SHV N. Am. Corp. v. Tracy - Ohio Supreme Court Opinion - Ohio Supreme Court Decision

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SHV North America Corporation, Appellee, v. Tracy, Tax Commr.,
Appellant.
[Cite as SHV N. Am. Corp. v. Tracy (1994), Ohio
St.3d .]
Taxation -- Franchise tax -- Application of R.C. 5733.05 in
establishing value of corporation's stock -- Company
preparing its franchise tax return on the net worth basis
is bound by its books, when -- Board of Tax Appeals
properly accepted values of separate subsidiaries of
company as reflected by the company's books, when.
(No. 93-1166 -- Submitted December 20, 1993, -- Decided
September 28, 1994.)
Appeal from the Board of Tax Appeals, No. 91-K-841.
The Tax Commissioner, appellant, appeals the decision of
the Board of Tax Appeals ("BTA") which allowed the application
of appellee, SHV North America Corporation ("SHV"), for a
refund of franchise tax for tax year 1987 in the amount of
$50,505.
SHV owns all the stock of six separate subsidiaries and
maintains separate accounts on its books for each such
investment. SHV contends that it filed its franchise tax
return and paid Ohio franchise tax on its net worth, computed
pursuant to R.C. 5733.05(A), but erroneously included in its
net worth amount the recorded appreciation of two of its
subsidiaries. The value of each of the other subsidiaries
declined during the tax year.
The cause is now before the court upon an appeal as of
right.

Taft, Stettinius & Hollister and Stephen M. Nechemias, for
appellee.
Lee Fisher, Attorney General, and Steven L. Zisser,
Assistant Attorney General, for appellant.

Per Curiam. We affirm the BTA's decision.
R.C. 5733.05 establishes the value of a corporation's stock
for franchise tax purposes, as follows:
"(A) The total value, as shown by the books of the company,

of its capital, surplus, whether earned or unearned, undivided
profits, and reserves, but exclusive of:
"* * *
"(4) Good will, appreciation, and abandoned property as set
up in the annual report of the corporation * * *." (Emphasis
added.)
The Tax Commisioner asserts that, in computing net worth
under this statute, SHV's exclusion for appreciation must be
reduced by the "negative appreciation" of subsidiaries which
have incurred losses. SHV contends, to the contrary, that R.C.
5733.05(A)(4) allows an exclusion for any recorded
appreciation, without taking into consideration those other
accounts which reflect losses; and that the statute does not
require the "netting" of accounts.
We agree with SHV that it is unnecessary to interpret the
word "appreciation" to include "negative appreciation," and
that it is unreasonable and unlawful to add to the statute
words not employed by the General Assembly therein. Wheeling
Steel Corp. v. Porterfield (1970), 24 Ohio St.2d 24, 28, 53
O.O.2d 13, 15, 263 N.E.2d 249, 251; Storer Communications, Inc.
v Limbach (1988), 37 Ohio St.3d 193, 194, 525 N.E.2d 466, 467.
The commissioner's reliance upon state income tax cases
which deal with "netting" of value is not appropriate. A
company in preparing its franchise tax return on the net worth
basis is bound by its books if they are kept according to sound
and generally recognized and approved accounting methods. SHV
kept separate accounts of its investments in each of its six
subsidiaries without netting them, and this practice, according
to the evidence, is a sound and generally recognized and
approved accounting method. See Gray Horse, Inc. v. Limbach
(1993), 66 Ohio St.3d 631, 633, 614 N.E.2d 1038, 1039. Thus,
the BTA properly accepted the values as reflected by SHV's
books because SHV reported the appreciation in its franchise
tax return as it had on its corporate books.
Accordingly, the decision of the BTA is neither
unreasonable nor unlawful, and it is affirmed.
Decision affirmed.
Moyer, C.J., A.W. Sweeney, Douglas, Wright, Resnick, F.E.
Sweeney and Pfeifer, JJ., concur.