Opinion No. 74-210 (1975) Ag ( 1975 )

TAX COMPUTATION The taxpayer whose taxable year began in 1970 and ended in 1971 cannot compute his taxes based entirely under the law as it existed in 1970. This is to acknowledge receipt of your letter wherein you ask, in effect, whether a taxpayer whose taxable year begins in 1970 and ends in 1971 may compute his taxes entirely under the "old" law existing in 1970 which was repealed in 1971 and replaced with the present law. The particular matter of interest is the deduction for federal income taxes which was allowed under the old law. This particular deduction was not provided for in the new law which was enacted in 1971. The new law is 68 Ohio St. 2351 [68-2351] — 68 Ohio St. 2384 [68-2384] (1971). Section 68 Ohio St. 2381 [68-2381] states: "Applicability of act to taxable years. — The provisions of this act shall apply to all taxpayers whose taxable year begins on and after January 1, 1971; provided, however, that in respect to any taxpayer whose taxable year begins in 1970 and ends in 1971, such taxpayer may, at his option, determine his tax under this act or compute his tax liability for such fiscal year ending in 1971, by using the sum of the computations of 1. and 2. as follows: "1. The tax computed under the provisions of the law applicable to the calendar year 1970, multiplied by the ratio of the number of months of the year in 1970, to the total number of months of the taxable year. "2. The tax computed under under the provisions of this law applicable to the calendar year 1971, multiplied by the ratio of the number of months of the year in 1971, to the total number of months of the taxable year." The Oklahoma Tax Commission has taken the view up to this time that this Section allows two choices or options for those taxpayers whose taxable year began in 1970 and lapped over in 1971: (1) All taxes would be computed under the 1971 Act, (thus, no deduction of federal income taxes), or, (2) The tax for the taxable year could be prorated in such a way that the federal income tax deduction could be taken for those months of the taxable year that were in 1970. It is being contended that there is a third option, to wit: The tax for a fiscal year beginning in 1970 and ending in 1971 may be computed entirely under the old law applicable in 1970 because Section 2381 starts out by stating that the Act (68 Ohio St. 2351-2384 [68-2351-2384]) shall apply to all taxpayers whose tax year begins on or after January. 1, 1971. It is apparent that if this Section stopped at this point, the Act would not apply to those taxpayers whose taxable year began before January 1, 1971. However, it should be noted that this particular beginning phrase is later qualified by further language in this Section in that this Section also provides for those taxpayers whose taxable year begins in 1970 and ends in 1971. As stated earlier, there are two options set out in this Section for those taxpayers whose taxable year begins before January 1, 1971. In summary, upon reading this Section in its entirety, it appears that it was the Legislative intent in enacting the Act that all those taxpayers whose taxable years begin on or after January 1, 1971, would be subject to the new Act; however, for those taxpayers whose taxable year begins in 1970 and ends in 1971, there is the choice of computing all their taxes under the new Act, or computing their taxes for the months in 1970 under the old Act, and the taxes for the months in 1971 under the new Act. Thus, there is no third option as referred to previously. It is, therefore, the opinion of the Attorney General that your question be answered as follows: The taxpayer whose taxable year began in 1970 and ended in 1971 cannot compute his taxes based entirely under the law as it existed in 1970. (Todd Markum)