Ohio § 5733.069

§ 5733.069.

(A) As used in this section: (1) “ Average of the payroll factor and the property factor ” means one-half multiplied by the sum of the payroll factor and the property factor. (2) Subject to divisions (C) and (H) of this section, “ export sales ” means sales used in determining the denominator of the sales factor under division (B)(2)(c) of section 5733.05 of the Revised Code , as long as the sales meet the requirements of division (A)(2)(a) of this section

and either or both of divisions (A)(2)(b) and (c) of this section. (a) The gross receipts with respect to the sales qualify as foreign trading gross receipts

as defined under section 924 of the Internal Revenue Code and regulations prescribed thereunder, except not including foreign trading gross

receipts defined under section 924(a)(5) of the Internal Revenue Code and regulations prescribed thereunder.  In addition, for the purposes of division (A)(2)(a) of this section, section 924 of the Internal Revenue Code is considered to apply to any taxpayer, not just an FSC as that term is defined under section 922 of the Internal Revenue Code . (b) In the case of sales of tangible personal property, the taxpayer establishes by preponderance

of the evidence that the property is not received by the purchaser within the United

States.  If the property is delivered by common carrier or by other means of transportation,

the place at which the property is ultimately received after all transportation has

been completed shall be considered as the place at which the property is received

by the purchaser.  Direct delivery in the United States, other than for purposes of transportation,

to a person or firm designated by the purchaser constitutes delivery to the purchaser

in the United States.  Direct delivery outside the United States to a person or firm designated by the

purchaser does not constitute delivery to the purchaser in the United States, regardless

of where title passes or other condition of sale. In addition, the taxpayer also establishes by clear and convincing evidence one of

the following: (i) With respect to sales of tangible personal property to a related member, within the

twelve-month period subsequent to the delivery to the related member, the related

member in turn sells the property, or leases it for a period of at least five years,

and delivers the property in the same form or as a component part of other property

to a purchaser or lessee who is not a related member.  In addition, during the twenty-four-month period commencing with the date of such

sale or lease by the related member, the purchaser or lessee or a related member of

the purchaser or lessee does not receive, use, or consume the property, either in

the same form or as a component part of other property, within the United States,

and does not directly or indirectly sell or lease the property, either in the same

form or as a component part of other property, for use or consumption in the United

States. (ii) With respect to all other sales of tangible personal property, during the twenty-four-month

period commencing with such sale, the purchaser or a related member of the purchaser

does not receive, use, or consume the property, either in the same form or as a component

part of other property, in the United States, and does not directly or indirectly

sell the property, either in the same form or as a component part of other property,

for use or consumption in the United States. (c) In the case of sales of services, the taxpayer establishes by preponderance of the

evidence that the purchaser uses or consumes the services or the object of the services

in a location other than the United States.  If a purchaser will receive and use or consume the services or the object of the

services both within and outside the United States, the sale is considered to be a

sale of services or of the object of the services used or consumed outside the United

States by the purchaser only to the extent of such proportionate use or consumption

outside the United States.  The taxpayer shall establish by preponderance of the evidence that the services

or the object of the services was ultimately received and used or consumed outside

the United States.  Direct or indirect sales of services or the object of services to a related member

do not meet the requirements of division (A)(2)(c) of this section unless the taxpayer

establishes by preponderance of the evidence that within the twelve-month period subsequent

to the sale to the related member, the related member in turn sold and delivered or

rendered the services or the object of the services to a person who is not a related

member and such person ultimately received and used or consumed the services or the

object of the services outside the United States.  In no event shall a sale of services qualify as an export sale if the taxpayer or

the taxpayer's related member directly or indirectly acquired such services from a

person who is not a United States person and if the taxpayer or the taxpayer's related

member in turn directly or indirectly sold such services in substantially the same

form.  For purposes of this section, services are sold in substantially the same form where

more than fifty per cent of the fair market value of such services sold is attributable

to services directly or indirectly purchased by the taxpayer or by the taxpayer's

related member from a person who is not a United States person. (3) “ Incremental increase in export sales ” means one-half the difference obtained by subtracting the amount of the taxpayer's

export sales for the second preceding taxable year from the amount of the taxpayer's

export sales for the taxable year. If the taxpayer's taxable year is a period of greater than or less than three hundred

sixty-five days, or three hundred sixty-six days for a taxable year that includes

February twenty-nine, the amount of the export sales for that taxable year shall be

adjusted and restated to an annualized amount. (4) Subject to divisions (C), (F)(1), (H), and (I) of this section, “ Ohio payroll increase factor ” means twelve and one-half multiplied by the difference obtained by subtracting two

one-hundredths from the largest of the following quotients: (a) The numerator of the payroll factor for the taxable year minus the numerator of the

payroll factor for the immediately preceding taxable year, divided by the numerator

of the payroll factor for the immediately preceding taxable year; (b) The numerator of the payroll factor for the taxable year minus the numerator of the

payroll factor for the second preceding taxable year, divided by the numerator of

the payroll factor for the second preceding taxable year; (c) The numerator of the payroll factor for the taxable year minus the numerator of the

payroll factor for the third preceding taxable year, divided by the numerator of the

payroll factor for the third preceding taxable year. If the numerator of the payroll factor for a taxable year represents payroll for a

period of greater than or less than three hundred sixty-five days, or three hundred

sixty-six days for a taxable year that includes February twenty-nine, for purposes

of this section the numerator for that taxable year shall be adjusted and restated

to an annualized amount.  If neither the taxpayer nor its related members were subject to the tax imposed

by section 5733.06 of the Revised Code for any of the three immediately preceding tax years, the numerator of the payroll

factor for any such year shall be considered to be one dollar. In no event shall the Ohio payroll increase factor be greater than one or less than

zero. (5) Subject to divisions (C), (F)(2), and (H) of this section, “ Ohio property increase factor ” means ten multiplied by the largest of the following quotients: (a) The numerator of the property factor for the taxable year minus the numerator of

the property factor for the immediately preceding taxable year, divided by the numerator

of the property factor for the immediately preceding taxable year; (b) The numerator of the property factor for the taxable year minus the numerator of

the property factor for the second preceding taxable year, divided by the numerator

of the property factor for the second preceding taxable year; (c) The numerator of the property factor for the taxable year minus the numerator of

the property factor for the third preceding taxable year, divided by the numerator

of the property factor for the third preceding taxable year. If neither the taxpayer nor its related members were subject to the tax imposed by section 5733.06 of the Revised Code for any of the three immediately preceding tax years, the numerator of the property

factor for any such year shall be considered to be one dollar. In no event shall the Ohio property increase factor be greater than one or less than

zero. (6) Subject to divisions (H) and (I) of this section, “ payroll factor ” has the same meaning as in division (B)(2)(b) of section 5733.05 of the Revised Code with any adjustments, exclusions, or alterations made in accordance with division

(B)(2)(d) of that section. (7) “ Pre-tax profit from the incremental increase in export sales ” means fifteen per cent of the incremental increase in export sales, except that

the taxpayer may establish by preponderance of the evidence that the pre-tax profit

margin from such sales is an amount exceeding fifteen per cent but not exceeding fifty

per cent.  For purposes of this section, the pre-tax profit margin shall be determined on a

product line by product line basis, and equals the quotient of the taxpayer's taxable

income with respect to the product line before operating loss deduction and special

deductions, as required to be reported for the taxable year under the Internal Revenue

Code, divided by the taxpayer's sales for the product line less sales returns, allowances,

and discounts. Nothing in division (A)(7) of this section shall be used or construed to support a

request under division (B)(2)(d) of section 5733.05 of the Revised Code . (8) Subject to division (H) of this section, “ property factor ” has the same meaning as in division (B)(2)(a) of section 5733.05 of the Revised Code with any adjustments, exclusions, or alterations made in accordance with division

(B)(2)(d) of that section. (9) “ Related member ” has the same meaning as under division (A)(6) of section 5733.042 of the Revised Code without regard to division (B) of that section. (10) “ Tentative credit ” means the credit under division (B) of this section without regard to the limitations

set forth in division (D) of this section. (11) “ United States ” means the United States and its territories and possessions. (12) “ United States person ” has the same meaning as under section 7701(A)(30) of the Internal Revenue Code . (B) A nonrefundable credit is allowed against the tax imposed by section 5733.06 of the Revised Code .  The credit shall be claimed in the order required under section 5733.98 of the Revised Code .  Subject to divisions (C), (D), and (G) of this section, the credit equals the sum

of the following: (1) For tax years 1993 to 2000, ten per cent of the product obtained by multiplying all

of the following together: (a) The pre-tax profit from the incremental increase in export sales for the taxable

year; (b) The average of the property factor and the payroll factor for the taxable year; (c) The greater of the Ohio payroll increase factor or the Ohio property increase factor. (2) For tax years 1994 to 2005, the sum of any amounts carried forward from tax years

1993 to 2000 in accordance with division (E) of this section. (C)(1) In the case of a taxpayer having a related member or a group of taxpayers having

a related member, the credit available under this section to the taxpayer or group

of taxpayers shall be computed as if the taxpayer or all taxpayers of the group and

all such related members were a consolidated, single taxpayer.  The credit shall be allocated to such taxpayer or to such group of taxpayers in

any amount elected for the tax year by the taxpayer or group.  Such election shall be revocable and amendable during the period described in division (B)(1) of section 5733.12 of the Revised Code .  Nothing in this section shall be construed to treat as an export sale a sale by

a related member who is not a United States person if such sale would not qualify

as an export sale without regard to the consolidation requirement set forth in this

section. (2) For purposes of this section, a taxpayer's or related member's export sales and the

numerators and denominators of the taxpayer's or related member's payroll and property

factors shall include the taxpayer's or related member's proportionate shares of the

export sales and numerators and denominators of the payroll and property factors,

respectively, for all pass-through entities.  For purposes of applying division (C)(2) of this section, the tax commissioner shall

be guided by the concepts set forth in section 41(f)(2) of the Internal Revenue Code and regulations prescribed thereunder.  Nothing in this section shall be construed to limit or disallow pass-through treatment

of a pass-through entity's income, deductions, credits, or other amounts necessary

to compute the tax imposed by section 5733.06 of the Revised Code and the credits allowed by this chapter. (D) In no circumstance shall the credit provided by this section be less than zero. If the tentative credit for a tax year for a taxpayer and any related members is greater

than two hundred fifty thousand dollars or the aggregate tax due for the taxpayer

and any related members after taking into account any other nonrefundable credits

that precede the credit under this section in the order required under section 5733.98 of the Revised Code , then the credit allowed for the tax year for the taxpayer and any related members

shall not exceed the lesser of two hundred fifty thousand dollars or the aggregate

tax due for the taxpayer and any related members after taking into account any other

nonrefundable credits that precede the credit under this section in that order. (E)(1) Pursuant to division (B)(2) of this section, the greater of the amount described

in division (E)(1)(a) or the amount described in division (E)(1)(b) of this section

shall be allowed as a nonrefundable credit in each ensuing tax year: (a) The excess, if any, of the tentative credit for the tax year over two hundred fifty

thousand dollars; (b) The excess, if any, of the tentative credit for the tax year over the aggregate tax

due for the tax year for the taxpayer and any related members, after taking into account

any other nonrefundable credits for the tax year that precede the credit under this

section in the order required under section 5733.98 of the Revised Code . (2) Any such amount allowed as a credit in an ensuing tax year shall be deducted from

the balance carried forward to the next ensuing tax year.  Such credit shall be taken into account prior to the allowance of any credit for

such tax year under division (B)(1) of this section.  In no event shall any amount or any portion of any amount described in division

(E)(1)(a) or (b) of this section be allowed in tax year 2006 or any subsequent tax

year. (F)(1) With respect to the computation of the Ohio payroll increase factor, divisions (A)(4)(b)

and (c) of this section shall not apply to tax years 1993 and 1994, and division (A)(4)(c)

of this section shall not apply to tax year 1995. (2) With respect to the computation of the Ohio property increase factor, divisions (A)(5)(b)

and (c) of this section shall not apply to tax years 1993 and 1994, and division (A)(5)(c)

of this section shall not apply to tax year 1995. (G) The aggregate credit allowed to the taxpayer and any related members for tax years

1993 to 2005 shall not exceed three million two hundred fifty thousand dollars. (H)(1) If a taxpayer or a taxpayer's related member acquires the major portion of a trade

or business of another person or the major portion of a separate unit of a trade or

business of another person, then for purposes of applying this section for any tax

year subsequent to the end of the taxable year in which the acquisition occurred,

the amount of the taxpayer's export sales, payroll, subject to division (I) of this

section, and property for periods before the acquisition shall be increased by so

much of such amounts paid or incurred by the previous owner of the acquired trade,

business, or separate unit as is attributable to the portion of such trade, business,

or separate unit acquired by the taxpayer or related member. (2) If a taxpayer or a taxpayer's related member disposes of a major portion of a trade

or business or the major portion of a separate unit of a trade or business in a transaction

to which division (H)(1) of this section applies, and if the taxpayer or the related

member furnished the acquiring person such information as is necessary for the application

of division (H)(1) of this section, then for purposes of applying this section to

any tax year subsequent to the end of the taxable year in which the disposition occurred,

the amount of the taxpayer's export sales, payroll, subject to division (I) of this

section, and property for periods before the disposition shall be decreased by so

much of such amounts as is attributable to the portion of such trade, business, or

separate unit disposed of by the taxpayer or related member. (3) For purposes of applying this division, the tax commissioner shall be guided by the

concepts set forth in section 41(f)(3) of the Internal Revenue Code and regulations prescribed thereunder. (I) For purposes of this section, payroll and compensation do not include amounts in

excess of two hundred thousand dollars directly or indirectly paid or accrued during

the taxable year to an employee.  For purposes of applying this division, the aggregate payroll and compensation directly

or indirectly paid or accrued by the taxpayer and by the taxpayer's related members,

if any, to an employee and to the employee's children, grandchildren, parents, and

spouse, other than a spouse who is legally separated from the employee, shall be considered

to be paid to the employee. (J) With respect to allowing the credit provided by this section, the tax commissioner

shall be guided by the doctrines of “economic reality,” “sham transaction,” “step

transaction,” and “substance over form.”  The taxpayer shall bear the burden of establishing by preponderance of the evidence

that any transaction giving rise to a claimed credit did not have as a principal purpose

the avoidance of any portion of the tax imposed by section 5733.06 of the Revised Code . Nothing in this section shall be construed to limit solely to this section the application

of the doctrines listed in this division.