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S. B. No. 282 As IntroducedAs Introduced
130th General Assembly | Regular Session | 2013-2014 |
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Cosponsor:
Senator Schaffer
A BILL
To amend sections 709.023, 718.01, 718.02, 718.04,
and 718.14 and to repeal section 718.011 of the
Revised Code to prohibit municipal corporations
from levying an income tax on nonresidents'
compensation for personal services or net profits
from a sole proprietorship.
BE IT ENACTED BY THE GENERAL ASSEMBLY OF THE STATE OF OHIO:
Section 1. That sections 709.023, 718.01, 718.02, 718.04, and
718.14 of the Revised Code be amended to read as follows:
Sec. 709.023. (A) A petition filed under section 709.021 of
the Revised Code that requests to follow this section is for the
special procedure of annexing land into a municipal corporation
when, subject to division (H) of this section, the land also is
not to be excluded from the township under section 503.07 of the
Revised Code. The owners who sign this petition by their signature
expressly waive their right to appeal in law or equity from the
board of county commissioners' entry of any resolution under this
section, waive any rights they may have to sue on any issue
relating to a municipal corporation requiring a buffer as provided
in this section, and waive any rights to seek a variance that
would relieve or exempt them from that buffer requirement.
The petition circulated to collect signatures for the special
procedure in this section shall contain in boldface capital
letters immediately above the heading of the place for signatures
on each part of the petition the following: "WHOEVER SIGNS THIS
PETITION EXPRESSLY WAIVES THEIR RIGHT TO APPEAL IN LAW OR EQUITY
FROM THE BOARD OF COUNTY COMMISSIONERS' ENTRY OF ANY RESOLUTION
PERTAINING TO THIS SPECIAL ANNEXATION PROCEDURE, ALTHOUGH A WRIT
OF MANDAMUS MAY BE SOUGHT TO COMPEL THE BOARD TO PERFORM ITS
DUTIES REQUIRED BY LAW FOR THIS SPECIAL ANNEXATION PROCEDURE."
(B) Upon the filing of the petition in the office of the
clerk of the board of county commissioners, the clerk shall cause
the petition to be entered upon the board's journal at its next
regular session. This entry shall be the first official act of the
board on the petition. Within five days after the filing of the
petition, the agent for the petitioners shall notify in the manner
and form specified in this division the clerk of the legislative
authority of the municipal corporation to which annexation is
proposed, the fiscal officer of each township any portion of which
is included within the territory proposed for annexation, the
clerk of the board of county commissioners of each county in which
the territory proposed for annexation is located other than the
county in which the petition is filed, and the owners of property
adjacent to the territory proposed for annexation or adjacent to a
road that is adjacent to that territory and located directly
across that road from that territory. The notice shall refer to
the time and date when the petition was filed and the county in
which it was filed and shall have attached or shall be accompanied
by a copy of the petition and any attachments or documents
accompanying the petition as filed.
Notice to a property owner is sufficient if sent by regular
United States mail to the tax mailing address listed on the county
auditor's records. Notice to the appropriate government officer
shall be given by certified mail, return receipt requested, or by
causing the notice to be personally served on the officer, with
proof of service by affidavit of the person who delivered the
notice. Proof of service of the notice on each appropriate
government officer shall be filed with the board of county
commissioners with which the petition was filed.
(C) Within twenty days after the date that the petition is
filed, the legislative authority of the municipal corporation to
which annexation is proposed shall adopt an ordinance or
resolution stating what services the municipal corporation will
provide, and an approximate date by which it will provide them, to
the territory proposed for annexation, upon annexation. The
municipal corporation is entitled in its sole discretion to
provide to the territory proposed for annexation, upon annexation,
services in addition to the services described in that ordinance
or resolution.
If the territory proposed for annexation is subject to zoning
regulations adopted under either Chapter 303. or 519. of the
Revised Code at the time the petition is filed, the legislative
authority of the municipal corporation also shall adopt an
ordinance or resolution stating that, if the territory is annexed
and becomes subject to zoning by the municipal corporation and
that municipal zoning permits uses in the annexed territory that
the municipal corporation determines are clearly incompatible with
the uses permitted under current county or township zoning
regulations in the adjacent land remaining within the township
from which the territory was annexed, the legislative authority of
the municipal corporation will require, in the zoning ordinance
permitting the incompatible uses, the owner of the annexed
territory to provide a buffer separating the use of the annexed
territory and the adjacent land remaining within the township. For
the purposes of this section, "buffer" includes open space,
landscaping, fences, walls, and other structured elements; streets
and street rights-of-way; and bicycle and pedestrian paths and
sidewalks.
The clerk of the legislative authority of the municipal
corporation to which annexation is proposed shall file the
ordinances or resolutions adopted under this division with the
board of county commissioners within twenty days following the
date that the petition is filed. The board shall make these
ordinances or resolutions available for public inspection.
(D) Within twenty-five days after the date that the petition
is filed, the legislative authority of the municipal corporation
to which annexation is proposed and each township any portion of
which is included within the territory proposed for annexation may
adopt and file with the board of county commissioners an ordinance
or resolution consenting or objecting to the proposed annexation.
An objection to the proposed annexation shall be based solely upon
the petition's failure to meet the conditions specified in
division (E) of this section.
If the municipal corporation and each of those townships
timely files an ordinance or resolution consenting to the proposed
annexation, the board at its next regular session shall enter upon
its journal a resolution granting the proposed annexation. If,
instead, the municipal corporation or any of those townships files
an ordinance or resolution that objects to the proposed
annexation, the board of county commissioners shall proceed as
provided in division (E) of this section. Failure of the municipal
corporation or any of those townships to timely file an ordinance
or resolution consenting or objecting to the proposed annexation
shall be deemed to constitute consent by that municipal
corporation or township to the proposed annexation.
(E) Unless the petition is granted under division (D) of this
section, not less than thirty or more than forty-five days after
the date that the petition is filed, the board of county
commissioners shall review it to determine if each of the
following conditions has been met:
(1) The petition meets all the requirements set forth in, and
was filed in the manner provided in, section 709.021 of the
Revised Code.
(2) The persons who signed the petition are owners of the
real estate located in the territory proposed for annexation and
constitute all of the owners of real estate in that territory.
(3) The territory proposed for annexation does not exceed
five hundred acres.
(4) The territory proposed for annexation shares a contiguous
boundary with the municipal corporation to which annexation is
proposed for a continuous length of at least five per cent of the
perimeter of the territory proposed for annexation.
(5) The annexation will not create an unincorporated area of
the township that is completely surrounded by the territory
proposed for annexation.
(6) The municipal corporation to which annexation is proposed
has agreed to provide to the territory proposed for annexation the
services specified in the relevant ordinance or resolution adopted
under division (C) of this section.
(7) If a street or highway will be divided or segmented by
the boundary line between the township and the municipal
corporation as to create a road maintenance problem, the municipal
corporation to which annexation is proposed has agreed as a
condition of the annexation to assume the maintenance of that
street or highway or to otherwise correct the problem. As used in
this section, "street" or "highway" has the same meaning as in
section 4511.01 of the Revised Code.
(F) Not less than thirty or more than forty-five days after
the date that the petition is filed, if the petition is not
granted under division (D) of this section, the board of county
commissioners, if it finds that each of the conditions specified
in division (E) of this section has been met, shall enter upon its
journal a resolution granting the annexation. If the board of
county commissioners finds that one or more of the conditions
specified in division (E) of this section have not been met, it
shall enter upon its journal a resolution that states which of
those conditions the board finds have not been met and that denies
the petition.
(G) If a petition is granted under division (D) or (F) of
this section, the clerk of the board of county commissioners shall
proceed as provided in division (C)(1) of section 709.033 of the
Revised Code, except that no recording or hearing exhibits would
be involved. There is no appeal in law or equity from the board's
entry of any resolution under this section, but any party may seek
a writ of mandamus to compel the board of county commissioners to
perform its duties under this section.
(H) Notwithstanding anything to the contrary in section
503.07 of the Revised Code, unless otherwise provided in an
annexation agreement entered into pursuant to section 709.192 of
the Revised Code or in a cooperative economic development
agreement entered into pursuant to section 701.07 of the Revised
Code, territory annexed into a municipal corporation pursuant to
this section shall not at any time be excluded from the township
under section 503.07 of the Revised Code and, thus, remains
subject to the township's real property taxes.
(I) Any owner of land that remains within a township and that
is adjacent to territory annexed pursuant to this section who is
directly affected by the failure of the annexing municipal
corporation to enforce compliance with any zoning ordinance it
adopts under division (C) of this section requiring the owner of
the annexed territory to provide a buffer zone, may commence in
the court of common pleas a civil action against that owner to
enforce compliance with that buffer requirement whenever the
required buffer is not in place before any development of the
annexed territory begins.
(J) Division (H)(12) of section 718.01 of the Revised Code
applies to the compensation paid to persons performing personal
services for a political subdivision on property owned by the
political subdivision after that property is annexed to a
municipal corporation under this section.
Sec. 718.01. (A) As used in this chapter:
(1) "Adjusted federal taxable income" 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:
(a) 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.
(b) Add an amount equal to five per cent of intangible income
deducted under division (A)(1)(a) 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;
(c) 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;
(d)(i) Except as provided in division (A)(1)(d)(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)(1)(d)(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.
(e) Add taxes on or measured by net income allowed as a
deduction in the computation of federal taxable income;
(f) In the case of a real estate investment trust and
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;
(g) 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 Revised Code.
If the taxpayer is not a C corporation and is not an
individual, the taxpayer shall compute adjusted federal taxable
income as if the taxpayer were a C corporation, except guaranteed
payments and other similar amounts paid or accrued to a partner,
former partner, member, or former member shall not be allowed as a
deductible expense; amounts paid or accrued to a qualified
self-employed retirement plan with respect to an owner or
owner-employee of the taxpayer, amounts paid or accrued to or for
health insurance for an owner or owner-employee, and amounts paid
or accrued to or for life insurance for an owner or owner-employee
shall not be allowed as a deduction.
Nothing in division (A)(1) 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.
Nothing in this chapter shall be construed as limiting or
removing the ability of any municipal corporation to administer,
audit, and enforce the provisions of its municipal income tax.
(2) "Internal Revenue Code" means the Internal Revenue Code
of 1986, 100 Stat. 2085, 26 U.S.C. 1, as amended.
(3) "Schedule C" means internal revenue service schedule C
filed by a taxpayer pursuant to the Internal Revenue Code.
(4) "Form 2106" means internal revenue service form 2106
filed by a taxpayer pursuant to the Internal Revenue Code.
(5) "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 Revised Code, and patents,
copyrights, trademarks, tradenames, 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 or other similar games of chance.
(6) "S corporation" means a corporation that has made an
election under subchapter S of Chapter 1 of Subtitle A of the
Internal Revenue Code for its taxable year.
(7) For taxable years beginning on or after January 1, 2004,
"net profit" for a taxpayer other than an individual means
adjusted federal taxable income and "net profit" for a taxpayer
who is an individual means the individual's profit required to be
reported on schedule C, schedule E, or schedule F, other than any
amount allowed as a deduction under division (E)(2) or (3) of this
section or amounts described in division (H) of this section.
(8) "Taxpayer" means a person subject to a tax on income
levied by a municipal corporation. Except as provided in division
(L) of this section, "taxpayer" does not include any person that
is a disregarded entity or a qualifying subchapter S subsidiary
for federal income tax purposes, but "taxpayer" includes any other
person who owns the disregarded entity or qualifying subchapter S
subsidiary.
(9) "Taxable year" means the corresponding tax reporting
period as prescribed for the taxpayer under the Internal Revenue
Code.
(10) "Tax administrator" means the individual charged with
direct responsibility for administration of a tax on income levied
by a municipal corporation and includes:
(a) The central collection agency and the regional income tax
agency and their successors in interest, and other entities
organized to perform functions similar to those performed by the
central collection agency and the regional income tax agency;
(b) A municipal corporation acting as the agent of another
municipal corporation; and
(c) Persons retained by a municipal corporation to administer
a tax levied by the municipal corporation, but only if the
municipal corporation does not compensate the person in whole or
in part on a contingency basis.
(11) "Person" includes individuals, firms, companies,
business trusts, estates, trusts, partnerships, limited liability
companies, associations, corporations, governmental entities, and
any other entity.
(12) "Schedule E" means internal revenue service schedule E
filed by a taxpayer pursuant to the Internal Revenue Code.
(13) "Schedule F" means internal revenue service schedule F
filed by a taxpayer pursuant to the Internal Revenue Code.
(B) No municipal corporation shall tax income at other than a
uniform rate.
(C) No municipal corporation shall levy a tax on income at a
rate in excess of one per cent without having obtained the
approval of the excess by a majority of the electors of the
municipality voting on the question at a general, primary, or
special election. The legislative authority of the municipal
corporation shall file with the board of elections at least ninety
days before the day of the election a copy of the ordinance
together with a resolution specifying the date the election is to
be held and directing the board of elections to conduct the
election. The ballot shall be in the following form: "Shall the
Ordinance providing for a ... per cent levy on income for (Brief
description of the purpose of the proposed levy) be passed?
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FOR THE INCOME TAX |
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AGAINST THE INCOME TAX |
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In the event of an affirmative vote, the proceeds of the levy
may be used only for the specified purpose.
(D)(1) Except as otherwise provided in this section and
section 718.04 of the Revised Code, no municipal corporation shall
exempt from a tax on income compensation for personal services of
individuals over eighteen years of age or the net profit from a
business or profession.
(2)(a) For taxable years beginning on or after January 1,
2004, no municipal corporation shall tax the net profit from a
business or profession using any base other than the taxpayer's
adjusted federal taxable income.
(b) Division (D)(2)(a) of this section does not apply to any
taxpayer required to file a return under section 5745.03 of the
Revised Code or to the net profit from a sole proprietorship.
(E)(1) The legislative authority of a municipal corporation
may, by ordinance or resolution, exempt from withholding and from
a tax on income the following:
(a) Compensation arising 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; or
(b) Compensation attributable to a nonqualified deferred
compensation plan or program described in section 3121(v)(2)(C) of
the Internal Revenue Code.
(2) The legislative authority of a municipal corporation may
adopt an ordinance or resolution that allows a taxpayer who is an
individual to deduct, in computing the taxpayer's municipal income
tax liability, an amount equal to the aggregate amount the
taxpayer paid in cash during the taxable year to a health savings
account of the taxpayer, to the extent the taxpayer is entitled to
deduct that amount on internal revenue service form 1040.
(3) The legislative authority of a municipal corporation may
adopt an ordinance or resolution that allows a taxpayer who has a
net profit from a business or profession that is operated as a
sole proprietorship to deduct from that net profit the amount that
the taxpayer paid during the taxable year for medical care
insurance premiums for the taxpayer, the taxpayer's spouse, and
dependents as defined in section 5747.01 of the Revised Code. The
deduction shall be allowed to the same extent the taxpayer is
entitled to deduct the premiums on internal revenue service form
1040. The deduction allowed under this division shall be net of
any related premium refunds, related premium reimbursements, or
related insurance premium dividends received by the taxpayer
during the taxable year.
(F) If an individual's taxable income includes income against
which the taxpayer has taken a deduction for federal income tax
purposes as reportable on the taxpayer's form 2106, and against
which a like deduction has not been allowed by the municipal
corporation, the municipal corporation shall deduct from the
taxpayer's taxable income an amount equal to the deduction shown
on such form allowable against such income, to the extent not
otherwise so allowed as a deduction by the municipal corporation.
(G)(1) In the case of a taxpayer who has a net profit from a
business or profession that is operated as a sole proprietorship,
no municipal corporation may tax or use as the base for
determining the amount of the net profit that shall be considered
as having a taxable situs in the municipal corporation, an amount
other than the net profit required to be reported by the taxpayer
on schedule C or F from such sole proprietorship for the taxable
year.
(2) In the case of a taxpayer who has a net profit from
rental activity required to be reported on schedule E, no
municipal corporation may tax or use as the base for determining
the amount of the net profit that shall be considered as having a
taxable situs in the municipal corporation, an amount other than
the net profit from rental activities required to be reported by
the taxpayer on schedule E for the taxable year.
(H) A municipal corporation shall not tax any of the
following:
(1) The military pay or allowances of members of the armed
forces of the United States and of members of their reserve
components, including the Ohio national guard;
(2) The income of religious, fraternal, charitable,
scientific, literary, or educational institutions to the extent
that such income is derived from tax-exempt real estate,
tax-exempt tangible or intangible property, or tax-exempt
activities;
(3) Except as otherwise provided in division (I) of this
section, intangible income;
(4) Compensation paid under section 3501.28 or 3501.36 of the
Revised Code to a person serving as a precinct election official,
to the extent that such compensation does not exceed one thousand
dollars annually. Such compensation in excess of one thousand
dollars may be subjected to taxation by a municipal corporation. A
municipal corporation shall not require the payer of such
compensation to withhold any tax from that compensation.
(5) Compensation paid to an employee of a transit authority,
regional transit authority, or regional transit commission created
under Chapter 306. of the Revised Code for operating a transit bus
or other motor vehicle for the authority or commission in or
through the municipal corporation, unless the bus or vehicle is
operated on a regularly scheduled route, the operator is subject
to such a tax by reason of residence or domicile in the municipal
corporation, or the headquarters of the authority or commission is
located within the municipal corporation;
(6) The income of a public utility, when that public utility
is subject to the tax levied under section 5727.24 or 5727.30 of
the Revised Code, except a municipal corporation may tax the
following, subject to Chapter 5745. of the Revised Code:
(a) Beginning January 1, 2002, the income of an electric
company or combined company;
(b) Beginning January 1, 2004, the income of a telephone
company.
As used in division (H)(6)(5) of this section, "combined
company," "electric company," and "telephone company" have the
same meanings as in section 5727.01 of the Revised Code.
(7)(6) On and after January 1, 2003, items excluded from
federal gross income pursuant to section 107 of the Internal
Revenue Code;
(8) On and after January 1, 2001, compensation paid to a
nonresident individual to the extent prohibited under section
718.011 of the Revised Code;
(9)(7)(a) Except as provided in divisions (H)(9)(7)(b) and
(c) of this section, an S corporation shareholder's distributive
share of net profits of the S corporation, other than any part of
the distributive share of net profits that represents wages as
defined in section 3121(a) of the Internal Revenue Code or net
earnings from self-employment as defined in section 1402(a) of the
Internal Revenue Code.
(b) If, pursuant to division (H) of former section 718.01 of
the Revised Code as it existed before March 11, 2004, a majority
of the electors of a municipal corporation voted in favor of the
question at an election held on November 4, 2003, the municipal
corporation may continue after 2002 to tax an S corporation
shareholder's distributive share of net profits of an S
corporation.
(c) If, on December 6, 2002, a municipal corporation was
imposing, assessing, and collecting a tax on an S corporation
shareholder's distributive share of net profits of the S
corporation to the extent the distributive share would be
allocated or apportioned to this state under divisions (B)(1) and
(2) of section 5733.05 of the Revised Code if the S corporation
were a corporation subject to taxes imposed under Chapter 5733. of
the Revised Code, the municipal corporation may continue to impose
the tax on such distributive shares to the extent such shares
would be so allocated or apportioned to this state only until
December 31, 2004, unless a majority of the electors of the
municipal corporation voting on the question of continuing to tax
such shares after that date vote in favor of that question at an
election held November 2, 2004. If a majority of those electors
vote in favor of the question, the municipal corporation may
continue after December 31, 2004, to impose the tax on such
distributive shares only to the extent such shares would be so
allocated or apportioned to this state.
(d) For the purposes of division (D)(C) of section 718.14 of
the Revised Code, a municipal corporation shall be deemed to have
elected to tax S corporation shareholders' distributive shares of
net profits of the S corporation in the hands of the shareholders
if a majority of the electors of a municipal corporation vote in
favor of a question at an election held under division
(H)(9)(7)(b) or (c) of this section. The municipal corporation
shall specify by ordinance or rule that the tax applies to the
distributive share of a shareholder of an S corporation in the
hands of the shareholder of the S corporation.
(10)(8) Employee compensation that is not "qualifying wages"
as defined in section 718.03 of the Revised Code;
(11) Beginning August 1, 2007, 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, municipal
income tax shall be payable only to the municipal corporation of
residence or domicile.
(12) 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 Revised Code on or after March 27, 2013, unless the person is
subject to such taxation because of residence or domicile. If the
compensation is subject to taxation because of residence or
domicile, municipal income tax shall be payable only to the
municipal corporation of residence or domicile.
(I) Any municipal corporation that taxes any type of
intangible income on March 29, 1988, pursuant to Section 3 of
Amended Substitute Senate Bill No. 238 of the 116th general
assembly, may continue to tax that type of income after 1988 if a
majority of the electors of the municipal corporation voting on
the question of whether to permit the taxation of that type of
intangible income after 1988 vote in favor thereof at an election
held on November 8, 1988.
(J) Nothing in this section or section 718.02 of the Revised
Code shall authorize the levy of any tax on income that a
municipal corporation is not authorized to levy under existing
laws or shall require a municipal corporation to allow a deduction
from taxable income for losses incurred from a sole proprietorship
or partnership.
(K)(1) Nothing in this chapter prohibits a municipal
corporation from allowing, by resolution or ordinance, a net
operating loss carryforward.
(2) Nothing in this chapter requires a municipal corporation
to allow a net operating loss carryforward.
(L)(1) A single member limited liability company that is a
disregarded entity for federal tax purposes may elect to 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:
(a) The limited liability company's single member is also a
limited liability company;
(b) 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;
(c) Not later than December 31, 2004, the limited liability
company and its single member each make an election to be treated
as a separate taxpayer under division (L) of this section;
(d) 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;
(e) The Ohio municipal corporation that is the primary place
of business of the sole member of the limited liability company
consents to the election.
(2) For purposes of division (L)(1)(e) of this section, a
municipal corporation is 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 is greater
in that municipal corporation than in any other municipal
corporation in Ohio, and that tax liability to that municipal
corporation for its taxable year ending in 2003 is at least four
hundred thousand dollars.
Sec. 718.02. This section does not apply to taxpayers that
are subject to and required to file reports under Chapter 5745. of
the Revised Code or to taxpayers with a net profit from a business
or profession operated as a sole proprietorship.
(A) Except as otherwise provided in division (D) of this
section, net profit from a business or profession conducted both
within and without the boundaries of a municipal corporation shall
be considered as having a taxable situs in such municipal
corporation 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 and tangible
personal property owned or used by the taxpayer in the business or
profession in such municipal corporation 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 paragraph, 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 persons employed in the business or profession
for services performed in such municipal corporation to wages,
salaries, and other compensation paid during the same period to
persons employed in the business or profession, wherever their
services are performed, excluding compensation that is not taxable
by the municipal corporation under section 718.011 of the Revised
Code;
(3) Gross receipts of the business or profession from sales
made and services performed during the taxable period in such
municipal corporation to gross receipts of the business or
profession during the same period from sales and services,
wherever made or performed.
If the foregoing apportionment formula does not produce an
equitable result, another basis may be substituted, under uniform
regulations, so as to produce an equitable result.
(B) As used in division (A) of this section, "sales made in a
municipal corporation" mean:
(1) All sales of tangible personal property delivered within
such municipal corporation regardless of where title passes if
shipped or delivered from a stock of goods within such municipal
corporation;
(2) All sales of tangible personal property delivered within
such municipal corporation regardless of where title passes even
though transported from a point outside such municipal corporation
if 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;
(3) All sales of tangible personal property shipped from a
place within such municipal corporation to purchasers outside such
municipal corporation regardless of where title passes if the
taxpayer is not, through its own employees, regularly engaged in
the solicitation or promotion of sales at the place where delivery
is made.
(C) Except as otherwise provided in division (D) of this
section, net profit from rental activity not constituting a
business or profession shall be subject to tax only by the
municipal corporation in which the property generating the net
profit is located.
(D) This section does not apply to Nothing in this section
prohibits a municipal corporation from imposing a tax on all
income earned by individuals who are residents of the municipal
corporation and, except as otherwise provided in section 718.01 of
the Revised Code, a municipal corporation may impose a tax on all
income earned by residents of the municipal corporation to the
extent allowed by the United States Constitution and section
718.01 of the Revised Code.
(E) If, in computing the taxpayer's adjusted federal taxable
income, the taxpayer deducted any amount with respect to a stock
option granted to an employee, and if the employee is not required
to include in income any amount or any portion thereof because it
is exempted from taxation under division (H)(10)(8) of section
718.01 of the Revised Code and division (A)(2)(d) of section
718.03 of the Revised Code by a municipal corporation to which the
taxpayer has apportioned a portion of its net profit, the taxpayer
shall add the amount that is exempt from taxation to the
taxpayer's net profit that was apportioned to that municipal
corporation. In no case shall a taxpayer 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 divisions (A) and (B)
of this section.
Sec. 718.04. (A) Except as otherwise provided in section
718.01 of the Revised Code, a municipal corporation may impose a
tax on all income earned by residents of the municipal corporation
to the extent allowed by the United States Constitution.
(B) No municipal corporation other than the municipal
corporation of residence shall levy a tax on the income of any
member or employee of the Ohio general assembly including the
lieutenant governor which income is received as a result of
services rendered as such member or employee and is paid from
appropriated funds of this state.
(B) No municipal corporation other than the municipal
corporation of residence and the city of Columbus shall levy a tax
on the income of the chief justice or a justice of the supreme
court received as a result of services rendered as the chief
justice or justice. No municipal corporation other than the
municipal corporation of residence shall levy a tax on the income
of a judge sitting by assignment of the chief justice or on the
income of a district court of appeals judge sitting in multiple
locations within the district, received as a result of services
rendered as a judge the compensation for personal services of a
nonresident individual or on the net profit from a business or
profession operated as a sole proprietorship of a nonresident.
Sec. 718.14. (A) As used in this section:
(1) "Limited liability company" means a limited liability
company formed under Chapter 1705. of the Revised Code or under
the laws of another state.
(2) "Pass-through entity" means a partnership, limited
liability company, S corporation, or any other class of entity the
income or profits from which are given pass-through treatment
under the Internal Revenue Code.
(3) "Income from a pass-through entity" means partnership
income of partners, membership interests of members of a limited
liability company, distributive shares of shareholders of an S
corporation, or other distributive or proportionate ownership
shares of income from other pass-through entities.
(4) "Owner" means a partner of a partnership, a member of a
limited liability company, a shareholder of an S corporation, or
other person with an ownership interest in a pass-through entity.
(5) "Owner's proportionate share," with respect to each owner
of a pass-through entity, means the ratio of (a) the owner's
income from the pass-through entity that is subject to taxation by
the municipal corporation, to (b) the total income from that
entity of all owners whose income from the entity is subject to
taxation by that municipal corporation.
(B) On and after January 1, 2003, any municipal corporation
imposing a tax that applies to income from a pass-through entity
shall grant a credit to each owner who is domiciled in the
municipal corporation for taxes paid to another municipal
corporation by a pass-through entity that does not conduct
business in the municipal corporation. The amount of the credit
shall equal the lesser of the following amounts, subject to
division (C) of this section:
(1) The owner's proportionate share of the amount, if any, of
tax paid by the pass-through entity to another municipal
corporation in this state;
(2) The owner's proportionate share of the amount of tax that
would be imposed on the pass-through entity by the municipal
corporation in which the taxpayer is domiciled if the pass-through
entity conducted business in the municipal corporation.
(C) If a municipal corporation grants a credit for a
percentage, less than one hundred per cent, of the amount of
income taxes paid on compensation by an individual who resides or
is domiciled in the municipal corporation to another municipal
corporation, the amount of credit otherwise required by division
(B) of this section shall be multiplied by that percentage.
(D) On and after January 1, 2003, any municipal corporation
that imposes a tax on income of or from a pass-through entity
shall specify by ordinance or rule whether the tax applies to
income of the pass-through entity in the hands of the entity or to
income from the pass-through entity in the hands of the owners of
the entity. A municipal corporation may specify a different
ordinance or rule under this division for each of the classes of
pass-through entity enumerated in division (A)(2) of this section.
Section 2. That existing sections 709.023, 718.01, 718.02,
718.04, and 718.14 and section 718.011 of the Revised Code are
hereby repealed.
Section 3. The amendment and repeal by this act of sections
709.023, 718.01, 718.011, 718.02, 718.04, and 718.14 of the
Revised Code shall apply to taxable years beginning on or after
the effective date of this act.
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