Bill Text: OH SB282 | 2013-2014 | 130th General Assembly | Introduced

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Bill Title: To prohibit municipal corporations from levying an income tax on nonresidents' compensation for personal services or net profits from a sole proprietorship.

Spectrum: Partisan Bill (Republican 2-0)

Status: (Introduced - Dead) 2014-02-18 - To Ways & Means [SB282 Detail]

Download: Ohio-2013-SB282-Introduced.html

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As Introduced

130th General Assembly Regular Session 2013-2014

S. B. No. 282

Senator Jordan 

Cosponsor: Senator Schaffer 

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A BILL

To amend sections 709.023, 718.01, 718.02, 718.04,

1

and 718.14 and to repeal section 718.011 of the

2

Revised Code to prohibit municipal corporations

3

from levying an income tax on nonresidents'

4

compensation for personal services or net profits

5

from a sole proprietorship.

6

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

Section 1. That sections 709.023, 718.01, 718.02, 718.04, and	7
718.14 of the Revised Code be amended to read as follows:	8

Sec. 709.023. (A) A petition filed under section 709.021 of	9
the Revised Code that requests to follow this section is for the	10
special procedure of annexing land into a municipal corporation	11
when, subject to division (H) of this section, the land also is	12
not to be excluded from the township under section 503.07 of the	13
Revised Code. The owners who sign this petition by their signature	14
expressly waive their right to appeal in law or equity from the	15
board of county commissioners' entry of any resolution under this	16
section, waive any rights they may have to sue on any issue	17
relating to a municipal corporation requiring a buffer as provided	18
in this section, and waive any rights to seek a variance that	19
would relieve or exempt them from that buffer requirement.	20

The petition circulated to collect signatures for the special	21
procedure in this section shall contain in boldface capital	22
letters immediately above the heading of the place for signatures	23
on each part of the petition the following: "WHOEVER SIGNS THIS	24
PETITION EXPRESSLY WAIVES THEIR RIGHT TO APPEAL IN LAW OR EQUITY	25
FROM THE BOARD OF COUNTY COMMISSIONERS' ENTRY OF ANY RESOLUTION	26
PERTAINING TO THIS SPECIAL ANNEXATION PROCEDURE, ALTHOUGH A WRIT	27
OF MANDAMUS MAY BE SOUGHT TO COMPEL THE BOARD TO PERFORM ITS	28
DUTIES REQUIRED BY LAW FOR THIS SPECIAL ANNEXATION PROCEDURE."	29

(B) Upon the filing of the petition in the office of the	30
clerk of the board of county commissioners, the clerk shall cause	31
the petition to be entered upon the board's journal at its next	32
regular session. This entry shall be the first official act of the	33
board on the petition. Within five days after the filing of the	34
petition, the agent for the petitioners shall notify in the manner	35
and form specified in this division the clerk of the legislative	36
authority of the municipal corporation to which annexation is	37
proposed, the fiscal officer of each township any portion of which	38
is included within the territory proposed for annexation, the	39
clerk of the board of county commissioners of each county in which	40
the territory proposed for annexation is located other than the	41
county in which the petition is filed, and the owners of property	42
adjacent to the territory proposed for annexation or adjacent to a	43
road that is adjacent to that territory and located directly	44
across that road from that territory. The notice shall refer to	45
the time and date when the petition was filed and the county in	46
which it was filed and shall have attached or shall be accompanied	47
by a copy of the petition and any attachments or documents	48
accompanying the petition as filed.	49

Notice to a property owner is sufficient if sent by regular	50
United States mail to the tax mailing address listed on the county	51
auditor's records. Notice to the appropriate government officer	52
shall be given by certified mail, return receipt requested, or by	53
causing the notice to be personally served on the officer, with	54
proof of service by affidavit of the person who delivered the	55
notice. Proof of service of the notice on each appropriate	56
government officer shall be filed with the board of county	57
commissioners with which the petition was filed.	58

(C) Within twenty days after the date that the petition is	59
filed, the legislative authority of the municipal corporation to	60
which annexation is proposed shall adopt an ordinance or	61
resolution stating what services the municipal corporation will	62
provide, and an approximate date by which it will provide them, to	63
the territory proposed for annexation, upon annexation. The	64
municipal corporation is entitled in its sole discretion to	65
provide to the territory proposed for annexation, upon annexation,	66
services in addition to the services described in that ordinance	67
or resolution.	68

If the territory proposed for annexation is subject to zoning	69
regulations adopted under either Chapter 303. or 519. of the	70
Revised Code at the time the petition is filed, the legislative	71
authority of the municipal corporation also shall adopt an	72
ordinance or resolution stating that, if the territory is annexed	73
and becomes subject to zoning by the municipal corporation and	74
that municipal zoning permits uses in the annexed territory that	75
the municipal corporation determines are clearly incompatible with	76
the uses permitted under current county or township zoning	77
regulations in the adjacent land remaining within the township	78
from which the territory was annexed, the legislative authority of	79
the municipal corporation will require, in the zoning ordinance	80
permitting the incompatible uses, the owner of the annexed	81
territory to provide a buffer separating the use of the annexed	82
territory and the adjacent land remaining within the township. For	83
the purposes of this section, "buffer" includes open space,	84
landscaping, fences, walls, and other structured elements; streets	85
and street rights-of-way; and bicycle and pedestrian paths and	86
sidewalks.	87

The clerk of the legislative authority of the municipal	88
corporation to which annexation is proposed shall file the	89
ordinances or resolutions adopted under this division with the	90
board of county commissioners within twenty days following the	91
date that the petition is filed. The board shall make these	92
ordinances or resolutions available for public inspection.	93

(D) Within twenty-five days after the date that the petition	94
is filed, the legislative authority of the municipal corporation	95
to which annexation is proposed and each township any portion of	96
which is included within the territory proposed for annexation may	97
adopt and file with the board of county commissioners an ordinance	98
or resolution consenting or objecting to the proposed annexation.	99
An objection to the proposed annexation shall be based solely upon	100
the petition's failure to meet the conditions specified in	101
division (E) of this section.	102

If the municipal corporation and each of those townships	103
timely files an ordinance or resolution consenting to the proposed	104
annexation, the board at its next regular session shall enter upon	105
its journal a resolution granting the proposed annexation. If,	106
instead, the municipal corporation or any of those townships files	107
an ordinance or resolution that objects to the proposed	108
annexation, the board of county commissioners shall proceed as	109
provided in division (E) of this section. Failure of the municipal	110
corporation or any of those townships to timely file an ordinance	111
or resolution consenting or objecting to the proposed annexation	112
shall be deemed to constitute consent by that municipal	113
corporation or township to the proposed annexation.	114

(E) Unless the petition is granted under division (D) of this	115
section, not less than thirty or more than forty-five days after	116
the date that the petition is filed, the board of county	117
commissioners shall review it to determine if each of the	118
following conditions has been met:	119

(1) The petition meets all the requirements set forth in, and	120
was filed in the manner provided in, section 709.021 of the	121
Revised Code.	122

(2) The persons who signed the petition are owners of the	123
real estate located in the territory proposed for annexation and	124
constitute all of the owners of real estate in that territory.	125

(3) The territory proposed for annexation does not exceed	126
five hundred acres.	127

(4) The territory proposed for annexation shares a contiguous	128
boundary with the municipal corporation to which annexation is	129
proposed for a continuous length of at least five per cent of the	130
perimeter of the territory proposed for annexation.	131

(5) The annexation will not create an unincorporated area of	132
the township that is completely surrounded by the territory	133
proposed for annexation.	134

(6) The municipal corporation to which annexation is proposed	135
has agreed to provide to the territory proposed for annexation the	136
services specified in the relevant ordinance or resolution adopted	137
under division (C) of this section.	138

(7) If a street or highway will be divided or segmented by	139
the boundary line between the township and the municipal	140
corporation as to create a road maintenance problem, the municipal	141
corporation to which annexation is proposed has agreed as a	142
condition of the annexation to assume the maintenance of that	143
street or highway or to otherwise correct the problem. As used in	144
this section, "street" or "highway" has the same meaning as in	145
section 4511.01 of the Revised Code.	146

(F) Not less than thirty or more than forty-five days after	147
the date that the petition is filed, if the petition is not	148
granted under division (D) of this section, the board of county	149
commissioners, if it finds that each of the conditions specified	150
in division (E) of this section has been met, shall enter upon its	151
journal a resolution granting the annexation. If the board of	152
county commissioners finds that one or more of the conditions	153
specified in division (E) of this section have not been met, it	154
shall enter upon its journal a resolution that states which of	155
those conditions the board finds have not been met and that denies	156
the petition.	157

(G) If a petition is granted under division (D) or (F) of	158
this section, the clerk of the board of county commissioners shall	159
proceed as provided in division (C)(1) of section 709.033 of the	160
Revised Code, except that no recording or hearing exhibits would	161
be involved. There is no appeal in law or equity from the board's	162
entry of any resolution under this section, but any party may seek	163
a writ of mandamus to compel the board of county commissioners to	164
perform its duties under this section.	165

(H) Notwithstanding anything to the contrary in section	166
503.07 of the Revised Code, unless otherwise provided in an	167
annexation agreement entered into pursuant to section 709.192 of	168
the Revised Code or in a cooperative economic development	169
agreement entered into pursuant to section 701.07 of the Revised	170
Code, territory annexed into a municipal corporation pursuant to	171
this section shall not at any time be excluded from the township	172
under section 503.07 of the Revised Code and, thus, remains	173
subject to the township's real property taxes.	174

(I) Any owner of land that remains within a township and that	175
is adjacent to territory annexed pursuant to this section who is	176
directly affected by the failure of the annexing municipal	177
corporation to enforce compliance with any zoning ordinance it	178
adopts under division (C) of this section requiring the owner of	179
the annexed territory to provide a buffer zone, may commence in	180
the court of common pleas a civil action against that owner to	181
enforce compliance with that buffer requirement whenever the	182
required buffer is not in place before any development of the	183
annexed territory begins.	184

(J) Division (H)(12) of section 718.01 of the Revised Code	185
applies to the compensation paid to persons performing personal	186
services for a political subdivision on property owned by the	187
political subdivision after that property is annexed to a	188
municipal corporation under this section.	189

Sec. 718.01.  (A) As used in this chapter:

190

(1) "Adjusted federal taxable income" means a C corporation's	191
federal taxable income before net operating losses and special	192
deductions as determined under the Internal Revenue Code, adjusted	193
as follows:	194

(a) Deduct intangible income to the extent included in	195
federal taxable income. The deduction shall be allowed regardless	196
of whether the intangible income relates to assets used in a trade	197
or business or assets held for the production of income.	198

(b) Add an amount equal to five per cent of intangible income	199
deducted under division (A)(1)(a) of this section, but excluding	200
that portion of intangible income directly related to the sale,	201
exchange, or other disposition of property described in section	202
1221 of the Internal Revenue Code;	203

(c) Add any losses allowed as a deduction in the computation	204
of federal taxable income if the losses directly relate to the	205
sale, exchange, or other disposition of an asset described in	206
section 1221 or 1231 of the Internal Revenue Code;	207

(d)(i) Except as provided in division (A)(1)(d)(ii) of this	208
section, deduct income and gain included in federal taxable income	209
to the extent the income and gain directly relate to the sale,	210
exchange, or other disposition of an asset described in section	211
1221 or 1231 of the Internal Revenue Code;	212

(ii) Division (A)(1)(d)(i) of this section does not apply to	213
the extent the income or gain is income or gain described in	214
section 1245 or 1250 of the Internal Revenue Code.	215

(e) Add taxes on or measured by net income allowed as a	216
deduction in the computation of federal taxable income;	217

(f) In the case of a real estate investment trust and	218
regulated investment company, add all amounts with respect to	219
dividends to, distributions to, or amounts set aside for or	220
credited to the benefit of investors and allowed as a deduction in	221
the computation of federal taxable income;	222

(g) Deduct, to the extent not otherwise deducted or excluded	223
in computing federal taxable income, any income derived from a	224
transfer agreement or from the enterprise transferred under that	225
agreement under section 4313.02 of the Revised Code.	226

If the taxpayer is not a C corporation and is not an	227
individual, the taxpayer shall compute adjusted federal taxable	228
income as if the taxpayer were a C corporation, except guaranteed	229
payments and other similar amounts paid or accrued to a partner,	230
former partner, member, or former member shall not be allowed as a	231
deductible expense; amounts paid or accrued to a qualified	232
self-employed retirement plan with respect to an owner or	233
owner-employee of the taxpayer, amounts paid or accrued to or for	234
health insurance for an owner or owner-employee, and amounts paid	235
or accrued to or for life insurance for an owner or owner-employee	236
shall not be allowed as a deduction.	237

Nothing in division (A)(1) of this section shall be construed	238
as allowing the taxpayer to add or deduct any amount more than	239
once or shall be construed as allowing any taxpayer to deduct any	240
amount paid to or accrued for purposes of federal self-employment	241
tax.	242

Nothing in this chapter shall be construed as limiting or	243
removing the ability of any municipal corporation to administer,	244
audit, and enforce the provisions of its municipal income tax.	245

(2) "Internal Revenue Code" means the Internal Revenue Code	246
of 1986, 100 Stat. 2085, 26 U.S.C. 1, as amended.	247

(3) "Schedule C" means internal revenue service schedule C	248
filed by a taxpayer pursuant to the Internal Revenue Code.	249

(4) "Form 2106" means internal revenue service form 2106	250
filed by a taxpayer pursuant to the Internal Revenue Code.	251

(5) "Intangible income" means income of any of the following	252
types: income yield, interest, capital gains, dividends, or other	253
income arising from the ownership, sale, exchange, or other	254
disposition of intangible property including, but not limited to,	255
investments, deposits, money, or credits as those terms are	256
defined in Chapter 5701. of the Revised Code, and patents,	257
copyrights, trademarks, tradenames, investments in real estate	258
investment trusts, investments in regulated investment companies,	259
and appreciation on deferred compensation. "Intangible income"	260
does not include prizes, awards, or other income associated with	261
any lottery winnings or other similar games of chance.	262

(6) "S corporation" means a corporation that has made an	263
election under subchapter S of Chapter 1 of Subtitle A of the	264
Internal Revenue Code for its taxable year.	265

(7) For taxable years beginning on or after January 1, 2004,	266
"net profit" for a taxpayer other than an individual means	267
adjusted federal taxable income and "net profit" for a taxpayer	268
who is an individual means the individual's profit required to be	269
reported on schedule C, schedule E, or schedule F, other than any	270
amount allowed as a deduction under division (E)(2) or (3) of this	271
section or amounts described in division (H) of this section.	272

(8) "Taxpayer" means a person subject to a tax on income	273
levied by a municipal corporation. Except as provided in division	274
(L) of this section, "taxpayer" does not include any person that	275
is a disregarded entity or a qualifying subchapter S subsidiary	276
for federal income tax purposes, but "taxpayer" includes any other	277
person who owns the disregarded entity or qualifying subchapter S	278
subsidiary.	279

(9) "Taxable year" means the corresponding tax reporting	280
period as prescribed for the taxpayer under the Internal Revenue	281
Code.	282

(10) "Tax administrator" means the individual charged with	283
direct responsibility for administration of a tax on income levied	284
by a municipal corporation and includes:	285

(a) The central collection agency and the regional income tax	286
agency and their successors in interest, and other entities	287
organized to perform functions similar to those performed by the	288
central collection agency and the regional income tax agency;	289

(b) A municipal corporation acting as the agent of another	290
municipal corporation; and	291

(c) Persons retained by a municipal corporation to administer	292
a tax levied by the municipal corporation, but only if the	293
municipal corporation does not compensate the person in whole or	294
in part on a contingency basis.	295

(11) "Person" includes individuals, firms, companies,	296
business trusts, estates, trusts, partnerships, limited liability	297
companies, associations, corporations, governmental entities, and	298
any other entity.	299

(12) "Schedule E" means internal revenue service schedule E	300
filed by a taxpayer pursuant to the Internal Revenue Code.	301

(13) "Schedule F" means internal revenue service schedule F	302
filed by a taxpayer pursuant to the Internal Revenue Code.	303

(B) No municipal corporation shall tax income at other than a	304
uniform rate.	305

(C) No municipal corporation shall levy a tax on income at a	306
rate in excess of one per cent without having obtained the	307
approval of the excess by a majority of the electors of the	308
municipality voting on the question at a general, primary, or	309
special election. The legislative authority of the municipal	310
corporation shall file with the board of elections at least ninety	311
days before the day of the election a copy of the ordinance	312
together with a resolution specifying the date the election is to	313
be held and directing the board of elections to conduct the	314
election. The ballot shall be in the following form: "Shall the	315
Ordinance providing for a ... per cent levy on income for (Brief	316
description of the purpose of the proposed levy) be passed?	317

318

		FOR THE INCOME TAX			319
		AGAINST THE INCOME TAX	"		320

321

In the event of an affirmative vote, the proceeds of the levy	322
may be used only for the specified purpose.	323

(D)(1) Except as otherwise provided in this section and	324
section 718.04 of the Revised Code, no municipal corporation shall	325
exempt from a tax on income compensation for personal services of	326
individuals over eighteen years of age or the net profit from a	327
business or profession.	328

(2)(a) For taxable years beginning on or after January 1,	329
2004, no municipal corporation shall tax the net profit from a	330
business or profession using any base other than the taxpayer's	331
adjusted federal taxable income.	332

(b) Division (D)(2)(a) of this section does not apply to any	333
taxpayer required to file a return under section 5745.03 of the	334
Revised Code or to the net profit from a sole proprietorship.	335

(E)(1) The legislative authority of a municipal corporation	336
may, by ordinance or resolution, exempt from withholding and from	337
a tax on income the following:	338

(a) Compensation arising from the sale, exchange, or other	339
disposition of a stock option, the exercise of a stock option, or	340
the sale, exchange, or other disposition of stock purchased under	341
a stock option; or	342

(b) Compensation attributable to a nonqualified deferred	343
compensation plan or program described in section 3121(v)(2)(C) of	344
the Internal Revenue Code.	345

(2) The legislative authority of a municipal corporation may	346
adopt an ordinance or resolution that allows a taxpayer who is an	347
individual to deduct, in computing the taxpayer's municipal income	348
tax liability, an amount equal to the aggregate amount the	349
taxpayer paid in cash during the taxable year to a health savings	350
account of the taxpayer, to the extent the taxpayer is entitled to	351
deduct that amount on internal revenue service form 1040.	352

(3) The legislative authority of a municipal corporation may	353
adopt an ordinance or resolution that allows a taxpayer who has a	354
net profit from a business or profession that is operated as a	355
sole proprietorship to deduct from that net profit the amount that	356
the taxpayer paid during the taxable year for medical care	357
insurance premiums for the taxpayer, the taxpayer's spouse, and	358
dependents as defined in section 5747.01 of the Revised Code. The	359
deduction shall be allowed to the same extent the taxpayer is	360
entitled to deduct the premiums on internal revenue service form	361
1040. The deduction allowed under this division shall be net of	362
any related premium refunds, related premium reimbursements, or	363
related insurance premium dividends received by the taxpayer	364
during the taxable year.	365

(F) If an individual's taxable income includes income against	366
which the taxpayer has taken a deduction for federal income tax	367
purposes as reportable on the taxpayer's form 2106, and against	368
which a like deduction has not been allowed by the municipal	369
corporation, the municipal corporation shall deduct from the	370
taxpayer's taxable income an amount equal to the deduction shown	371
on such form allowable against such income, to the extent not	372
otherwise so allowed as a deduction by the municipal corporation.	373

(G)(1) In the case of a taxpayer who has a net profit from a	374
business or profession that is operated as a sole proprietorship,	375
no municipal corporation may tax or use as the base for	376
determining the amount of the net profit that shall be considered	377
as having a taxable situs in the municipal corporation, an amount	378
other than the net profit required to be reported by the taxpayer	379
on schedule C or F from such sole proprietorship for the taxable	380
year.	381

(2) In the case of a taxpayer who has a net profit from	382
rental activity required to be reported on schedule E, no	383
municipal corporation may tax or use as the base for determining	384
the amount of the net profit that shall be considered as having a	385
taxable situs in the municipal corporation, an amount other than	386
the net profit from rental activities required to be reported by	387
the taxpayer on schedule E for the taxable year.	388

(H) A municipal corporation shall not tax any of the	389
following:	390

(1) The military pay or allowances of members of the armed	391
forces of the United States and of members of their reserve	392
components, including the Ohio national guard;	393

(2) The income of religious, fraternal, charitable,	394
scientific, literary, or educational institutions to the extent	395
that such income is derived from tax-exempt real estate,	396
tax-exempt tangible or intangible property, or tax-exempt	397
activities;	398

(3) Except as otherwise provided in division (I) of this	399
section, intangible income;	400

(4) Compensation paid under section 3501.28 or 3501.36 of the	401
Revised Code to a person serving as a precinct election official,	402
to the extent that such compensation does not exceed one thousand	403
dollars annually. Such compensation in excess of one thousand	404
dollars may be subjected to taxation by a municipal corporation. A	405
municipal corporation shall not require the payer of such	406
compensation to withhold any tax from that compensation.	407

(5) Compensation paid to an employee of a transit authority,	408
regional transit authority, or regional transit commission created	409
under Chapter 306. of the Revised Code for operating a transit bus	410
or other motor vehicle for the authority or commission in or	411
through the municipal corporation, unless the bus or vehicle is	412
operated on a regularly scheduled route, the operator is subject	413
to such a tax by reason of residence or domicile in the municipal	414
corporation, or the headquarters of the authority or commission is	415
located within the municipal corporation;	416

(6) The income of a public utility, when that public utility	417
is subject to the tax levied under section 5727.24 or 5727.30 of	418
the Revised Code, except a municipal corporation may tax the	419
following, subject to Chapter 5745. of the Revised Code:	420

(a) Beginning January 1, 2002, the income of an electric	421
company or combined company;	422

(b) Beginning January 1, 2004, the income of a telephone	423
company.	424

As used in division (H)(6)(5) of this section, "combined	425
company," "electric company," and "telephone company" have the	426
same meanings as in section 5727.01 of the Revised Code.	427

(7)(6) On and after January 1, 2003, items excluded from	428
federal gross income pursuant to section 107 of the Internal	429
Revenue Code;	430

(8) On and after January 1, 2001, compensation paid to a	431
nonresident individual to the extent prohibited under section	432
718.011 of the Revised Code;	433

(9)(7)(a) Except as provided in divisions (H)(9)(7)(b) and	434
(c) of this section, an S corporation shareholder's distributive	435
share of net profits of the S corporation, other than any part of	436
the distributive share of net profits that represents wages as	437
defined in section 3121(a) of the Internal Revenue Code or net	438
earnings from self-employment as defined in section 1402(a) of the	439
Internal Revenue Code.	440

(b) If, pursuant to division (H) of former section 718.01 of	441
the Revised Code as it existed before March 11, 2004, a majority	442
of the electors of a municipal corporation voted in favor of the	443
question at an election held on November 4, 2003, the municipal	444
corporation may continue after 2002 to tax an S corporation	445
shareholder's distributive share of net profits of an S	446
corporation.	447

(c) If, on December 6, 2002, a municipal corporation was	448
imposing, assessing, and collecting a tax on an S corporation	449
shareholder's distributive share of net profits of the S	450
corporation to the extent the distributive share would be	451
allocated or apportioned to this state under divisions (B)(1) and	452
(2) of section 5733.05 of the Revised Code if the S corporation	453
were a corporation subject to taxes imposed under Chapter 5733. of	454
the Revised Code, the municipal corporation may continue to impose	455
the tax on such distributive shares to the extent such shares	456
would be so allocated or apportioned to this state only until	457
December 31, 2004, unless a majority of the electors of the	458
municipal corporation voting on the question of continuing to tax	459
such shares after that date vote in favor of that question at an	460
election held November 2, 2004. If a majority of those electors	461
vote in favor of the question, the municipal corporation may	462
continue after December 31, 2004, to impose the tax on such	463
distributive shares only to the extent such shares would be so	464
allocated or apportioned to this state.	465

(d) For the purposes of division (D)(C) of section 718.14 of	466
the Revised Code, a municipal corporation shall be deemed to have	467
elected to tax S corporation shareholders' distributive shares of	468
net profits of the S corporation in the hands of the shareholders	469
if a majority of the electors of a municipal corporation vote in	470
favor of a question at an election held under division	471
(H)(9)(7)(b) or (c) of this section. The municipal corporation	472
shall specify by ordinance or rule that the tax applies to the	473
distributive share of a shareholder of an S corporation in the	474
hands of the shareholder of the S corporation.	475

(10)(8) Employee compensation that is not "qualifying wages"	476
as defined in section 718.03 of the Revised Code;	477

(11) Beginning August 1, 2007, compensation paid to a person	478
employed within the boundaries of a United States air force base	479
under the jurisdiction of the United States air force that is used	480
for the housing of members of the United States air force and is a	481
center for air force operations, unless the person is subject to	482
taxation because of residence or domicile. If the compensation is	483
subject to taxation because of residence or domicile, municipal	484
income tax shall be payable only to the municipal corporation of	485
residence or domicile.	486

(12) Compensation paid to a person for personal services	487
performed for a political subdivision on property owned by the	488
political subdivision, regardless of whether the compensation is	489
received by an employee of the subdivision or another person	490
performing services for the subdivision under a contract with the	491
subdivision, if the property on which services are performed is	492
annexed to a municipal corporation pursuant to section 709.023 of	493
the Revised Code on or after March 27, 2013, unless the person is	494
subject to such taxation because of residence or domicile. If the	495
compensation is subject to taxation because of residence or	496
domicile, municipal income tax shall be payable only to the	497
municipal corporation of residence or domicile.	498

(I) Any municipal corporation that taxes any type of	499
intangible income on March 29, 1988, pursuant to Section 3 of	500
Amended Substitute Senate Bill No. 238 of the 116th general	501
assembly, may continue to tax that type of income after 1988 if a	502
majority of the electors of the municipal corporation voting on	503
the question of whether to permit the taxation of that type of	504
intangible income after 1988 vote in favor thereof at an election	505
held on November 8, 1988.	506

(J) Nothing in this section or section 718.02 of the Revised	507
Code shall authorize the levy of any tax on income that a	508
municipal corporation is not authorized to levy under existing	509
laws or shall require a municipal corporation to allow a deduction	510
from taxable income for losses incurred from a sole proprietorship	511
or partnership.	512

(K)(1) Nothing in this chapter prohibits a municipal	513
corporation from allowing, by resolution or ordinance, a net	514
operating loss carryforward.	515

(2) Nothing in this chapter requires a municipal corporation	516
to allow a net operating loss carryforward.	517

(L)(1) A single member limited liability company that is a	518
disregarded entity for federal tax purposes may elect to be a	519
separate taxpayer from its single member in all Ohio municipal	520
corporations in which it either filed as a separate taxpayer or	521
did not file for its taxable year ending in 2003, if all of the	522
following conditions are met:	523

(a) The limited liability company's single member is also a	524
limited liability company;	525

(b) The limited liability company and its single member were	526
formed and doing business in one or more Ohio municipal	527
corporations for at least five years before January 1, 2004;	528

(c) Not later than December 31, 2004, the limited liability	529
company and its single member each make an election to be treated	530
as a separate taxpayer under division (L) of this section;	531

(d) The limited liability company was not formed for the	532
purpose of evading or reducing Ohio municipal corporation income	533
tax liability of the limited liability company or its single	534
member;	535

(e) The Ohio municipal corporation that is the primary place	536
of business of the sole member of the limited liability company	537
consents to the election.	538

(2) For purposes of division (L)(1)(e) of this section, a	539
municipal corporation is the primary place of business of a	540
limited liability company if, for the limited liability company's	541
taxable year ending in 2003, its income tax liability is greater	542
in that municipal corporation than in any other municipal	543
corporation in Ohio, and that tax liability to that municipal	544
corporation for its taxable year ending in 2003 is at least four	545
hundred thousand dollars.	546

Sec. 718.02.  This section does not apply to taxpayers that	547
are subject to and required to file reports under Chapter 5745. of	548
the Revised Code or to taxpayers with a net profit from a business	549
or profession operated as a sole proprietorship.	550

(A) Except as otherwise provided in division (D) of this	551
section, net profit from a business or profession conducted both	552
within and without the boundaries of a municipal corporation shall	553
be considered as having a taxable situs in such municipal	554
corporation for purposes of municipal income taxation in the same	555
proportion as the average ratio of the following:	556

(1) The average original cost of the real and tangible	557
personal property owned or used by the taxpayer in the business or	558
profession in such municipal corporation during the taxable period	559
to the average original cost of all of the real and tangible	560
personal property owned or used by the taxpayer in the business or	561
profession during the same period, wherever situated.	562

As used in the preceding paragraph, real property shall	563
include property rented or leased by the taxpayer and the value of	564
such property shall be determined by multiplying the annual rental	565
thereon by eight;	566

(2) Wages, salaries, and other compensation paid during the	567
taxable period to persons employed in the business or profession	568
for services performed in such municipal corporation to wages,	569
salaries, and other compensation paid during the same period to	570
persons employed in the business or profession, wherever their	571
services are performed, excluding compensation that is not taxable	572
by the municipal corporation under section 718.011 of the Revised	573
Code;	574

(3) Gross receipts of the business or profession from sales	575
made and services performed during the taxable period in such	576
municipal corporation to gross receipts of the business or	577
profession during the same period from sales and services,	578
wherever made or performed.	579

If the foregoing apportionment formula does not produce an	580
equitable result, another basis may be substituted, under uniform	581
regulations, so as to produce an equitable result.	582

(B) As used in division (A) of this section, "sales made in a	583
municipal corporation" mean:	584

(1) All sales of tangible personal property delivered within	585
such municipal corporation regardless of where title passes if	586
shipped or delivered from a stock of goods within such municipal	587
corporation;	588

(2) All sales of tangible personal property delivered within	589
such municipal corporation regardless of where title passes even	590
though transported from a point outside such municipal corporation	591
if the taxpayer is regularly engaged through its own employees in	592
the solicitation or promotion of sales within such municipal	593
corporation and the sales result from such solicitation or	594
promotion;	595

(3) All sales of tangible personal property shipped from a	596
place within such municipal corporation to purchasers outside such	597
municipal corporation regardless of where title passes if the	598
taxpayer is not, through its own employees, regularly engaged in	599
the solicitation or promotion of sales at the place where delivery	600
is made.	601

(C) Except as otherwise provided in division (D) of this	602
section, net profit from rental activity not constituting a	603
business or profession shall be subject to tax only by the	604
municipal corporation in which the property generating the net	605
profit is located.	606

(D) This section does not apply toNothing in this section	607
prohibits a municipal corporation from imposing a tax on all	608
income earned by individuals who are residents of the municipal	609
corporation and, except as otherwise provided in section 718.01 of	610
the Revised Code, a municipal corporation may impose a tax on all	611
income earned by residents of the municipal corporation to the	612
extent allowed by the United States Constitution and section	613
718.01 of the Revised Code.	614

(E) If, in computing the taxpayer's adjusted federal taxable	615
income, the taxpayer deducted any amount with respect to a stock	616
option granted to an employee, and if the employee is not required	617
to include in income any amount or any portion thereof because it	618
is exempted from taxation under division (H)(10)(8) of section	619
718.01 of the Revised Code and division (A)(2)(d) of section	620
718.03 of the Revised Code by a municipal corporation to which the	621
taxpayer has apportioned a portion of its net profit, the taxpayer	622
shall add the amount that is exempt from taxation to the	623
taxpayer's net profit that was apportioned to that municipal	624
corporation. In no case shall a taxpayer be required to add to its	625
net profit that was apportioned to that municipal corporation any	626
amount other than the amount upon which the employee would be	627
required to pay tax were the amount related to the stock option	628
not exempted from taxation.	629

This division applies solely for the purpose of making an	630
adjustment to the amount of a taxpayer's net profit that was	631
apportioned to a municipal corporation under divisions (A) and (B)	632
of this section.	633

Sec. 718.04.  (A) Except as otherwise provided in section	634
718.01 of the Revised Code, a municipal corporation may impose a	635
tax on all income earned by residents of the municipal corporation	636
to the extent allowed by the United States Constitution.	637

(B) No municipal corporation other than the municipal	638
corporation of residence shall levy a tax on the income of any	639
member or employee of the Ohio general assembly including the	640
lieutenant governor which income is received as a result of	641
services rendered as such member or employee and is paid from	642
appropriated funds of this state.	643

(B) No municipal corporation other than the municipal	644
corporation of residence and the city of Columbus shall levy a tax	645
on the income of the chief justice or a justice of the supreme	646
court received as a result of services rendered as the chief	647
justice or justice. No municipal corporation other than the	648
municipal corporation of residence shall levy a tax on the income	649
of a judge sitting by assignment of the chief justice or on the	650
income of a district court of appeals judge sitting in multiple	651
locations within the district, received as a result of services	652
rendered as a judgethe compensation for personal services of a	653
nonresident individual or on the net profit from a business or	654
profession operated as a sole proprietorship of a nonresident.	655

Sec. 718.14.  (A) As used in this section:

656

(1) "Limited liability company" means a limited liability	657
company formed under Chapter 1705. of the Revised Code or under	658
the laws of another state.	659

(2) "Pass-through entity" means a partnership, limited	660
liability company, S corporation, or any other class of entity the	661
income or profits from which are given pass-through treatment	662
under the Internal Revenue Code.	663

(3) "Income from a pass-through entity" means partnership	664
income of partners, membership interests of members of a limited	665
liability company, distributive shares of shareholders of an S	666
corporation, or other distributive or proportionate ownership	667
shares of income from other pass-through entities.	668

(4) "Owner" means a partner of a partnership, a member of a	669
limited liability company, a shareholder of an S corporation, or	670
other person with an ownership interest in a pass-through entity.	671

(5) "Owner's proportionate share," with respect to each owner	672
of a pass-through entity, means the ratio of (a) the owner's	673
income from the pass-through entity that is subject to taxation by	674
the municipal corporation, to (b) the total income from that	675
entity of all owners whose income from the entity is subject to	676
taxation by that municipal corporation.	677

(B) On and after January 1, 2003, any municipal corporation	678
imposing a tax that applies to income from a pass-through entity	679
shall grant a credit to each owner who is domiciled in the	680
municipal corporation for taxes paid to another municipal	681
corporation by a pass-through entity that does not conduct	682
business in the municipal corporation. The amount of the credit	683
shall equal the lesser of the following amounts, subject to	684
division (C) of this section:	685

(1) The owner's proportionate share of the amount, if any, of	686
tax paid by the pass-through entity to another municipal	687
corporation in this state;	688

(2) The owner's proportionate share of the amount of tax that	689
would be imposed on the pass-through entity by the municipal	690
corporation in which the taxpayer is domiciled if the pass-through	691
entity conducted business in the municipal corporation.	692

(C) If a municipal corporation grants a credit for a	693
percentage, less than one hundred per cent, of the amount of	694
income taxes paid on compensation by an individual who resides or	695
is domiciled in the municipal corporation to another municipal	696
corporation, the amount of credit otherwise required by division	697
(B) of this section shall be multiplied by that percentage.	698

(D) On and after January 1, 2003, any municipal corporation	699
that imposes a tax on income of or from a pass-through entity	700
shall specify by ordinance or rule whether the tax applies to	701
income of the pass-through entity in the hands of the entity or to	702
income from the pass-through entity in the hands of the owners of	703
the entity. A municipal corporation may specify a different	704
ordinance or rule under this division for each of the classes of	705
pass-through entity enumerated in division (A)(2) of this section.	706

Section 2. That existing sections 709.023, 718.01, 718.02,	707
718.04, and 718.14 and section 718.011 of the Revised Code are	708
hereby repealed.	709

Section 3. The amendment and repeal by this act of sections	710
709.023, 718.01, 718.011, 718.02, 718.04, and 718.14 of the	711
Revised Code shall apply to taxable years beginning on or after	712
the effective date of this act.	713