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164.04 EFFECTIVE DATE.
(a) Ordinance 93-2015, effective January 1, 2016, and corresponding changes to Chapter 718 of the Ohio Revised Code, apply to municipal taxable years beginning on or after January 1, 2016. All provisions of this Chapter 164 apply to taxable years beginning 2016 and succeeding taxable years.
(b) Ordinance 93-2015 does not repeal the existing Chapter 161 for any taxable year prior to 2016. For municipal taxable years beginning before January 1, 2016, the Municipality shall continue to administer, audit, and enforce the income tax of the Municipality under Chapter 718 of the Ohio Revised Code, Chapter 161 of the codified ordinances, and the rules and regulations of the Municipality as that Chapter, ordinances, and rules and regulations existed before January 1, 2016. (Ord. 93-2015. Passed 11-23-15.)
164.05 DEFINITIONS.
Any term used in this Section that is not otherwise defined in this Section has the same meaning as when used in a comparable context in the laws of the United States relating to federal income taxation or in Title LVII of the Ohio Revised Code, unless the context clearly requires or indicates a different meaning. If a term is used in this Section and it is not defined in this Section and it is used in a comparable context in both the laws of the United States relating to federal income tax and in Title LVII of the Ohio Revised Code and the use is not consistent, then the use of the term in the law of the United States relating to federal income tax shall control over the use of the term in Title LVII of the Ohio Revised Code.
For purposes of this Chapter, the singular shall include the plural, and the masculine shall include the feminine and the gender-neutral.
As used in this Chapter:
(a) “ADJUSTED FEDERAL TAXABLE INCOME," for a person required to file as a C corporation, or for a person that has elected to be taxed as a C corporation under Division (v)(5)(iii) of this Section, means a C corporation's federal taxable income before net operating losses and special deductions as determined under the Internal Revenue Code, adjusted as follows:
(1) 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.
(2) Add an amount equal to five per cent of intangible income deducted under (a)(1) of this Section, 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;
(3) 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 or 1231 of the Internal Revenue Code;
(4) i. Except as provided in Division (a)(4)(ii) of this Section, 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;
ii. Division (a)(4)(i) of this Section 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.
(5) Add taxes on or measured by net income allowed as a deduction in the computation of federal taxable income;
(6) In the case of a real estate investment trust or 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;
(7) Deduct, to the extent not otherwise deducted or excluded in computing federal taxable income, any income derived from a transfer agreement or from the enterprise transferred under that agreement under Section 4313.02 of the Ohio Revised Code;
(8)
Deduct exempt income to the extent not otherwise deducted or excluded in computing adjusted federal taxable income.
(9) Deduct any net profit of a pass-through entity owned directly or indirectly by the taxpayer and included in the taxpayer's federal taxable income unless an affiliated group of corporations includes that net profit in the group's federal taxable income in accordance with Section 164.09(e)(3)(ii) of this Chapter.
(10) Add any loss incurred by a pass-through entity owned directly or indirectly by the taxpayer and included in the taxpayer's federal taxable income unless an affiliated group of corporations includes that loss in the group's federal taxable income in accordance with Section 164.09(e)(3)(ii) of this Chapter.
If the taxpayer is not a C corporation, is not a disregarded entity that has made an election described in Division (vv)(1) of this Section, is not a publicly traded partnership that has made the election described in Division (v)(5)(iii) of this Section, and is not an individual, the taxpayer shall compute adjusted federal taxable income under this Section as if the taxpayer were a C corporation, except guaranteed payments and other similar amounts paid or accrued to a partner, former partner, shareholder, former shareholder, member, or former member shall not be allowed as a deductible expense unless such payments are in consideration for the use of capital and treated as payment of interest under Section 469 of the Internal Revenue Code or United States treasury regulations. Amounts paid or accrued to a qualified self-employed retirement plan with respect to a partner, former partner, shareholder, former shareholder, member, or former member of the taxpayer, amounts paid or accrued to or for health insurance for a partner, former partner, shareholder, former shareholder, member, or former member, and amounts paid or accrued to or for life insurance for a partner, former partner, shareholder, former shareholder, member, or former member shall not be allowed as a deduction.
Nothing in division (a) of this section shall be construed as allowing the taxpayer to add or deduct any amount more than once or to deduct any amount paid to or accrued for purposes of federal self-employment tax.
(b) (1) "ASSESSMENT" means a written finding by the Tax Administrator that a person has underpaid municipal income tax, or owes penalty and interest, or any combination of tax, penalty, or interest to the municipal corporation that commences the person's time limitation for making an appeal to the Board of Tax Review pursuant to Section 164.32, and has "ASSESSMENT" written in all capital letters at the top of such finding.
(2) "ASSESSMENT" does not include a notice denying a request for refund issued under Division 164.19(b)(3) a billing statement notifying a taxpayer of current or past-due balances owed to the municipality, a request for additional information from the Tax Administrator, a notification to the taxpayer of mathematical errors, or the Tax Administrator's other written correspondence to a person or taxpayer that does not meet the criteria prescribed by Division (b)(1) of this Section.
(c) "AUDIT" means the examination of a person or the inspection of the books, records, memoranda, or accounts of a person, ordered to appear before the Tax Administrator, for the purpose of determining liability for a municipal income tax.
(d) "CALENDAR QUARTER" means the three-month period ending on the last day of March, June, September, and December.
(e) "CERTIFIED MAIL," "EXPRESS MAIL," "UNITED STATES MAIL," "POSTAL SERVICE," and similar terms include any delivery service authorized pursuant to Section 5703.056 of the Ohio Revised Code.
(f) "DISREGARDED ENTITY" means a single member limited liability company, a qualifying subchapter S subsidiary, or another entity if the company, subsidiary, or entity is a disregarded entity for federal income tax purposes.
(g) "DOMICILE" means the true, fixed and permanent home of the taxpayer to which, whenever absent, the taxpayer intends to return. Domicile differs from residency. Although a person may have multiple residences, a person can have only one domicile.
(h) "EMPLOYEE" means an individual who is an employee for federal income tax purposes.
(i) "EMPLOYER" means a person that is an employer for federal income tax purposes.
(j) "EXEMPT INCOME" means all of the following:
(1) The military pay or allowances of members of the armed forces of the United States or members of their reserve components, including the national guard of any state;
(2) Intangible Income;
(3) Social security benefits, railroad retirement benefits, unemployment compensation, pensions, retirement benefit payments, payments from annuities, and similar payments made to an employee or to the beneficiary of an employee under a retirement program or plan, disability payments received from private industry or local, state, or federal governments or from charitable, religious or educational organizations, and the proceeds of sickness, accident, or liability insurance policies. As used in Division (j)(3) of this Section, "unemployment compensation" does not include supplemental unemployment compensation described in Section 3402(o)(2) of the Internal Revenue Code.
(4) The income of religious, fraternal, charitable, scientific, literary, or educational institutions to the extent such income is derived from tax-exempt real estate, tax-exempt tangible or intangible property, or tax-exempt activities.
(5)
Compensation paid under Section 3501.28 or 3501.36 of the Ohio Revised Code to a person serving as a precinct election official to the extent that such compensation does not exceed one thousand dollars for the taxable year. Such compensation in excess of one thousand dollars for the taxable year will be subject to taxation. The payer of such compensation is not required to withhold any tax from that compensation.
(6) Dues, contributions, and similar payments received by charitable, religious, educational, literary organizations, labor unions, lodges, and similar organizations;
(7) Alimony and child support received;
(8) Awards for personal injuries or for damages to property from insurance proceeds or otherwise, excluding compensation paid for lost salaries or wages or awards for punitive damages;
(9) Income of a public utility when that public utility is subject to the tax levied under Section 5727.24 or 5727.30 of the Ohio Revised Code. Division (j)(9) of this Section does not apply for purposes of Chapter 5745 of the Ohio Revised Code.
(10) Gains from involuntary conversions, interest on federal obligations, items of income subject to a tax levied by the state and that a municipal corporation is specifically prohibited by law from taxing, and income of a decedent's estate during the period of administration except such income from the operation of a trade or business;
(11) Compensation or allowances for the rental value of parsonages excluded from federal gross income under Section 107 of the Internal Revenue Code;
(12) Employee compensation that is not qualifying wages as defined in Division (hh) of this Section;
(13) Compensation paid to a person employed within the boundaries of a United States air force base under the jurisdiction of the United States air force that is used for the housing of members of the United States air force and is a center for air force operations, unless the person is subject to taxation because of residence or domicile. If the compensation is subject to taxation because of residence or domicile in the City, tax on such income shall be payable to the City.
(14) All of the municipal taxable income earned by individuals while they are under eighteen years of age.
(15) i. Except as provided in Divisions (j)(15)(ii), (iii), and (iv) of this Section, qualifying wages described in Division 164.11(b)(1) or (e) of this Chapter to the extent the qualifying wages are not subject to withholding for the City under either of those Divisions.
ii. The exemption provided in Division (j)(15)(i) of this Section does not apply with respect to the municipal corporation in which the employee resided at the time the employee earned the qualifying wages.
iii. The exemption provided in Division (j)(15)(i) of this Section does not apply to qualifying wages that an employer elects to withhold under Section 164.11(d)(2) of this Chapter.
iv. The exemption provided in Division (j)(15)(i) of this Section does not apply to qualifying wages if both of the following conditions apply:
a) For qualifying wages described in Section 164.11(b)(1), the employee's employer withholds and remits tax on the qualifying wages to the municipal corporation in which the employee's principal place of work is situated, or, for qualifying wages described in Section 164.11(e), the employee's employer withholds and remits tax on the qualifying wages to the municipal corporation in which the employer's fixed location is located;
b) The employee receives a refund of the tax described in Division (j)(15)(iv)(a) of this Section on the basis of the employee not performing services in that municipal corporation.
(16) i. Except as provided in Division (j)(16)(ii) or (iii) of this Section, compensation that is not qualifying wages paid to a nonresident individual for personal services performed in the City on not more than twenty days in a taxable year.
ii. The exemption provided in Division (j)(16)(i) of this Section does not apply under either of the following circumstances:
a) The individual's base of operation is located in the municipal corporation.
b) The individual is a professional athlete, professional entertainer, or public figure, and the compensation is paid for the performance of services in the individual's capacity as a professional athlete, professional entertainer, or public figure. For purposes of Division (j)(16)(ii)(b) of this Section, "professional athlete," "professional entertainer," and "public figure" have the same meanings as in Section 164.11 of this Chapter.
iii. Compensation to which Division (j)(16)(i) of this Section applies shall be treated as earned or received at the individual's base of operation. If the individual does not have a base of operation, the compensation shall be treated as earned or received where the individual is domiciled.
iv. For purposes of Division (j)(16)(i) of this Section, "base of operation" means the location where an individual owns or rents an office, storefront, or similar facility to which the individual regularly reports and at which the individual regularly performs personal services for compensation.
(17) Compensation paid to a person for personal services performed for a political subdivision on property owned by the political subdivision, regardless of whether the compensation is received by an employee of the subdivision or another person performing services for the subdivision under a contract with the subdivision, if the property on which services are performed is annexed to a municipal corporation pursuant to Section 709.023 of the Ohio Revised Code on or after March 27, 2013, unless the person is subject to such taxation because of residence. If the compensation is subject to taxation because of residence, municipal income tax shall be payable only to the municipal corporation of residence.
(18) Income that the constitution or laws of the United States prohibit from being taxed.
(k) "FORM 2106" means Internal Revenue Service form 2106 filed by a taxpayer pursuant to the Internal Revenue Code.
(l) "GENERIC FORM" means an electronic or paper form that is not prescribed by a particular municipal corporation and that is designed for reporting taxes withheld by an employer, agent of an employer, or other payer, estimated municipal income taxes, or annual municipal income tax liability or for filing a refund claim.
(m) "INCOME" means the following:
(1) i. For residents, all income, salaries, qualifying wages, commissions, and other compensation from whatever source earned or received by the resident, including the resident's distributive share of the net profit of pass-through entities owned directly or indirectly by the resident and any net profit of the resident, except as provided in (v)(5) of this Division.
ii. For the purposes of Division (m)(1)(i) of this Section:
a) Any net operating loss of the resident incurred in the taxable year and the resident's distributive share of any net operating loss generated in the same taxable year and attributable to the resident's ownership interest in a pass-through entity shall be allowed as a deduction, for that taxable year and the following five taxable years, against any other net profit of the resident or the resident's distributive share of any net profit attributable to the resident's ownership interest in a pass-through entity until fully utilized, subject to Division (m)(1)(iv) of this Section;
b) The resident's distributive share of the net profit of each pass-through entity owned directly or indirectly by the resident shall be calculated without regard to any net operating loss that is carried forward by that entity from a prior taxable year and applied to reduce the entity's net profit for the current taxable year.
iii. Division (m)(1)(ii) of this Section does not apply with respect to any net profit or net operating loss attributable to an ownership interest in an S corporation unless shareholders' shares of net profits from S corporations are subject to tax in the municipal corporation as provided in Division (m)(5) of this Section.
iv. Any amount of a net operating loss used to reduce a taxpayer's net profit for a taxable year shall reduce the amount of net operating loss that may be carried forward to any subsequent year for use by that taxpayer. In no event shall the cumulative deductions for all taxable years with respect to a taxpayer's net operating loss exceed the original amount of that net operating loss available to that taxpayer.
(2) In the case of nonresidents, all income, salaries, qualifying wages, commissions, and other compensation from whatever source earned or received by the nonresident for work done, services performed or rendered, or activities conducted in the municipal corporation, including any net profit of the nonresident, but excluding the nonresident's distributive share of the net profit or loss of only pass-through entities owned directly or indirectly by the nonresident.
(3) For taxpayers that are not individuals, net profit of the taxpayer.
(4) Lottery, sweepstakes, gambling, sports winnings, winnings from games of chance, prizes and awards. If the taxpayer is a professional gambler for federal income tax purposes, the taxpayer may deduct related wagering losses and expenses to the extent authorized under the Internal Revenue Code and claimed against such winnings.
(5) In accordance with a ballot issue, regarding S corporation language, approved by the voters in the election on November 2, 2004, a shareholder's share of net profits of an S corporation are taxable to the municipality to the extent such shares would be so allocated or apportioned to the State of Ohio.
(n) "INTANGIBLE INCOME" means income of any of the following types: income yield, interest, capital gains, dividends, or other income arising from the ownership, sale, exchange, or other disposition of intangible property including, but not limited to, investments, deposits, money, or credits as those terms are defined in Chapter 5701 of the Ohio Revised Code, and patents, copyrights, trademarks, trade names, investments in real estate investment trusts, investments in regulated investment companies, and appreciation on deferred compensation. "Intangible income" does not include prizes, awards, or other income associated with any lottery winnings, gambling winnings, or other similar games of chance.
(o) "INTERNAL REVENUE CODE" means the "Internal Revenue Code of 1986," 100 Sta. 2085, 26 U.S.C.A. 1, as amended.
(p) "LIMITED LIABILITY COMPANY" means a limited liability company formed under Chapter 1705 of the Ohio Revised Code or under the laws of another state.
(r) "MUNICIPAL CORPORATION" means, in general terms a status conferred upon a local government unit, by state law giving the unit certain autonomous operating authority such as the power of taxation, power of eminent domain, police power and regulatory power, and includes a joint economic development district or joint economic development zone that levies an income tax or net profit tax under Sections 715.691, 715.70, 715.71, or 715.74 of the Ohio Revised Code. The City of Cuyahoga Falls is a municipal corporation for purposes of this Chapter.
(s) (1) "MUNICIPAL TAXABLE INCOME" means the following:
i. For a person other than an individual, income reduced by exempt income to the extent otherwise included in income and then, as applicable, apportioned or sitused to the municipality under Section 164.08, and further reduced by any pre-2017 net operating loss carryforward available to the person for the municipality.
ii. For an individual who is a resident of the municipality, income reduced by exempt income to the extent otherwise included in income, then reduced as provided in Division (s)(2) of this Section, and further reduced by any pre-2017 net operating loss carryforward available to the individual for the municipality.
iii. For an individual who is a nonresident of the municipality, income reduced by exempt income to the extent otherwise included in income and then, as applicable, apportioned or sitused to the municipality under Section 164.08 of this Chapter, then reduced as provided in Division (s)(2) of this Section, and further reduced by any pre-2017 net operating loss carryforward available to the individual for the City.
(2) In computing the municipal taxable income of a taxpayer who is an individual, the taxpayer may subtract, as provided in Division (s)(1)(ii) or (s)(1)(iii) of this Section, the amount of the individual's employee business expenses reported on the individual's form 2106 that the individual deducted for federal income tax purposes for the taxable year, subject to the limitation imposed by Section 67 of the Internal Revenue Code. For the municipal corporation in which the taxpayer is a resident, the taxpayer may deduct all such expenses allowed for federal income tax purposes, but to the extent the expenses do not relate to exempt income. For a municipal corporation in which the taxpayer is not a resident, the taxpayer may deduct such expenses only to the extent the expenses are related to the taxpayer's performance of personal services in that nonresident municipal corporation and are not related to exempt income.
(t) "MUNICIPALITY" means the City of Cuyahoga Falls, and includes any joint economic development district or joint economic development zone that levies an income tax or net profit tax under Sections 718.691, 715.70, 715.71, or 715.74 of the Ohio Revised Code or within which the City levies an income tax or net profit tax pursuant to said Sections of the Ohio Revised Code, including but not limited to the Boston Township-Cuyahoga Falls Joint Economic Development District.
(u) "NET OPERATING LOSS" means a loss incurred by a person in the operation of a trade or business. "Net operating loss" does not include unutilized losses resulting from basis limitations, at-risk limitations, or passive activity loss limitations.
(v) (1) "NET PROFIT" for a person who is an individual means the individual's net profit required to be reported on schedule C, schedule E, or schedule F reduced by any net operating loss carried forward. For the purposes of Division (v)(1) of this Section, the net operating loss carried forward shall be calculated and deducted in the same manner as provided in Division (v)(3) of this Section. “Net Profit” for a person other than an individual means adjusted federal taxable income reduced by any net operating loss incurred by the person in a taxable year beginning on or after January 1, 2017, subject to the limitations of division (v)(3) of this section.
(2) For the purposes of this Chapter, and notwithstanding Division (v)(1) of this Section, net profit of a disregarded entity shall not be taxable as against that disregarded entity, but shall instead be included in the net profit of the owner of the disregarded entity.
(3) i. The amount of such net operating loss shall be deducted from net profit to the extent necessary to reduce municipal taxable income to zero, with any remaining unused portion of the net operating loss carried forward to not more than five consecutive taxable years following the taxable year in which the loss was incurred, but in no case for more years than necessary for the deduction to be fully utilized.
ii. No person shall use the deduction allowed by division (v)(3)(i) of this section to offset qualifying wages.
iii. For taxable years beginning in 2018, 2019, 2020, 2021, or 2022, a person may not deduct, more than fifty per cent of the amount of the deduction otherwise allowed by division (v)(3)(i) of this section.
iv. For taxable years beginning in 2023 or thereafter, a person may deduct, the full amount allowed by division (v)(3)(i) of this section without regard to the limitation of division (v)(3)(iii) of this section.
v. Any pre-2017 net operating loss carryforward deduction that is available may be utilized before a taxpayer may deduct any amount pursuant to division (v)(3) of this section.
vi. Nothing in division (v)(3) (iii) of this section precludes a person from carrying forward, for use with respect to any return filed for a taxable year beginning after 2018, any amount of net operating loss that was not fully utilized by operation of division (v)(3)(iii) of this section. To the extent that an amount of net operating loss that was not fully utilized in one or more taxable years by operation of division (v)(3)(iii) of this section is carried forward for use with respect to a return filed for a taxable year beginning in 2019, 2020, 2021, or 2022, the limitation described in division (v)(3)(iii) of this section shall apply to the amount carried forward.
(4) For the purposes of this Chapter, and notwithstanding Division (v)(1)(2) of this Section, net profit of a disregarded entity shall not be taxable as against that disregarded entity, but shall instead be included in the net profit of the owner of the disregarded entity.
(5) i. For purposes of this Chapter, "publicly traded partnership" means any partnership, an interest in which is regularly traded on an established securities market. A "publicly traded partnership" may have any number of partners.
ii. For the purposes of this Chapter, and notwithstanding any other provision of this Chapter, the net profit of a publicly traded partnership that makes the election described in Division (v)(5)(iii) of this Section shall be taxed as if the partnership were a C corporation, and shall not be treated as the net profit or income of any owner of the partnership.
iii. A publicly traded partnership that is treated as a partnership for federal income tax purposes, and that is subject to tax on its net profits by the municipality, may elect to be treated as a C corporation. The election shall be made on the annual return for the municipality. The municipality will treat the publicly traded partnership as a C corporation if the election is so made.
iv. The individual owners of the partnership not filing as a C corporation are required to file with their municipal corporation of residence, and report partnership distribution of net profit.
(w) "NONRESIDENT" means an individual that is not a resident of the City of Cuyahoga Falls.
(x) "OHIO BUSINESS GATEWAY" means the online computer network system, created under Section 125.30 of the Ohio Revised Code, that allows businesses to electronically file business reply forms with state agencies and includes any successor electronic filing and payment system.
(y) "OTHER COMPENSATION" all forms of earned income including but not limited to severance pay, tips, tax shelter plans, gifts of any type for services rendered, vacation and holiday pay, wage continuation benefits, director's fees, jury duty fees, stock options granted in connection with the performance of service and not designated as capital gains, property in lieu of cash, sick pay, bonuses, incentive payments in whatever form, company closing benefits, earnings designated as deferred compensation or compensation paid by an employer in whatever form for services rendered, employer paid premiums for group-term insurance in excess of fifty thousand dollars ($50,000), strike benefits, depreciation recapture, ordinary income shown on the federal form 4797, and a resident partner's or stockholder's distributive share of a nonresident partnership or S-corporation net profits. If income appears as part of Medicare wages on a W-2 form and is not shown to be an exception in accordance with Section 164.05(j) it shall be considered other compensation and is therefore taxable to the individual.
(z) "OTHER PAYER" means any person, other than an individual's employer or the employer's agent that pays an individual any amount included in the federal gross income of the individual. "Other payer" includes casino operators and video lottery terminal sales agents.
(aa) "PASS-THROUGH ENTITY" means a partnership not treated as an association taxable as a C corporation for federal income tax purposes, a limited liability company not treated as an association taxable as a C corporation for federal income tax purposes, an S corporation, or any other class of entity from which the income or profits of the entity are given pass-through treatment for federal income tax purposes. "Pass-through entity" does not include a trust, estate, grantor of a grantor trust, or disregarded entity.
(bb) "PENSION" means a retirement benefit plan, regardless of whether the plan satisfies the qualifications described under Section 401(a) of the Internal Revenue Code, including amounts that are taxable under the “Federal Insurance Contributions Act”, Chapter 21 of the Internal Revenue Code, excluding employee contributions and elective deferrals, and regardless of whether such amounts are paid in the same taxable year in which the amounts are included in the employee’s wages, as defined by Section 3121(a) of the Internal Revenue Code.
(cc) "PERSON" includes individuals, firms, companies, joint stock companies, business trusts, estates, trusts, partnerships, limited liability partnerships, limited liability companies, associations, C corporations, S corporations, governmental entities, and any other entity.
(dd) "POSTAL SERVICE" means the United States postal service, or private delivery service delivering documents and packages within an agreed upon delivery schedule, or any other carrier service delivering the item.
(ee) "POSTMARK DATE," "DATE OF POSTMARK," and similar terms include the date recorded and marked by a delivery service and recorded electronically to a database kept in the regular course of its business and marked on the cover in which the payment or document is enclosed.
(ff) "PRE-2017 NET OPERATING LOSS CARRYFORWARD" means any net operating loss incurred in a taxable year beginning before January 1, 2017, to the extent such loss was permitted, by 161.03(c)(1) through (3) to be carried forward and utilized to offset income or net profit generated in the municipality in future taxable years. For the purpose of calculating municipal taxable income, any pre-2017 net operating loss carryforward may be carried forward to any taxable year, including taxable years beginning in 2017 or thereafter, for the number of taxable years provided in the ordinance or until fully utilized, whichever is earlier.
(gg) "PUBLICLY TRADED PARTNERSHIP" means any partnership, an interest in which is regularly traded on an established securities market. A "publicly traded partnership" may have any number of partners.
(hh) "QUALIFYING WAGES" means wages, as defined in Section 3121(a) of the Internal Revenue Code, without regard to any wage limitations, adjusted as follows:
(1) Deduct the following amounts:
i. Any amount included in wages if the amount constitutes compensation attributable to a plan or program described in Section 125 of the Internal Revenue Code.
ii. Any amount included in wages if the amount constitutes payment on account of a disability related to sickness or an accident paid by a party unrelated to the employer, agent of an employer, or other payer.
iii. Any amount included in wages that is exempt income.
(2) Add the following amounts:
i. Any amount not included in wages solely because the employee was employed by the employer before April 1, 1986.
ii. Any amount not included in wages because the amount arises from the sale, exchange, or other disposition of a stock option, the exercise of a stock option, or the sale, exchange, or other disposition of stock purchased under a stock option and the municipal corporation has not exempted the amount from withholding and tax adopted before January 1, 2016. Division (hh)(2)(ii) of this Section applies only to those amounts constituting ordinary income.
iii. Any amount not included in wages if the amount is an amount described in Sections 401(k), 403(b), or 457 of the Internal Revenue Code. Division (hh)(2)(iii) of this Section applies only to employee contributions and employee deferrals.
iv. Any amount that is supplemental unemployment compensation benefits described in Section 3402(o)(2) of the Internal Revenue Code and not included in wages.
v. Any amount received that is treated as self-employment income for federal tax purposes in accordance with Section 1402(a)(8) of the Internal Revenue Code.
vi. Any amount not included in wages if all of the following apply:
a) For the taxable year the amount is employee compensation that is earned outside the United States and that either is included in the taxpayer's gross income for federal income tax purposes or would have been included in the taxpayer's gross income for such purposes if the taxpayer did not elect to exclude the income under Section 911 of the Internal Revenue Code;
b) For no preceding taxable year did the amount constitute wages as defined in Section 3121(a) of the Internal Revenue Code;
c) For any taxable year the amount has not otherwise been added to wages pursuant to either Division (hh)(2) of this Section or Section 718.03 of the Ohio Revised Code, as that Section existed before the effective date of H.B. 5 of the 130th General Assembly, March 23, 2015.
(ii) "RELATED ENTITY"
(1) An individual stockholder, or a member of the stockholder's family enumerated in Section 318 of the Internal Revenue Code, if the stockholder and the members of the stockholder's family own directly, indirectly, beneficially, or constructively, in the aggregate, at least fifty per cent of the value of the taxpayer's outstanding stock;
(2) A stockholder, or a stockholder's partnership, estate, trust, or corporation, if the stockholder and the stockholder's partnerships, estates, trusts, or corporations own directly, indirectly, beneficially, or constructively, in the aggregate, at least fifty per cent of the value of the taxpayer's outstanding stock;
(3) A corporation, or a party related to the corporation in a manner that would require an attribution of stock from the corporation to the party or from the party to the corporation under Division (ii)(4) of this Section, provided the taxpayer owns directly, indirectly, beneficially, or constructively, at least fifty per cent of the value of the corporation's outstanding stock;
(4) The attribution rules described in Section 318 of the Internal Revenue Code apply for the purpose of determining whether the ownership requirements in Divisions (ii)(1) to (3) of this Section have been met.
(jj) "RELATED MEMBER" means a person that, with respect to the taxpayer during all or any portion of the taxable year, is either a related entity, a component member as defined in Section 1563(b) of the Internal Revenue Code, or a person to or from whom there is attribution of stock ownership in accordance with Section 1563(e) of the Internal Revenue Code except, for purposes of determining whether a person is a related member under this Division, "twenty per cent" shall be substituted for "5 percent" wherever "5 percent" appears in Section 1563(e) of the Internal Revenue Code.
(kk) "RESIDENT" means an individual who is domiciled in the Municipality as determined under Section 164.20 of this Chapter.
(ll) “RETIREMENT BENEFIT PLAN” means an arrangement whereby an entity provides benefits to individuals either on or after their termination of service because of retirement or disability. “Retirement benefit plan” does not include wage continuation payments, severance payments, or payments made for accrued personal or vacation time.
(mm) "S CORPORATION" means a person that has made an election under subchapter S of Chapter 1 of Subtitle A of the Internal Revenue Code for its taxable year
(nn) "SCHEDULE C" means internal revenue service schedule C (form 1040) filed by a taxpayer pursuant to the Internal Revenue Code.
(oo) "SCHEDULE E" means internal revenue service schedule E (form 1040) filed by a taxpayer pursuant to the Internal Revenue Code.
(pp) "SCHEDULE F" means internal revenue service schedule F (form 1040) filed by a taxpayer pursuant to the Internal Revenue Code.
(qq) "SINGLE MEMBER LIMITED LIABILITY COMPANY" means a limited liability company that has one direct member.
(rr) "SMALL EMPLOYER" means any employer that had total revenue of less than five hundred thousand dollars during the preceding taxable year. For purposes of this Division, "total revenue" means receipts of any type or kind, including, but not limited to, sales receipts; payments; rents; profits; gains, dividends, and other investment income; commissions; premiums; money; property; grants; contributions; donations; gifts; program service revenue; patient service revenue; premiums; fees, including premium fees and service fees; tuition payments; unrelated business revenue; reimbursements; any type of payment from a governmental unit, including grants and other allocations; and any other similar receipts reported for federal income tax purposes or under generally accepted accounting principles. "Small employer" does not include the federal government; any state government, including any state agency or instrumentality; any political subdivision; or any entity treated as a government for financial accounting and reporting purposes.
(ss) "TAX ADMINISTRATOR" means the individual charged with direct responsibility for administration of the income tax levied by the City in accordance with this Chapter
(tt) "TAX RETURN PREPARER" means any individual described in Section 7701(a)(36) of the Internal Revenue Code and 26 C.F.R. 301.7701-15 .
(uu) "TAXABLE YEAR" means the corresponding tax reporting period as prescribed for the taxpayer under the Internal Revenue Code.
(vv) "TAXPAYER" means a person subject to a tax levied on income by a municipal corporation in accordance with this Chapter. "Taxpayer" does not include a grantor trust or, except as provided in Division (vv)(1) of this Section, a disregarded entity.
(1) A single member limited liability company that is a disregarded entity for federal tax purposes may be a separate taxpayer from its single member in all Ohio municipal corporations in which it either filed as a separate taxpayer or did not file for its taxable year ending in 2003, if all of the following conditions are met:
i. The limited liability company's single member is also a limited liability company.
ii. The limited liability company and its single member were formed and doing business in one or more Ohio municipal corporations for at least five years before January 1, 2004.
iii. Not later than December 31, 2004, the limited liability company and its single member each made an election to be treated as a separate taxpayer under Division (L) of Section 718.01 of the Ohio Revised Code as this Section existed on December 31, 2004.
iv. The limited liability company was not formed for the purpose of evading or reducing Ohio municipal corporation income tax liability of the limited liability company or its single member.
v. The Ohio municipal corporation that was the primary place of business of the sole member of the limited liability company consented to the election.
(2) For purposes of Division (vv)(1)(v) of this Section, a municipal corporation was the primary place of business of a limited liability company if, for the limited liability company's taxable year ending in 2003, its income tax liability was greater in that municipal corporation than in any other municipal corporation in Ohio, and the tax liability to that municipal corporation for its taxable year ending in 2003 was at least four hundred thousand dollars.
(ww) "TAXPAYERS' RIGHTS AND RESPONSIBILITIES" means the rights provided to taxpayers in Sections 718.11, 718.12, 718.19, 718.23, 718.36, 718.37, 718.38, 5717.011, and 5717.03 of the Ohio Revised Code and any corresponding ordinances of the Municipality, and the responsibilities of taxpayers to file, report, withhold, remit, and pay municipal income tax and otherwise comply with Chapter 718 of the Ohio Revised Code, ordinances, and rules and regulations adopted by the municipality for the imposition and administration of a municipal income tax.
(Ord. 13-2021. Passed 3-8-21.)
164.06 DETERMINING MUNICIPAL TAXABLE INCOME FOR INDIVIDUALS.
(a) "Municipal Taxable Income" for a resident of the municipality is calculated as follows:
(1) "Income" reduced by "Exempt Income" to the extent such exempt income is otherwise included in income, reduced by allowable employee business expense deduction as found in Section 164.05(s)(2) of this Chapter, further reduced by any "Pre-2017 Net Operating Loss Carryforward" equals "Municipal Taxable Income".
2. "Net profit" is included in "income", and is defined in Section 164.05(v) of this Chapter. The net operating loss carryforward shall be calculated and deducted in the same manner as provided in Section 164.05(a)(8) of this Chapter. Treatment of net profits received by an individual taxpayer from rental real estate is provided in Section 164.08(e) of this Chapter.
3. Section 164.05(m) provides the following: offsetting and net operating loss carryforward treatment in (m)(1)(ii)(a); resident's distributive share of net profit from pass through entity treatment in (m)(1)(ii)(b); treatment of S Corporation distributive share of net profit in the hands of the shareholder in (m)(1)(iii); restriction of amount of loss permitted to be carried forward for use by taxpayer in a subsequent taxable year in (m)(1)(iv).
iii. Allowable employee business expense deduction is described in Section 164.05(s)(2) of this Chapter, and is subject to the limitations provided in that Section.
(b) "Municipal Taxable Income" for a nonresident of the Municipality is calculated as follows:
(1) "Income" reduced by "Exempt Income" to the extent such exempt income is otherwise included in income, as applicable, apportioned or sitused to the Municipality as provided in Section 164.08 of this Chapter, reduced by allowable employee business expense deduction as found in 164.05(s)(2) of this Chapter, further reduced by any "Pre-2017 Net Operating Loss Carryforward" equals "Municipal Taxable Income".
2. "Net profit" is included in "income", and is defined in Section 164.05(v) of this Chapter. This Section also provides that the net operating loss carryforward shall be calculated and deducted in the same manner as provided in Section 164.05(a)(8). "Net profit" for a nonresident individual includes any net profit of the nonresident, but excludes the distributive share of net profit or loss of only a pass through entity owned directly or indirectly by the nonresident.
iii. "Apportioned or sitused to the Municipality as provided in Section 164.08 of this Chapter" includes the apportionment of net profit income attributable to work done or services performed in the Municipality. Treatment of net profits received by an individual taxpayer from rental real estate is provided in Section 164.08(e) of this Chapter.
iv. "Allowable employee business expense deduction" as described Section 164.05(s)(2) of this Chapter, is subject to the limitations provided in that Section. For a nonresident of the Municipality, the deduction is limited to the extent the expenses are related to the performance of personal services by the nonresident in the Municipality.
(Ord. 93-2015. Passed 11-23-15.)
164.07 DETERMINING MUNICIPAL TAXABLE INCOME FOR TAXPAYERS WHO ARE NOT INDIVIDUALS.
(a) "Municipal Taxable Income" for a taxpayer who is not an individual is calculated as follows:
(1) "Income" multiplied by apportionment, and if applicable, reduced by any "Pre-2017 Net Operating Loss Carryforward" equals "Municipal Taxable Income".
i. "Net Profit" for a person other than an individual is defined in Section 164.05(v) of this Chapter.
(Ord. 4-2018. Passed 1-22-18.)
164.08 NET PROFIT; INCOME SUBJECT TO NET PROFIT TAX; ALTERNATIVE APPORTIONMENT.
This Section applies to any taxpayer engaged in a business or profession in the Municipality unless the taxpayer is an individual who resides in the Municipality or the taxpayer is an electric company, combined company, or telephone company that is subject to and required to file reports under Chapter 5745 of the Ohio Revised Code. For purposes of this Section, the municipality is defined in Section 164.05(t) and the net profit calculated herein shall apply as set forth in Section 164.06 and 164.07 of this Chapter.
(a) Except as otherwise provided in divisions (b) and (i) of this section, net profit from a business or profession conducted both within and outside of the boundaries of the Municipality shall be considered as having a taxable situs in the Municipality for purposes of municipal income taxation in the same proportion as the average ratio of the following:
(1) The average original cost of the real property and tangible personal property owned or used by the taxpayer in the business or profession in the Municipality during the taxable period to the average original cost of all of the real and tangible personal property owned or used by the taxpayer in the business or profession during the same period, wherever situated. As used in the preceding sentence, tangible personal or real property shall include property rented or leased by the taxpayer and the value of such property shall be determined by multiplying the annual rental thereon by eight;
(2) Wages, salaries, and other compensation paid during the taxable period to individuals employed in the business or profession for services performed in the Municipality to wages, salaries, and other compensation paid during the same period to individuals employed in the business or profession, wherever the individual's services are performed, excluding compensation from which taxes are not required to be withheld under Section 164.11 of this Chapter;
(3) Total gross receipts of the business or profession from sales and rentals made and services performed during the taxable period in the Municipality to total gross receipts of the business or profession during the same period from sales, rentals, and services, wherever made or performed.
(b) (1) If the apportionment factors described in Division (a) of this Section do not fairly represent the extent of a taxpayer's business activity in the Municipality, the taxpayer may request, or the Tax Administrator may require, that the taxpayer use, with respect to all or any portion of the income of the taxpayer, an alternative apportionment method involving one or more of the following:
i. Separate accounting;
ii. The exclusion of one or more of the factors;
iii. The inclusion of one or more additional factors that would provide for a more fair apportionment of the income of the taxpayer to the Municipality;
iv. A modification of one or more of the factors.
(2) A taxpayer request to use an alternative apportionment method shall be in writing and shall accompany a tax return, timely filed appeal of an assessment, or timely filed amended tax return. The taxpayer may use the requested alternative method unless the Tax Administrator denies the request in an assessment issued within the period prescribed by Section 164.33 of this Chapter.
(3) The Tax Administrator may require a taxpayer to use an alternative apportionment method as described in Division (b)(1) of this Section only by issuing an assessment to the taxpayer within the period prescribed by Section 164.33 of this Chapter.
(4) Nothing in Division (b) of this Section nullifies or otherwise affects any alternative apportionment arrangement approved by the Tax Administrator or otherwise agreed upon by both the Tax Administrator and taxpayer before January 1, 2016.
(c) As used in Division (a)(2) of this Section, "wages, salaries, and other compensation" includes only wages, salaries, or other compensation paid to an employee for services performed at any of the following locations:
(1) A location that is owned, controlled, or used by, rented to, or under the possession of one of the following:
i. The employer;
ii. A vendor, customer, client, or patient of the employer, or a related member of such a vendor, customer, client, or patient;
iii. A vendor, customer, client, or patient of a person described in Division (c)(1)(ii) of this Section, or a related member of such a vendor, customer, client, or patient.
(2) Any location at which a trial, appeal, hearing, investigation, inquiry, review, court-martial, or similar administrative, judicial, or legislative matter or proceeding is being conducted, provided that the compensation is paid for services performed for, or on behalf of, the employer or that the employee's presence at the location directly or indirectly benefits the employer;
(3) Any other location, if the Tax Administrator determines that the employer directed the employee to perform the services at the other location in lieu of a location described in Division (c)(1) or (2) of this Section solely in order to avoid or reduce the employer's municipal income tax liability. If the Tax Administrator makes such a determination, the employer may dispute the determination by establishing, by a preponderance of the evidence, that the Tax Administrator's determination was unreasonable.
(d) For the purposes of Division (a)(3) of this Section, and except as provided in division (i) of this section, receipts from sales and rentals made and services performed shall be sitused to a municipal corporation as follows:
(1) Gross receipts from the sale of tangible personal property shall be sitused to the municipal corporation only if, regardless of where title passes, the property meets either of the following criteria:
i. The property is shipped to or delivered within the municipal corporation from a stock of goods located within the municipal corporation.
ii. The property is delivered within the municipal corporation from a location outside the municipal corporation, provided the taxpayer is regularly engaged through its own employees in the solicitation or promotion of sales within such municipal corporation and the sales result from such solicitation or promotion.
(2) Gross receipts from the sale of services shall be sitused to the municipal corporation to the extent that such services are performed in the municipal corporation.
(3) To the extent included in income, gross receipts from the sale of real property located in the municipal corporation shall be sitused to the municipal corporation.
(4) To the extent included in income, gross receipts from rents and royalties from real property located in the municipal corporation shall be sitused to the municipal corporation.
(5) Gross receipts from rents and royalties from tangible personal property shall be sitused to the municipal corporation based upon the extent to which the tangible personal property is used in the municipal corporation.
(e) The net profit received by an individual taxpayer from the rental of real estate owned directly by the individual or by a disregarded entity owned by the individual shall be subject to tax only by the municipal corporation in which the property generating the net profit is located and the municipal corporation in which the individual taxpayer that receives the net profit resides. A municipal corporation shall allow such taxpayers to elect to use separate accounting for the purpose of calculating net profit sitused under this Division to the municipal corporation in which the property is located. For purposes of the application of any net operating loss realized from the rental of real estate, said loss is to be applied using separate accounting as it relates to those properties within a given municipal taxing jurisdiction. Common or shared expenses relating to rental real estate shall be allocated equally among all rental properties.
(f) (1) Except as provided in Division (f)(2) of this Section, commissions received by a real estate agent or broker relating to the sale, purchase, or lease of real estate shall be sitused to the municipal corporation in which the real estate is located. Net profit reported by the real estate agent or broker shall be allocated to a municipal corporation based upon the ratio of the commissions the agent or broker received from the sale, purchase, or lease of real estate located in the municipal corporation to the commissions received from the sale, purchase, or lease of real estate everywhere in the taxable year.
(2) An individual who is a resident of a municipal corporation that imposes a municipal income tax shall report the individual's net profit from all real estate activity on the individual's annual tax return for that municipal corporation. The individual may claim a credit for taxes the individual paid on such net profit to another municipal corporation to the extent that such credit is allowed under 164.14 of this Chapter.
(g) If, in computing a taxpayer's adjusted federal taxable income, the taxpayer deducted any amount with respect to a stock option granted to an employee, the taxpayer shall add the amount that is exempt from taxation to the taxpayer's net profit that was apportioned to that municipal corporation. The taxpayer will not be required to add to its net profit that was apportioned to that Municipal Corporation any amount other than the amount upon which the employee would be required to pay tax were the amount related to the stock option not exempted from taxation. This Division applies solely for the purpose of making an adjustment to the amount of a taxpayer's net profit that was apportioned to a municipal corporation under this Section.
(h) When calculating the ratios described in Division (a) or Division (b) of this Section, the owner of a disregarded entity shall include in the owner's ratios the property, payroll, and gross receipts of such disregarded entity.
(Ord. 4-2018. Passed 1-22-18.)
(i) Election to be subject to R.C. §§718.80 to 718.95.
(1) The City of Cuyahoga Falls hereby adopts and incorporates herein by reference R.C. §§ 718.80 to 718.95 for tax years beginning on or after January 1, 2018.
(2) A taxpayer, as defined in division (3) of this section, may elect to be subject to R.C. §§718.80 to 718.95 in lieu of the provisions of this chapter.
(3) “Taxpayer” has the same meaning as in R.C. §718.01, except that “taxpayer” does not include natural persons or entities subject to the tax imposed under R.C. Chapter 5745. “Taxpayer” may include receivers, assignees, or trustees in bankruptcy when such persons are required to assume the role of a taxpayer.
(j) As used in this division:
(1) "Qualifying remote employee or owner" means an individual who is an employee of a taxpayer or who is a partner or member holding an ownership interest in a taxpayer that is treated as a partnership for federal income tax purposes. provided that the individual meets both of the following criteria:
(i) The taxpayer has assigned the individual to a qualifying reporting location.
(ii) The individual is permitted or required to perform services for the taxpayer at a qualifying remote work location.
(2) "Qualifying remote work location" means a permanent or temporary location at which an employee or owner chooses or is required to perform services for the taxpayer. other than a reporting location of the taxpayer or any other location owned or controlled by a customer or client of the taxpayer. "Qualifying remote work location" may include the residence of an employee or owner and may be located outside of a municipal corporation that imposes an income tax in accordance with this chapter. An employee or owner may have more than one qualifying remote work location during a taxable year.
(3) "Reporting location" means either of the following:
(i) A permanent or temporary place of doing business. such as an office, warehouse, storefront, construction site, or similar location. that is owned or controlled directly or indirectly by the taxpayer:
(ii) Any location in this state owned or controlled by a customer or client of the taxpayer, provided that the taxpayer is required to withhold taxes under Section 164.10,
on qualifying wages paid to an employee for the performance of personal services at that location.
(4) "Qualifying reporting location" means one of the following:
(i) The reporting location in this state at which an employee or owner performs services for the taxpayer on a regular or periodic basis during the taxable year:
(ii) If no reporting location exists in this state for an employee or owner under division (j)(4)(i) of this section. the reporting location in this state at which the employee's or owner's supervisor regularly or periodically reports during the taxable year:
(iii) If no reporting location exists in this state for an employee or owner under division (i)(4)(i) or (ii) of this section. the location that the taxpayer otherwise assigns as the employee's or owner's qualifying reporting location, provided the assignment is made in good faith and is recorded and maintained in the taxpayer's business records. A taxpayer may change the qualifying reporting location designated for an employee or owner under this division at any time.
(k) For tax years ending on or after December 31, 2023, a taxpayer may elect to apply the provisions of this division to the apportionment of its net profit from a business or profession. For taxpayers that make this election, the provisions of this Section apply to such apportionment except as otherwise provided in this division.
A taxpayer shall make the election allowed under this division in writing on or with the taxpayer's net profit return or, if applicable, a timely filed amended net profit return or a timely filed appeal of an assessment. The election applies to the taxable year for which that return or appeal is filed and for all subsequent taxable years, until the taxpayer revokes the election.
The taxpayer shall make the initial election with the tax administrator of each municipal corporation with which, after applying the apportionment provisions authorized in this division. the taxpayer is required to file a net profit tax return for that taxable year. A taxpayer shall not be required to notify the tax administrator of a municipal corporation in which a qualifying remote employee's or owner's qualifying remote work location is located. unless the taxpayer is otherwise required to file a net profit return with that municipal corporation due to business operations that are unrelated to the employee's or owner's activity at the qualifying remote work location.
After the taxpayer makes the initial election. the election applies to every municipal corporation in which the taxpayer conducts business. The taxpayer shall not be required to file a net profit return with a municipal corporation solely because a qualifying remote employee's or owner's qualifying remote work location is located in such municipal corporation.
Nothing in this division prohibits a taxpayer from making a new election under this division after properly revoking a prior election,
(l) For the purpose of calculating the ratios described in division (a) of this section. all of the following apply to a taxpayer that has made the election described in division (k):
(1) For the purpose of division (a)(1) of this section, the average original cost of any tangible personal property used by a qualifying remote employee or owner at that individual's qualifying remote work location shall be sitused to that individual's qualifying reporting location.
(2) For the purpose of division (a)(2) of this section. any wages. salaries. and other compensation paid during the taxable period to a qualifying remote employee or owner for services performed at that individual's qualifying remote work location shall be sitused to that individual's qualifying reporting location.
(3) For the purpose of division (a)(3) of this section, and notwithstanding division (d) of this section. any gross receipts of the business or profession from services performed during the taxable period by a qualifying remote employee or owner for services performed at that individual's qualifying remote work location shall be sitused to that individual's qualifying reporting location.
(m) Nothing in this division prevents a taxpayer from requesting. or a tax administrator from requiring, that the taxpayer use, with respect to all or a portion of the income of the taxpayer, an alternative apportionment method as described in division (b) of this section. However, a tax administrator shall not require an alternative apportionment method in such a manner that it would require a taxpayer to file a net profit return with a municipal corporation solely because a qualifying remote employee's or owner's qualifying remote work location is located in that municipal corporation.
(n) Except as otherwise provided in this division, nothing in this division is intended to affect the withholding of taxes on qualifying wages pursuant to Section 164.10.
(Ord. 114-2023. Passed 11-13-23.)
164.09 CONSOLIDATED FEDERAL INCOME TAX RETURN.
(a) As used in this Section:
(1) "Affiliated group of corporations" means an affiliated group as defined in Section 1504 of the Internal Revenue Code, except that, if such a group includes at least one incumbent local exchange carrier that is primarily engaged in the business of providing local exchange telephone service in this state, the affiliated group shall not include any incumbent local exchange carrier that would otherwise be included in the group.
(2) "Consolidated federal income tax return" means a consolidated return filed for federal income tax purposes pursuant to Section 1501 of the Internal Revenue Code.
(3) "Consolidated federal taxable income" means the consolidated taxable income of an affiliated group of corporations, as computed for the purposes of filing a consolidated federal income tax return, before consideration of net operating losses or special deductions. "Consolidated federal taxable income" does not include income or loss of an incumbent local exchange carrier that is excluded from the affiliated group under Division (a)(1) of this Section.
(4) "Incumbent local exchange carrier" has the same meaning as in Section 4927.01 of the Ohio Revised Code.
(5) "Local exchange telephone service" has the same meaning as in Section 5727.01 of the Ohio Revised Code.
(b) (1) For taxable years beginning on or after January 1, 2016, a taxpayer that is member of an affiliated group of corporations may elect to file a consolidated municipal income tax return for a taxable year if at least one member of the affiliated group of corporations is subject to the municipal income tax in that taxable year and if the affiliated group of corporations filed a consolidated federal income tax return with respect to that taxable year.
i. The election is binding for a five-year period beginning with the first taxable year of the initial election unless a change in the reporting method is required under federal law.
ii. The election continues to be binding for each subsequent five-year period unless the taxpayer elects to discontinue filing consolidated municipal income tax returns under Division (b)(2) of this Section; or
iii. A taxpayer receives permission from the Tax Administrator. The Tax Administrator shall approve such a request for good cause shown.
(2) An election to discontinue filing consolidated municipal income tax returns under this Section must be made in the first year following the last year of a five-year consolidated municipal income tax return election period in effect under Division (b)(1) of this Section. The election to discontinue filing a consolidated municipal income tax return is binding for a five-year period beginning with the first taxable year of the election.
(3) An election made under Division (b)(1) or (2) of this Section is binding on all members of the affiliated group of corporations subject to a municipal income tax.
(c) A taxpayer that is a member of an affiliated group of corporations that filed a consolidated federal income tax return for a taxable year must file a consolidated municipal income tax return for that taxable year if the Tax Administrator determines, by a preponderance of the evidence, that intercompany transactions have not been conducted at arm's length and that there has been a distortive shifting of income or expenses with regard to allocation of net profits to the municipal corporation. A taxpayer that is required to file a consolidated municipal income tax return for a taxable year shall file a consolidated municipal income tax return for all subsequent taxable years unless the taxpayer requests and receives written permission from the Tax Administrator to file a separate return or a taxpayer has experienced a change in circumstances.
(d) A taxpayer is required to prepare a consolidated municipal income tax return in the same manner as is required under the United States Department of Treasury regulations that prescribe procedures for the preparation of the consolidated federal income tax return required to be filed by the common parent of the affiliated group of which the taxpayer is a member.
(e) (1) Except as otherwise provided in Divisions (e)(2), (3), and (4) of this Section, corporations that file a consolidated municipal income tax return shall compute adjusted federal taxable income, as defined in Section 164.05(a) of this Chapter, by substituting "consolidated federal taxable income" for "federal taxable income" wherever "federal taxable income" appears in that Division and by substituting "an affiliated group of corporation's" for "a C corporation's" wherever "a C corporation's" appears in that Division.
(2) No corporation filing a consolidated municipal income tax return shall make any adjustment otherwise required under Division 164.05(a) of this Chapter to the extent that the item of income or deduction otherwise subject to the adjustment has been eliminated or consolidated in the computation of consolidated federal taxable income.
(3) If the net profit or loss of a pass-through entity having at least eighty per cent of the value of its ownership interest owned or controlled, directly or indirectly, by an affiliated group of corporations is included in that affiliated group's consolidated federal taxable income for a taxable year, the corporation filing a consolidated municipal income tax return shall do one of the following with respect to that pass-through entity's net profit or loss for that taxable year:
i. Exclude the pass-through entity's net profit or loss from the consolidated federal taxable income of the affiliated group and, for the purpose of making the computations required in Section 164.08 of this Chapter, exclude the property, payroll, and gross receipts of the pass-through entity in the computation of the affiliated group's net profit sitused to a municipal corporation. If the entity's net profit or loss is so excluded, the entity shall be subject to taxation as a separate taxpayer on the basis of the entity's net profits that would otherwise be included in the consolidated federal taxable income of the affiliated group.
ii. Include the pass-through entity's net profit or loss in the consolidated federal taxable income of the affiliated group and, for the purpose of making the computations required in Section 164.08 of this Chapter, include the property, payroll, and gross receipts of the pass-through entity in the computation of the affiliated group's net profit sitused to a municipal corporation. If the entity's net profit or loss is so included, the entity shall not be subject to taxation as a separate taxpayer on the basis of the entity's net profits that are included in the consolidated federal taxable income of the affiliated group. The entity shall be subject to taxation as a separate taxpayer on that portion of the entity's net profit or loss not included in the consolidated federal taxable income of the affiliated groups and sitused to municipal corporation.
(4) If the net profit or loss of a pass-through entity having less than eighty per cent of the value of its ownership interest owned or controlled, directly or indirectly, by an affiliated group of corporations is included in that affiliated group's consolidated federal taxable income for a taxable year, all of the following shall apply:
i. The corporation filing the consolidated municipal income tax return shall exclude the pass-through entity's net profit or loss from the consolidated federal taxable income of the affiliated group and, for the purposes of making the computations required in Section 164.08 of this Chapter, exclude the property, payroll, and gross receipts of the pass-through entity in the computation of the affiliated group's net profit sitused to a municipal corporation;
ii. The pass-through entity shall be subject to municipal income taxation as a separate taxpayer in accordance with this Chapter on the basis of the entity's net profits that would otherwise be included in the consolidated federal taxable income of the affiliated group.
(5) Corporations filing a consolidated municipal income tax return shall make the computations required under Section 164.08 of this Chapter by substituting "consolidated federal taxable income attributable to" for "net profit from" wherever "net profit from" appears in that Section and by substituting "affiliated group of corporations" for "taxpayer" wherever "taxpayer" appears in that Section.
(6) Each corporation filing a consolidated municipal income tax return is jointly and severally liable for any tax, interest, penalties, fines, charges, or other amounts imposed by the municipality in accordance with this Chapter on the corporation, an affiliated group of which the corporation is a member for any portion of the taxable year, or any one or more members of such an affiliated group.
(7) Corporations and their affiliates that made an election or entered into an agreement with a municipal corporation before January 1, 2016, to file a consolidated or combined tax return with such municipal corporation may continue to file consolidated or combined tax returns in accordance with such election or agreement for taxable years beginning on and after January 1, 2016. (Ord. 93-2015. Passed 11-23-15.)
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