Minimum Measure Of Franchise Tax

(1) Rentals included in the minimum measure of the franchise tax may be offset by subrentals only to the amount of rentals paid. To qualify as subrental, the sublessee must have the same rights as the lessee with respect to use of the property. (2) If property owned by others is used by the taxpayer at no charge or rented by the taxpayer for a nominal rate, the net annual rental rate for such property shall be determined on the basis of a reasonable market rental rate for such property. (3) Property in transit between locations of the taxpayer to which it belongs shall be considered to be at the destination for purposes of the franchise tax. Property in transit between the FRANCHISE AND EXCISE TAX RULES AND REGULATIONS CHAPTER 1320-06-01 buyer and seller and shown on the books and records of the taxpayer in accordance with its regular accounting practices shall be included in the minimum measure of the franchise tax if it is destined to a Tennessee location. (4) The value of any property while under construction must be included in the minimum measure of the franchise tax if there is actual utilization of such property by the taxpayer either in whole or in part. Actual utilization of the construction in progress will depend upon whether or not the construction in progress is utilized in the particular business conducted by the corporation. Example 1: A manufacturer is in the process of building or expanding its facilities. The construction in progress would not actually be utilized in conducting the business of manufacturing until put in service by the corporation. Example 2: A corporation is in the business of building and selling homes and the construction in progress will ultimately be for sale or rental. All of the construction in progress is utilized in conducting the business of home building. Example 3: A corporation is in the business of operating motels and has a facility under construction. The construction in progress would not actually be utilized in conducting the business of operating motels until put in service by the corporation.