§ 40.41  DEFINITIONS.
   If a term used in §§ 40.40 to 40.55 of this chapter that is not otherwise defined in this chapter is used in a comparable context in both the laws of the United States relating to federal income tax and in R.C. Title LVII and the use is not consistent, then the use of the term in the laws of the United States relating to federal income tax shall have control over the use of the term in R.C. Title LVII, unless the term is defined in R.C. Chapter 5703, in which case the definition in that chapter shall control. Any reference in this chapter to the Internal Revenue Code includes other laws of the United States related to federal income taxes. If a term is defined in both this section and § 40.03 of this chapter, the definition in this section shall control for all uses of that term in §§ 40.40 to 40.55. As used in §§ 40.40 to 40.55 of this chapter only:
   (A)   MUNICIPAL TAXABLE INCOME means income apportioned or sitused to the municipal corporation under § 40.03(20) of this chapter, as applicable, reduced by any pre-2017 net operating loss carryforward available to the person for the municipal corporation.
   (B)   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 as described in R.C. § 718.01(D)(5) and § 40.03(1) of this chapter, 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 5% of intangible income deducted under division (B)(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)   (a)   Except as provided in division (B)(4)(b) 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.
         (b)   Division (B)(4)(a) 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 R.C. § 4313.02.
      (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 § 40.063(E)(3)(b) 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 § 40.063(E)(3)(b) of this chapter.
         (a)   If the taxpayer is not a C corporation, is not a disregarded entity that has made the election described in § 40.03(47)(b) of this chapter, and is not a  publicly traded partnership that has made the election described in § 40.03(23)(d) of this chapter, 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.
         (b)   Nothing in division (B) of this section 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 purposes of federal self-employment tax.
   (C)   TAXPAYER has the same meaning as in § 40.03(47) of this chapter, 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.
   (D)   TAX RETURN or RETURN means the notifications and reports required to be filed pursuant to §§ 40.40 to 40.55 of this chapter for the purpose of reporting municipal income taxes, and includes declarations of estimated tax.
   (E)   TAXABLE YEAR means the calendar year or the taxpayer's fiscal year ending during the calendar year, or fractional part thereof, upon which the calculation of the taxpayer's adjusted federal taxable income is based pursuant to this chapter. If a taxpayer's taxable year is changed for federal income tax purposes, the taxable year for purposes of §§ 40.40 to 40.55 of this chapter is changed accordingly but may consist of an aggregation of more than one taxable year for federal income tax purposes. The Tax Commissioner may prescribe by rule an appropriate period as the taxable year for a taxpayer that has had a change of its taxable year for federal income tax purposes, for a taxpayer that has two or more short taxable years for federal income tax purposes as the result of a change of ownership, or for a new taxpayer that would otherwise have no taxable year.
   (F)   ASSESSMENT means a notice of underpayment or nonpayment of a tax issued pursuant to § 40.17 of this chapter.
(Ord. 2018-2, passed 2-12-2018)