Commissioner in writing on or before April 30, or within the filing time as extended, of the year in which such return is filed. Thereafter, every such corporation must continue to file consolidated returns until the parent corporation notifies the Commissioner in writing on or before April 20 of the year in which such return is filed that it does not intend to file a consolidated return for such year. Any corporation which elects to file a consolidated return and subsequently discontinues the use of such return must comply with the provisions of the first sentence of this paragraph before it may again file a consolidated return."
In resolving this issue, the Board of Tax Appeals determined that a corporate taxpayer desiring to initially file a consolidated personal property tax return must comply with the appellant's regulation. However, "if * * * the Tax Commissioner does not accept, as filed, the return of the corporate taxpayer and levies an additional assessment based upon a modification of such return, the corporate taxpayer is also entitled to amend such return * * *, including a modification of the type of return that such a taxpayer could have been authorized to file pertaining to the tax year to which the Tax Commissioner's additional assessment relates. To hold otherwise would allow form to control over substance." We agree.
Upon the facts of the instant case, the decision of the Board of Tax Appeals, being neither unreasonable nor unlawful, is hereby affirmed.
Decision affirmed.
CELEBREZZE, C.J., W. BROWN, SWEENEY, LOCHER, HOLMES, C. BROWN and KRUPANSKY, JJ., concur.