Ohio § 718.06

§ 718.06.

(A) As used in this section: (1) “ Affiliated group of corporations ” means an affiliated group as defined in section 1504 of the Internal Revenue Code , 1 except that, if such a group includes at least one incumbent local exchange carrier

that is primarily engaged in the business of providing local exchange telephone service

in this state, the affiliated group shall not include any incumbent local exchange

carrier that would otherwise be included in the group. (2) “ Consolidated federal income tax return ” means a consolidated return filed for federal income tax purposes pursuant to section 1501 of the Internal Revenue Code . 2 (3) “ Consolidated federal taxable income ” means the consolidated taxable income of an affiliated group of corporations, as

computed for the purposes of filing a consolidated federal income tax return, before

consideration of net operating losses or special deductions.  “Consolidated federal taxable income” does not include income or loss of an incumbent

local exchange carrier that is excluded from the affiliated group under division (A)(1)

of this section. (4) “Incumbent local exchange carrier” has the same meaning as in section 4927.01 of the Revised Code . (5) “Local exchange telephone service” has the same meaning as in section 5727.01 of the Revised Code . (B)(1) For taxable years beginning on or after January 1, 2016, a taxpayer that is a member

of an affiliated group of corporations may elect to file a consolidated municipal

income tax return for a taxable year if at least one member of the affiliated group

of corporations is subject to the municipal income tax in that taxable year and if

the affiliated group of corporations filed a consolidated federal income tax return

with respect to that taxable year.  The election is binding for a five-year period beginning with the first taxable

year of the initial election unless a change in the reporting method is required under

federal law.  The election continues to be binding for each subsequent five-year period unless

the taxpayer elects to discontinue filing consolidated municipal income tax returns

under division (B)(2) of this section or a taxpayer receives permission from the tax

administrator.  The tax administrator shall approve such a request for good cause shown. (2) An election to discontinue filing consolidated municipal income tax returns under

this section must be made in the first year following the last year of a five-year

consolidated municipal income tax return election period in effect under division

(B)(1) of this section.  The election to discontinue filing a consolidated municipal income tax return is

binding for a five-year period beginning with the first taxable year of the election. (3) An election made under division (B)(1) or (2) of this section is binding on all members

of the affiliated group of corporations subject to a municipal income tax. (4) When a taxpayer makes the election allowed under section 718.80 of the Revised Code , a valid election made by the taxpayer under division (B)(1) or (2) of this section

is binding upon the tax commissioner for the remainder of the five-year period. (5) When an election made under section 718.80 of the Revised Code is terminated, a valid election made under section 718.86 of the Revised Code is binding upon the tax administrator for the remainder of the five-year period. (C) A taxpayer that is a member of an affiliated group of corporations that filed a consolidated

federal income tax return for a taxable year shall file a consolidated municipal income

tax return for that taxable year if the tax administrator determines, by a preponderance

of the evidence, that intercompany transactions have not been conducted at arm's length

and that there has been a distortive shifting of income or expenses with regard to

allocation of net profits to the municipal corporation.  A taxpayer that is required to file a consolidated municipal income tax return for

a taxable year shall file a consolidated municipal income tax return for all subsequent

taxable years unless the taxpayer requests and receives written permission from the

tax administrator to file a separate return or a taxpayer has experienced a change

in circumstances. (D) A taxpayer shall prepare a consolidated municipal income tax return in the same manner

as is required under the United States department of treasury regulations that prescribe

procedures for the preparation of the consolidated federal income tax return required

to be filed by the common parent of the affiliated group of which the taxpayer is

a member. (E)(1) Except as otherwise provided in divisions (E)(2), (3), and (4) of this section, corporations

that file a consolidated municipal income tax return shall compute adjusted federal

taxable income, as defined in section 718.01 of the Revised Code , by substituting “consolidated federal taxable income” for “federal taxable income”

wherever “federal taxable income” appears in that division and by substituting “an

affiliated group of corporation's” for “a C corporation's” wherever “a C corporation's”

appears in that division. (2) No corporation filing a consolidated municipal income tax return shall make any adjustment

otherwise required under division (E) of section 718.01 of the Revised Code to the extent that the item of income or deduction otherwise subject to the adjustment

has been eliminated or consolidated in the computation of consolidated federal taxable

income. (3) If the net profit or loss of a pass-through entity having at least eighty per cent

of the value of its ownership interest owned or controlled, directly or indirectly,

by an affiliated group of corporations is included in that affiliated group's consolidated

federal taxable income for a taxable year, the corporation filing a consolidated municipal

income tax return shall do one of the following with respect to that pass-through

entity's net profit or loss for that taxable year: (a) Exclude the pass-through entity's net profit or loss from the consolidated federal

taxable income of the affiliated group and, for the purpose of making the computations

required in section 718.02 of the Revised Code , exclude the property, payroll, and gross receipts of the pass-through entity in

the computation of the affiliated group's net profit sitused to a municipal corporation.  If the entity's net profit or loss is so excluded, the entity shall be subject to

taxation as a separate taxpayer on the basis of the entity's net profits that would

otherwise be included in the consolidated federal taxable income of the affiliated

group. (b) Include the pass-through entity's net profit or loss in the consolidated federal

taxable income of the affiliated group and, for the purpose of making the computations

required in section 718.02 of the Revised Code , include the property, payroll, and gross receipts of the pass-through entity in

the computation of the affiliated group's net profit sitused to a municipal corporation.  If the entity's net profit or loss is so included, the entity shall not be subject

to taxation as a separate taxpayer on the basis of the entity's net profits that are

included in the consolidated federal taxable income of the affiliated group. (4) If the net profit or loss of a pass-through entity having less than eighty per cent

of the value of its ownership interest owned or controlled, directly or indirectly,

by an affiliated group of corporations is included in that affiliated group's consolidated

federal taxable income for a taxable year, all of the following shall apply: (a) The corporation filing the consolidated municipal income tax return shall exclude

the pass-through entity's net profit or loss from the consolidated federal taxable

income of the affiliated group and, for the purposes of making the computations required

in section 718.02 of the Revised Code , exclude the property, payroll, and gross receipts of the pass-through entity in

the computation of the affiliated group's net profit sitused to a municipal corporation; (b) The pass-through entity shall be subject to municipal income taxation as a separate

taxpayer in accordance with this chapter on the basis of the entity's net profits

that would otherwise be included in the consolidated federal taxable income of the

affiliated group. (F) Corporations filing a consolidated municipal income tax return shall make the computations

required under section 718.02 of the Revised Code by substituting “consolidated federal taxable income attributable to” for “net profit

from” wherever “net profit from” appears in that section and by substituting “affiliated

group of corporations” for “taxpayer” wherever “taxpayer” appears in that section. (G) Each corporation filing a consolidated municipal income tax return is jointly and

severally liable for any tax, interest, penalties, fines, charges, or other amounts

imposed by a municipal corporation in accordance with this chapter on the corporation,

an affiliated group of which the corporation is a member for any portion of the taxable

year, or any one or more members of such an affiliated group. (H) Corporations and their affiliates that made an election or entered into an agreement

with a municipal corporation before January 1, 2016, to file a consolidated or combined

tax return with such municipal corporation may continue to file consolidated or combined

tax returns in accordance with such election or agreement for taxable years beginning

on and after January 1, 2016. 1

 26 U.S.C.A. § 1504. 2

 26 U.S.C.A. § 1501.