(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 Ohio R.C. 4927.01.
(5) "Local exchange telephone service" has the same meaning as in Ohio R.C. 5727.01.
(b) (1) For taxable years beginning on or after January 1, 2016, a taxpayer that is a 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.
A. 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.
B. 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
C. 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 (b)(2) of this section is binding on all members of the affiliated group of corporations subject to the tax established by this chapter.
(4) When a taxpayer makes the election allowed under R.C. § 718.80, a valid election made by the taxpayer under division (b)(1) or (b)(2) of this section is binding upon the tax commissioner for the remainder of the five year period.
(5) When an election made under R.C. § 718.80 is terminated, a valid election made under R.C. § 718.86 is binding upon the tax administrator for the remainder of the five year period.
(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 shall 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 shall 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), (e)(3), and (e)(4) of this section, corporations that file a consolidated Municipal income tax return shall compute adjusted Federal taxable income, as defined in Section 881.03(c)(1), 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 Section 881.03(c)(1) 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 percent 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:
A. 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 881.062, 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.
B. 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 881.062, 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.
(4) If the net profit or loss of a pass-through entity having less than eighty percent 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:
A. 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 881.062, 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;
B. 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.
(f) Corporations filing a consolidated Municipal income tax return shall make the computations required under Section 881.062 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.
(g) 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.
(h) When calculating the ratios described in division (a) of this section for the purposes of that division 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.
(i) Alternative net profits apportionment for net profits with remote employees of R.C. § 718.821.
(1) Terms used in this section have the same meanings as in R.C. § 718.021.
(2) A taxpayer may elect to apply the provisions of this section to the apportionment of its net profit from a business or profession. For taxpayers that make this election, the provisions of R.C. § 718.82 apply to such apportionment except as otherwise provided in this section. A taxpayer shall make the election allowed under this section by notifying the tax administrator 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. After the taxpayer makes the initial election, the election applies to every municipal corporation in which the taxpayer conducts business. Nothing in this section prohibits a taxpayer from making a new election under this section after properly revoking a prior election.
(3) For the purpose of calculating the ratios described in division (A) of R.C. § 718.82, all of the following apply to a taxpayer that has made the election described in division (i)(2) of this section:
A. For the purpose of division (A)(l) of R.C. § 718.82, the average original cost of any tangible persona1 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.
B. For the purpose of division (A)(2) of R.C. § 718.82, 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.
C. For the purpose of division (A)(3) of R.C. § 718.82, and notwithstanding division (D) of that 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.
(4) Nothing in this section prevents a taxpayer from requesting, or the 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 R.C. § 718.82, However, the tax administrator shall require an alternative apportionment method in such a manner that it would cause a taxpayer to incur tax liability in a municipal corporation solely because a qualifying remote employee's or owner's qualifying remote work location is located in that municipal corporation.
(5) Except as otherwise provided in this section, nothing in this section is intended to affect the withholding of taxes on qualifying wages pursuant to R.C. §§ 718.011 and 718.03.
(Ord. 15-17. Passed 11-10-15; Ord. 18-02. Passed 2-27-18; Ord. 23-16. Passed 11-28-23.)