Remove limit on certain tax net operating loss carry-forwards

As Introduced

136th
General Assembly

Regular
Session
H. B. No. 642

2025-2026

Representative Demetriou

To
amend sections 718.01, 718.81, and 718.84 of the Revised Code
to
remove a five-year limit on municipal income tax net operating loss
carry-forwards.

BE
IT ENACTED BY THE GENERAL ASSEMBLY OF THE STATE OF OHIO:

Section
1.
That
sections 718.01, 718.81, and 718.84 of the Revised Code be amended to
read as follows:

Sec.
718.01.
Any
term used in this chapter that is not otherwise defined in this
chapter has the same meaning as when used in a comparable context in
laws of the United States relating to federal income taxation or in
Title LVII of the Revised Code, unless a different meaning is clearly
required. Except as provided in section 718.81 of the Revised Code,
if a term used in 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 Title LVII of the
Revised Code 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
control over the use of the term in Title LVII of the Revised Code.

Except
as otherwise provided in section 718.81 of the Revised Code, as used
in this chapter:

(A)(1)
"Municipal taxable income" means the following:

(a)
For a person other than an individual, income apportioned or sitused
to the municipal corporation under section 718.02 of the Revised
Code, as applicable
,
reduced by any pre-2017 net operating loss carryforward available to
the person for the municipal corporation
.

(b)(i)
For an individual who is a resident of a municipal corporation other
than a qualified municipal corporation, income reduced by exempt
income to the extent otherwise included in income,
and

then
reduced as provided in division (A)(2) of this section
,
and further reduced by any pre-2017 net operating loss carryforward
available to the individual for the municipal corporation
.

(ii)
For an individual who is a resident of a qualified municipal
corporation, Ohio adjusted gross income reduced by income exempted,
and increased by deductions excluded, by the qualified municipal
corporation from the qualified municipal corporation's tax. If a
qualified municipal corporation, on or before December 31, 2013,
exempts income earned by individuals who are not residents of the
qualified municipal corporation and net profit of persons that are
not wholly located within the qualified municipal corporation, such
individual or person shall have no municipal taxable income for the
purposes of the tax levied by the qualified municipal corporation and
may be exempted by the qualified municipal corporation from the
requirements of section 718.03 of the Revised Code.

(c)
For an individual who is a nonresident of a municipal corporation,
income reduced by exempt income to the extent otherwise included in
income and then, as applicable, apportioned or sitused to the
municipal corporation under section 718.02 of the Revised Code,
and

then
reduced as provided in division (A)(2) of this section
,
and further reduced by any pre-2017 net operating loss carryforward
available to the individual for the municipal corporation
.

(2)
In computing the municipal taxable income of a taxpayer who is an
individual, the taxpayer may subtract, as provided in division
(A)(1)(b)(i) or (c) of this section, the amount of the individual's
employee business expenses reported on the individual's form 2106
that the individual deducted for federal income tax purposes for the
taxable year, subject to the limitation imposed by section 67 of the
Internal Revenue Code. For the municipal corporation in which the
taxpayer is a resident, the taxpayer may deduct all such expenses
allowed for federal income tax purposes. For a municipal corporation
in which the taxpayer is not a resident, the taxpayer may deduct such
expenses only to the extent the expenses are related to the
taxpayer's performance of personal services in that nonresident
municipal corporation.

(B)
"Income" means the following:

(1)(a)
For residents, all income, salaries, qualifying wages, commissions,
and other compensation from whatever source earned or received by the
resident, including the resident's distributive share of the net
profit of pass-through entities owned directly or indirectly by the
resident and any net profit of the resident, except as provided in
division (D)(5) of this section.

(b)
For the purposes of division (B)(1)(a) of this section:

(i)
Any net operating loss of the resident incurred in the taxable year
and the resident's distributive share of any net operating loss
generated in the same taxable year and attributable to the resident's
ownership interest in a pass-through entity shall be allowed as a
deduction
,
for that taxable year and the following five taxable years,

against any other net profit of the resident or the resident's
distributive share of any net profit attributable to the resident's
ownership interest in a pass-through entity
for
that taxable year and the next succeeding taxable year or years
until
fully utilized, subject to division (B)(1)(d) of this section;

(ii)
The resident's distributive share of the net profit of each
pass-through entity owned directly or indirectly by the resident
shall be calculated without regard to any net operating loss that is
carried forward by that entity from a prior taxable year and applied
to reduce the entity's net profit for the current taxable year.

(c)
Division (B)(1)(b) of this section does not apply with respect to any
net profit or net operating loss attributable to an ownership
interest in an S corporation unless shareholders' distributive shares
of net profits from S corporations are subject to tax in the
municipal corporation as provided in division (C)(14)(b) or (c) of
this section.

(d)
Any amount of a net operating loss used to reduce a taxpayer's net
profit for a taxable year shall reduce the amount of net operating
loss that may be carried forward to any subsequent year for use by
that taxpayer. In no event shall the cumulative deductions for all
taxable years with respect to a taxpayer's net operating loss exceed
the original amount of that net operating loss available to that
taxpayer.

(2)
In the case of nonresidents, all income, salaries, qualifying wages,
commissions, and other compensation from whatever source earned or
received by the nonresident for work done, services performed or
rendered, or activities conducted in the municipal corporation,
including any net profit of the nonresident, but excluding the
nonresident's distributive share of the net profit or loss of only
pass-through entities owned directly or indirectly by the
nonresident.

(3)
For taxpayers that are not individuals, net profit of the taxpayer;

(4)
Lottery, sweepstakes, gambling and sports winnings, winnings from
games of chance, and prizes and awards. If the taxpayer is a
professional gambler for federal income tax purposes, the taxpayer
may deduct related wagering losses and expenses to the extent
authorized under the Internal Revenue Code and claimed against such
winnings.

(C)
"Exempt income" means all of the following:

(1)
The military pay or allowances of members of the armed forces of the
United States or members of their reserve components, including the
national guard of any state. As used in division (C)(1) of this
section, "armed forces" has the same meaning as in 10
U.S.C. 101.

(2)(a)
Except as provided in division (C)(2)(b) of this section, intangible
income;

(b)
A municipal corporation that taxed any type of intangible income on
March 29, 1988, pursuant to Section 3 of S.B. 238 of the 116th
general assembly, may continue to tax that type of income 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 voted in favor thereof at an election held on
November 8, 1988.

(3)
Social security benefits, railroad retirement benefits, unemployment
compensation, pensions, retirement benefit payments, payments from
annuities, and similar payments made to an employee or to the
beneficiary of an employee under a retirement program or plan,
disability payments received from private industry or local, state,
or federal governments or from charitable, religious or educational
organizations, and the proceeds of sickness, accident, or liability
insurance policies. As used in division (C)(3) of this section,
"unemployment compensation" does not include supplemental
unemployment compensation described in section 3402(o)(2) of the
Internal Revenue Code.

(4)
The income of religious, fraternal, charitable, scientific, literary,
or educational institutions to the extent such income is derived from
tax-exempt real estate, tax-exempt tangible or intangible property,
or tax-exempt activities.

(5)
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
for the taxable year. Such compensation in excess of one thousand
dollars for the taxable year may be subject to taxation by a
municipal corporation. A municipal corporation shall not require the
payer of such compensation to withhold any tax from that
compensation.

(6)
Dues, contributions, and similar payments received by charitable,
religious, educational, or literary organizations or labor unions,
lodges, and similar organizations;

(7)
Alimony and child support received;

(8)
Compensation for personal injuries or for damages to property from
insurance proceeds or otherwise, excluding compensation paid for lost
salaries or wages or compensation from punitive damages;

(9)
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.
Division (C)(9) of this section does not apply for purposes of
Chapter 5745. of the Revised Code.

(10)
Gains from involuntary conversions, interest on federal obligations,
items of income subject to a tax levied by the state and that a
municipal corporation is specifically prohibited by law from taxing,
and income of a decedent's estate during the period of administration
except such income from the operation of a trade or business;

(11)
Compensation or allowances excluded from federal gross income under
section 107 of the Internal Revenue Code;

(12)
Employee compensation that is not qualifying wages as defined in
division (R) of this section;

(13)
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, tax on such income shall be payable only to
the municipal corporation of residence or domicile.

(14)(a)
Except as provided in division (C)(14)(b) or (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 voted in favor of that
question at an election held November 2, 2004. If a majority of those
electors voted 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)
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 voted in favor of a question at
an election held under division (C)(14)(b) or (c) of this section.
The municipal corporation shall specify by resolution or ordinance
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.

(15)
The income of individuals under eighteen years of age.

(16)(a)
Except as provided in divisions (C)(16)(b), (c), and (d) of this
section, qualifying wages described in division (B)(1) or (E) of
section 718.011 of the Revised Code to the extent the qualifying
wages are not subject to withholding for the municipal corporation
under either of those divisions.

(b)
The exemption provided in division (C)(16)(a) of this section does
not apply with respect to the municipal corporation in which the
employee resided at the time the employee earned the qualifying
wages.

(c)
The exemption provided in division (C)(16)(a) of this section does
not apply to qualifying wages that an employer elects to withhold
under division (D)(2) of section 718.011 of the Revised Code.

(d)
The exemption provided in division (C)(16)(a) of this section does
not apply to qualifying wages if both of the following conditions
apply:

(i)
For qualifying wages described in division (B)(1) of section 718.011
of the Revised Code, the employee's employer withholds and remits tax
on the qualifying wages to the municipal corporation in which the
employee's principal place of work is situated, or, for qualifying
wages described in division (E) of section 718.011 of the Revised
Code, the employee's employer withholds and remits tax on the
qualifying wages to the municipal corporation in which the employer's
fixed location is located;

(ii)
The employee receives a refund of the tax described in division
(C)(16)(d)(i) of this section on the basis of the employee not
performing services in that municipal corporation.

(17)(a)
Except as provided in division (C)(17)(b) or (c) of this section,
compensation that is not qualifying wages paid to a nonresident
individual for personal services performed in the municipal
corporation on not more than twenty days in a taxable year.

(b)
The exemption provided in division (C)(17)(a) of this section does
not apply under either of the following circumstances:

(i)
The individual's base of operation is located in the municipal
corporation.

(ii)
The individual is a professional athlete, professional entertainer,
or public figure, and the compensation is paid for the performance of
services in the individual's capacity as a professional athlete,
professional entertainer, or public figure. For purposes of division
(C)(17)(b)(ii) of this section, "professional athlete,"
"professional entertainer," and "public figure"
have the same meanings as in section 718.011 of the Revised Code.

(c)
Compensation to which division (C)(17) of this section applies shall
be treated as earned or received at the individual's base of
operation. If the individual does not have a base of operation, the
compensation shall be treated as earned or received where the
individual is domiciled.

(d)
For purposes of division (C)(17) of this section, "base of
operation" means the location where an individual owns or rents
an office, storefront, or similar facility to which the individual
regularly reports and at which the individual regularly performs
personal services for compensation.

(18)
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. If the compensation is subject to taxation because of
residence, municipal income tax shall be payable only to the
municipal corporation of residence.

(19)
In the case of a tax administered, collected, and enforced by a
municipal corporation pursuant to an agreement with the board of
directors of a joint economic development district under section
715.72 of the Revised Code, the net profits of a business, and the
income of the employees of that business, exempted from the tax under
division (Q) of that section.

(20)
All of the following:

(a)
Income derived from disaster work conducted in this state by an
out-of-state disaster business during a disaster response period
pursuant to a qualifying solicitation received by the business;

(b)
Income of a qualifying employee described in division (A)(14)(a) of
section 5703.94 of the Revised Code, to the extent such income is
derived from disaster work conducted in this state by the employee
during a disaster response period pursuant to a qualifying
solicitation received by the employee's employer;

(c)
Income of a qualifying employee described in division (A)(14)(b) of
section 5703.94 of the Revised Code, to the extent such income is
derived from disaster work conducted in this state by the employee
during a disaster response period on critical infrastructure owned or
used by the employee's employer.

(21)
Income the taxation of which is prohibited by the constitution or
laws of the United States.

Any
item of income that is exempt income of a pass-through entity under
division (C) of this section is exempt income of each owner of the
pass-through entity to the extent of that owner's distributive or
proportionate share of that item of the entity's income.

(D)(1)
"Net profit" for a person who is an individual means the
individual's net profit required to be reported on schedule C,
schedule E, or schedule F reduced by any net operating loss carried
forward. For the purposes of division (D)(1) of this section, the net
operating loss carried forward shall be calculated and deducted in
the same manner as provided in division (D)(3) of this section.

(2)
"Net profit" for a person other than an individual means
adjusted federal taxable income reduced by any net operating loss
incurred by the person

in a taxable year beginning on or after January 1, 2017
,
subject to the limitations of division (D)(3) of this section.

(3)(a)
The amount of such net operating loss shall be deducted from net
profit to the extent necessary to reduce municipal taxable income to
zero, with any remaining unused portion of the net operating loss
carried forward to
not
more than five consecutive taxable years following the taxable year
in which the loss was incurred, but in no case for more years than
necessary for the deduction to be
the
next succeeding taxable year or years until
fully
utilized.

(b)
No person shall use the deduction allowed by division (D)(3) of this
section to offset qualifying wages.

(c)(i)
For taxable years beginning in 2018, 2019, 2020, 2021, or 2022, a
person may not deduct, for purposes of an income tax levied by a
municipal corporation that levies an income tax before January 1,
2016, more than fifty per cent of the amount of the deduction
otherwise allowed by division (D)(3) of this section.

(ii)
For taxable years beginning in 2023 or thereafter, a person may
deduct, for purposes of an income tax levied by a municipal
corporation that levies an income tax before January 1, 2016, the
full amount allowed by division (D)(3) of this section without regard
to the limitation of division (D)(3)(c)(i) of this section.

(d)
Any pre-2017 net operating loss carryforward deduction that is
available may be utilized before a taxpayer may deduct any amount
pursuant to division (D)(3) of this section.

(e)
Nothing in division (D)(3)(c)(i) of this section precludes a person
from carrying forward, for use with respect to any return filed for a
taxable year beginning after 2018, any amount of net operating loss
that was not fully utilized by operation of division (D)(3)(c)(i) of
this section. To the extent that an amount of net operating loss that
was not fully utilized in one or more taxable years by operation of
division (D)(3)(c)(i) of this section is carried forward for use with
respect to a return filed for a taxable year beginning in 2019, 2020,
2021, or 2022, the limitation described in division (D)(3)(c)(i) of
this section shall apply to the amount carried forward.

(4)
For the purposes of this chapter, and notwithstanding division (D)(2)
of this section, net profit of a disregarded entity shall not be
taxable as against that disregarded entity, but shall instead be
included in the net profit of the owner of the disregarded entity.

(5)
For the purposes of this chapter, and notwithstanding any other
provision of this chapter, the net profit of a publicly traded
partnership that makes the election described in division (D)(5) of
this section shall be taxed as if the partnership were a C
corporation, and shall not be treated as the net profit or income of
any owner of the partnership.

A
publicly traded partnership that is treated as a partnership for
federal income tax purposes and that is subject to tax on its net
profits in one or more municipal corporations in this state may elect
to be treated as a C corporation for municipal income tax purposes.
The publicly traded partnership shall make the election in every
municipal corporation in which the partnership is subject to taxation
on its net profits. The election shall be made on the annual tax
return filed in each such municipal corporation. The publicly traded
partnership shall not be required to file the election with any
municipal corporation in which the partnership is not subject to
taxation on its net profits, but division (D)(5) of this section
applies to all municipal corporations in which an individual owner of
the partnership resides.

(E)
"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 under division (D)(5) of this section, 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 five per cent of intangible income deducted
under division (E)(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 (E)(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 (E)(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 section
4313.02 of the Revised Code;

(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 division (E)(3)(b) of section 718.06 of the Revised Code.

(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
division (E)(3)(b) of section 718.06 of the Revised Code.

If
the taxpayer is not a C corporation, is not a disregarded entity that
has made the election described in division (L)(2) of this section,
is not a publicly traded partnership that has made the election
described in division (D)(5) of this section, and is not an
individual, 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 a pension or retirement benefit payment paid
to a retired partner, retired shareholder, or retired member or 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.

Nothing
in division (E) 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.

(F)
"Schedule C" means internal revenue service schedule C
(form 1040) filed by a taxpayer pursuant to the Internal Revenue
Code.

(G)
"Schedule E" means internal revenue service schedule E
(form 1040) filed by a taxpayer pursuant to the Internal Revenue
Code.

(H)
"Schedule F" means internal revenue service schedule F
(form 1040) filed by a taxpayer pursuant to the Internal Revenue
Code.

(I)
"Internal Revenue Code" has the same meaning as in section
5747.01 of the Revised Code.

(J)
"Resident" means an individual who is domiciled in the
municipal corporation as determined under section 718.012 of the
Revised Code.

(K)
"Nonresident" means an individual that is not a resident.

(L)(1)
"Taxpayer" means a person subject to a tax levied on income
by a municipal corporation in accordance with this chapter.
"Taxpayer" does not include a grantor trust or, except as
provided in division (L)(2)(a) of this section, a disregarded entity.

(2)(a)
A single member limited liability company that is a disregarded
entity for federal tax purposes may 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:

(i)
The limited liability company's single member is also a limited
liability company.

(ii)
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.

(iii)
Not later than December 31, 2004, the limited liability company and
its single member each made an election to be treated as a separate
taxpayer under division (L) of this section as this section existed
on December 31, 2004.

(iv)
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.

(v)
The Ohio municipal corporation that was the primary place of business
of the sole member of the limited liability company consented to the
election.

(b)
For purposes of division (L)(2)(a)(v) of this section, a municipal
corporation was 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 was 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 was at least four hundred thousand dollars.

(M)
"Person" includes individuals, firms, companies, joint
stock companies, business trusts, estates, trusts, partnerships,
limited liability partnerships, limited liability companies,
associations, C corporations, S corporations, governmental entities,
and any other entity.

(N)
"Pass-through entity" means a partnership not treated as an
association taxable as a C corporation for federal income tax
purposes, a limited liability company not treated as an association
taxable as a C corporation for federal income tax purposes, an S
corporation, or any other class of entity from which the income or
profits of the entity are given pass-through treatment for federal
income tax purposes. "Pass-through entity" does not include
a trust, estate, grantor of a grantor trust, or disregarded entity.

(O)
"S corporation" means a person that has made an election
under subchapter S of Chapter 1 of Subtitle A of the Internal Revenue
Code for its taxable year.

(P)
"Single member limited liability company" means a limited
liability company that has one direct member.

(Q)
"Limited liability company" means a limited liability
company formed under former Chapter 1705. of the Revised Code as that
chapter existed prior to February 11, 2022, Chapter 1706. of the
Revised Code, or the laws of another state.

(R)
"Qualifying wages" means wages, as defined in section
3121(a) of the Internal Revenue Code, without regard to any wage
limitations, adjusted as follows:

(1)
Deduct the following amounts:

(a)
Any amount included in wages if the amount constitutes compensation
attributable to a plan or program described in section 125 of the
Internal Revenue Code.

(b)
Any amount included in wages if the amount constitutes payment on
account of a disability related to sickness or an accident paid by a
party unrelated to the employer, agent of an employer, or other
payer.

(c)
Any amount attributable to a nonqualified deferred compensation plan
or program described in section 3121(v)(2)(C) of the Internal Revenue
Code if the compensation is included in wages and the municipal
corporation has, by resolution or ordinance adopted before January 1,
2016, exempted the amount from withholding and tax.

(d)
Any amount included in wages if the amount arises 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 and the municipal corporation has, by
resolution or ordinance adopted before January 1, 2016, exempted the
amount from withholding and tax.

(e)
Any amount included in wages that is exempt income.

(2)
Add the following amounts:

(a)
Any amount not included in wages solely because the employee was
employed by the employer before April 1, 1986.

(b)
Any amount not included in wages because the amount arises 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 and the municipal corporation
has not, by resolution or ordinance, exempted the amount from
withholding and tax adopted before January 1, 2016. Division
(R)(2)(b) of this section applies only to those amounts constituting
ordinary income.

(c)
Any amount not included in wages if the amount is an amount described
in section 401(k), 403(b), or 457 of the Internal Revenue Code.
Division (R)(2)(c) of this section applies only to employee
contributions and employee deferrals.

(d)
Any amount that is supplemental unemployment compensation benefits
described in section 3402(o)(2) of the Internal Revenue Code and not
included in wages.

(e)
Any amount received that is treated as self-employment income for
federal tax purposes in accordance with section 1402(a)(8) of the
Internal Revenue Code.

(f)
Any amount not included in wages if all of the following apply:

(i)
For the taxable year the amount is employee compensation that is
earned outside of the United States and that either is included in
the taxpayer's gross income for federal income tax purposes or would
have been included in the taxpayer's gross income for such purposes
if the taxpayer did not elect to exclude the income under section 911
of the Internal Revenue Code;

(ii)
For no preceding taxable year did the amount constitute wages as
defined in section 3121(a) of the Internal Revenue Code;

(iii)
For no succeeding taxable year will the amount constitute wages; and

(iv)
For any taxable year the amount has not otherwise been added to wages
pursuant to either division (R)(2) of this section or section 718.03
of the Revised Code, as that section existed before the effective
date of H.B. 5 of the 130th general assembly, March 23, 2015.

(S)
"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,
gambling winnings, or other similar games of chance.

(T)
"Taxable year" means the corresponding tax reporting period
as prescribed for the taxpayer under the Internal Revenue Code.

(U)(1)
"Tax administrator" means, subject to division (U)(2) of
this section, the individual charged with direct responsibility for
administration of an income tax levied by a municipal corporation in
accordance with this chapter, and also includes the following:

(a)
A municipal corporation acting as the agent of another municipal
corporation;

(b)
A person 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;

(c)
The central collection agency or the regional income tax agency or
their successors in interest, or another entity organized to perform
functions similar to those performed by the central collection agency
and the regional income tax agency.

(2)
"Tax administrator" does not include the tax commissioner.

(3)
A private individual or entity serving in any position described in
division (U)(1)(b) or (c) of this section shall have no access to
criminal history record information.

(V)
"Employer" means a person that is an employer for federal
income tax purposes.

(W)
"Employee" means an individual who is an employee for
federal income tax purposes.

(X)
"Other payer" means any person, other than an individual's
employer or the employer's agent, that pays an individual any amount
included in the federal gross income of the individual. "Other
payer" includes casino operators and video lottery terminal
sales agents.

(Y)
"Calendar quarter" means the three-month period ending on
the last day of March, June, September, or December.

(Z)
"Form 2106" means internal revenue service form 2106 filed
by a taxpayer pursuant to the Internal Revenue Code.

(AA)
"Municipal corporation" includes a joint economic
development district or joint economic development zone that levies
an income tax under section 715.691, 715.70, 715.71, or 715.72 of the
Revised Code.

(BB)
"Disregarded entity" means a single member limited
liability company, a qualifying subchapter S subsidiary, or another
entity if the company, subsidiary, or entity is a disregarded entity
for federal income tax purposes.

(CC)
"Generic form" means an electronic or paper form that is
not prescribed by a particular municipal corporation and that is
designed for reporting taxes withheld by an employer, agent of an
employer, or other payer, estimated municipal income taxes, or annual
municipal income tax liability or for filing a refund claim.

(DD)
"Tax return preparer" means any individual described in
section 7701(a)(36) of the Internal Revenue Code and 26 C.F.R.
301.7701-15.

(EE)
"Ohio business gateway" means the online computer network
system created under section 125.30 of the Revised Code or any
successor electronic filing and payment system.

(FF)
"Local board of tax review" and "board of tax review"
mean the entity created under section 718.11 of the Revised Code.

(GG)
"Net operating loss" means a loss incurred by a person in
the operation of a trade or business. "Net operating loss"
does not include unutilized losses resulting from basis limitations,
at-risk limitations, or passive activity loss limitations.

(HH)
"Casino operator" and "casino facility" have the
same meanings as in section 3772.01 of the Revised Code.

(II)
"Video lottery terminal" has the same meaning as in section
3770.21 of the Revised Code.

(JJ)
"Video lottery terminal sales agent" means a lottery sales
agent licensed under Chapter 3770. of the Revised Code to conduct
video lottery terminals on behalf of the state pursuant to section
3770.21 of the Revised Code.

(KK)
"Postal service" means the United States postal service.

(LL)
"Certified mail," "express mail," "United
States mail," "postal service," and similar terms
include any delivery service authorized pursuant to section 5703.056
of the Revised Code.

(MM)
"Postmark date," "date of postmark," and similar
terms include the date recorded and marked in the manner described in
division (B)(3) of section 5703.056 of the Revised Code.

(NN)
"Related member" means a person that, with respect to the
taxpayer during all or any portion of the taxable year, is either a
related entity, a component member as defined in section 1563(b) of
the Internal Revenue Code, or a person to or from whom there is
attribution of stock ownership in accordance with section 1563(e) of
the Internal Revenue Code except, for purposes of determining whether
a person is a related member under this division, "twenty per
cent" shall be substituted for "5 percent" wherever "5
percent" appears in section 1563(e) of the Internal Revenue
Code.

(OO)
"Related entity" means any of the following:

(1)
An individual stockholder, or a member of the stockholder's family
enumerated in section 318 of the Internal Revenue Code, if the
stockholder and the members of the stockholder's family own directly,
indirectly, beneficially, or constructively, in the aggregate, at
least fifty per cent of the value of the taxpayer's outstanding
stock;

(2)
A stockholder, or a stockholder's partnership, estate, trust, or
corporation, if the stockholder and the stockholder's partnerships,
estates, trusts, or corporations own directly, indirectly,
beneficially, or constructively, in the aggregate, at least fifty per
cent of the value of the taxpayer's outstanding stock;

(3)
A corporation, or a party related to the corporation in a manner that
would require an attribution of stock from the corporation to the
party or from the party to the corporation under division (OO)(4) of
this section, provided the taxpayer owns directly, indirectly,
beneficially, or constructively, at least fifty per cent of the value
of the corporation's outstanding stock;

(4)
The attribution rules described in section 318 of the Internal
Revenue Code apply for the purpose of determining whether the
ownership requirements in divisions (OO)(1) to (3) of this section
have been met.

(PP)(1)
"Assessment" means a written finding by the tax
administrator that a person has underpaid municipal income tax, or
owes penalty and interest, or any combination of tax, penalty, or
interest, to the municipal corporation that commences the person's
time limitation for making an appeal to the local board of tax review
pursuant to section 718.11 of the Revised Code, and has "ASSESSMENT"
written in all capital letters at the top of such finding.

(2)
"Assessment" does not include an informal notice denying a
request for refund issued under division (B)(3) of section 718.19 of
the Revised Code, a billing statement notifying a taxpayer of current
or past-due balances owed to the municipal corporation, a tax
administrator's request for additional information, a notification to
the taxpayer of mathematical errors, or a tax administrator's other
written correspondence to a person or taxpayer that does not meet the
criteria prescribed by division (PP)(1) of this section.

(QQ)
"Taxpayers' rights and responsibilities" means the rights
provided to taxpayers in sections 718.11, 718.12, 718.19, 718.23,
718.36, 718.37, 718.38, 5717.011, and 5717.03 of the Revised Code and
the responsibilities of taxpayers to file, report, withhold, remit,
and pay municipal income tax and otherwise comply with Chapter 718.
of the Revised Code and resolutions, ordinances, and rules adopted by
a municipal corporation for the imposition and administration of a
municipal income tax.

(RR)
"Qualified municipal corporation" means a municipal
corporation that, by resolution or ordinance adopted on or before
December 31, 2011, adopted Ohio adjusted gross income, as defined by
section 5747.01 of the Revised Code, as the income subject to tax for
the purposes of imposing a municipal income tax.

(SS)(1)
"Pre-2017 net operating loss carryforward" means any net
operating loss incurred in a taxable year beginning before January 1,
2017, to the extent such loss was permitted, by a resolution or
ordinance of the municipal corporation that was adopted by the
municipal corporation before January 1, 2016, to be carried forward
and utilized to offset income or net profit generated in such
municipal corporation in future taxable years.

(2)
For the purpose of calculating municipal taxable income, any pre-2017
net operating loss carryforward may be carried forward to any taxable
year, including taxable years beginning in 2017 or thereafter, for
the number of taxable years provided in the resolution or ordinance
or until fully utilized, whichever is earlier.
(SS)
"Retirement benefit plan" means an arrangement whereby an
entity provides benefits to individuals either on or after their
termination of service because of retirement or disability.
"Retirement benefit plan" does not include wage
continuation payments, severance payments, or payments made for
accrued personal or vacation time.

(TT)
"Small employer" means any employer that had total revenue
of less than five hundred thousand dollars during the preceding
taxable year. For purposes of this division, "total revenue"
means receipts of any type or kind, including, but not limited to,
sales receipts; payments; rents; profits; gains, dividends, and other
investment income; compensation; commissions; premiums; money;
property; grants; contributions; donations; gifts; program service
revenue; patient service revenue; premiums; fees, including premium
fees and service fees; tuition payments; unrelated business revenue;
reimbursements; any type of payment from a governmental unit,
including grants and other allocations; and any other similar
receipts reported for federal income tax purposes or under generally
accepted accounting principles. "Small employer" does not
include the federal government; any state government, including any
state agency or instrumentality; any political subdivision; or any
entity treated as a government for financial accounting and reporting
purposes.

(UU)
"Audit" means the examination of a person or the inspection
of the books, records, memoranda, or accounts of a person for the
purpose of determining liability for a municipal income tax.

(VV)
"Publicly traded partnership" means any partnership, an
interest in which is regularly traded on an established securities
market. A "publicly traded partnership" may have any number
of partners.

(WW)
"Tax commissioner" means the tax commissioner appointed
under section 121.03 of the Revised Code.

(XX)
"Out-of-state disaster business," "qualifying
solicitation," "qualifying employee," "disaster
work," "critical infrastructure," and "disaster
response period" have the same meanings as in section 5703.94 of
the Revised Code.

(YY)
"Pension" means a retirement benefit plan, regardless of
whether the plan satisfies the qualifications described under section
401(a) of the Internal Revenue Code, including amounts that are
taxable under the "Federal Insurance Contributions Act,"
Chapter 21 of the Internal Revenue Code, excluding employee
contributions and elective deferrals, and regardless of whether such
amounts are paid in the same taxable year in which the amounts are
included in the employee's wages, as defined by section 3121(a) of
the Internal Revenue Code.

(ZZ)
"Retirement benefit plan" means an arrangement whereby an
entity provides benefits to individuals either on or after their
termination of service because of retirement or disability.
"Retirement benefit plan" does not include wage
continuation payments, severance payments, or payments made for
accrued personal or vacation time.

Sec.
718.81.
If
a term used in sections 718.80 to 718.95 of the Revised Code 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 Title LVII of the Revised Code 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
Title LVII of the Revised Code, unless the term is defined in Chapter
5703. of the Revised Code, 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
section 718.01 of the Revised Code, the definition in this section
shall control for all uses of that term in sections 718.80 through
718.95 of the Revised Code.

As
used in sections 718.80 to 718.95 of the Revised Code only:

(A)
"Municipal taxable income" means income apportioned or
sitused to the municipal corporation under section 718.82 of the
Revised Code, 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 division (D)(5) of section 718.01
of the Revised Code, 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 five per cent 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 section
4313.02 of the Revised Code.

(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 division (E)(3)(b) of section 718.86 of the Revised Code.

(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
division (E)(3)(b) of section 718.86 of the Revised Code.

If
the taxpayer is not a C corporation, is not a disregarded entity that
has made the election described in division (L)(2) of section 718.01
of the Revised Code, and is not a publicly traded partnership that
has made the election described in division (D)(5) of section 718.01
of the Revised Code, 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 a pension or retirement
benefit payment paid to a retired partner, retired shareholder, or
retired member or 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.

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 section 718.01 of the
Revised Code, except that "taxpayer" does not include
natural persons or entities subject to the tax imposed under Chapter
5745. of the Revised Code. "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 sections 718.80 to
718.95 of the Revised Code for the purpose of reporting municipal
income taxes, and includes declarations of estimated tax.

(E)
"Assessment" means a notice of underpayment or nonpayment
of a tax issued pursuant to section 718.90 of the Revised Code.

Sec.
718.84.
(A)
Any information gained as a result of returns, investigations,
hearings, or verifications required or authorized by sections 718.80
to 718.95 of the Revised Code is confidential, and no person shall
disclose such information, except for official purposes, in
accordance with a proper judicial order, or as provided in section
4123.271 or 5703.21 of the Revised Code. The tax commissioner may
furnish the internal revenue service with copies of returns filed.
This section does not prohibit the publication of statistics in a
form which does not disclose information with respect to particular
taxpayers.

(B)
In May and December of each year, the tax commissioner shall provide
each tax administrator with the following information for every
taxpayer that had municipal taxable income apportionable to the
municipal corporation under this chapter on tax returns filed with
the commissioner under sections 718.80 to 718.95 of the Revised Code
in the preceding five or seven months, respectively:

(1)
The taxpayer's name, address, and federal employer identification
number;

(2)
The taxpayer's apportionment ratio for, and amount of municipal
taxable income apportionable to, the municipal corporation pursuant
to section 718.82 of the Revised Code;

(3)

The
amount of any pre-2017 net operating loss carryforward utilized by
the taxpayer;

(4)

Whether
the taxpayer requested that any overpayment be carried forward to a
future taxable year;

(5)
(4)

The amount of any credit claimed under section 718.94 of the Revised
Code.

(C)
Not later than thirty days after each distribution made to municipal
corporations under section 718.83 of the Revised Code, the tax
commissioner shall provide to each municipal corporation a report
stating the name and federal identification number of every taxpayer
that made estimated payments that are attributable to the municipal
corporation and the amount of each such taxpayer's estimated payment.

(D)
Not later than the thirty-first day of January of each year, every
municipal corporation having taxpayers that have made the election
allowed under section 718.80 of the Revised Code shall provide to the
tax commissioner, in a format prescribed by the commissioner, the
name and mailing address of up to two persons to whom the municipal
corporation requests that the commissioner send the information
described in divisions (B) and (C) of this section. The commissioner
shall not provide such information to any person other than a person
who is designated to receive the information under this section and
who is employed by the municipal corporation or by a tax
administrator, as defined in section 718.01 of the Revised Code, that
administers the municipal corporation's income tax, except as may
otherwise be provided by law.

(E)(1)
The tax commissioner may adopt rules that further govern the terms
and conditions under which tax returns filed with the commissioner
under this chapter, and any other information gained in the
performance of the commissioner's duties prescribed by this chapter,
shall be available for inspection by properly authorized officers,
employees, or agents of the municipal corporations to which the
taxpayer's net profit is apportioned under section 718.82 of the
Revised Code.

(2)
As used in this division, "properly authorized officer,
employee, or agent" means an officer, employee, or agent of a
municipal corporation who is authorized by charter or ordinance of
the municipal corporation to view or possess information referred to
in section 718.13 of the Revised Code.

(F)(1)
If, upon receiving the information described in division (B) of
section 718.91 of the Revised Code or division (B) or (C) of this
section, a municipal corporation discovers that it has additional
information in its possession that could result in a change to a
taxpayer's tax liability, the municipal corporation may refer the
taxpayer to the tax commissioner for an audit. Such referral shall be
made on a form prescribed by the commissioner and shall include any
information that forms the basis for the referral.

(2)
Upon receipt of a referral under division (F)(1) of this section, the
commissioner shall review the referral and may conduct an audit of
the taxpayer that is the subject of the referral based on the
information in the referral and any other relevant information
available to the commissioner.

(3)
Nothing in division (F) of this section shall be construed as forming
the sole basis upon which the commissioner may conduct an audit of a
taxpayer.

(4)
Nothing in this chapter shall prohibit a municipal corporation from
filing a writ of mandamus if the municipal corporation believes that
the commissioner has violated the commissioner's fiduciary duty as
the administrator of the tax levied by the municipal corporation.

Section
2.
That
existing sections 718.01, 718.81, and 718.84 of the Revised Code are
hereby repealed.

Section
3.
The
amendment by this act of sections 718.01, 718.81, and 718.84 of the
Revised Code applies to taxable years ending on or after the
effective date of this section.