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INSTRUCTIONS FOR PREPARING CITY OF KETTERING
BUSINESS INCOME TAX RETURN
Please complete Page 2, Schedules X and Y before completing Part A – Tax Calculation.
LINE 4: Calculate the allowable pre-apportionment net operating
PART A – TAX CALCULATION loss (NOL) using the Net Operating Loss worksheet on page 3 of the
LINE 1: Enter Federal Taxable Income from the appropriate federal form instructions. Enter the allowable amount on Line 4.
as follows:
• Form 1120 – Line 28 Note that for tax years 2018-2022, only 50% of the available loss
• Form 1120-S – Schedule K, Line 18 carryforward may be deducted in subsequent tax years; such limitation
• Form 1065 – Analysis of Net Income (Loss), Line 1 applies only to losses incurred in tax years 2017 and after. Losses incurred
• Form 1041 – Line 23 in tax years 2017 and after are also applied on a pre-apportionment basis.
LINE 2: Complete the Schedule X on page 2 of the return using the Note: For loss carryforward purposes, a partnership loss shall remain at the
instructions below and enter the total net adjustments. partnership level for taxable years beginning on or after January 1, 2016.
ITEMS NOT DEDUCTIBLE (ADDITIONS) LINE 5: Line 3 plus Line 4.
Line A – Enter the amount of non-deductible losses incurred from the LINE 6: Complete the Schedule Y on page 2 of the return using the
sale or exchange of capital or other assests (IRC Section 1231 Losses). instructions below and enter the apportionment percentage. Column A
Line B – Enter the amount of taxes paid based on net income, including relates to total property, wages and gross recipts as reported on the federal
any state and local tax. return. Column B should be completed for property situated, compensation
paid to employees for services performed, and gross receipts from sales
Line C – Enter the amount of guaranteed payments to partners or made or services performed in the City of Kettering.
members, only if not already included in net profits.
Line D – Enter the amount equal to 5% of the expenses attributable to STEP 1: Enter the average original cost of real and tangible personal
total intangible income (excluding capital gains). property owned by the taxpayer everywhere (column A) and in Kettering
(column B). Then, enter the total amount of rents deducted on your
Line E – Enter the amount of Real Estate Investment Trust (REIT) federal return multiplied by 8 (column A) and Kettering rents multiplied
distributions. by 8 (column B). Total each column and then divide the total for Column
Line F – Enter the amount paid or accrued for qualified retirement plans B by the total for Column A, enter the percentage.
on behalf of partners, shareholders or members.
STEP 2: Enter the wages, salaries and other compensation paid
Line G – Enter the amount paid or accrued for health and/or life to employees for services performed everywhere (column A) and
insurance plans on behalf of partners, shareholders or members. specifically in Kettering (column B). Divide Column B by Column A,
Line H – Enter the amount of net loss from pass-through entities owned enter the percentage.
directly or indirectly by the taxpayer and included in the taxpayer’s
federal taxable income, unless the net loss is included in the net profit of STEP 3: Enter the gross receipts from sales made or services
an affiliated group in accordance with ORC 718.06(E)(3)(b). performed everywhere (column A) and gross reciepts from sales made
or services performed in Kettering (column B). Divide Column B by
Line I – Other (Please provide an explanation, ie. charitable Column A, enter the percentage.
contributions limitations, Section 179 add-back, etc.)
TOTAL ADDITIONS – Add lines A through I and enter the amount on STEP 4: Add the percentages from Steps 1-3.
Line J
STEP 5: Divide the percentage total from Step 4 by the number of
ITEMS NOT TAXABLE (DEDUCTIONS) factors used. (For example, if all three factors are used, divide Step 4
by 3. If only two factors were used, divide Step 4 by 2, etc.) Enter the
Line K – Enter the amount of non-taxable gains from the sale or resulting percentage on Page 1, Line 6.
exchange of capital or other assets (IRC Section 1231 gains). Do not
include IRC Section 1245 or 1250 gains. LINE 7: Multiply Line 5 by Line 6.
Line L – Enter the amount of dividend income.
LINE 8: Multiply Line 7 by 2.25% (.0225).
Line M – Enter the amount of interest income.
Line N – Enter the amount of other intangible income including patents, LINE 9a: Enter the amount of estimated tax payments including any
trademarks, copyrights and royalties (unrelated to gas, oil or land) as amounts paid with an extension.
defined by ORC 718.01(S)).
LINE 9b: Enter the amount of prior year credit, if applicable.
Line O – Enter the amount of net profit from pass-throught entities
owned directly or indirectly by the taxpayer and included in the LINE 10: Line 9a plus Line 9b.
taxpayer’s federal taxable income, unless the net profit is included in the
net profit of an affiliated group in accordance with ORC 718.06(E)(3)(b). LINE 11: Line 8 minus Line 10.
Line P – Other (Please provide an explanation) (Do not include any
deductions for federal tax credits.) LINE 12: Enter the amount of penalty, if applicable. A 15% penalty will
be imposed on the balance of unpaid tax due as of the first day after the
TOTAL DEDUCTIONS – Add lines J through O and enter the amount on original due date of the return.
Line Q
NET ADJUSTMENTS – Subtract the total on Line Q from Line J and LINE 13: Enter the amount of interest, if applicable. Interest will be
enter the total on Page 1, Line 2. imposed on the balance of unpaid tax due beginning with the first day after
the original due date of the return. The interest rate is adjusted annually
LINE 3: Line 1 plus Line 2. based on the federal short-term rate + 5%. Please visit our website
(www.ketteringoh.org) for the current interest rate.
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