Net Profit Income Tax Form 27 Instruction Booklet

Schedule X – Reconciliation with Federal

Schedule Y – Business Apportionment

Income Tax Return

Formula

This schedule is used for the purpose of making adjustments when total income (Line

A Business Apportionment Formula consisting of the average original cost of

1) includes income not taxable and/or items not deductible for municipal purposes.

real and tangible personal property, gross receipts, and wages paid must be

Enter the amounts of any such items in Schedule X and carry totals, Line G and Line

used by business entities not required to pay tax on entire net profits, by

Q, respectively to Lines (2A) and (2B).

reason of doing business both within and without of RITA municipalities. (ORC §

718.02) However, if the Business Apportionment Formula does not produce an

equitable result, another basis (for example the Books and Records) may be

Line A. Section 1221 and 1231 Losses

substituted following the process outlined in Section 3(F)(3)(b) of RITA’s Rules

Report all losses (ordinary and capital) directly related to the sale, exchange, or other

and Regulations.

disposition of an asset described in Section 1221 or 1231 of the Internal Revenue

Code (IRC). Losses related to Section 1221 assets are normally reported on Federal

Step 1. Property

Schedule D while losses related to Section 1231 assets are normally reported on

Federal Form 4797.

The average original cost of real property and tangible personal property

within RITA municipalities. Annual rental on rented or leased real property

situated within city limits multiplied by 8.

Line B. Taxes Based on Income

Include foreign, state, local, and other taxes based on income.

Step 2. Wages and Salaries

Wages, salaries and other compensation paid during the taxable period to

Line C. 5% of Certain Intangible Income

W-2 employees for services performed within RITA municipalities,

Multiply Schedule X, Line O, (if used) by 5%.

excluding compensation from which taxes are not required to be withheld

under ORC § 718.011.

Line D. Certain Owner Compensation

Step 3. Gross Receipts

For use by taxpayers that are not C Corporations and are not individuals. Ohio law

prohibits taxpayers that are not C Corporations and not individuals from claiming a

Total gross receipts of the business or profession from sales and rentals

deduction for payments to a qualified self-employed retirement plan, payments for

made and services performed during the taxable period in the municipal

health or life insurance for an owner or owner-employee, or federal self-employment tax.

corporation to total gross receipts of the business or profession during the

Report all such payments here.

same period from sales, rentals and services, where made or performed.

Gross receipts from the sale of services shall be sitused to a RITA municipality to

Line E. REIT and RIC Adjustments

the extent that such services are performed in the RITA municipality.

A real estate investment trust or regulated investment company must report all

dividends, distributions, or amounts set aside for the benefit of investors included in

Sales and gross receipts in RITA municipalities means:

Page 1, Line 1.

1. All sales of tangible personal property which is shipped from a RITA

municipality to purchasers outside of a RITA municipality regardless of where

Line N. Certain Section 1221 and 1231 Gains

title passes if the taxpayer is not, through its own employees regularly engaged

Report all income and gains directly related to the sale, exchange, or other

in the solicitation or promotion of sales at the place where delivery is made.

disposition of an asset described in Section 1221 or 1231 of the IRC. (Note: Do not

include income or gain(s) described in Section 1245 or 1250 of the IRC. ORC §718.01

2. All sales of tangible personal property which is delivered within a RITA

(E) requires all S-Corporations and partnerships to increase their Section 1250 gains by

municipality regardless of where title passes, even though transported from a

the adjustment all C Corporations must make under IRC Section 291.)

point outside a RITA municipality, if the taxpayer is regularly engaged through

its own employees in the solicitation and the sales result from such solicitation or

Line P. Other Items Not Taxable

promotion.

Use this line to report pass-through income/(loss) from another entity . Indicate the

3. All sales of tangible personal property which is delivered within a RITA

Federal Identification Number of the business that originated the pass-through income

municipality regardless of where title passes, if shipped or delivered from a stock

and include a copy of the K-1 issued. Do not include or take credit for tax paid by the

of goods within a RITA municipality.

business that generated the pass-through income.

A l s o use this line to report any other income RITA municipalities are specifically

Schedule Y-1. Reconciliation of Y Wages

prohibited from taxing that is not required to be reported on another line of

to Withholding Returns

Schedule X or on the AFTI Worksheet. Note: Cancellation of indebtedness and wage

adjustments associated with federal work and job credits are included as income

Use this schedule to reconcile workplace wages, salaries, etc. allocated to

under federal code. A F T I ( ORC §7 1 8 . 0 1 ( E ) ) does not permit deductions for

RITA municipalities on Schedule Y with the amounts reported on your

cancellation of indebtedness or for wage adjustments associated with federal work

withholding returns filed for the tax year covered by this return.

and job credits

Line 1. Withholding Return Wages

AFTI Worksheet

A calendar year taxpayer must use the workplace wages reported on their

Ohio law creates a uniform definition of taxable income for net profit tax returns,

annual Reconciliation of Income Tax Withheld (Form 17). A fiscal year taxpayer

Adjusted Federal Taxable Income (AFTI). The definition of AFTI is found at ORC

must use the sum of the wages reported on the Form 11 withholding statements

§718.01(E). A taxpayer that is not a C Corporation and is not an individual must make

that correspond to the fiscal year.

the adjustments in Lines B, C and/or Line D below.

Line 2. Explanation of Discrepancy

Line B. Section 179 Adjustment

Provide an explanation on Line 2 if the overall discrepancy is: (1) greater than

Add federal Section 179 depreciation in excess of what would be allowed for federal tax

10% of the total workplace wages reported; or (2) greater than $5,000. If

purposes if the taxpayer were a C Corporation. Excess Section 179 expenses should

you are reporting workplace wages for multiple RITA municipalities apply the

be carried forward to subsequent years. Subtract Section 179 depreciation carried

10% / $5,000 thresholds to each municipality.

over from prior years to the same extent as would be allowed if a C Corporation. Attach

a schedule showing your carry forwards for municipal tax purposes.

Schedule Z. Pass-Through Distributive

Shares of Net Income

Line C. Charitable Contribution Adjustment

Add charitable contributions in excess of what would be allowed for federal tax

All

pass-through

entities

must

attach

schedule

showing

each

purposes if the taxpayer were a C Corporation. Excess charitable contributions

partner’s/shareholder’s name, social security number, distributive share,

should be carried forward to subsequent years. Subtract charitable contributions

guaranteed payments (if applicable) and taxable percentage. The amounts

carried over from prior years to the same extent as would be allowed if a C

reported on this schedule must correspond with the amounts reported on your

Corporation.

Attach a schedule showing your carry forwards for municipal tax

federal return. Attach a schedule if you need more space.

purposes

Consolidated Returns

Line D. Other

Taxpayers filing consolidated returns must include copies of the Consolidation

Other Adjustments (Including any Section 754 depreciation claimed on a return other

schedules attached to their federal returns when filing their Form 27. Once

than the return of the purchasing partner per ORC §718.01 (E) (10).

an election is made to file a consolidated return, permission is needed to file

separately in future years. For tax years beginning on or after January 1, 2016,

consolidated filers now have a five year opt-in/out window for changing from

consolidated to single filers and can elect each year to include or exclude income

from 80% PTE ownership. Please see ORC §718.06 for more information on

municipal income tax consolidated return requirements.

Net Profit Income Tax Form 27 Instruction Booklet - 2016 Page 2

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