In September, at the request of an Ohio-based national bank, the Office of the Comptroller of the Currency issued an opinion challenging the application of the Ohio Financial Institutions Tax (FIT) to national banks with their principal office in Ohio.
The opinion held that the FIT contradicted a federal statute that provides a national bank should be treated as a state bank chartered by the state in which the national bank has its principal office when state taxes are assessed.
The challenger maintain that the FIT contradicted federal law because Ohio chartered banks have a tax credit against the FIT for regulatory assessments paid to the Ohio Division of Financial Institutions but the FIT does not provide corresponding credit for national banks. The OCC agreed.
The opinion concluded that:
“Ohio law provides that each bank organization organized under Title XI of the Ohio Revised Code may claim a non-refundable tax credit against the FIT for regulatory assessments paid to the Ohio Division of Financial Institutions. The law provides no similar credit for regulatory assessments paid by bank organizations not organized under Title XI of the Ohio Revised Code, and it provides no credit for assessments paid to other financial regulators. Thus, the FIT provides a tax credit to Ohio-chartered state banks that is not available to national banks. This arrangement does not treat a national bank with its principal office located in Ohio as if it were an Ohio-chartered state bank . . .”
A review of OCC letter and review of Ohio Revised Code (“R.C.”) Chapter 5726 dealing with the FIT suggests from a substantive standpoint, the Department of Taxation would likely argue that the sum of FIT paid by an Ohio-chartered bank (taking advantage of the deduction) plus the Ohio regulatory assessment on such bank is equal to the FIT on a similarly situated nationally-chartered bank, so the treatment of the two banks is the same. The counter-argument is likely that the Ohio regulatory assessment isn’t under the FIT and shouldn’t count when assessing the federal preemption of the FIT.
Procedurally, a nationally-chartered bank can file for a FIT refund under R.C. 5726.30 for taxes paid within the last four years. Ohio Taxation Form FIT REF would be used. The form contains space for the reason. The Tax Commissioner then must act under R.C. 5703.70 by allowing briefing and/or a hearing. The Tax Commissioner could issue a refund as relief sought (unlikely) or issue a negative Final Determination. The bank would then have 60 days under R.C. 5717.02 to file an appeal of a negative Final Determination with the Board of Tax Appeals. Decisions of the Board of Tax Appeals may be taken to the Ohio Supreme Court.