Chapter 5745: MUNICIPAL TAXATION OF ELECTRIC LIGHT COMPANY INCOME

5745.01 Municipal taxation of electric light company income definitions.

As used in this chapter:

(A) "Electric company," "combined company," and "telephone company," have the same meanings as in section 5727.01 of the Revised Code, except "telephone company" does not include a non profit corporation.

(B) "Electric light company" has the same meaning as in section 4928.01 of the Revised Code, and includes the activities of a combined company as an electric company, but excludes nonprofit companies and municipal corporations.

(C) "Taxpayer" means either of the following:

(1) An electric light company subject to taxation by a municipal corporation in this state for a taxable year, excluding an electric light company that is not an electric company or a combined company and for which an election made under section 5745.031 of the Revised Code is not in effect with respect to the taxable year. If such a company is a qualified subchapter S subsidiary as defined in section 1361 of the Internal Revenue Code or a disregarded entity, the company's parent S corporation or owner is the taxpayer for the purposes of this chapter and is hereby deemed to have nexus with this state under the Constitution of the United States for the purposes of this chapter.

(2) A telephone company subject to taxation by a municipal corporation in this state for a taxable year. A telephone company is subject to taxation under this chapter for any taxable year that begins on or after January 1, 2004. A telephone company with a taxable year ending in 2004 shall compute the tax imposed under this chapter, or shall compute its net operating loss carried forward for that taxable year, by multiplying the tax owed, or the loss for the taxable year, by fifty per cent.

(D) "Disregarded entity" means an entity that, for its taxable year, is by default, or has elected to be, disregarded as an entity separate from its owner pursuant to 26 C.F.R. 301.7701 -3 .

(E) "Taxable year" of a taxpayer is the taxpayer's taxable year for federal income tax purposes.

(F) "Federal taxable income" means taxable income, before operating loss deduction and special deductions, as required to be reported for the taxpayer's taxable year under the Internal Revenue Code.

(G) "Adjusted federal taxable income" means federal taxable income adjusted as follows:

(1) Deduct intangible income as defined in section 718.01 of the Revised Code to the extent included in federal taxable income;

(2) Add expenses incurred in the production of such intangible income;

(3) If, with respect to a qualifying taxpayer and a qualifying asset there occurs a qualifying taxable event, the qualifying taxpayer shall reduce its federal taxable income, as defined in division (F) of this section, by the amount of the book-tax difference for that qualifying asset if the book-tax difference is greater than zero, and shall increase its federal taxable income by the absolute value of the amount of the book-tax difference for that qualifying asset if the book-tax difference is less than zero. The adjustments provided in division (G)(3) of this section are subject to divisions (B)(3), (4), and (5) of section 5733.0510 of the Revised Code to the extent those divisions apply to the adjustments in that section for the taxable year. A taxpayer shall not deduct or add any amount under division (G)(3) of this section with respect to a qualifying asset the sale, exchange, or other disposition of which resulted in the recognition of a gain or loss that the taxpayer deducted or added, respectively, under division (G)(1) or (2) of this section.

For the purposes of division (G)(3) of this section, "book-tax difference," "qualifying taxpayer," "qualifying asset," and "qualifying taxable event" have the same meanings as in section 5733.0510 of the Revised Code.

(4) If the taxpayer is not a C corporation and is not an individual, the taxpayer shall compute "adjusted federal taxable income" as if the taxpayer were a C corporation, except:

(a) Guaranteed payments and other similar amounts paid or accrued to a partner, former partner, or member or former member shall not be allowed as a deductible expense; and

(b) With respect to each owner or owner-employee of the taxpayer, amounts paid or accrued to a qualified self-employed retirement plan and amounts paid or accrued to or for health insurance or life insurance shall not be allowed as a deduction.

Nothing in this division shall be construed as allowing the taxpayer to deduct any amount more than once.

(5) Add or deduct the amounts described in section 5733.0511 of the Revised Code for qualifying telephone company taxpayers.

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

(I) "Ohio net income" means the amount determined under division (B) of section 5745.02 of the Revised Code.

Effective Date: 09-26-2003; 03-30-2006

5745.02 Determining taxpayer's state net income and portion taxable by municipal corporation.

(A) The annual report filed under section 5745.03 of the Revised Code determines a taxpayer's Ohio net income and the portion of Ohio net income to be apportioned to a municipal corporation.

(B) A taxpayer's Ohio net income is determined by multiplying the taxpayer's adjusted federal taxable income by the sum of the property factor multiplied by one-third, the payroll factor multiplied by one-third, and the sales factor multiplied by one-third. If the denominator of one of the factors is zero, the remaining two factors each shall be multiplied by one-half instead of one-third; if the denominator of two of the factors is zero, the remaining factor shall be multiplied by one. The property, payroll, and sales factors shall be determined in the manner prescribed by divisions (B)(1), (2), and (3) of this section.

(1) The property factor is a fraction, the numerator of which is the average value of the taxpayer's real and tangible personal property owned or rented, and used in business in this state during the taxable year, and the denominator of which is the average value of all the taxpayer's real and tangible personal property owned or rented, and used in business everywhere during such year. Property owned by the taxpayer is valued at its original cost. Property rented by the taxpayer is valued at eight times the net annual rental rate. "Net annual rental rate" means the annual rental rate paid by the taxpayer less any annual rental rate received by the taxpayer from subrentals. The average value of property shall be determined by averaging the values at the beginning and the end of the taxable year, but the tax commissioner may require the averaging of monthly values during the taxable year, if reasonably required to reflect properly the average value of the taxpayer's property.

(2) The payroll factor is a fraction, the numerator of which is the total amount paid in this state during the taxable year by the taxpayer for compensation, and the denominator of which is the total compensation paid everywhere by the taxpayer during such year. Compensation means any form of remuneration paid to an employee for personal services. Compensation is paid in this state if: (a) the recipient's service is performed entirely within this state, (b) the recipient's service is performed both within and without this state, but the service performed without this state is incidental to the recipient's service within this state, or (c) some of the service is performed within this state and either the base of operations, or if there is no base of operations, the place from which the service is directed or controlled is within this state, or the base of operations or the place from which the service is directed or controlled is not in any state in which some part of the service is performed, but the recipient's residence is in this state.

(3) The sales factor is a fraction, the numerator of which is the total sales in this state by the taxpayer during the taxable year, and the denominator of which is the total sales by the taxpayer everywhere during such year. Sales of electricity shall be sitused to this state in the manner provided under section 5733.059 of the Revised Code. In determining the numerator and denominator of the sales factor, receipts from the sale or other disposal of a capital asset or an asset described in section 1231 of the Internal Revenue Code shall be eliminated. Also, in determining the numerator and denominator of the sales factor, in the case of a reporting taxpayer owning at least eighty per cent of the issued and outstanding common stock of one or more insurance companies or public utilities, except an electric company, a combined company, or a telephone company, or owning at least twenty-five per cent of the issued and outstanding common stock of one or more financial institutions, receipts received by the reporting taxpayer from such utilities, insurance companies, and financial institutions shall be eliminated.

For the purpose of division (B)(3) of this section, sales of tangible personal property are in this state where such property is received in this state by the purchaser. In the case of delivery of tangible personal property by common carrier or by other means of transportation, the place at which such property is ultimately received after all transportation has been completed shall be considered as the place at which such property is received by the purchaser. Direct delivery in this state, other than for purposes of transportation, to a person or firm designated by a purchaser constitutes delivery to the purchaser in this state, and direct delivery outside this state to a person or firm designated by a purchaser does not constitute delivery to the purchaser in this state, regardless of where title passes or other conditions of sale.

Sales, other than sales of electricity or tangible personal property, are in this state if either the income-producing activity is performed solely in this state, or the income-producing activity is performed both within and without this state and a greater proportion of the income-producing activity is performed within this state than in any other state, based on costs of performance.

For the purposes of division (B)(3) of this section, the tax commissioner may adopt rules to apportion sales within this state.

(C) The portion of a taxpayer's Ohio net income taxable by each municipal corporation imposing an income tax shall be determined by multiplying the taxpayer's Ohio net income by the sum of the municipal property factor multiplied by one-third, the municipal payroll factor multiplied by one-third, and the municipal sales factor multiplied by one-third, and subtracting from the product so obtained any "municipal net operating loss carryforward from prior taxable years." If the denominator of one of the factors is zero, the remaining two factors each shall be multiplied by one-half instead of one-third; if the denominator of two of the factors is zero, the remaining factor shall be multiplied by one. In calculating the "municipal net operating loss carryforward from prior taxable years" for each municipal corporation, net operating losses are apportioned in and out of a municipal corporation for the taxable year in which the net operating loss occurs in the same manner that positive net income would have been so apportioned. Any net operating loss for a municipal corporation may be applied to subsequent net income in that municipal corporation to reduce that income to zero or until the net operating loss has been fully used as a deduction. The unused portion of net operating losses for each taxable year apportioned to a municipal corporation may only be applied against the income apportioned to that municipal corporation for five subsequent taxable years. Net operating losses occurring in taxable years ending before 2002 may not be subtracted under this section.

A taxpayer's municipal property, municipal payroll, and municipal sales factors for a municipal corporation shall be determined as provided in divisions (C)(1), (2), and (3) of this section.

(1) The municipal property factor is the quotient obtained by dividing (a) the average value of real and tangible personal property owned or rented by the taxpayer and used in business in the municipal corporation during the taxable year by (b) the average value of all of the taxpayer's real and tangible personal property owned or rented and used in business during that taxable year in this state. The value and average value of such property shall be determined in the same manner provided in division (B)(1) of this section.

(2) The municipal payroll factor is the quotient obtained by dividing (a) the total amount of compensation earned in the municipal corporation by the taxpayer's employees during the taxable year for services performed for the taxpayer and that is subject to income tax withholding by the municipal corporation by (b) the total amount of compensation paid by the taxpayer to its employees in this state during the taxable year. Compensation has the same meaning as in division (B)(2) of this section.

(3) The municipal sales factor is a fraction, the numerator of which is the taxpayer's total sales in a municipal corporation during the taxable year, and the denominator of which is the taxpayer's total sales in this state during such year.

For the purpose of division (C)(3) of this section, sales of tangible personal property are in the municipal corporation where such property is received in the municipal corporation by the purchaser. Sales of electricity directly to the customer, as defined in section 5733.059 of the Revised Code, shall be considered sales of tangible personal property. In the case of the delivery of tangible personal property by common carrier or by other means of transportation, the place at which such property ultimately is received after all transportation has been completed shall be considered as the place at which the property is received by the purchaser. Direct delivery in the municipal corporation, other than for purposes of transportation, to a person or firm designated by a purchaser constitutes delivery to the purchaser in that municipal corporation, and direct delivery outside the municipal corporation to a person or firm designated by a purchaser does not constitute delivery to the purchaser in that municipal corporation, regardless of where title passes or other conditions of sale. Sales, other than sales of tangible personal property, are in the municipal corporation if either:

(a) The income-producing activity is performed solely in the municipal corporation;

(b) The income-producing activity is performed both within and without the municipal corporation and a greater proportion of the income-producing activity is performed within that municipal corporation than any other location in this state, based on costs of performance.

For the purposes of division (C)(3) of this section, the tax commissioner may adopt rules to apportion sales within each municipal corporation.

(D) If a taxpayer is a combined company as defined in section 5727.01 of the Revised Code, the municipal property, payroll, and sales factors under division (C) of this section shall be adjusted as follows:

(1) The numerator of the municipal property factor shall include only the value, as determined under division (C)(1) of this section, of the company's real and tangible property in the municipal corporation attributed to the company's activity as an electric company using the same methodology prescribed under section 5727.03 of the Revised Code for taxable tangible personal property.

(2) The numerator of the municipal payroll factor shall include only compensation paid in the municipal corporation by the company to its employees for personal services rendered in the company's activity as an electric company.

(3) The numerator of the municipal sales factor shall include only the sales of tangible personal property and services, as determined under division (C)(3) of this section, made in the municipal corporation in the course of the company's activity as an electric company.

(E)

(1) If the provisions for apportioning adjusted federal taxable income or Ohio net income under divisions (B), (C), and (D) of this section do not fairly represent business activity in this state or among municipal corporations, the tax commissioner may adopt rules for apportioning such income by an alternative method that fairly represents business activity in this state or among municipal corporations.

(2) If any of the factors determined under division (B), (C), or (D) of this section does not fairly represent the extent of a taxpayer's business activity in this state or among municipal corporations, the taxpayer may request, or the tax commissioner may require, that the taxpayer's adjusted federal taxable income or Ohio net income be determined by an alternative method, including any of the alternative methods enumerated in division (B)(2)(d) of section 5733.05 of the Revised Code. A taxpayer requesting an alternative method shall make the request in writing to the tax commissioner either with the annual report, a timely filed amended report, or a timely filed petition for reassessment. When the tax commissioner requires or permits an alternative method under division (E)(2) of this section, the tax commissioner shall cause a written notice to that effect to be delivered to any municipal corporation that would be affected by application of the alternative method. Nothing in this division shall be construed to extend any statute of limitations under this chapter.

(F)

(1) The tax commissioner may adopt rules providing for the combination of adjusted federal taxable incomes of taxpayers satisfying the ownership or control requirements of section 5733.052 of the Revised Code if the tax commissioner finds that such combinations are necessary to properly reflect adjusted federal taxable income, Ohio net income, or the portion of Ohio net income to be taxable by municipal corporations.

(2) A taxpayer satisfying the ownership or control requirements of section 5733.052 of the Revised Code with respect to one or more other taxpayers may not combine their adjusted federal taxable incomes for the purposes of this section unless rules are adopted under division (F)(1) of this section allowing such a combination or the tax commissioner finds that such a combination is necessary to properly reflect the taxpayers' adjusted federal taxable incomes, Ohio net incomes, or the portion of Ohio net incomes to be subject to taxation within a municipal corporation.

(G) The tax commissioner may adopt rules providing for alternative apportionment methods for a telephone company.

Effective Date: 09-26-2003; 2007 HB119 06-30-2007

5745.03 Filing annual report and remitting tax due - extensions.

(A) For each taxable year, each taxpayer shall file an annual report with the tax commissioner not later than the fifteenth day of the fourth month after the end of the taxpayer's taxable year, and shall remit with that report the amount of tax due as shown on the report less the amount paid for the year under section 5745.04 of the Revised Code. The remittance shall be made in the form prescribed by the tax commissioner. If the amount payable with the report exceeds one thousand dollars, the taxpayer shall remit the amount by electronic funds transfer as prescribed by the treasurer of state. The tax commissioner shall immediately forward to the treasurer of state all amounts that the tax commissioner receives pursuant to this chapter. The treasurer of state shall credit ninety-eight and one-half per cent of such remittances to the municipal income tax fund, which is hereby created in the state treasury, and credit the remainder to the municipal income tax administrative fund, which is hereby created in the state treasury.

(B) Any taxpayer that has been granted an extension for filing a federal income tax return may request an extension for filing the return required under this section by filing with the tax commissioner a copy of the taxpayer's request for the federal filing extension. The request shall be filed not later than the last day for filing the return as required under division (A) of this section. If such a request is properly and timely filed, the tax commissioner shall extend the last day for filing the return required under this section for the same period for which the federal filing extension was granted. The tax commissioner may deny the filing extension request only if the taxpayer fails to timely file the request, fails to file a copy of the federal extension request, owes past due taxes, interest, or penalty under this chapter, or has failed to file a required report or other document for a prior taxable year. The granting of an extension under this section does not extend the last day for paying taxes without penalty pursuant to this chapter unless the tax commissioner extends the payment date.

(C) The annual report shall include statements of the following facts as of the last day of the taxpayer's taxable year:

(1) The name of the taxpayer;

(2) The name of the state or country under the laws of which it is incorporated;

(3) The location of its principal office in this state and, in the case of a taxpayer organized under the laws of another state, the principal place of business in this state and the name and address of the officer or agent of the taxpayer in charge of the business conducted in this state;

(4) The names of the president, secretary, treasurer, and statutory agent in this state, with the post-office address of each;

(5) The date on which the taxpayer's taxable year begins and ends;

(6) The taxpayer's federal taxable income during the taxpayer's taxable year;

(7) Any other information the tax commissioner requires for the proper administration of this chapter.

(D) The tax commissioner may require any reports required under this chapter to be filed in an electronic format.

(E) A municipal corporation may not require a taxpayer required to file a report under this section to file a report of the taxpayer's income, but a municipal corporation may require a taxpayer to report to the municipal corporation the value of the taxpayer's real and tangible personal property situated in the municipal corporation, compensation paid by the taxpayer to its employees in the municipal corporation, and sales made in the municipal corporation by the taxpayer, to the extent necessary for the municipal corporation to compute the taxpayer's municipal property, payroll, and sales factors for the municipal corporation.

(F) On or before the thirty-first day of January each year, each municipal corporation imposing a tax on income shall certify to the tax commissioner the rate of the tax in effect on the first day of January of that year. If any municipal corporation fails to certify its income tax rate as required by this division, the tax commissioner shall notify the director of budget and management, who, upon receiving such notification, shall withhold from each payment made to the municipal corporation under section 5745.05 of the Revised Code fifty per cent of the amount of the payment otherwise due the municipal corporation under that section as computed on the basis of the tax rate most recently certified until the municipal corporation certifies the tax rate in effect on the first day of January of that year.

The tax rate used to determine the tax payable to a municipal corporation under this section for a taxpayer's taxable year shall be the tax rate in effect in a municipal corporation on the first day of January in that taxable year. If a taxpayer's taxable year is for a period less than twelve months that does not include the first day of January, the tax rate used to determine the tax payable to a municipal corporation under this section for the taxpayer's taxable year shall be the tax rate in effect in a municipal corporation on the first day of January in the preceding taxable year.

Effective Date: 01-01-2003

5745.031 Written application to be a taxpayer.

An electric light company that is not an electric company or a combined company may elect to be a taxpayer for the purposes of this chapter if not less than fifty per cent of the company's total sales in this state consist of electricity, as determined under section 5733.059 of the Revised Code, and other energy commodities during the taxpayer's most recently concluded taxable year. The company shall make the election by application in writing to the tax commissioner before the first day of the first taxable year to which the election is to apply. The election is effective for five consecutive taxable years and, once made, is irrevocable for the five taxable years for which the election was made.

The failure of such a company to make an election under this section shall not be construed to exempt or exclude such a company from the income tax of any municipal corporation.

Effective Date: 01-01-2001

5745.04 Filing declaration of estimated taxes - remittance.

(A) As used in this section, "combined tax liability" means the total of a taxpayer's income tax liabilities to all municipal corporations in this state for a taxable year.

(B) Beginning with its taxable year beginning in 2003, each taxpayer shall file a declaration of estimated tax report with, and remit estimated taxes to, the tax commissioner, payable to the treasurer of state, at the times and in the amounts prescribed in divisions (B)(1) to (4) of this section. This division also applies to a taxpayer having a taxable year consisting of fewer than twelve months, at least one of which is in 2002, that ends before January 1, 2003. The first taxable year a taxpayer is subject to this chapter, the estimated taxes the taxpayer is required to remit under this section shall be based solely on the current taxable year and not on the liability for the preceding taxable year.

(1) Not less than twenty-five per cent of the combined tax liability for the preceding taxable year or twenty per cent of the combined tax liability for the current taxable year shall have been remitted not later than the fifteenth day of the fourth month after the end of the preceding taxable year.

(2) Not less than fifty per cent of the combined tax liability for the preceding taxable year or forty per cent of the combined tax liability for the current taxable year shall have been remitted not later than the fifteenth day of the sixth month after the end of the preceding taxable year.

(3) Not less than seventy-five per cent of the combined tax liability for the preceding taxable year or sixty per cent of the combined tax liability for the current taxable year shall have been remitted not later than the fifteenth day of the ninth month after the end of the preceding taxable year.

(4) Not less than one hundred per cent of the combined tax liability for the preceding taxable year or eighty per cent of the combined tax liability for the current taxable year shall have been remitted not later than the fifteenth day of the twelfth month after the end of the preceding taxable year.

(C) Each taxpayer shall report on the declaration of estimated tax report the portion of the remittance that the taxpayer estimates that it owes to each municipal corporation for the taxable year.

(D) Upon receiving a declaration of estimated tax report and remittance of estimated taxes under this section, the tax commissioner shall immediately forward to the treasurer of state such remittance. The treasurer of state shall credit ninety-eight and one-half per cent of the remittance to the municipal income tax fund and credit the remainder to the municipal income tax administrative fund.

(E) If any remittance of estimated taxes is for one thousand dollars or more, the taxpayer shall make the remittance by electronic funds transfer as prescribed by section 5745.04 of the Revised Code.

(F) Notwithstanding section 5745.08 or 5745.09 of the Revised Code, no penalty or interest shall be imposed on a taxpayer if the declaration of estimated tax report is properly filed, and the estimated tax is paid, within the time prescribed by division (B) of this section.

Effective Date: 09-26-2003

5745.041 Paying taxes by electronic funds transfer.

Any taxpayer required by section 5745.03 or 5745.04 of the Revised Code to remit tax payments by electronic funds transfer shall remit such payments to the treasurer of state in the manner prescribed by rules adopted by the treasurer under section 113.061 of the Revised Code. Except as otherwise provided in this paragraph, the payment of taxes by electronic funds transfer does not affect a taxpayer's obligation to file reports under this chapter. If a taxpayer remits estimated tax payments in a manner, designated by rule of the treasurer of state, that permits the inclusion of all information necessary for the treasurer of state to process the payment, the taxpayer is not required to file the declaration of estimated tax report as otherwise required under section 5745.04 of the Revised Code.

The treasurer of state, in consultation with the tax commissioner, may adopt rules governing the format for reporting and paying estimated taxes by electronic funds transfer.

A taxpayer required to remit taxes by electronic funds transfer may apply to the treasurer of state in the manner prescribed by the treasurer to be excused from that requirement. The treasurer of state may excuse the taxpayer from the requirement for good cause shown for the period of time requested by the taxpayer or for a portion of that period. The treasurer shall notify the tax commissioner and the taxpayer of the treasurer's decision as soon as is practicable.

If a taxpayer required by this section to remit taxes by electronic funds transfer remits those taxes by some means other than by electronic funds transfer as prescribed by this section and the rules adopted by the treasurer of state, and the treasurer determines that such failure was not due to reasonable cause or was due to willful neglect, the treasurer shall notify the tax commissioner of the failure to remit by electronic funds transfer and shall provide the commissioner with any information used in making that determination. The tax commissioner may collect an additional charge by assessment in the manner prescribed by section 5745.12 of the Revised Code. The additional charge shall equal five per cent of the amount of the taxes or estimated tax payments required to be paid by electronic funds transfer, but shall not exceed five thousand dollars. Any additional charge assessed under this section is in addition to any other penalty or charge imposed under this chapter, and shall be considered as revenue arising from municipal income taxes collected under this chapter. The tax commissioner may remit all or a portion of such a charge and may adopt rules governing such remission.

No additional charge shall be assessed under this section against a taxpayer that has been notified of its obligation to remit taxes under this section and that remits its first two tax payments after such notification by some means other than electronic funds transfer. The additional charge may be assessed upon the remittance of any subsequent tax payment that the taxpayer remits by some means other than electronic funds transfer.

Effective Date: 01-01-2001

5745.05 Quarterly payments of amounts certified to municipal corporations.

(A) Prior to the first day of March, June, September, and December, the tax commissioner shall certify to the director of budget and management the amount to be paid to each municipal corporation, as indicated on the declaration of estimated tax reports and annual reports received under sections 5745.03 and 5745.04 of the Revised Code, less any amounts previously distributed and net of any audit adjustments made by the tax commissioner. Not later than the first day of March, June, September, and December, the director of budget and management shall provide for payment of the amount certified to each municipal corporation from the municipal income tax fund, plus a pro rata share of any investment earnings accruing to the fund since the previous payment under this section apportioned among municipal corporations entitled to such payments in proportion to the amount certified by the tax commissioner. All investment earnings on money in the municipal income tax fund shall be credited to that fund.

(B) If the tax commissioner determines that the amount of tax paid by a taxpayer and distributed to a municipal corporation under this section for a taxable year exceeds the amount payable to that municipal corporation under this chapter after accounting for amounts remitted with the annual report and as estimated taxes, the tax commissioner shall permit the taxpayer to credit the excess against the taxpayer's payments to the municipal corporation of estimated taxes remitted for an ensuing taxable year under section 5745.04 of the Revised Code. If, upon the written request of the taxpayer, the tax commissioner determines that the excess to be so credited is likely to exceed the amount of estimated taxes payable by the taxpayer to the municipal corporation during the ensuing twelve months, the tax commissioner shall so notify the municipal corporation and the municipal corporation shall issue a refund of the excess to the taxpayer within ninety days after receiving such a notice. Interest shall accrue on the amount to be refunded and is payable to the taxpayer at the rate per annum prescribed by section 5703.47 of the Revised Code from the ninety-first day after the notice is received by the municipal corporation until the day the refund is paid. Immediately after notifying a municipal corporation under this division of an excess to be refunded, the commissioner also shall notify the director of budget and management of the amount of the excess, and the director shall transfer from the municipal income tax administrative fund to the municipal income tax fund one and one-half per cent of the amount of the excess. The commissioner shall include the transferred amount in the computation of the amount due the municipal corporation in the next certification to the director under division (A) of this section.

Effective Date: 01-01-2001; 2007 HB119 06-30-2007; 2008 HB562 06-24-2008

5745.06 Nonrefundable credit for tax due from or paid by qualifying pass-through entity.

(A) As used in this section:

(1) "Qualifying pass-through entity" means a pass-through entity, as defined in section 5733.04 of the Revised Code, that is a taxpayer under this chapter.

(2) "Qualifying taxpayer" means a taxpayer, that, during any portion of the taxable year of a qualifying pass-through entity, holds a direct ownership interest in that qualifying pass-through entity.

(B) There is hereby allowed a nonrefundable credit against the amount of tax payable under this chapter to a municipal corporation by a qualifying taxpayer. The credit shall equal the qualifying taxpayer's proportionate share of the lesser of the tax due from or the tax paid by a qualifying pass-through entity to that municipal corporation under this chapter for the entity's taxable year ending in the qualifying taxpayer's taxable year. The taxpayer shall claim the credit for the taxpayer's taxable year in which the qualifying pass-through entity's taxable year ends. In determining the taxpayer's proportionate share of the tax due or tax paid by the qualifying pass-through entity, the taxpayer shall follow the concepts set forth in subchapters J and K of the Internal Revenue Code.

If the amount of the credit claimed for a taxable year exceeds the amount of tax due to that municipal corporation for that year, the excess shall be allowed as a credit against the taxes payable to that municipal corporation for ensuing taxable years until the full amount of the credit is claimed. Any amount of the credit claimed for a taxable year shall be deducted from the balance carried forward to the ensuing taxable year.

Effective Date: 01-01-2001

5745.07 Interest on unpaid taxes.

If the tax required to be paid under this chapter or any portion of that tax is not paid on or before the date prescribed for its payment, interest shall be assessed, collected, and paid, in the same manner as the tax, upon such unpaid amount at the rate per annum prescribed by section 5703.47 of the Revised Code from the date prescribed for its payment until it is paid or until the day an assessment is issued under section 5745.12 of the Revised Code, whichever occurs first.

Effective Date: 01-01-2001

5745.08 Penalties assessed.

(A) The following penalties shall apply under the circumstances indicated:

(1) If a taxpayer required to file a report or remit tax as required by this chapter fails to make and file the report within the time prescribed, including any extensions of time granted by the tax commissioner, the tax commissioner may impose a penalty not exceeding the greater of fifty dollars per month or fraction of a month, not to exceed five hundred dollars, or five per cent per month or fraction of a month, not to exceed fifty per cent, of the tax required to be shown on the report, for each month or fraction of a month elapsing between the due date, including extensions of the due date, and the day on which the report is filed.

(2) If a taxpayer fails to pay any amount of estimated tax required to be paid under division (B) of section 5745.04 of the Revised Code by the dates prescribed for payment, the tax commissioner may impose a penalty not to exceed twice the interest charged under section 5745.09 of the Revised Code for the delinquent payment.

(3) If a taxpayer files what purports to be a report required by this chapter that does not contain information upon which the substantial correctness of the report may be judged or contains information that on its face indicates that the report is substantially incorrect, and the filing of the report in that manner is due to a position that is frivolous or a desire that is apparent from the report to delay or impede the administration of this chapter, a penalty of up to five hundred dollars may be imposed.

(4) If a taxpayer makes a fraudulent attempt to evade the reporting or payment of the tax required to be shown on any report required under this chapter, a penalty may be imposed not exceeding the greater of one thousand dollars or one hundred per cent of the tax required to be shown on the report.

(5) If any person makes a false or fraudulent claim for a refund under section 5745.11 of the Revised Code, a penalty may be imposed not exceeding the greater of one thousand dollars or one hundred per cent of the claim. Any penalty imposed under division (A)(5) of this section, any refund issued on the claim, and interest on any refund from the date of the refund, may be assessed under section 5745.12 of the Revised Code without regard to any time limitation for the assessment imposed by division (A) of that section.

(B) For the purposes of this section, the tax required to be shown on the report shall be reduced by the amount of any part of the tax paid on or before the date, including extensions of the date, prescribed for filing the report.

(C) Each penalty imposed under this section shall be in addition to any other penalty provided in this section. All or part of any penalty imposed under this section may be abated by the commissioner. The tax commissioner may adopt rules governing the imposition and abatement of such penalties.

(D) All amounts collected under this section from a taxpayer shall be considered as taxes collected under this chapter and shall be credited and distributed to municipal corporations in the same proportions as the taxpayer's taxes are distributed for the reporting period under section 5745.05 of the Revised Code or, if the taxpayer has filed the annual report for the year under section 5745.03 of the Revised Code, in the amounts found to be due such municipal corporations on the basis of the annual report.

Effective Date: 01-01-2001

5745.09 Underpayments.

(A) In case of any underpayment of the estimated tax under section 5745.04 of the Revised Code, there shall be added to the tax an amount determined at the rate per annum prescribed by section 5703.47 of the Revised Code upon the amount of underpayment for the period of underpayment.

(B) The amount of the underpayment shall be the excess of division (B)(1) over division (B)(2) of this section:

(1) The amount of the estimated tax payment that would be required to be paid for the taxable year if the total estimated tax were equal to the total tax shown to be due on the annual report, or if no report was filed, the tax for such year;

(2) The amount, if any, of the estimated tax paid on or before the last day prescribed for such payment.

(C) The period of the underpayment shall run from the date the estimated tax payment was required to be made to the date on which such payment is made. For purposes of this section, a payment of estimated tax on any payment date shall be considered a payment of any previous underpayment only to the extent such payment exceeds the amount of the payment presently due.

(D) All amounts collected under this section shall be considered as taxes collected under this chapter and shall be credited and distributed to municipal corporations in the same proportions as the taxpayer's taxes are distributed for the reporting period under section 5745.05 of the Revised Code or, if the taxpayer has filed the annual report for the year under section 5745.03 of the Revised Code, in the amounts found to be due to such municipal corporations on the basis of the annual report.

Effective Date: 01-01-2001

5745.10 [Repealed Effective 9/17/2014] Date of postmark deemed date of delivery or date of payment.

Except as otherwise provided in section 5703.053 of the Revised Code, if any report, claim, statement, or other document required to be filed, or any payment required to be made, within a prescribed period or on or before a prescribed date under this chapter is, after such period or such date, delivered by United States mail to the agency, officer, or office with which such report, claim, statement, or other document is required to be filed, or to which such payment is required to be made, the date of the postmark stamped on the cover in which such report, claim, statement, or other document, or payment is mailed shall be deemed the date of delivery or the date of payment.

"The date of the postmark" means, in the event there is more than one date on the cover, the earliest date imprinted on the cover by the post office.

Repealed by 130th General Assembly File No. TBD, HB 492, §2, eff. 9/17/2014.

Effective Date: 01-01-2001

5745.11 Application for refund.

An application to refund to a taxpayer the amount of taxes paid on any illegal, erroneous, or excessive payment of tax under this chapter, including assessments, shall be filed with the tax commissioner within three years after the date of the illegal, erroneous, or excessive payment of the tax, or within any additional period allowed by division (A) of section 5745.12 of the Revised Code. The application shall be filed in the form prescribed by the tax commissioner.

On the filing of a refund application, the commissioner shall determine the amount of refund to which the applicant is entitled. If the amount is not less than that claimed, the commissioner shall certify the amount of the refund to each municipal corporation to which the overpayment was made. If the amount is less than that claimed, the commissioner shall proceed in accordance with divisions (A) to (C) of section 5703.70 of the Revised Code and shall certify to each municipal corporation to which the overpayment was made the amount to be refunded under division (B) or (C) of that section.

On receipt of a certification of a refund, the municipal corporation shall issue a refund to the taxpayer, or, upon the taxpayer's written request, shall credit the amount of the refund against the taxpayer's estimated tax payments to the municipal corporation for an ensuing taxable year.

Any portion of the refund not issued within ninety days after the tax commissioner's notice is received by the municipal corporation shall bear interest at the rate per annum prescribed by section 5703.47 of the Revised Code from the ninetieth day after such notice is received by the municipal corporation until the day the refund is paid or credited. On an illegal or erroneous assessment, interest shall be paid at that rate from the date of payment on the illegal or erroneous assessment until the day the refund is paid or credited.

Effective Date: 09-06-2002

5745.12 Assessment for deficiencies.

(A) If any taxpayer required to file a report under this chapter fails to file the report within the time prescribed, files an incorrect report, or fails to remit the full amount of the tax due for the period covered by the report, the tax commissioner may make an assessment against the taxpayer for any deficiency for the period for which the report or tax is due, based upon any information in the commissioner's possession.

The tax commissioner shall not make or issue an assessment against a taxpayer more than three years after the later of the final date the report subject to assessment was required to be filed or the date the report was filed. Such time limit may be extended if both the taxpayer and the commissioner consent in writing to the extension. Any such extension shall extend the three-year time limit in section 5745.11 of the Revised Code for the same period of time. There shall be no bar or limit to an assessment against a taxpayer that fails to file a report subject to assessment as required by this chapter, or that files a fraudulent report. The commissioner shall give the taxpayer assessed written notice of the assessment as provided in section 5703.37 of the Revised Code. With the notice, the commissioner shall provide instructions on how to petition for reassessment and request a hearing on the petition.

(B) Unless the taxpayer assessed files with the tax commissioner within sixty days after service of the notice of assessment, either personally or by certified mail, a written petition for reassessment signed by the authorized agent of the taxpayer assessed having knowledge of the facts, the assessment becomes final, and the amount of the assessment is due and payable from the taxpayer to the treasurer of state. The petition shall indicate the taxpayer's objections, but additional objections may be raised in writing if received by the commissioner prior to the date shown on the final determination. If the petition has been properly filed, the commissioner shall proceed under section 5703.60 of the Revised Code.

(C) After an assessment becomes final, if any portion of the assessment remains unpaid, including accrued interest, a certified copy of the tax commissioner's entry making the assessment final may be filed in the office of the clerk of the court of common pleas in the county in which the taxpayer has an office or place of business in this state, the county in which the taxpayer's statutory agent is located, or Franklin county.

Immediately upon the filing of the entry, the clerk shall enter a judgment against the taxpayer assessed in the amount shown on the entry. The judgment may be filed by the clerk in a loose-leaf book entitled "special judgments for municipal income taxes," and shall have the same effect as other judgments. Execution shall issue upon the judgment upon the request of the tax commissioner, and all laws applicable to sales on execution shall apply to sales made under the judgment.

If the assessment is not paid in its entirety within sixty days after the day the assessment was issued, the portion of the assessment consisting of tax due shall bear interest at the rate per annum prescribed by section 5703.47 of the Revised Code from the day the commissioner issues the assessment until the assessment is paid or until it is certified to the attorney general for collection under section 131.02 of the Revised Code, whichever comes first. If the unpaid portion of the assessment is certified to the attorney general for collection, the entire unpaid portion of the assessment shall bear interest at the rate per annum prescribed by section 5703.47 of the Revised Code from the date of certification until the date it is paid in its entirety. Interest shall be paid in the same manner as the tax and may be collected by issuing an assessment under this section.

(D) All money collected under this section shall be credited and distributed to the municipal corporation to which the money is owed based on the assessment issued under this section.

(E) If the tax commissioner believes that collection of the tax imposed by this chapter will be jeopardized unless proceedings to collect or secure collection of the tax are instituted without delay, the commissioner may issue a jeopardy assessment against the taxpayer liable for the tax. Immediately upon the issuance of the jeopardy assessment, the commissioner shall file an entry with the clerk of the court of common pleas in the manner prescribed by division (C) of this section. Notice of the jeopardy assessment shall be served on the taxpayer assessed or the taxpayer's legal representative in the manner provided in section 5703.37 of the Revised Code within five days of the filing of the entry with the clerk. The total amount assessed is immediately due and payable, unless the taxpayer assessed files a petition for reassessment in accordance with division (B) of this section and provides security in a form satisfactory to the commissioner and in an amount sufficient to satisfy the unpaid balance of the assessment. Full or partial payment of the assessment does not prejudice the commissioner's consideration of the petition for reassessment.

(F) Notwithstanding the fact that a petition for reassessment is pending, the taxpayer may pay all or a portion of the assessment that is the subject of the petition. The acceptance of a payment by the treasurer of state does not prejudice any claim for refund upon final determination of the petition.

If upon final determination of the petition an error in the assessment is corrected by the tax commissioner, upon petition so filed or pursuant to a decision of the board of tax appeals or any court to which the determination or decision has been appealed, so that the amount due from the taxpayer under the corrected assessment is less than the portion paid, there shall be issued to the taxpayer, its assigns, or legal representative a refund in the amount of the overpayment as provided by section 5745.11 of the Revised Code, with interest on that amount as provided by section 5745.11 of the Revised Code.

Amended by 130th General Assembly File No. 25, HB 59, §101.01, eff. 9/29/2013.

Effective Date: 09-06-2002

5745.13 Adjustments to income apportionable to municipal corporation.

If, upon examination of any books, records, reports, or other documents of a taxpayer, the tax commissioner determines that an adjustment shall be made in the portion of the taxpayer's income that is to be apportioned to a municipal corporation, the tax commissioner shall notify the taxpayer and, if the adjustment causes an adjustment in the taxpayer's tax owed to a municipal corporation for the taxpayer's taxable year of more than five hundred dollars, shall notify that municipal corporation that the taxpayer's tax has been adjusted.

Any municipal corporation to which such a notice is issued may request a review and redetermination of the taxpayer's federal taxable income, Ohio net income, or the portion of Ohio net income apportioned to the municipal corporation by filing a petition with the tax commissioner not later than sixty days after the tax commissioner issues the notice. The petition shall be filed either personally or by certified mail, and shall indicate the objections of the municipal corporation.

Upon receiving such a petition, if a hearing is requested the tax commissioner shall assign a time and place for a hearing on the petition and shall notify the petitioner of the time and place of the hearing by ordinary mail. The tax commissioner may continue the hearing from time to time as necessary. The tax commissioner shall make any correction to the taxpayer's federal taxable income, Ohio net income, or apportionment of Ohio net income that the commissioner finds proper, and issue notice of any correction by ordinary mail to the petitioner, to each other municipal corporation affected by the correction of the apportionment, and to the taxpayer. The tax commissioner's decision on the matter is final, and is not subject to further appeal.

Effective Date: 01-01-2001; 2007 HB119 06-30-2007

5745.14 Filing amended report based on adjustments to federal tax return.

(B) In the case of an underpayment, the amended report shall be accompanied by payment of an additional tax and interest due and is a report subject to assessment under section 5745.12 of the Revised Code for the purpose of assessing any additional tax due under this division, together with any applicable penalty and interest. It shall not reopen those facts, figures, computations, or attachments from a previously filed report no longer subject to assessment that are not affected, either directly or indirectly, by the adjustment to the taxpayer's federal income tax return.

(C) In the case of an overpayment, an application for refund may be filed under section 5745.11 of the Revised Code within the one-year period prescribed for filing the amended report even if it is filed beyond the period prescribed by that section, if it otherwise conforms to the requirements of such section. An application filed under this division shall claim refund of overpayments resulting from alterations to only those facts, figures, computations, or attachments required in the taxpayer's report that are affected, either directly or indirectly, by the adjustment to the taxpayer's federal income tax return unless it is also filed within the time prescribed by section 5745.11 of the Revised Code. It shall not reopen those facts, figures, computations, or attachments that are not affected, either directly or indirectly, by the adjustment to the taxpayer's federal income tax return.

Effective Date: 01-01-2001

5745.15 Maintaining records.

(A) Each taxpayer shall make its records, documents, returns, and reports open to inspection by the tax commissioner during normal business hours, and shall preserve those records, documents, returns, and reports for a period of three years after the date the return or report, or return or report to which such a record or document pertains, was required to be filed or actually was filed, whichever is later. The tax commissioner may consent in writing to the destruction of such records, documents, returns, or reports within that three-year period.

(B) The tax commissioner shall administer and enforce this chapter. In addition to any other powers conferred by law on the tax commissioner, the tax commissioner may prescribe all forms required to be filed under those sections, adopt rules that, in the opinion of the tax commissioner, are necessary to carry out those sections, and appoint and employ such personnel as may be necessary to carry out the tax commissioner's duties under those sections.

Effective Date: 01-01-2001

5745.16 Rules governing terms and conditions under which such reports or information shall be available for inspection.

With respect to reports filed with the tax commissioner under this chapter, and any other information gained in the performance of the tax commissioner's duties prescribed by this chapter, the tax commissioner shall adopt rules governing the terms and conditions under which such reports or information shall be available for inspection by properly authorized officers, employees, or agents of the municipal corporation to which the taxpayer's Ohio net income is apportioned under division (D) of section 5745.02 of the Revised Code. The rules shall prohibit disclosure of such reports or information to any person other than a properly authorized officer, employee, or agent of a municipal corporation, and shall provide for disclosure of only such information as is necessary, in the opinion of the tax commissioner, for properly authorized officers, employees, or agents of a municipal corporation to ascertain the share of a taxpayer's net income to be apportioned to that municipal corporation.

As used in this division, "properly authorized officer, employee, or agent" means an officer, employee, or agent of a municipal corporation who is authorized by charter or ordinance of the municipal corporation to view or possess information referred to in section 718.13 of the Revised Code.

Effective Date: 01-01-2001