(a) For taxable years beginning on or after January 1, 2004, net profits for a taxpayer other than an individual shall be based on “adjusted federal taxable income” as defined herein.
(1) “Adjusted federal taxable income” is a C corporation’s federal taxable income before net operating losses and special deductions as determined under the Internal Revenue Code adjusted as follows:
A. Deduct intangible income to the extent included in federal taxable income. The deduction shall be allowed regardless of whether the intangible income relates to assets used in a trade or business or assets held for the production of income.
B. Add an amount equal to five percent (5%) of intangible income deducted under subsection (a)(1)A. hereof, but excluding that portion of intangible income directly related to the sale, exchange or other disposition of property described in section 1221 of the Internal Revenue Code.
C. Add any losses allowed as a deduction in the computation of federal taxable income if the losses directly relate to the sale, exchange, or other disposition of an asset described in section 1221 of 1231 of the Internal Revenue Code.
D. Except as provided in subsection (a)(1)E. hereof, deduct income and gain included in federal taxable income to the extent the income and gain directly relate to the sale, exchange or other disposition of an asset described in section 1221 or 1231 of the Internal Revenue Code.
E. Subsection (a)(1)D. hereof does not apply to the extent the income or gain is income or gain described in section 1245 or 1250 of the Internal Revenue Code.
F. Add taxes on or measured by net income allowed as a deduction in the computation of federal taxable income.
G. In the case of a real estate investment trust and regulated investment company, add all amounts with respect to dividends to, distributions to, or amounts set aside for or credited to the benefit of investors and allowed as a deduction in the computation of federal taxable income.
(2) If the taxpayer is not a C corporation and is not an individual, the taxpayer shall compute adjusted federal income as if the taxpayer were a C corporation except:
A. Guaranteed payments and other similar amounts paid or accrued to a partner, former partner, member or former member shall not be allowed as a deductible expense; and
B. Amounts paid or accrued to a qualified self-employed retirement plan with respect to an owner or owner-employee of the taxpayer, amounts paid or accrued to or for the health insurance for an owner or owner- employee, and amounts paid or accrued to or for life insurance for an owner or owner-employee shall not be allowed as a deduction.
(b) For taxable years beginning on or after January 1, 2004, net profits for a taxpayer who is an individual shall mean the individual’s profit required to be reported on schedule C, schedule E, or schedule F.
(1) Rentals, as reported on schedule E, may aggregate profits and losses for a net rental income but no net loss may be taken against other income nor may it be carried either forward or backward.
(2) All other businesses may aggregate profits and losses of separate businesses for a net business profit depending on if such profits and losses are aggregated on schedule SE for federal income tax purposes, excluding the profits or losses of resident partnerships, associations or other unincorporated businesses taxed as entities as provided in Section 187.05(c) and the profits or losses of non-resident partnerships, associations or other unincorporated businesses apportioned to Bucyrus.
(3) In no case may business losses or rental losses be taken against wages or other compensation earned as an employee.
(c) All rentals of every description shall constitute a business or profession regardless of the amount of gross rents or the form or compensation.
(d) Nothing in this article shall be construed as allowing the taxpayer to add or deduct any amount more than once or shall be construed as allowing any taxpayer to deduct any amount paid to or accrued for the purposes of federal self-employment tax.
(Res. 240-2003. Passed 12-30-03.)