Ohio Tax Department Explains Corporation Franchise Tax

The purpose of this information release is to explain, in question and answer format, the corporation franchise tax (CFT) sales factor situsing provisions following the adoption of the business/nonbusiness concept enacted by Amended Substitute House Bill 95 (H.B. 95) of the 125th General Assembly and to explain the subsequent amendments to the sales factor situsing provisions enacted by Substitute House Bill 127 (H.B. 127) of the125th General Assembly1. As defined in Ohio Revised Code section (R.C.) 5733.04(Q) and used in this information release the term "business income' means income arising from transactions, activities, and sources in the regular course of a trade or business and includes income from real property, tangible personal property, and intangible personal property if the acquisition, rental, management, and disposition of the property constitute integral parts of the regular course of a trade or business operation. 'Business income' includes income, including gain or loss, from a partial or complete liquidation of a business, including, but not limited to, gain or loss from the sale or other disposition of goodwill.” As noted below, for taxable years ending on or after the June 26, 2003 effective date of H.B. 95, the Department of Taxation, in general, will presume that all income, gain, loss, and expense is business income. The term “nonbusiness income” is defined in R.C. 5733.04(R) as “all income other than business income.” Business income is apportioned (R.C. 5733.05(B)) and nonbusiness income is allocated (R.C. 5733.051). You can view the text of these new laws by visiting the Ohio General Assembly’s web site at: