The opinion
William B. Brown, J.,
concurring. The opinion of the court buries the crux of this case in footnote 4. We should rule that in connection with corporate asset acquisitions described in Section 381 (a) of the Internal Revenue Code, an acquiring corporation may inherit only those transferor or distributor corporation net operating losses which were previously apportioned to Ohio pursuant to R. C. 5733.05 (B) (2), and which the transferor or distributor corporation could have utilized 5 absent the acquisition. Such a rule properly focuses on the existence of Ohio net operating losses. As such, it would certainly dispose of the case at bar where the distributor subsidiaries had insufficient Ohio contacts during the loss years at issue to qualify as franchise taxpayers. The emphasis in the syllabus placed on the subsidiaries not being “taxpayers” simply introduces the possibility that our decision will be read too narrowly, especially if footnote 4 is ignored. 6
It is also both unnecessary and confusing for the court to assert that the subsidiaries, and not Gulf, are “taxpayer (s)” within the meaning of R. C. 5733.04 (I) (1). *33 R. C. 5733.04 (I) directs a corporate taxpayer to adjust its federal taxable income in certain ways to reflect Ohio franchise tax base income. In this connection, R. C. 5733.04 (I) (1) directs the “taxpayer” to set off certain earlier net operating losses against its current taxable income. To suggest that this “taxpayer” is not Gulf is confusing at best, and may cause the commissioner difficulties in other contexts. Moreover, this definitional manipulation is unnecessary since we still need to determine the amount of net operating losses Gulf may properly inherit from its subsidiaries.
The statutory basis for the above determination should have been the phrase in R. C. 5733.04 (I) (1) that “[t]he amount of such net operating loss as determined under the allocation and apportionment provisions * * *for the year in which the net operating loss occurs, shall be deducted from net income***.” (Emphasis added.) 7 Since R. C. 5733.04 (I) (1) was not drafted with corporate acquisitions in mind, it does not inform Gulf whose apportionment ratios should be multiplied by its subsidiaries’ earlier accumulated net operating losses. Surely, to use any ratios but those of the subsidiaries for each of their loss years, respectively, would be absurd. We should simply read this requirement into R. C. 5733.04 (I) (1) until the General Assembly drafts a provision tailored to corporate acquisitions.
Celebrezze, C. J., Herbert and P. Brown, JJ., concur in the foregoing concurring opinion.
For example, R. C. 5733.04 (I) (1) limits the carry-forward period to five years. It would follow from the rule set forth here that an acquiring corporation would succeed only to the unused portion of this period.
Although there is no case law on the issue, federal tax rules in a comparable context (merger of non-resident foreign corporation into a domestic parent) are similar in effect. See Section 882 (c) (1) (A) of the Internal Revenue Code; Treas. Regs. 1.861-8 and 1.381 (a)-l (c). It is also noted that the analysis in Rev. Rui. 72-421 (discussed by the court) is based on the above provisions and is thus fully supportive of the rule espoused here.
In contradiction to this language, Gulf used its merger year apportionment ratio, not its subsidiaries’ loss year apportionment ratios, to calculate its entitlement to its subsidiaries’ pre-merger net operating losses.