2023 NET PROFIT INCOME TAX FORM 27 INSTRUCTION BOOKLET

2023 NET PROFIT INCOME TAX

FORM 27 INSTRUCTION BOOKLET

Filing Requirements

Every corporation, partnership, trust, or estate that conducts business in a RITA

municipality must file a return and pay tax on net profit earned in the municipality. A

disregarded entity or qualifying subchapter S subsidiary for federal income tax purposes

is not considered the “taxpayer” under Ohio law. Instead, the “taxpayer” includes any

other person who owns the disregarded entity or qualifying subchapter S subsidiary.

When to File

Generally, a business must file its income tax return on or before the fifteenth (15th)

day of the fourth (4th) month following the end of the taxpayer’s taxable year.

Note: Calendar year end filers due April 15, 2024.

Where to File

Forms may be mailed with payment to: RITA, P.O. Box 94582, Cleveland, OH 44101-

4582; without payment to: RITA, P.O. Box 89475, Cleveland, OH 44101-6475; or with

refund to: RITA, P.O. Box 94652, Cleveland, OH 4410-4652. Please visit ritaohio.com

for office locations and business hours.

When a Return is Not Required

Nonprofits (as defined in IRC Section 501c) are not required to file an annual return

if a copy of the organization’s approved IRS determination letter is on file with RITA.

However, should a nonprofit have unrelated business income, said nonprofit is

required to file a municipal return and pay tax thereon.

Extensions of Time to File

Effective with tax year 2023 for calendar year filers (effective tax year 2022 for fiscal

year filers) a federal extension extends the municipal due date to the fifteenth day of the

eleventh month after the last day of the taxable year. For tax years prior to 2023 for

calendar year filers and 2022 for fiscal filers, a federal extension extends the municipal

due date to the fifteenth day of the tenth month after the last day of the taxable year to

which the return relates. It is not necessary to file a copy of the federal extension with

RITA by the annual filing due date. Attach a copy of the federal extension when

filing the Net Profit annual return on or before the extended due date. If you have

not requested or received a federal extension you may receive an extension for the filing

of the Net Profit annual return by completing Form 20-EXT Net Profit Estimated Income

Tax and/or Extension of Time to File which is due by the annual filing due date. An

extension to file is not an extension to pay – the tax owed must be paid by the annual

filing due date. Remit Form 20-EXT to pay the tax balance due.

Extensions of time to file have no effect on the due dates of estimated

taxes. If the return is on extension, use Form 20-EXT to pay first quarter

estimated taxes on or before the fifteenth (15th) day of the fourth (4th)

month of the tax year.

Rounding Off to Whole Dollars

A business may round off cents on its return and schedules. Eliminate any amount less

than fifty cents and increase any amount from fifty cents through ninety-nine cents to the

next higher dollar.

Penalty and Interest

In accordance with the law, penalty and interest is charged on taxes (including

estimated taxes) paid late, even if an extension of time to file is granted. Penalties may

also be charged for failing to file a return when due. A fee will be charged to your

account for a dishonored check or a check/electronic debit that cannot be

processed. RITA may choose to redeposit your returned item electronically.

Additionally, you understand and agree that we may collect a returned item

processing fee as allowed by state law. Electronic filers assume all responsibility

for the accuracy of the information submitted and are, therefore, subject to any

charged fees described above for any errors.

Uniform Definition of Net Profit

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

“Adjusted Federal Taxable Income” (AFTI). This definition can be found under Ohio

Revised Code (ORC) §718.01. Refer to the AFTI worksheet found on Page 3 of Form 27

or at ritaohio.com

to determine AFTI as it pertains to a taxpayer that is not a C

Corporation and is not an individual, and who must compute Federal Taxable Income

(FTI) as if the taxpayer were a C Corporation.

Name and Address

Print your company name, address, and federal identification number.

Alternate Method

Check this box if you are requesting a method other than the prescribed three

factor formula for apportioning net profits. The request must be in writing,

attached to this return, and contain an explanation as to why an alternate

method is being requested.

Small Employer

Check this box if the taxpayer is a small employer. A small employer is an Ohio

employer that had total gross revenue of less than $500,000. A small employer

does not include the federal government, any state government, including any

state agency or instrumentality; any political subdivision; or any entity treated as

a government for financial accounting and reporting purposes. See ORC

§718.01 (TT).

ORC 718.021 Election

Check this box if electing to apportion income based on the guidelines in ORC

718.021 and will be situsing any payroll, property or sales from a qualifying

remote employee or owner at the individual’s qualifying remote work location to

that individual’s qualifying reporting location.

Line 1. Federal Taxable Income

Indicate your C Corporation Federal Taxable Income (“FTI”), or the equivalent on

Line 1. Refer to the AFTI worksheet found on Page 3 of Form 27 or at

ritaohio.com

to determine the starting point for FTI. A taxpayer that is not a C

Corporation and is not an individual, must compute FTI as if the taxpayer were

a C Corporation.

Line 3B. Checkbox

Check this box when using different Net Operating Loss amounts for different

municipalities and attach your Net Operating Losses worksheet.

For Tax Year 2023, only two RITA municipalities allow a net operating loss to be

carried forward greater than five (5) years for tax years beginning prior to 1/1/17.

JEWETT allows a net operating loss to be carried forward for a maximum of

seven (7) years for tax years beginning prior to 1/1/17.

MCDONALD allows a net operating loss to be carried forward for a maximum of

ten (10) years for tax years beginning prior to 1/1/17.

A municipality specific worksheet or schedule is required to support a net

operating loss carryforward claimed on the return.

Line 3Bi. This line is intentionally left blank

Line 3Bii. Pre-Apportioned Losses from

Tax Years Beginning on or After 1/1/18

Utilized in this Tax Year

Enter the total amount of pre-apportioned net operating loss being used. If you

select the Line 3B checkbox and used different amounts of a net operating loss

for various municipalities, enter the greatest value amount of the net operating

loss used on this Line. Attach the Net Operating Loss schedule to the form for

additional support documentation.

Line 3C. Percent Allocable to RITA

If the business operates strictly within one RITA municipality, enter 100% as the

percentage on Line 3C. Otherwise, enter the total average percentage from

Page 4, Schedule Y, Step 5. The Ohio Revised Code requires that Schedule Y

be the default method used to determine the percentage of income attributable

to RITA municipalities by business entities conducting business activity both

within and outside RITA municipalities.

Line 4 Amount Subject to Municipal Income

Tax

Enter the amount of Line 3b(iii) multiplied by 3C (the percentage) on Line 4. Note

if you checked the 3B checkbox you will need to calculate the income for each

municipality separately and enter the total.

Per ORC §718.02 (G) when computing taxable income allocable to Brooklyn,

Jackson, Lagrange, Niles, Oberlin, Spencerville, Walton Hills and Wintersville,

add back to the income apportioned to each of these municipalities the amount

of the stock option income that is exempt from each municipality’s withholding

(attach schedule).



Caution

Schedule B – Distribution of Tax within

RITA Municipalities

If the amount of income (loss) and tax reported on Lines 4 and 5 of this form is to be

allocated to any RITA municipality, you must fill in the names of all the RITA

municipalities in which you conducted business along with the amount of taxable

income (loss) and tax due for each. If tax due is $10 or less for a municipality, enter

zero in the Tax Due field of Schedule B for that municipality. The total tax distribution in

Schedule B must equal the total tax due shown on Page 1, Line 5. Attach a schedule if

you need more space.

Schedule X – Reconciliation with Federal

Income Tax Return

This schedule is used to make adjustments when total income (Line 1) includes income

not taxable and/or items not deductible for municipal purposes. Enter the amounts of

any such items in Schedule X and carry totals from Line G and Line Q respectively, to

Lines (2A) and (2B).

Line A. Section 1221 and 1231 Losses

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

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

(IRC). Losses related to Section 1221 assets are usually reported on Federal Schedule

D while losses related to Section 1231 assets are usually reported on Federal Form

4797.

Line B. Taxes Based on Income

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

Line C. 5% of Certain Intangible Income

Multiply Schedule X, Line O, (if used) by 5%. (Line C is not applicable to Wickliffe;

intangible income is taxable to the city of Wickliffe).

Line D. Certain Owner Compensation

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

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

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

tax. Report all such payments here.

Line E. REIT and RIC Adjustments

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

Page 1, Line 1.

Line N. Certain Section 1221 and 1231 Gains

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

requires all S-Corporations and partnerships to increase their Section 1250 gains by the

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

Line P. Other Items Not Taxable

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

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

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

business that generated the pass-through income.

Also use this line to report any other income RITA municipalities are specifically

prohibited from taxing that is not required to be reported on another line of 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 under federal code.

AFTI (ORC §718.01(E)) does not permit deductions for cancellation of indebtedness or

for wage adjustments associated with federal work and job credits

AFTI Worksheet

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

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

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

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

Line B. Section 179 Adjustment

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

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

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

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

and trusts can claim the IRC section 179 deduction to the extent the deduction would

be allowed if the estate or trust were a C corporation. Attach a schedule showing your

carryforwards for municipal tax purposes.

Line C. Charitable Contribution Adjustment

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

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

should be carried forward to subsequent years. Subtract charitable contributions

carried 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.

Line D. Other

Each taxpayer, who is not an individual, must compute net profit as if the entity

were a C corporation. As such, in addition to the adjustments required for Lines

B and C on this worksheet, the taxpayer must also make the following applicable

adjustments on Line D of this worksheet:

• Add back any distribution deduction claimed on IRS form 1041 (estates

and trusts only).

• Add back the additional deductions, if any (generally, depreciation

expense deductions) claimed on the IRS form 1065 on account of the

election described in IRC section 743 or section 754 (partnerships and

LLCs treated as partnerships only).

• Add the amount of recapture income described in IRC section 291.

• Add the amount of interest expense otherwise deducted to the extent that

deduction is not allowed to a C corporation under IRC section 163 (j).

• Add back all other items of income and deductions to the extent those

items (i) are not listed above, (ii) are not already included in the

computation of net profit, and (iii) would be taxable or nondeductible,

respectively, if the taxpayer were a C corporation.

• Subtract any amount otherwise included in computation of net profit to the

extent that amount would either be nontaxable or deductible if the

taxpayer were a C corporation.

Schedule Y – Business Apportionment

Formula

A Business Apportionment Formula consisting of the average original cost of

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

used by business entities not required to pay tax on entire net profits by 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 Books and Records) may be

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

and Regulations.

NOTE: Check the ORC 718.021 Election box on page 1 if the taxpayer has

elected to apportion income based on the guidelines in ORC 718.021 and will be

situsing any payroll, property or sales from a qualifying remote employee or

owner at that individual’s qualifying remote work location to that individual’s

qualifying reporting location.

Step 1. Property

The average original cost of real property and tangible personal property within

RITA municipalities. Annual rental on rented or leased real and tangible personal

property situated within the RITA municipality multiplied by 8.

Property at a qualifying remote employee or owner’s qualifying remote work

location may be sitused to a qualifying reporting location under ORC 718.021. If

making this election note that it applies to all municipalities and the ORC

718.021 Election box on Page 1 must be selected.

Step 2. Wages and Salaries

Wages, salaries and other compensation paid during the taxable period to W-2

employees for services performed within RITA municipalities, excluding

compensation from which taxes are not required to be withheld under ORC §

718.011. If your business is considered a “Small Employer” as defined on page

1 of these instructions or your business is impacted by the 20 day rule, allocate

wages and salaries in the same manner in which they were withheld.

Wages, salaries and other compensation earned at a qualifying remote

employee or owner’s qualifying remote work location may be sitused to a

qualifying reporting location under ORC 718.021. If making this election note

that it applies to all municipalities and the ORC 718.021 Election box on Page 1

must be selected.

Step 3. Gross Receipts

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

and services performed during the taxable period in the municipal corporation to

total gross receipts of the business or profession during the same period from

sales, rentals and services, wherever made or performed.

Sales or services at a qualifying remote employee or owner’s qualifying remote

work location may be sitused to a qualifying reporting location under ORC

718.021. If making this election note that it applies to all municipalities and the

ORC 718.021 Election box on Page 1 must be selected.

Step 3. Gross Receipts (continued)

Sales and gross receipts in RITA municipalities means:

(1) Gross receipts from the sale of tangible personal property shall be sitused to the

municipal corporation only if, regardless of where title passes, the property meets

either of the following criteria:

a) The property is shipped to or delivered within the municipal corporation

from a stock of goods located within the municipal corporation.

b) The property is delivered within the municipal corporation from a location

outside the municipal corporation, provided the taxpayer is regularly engaged

through its own employees in the solicitation or promotion of sales within such

municipal corporation and the sales result from such solicitation or promotion.

(2) Gross receipts from the sale of services shall be sitused to the municipal

corporation to the extent that such services are performed in the municipal

corporation.

(3) To the extent included in income, gross receipts from the sale of real property

located in the municipal corporation shall be sitused to the municipal corporation.

(4) To the extent included in income, gross receipts from rents and royalties from real

property located in the municipal corporation shall be sitused to the municipal

corporation.

(5) Gross receipts from rents and royalties from tangible personal property shall be

sitused to the municipal corporation based upon the extent to which the tangible

personal property is used in the municipal corporation.

Schedule Y-1. Reconciliation of Schedule

Y Wages to Withholding Returns

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

municipalities on Schedule Y with the amounts reported on your withholding returns

filed for the tax year covered by this return.

Line 1. Withholding Return Wages

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

Reconciliation of Income Tax Withheld (Form 17). A fiscal year taxpayer must use the

sum of the wages reported on the Form 11 withholding statements that correspond to

the fiscal year.

Line 2. Explanation of Discrepancy

Attach an explanation if the overall discrepancy is: (1) greater than 10% of the total

workplace wages reported; and (2) greater than $5,000. If you are reporting workplace

wages for multiple RITA municipalities apply the 10% / $5,000 thresholds to each

municipality.

Line 3. Other Company Information

Provide the Company Name and Federal Identification Number under which the

withholding tax was remitted if different than the FEIN reported on page 1 of the Form

27.

Schedule Z. Pass-Through Distributive Shares

of Net Income

All pass-through entities must attach a schedule showing each partner/shareholder

name, social security number, distributive share, guaranteed payments (if applicable)

and ownership percentage. The amounts reported on this schedule must correspond

with the amounts reported on your federal return.

Schedule ZZ: Consolidated Returns

Taxpayers filing consolidated returns must attach Federal Form 851 or a schedule

listing the name, address and employer identification number of each affiliate included

in the consolidated return when filing their Form 27. Once 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 have a five year opt-

in/out window for changing from consolidated to single filing, or vice versa, and can

elect each year to include or exclude income from 80% PTE ownership from the

consolidated group. Please see ORC §718.06 for more information on municipal

income tax consolidated return requirements.

Line 5. Municipal Tax Due

You must complete Schedule B on Page 2 for any amount shown on Line 5. See

ritaohio.com

to obtain current tax rates.

Line 6A. Payments on Declarations of

Estimated Municipal Tax

Enter estimated payments made to RITA municipalities for this taxable year.

Line 6B. Amount of Previous Year Credits

Enter credit from prior year(s). (This should be the overpayment you indicated on

the prior year return to be credited against this year’s tax).

Line 7A. Balance Due

If Line 5 is greater than Line 6C, enter the difference here. Remittance in this

amount must accompany the return when filed. A business may round off cents.

Line 7B. Overpayment Claimed

If Line 6C is greater than Line 5, enter the difference here. This amount will be

transferred as a credit unless you request a refund. Amounts $10 or less will not

be refunded. If requesting a refund, please check the refund box on return

envelope to expedite processing of the refund.

Line 8. Computation of Estimated Tax

Estimated tax payments are due on the fifteenth (15th) day of the fourth

(4th) sixth (6th), ninth (9th) and twelfth (12th) months of each fiscal year.

A. Enter the estimated taxable income and tax for each municipality in the space

provided next to the name of that municipality. Then place the total estimated

taxes on Line 8A.

B. Credit from prior year: If upon completion of your annual net profit

Form 27 you have accrued a credit and did not request a refund, you may

take that credit on Line 8B. Otherwise, place a zero on this line.

D. Enter the amount of estimated tax to be paid with this return. For your

convenience, you may pay the full amount of total estimated tax due, (Line 8C)

with this declaration. Otherwise, at least 1/4 of the estimated tax due, less any

credit carryforward, must be remitted with this declaration and the

remaining amount will be billed. If the return is filed on extension, more than ¼ of

the estimated tax may be due.

For each RITA municipality owed, if your estimated payments are not 90%

of the tax due or are not equal to or greater than your prior year’s total tax

liability, you will be subject to penalty and interest charges. Quarterly

payments of estimated tax must be made to each RITA municipality if the

anticipated amount owed is greater than or equal to $200.

Line 9. Total Due

Print your federal employer identification number on your check or money order

and make it payable to RITA. Sign and date Form 27 in the space provided.

Enclose your check or money order with the Form 27 along with a copy of the

federal return and supporting schedules as indicated below.

WHAT TO ATTACH TO YOUR RETURN:

Attach a complete copy of the Federal Form 1041, 1065, 1120, 1120-A, 1120-

REIT, or 1120S as appropriate. Also attach copies of Schedule D, Schedule E,

Form 1125-A, Form 4562, Form 4797, Form 8825, and any supporting

statements for “other income”, “taxes and licenses”, “other expenses”, and Form

1125-A “other costs”. If applicable, attach copies of any K-1 schedules issued or

received. If filing a consolidated return, attach copies of your federal

consolidation schedules. If you issued any 1099-NEC forms, please attach

copies of those issued to Ohio residents. Note: The federal return MUST be

attached to be considered a complete tax return. Please also attach all

applicable schedules and 1099-NEC to avoid delays in processing.

Joint Economic Districts (JEDDs) or Joint

Economic Development Districts (JEDZs)

Most RITA revenue sharing districts (JEDDs and JEDZs) require taxpayers to file

annual Net Profit returns separately from the related municipal tax authority,

meaning net profits must be allocated to revenue sharing districts as if the

districts are separate, stand-alone municipalities. However, the following JEDDs

or JEDZ require that you file the annual Net Profit return with the related tax

authority

JEDD or JEDZ ______

Tax Authority

Beachwood East JEDD

Beachwood

Beachwood West JEDD

Beachwood

Orange Chagrin Highland JEDD

Orange