§ 37.035 DETERMINING MUNICIPAL TAXABLE INCOME FOR INDIVIDUALS.

   (A)   Municipal taxable income for a resident of the city is calculated as follows: “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 § 37.002 in division (b) of the definition for MUNICIPAL TAXABLE INCOME equals “municipal taxable income”.

      (1)   INCOME is defined in § 37.002.

         (a)   QUALIFYING WAGES is defined in § 37.002.

         (b)   “Net profit” is included in INCOME, and is defined in § 37.002. This section also provides that the net operating loss carryforward shall be calculated and deducted in the same manner as provided in division (h) of the definition for ADJUSTED FEDERAL TAXABLE INCOME in § 37.002. Treatment of net profits received by an individual taxpayer from rental real estate is provided in § 37.065(E).

         (c)   Section 37.002 INCOME provides the following: offsetting and net operating loss carryforward treatment in (14)(A)(ii)(a); resident’s distributive share of net profit from pass through entity treatment in the definition for INCOME division (1)(b); treatment of S corporation distributive share of net profit in the hands of the shareholder in the definition for INCOME division (1)(c); restriction of amount of loss permitted to be carried forward for use by taxpayer in a subsequent taxable year in the definition for INCOME division (a)4.

         (d)   PASS THROUGH ENTITY is defined in § 37.002.

      (2)   EXEMPT INCOME is defined in § 37.002.

      (3)   Allowable employee business expense deduction is described in division (b) of the definition for MUNICIPAL TAXABLE INCOME in § 37.002, and is subject to the limitations provided in that section.

   (B)   “Municipal taxable income” for a nonresident of the city 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 city as provided in § 37.065, reduced by allowable employee business expense deduction as found in § 37.002 equals “municipal taxable income”.

         (a)   “Income” is defined in § 37.002.

            1.   “Qualifying wages” is defined in § 37.002.

            2.   “Net profit” is included in “income”, and is defined in § 37.002. This section also provides that the net operating loss carryforward shall be calculated and deducted in the same manner as provided in the definition for ADJUSTED FEDERAL TAXABLE INCOME of § 3.002.

            3.   “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.

            4.   “Pass-through entity” is defined in § 37.002.

         (b)   “Exempt income” is defined in § 37.002.

         (c)   “Apportioned or sitused to the city as provided in § 37.065” includes the apportionment of net profit income attributable to work done or services performed in city. Treatment of net profits received by an individual taxpayer from rental real estate is provided in § 37.065(E).

         (d)   “Allowable employee business expense deduction”, as described in the definition for MUNICIPAL TAXABLE INCOME in division (b) of § 37.002, is subject to the limitations provided in that section. For a nonresident of the city, the deduction is limited to the extent the expenses are related to the performance of personal services by the nonresident in the city.

         (e)   PRE-2017 NET OPERATING LOSS CARRYFORWARD is defined in § 37.002.

(Prior Code, § 35.04.01)