§ 37.041 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 § 37.03(C)(23)(b), further reduced by any pre-2017 net operating loss carryforward equals municipal taxable income.

         (a)   INCOME is defined in § 37.03(C)(17).

            1.   QUALIFYING WAGES is defined in § 37.03(C)(37).

            2.   NET PROFIT is included in income, and is defined in § 37.03(C)(26). This section also provides that the net operating loss carryforward shall be calculated and deducted in the same manner as provided in § 37.03(C)(1)(h). Treatment of net profits received by an individual taxpayer from rental real estate is provided in § 37.062(E).

            3.   Section 37.03(C)(17) provides the following: offsetting and net operating loss carryforward treatment in § 37.03(C)(17)(a)2.a.; resident's distributive share of net profit from pass through entity treatment in § 37.03(C)(17)(a)2.b.; treatment of S corporation distributive share of net profit in the hands of the shareholder in § 37.03(C)(17)(a)3.; restriction of amount of loss permitted to be carried forward for use by taxpayer in a subsequent taxable year in § 37.03(C)(17)(a)4.

            4.   PASS THROUGH ENTITY is defined in § 37.03(C)(30).

         (b)   EXEMPT INCOME is defined in § 37.03(C)(13).

         (c)   Allowable employee business expense deduction is described in § 37.03(C)(23)(b), and is subject to the limitations provided in that section.

         (d)   PRE-2017 NET OPERATING LOSS CARRYFORWARD is defined in § 37.03(C)(36).

   (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 § 37.062, reduced by allowable employee business expense deduction as found in § 37.03(C)(23)(b), further reduced by any pre-2017 net operating loss carryforward equals municipal taxable income.

         (a)   INCOME is defined in § 37.03(C)(17).

            1.   QUALIFYING WAGES is defined in § 37.03(C)(37).

            2.   NET PROFIT is included in "income", and is defined in § 37.03(C)(26). This section also provides that the net operating loss carryforward shall be calculated and deducted in the same manner as provided in § 37.03(C)(1)(h). 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 pass through entity owned directly or indirectly by the nonresident.

            3.   PASS THROUGH ENTITY is defined in § 37.03(C)(30).

         (b)   EXEMPT INCOME is defined in § 37.03(C)(13).

         (c)   Apportioned or sitused to the municipality as provided in § 37.062 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 § 37.062(E).

         (d)   Allowable employee business expense deduction as described in § 37.03(C)(23)(b), 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.

         (e)   PRE-2017 NET OPERATING LOSS CARRYFORWARD is defined in § 37.03(C)(36).

(Ord. 2018-6, passed 1-17-18)