1. The portion of a net operating loss, based on income taxable
under the Ordinance, sustained in any taxable year subsequent
to January 1, 1987, in which a detailed final return has been
timely filed, allocable to Massillon may be applied against the
portion of the profit of succeeding year(s) allocable to Massillon
until exhausted, but in no event more than the five (5) years
immediately following the year in which the loss was sustained.
No portion of a net operating loss shall be carried back against
Net Profits of any prior year.
2. In the event Net Profits are allocated both within and
without Massillon, the portion of a net operating loss sustained
shall be allocated to Massillon in the same manner as provided
here for allocating Net Profits to Massillon. The portion of
a net operating loss to be carried forward shall be determined
in the year the net operating loss is sustained, on the basis
of the allocation factors applicable to that year.
The same method of accounting and allocation must be used
in the year to which an operating loss is carried as was used
in the year in which the operating loss was sustained.
3. A short Fiscal Year (a Fiscal Year of less than twelve
(12) months) brought about by a change in accounting period,
a new Taxpayer selecting a short Fiscal Year, or a Taxpayer operating
in Massillon for less than his full accounting period shall be
considered as a full taxable Fiscal Year for purposes of Loss
carry-forward.
4. In any return in which a net operating loss deduction is
claimed, a schedule should be attached showing:
a. Year in which net operating loss was sustained.
b. Method of accounting and allocation, used to determine
portion of net operating loss allocable to Massillon.
c. Amount of net operating loss used as a deduction in prior
years.
d. Amount of net operating loss claimed as a deduction in
current year.
5. The net operating loss of a Taxpayer which loses its identity
through merger, consolidation, etc., shall not be allowed as
a carry-forward loss deduction to the surviving or new Taxpayer.
6. In the case of a net operating loss sustained by Taxpayers
filing a consolidated return, see Article III, paragraph D.
1. Consolidated returns may be filed by a group of corporations
who are affiliated through stock ownership. For a corporation
to be included in a consolidated return, 80% of its stock must
be owned by the other members of the affiliated group. A consolidated
return must include all companies which are so affiliated.
2. Once a consolidated return has been filed for any taxable
year, the consolidated group must continue to file consolidated
returns in subsequent years unless:
a. Permission in writing is granted by the Administrator to
file separate returns.
b. A new corporation, other than a corporation created or
organized by a member of the group, has become a member of the
group during the taxable year.
c. A corporation member of the group is sold or exchanged.
Liquidating a corporation or merging one of the corporations
of the group into another will not qualify the group for filing
separate returns.
3. If a corporation becomes a member of the group during the
taxable year the consolidated return must include the income
for the entire taxable year of the common parent corporation
and any subsidiaries which were members of the group for the
entire year, plus the income of each subsidiary; which becomes
a member of the group during the year for the period beginning
with the date it became a member of the affiliated group. For
the period prior to the time any subsidiary became a member of
the group, separate returns must be filed for that subsidiary.
When a subsidiary ceases to be a member of the affiliated group,
the consolidated return must include the income of such subsidiary
for the period during which it was a member of the group, but
for the period after it ceases to be a member, separate returns
must be filed. If a corporation has been a member of the affiliated
group for less than one month of the taxable year of the group,
it may be considered as being a member of the affiliated group
during the entire taxable year of the group if the period during
which it was not a member of the group does not exceed one month.
If a subsidiary is a member of the consolidated group for only
part of a taxable year, the income considered to be earned in
such fractional part of the year shall be that portion of the
net income for the entire year which the number of days it was
a member of the group bears to the total number of days in the
taxable year.
4. In determining the allocation fraction where a corporation
become a member of the group or ceases to be a member of the
group during the taxable year, the property fraction (Step 1
of the formula) shall be determined on the basis of the average
net book value of the property during the period such corporation
was a member of the group. The rental portion of the fraction,
however, shall be computed at 8 times the annual rent. The gross
receipts and wage fractions shall be based on the actual figures.
5. All subsidiary corporations must agree in writing to the
filing of the consolidated return as they will be liable for
the tax as well as will be the parent corporation.
6. The net operating loss carryover of a corporation which
filed a separate return in a prior year may be carried over to
the consolidated return but will be limited in amount to the
amount of that same corporation's net income included in the
consolidation. The net operating loss carryover from a separate
year shall be deducted first before application of the allocation
fraction. After application of the allocation fraction, the consolidated
net operating loss carryover allocated to this Municipality shall
be allowed.
7. In consolidating the net income, the taxable income of
each corporation shall be computed in accordance with provisions
governing the taxable income of separate corporations except
that there shall be eliminated unrealized profits and losses
in transactions between member of the affiliated group.
8. In determining expenses that are not allowable because
they are allocable to non-taxable income, such calculation shall
be based on the consolidated net income. As an example, inter-company
dividends which are eliminated in the consolidated will not be
taken into consideration in determining non-taxable income.
