Opinion
No. 81-628
Decided February 17, 1982.
Taxation — Franchise tax — Combined return — Method of valuation to be employed — Former R.C. 5733.052(E), ambiguous.
APPEAL from the Board of Tax Appeals.
Appellees, Motorists Development Company, Motorists Building Corporation, Motorists Agency Services, Inc., and Mileasing Company, filed combined franchise tax returns under R.C. 5733.052(B) for 1972 and 1973. The returns contained a computation of the value of appellees' issued and outstanding shares of stock based on their combined net income only.
The appellant, Tax Commissioner, initially disallowed the combined returns and assessed franchise taxes which were computed individually for each corporation. Appellees paid the assessments and then filed applications for review and correction and for refund.
After hearing, appellant modified the original assessments, finding that appellees were entitled to file combined returns under R.C. 5733.052(B). Appellant made an alternate computation of the value of appellees' stock based on net worth which was greater than that based upon combined net income. The final assessments utilized the net worth valuations.
Upon appeal, the Board of Tax Appeals reversed, finding that appellees were entitled to calculate their franchise tax liability solely upon combined net income under R.C. 5733.052.
The cause is now before this court upon an appeal as of right.
Messrs. Vorys, Sater, Seymour Pease, Mr. Robert E. Leach and Mr. Kenneth D. Beck, for appellees.
Mr. William J. Brown, attorney general, and Mr. Mark A. Engel, for appellant.
The measure of a corporation's franchise tax liability is the value of its issued and outstanding shares of stock (R.C. 5733.05), which is determined either on the basis of net worth (R.C. 5733.05[A]), or on the basis of net income (R.C. 5733.05[B]). Where a corporation files an individual return, both computations of value must be made. The rate of taxation for the net income valuation is set forth in R.C. 5733.06(A) and (B); and the rate for the net worth valuation is set forth in R.C. 5733.06(C). The franchise tax payable is the greater of the amount computed under R.C. 5733.06(A) and (B), or the amount computed under R.C. 5733.06(C). The Tax Commissioner argues that the alternate computation is required regardless of whether the taxpayer elects to file a combined franchise tax return.
At the time relevant to this action, R.C. 5733.052(E), specifically applicable to combined franchise tax returns, provided: "The tax imposed by this chapter on the base calculated under section 5733.05 of the Revised Code shall be computed on the combined net income apportioned to Ohio and shall be prorated to each taxpayer on the basis of its proportionate part of the factors used to apportion the total net income to Ohio."
Effective July 2, 1981, R.C. 5733.052(E) was amended, and we do not address the amendment herein.
The Board of Tax Appeals found that R.C. 5733.052(E) was ambiguous by requiring that the tax "shall be computed on the combined net income" and also by referring to R.C. 5733.05, which includes two methods of valuation.
We agree with the board that R.C. 5733.052(E) is ambiguous as to which method of valuation is to be employed in computing the franchise tax payable where a combined return is filed. In light of the rule that any ambiguity should be resolved in favor of the taxpayer ( Gulf Oil Corp. v. Kosydar, 44 Ohio St.2d 208, paragraph one of the syllabus), we find that the decision of the board was neither unreasonable nor unlawful.
Accordingly, the decision of the Board of Tax Appeals is affirmed.
Decision affirmed.
CELEBREZZE, C.J., W. BROWN, SWEENEY, LOCHER, HOLMES, C. BROWN and KRUPANSKY, JJ., concur.