Bill Title: To eliminate authority of municipal corporations to exempt stock options and nonqualified deferred compensation from municipal income taxation.
Spectrum: Partisan Bill (Democrat 1-0)
Status: (Introduced - Dead) 2009-11-19 - To Ways & Means
[HB378 Detail]Download: Ohio-2009-HB378-Introduced.html
As Introduced
128th General Assembly | Regular Session | 2009-2010 |
| |
A BILL
| To amend sections 718.01, 718.02, and 718.03 of the | 1 |
|
Revised Code to eliminate authority of municipal | 2 |
|
corporations to exempt stock options and | 3 |
|
nonqualified deferred compensation from municipal | 4 |
BE IT ENACTED BY THE GENERAL ASSEMBLY OF THE STATE OF OHIO:
Section 1. That sections 718.01, 718.02, and 718.03 of the | 6 |
Revised Code be amended to read as follows: | 7 |
Sec. 718.01. (A) As used in this chapter: | 8 |
(1) "Adjusted federal taxable income" means a C corporation's | 9 |
federal taxable income before net operating losses and special | 10 |
deductions as determined under the Internal Revenue Code, adjusted | 11 |
as follows: | 12 |
(a) Deduct intangible income to the extent included in | 13 |
federal taxable income. The deduction shall be allowed regardless | 14 |
of whether the intangible income relates to assets used in a trade | 15 |
or business or assets held for the production of income. | 16 |
(b) Add an amount equal to five per cent of intangible income | 17 |
deducted under division (A)(1)(a) of this section, but excluding | 18 |
that portion of intangible income directly related to the sale, | 19 |
exchange, or other disposition of property described in section | 20 |
1221 of the Internal Revenue Code; | 21 |
(c) Add any losses allowed as a deduction in the computation | 22 |
of federal taxable income if the losses directly relate to the | 23 |
sale, exchange, or other disposition of an asset described in | 24 |
section 1221 or 1231 of the Internal Revenue Code; | 25 |
(d)(i) Except as provided in division (A)(1)(d)(ii) of this | 26 |
section, deduct income and gain included in federal taxable income | 27 |
to the extent the income and gain directly relate to the sale, | 28 |
exchange, or other disposition of an asset described in section | 29 |
1221 or 1231 of the Internal Revenue Code; | 30 |
(ii) Division (A)(1)(d)(i) of this section does not apply to | 31 |
the extent the income or gain is income or gain described in | 32 |
section 1245 or 1250 of the Internal Revenue Code. | 33 |
(e) Add taxes on or measured by net income allowed as a | 34 |
deduction in the computation of federal taxable income; | 35 |
(f) In the case of a real estate investment trust and | 36 |
regulated investment company, add all amounts with respect to | 37 |
dividends to, distributions to, or amounts set aside for or | 38 |
credited to the benefit of investors and allowed as a deduction in | 39 |
the computation of federal taxable income; | 40 |
(g) If the taxpayer is not a C corporation and is not an | 41 |
individual, the taxpayer shall compute adjusted federal taxable | 42 |
income as if the taxpayer were a C corporation, except: | 43 |
(i) Guaranteed payments and other similar amounts paid or | 44 |
accrued to a partner, former partner, member, or former member | 45 |
shall not be allowed as a deductible expense; and | 46 |
(ii) Amounts paid or accrued to a qualified self-employed | 47 |
retirement plan with respect to an owner or owner-employee of the | 48 |
taxpayer, amounts paid or accrued to or for health insurance for | 49 |
an owner or owner-employee, and amounts paid or accrued to or for | 50 |
life insurance for an owner or owner-employee shall not be allowed | 51 |
as a deduction. | 52 |
Nothing in division (A)(1) of this section shall be construed | 53 |
as allowing the taxpayer to add or deduct any amount more than | 54 |
once or shall be construed as allowing any taxpayer to deduct any | 55 |
amount paid to or accrued for purposes of federal self-employment | 56 |
tax. | 57 |
Nothing in this chapter shall be construed as limiting or | 58 |
removing the ability of any municipal corporation to administer, | 59 |
audit, and enforce the provisions of its municipal income tax. | 60 |
(2)
"Internal Revenue Code" means the Internal Revenue Code | 61 |
of
1986, 100
Stat. 2085, 26 U.S.C. 1, as amended. | 62 |
(3)
"Schedule C" means internal revenue service schedule C | 63 |
filed by a
taxpayer pursuant to the Internal Revenue Code. | 64 |
(4)
"Form 2106" means internal revenue service form 2106 | 65 |
filed by a taxpayer
pursuant to the Internal Revenue Code. | 66 |
(5)
"Intangible income" means income of any of the following | 67 |
types: income
yield, interest, capital gains, dividends, or other | 68 |
income arising
from the ownership, sale,
exchange, or other | 69 |
disposition of
intangible property including, but not
limited to, | 70 |
investments,
deposits, money, or credits as those terms are | 71 |
defined in Chapter
5701. of the Revised Code, and patents, | 72 |
copyrights, trademarks, tradenames, investments in real estate | 73 |
investment trusts, investments in regulated investment companies, | 74 |
and appreciation on deferred compensation. "Intangible income" | 75 |
does not include prizes, awards, or other income associated with | 76 |
any lottery winnings or other similar games of chance. | 77 |
(6) "S corporation" means a corporation that has made an | 78 |
election under subchapter S of Chapter 1 of Subtitle A of the | 79 |
Internal Revenue Code for its taxable year. | 80 |
(7) For taxable years beginning on or after January 1, 2004, | 81 |
"net profit" for a taxpayer other than an individual means | 82 |
adjusted federal taxable income and "net profit" for a taxpayer | 83 |
who is an individual means the individual's profit required to be | 84 |
reported on schedule C, schedule E, or schedule F, other than any | 85 |
amount allowed as a deduction under division (E)(2)(1) or (3)(2) | 86 |
of this
section or amounts described in division (H) of this | 87 |
section. | 88 |
(8) "Taxpayer" means a person subject to a tax on income | 89 |
levied by a municipal corporation. Except as provided in division | 90 |
(L) of this section, "taxpayer" does not include any person
that | 91 |
is a disregarded entity or a qualifying subchapter S
subsidiary | 92 |
for federal income tax purposes, but "taxpayer"
includes any | 93 |
other
person who owns the disregarded entity or
qualifying | 94 |
subchapter S
subsidiary. | 95 |
(9) "Taxable year" means the corresponding tax reporting | 96 |
period as prescribed for the taxpayer under the Internal Revenue | 97 |
Code. | 98 |
(10) "Tax administrator" means the individual charged with | 99 |
direct responsibility for administration of a tax on income levied | 100 |
by a municipal corporation and includes: | 101 |
(a) The central collection agency and the regional income tax | 102 |
agency and their successors in interest, and other entities | 103 |
organized to perform functions similar to those performed by the | 104 |
central collection agency and the regional income tax agency; | 105 |
(b) A municipal corporation acting as the agent of another | 106 |
municipal corporation; and | 107 |
(c) Persons retained by a municipal corporation to administer | 108 |
a tax levied by the municipal corporation, but only if the | 109 |
municipal corporation does not compensate the person in whole or | 110 |
in part on a contingency basis. | 111 |
(11) "Person" includes individuals, firms, companies, | 112 |
business trusts, estates, trusts, partnerships, limited liability | 113 |
companies, associations, corporations, governmental entities, and | 114 |
any other entity. | 115 |
(12) "Schedule E" means internal revenue service schedule E | 116 |
filed by a taxpayer pursuant to the Internal Revenue Code. | 117 |
(13) "Schedule F" means internal revenue service schedule F | 118 |
filed by a taxpayer pursuant to the Internal Revenue Code. | 119 |
(B) No municipal corporation
shall tax income at other than | 120 |
a uniform
rate. | 121 |
(C) No municipal corporation shall levy a tax on income at a | 122 |
rate in excess
of one per cent without having obtained the | 123 |
approval of the excess by a
majority of the electors of the | 124 |
municipality voting on the question at a
general, primary, or | 125 |
special election. The legislative authority of the
municipal | 126 |
corporation shall file with the board of elections at least | 127 |
seventy-five days before the day of the election a copy of the | 128 |
ordinance
together with a resolution specifying the date the | 129 |
election is to be held and
directing the board of elections to | 130 |
conduct the election. The ballot shall be
in the following form: | 131 |
"Shall the Ordinance providing for a ... per cent levy
on income | 132 |
for (Brief description of the purpose of the proposed levy) be | 133 |
passed? | 134 |
|
|
FOR THE INCOME TAX |
|
|
136 |
|
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AGAINST THE INCOME TAX |
" |
|
137 |
In the event of an affirmative vote, the proceeds of the
levy | 139 |
may be used only for the specified purpose. | 140 |
(D)(1) Except as otherwise provided in
this
section, no | 141 |
municipal corporation shall exempt from
a tax on
income | 142 |
compensation for
personal services of individuals
over
eighteen | 143 |
years of age or the net profit
from a business or
profession. | 144 |
(2)(a) For taxable years beginning on or after January 1, | 145 |
2004, no municipal corporation shall tax the net profit from a | 146 |
business or profession using any base other than the taxpayer's | 147 |
adjusted federal taxable income. | 148 |
(b) Division (D)(2)(a) of this section does not apply to any | 149 |
taxpayer required to file a return under section 5745.03 of the | 150 |
Revised Code or to the net profit from a sole proprietorship. | 151 |
(E)(1) The legislative authority of a municipal corporation | 152 |
may,
by ordinance or resolution, exempt from withholding and from | 153 |
a tax
on income the following: | 154 |
(a) Compensation arising from the sale, exchange, or other | 155 |
disposition of a stock option, the exercise of a stock option, or | 156 |
the sale, exchange, or other disposition of stock purchased under | 157 |
a stock option; or | 158 |
(b) Compensation attributable to a nonqualified deferred | 159 |
compensation plan or program described in section 3121(v)(2)(C) of | 160 |
the Internal Revenue Code. | 161 |
(2) The legislative authority of a municipal corporation may | 162 |
adopt an ordinance or resolution that allows a taxpayer who is an | 163 |
individual to deduct, in computing the taxpayer's municipal income | 164 |
tax liability, an amount equal to the aggregate amount the | 165 |
taxpayer paid in cash during the taxable year to a health savings | 166 |
account of the taxpayer, to the extent the taxpayer is entitled to | 167 |
deduct that amount on internal revenue service form 1040. | 168 |
(3)(2) The legislative authority of a municipal corporation | 169 |
may
adopt an ordinance or resolution that allows a taxpayer who | 170 |
has a
net profit from a business or profession that is operated | 171 |
as a
sole proprietorship to deduct from that net profit the | 172 |
amount that
the taxpayer paid during the taxable year for medical | 173 |
care
insurance premiums for the taxpayer, the taxpayer's spouse, | 174 |
and
dependents as defined in section 5747.01 of the Revised Code. | 175 |
The
deduction shall be allowed to the same extent the taxpayer is | 176 |
entitled to deduct the premiums on internal revenue service form | 177 |
1040. The deduction allowed under this division shall be net of | 178 |
any related premium refunds, related premium reimbursements, or | 179 |
related insurance premium dividends received by the taxpayer | 180 |
during the taxable year. | 181 |
(F)
If
an individual's
taxable income includes income against | 182 |
which the taxpayer has taken a
deduction for federal income tax | 183 |
purposes as reportable on the taxpayer's form
2106, and against | 184 |
which a like deduction has not been allowed by the municipal | 185 |
corporation, the municipal corporation shall deduct from the | 186 |
taxpayer's
taxable income an amount equal to the deduction shown | 187 |
on such form allowable
against such income, to the extent not | 188 |
otherwise so allowed as a deduction by
the municipal corporation. | 189 |
(G)(1) In the case of a taxpayer who has a net profit
from a | 190 |
business or
profession that is operated as a sole proprietorship, | 191 |
no
municipal
corporation may tax or use as the base for | 192 |
determining the amount
of
the net profit that shall be considered | 193 |
as having a taxable
situs in the
municipal corporation, an amount | 194 |
other than the net profit required to be reported by the taxpayer | 195 |
on schedule C or F from such sole proprietorship for the taxable | 196 |
year. | 197 |
(2) In the case of a taxpayer who has a net profit from | 198 |
rental
activity required to be reported on schedule E, no | 199 |
municipal
corporation may tax or use as the base for determining | 200 |
the amount
of the net profit that shall be considered as having a | 201 |
taxable
situs in the municipal corporation, an amount other than | 202 |
the net
profit from rental activities required to be reported by | 203 |
the
taxpayer on schedule E for the taxable year. | 204 |
(H) A municipal corporation shall not tax any of the | 205 |
following: | 206 |
(1) The military pay or allowances of members of the armed | 207 |
forces of the
United States and of members of their reserve | 208 |
components, including the Ohio
national guard; | 209 |
(2) The income of religious, fraternal, charitable, | 210 |
scientific, literary, or
educational institutions to the extent | 211 |
that such income is derived from
tax-exempt real estate, | 212 |
tax-exempt tangible or intangible property, or
tax-exempt | 213 |
activities; | 214 |
(3) Except as otherwise provided in division (I) of this | 215 |
section, intangible
income; | 216 |
(4) Compensation paid under section 3501.28 or 3501.36 of
the | 217 |
Revised Code to
a person serving as a precinct election
official, | 218 |
to the extent that such
compensation does not exceed one
thousand | 219 |
dollars annually. Such compensation
in excess of one
thousand | 220 |
dollars may be subjected to taxation by a municipal
corporation. A | 221 |
municipal corporation shall not require the payer
of such | 222 |
compensation to withhold any tax from that compensation. | 223 |
(5) Compensation paid to an employee of a transit authority, | 224 |
regional transit
authority, or regional transit commission created | 225 |
under Chapter 306. of the
Revised Code for operating a transit bus | 226 |
or other motor vehicle for the
authority or commission in or | 227 |
through the municipal corporation, unless the
bus or vehicle is | 228 |
operated on a regularly scheduled route, the operator is
subject | 229 |
to such a tax by reason of residence or domicile in the municipal | 230 |
corporation, or the headquarters of the authority or commission is | 231 |
located
within the municipal corporation; | 232 |
(6) The income of a public utility, when that public utility | 233 |
is
subject to the tax levied under section 5727.24 or 5727.30 of | 234 |
the Revised
Code, except a municipal
corporation may tax the | 235 |
following, subject to
Chapter 5745. of the
Revised Code: | 236 |
(a) Beginning January 1, 2002, the income of an electric | 237 |
company or combined company; | 238 |
(b) Beginning January 1, 2004, the income of a telephone | 239 |
company. | 240 |
As used in division (H)(6) of this section, "combined | 241 |
company," "electric
company," and "telephone company" have
the | 242 |
same meanings as in section 5727.01 of the Revised Code. | 243 |
(7) On and after January 1, 2003, items excluded from
federal | 244 |
gross income pursuant to section 107 of the Internal
Revenue Code; | 245 |
(8) On and after January 1, 2001, compensation paid to a | 246 |
nonresident
individual to the extent prohibited under
section | 247 |
718.011 of the Revised Code; | 248 |
(9)(a) Except as provided in division (H)(9)(b) and (c) of | 249 |
this section, an S
corporation
shareholder's distributive share of | 250 |
net
profits of the
S
corporation, other than any part of the | 251 |
distributive share of
net
profits that represents
wages as defined | 252 |
in section 3121(a) of
the Internal Revenue Code or net earnings | 253 |
from self-employment as
defined in section 1402(a) of the Internal | 254 |
Revenue Code. | 255 |
(b) If, pursuant to division (H) of former section 718.01 of | 256 |
the Revised Code as it existed before March 11, 2004, a
majority | 257 |
of
the electors of a municipal corporation voted in
favor of the | 258 |
question at an election held on November 4, 2003,
the municipal | 259 |
corporation may continue after 2002 to tax an S
corporation | 260 |
shareholder's distributive share of net profits of an
S | 261 |
corporation. | 262 |
(c) If, on December 6, 2002, a municipal corporation was | 263 |
imposing, assessing, and collecting a tax on an S corporation | 264 |
shareholder's distributive share of net profits of the S | 265 |
corporation to the extent the distributive share would be | 266 |
allocated or apportioned to this state under divisions (B)(1) and | 267 |
(2) of section 5733.05 of the Revised Code if the S corporation | 268 |
were a corporation subject to taxes imposed under Chapter 5733. of | 269 |
the Revised Code, the municipal corporation may continue to impose | 270 |
the tax on such distributive shares to the extent such shares | 271 |
would be so allocated or apportioned to this state only until | 272 |
December 31, 2004, unless a majority of the electors of the | 273 |
municipal corporation voting on the question of continuing to tax | 274 |
such shares after that date vote in favor of that question at an | 275 |
election held November 2, 2004. If a majority of those electors | 276 |
vote in favor of the question, the municipal corporation may | 277 |
continue after December 31, 2004, to impose the tax on such | 278 |
distributive shares only to the extent such shares would be so | 279 |
allocated or apportioned to this state. | 280 |
(d) For the purposes of division (D) of section 718.14 of the | 281 |
Revised Code, a municipal corporation shall be deemed to have | 282 |
elected to tax S corporation shareholders' distributive shares of | 283 |
net profits of the S corporation in the hands of the shareholders | 284 |
if a majority of the electors of a municipal corporation vote in | 285 |
favor of a question at an election held under division
(H)(9)(b) | 286 |
or (c) of this section. The municipal corporation
shall specify | 287 |
by
ordinance or rule that the tax applies to the
distributive | 288 |
share
of a shareholder of an S corporation in the
hands of the | 289 |
shareholder of the S corporation. | 290 |
(10) Employee compensation that is not "qualifying wages" as | 291 |
defined in section 718.03 of the Revised Code; | 292 |
(11) Beginning August 1, 2007, compensation paid to a person | 293 |
employed within the
boundaries of a United States air force base | 294 |
under
the jurisdiction of the United States
air force that is | 295 |
used for the housing of members of the United States air force and | 296 |
is a center for air force
operations, unless the person is | 297 |
subject to taxation because of residence or domicile. If the | 298 |
compensation is subject to taxation because of residence or | 299 |
domicile, municipal income tax shall be payable only to the | 300 |
municipal corporation of residence or domicile. | 301 |
(I) Any municipal corporation that taxes any type of | 302 |
intangible income on
March 29, 1988, pursuant to Section 3 of | 303 |
Amended Substitute Senate Bill No.
238 of the 116th general | 304 |
assembly, may continue to tax that type of income
after 1988 if a | 305 |
majority of the electors of the municipal corporation voting
on | 306 |
the question of whether to permit the taxation of that type of | 307 |
intangible
income after 1988 vote in favor thereof at an election | 308 |
held on November 8,
1988. | 309 |
(J) Nothing in this section or section 718.02 of the
Revised | 310 |
Code
shall authorize the levy of any tax on income that a | 311 |
municipal
corporation is not
authorized to levy under existing | 312 |
laws or shall require a municipal
corporation to allow a deduction | 313 |
from taxable income for losses incurred from
a sole proprietorship | 314 |
or partnership. | 315 |
(K)(1) Nothing in this chapter prohibits a municipal | 316 |
corporation from allowing, by resolution or ordinance, a net | 317 |
operating loss carryforward. | 318 |
(2) Nothing in this chapter requires a municipal corporation | 319 |
to allow a net operating loss carryforward. | 320 |
(L)(1) A single member limited liability company that is a | 321 |
disregarded entity for federal tax purposes may elect to be a | 322 |
separate taxpayer from its single member in all Ohio municipal | 323 |
corporations in which it either filed as a separate taxpayer or | 324 |
did not file for its taxable year ending in 2003, if all of the | 325 |
following conditions are met: | 326 |
(a) The limited liability company's single member is also a | 327 |
limited liability company; | 328 |
(b) The limited liability company and its single member were | 329 |
formed and doing business in one or more Ohio municipal | 330 |
corporations for at least five years before January 1, 2004; | 331 |
(c) Not later than December 31, 2004, the limited liability | 332 |
company and its single member each make an election to be treated | 333 |
as a separate taxpayer under division (L) of this section; | 334 |
(d) The limited liability company was not formed for the | 335 |
purpose of evading or reducing Ohio municipal corporation income | 336 |
tax liability of the limited liability company or its single | 337 |
member; | 338 |
(e) The Ohio municipal corporation that is the primary place | 339 |
of business of the sole member of the limited liability company | 340 |
consents to the election. | 341 |
(2) For purposes of division (L)(1)(e) of this section, a | 342 |
municipal corporation is the primary place of business of a | 343 |
limited liability company if, for the limited liability company's | 344 |
taxable year ending in 2003, its income tax liability is greater | 345 |
in that municipal corporation than in any other municipal | 346 |
corporation in Ohio, and that tax liability to that municipal | 347 |
corporation for its taxable year ending in 2003 is at least four | 348 |
hundred thousand dollars. | 349 |
Sec. 718.02. This section does not apply to taxpayers that | 350 |
are subject to and required to file reports under Chapter 5745. of | 351 |
the Revised
Code. | 352 |
(A) Except as otherwise provided in division (D) of this | 353 |
section, net profit from a
business or profession conducted both | 354 |
within and without the
boundaries of a municipal corporation shall | 355 |
be considered as
having a taxable situs in such municipal | 356 |
corporation for purposes
of municipal income taxation in the same | 357 |
proportion as the
average ratio of the following: | 358 |
(1) The average original cost of the real and tangible | 359 |
personal property owned or used by the taxpayer in the business
or | 360 |
profession in such municipal corporation during the taxable
period | 361 |
to the average original cost of all of the real and
tangible | 362 |
personal property owned or used by the taxpayer in the
business or | 363 |
profession during the same period, wherever situated. | 364 |
As used in the preceding paragraph, real property shall | 365 |
include property rented or leased by the taxpayer and the value
of | 366 |
such property shall be determined by multiplying the annual
rental | 367 |
thereon by eight; | 368 |
(2) Wages, salaries, and other compensation paid during
the | 369 |
taxable period to persons employed in the business or
profession | 370 |
for services performed in such municipal corporation
to wages, | 371 |
salaries, and other compensation paid during the same
period to | 372 |
persons employed in the business or profession,
wherever their | 373 |
services are performed, excluding compensation
that is not taxable | 374 |
by the municipal corporation under section 718.011 of the Revised | 375 |
Code; | 376 |
(3) Gross receipts of the business or profession from
sales | 377 |
made and services performed during the taxable period in
such | 378 |
municipal corporation to gross receipts of the business or | 379 |
profession during the same period from sales and services, | 380 |
wherever made or performed. | 381 |
If the foregoing apportionment formula does not
produce an | 382 |
equitable result, another basis may be substituted, under
uniform | 383 |
regulations, so as to produce an equitable
result. | 384 |
(B) As used in division (A) of this section,
"sales made
in
a | 385 |
municipal corporation" mean: | 386 |
(1) All sales of tangible personal property
delivered within | 387 |
such municipal corporation regardless of where
title passes if | 388 |
shipped or delivered from a stock of goods within
such municipal | 389 |
corporation; | 390 |
(2) All sales of tangible personal property
delivered within | 391 |
such municipal corporation regardless of where
title passes even | 392 |
though transported from a point outside such
municipal corporation | 393 |
if the taxpayer is regularly engaged
through its own employees in | 394 |
the solicitation or promotion of
sales within such municipal | 395 |
corporation and the sales result from
such solicitation or | 396 |
promotion; | 397 |
(3) All sales of tangible personal property
shipped from a | 398 |
place within such municipal corporation to
purchasers outside such | 399 |
municipal corporation regardless of where
title passes if the | 400 |
taxpayer is not, through its own employees,
regularly engaged in | 401 |
the solicitation or promotion of sales at
the place where delivery | 402 |
is made. | 403 |
(C) Except as otherwise provided in division (D) of this | 404 |
section, net profit from rental activity not constituting a | 405 |
business or profession shall be subject to tax only by the | 406 |
municipal corporation in which the property generating the net | 407 |
profit is located. | 408 |
(D) This section does not apply to individuals who are | 409 |
residents of the municipal corporation and, except as otherwise | 410 |
provided in section 718.01 of the Revised Code, a municipal | 411 |
corporation may impose a tax on all income earned by residents of | 412 |
the municipal corporation to the extent allowed by the United | 413 |
States Constitution. | 414 |
(E) If, in computing the taxpayer's adjusted federal taxable | 415 |
income, the taxpayer deducted any amount with respect to a stock | 416 |
option granted to an employee, and if the employee is not required | 417 |
to include in income any amount or any portion thereof because it | 418 |
is exempted from taxation under division (H)(10) of section | 419 |
718.01 of the Revised Code and division (A)(2)(d) of section | 420 |
718.03 of the Revised Code by a municipal corporation to which the | 421 |
taxpayer has apportioned a portion of its net profit, the taxpayer | 422 |
shall add the amount that is exempt from taxation to the | 423 |
taxpayer's net profit that was apportioned to that municipal | 424 |
corporation. In no case shall a taxpayer be required to add to its | 425 |
net profit that was apportioned to that municipal corporation any | 426 |
amount other than the amount upon which the employee would be | 427 |
required to pay tax were the amount related to the stock option | 428 |
not exempted from taxation. | 429 |
This division applies solely for the purpose of making an | 430 |
adjustment to the amount of a taxpayer's net profit that was | 431 |
apportioned to a municipal corporation under divisions (A) and (B) | 432 |
of this section. | 433 |
Sec. 718.03. (A) As used in this section: | 434 |
(1) "Other payer" means any person, other than an | 435 |
individual's employer or the employer's agent, that pays an | 436 |
individual any amount included in the federal gross income of the | 437 |
individual. | 438 |
(2) "Qualifying wages" means wages, as defined in section | 439 |
3121(a) of the Internal Revenue Code, without regard to any wage | 440 |
limitations, adjusted as follows: | 441 |
(a) Deduct the following amounts: | 442 |
(i) Any amount included in wages if the amount constitutes | 443 |
compensation attributable to a plan or program described in | 444 |
section 125 of the Internal Revenue Code; | 445 |
(ii) For purposes of division (B) of this section, any amount | 446 |
included in wages if the amount constitutes payment on account of | 447 |
sickness or accident disability. | 448 |
(b) Add the following amounts: | 449 |
(i) Any amount not included in wages solely because the | 450 |
employee was employed by the employer prior to April 1, 1986; | 451 |
(ii) Any amount not included in wages because the amount | 452 |
arises from the sale, exchange, or other disposition of a stock | 453 |
option, the exercise of a stock option, or the sale, exchange, or | 454 |
other disposition of stock purchased under a stock option and the | 455 |
municipal corporation has not, by resolution or ordinance, | 456 |
exempted the amount from withholding and tax. Division | 457 |
(A)(2)(b)(ii) of this section applies only to those amounts | 458 |
constituting ordinary income. | 459 |
(iii) Any amount not included in wages if the amount is an | 460 |
amount described in section 401(k) or 457 of the Internal Revenue | 461 |
Code. Division (A)(2)(b)(iii) of this section applies only to | 462 |
employee contributions and employee deferrals. | 463 |
(iv) Any amount that is supplemental unemployment | 464 |
compensation benefits described in section 3402(o)(2) of the | 465 |
Internal Revenue Code and not included in wages. | 466 |
(c) Deduct any amount attributable to a nonqualified deferred | 467 |
compensation plan or program described in section 3121(v)(2)(C) of | 468 |
the Internal Revenue Code if the compensation is included in wages | 469 |
and has, by resolution or ordinance, been exempted from taxation | 470 |
by the municipal corporation. | 471 |
(d) Deduct any amount included in wages if the amount arises | 472 |
from the sale, exchange, or other disposition of a stock option, | 473 |
the exercise of a stock option, or the sale, exchange, or other | 474 |
disposition of stock purchased under a stock option and the | 475 |
municipal corporation has, by resolution or ordinance, exempted | 476 |
the amount from withholding and tax. | 477 |
(B) For taxable years beginning after 2003, no municipal | 478 |
corporation shall require any employer, or any agent of any | 479 |
employer or any other payer, to withhold tax with respect to any | 480 |
amount other than qualifying wages. Nothing in this section | 481 |
prohibits an employer from withholding tax on a basis greater than | 482 |
qualifying wages. | 483 |
(C) An employer is not required to make any withholding with | 484 |
respect to an individual's disqualifying disposition of an | 485 |
incentive stock option if, at the time of the disqualifying | 486 |
disposition, the individual is not an employee of the corporation | 487 |
with respect to whose stock the option has been issued. | 488 |
(D)(1) An employee is not relieved from liability for a tax | 489 |
by the failure of the employer to withhold the tax as required by | 490 |
a municipal corporation or by the employer's exemption from the | 491 |
requirement to withhold the tax. | 492 |
(2) The failure of an employer to remit to the municipal | 493 |
corporation the tax withheld relieves the employee from liability | 494 |
for that tax unless the employee colluded with the employer in | 495 |
connection with the failure to remit the tax withheld. | 496 |
(E) Compensation deferred before June 26, 2003, is not | 497 |
subject to any municipal
corporation income tax or municipal | 498 |
income tax withholding
requirement to the extent the deferred | 499 |
compensation does not
constitute qualifying wages at the time the | 500 |
deferred compensation
is paid or distributed. | 501 |
Section 2. That existing sections 718.01, 718.02, and 718.03 | 502 |
of the Revised Code are hereby repealed. | 503 |
Section 3. The amendment by this act of sections 718.01, | 504 |
718.02, and 718.03 of the Revised Code applies to taxable years | 505 |
beginning on or after January 1, 2010. | 506 |