Ohio § 718.01

§ 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, 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 , 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 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 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. (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.