§ 311-59. Consolidated Return.

(a)

As used in this section:

(i)

"Affiliated group of corporations" means an affiliated group as defined in section 1504 of the Internal Revenue Code, 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.

(ii)

"Consolidated federal income tax return" means a consolidated return filed for federal income tax purposes pursuant to section 1501 of the Internal Revenue Code.

(iii)

"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 subsection (a)(i) of this section.

(iv)

"Incumbent local exchange carrier" has the same meaning as in section 4927.01 of the Revised Code.

(v)

"Local exchange telephone service" has the same meaning as in section 5727.01 of the Revised Code.

(b)

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 the affiliated group of corporations filed a consolidated federal income tax return with respect to that taxable year and if one of the following applies:

(i)

For tax years beginning prior to January 1, 2016, all of the members of the affiliated group of corporations are subject to the municipal income tax in that taxable year; or

(ii)

For tax years beginning on or after January 1, 2016, at least one member of the affiliated group of corporations is subject to the municipal income tax in that taxable year.

(c)

For tax years beginning prior to January 1, 2016:

(i)

An affiliated group of corporations subject to the tax imposed by this chapter that properly files a consolidated return in accordance with subsection (b)(i) of this section must file a consolidated return that includes those corporations in the group that are subject to municipal income tax for each succeeding taxable year in which the group files a consolidated return for federal income tax purposes unless, on or before the due date (taking into account extensions of time properly granted) of the return for a taxable year, the affiliated group obtains the permission of the tax commissioner to cease filing a consolidated return for that year;

(ii)

A consolidated return shall include information to disclose the net profit or loss of each corporate member of the group before consolidation;

(iii)

Profits and losses are combined after the schedules are separately applied to each respective corporation in the affiliated group;

(iv)

Losses incurred by a corporation prior to the period of the consolidation year may be carried forward to the period of consolidation and applied against the allocated profit or loss of the same corporation, but such loss may not be used to reduce the income of other corporate members of the consolidated filing;

(v)

If the tax commissioner finds net profits are not properly allocated to the Municipality for any reason, the filing of separate returns or other adjustments may be required by the tax commissioner as may be necessary to produce a fair and proper allocation;

(vi)

In the case of a corporation that carried on transactions with its stockholders or with other corporations related by stock ownership, interlocking directorates or some other method, or in case any person operates a division, branch, factory, office, laboratory or activity within the Municipality constituting only a portion of its total business, the tax commissioner shall require such additional information as the tax commissioner deems necessary to ascertain whether net profits are properly allocated to the Municipality. If the tax commissioner finds the net profits are not properly allocated to the Municipality by reason of transactions with stockholders or with other corporations related by stock ownership, interlocking directorates or transactions with a division, branch, factory, office, laboratory or activity, or by some other method, the tax commissioner shall make such adjustments to, and allocation of, net profits to fairly and reasonably reflect the proper allocation of net profits to the Municipality.

(d)

For tax years beginning on or after January 1, 2016:

(i)

An election made pursuant to subsection (b)(ii) of this section is binding for a five-year period beginning with the first (1 ^st ) taxable year of the initial election unless a change in the reporting method is required under federal law;

(1)

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 subsection (d)(i)(2) of this section or the taxpayer receives permission from the tax commissioner. The tax commissioner 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 (1 ^st ) year following the last year of a five-year consolidated municipal income tax return election period in effect under subsection (d)(i)(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 (1 ^st ) taxable year of the election;

(ii)

A taxpayer that is a member of an affiliated group of corporations that filed a consolidated federal income tax purposes pursuant to Section 1501 of the Internal Revenue Code return for a taxable year shall file a consolidated municipal income tax return for that taxable year if the tax commissioner 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 Municipality. 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 in all subsequent taxable years unless the taxpayer requests and receives written permission from the tax commissioner to file a separate return or a taxpayer has experienced a change in circumstances;

(iii)

(1)

Except as otherwise provided in subsections (d)(iii)(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 311-9-A1 of this chapter, 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 Section 311-9-A1 of this chapter 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 percent (80%) 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 311-13 of this chapter, 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 311-13 of this chapter, 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 percent (80%) 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 311-13 of this chapter, 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; and

(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;

(iv)

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)

An election made under subsections (b)(i), (b)(ii) or (d)(i)(2) of this Section 311-59 is binding on all members of the affiliated group of corporations subject to a municipal income tax.

(f)

Corporations filing a consolidated municipal income tax return shall make the computations required under Section 311-13 of this chapter 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.

(Ordained by Emer. Ord. No. 363-2015, § 2, eff. Jan. 1, 2016)