Chapter 5703-3 | Property Tax

Rule 5703-3-01 | Property excepting oil, gas and water production plants.

• Effective: December 19, 2020
• Promulgated Under: Other

(A) For the purpose of classifying property for taxation, items of property devoted primarily to the general use of the land or buildings thereon are to be considered as real property and all other items of property including their foundations and all things accessory thereto which are devoted primarily to the business conducted on the premises are to be considered as personal property.

(B) The following items are hereby classified as real property for the purpose of taxation. This list is not all-inclusive and items similar to those herein classified are to be considered as real property if they meet the test as set forth in the preceding paragraph.

(1) Land and improvements to land, including retaining walls, piling, and mats for the general improvement of the site, private roads, walks, paving, areaways, culverts, bridges, viaducts, subways and tunnels, fencing, artificial lakes, reservoirs, spray ponds, dykes, dams, ditches and canals, drainage, storm and sanitary sewers, water lines for drinking, sanitary and fire protection purposes.

(2) Buildings, structural and other improvements to buildings, including their foundations, floors, partitions, insulation, walls, roof, stairways, loading and unloading platforms and canopies, systems for heating, air-conditioning, ventilating, sanitation, fixed fire protection, lighting, plumbing and drinking water, awnings and shades, building elevators, building escalators and package chutes.

(3) Generating equipment:

(a) Steam generating equipment primarily for furnishing heat to buildings and steam power for generators described in paragraph (B)(3)(b) of this rule, including all equipment and appurtenances and service lines auxiliary thereto.

(b) Electric generating equipment primarily for furnishing lights for buildings and yards, including all equipment and appurtenances auxiliary thereto and including all electric lighting circuits and equipment incidental thereto.

(4) Permanent standard gauge railroad trackage, bridges and trestles.

(5) Permanent crane trackage which is an integral structural part of a building.

(6) Fixed river or lake wharves and docks.

(7) Stationary car dumpers, other than mechanical dumpers, including track hoppers and bins.

(8) Silos used in farming.

(9) Walls forming storage yards.

(10) Mine shafts and entries.

Supplemental Information

Authorized By: 5703.05
Amplifies: 5701.02, 5701.03
Five Year Review Date: 12/19/2025
Prior Effective Dates: 7/8/1958

Rule 5703-3-02 | Oil, gas and water production plants.

• Effective: December 19, 2020
• Promulgated Under: Other

Certain tangible property used in the oil, gas and water production industry shall be classified as real property or personal property as follows:

General plant facilities

(Common to general oil, gas and water production plants, separate units)

(A) Real property

(1) Land and improvements to land, including retaining walls, piling, and foundations for the improvement of the site; private roads, walks, paving, areaways, culverts, bridges, viaducts, subways and tunnels; fencing, artificial lakes, reservoirs, spray ponds, dams, ditches, and canals; drainage, storm, plant waste, and sanitary sewers.

(2) Buildings and improvements to buildings, including foundations, floors, frames, permanent partitions, walls, roofs, stairways, loading and unloading platforms, and canopies; built-in system for heating, air-conditioning, ventilating, sanitation, fixed fire protection, lighting, plumbing and drinking water; awnings and shades, built-in inter-communicating system including private telephone, telegraph, and auto-call equipment, building elevators, (freight and passenger) and escalators.

(3) Power plant machinery and equipment:

(a) Steam power generating equipment including boilers, settings, breechings, and stacks; fuel storage tanks and bunkers; fuel preparation and handling equipment; special burners for coal, coke, oil or gas; ash handling equipment; fans, motors, turbines, or engines, pumps, piping, valves, fittings and insulation; condensing equipment, cooling towers, and spray pond equipment, air compressors, receivers, etc., and all auxiliary equipment.

(b) Electric power generating equipment including engines, turbines, generators, motors, exciters, pumps, condensers, coolers, fans, instruments, and all auxiliary equipment; piping, valves, fittings, and insulation; main switchboard complete; transformers, electric power circuits complete with wires, cables, conduits, towers, poles, and incidental equipment on primary side of sub-station switchboard.

(c) Electric power receiving equipment including main switchboard complete, transformers, converters, electric power circuits, complete with wires, cables, conduits, towers, poles, and incidental equipment on primary side of sub-station switchboard.

(4) Main water pumping station equipment, including deep wells, intakes, pumps, piping, valves, fittings, and insulation; storage tanks, fixed fire protection systems, storage and pressure water tanks and pressure pumps, piping, valves, fittings, and insulation; hydrants, and sprinkler systems.

(5) Main service lines for steam, electric power circuits, water or gas.

(6) Permanent trackage, bridges, trestles, and track scales; water and coaling stations.

(7) Permanent trackage, and electric power lines for gantry cranes, ore bridges and similar equipment.

(8) Wagon or truck platform scales.

(9) Fixed river or lake wharves.

(10) Gas holders.

The following items in paragraphs (A)(11) to (A)(22) of this rule when installed and located on the premises or leased premises of the owner and used in the recovery or production of water, will be included in the value of the right to the mineral and are to be assessed as real estate as provided in sections 5713.05 and 5713.06 of the Revised Code. The following items in paragraphs (A)(11) to (A)(22) of this rule when installed and located on the premises or leased premises of the owner and used in the recovery or production of oil or gas, shall not be included in the valuation of the right to the minerals pursuant to sections 5709.112 and 5715.01 of the Revised Code. The values as determined by section 5713.051 of the Revised Code shall be the true value in money of oil reserves and gas reserves constituting real property on the first day of January of each tax year. Items in paragraphs (A)(11) to (A)(22) of this rule are to be classified and assessed as personal property if they are not installed on the leased premises or premises of the owner or if said items are used for the transmission, transportation or distribution of oil, gas or water.

(11) All equipment, supplying power to pumps and pumping jacks, including motors, or engines, gas, gasoline, or diesel; driving pulley for belt to "Bull Wheel"; connector rods and supports.

(12) All casings.

(13) Foot valves and rods for operation of valves.

(14) Sucker rods.

(15) Derricks.

(16) All piping, valves and fittings and supports.

(17) Receiving and storage tanks.

(18) Compressors and engines (gas and air) piping, receivers, etc.

(19) Main distributing switchboard.

(20) Power wiring from switchboard to equipment.

(21) Gas scrubbers.

(22) Cooling water storage tanks.

(B) Personal property

General

(1) Well drilling equipment.

(2) Tool pullers.

(3) All machine shop equipment for repair of equipment and care of tools.

(4) All portable tools, including swabbing and clean out equipment, as well as all hand tools.

(5) Office furniture and fixtures.

(6) Equipment for preparation of sites, road building, grading, etc.

Compressor stations

(Used in transmission, transportation or distribution)

(7) Compressors and engines (gas and air), piping, receivers, etc.

(8) Main distributing switchboard.

(9) Power wiring from switchboard to equipment.

(10) Reforming gas plant.

(11) Gas cooling towers, pumps and piping and supports.

(12) Main steam piping used in production.

(13) Gas scrubbers.

(14) Water pumps and piping and supports from compressors to spray pond.

(15) Spray pond pumps, piping and supports, spray heads.

(16) Machine shop equipment for maintenance and repair.

(17) Absorbers and dehydrators; contractors.

(18) Calorimeters.

(19) Welding shop and equipment.

(20) Yard flood lighting.

(21) Portable fire protection equipment.

(22) Hoists and cranes.

(23) Lubricating oil equipment, including storage tanks, pumps, piping, filters, dewatering equipment, settling tanks, etc.; fuel measuring equipment, meters, pressure regulators, etc.

(24) Lockers.

(25) Control room, meters, gauges and piping.

(26) Portable tools, (welders, air compressors and small tools).

(27) Cooling water storage tanks.

(28) All other engines, machinery, tools and implements of every kind, including foundations, used or designed to be used in processing, or incidental thereto, with their installation costs, including all equipment ancillary or auxiliary to any of the personalty above listed.

Freight, cartage and installation costs, including foundations and incidental materials, labor, etc., incurred in erecting any above equipment are to be included as a part of the cost of this equipment.

Supplemental Information

Authorized By: 5703.05
Amplifies: 5701.02, 5701.03
Five Year Review Date: 12/19/2025
Prior Effective Dates: 1/14/2008

Rule 5703-3-03 | Filing of balance sheets; effect of repeal and reduction of listing percentage.

• Effective: December 19, 2020
• Promulgated Under: Other

Taxpayers engaged in any business, profession or occupation conducted for gain, profit or income on their own account, and taxpayers or fiduciaries returning for estates or beneficial owners engaged in any business, profession or occupation conducted for gain, profit or income, who are required to file a personal property tax return shall file a balance sheet at the time of making return on appropriate forms prescribed by the department of taxation.

Supplemental Information

Authorized By: 5703.05
Amplifies: 5711.101, 5711.27
Five Year Review Date: 12/19/2025
Prior Effective Dates: 7/25/1939, 8/7/2014

Rule 5703-3-04 | Dates for listing taxable personal property.

• Effective: December 19, 2020
• Promulgated Under: Other

All taxpayers required by rule 5703-3-03 of the Administrative Code to file a balance sheet and make a return of taxable property used in business shall list such personal property as of the close of business of the last day of December.

Supplemental Information

Authorized By: 5703.05
Amplifies: 5709.01, 5709.02, 5711.03, 5711.04, 5711.101
Five Year Review Date: 12/19/2025
Prior Effective Dates: 2/17/1975, 12/30/1984

Rule 5703-3-10 | Tangible personal property tax; true value of depreciable assets; application of "true value" or "302" computation.

• Effective: June 22, 2017
• Promulgated Under: Other

(A) Tangible personal property used in business in this state must be returned, for purposes of the personal property tax, at its true value in money. The true value of depreciable tangible personal property is its book cost less book depreciation, unless the tax commissioner finds that the depreciated book value is greater or less than the true value of such property.

(B) Application of the composite annual allowance procedure provided for in rule 5703-3-11 of the Administrative Code shall determine the prima facie true value of depreciable tangible personal property used in business. The prima facie valuations can be rebutted by probative evidence of higher or lower valuation.

(1) When an item of tangible personal property is acquired in an arms-length transaction, its true value at the time of purchase is the acquisition cost, including all costs incurred to put the property in place and make it capable of operation, which are normally capitalized in accordance with generally accepted accounting principles.

(2) The true value in money of any tangible personal property may be proved by establishing the amount for which the property would sell in an open market by a willing seller to a willing buyer in an arm's-length transaction. If market value is estimated by an appraisal, the property must be appraised as part of an ongoing business unless the taxpayer can demonstrate that the property is more accurately appraised on the basis of piecemeal liquidation or disposal.

(3) If a taxpayer believes that the composite annual allowance procedure as determined by the commissioner does not accurately reflect the true value in money of the taxpayer's depreciable tangible personal property on hand, the taxpayer may establish more accurate annual allowances by probative evidence.

(a) Such evidence must show that the published composite annual allowance procedures are inappropriate because they cause an unjust or unreasonable result, or must be modified because of special or unusual circumstances.

(b) Such evidence may include, but is not limited to, an aging of disposals study and any other studies, data, or documentation the taxpayer wishes to submit for consideration by the commissioner.

(c) Such evidence must cover a sufficient number of years to demonstrate a pattern in the history of the useful life of the subject property.

(C) A taxpayer must file a claim for deduction from book value for every tax return on which depreciable tangible personal property is returned at a value less than depreciated book value. Such claim must be made in writing at the time of filing the return on form 902, as prescribed by the commissioner, or in a format containing substantially all information as required on form 902.

Last updated October 30, 2024 at 11:10 AM

Supplemental Information

Authorized By: 5703.05
Amplifies: 5711.02, 5711.03, 5711.09, 5711.18
Five Year Review Date: 6/22/2022
Prior Effective Dates: 2/21/1986

Rule 5703-3-11 | Tangible personal property tax; "true value" or "302" computation.

• Effective: June 22, 2017
• Promulgated Under: Other

(A) To assist taxpayers in returning the true value of depreciable tangible personal property used in business in this state, as required by Chapter 5711. of the Revised Code and rule 5703-3-10 of the Administrative Code, and to assist in the efficient administration of the personal property tax, the tax commissioner shall determine a composite annual allowance procedure for use in computing the true value of such property. The application of the composite annual allowance procedure to the original cost of tangible personal property may be referred to as the "true value computation" or the "302 computation."

(B) The valuation determined by the true value computation shall be the prima facie true value in money of taxable tangible personal property.

(C) The composite annual allowance procedure shall take into consideration the type of business conducted, the types and classes of property, the useful life of the property in such classes, physical deterioration, functional and economic obsolescence, repair and maintenance practices, salvage value of property assigned to such classes, and any other factors that the commissioner considers proper in determining the true value of depreciable tangible personal property used in business in this state.

(D) The commissioner shall publish and make available the composite annual allowance procedure, with such instructions and examples as the commissioner deems useful or necessary to assist taxpayers in computing their proper tax liability.

(E) The commissioner shall review and, if necessary, modify the composite annual allowance procedure, from time to time, to assure that such allowance procedure reflects current technology and business experience.

Last updated October 8, 2024 at 11:31 AM

Supplemental Information

Authorized By: 5703.05
Amplifies: 5711.03, 5711.18, 5711.21, 5711.22
Five Year Review Date: 10/8/2029

Rule 5703-3-12 | Tangible personal property tax; true value; exhaustion method; presumed disposals.

• Effective: June 22, 2017
• Promulgated Under: Other

(A) As used in this rule, "exhaustion method" means a procedure for valuing tangible personal property of a business in which the cost and accumulated depreciation reserves of furniture, fixtures, and machinery and equipment are shown on the taxpayer's books and records as fully depreciated, and the taxpayer maintains no records of actual disposals of such property.

(B) Retail merchants and other taxpayers who follow the practice of showing fully depreciated assets on the books, whether or not physically disposed of, must value and list these assets for taxation as long as they are held for use in business. If the taxpayer maintains no records of disposals of fully depreciated assets, the exhaustion method may be used to compute the true value of this property for the purposes of the tangible personal property tax.

(C) A taxpayer who meets the requirements of paragraph (B) of this rule shall calculate the true value of furniture, fixtures, and machinery and equipment as follows: The costs of fully depreciated assets acquired during each of the ten years preceding the year for which that class of property reaches its minimum utility value as shown on the composite annual allowance procedure for the current year, as determined pursuant to rule 5703-3-11 of the Administrative Code, shall be included. To reflect estimated disposals, the cost shall be reduced by ten per cent for each year that the year of acquisition precedes the year of minimum utility value for the current tax year. The property is considered to be totally disposed of if acquired more than nine years before the year of minimum utility value for the current tax year. The value of this property is computed using the reduced cost and the minimum utility value percentage for that class of property for the current tax year.

(D) The tax commissioner may publish detailed instructions or examples to assist taxpayers in applying the provisions of this rule.

Last updated October 7, 2024 at 1:28 PM

Supplemental Information

Authorized By: 5703.05
Amplifies: 5711.03, 5711.18, 5711.21, 5711.22
Five Year Review Date: 9/23/2029

Rule 5703-3-32 | Dealer in intangibles tax definition of "primarily".

• Effective: January 7, 2024
• Promulgated Under: Other

(A)

(1) Division (B)(1) of section 5725.01 of the Revised Code defines "dealer in intangibles." Paragraphs (B) to (D) of this rule define "primarily" as used in section 5725.01 of the Revised Code. In addition to the primarily requirement defined in this rule, a person needs to meet all other legal requirements in order to meet the definition of "dealer in intangibles."

(2) As used in this rule:

(a) "Affiliated group" means two or more persons related in such a way that one person owns or controls the business operation of another member of the group. In the case of corporations with stock, one corporation owns or controls another if it owns more than fifty per cent of the other corporation's common stock with voting rights.

(b) "Dealer activities" means lending money, or discounting, buying, or selling bills of exchange, drafts, acceptances, notes, mortgages, or other evidences of indebtedness, or buying or selling bonds, stocks, or other investment securities, whether on the person's own account with a view to profit, or as agent or broker for others, with a view to profit or personal earnings. "Dealer activities" includes the servicing of loans originated or purchased by or on behalf of the person or another member of the person's affiliated group.

(c) "Gross income," except as otherwise provided in this rule, has the same meaning as in section 61 of the Internal Revenue Code, as amended. In no event will "gross income" include the recovery of basis from the sale, exchange, or other disposition of an asset.

(d) "Hedging transactions" means transactions engaged in for the purpose of reducing exposure to risk from market fluctuations in price or availability.

(B)

(1) As used in division (B)(1) of section 5725.01 of the Revised Code, and except as otherwise provided in this rule, a person's business consists primarily of dealer activities if either paragraph (B)(1)(a) or (B)(1)(b) of this rule applies:

(a) For a person that had an office or other place of business in Ohio at the end of each of the three preceding calendar years, such person's gross income from one or more dealer activities exceeds fifty per cent of the person's total gross income in at least two of the three preceding calendar years; or

(b) For a person that had an office or other place of business in Ohio at the end of the immediately preceding calendar year but did not have an office or other place of business in Ohio at the end of one or both of the other two of the three preceding calendar years, such person's gross income from one or more dealer activities exceeds fifty per cent of the person's total gross income in the immediately preceding calendar year.

(2) For purposes of paragraph (B)(1) of this rule, the computation of the applicable percentages will not include, in the numerator or the denominator, any gross income from hedging transactions.

(C)

(1) A person whose business does not meet the percentage test in paragraph (B) of this rule may show that such person's business nonetheless consists primarily of dealer activities. Paragraph (C)(1) of this rule applies only if the person files a written notice with the tax commissioner, in person or by certified mail, of the person's intent to apply such paragraph to the tax year no later than the later of the following:

(a) The due date, without extension, for filing the dealer in intangibles tax return for that tax year;

(b) Sixty days from the date the person receives written notice from the tax commissioner that it appears that the person does not meet the percentage test in paragraph (B) of this rule for that tax year.

(2) The tax commissioner may show that a person's business that meets the percentage test in paragraph (B) of this rule nonetheless does not consist primarily of dealer activities. Paragraph (C)(2) of this rule applies only if the tax commissioner sends to the person a written notice, in person or by certified mail, of the tax commissioner's intent to apply such paragraph no later than two years after the date the person files a dealer in intangibles tax return for the tax year to which the commissioner seeks to apply such paragraph.

(3) Whoever seeks to apply paragraph (C) of this rule bears the burden of showing, based on the totality of the circumstances, that the person's business consists primarily of activities other than as shown by the percentage test in paragraph (B) of this rule. Factors to consider in addition to the person's gross income from dealer activities include, but are not limited to, the proportion of the person's assets related to dealer activities, the proportion of time the person or the person's employees spend engaging in dealer activities, the proportion of costs incurred in performing dealer activities, and substantial changes in the character of the person's business.

(D) As used in division (B)(1) of section 5725.01 of the Revised Code, the determination of whether a person winding up a dealer business conducted on the person's own account remains in business primarily for the purpose of realizing upon the assets of the business is based on the totality of the circumstances.

(E) This rule is not intended to address whether a person meeting the definition of "dealer in intangibles" may be a "dual capacity" enterprise in accordance with Gen. American Transp. Corp. v. Limbach (1984), 15 Ohio St.3d 302.

Last updated January 8, 2024 at 8:37 AM

Supplemental Information

Authorized By: 5703.05
Amplifies: 5725.01(B)(1)
Five Year Review Date: 1/7/2029
Prior Effective Dates: 4/6/2006