881.03 IMPOSITION OF TAX.

(a) To provide funds for the purposes of general Municipal operations, maintenance, new equipment, extension and enlargement of Municipal services and facilities and capital improvements, City hereby levies an annual municipal income tax on income, qualifying wages, commissions and other compensation, and on net profits as provided in this chapter.

(b) (1) The annual tax is levied at a rate of 1.75% (one and seventy-five hundredths percent). The tax is levied at a uniform rate on all persons residing in or earning or receiving income in City. The tax is levied on income, qualifying wages, commissions and other compensation and on net profits as hereinafter provided in Section 881.03 of this chapter and other sections as they may apply.

(2) The funds collected under the provisions of this chapter shall be applied for the following purposes:

A. Such part thereof as is necessary to defray all costs of collecting the taxes levied by this chapter and the cost of administering and enforcing the provisions of this chapter shall first be paid.

B. After providing for the allocation of funds set forth in subsection (a) hereof, 100 percent of the funds collected after April 1, 1978, shall be set aside and used for the purposes of meeting current expenses and other expenditures of the General Fund, and for such other purposes as may be determined by Council, with the exception of:

1. Construction of a fire station and operation of a full-time fire department, capital improvements for and operations of the fire department and police department, which makes up 0.50% of the 1.75%.

2. Construction and/or acquisition of a recreational facility, including but not limited to, a swimming facility, baseball diamonds, soccer fields and all appurtenances thereto, land acquisition within the City of Avon, services to the area of the recreation complex, installation, relocation and/or acquisition of utilities, sidewalks, bike paths, landscaping and other public infrastructure improvements which will serve the proposed development together with engineering and legal costs, operating costs, maintenance, the purchase of new and/or used equipment, extending and/or enlarging new or existing services and facilities an such other capital improvements related thereto, which makes up 0.25% of the 1.75%. See above.

(c) The tax on income and the withholding tax established by this Chapter 881 are authorized by Article XVIII, Section 880.03 of the Ohio Constitution. The tax is levied in accordance with, and is intended to be consistent with, the provisions and limitations of Ohio R.C. Chapter 718.

(Ord. 145-15. Passed 11-9-15.)

881.02 DEFINITIONS.

(a) Any term used in this chapter that is not otherwise defined in this chapter has the same meaning as when used in a comparable context in laws of the United States relating to Federal income taxation or in Ohio R.C. Title LVII, unless a different meaning is clearly required. If a term used in this chapter that is not otherwise defined in this chapter is used in a comparable context in both the laws of the United States relating to Federal income tax and in Ohio R.C. Title LVII and the use is not consistent, then the use of the term in the laws of the United States relating to Federal income tax shall control over the use of the term in Ohio R.C. Title LVII.

(b) The singular shall include the plural, and the masculine shall include the feminine and the gender-neutral.

(1) "Adjusted Federal taxable income," for a person required to file as a C corporation, or for a person that has elected to be taxed as a C corporation under (c)(24)D. of this division, means a C corporation's Federal taxable income before net operating losses and special deductions as determined under the Internal Revenue Code, adjusted as follows:

A. Deduct intangible income to the extent included in Federal taxable income. The deduction shall be allowed regardless of whether the intangible income relates to assets used in a trade or business or assets held for the production of income;

B. Add an amount equal to five percent (5%) of intangible income deducted under division (c)(1)A. of this section, but excluding that portion of intangible income directly related to the sale, exchange, or other disposition of property described in Section 1221 of the Internal Revenue Code;

C. Add any losses allowed as a deduction in the computation of Federal taxable income if the losses directly relate to the sale, exchange, or other disposition of an asset described in Section 1221 or 1231 of the Internal Revenue Code;

D. 1. Except as provided in (c)(1)D.2. of this section, deduct income and gain included in federal taxable income to the extent the income and gain directly relate to the sale, exchange, or other disposition of an asset described in Section 1221 or 1231 of the Internal Revenue Code;

2. Division.(c)(1)D.1. of this section does not apply to the extent the income or gain is income or gain described in Section 1245 or 1250 of the Internal Revenue Code.

E. Add taxes on or measured by net income allowed as a deduction in the computation of Federal taxable income;

F. In the case of a real estate investment trust or regulated investment company, add all amounts with respect to dividends to, distributions to, or amounts set aside for or credited to the benefit of investors and allowed as a deduction in the computation of Federal taxable income;

G. Deduct, to the extent not otherwise deducted or excluded in computing Federal taxable income, any income derived from a transfer agreement or from the enterprise transferred under that agreement under Ohio R.C. 4313.02;

H. Deduct exempt income to the extent not otherwise deducted or excluded in computing adjusted Federal taxable income.

I. Deduct any net profit of a pass-through entity owned directly or indirectly by the taxpayer and included in the taxpayer's Federal taxable income unless an affiliated group of corporations includes that net profit in the group's Federal taxable income in accordance with Section 881.05(d)(5)C.2.

J. Add any loss incurred by a pass-through entity owned directly or indirectly by the taxpayer and included in the taxpayer's Federal taxable income unless an affiliated group of corporations includes that loss in the group's Federal taxable income in accordance with Section 881.05(d)(5)C.2.

If the taxpayer is not a C corporation, is not a disregarded entity that has made an election described in division (c)(48)B. of this section, is not a publicly traded partnership that has made the election described in division (c)(24)D. of this section, and is not an individual, the taxpayer shall compute adjusted Federal taxable income under this section as if the taxpayer were a C corporation, except guaranteed payments and other similar amounts paid or accrued to a partner, former partner, shareholder, former shareholder, member, or former member shall not be allowed as a deductible expense unless such payments are in consideration for the use of capital and treated as payment of interest under Section 469 of the Internal Revenue Code or United States Treasury Regulations. Amounts paid or accrued to a qualified self-employed retirement plan with respect to a partner, former partner, shareholder, former shareholder, member, or former member of the taxpayer, amounts paid or accrued to or for health insurance for a partner, former partner, shareholder, former shareholder, member, or former member, and amounts paid or accrued to or for life insurance for a partner, former partner, shareholder, former shareholder, member, or former member shall not be allowed as a deduction.

Nothing in division (c)(1) of this section shall be construed as allowing the taxpayer to add or deduct any amount more than once or shall be construed as allowing any taxpayer to deduct any amount paid to or accrued for purposes of Federal self- employment tax.

(2) A. "Assessment" means a written finding by the Tax Administrator that a person has underpaid municipal income tax, or owes penalty and interest, or any combination of tax, penalty, or interest, to the municipal corporation that commences the person's time limitation for making an appeal to the Board of Tax Review pursuant to Section 881.21, and has "ASSESSMENT" written in all capital letters at the top of such finding.

B. "Assessment" does not include a notice denying a request for refund issued under Section 881.09(a)(3), a billing statement notifying a taxpayer of current or past-due balances owed to the municipal corporation, a Tax Administrator's request for additional information, a notification to the taxpayer of mathematical errors, or a Tax Administrator's other written correspondence to a person or taxpayer that does not meet the criteria prescribed by division (c)(2)A. of this section.

(3) "Audit" means the examination of a person or the inspection of the books, records, memoranda, or accounts of a person, ordered to appear before the Tax Administrator, for the purpose of determining liability for a municipal income tax.

(4) "Board of Tax Review" or "Board of Review" or "Board of Tax Appeals", or other named local board constituted to hear appeals of municipal income tax matters, means the entity created under Section 881.21.

(5) "Calendar quarter" means the three-month period ending on the last day of March, June, September, or December.

(6) "Casino operator" and "casino facility" have the same meanings as in Ohio R.C. 3772.01.

(7) "Certified Mail," "Express Mail," "United States Mail," "Postal Service," and similar terms include any delivery service authorized pursuant to Ohio R.C. 5703.056.

(8) "Disregarded entity" means a single member limited liability company, a qualifying subchapter S subsidiary, or another entity if the company, subsidiary, or entity is a disregarded entity for Federal income tax purposes.

(9) "Domicile" means the true, fixed, and permanent home of a taxpayer and to which, whenever absent, the taxpayer intends to return. A taxpayer may have more than one residence but not more than one domicile.

(10) "Employee" means an individual who is an employee for Federal income tax purposes.

(11) "Employer" means a person that is an employer for Federal income tax purposes.

(12) "Exempt income" means all of the following:

A. The military pay or allowances of members of the Armed Forces of the United States or members of their reserve components, including the national guard of any state.

B. Intangible income. However, a municipal corporation that taxed any type of intangible income on March 29, 1988, pursuant to Section 3 of S.B. 238 of the 116th General Assembly, may continue to tax that type of income if a majority of the electors of the municipal corporation voting on the question of whether to permit the taxation of that type of intangible income after 1988 voted in favor thereof at an election held on November 8, 1988.

C. Social security benefits, railroad retirement benefits, unemployment compensation, pensions, retirement benefit payments, payments from annuities, and similar payments made to an employee or to the beneficiary of an employee under a retirement program or plan, disability payments received from private industry or local, state, or Federal governments or from charitable, religious or educational organizations, and the proceeds of sickness, accident, or liability insurance policies. As used in division (c)(12)C. of this section, "unemployment compensation" does not include supplemental unemployment compensation described in Section 3402(o)(2) of the Internal Revenue Code.

D. The income of religious, fraternal, charitable, scientific, literary, or educational institutions to the extent such income is derived from tax-exempt real estate, tax- exempt tangible or intangible property, or tax-exempt activities.

E. Compensation paid under Ohio R.C. 3501.28 or 3501.36 to a person serving as a precinct election official to the extent that such compensation does not exceed one thousand dollars ($1,000) for the taxable year. Such compensation in excess of one thousand dollars ($1,000) for the taxable year may be subject to taxation by a municipal corporation. A municipal corporation shall not require the payer of such compensation to withhold any tax from that compensation.

F. Dues, contributions, and similar payments received by charitable, religious, educational, or literary organizations or labor unions, lodges, and similar organizations.

G. Alimony and child support received.

H. Compensation for personal injuries or for damages to property from insurance proceeds or otherwise, excluding compensation paid for lost salaries or wages or compensation from punitive damages.

I. Income of a public utility when that public utility is subject to the tax levied under Ohio R.C. 5727.24 or 5727.30. Division (c)(12)I. of this section does not apply for purposes of Ohio R.C. Chapter 5745.

J. Gains from involuntary conversions, interest on Federal obligations, items of income subject to a tax levied by the State and that a municipal corporation is specifically prohibited by law from taxing, and income of a decedent's estate during the period of administration except such income from the operation of a trade or business.

K. Compensation or allowances excluded from Federal gross income under Section 107 of the Internal Revenue Code.

L. Employee compensation that is not qualifying wages as defined in division (c)(35) of this section.

M. Compensation paid to a person employed within the boundaries of a United States Air Force base under the jurisdiction of the United States Air Force that is used for the housing of members of the United States Air Force and is a center for Air Force operations, unless the person is subject to taxation because of residence or domicile. If the compensation is subject to taxation because of residence or domicile, tax on such income shall be payable only to the municipal corporation of residence or domicile.

N. Intentionally left blank.

O. To the extent authorized under a resolution or ordinance adopted by City before January 1, 2016, all or a portion of the income of individuals or a class of individuals under 18 years of age.

P. 1. Except as provided in divisions (c)(12)P.2., 3., and 4. of this section, qualifying wages described in division (c)(2) or (5) of Section 881.04 to the extent the qualifying wages are not subject to withholding for City under either of those divisions.

2. The exemption provided in division (c)(12)P.1. of this section does not apply with respect to the municipal corporation in which the employee resided at the time the employee earned the qualifying wages.

3. The exemption provided in division (c)(12)P.1. of this section does not apply to qualifying wages that an employer elects to withhold under Section 881.04(b)(1)D.2.

4. The exemption provided in division (c)(12)P.1. of this section does not apply to qualifying wages if both of the following conditions apply:

a. For qualifying wages described in Section 881.04(b)(1)B., the employee's employer withholds and remits tax on the qualifying wages to the municipal corporation in which the employee's principal place of work is situated, or, for qualifying wages described in Section 881.04(b)(1)E., the employee's employer withholds and remits tax on the qualifying wages to the municipal corporation in which the employer's fixed location is located;

b. The employee receives a refund of the tax described in division (c)(12)P.4.a. of this section on the basis of the employee not performing services in that municipal corporation.

Q. 1. Except as provided in division (c)(12)Q.2. or 3. of this section, compensation that is not qualifying wages paid to a nonresident individual for personal services performed in City on not more than 20 days in a taxable year.

2. The exemption provided in division (c)(12)Q.2. of this section does not apply under either of the following circumstances:

a. The individual's base of operation is located in the municipal corporation.

b. The individual is a professional athlete, professional entertainer, or public figure, and the compensation is paid for the performance of services in the individual's capacity as a professional, athlete, professional entertainer, or public figure. For purposes of division (c)(12)Q.2.b. of this section, "professional athlete," "professional entertainer," and "public figure" have the same meanings as in Section 881.04(b).

3. Compensation to which division (c)(12)Q. of this section applies shall be treated as earned or received at the individual's base of operation. If the individual does not have a base of operation, the compensation shall be treated as earned or received where the individual is domiciled.

4. For purposes of division (c)(12)Q. of this section, "base of operation" means the location where an individual owns or rents an office, storefront, or similar facility to which the individual regularly reports and at which the individual regularly performs personal services for compensation.

R. Compensation paid to a person for personal services performed for a political subdivision on property owned by the political subdivision, regardless of whether the compensation is received by an employee of the subdivision or another person performing services for the subdivision under a contract with the subdivision, if the property on which services are performed is annexed to a municipal corporation pursuant to Ohio R.C. 709.023 on or after March 27, 2013, unless the person is subject to such taxation because of residence. If the compensation is subject to taxation because of residence, municipal income tax shall be payable only to the municipal corporation of residence.

S. Income the taxation of which is prohibited by the constitution or laws of the United States.

Any item of income that is exempt income of a pass- through entity under division (c) of this section is exempt income of each owner of the pass- through entity to the extent of that owner's distributive or proportionate share of that item of the entity's income.

(13) "Form 2106" means Internal Revenue Service Form 2106 filed by a taxpayer pursuant to the Internal Revenue Code.

(14) "Generic form" means an electronic or paper form that is not prescribed by a particular municipal corporation and that is designed for reporting taxes withheld by an employer, agent of an employer, or other payer, estimated municipal income taxes, or annual municipal income tax liability or for filing a refund claim.

(15) "Gross receipts" means the total revenue derived from sales, work done, or service rendered.

(16) "Income" means the following:

A. 1. For residents, all income, salaries, qualifying wages, commissions, and other compensation from whatever source earned or received by the resident, including the resident’s distributive share of the net profit of pass-through entities owned directly or indirectly by the resident and any net profit of the resident, except as provided in (c)(24)D. of this division.

2. For the purposes of division (c)(16)A.1, of this section:

a. Any net operating loss of the resident incurred in the taxable year and the resident's distributive share of any net operating loss generated in the same taxable year and attributable to the resident's ownership interest in a pass-through entity shall be allowed as a deduction, for that taxable year and the following five taxable years, against any other net profit of the resident or the resident's distributive share of any net profit attributable to the resident's ownership interest in a pass-through entity until fully utilized, subject to division (c)(16)A.4. of this section;

b. The resident's distributive share of the net profit of each pass-through entity owned directly or indirectly by the resident shall be calculated without regard to any net operating loss that is carried forward by that entity from a prior taxable year and applied to reduce the entity's net profit for the current taxable year.

3. Division (c)(16)A.2. of this section does not apply with respect to any net profit or net operating loss attributable to an ownership interest in an S corporation unless shareholders' shares of net profits from S corporations are subject to tax in the municipal corporation as provided in division (c)(12)N. or (c)(16)E. of this section.

4. Any amount of a net operating loss used to reduce a taxpayer's net profit for a taxable year shall reduce the amount of net operating loss that may be carried forward to any subsequent year for use by that taxpayer. In no event shall the cumulative deductions for all taxable years with respect to a taxpayer's net operating loss exceed the original amount of that net operating loss available to that taxpayer.

B. In the case of nonresidents, all income, salaries, qualifying wages, commissions, and other compensation from whatever source earned or received by the nonresident for work done, services performed or rendered, or activities conducted in the municipal corporation, including any net profit of the nonresident, but excluding the nonresident's distributive share of the net profit or loss of only pass-through entities owned directly or indirectly by the nonresident.

C. For taxpayers that are not individuals, net profit of the taxpayer;

D. Lottery, sweepstakes, gambling and sports winnings, winnings from games of chance, and prizes and awards. If the taxpayer is a professional gambler for Federal income tax purposes, the taxpayer may deduct related wagering losses and expenses to the extent authorized under the Internal Revenue Code and claimed against such winnings.

E. In accordance with a ballot issue, regarding S corporation language, approved by the voters in the election on November 2, 2004, a shareholder's share of net profits of an S corporation are taxable to City to the extent such shares would be so allocated or apportioned to this State.

(17) "Intangible income" means income of any of the following types: income yield, interest, capital gains, dividends, or other income arising from the ownership, sale, exchange, or other disposition of intangible property including, but not limited to, investments, deposits, money, or credits as those terms are defined in Ohio R.C. Chapter 5701, and patents, copyrights, trademarks, tradenames, investments in real estate investment trusts, investments in regulated investment companies, and appreciation on deferred compensation. "Intangible income" does not include prizes, awards, or other income associated with any lottery winnings, gambling winnings, or other similar games of chance.

(18) "Internal Revenue Code" has the same meaning as in Ohio R.C. 5747.01.

(19) "Limited liability company" means a limited liability company formed under Ohio R.C. Chapter 1705 or under the laws of another state.

(20) "Municipal corporation" includes a joint economic development district or joint economic development zone that levies an income tax under Ohio R.C. 715.691, 715.70, 715.71, or 715.74.

(21) A. “Municipal taxable income” means the following:

1. For a person other than an individual, income, apportioned or sitused to City under Section 881.03, as applicable reduced by any pre-2017 net operating loss carry-forward available to the person for City.

2. a. For an individual who is a resident of City, income reduced by exempt income to the extent otherwise included in income, then reduced as provided in division (c)(21)B. of this section, and further reduced by any pre-2017 net operating loss carry-forward available to the individual for the municipal corporation.

b. For an individual who is a nonresident of City, income reduced by exempt income to the extent otherwise included in income and then, as applicable, apportioned or sitused to the municipal corporation under Section 881.03, then reduced as provided in division (c)(21)B. of this section, and further reduced by any pre-2017 net operating loss carry-forward available to the individual for City.

B. In computing the municipal taxable income of a taxpayer who is an individual, the taxpayer may subtract, as provided in division (c)(21)A.2.a. or (c)(21)B. of this section, the amount of the individual's employee business expenses reported on the individual's Form 2106 that the individual deducted for Federal income tax purposes for the taxable year, subject to the limitation imposed by Section 67 of the Internal Revenue Code. For the municipal corporation in which the taxpayer is a resident, the taxpayer may deduct all such expenses allowed for Federal income tax purposes, but to the extent the expenses do not relate to exempt income. For a municipal corporation in which the taxpayer is not a resident, the taxpayer may deduct such expenses only to the extent the expenses are related to the taxpayer's performance of personal services in that nonresident municipal corporation and are not related to exempt income.

(22) "Municipality" means the same as the City of Avon, Ohio. If the terms are capitalized in the ordinance they are referring to Avon. If not capitalized they refer to a municipal corporation other than Avon.

(23) "Net operating loss" means a loss incurred by a person in the operation of a trade or business. "Net operating loss" does not include unutilized losses resulting from basis limitations, at-risk limitations, or passive activity loss limitations.

(24) A. “Net profit” for a person other than an individual means adjusted Federal taxable income reduced by any net operating loss incurred by the person in a taxable year beginning on or after January 1, 2017, subject to the limitations of division (c)(24)C. of this section..

B. “Net profit” for a person who is an individual means the individual's net profit required to be reported on Schedule C, Schedule E, or Schedule F reduced by any net operating loss carried forward. For the purposes of division (c)(24)A. of this section, the net operating loss carried forward shall be calculated and deducted in the same manner as provided in division (c)(24)C. of this section.

C. 1. The amount of such operating loss shall be deducted from net profit to the extent necessary to reduce municipal taxable income to zero, with any remaining unused portion of the net operating loss carried forward to not more than five consecutive taxable years following the taxable year in which the loss was incurred, but in no case for more years than necessary for the deduction to be fully utilized.

2. No person shall use the deduction allowed by division (c)(24)C. of this section to offset qualifying wages.

3. a. For taxable years beginning in 2018, 2019, 2020, 2021, or 2022, a person may not deduct more than fifty percent (50%) of the amount of the deduction otherwise allowed by division (c)(24)C. of this section.

b. For taxable years beginning in 2023 or thereafter, a person may deduct the full amount allowed by division (c)(24)C. of this section without regard to the limitation of division (c)(24)C.3.a. of this section.

4. Any pre-2017 net operating loss carry forward deduction that is available may be utilized before a taxpayer may deduct any amount pursuant to division (c)(24)C. of this section.

5. Nothing in division (c)(24)C.3.a. of this section precludes a person from carrying forward, for use with respect to any return filed for a taxable year beginning after 2018, any amount of net operating loss that was not fully utilized by operation of division (c)(24)C.3.a. of this section. To the extent that an amount of net operating loss that was not fully utilized in one or more taxable years by operation of division (c)(24)C.3.a. of this section is carried forward for use with respect to a return filed for a taxable year beginning in 2019, 2020, 2021, or 2022, the limitation described in division (c)(24)C.3.a. of this section shall apply to the amount carried forward.

D. For the purposes of this chapter, and notwithstanding division (c)(24)A. of this section, net profit of a disregarded entity shall not be taxable as against that disregarded entity, but shall instead be included in the net profit of the owner of the disregarded entity.

E. A publicly traded partnership that is treated as a partnership for Federal income tax purposes, and that is subject to tax on its net profits by City, may elect to be treated as a C corporation for City. The election shall be made on the annual return for City. City will treat the publicly traded partnership as a C corporation if the election is so made.

(25) "Nonresident" means an individual that is not a resident.

(26) "Ohio Business Gateway" means the online computer network system, created under Ohio R.C. 125.30, that allows persons to electronically file business reply forms with State agencies and includes any successor electronic filing and payment system.

(27) "Other payer" means any person, other than an individual's employer or the employer's agent, that pays an individual any amount included in the Federal gross income of the individual. "Other payer" includes casino operators and video lottery terminal sales agents.

(28) "Pass-through entity" means a partnership not treated as an association taxable as a C corporation for Federal income tax purposes, a limited liability company not treated as an association taxable as a C corporation for Federal income tax purposes, an S corporation, or any other class of entity from which the income or profits of the entity are given pass-through treatment for Federal income tax purposes. "Pass-through entity" does not include a trust, estate, grantor of a grantor trust, or disregarded entity.

(29) "Pension" means any amount paid to an employee or former employee that is reported to the recipient on an IRS Form 1099-R, or successor form. “Pension” does not include deferred compensation, or amounts attributable to nonqualified deferred compensation plans, reported as FICA/Medicare wages on an IRS Form W-2, Wage and Tax Statement, or successor form.

(30) "Person" includes individuals, firms, companies, joint stock companies, business trusts, estates, trusts, partnerships, limited liability partnerships, limited liability companies, associations, C corporations, S corporations, governmental entities, and any other entity.

(31) "Postal Service" means the United States Postal Service.

(32) "Postmark date," "date of postmark," and similar terms include the date recorded and marked in the manner described in Ohio R.C. 5703.056(B)(3).

(33) A. "Pre-2017 net operating loss carry-forward" means any net operating loss incurred in a taxable year beginning before January 1, 2017, to the extent such loss was permitted, by a resolution or ordinance of the municipal corporation that was adopted by the municipal corporation before January 1, 2016, to be carried forward and utilized to offset income or net profit generated in such municipal corporation in future taxable years.

B. For the purpose of calculating municipal taxable income, any pre-2017 net operating loss carry-forward may be carried forward to any taxable year, including taxable years beginning in 2017 or thereafter, for the number of taxable years provided in the resolution or ordinance or until fully utilized, whichever is earlier.

(34) "Publicly traded partnership" means any partnership, an interest in which is regularly traded on an established securities market. A "publicly traded partnership" may have any number of partners.

(35) "Qualifying wages" means wages, as defined in Section 3121(a) of the Internal Revenue Code, without regard to any wage limitations, adjusted as follows:

A. Deduct the following amounts:

1. Any amount included in wages if the amount constitutes compensation attributable to a plan or program described in Section 125 of the Internal Revenue Code.

2. Any amount included in wages if the amount constitutes payment on account of a disability related to sickness or an accident paid by a parry unrelated to the employer, agent of an employer, or other payer.

3. Intentionally left blank.

4. Intentionally left blank.

5. Any amount included in wages that is exempt income.

B. Add the following amounts:

1. Any amount not included in wages solely because the employee was employed by the employer before April 1,1986.

2. Any amount not included in wages because the amount arises from the sale, exchange, or other disposition of a stock option, the exercise of a stock option, or the sale, exchange, or other disposition of stock purchased under a stock option and the municipal corporation has not, by resolution or ordinance, exempted the amount from withholding and tax adopted before January 1, 2016. Division (c)(35)B.2. of this section applies only to those amounts constituting ordinary income.

3. Any amount not included in wages if the amount is an amount described in Section 401(k), 403(b), or 457 of the Internal Revenue Code. Division (c)(35)B.2. of this section applies only to employee contributions and employee deferrals.

4. Any amount that is supplemental unemployment compensation benefits described in Section 3402(o)(2) of the Internal Revenue Code and not included in wages.

5. Any amount received that is treated as self-employment income for Federal tax purposes in accordance with Section 1402(a)(8) of the Internal Revenue Code.

6. Any amount not included in wages if all of the following apply:

a. For the taxable year the amount is employee compensation that is earned outside the United States and that either is included in the taxpayer's gross income for Federal income tax purposes or would have been included in the taxpayer's gross income for such purposes if the taxpayer did not elect to exclude the income under Section 911 of the Internal Revenue Code;

b. For no preceding taxable year did the amount constitute wages as defined in Section 3121(a) of the Internal Revenue Code;

c. For no succeeding taxable year will the amount constitute wages; and

d. For any taxable year the amount has not otherwise been added to wages pursuant to either division (c)(35)B. of this section or Section 881.04, as that section existed before the effective date of H.B. 5 of the 130th General Assembly, March 23, 2015.

(36) "Related entity" means any of the following:

A. An individual stockholder, or a member of the stockholder's family enumerated in Section 318 of the Internal Revenue Code, if the stockholder and the members of the stockholder's family own directly, indirectly, beneficially, or constructively, in the aggregate, at least fifty percent (50%) of the value of the taxpayer's outstanding stock;

B. A stockholder, or a stockholder's partnership, estate, trust, or corporation, if the stockholder and the stockholder's partnerships, estates, trusts, or corporations own directly, indirectly, beneficially, or constructively, in the aggregate, at least fifty percent (50%) of the value of the taxpayer's outstanding stock;

C. A corporation, or a party related to the corporation in a manner that would require an attribution of stock from the corporation to the party or from the party to the corporation under division (c)(36)D. of this section, provided the taxpayer owns directly, indirectly, beneficially, or constructively, at least fifty percent (50%) of the value of the corporation's outstanding stock;

D. The attribution rules described in Section 318 of the Internal Revenue Code apply for the purpose of determining whether the ownership requirements in divisions (c)(36)A. to C. of this section have been met.

(37) "Related member" means a person that, with respect to the taxpayer during all or any portion of the taxable year, is either a related entity, a component member as defined in Section 1563(b) of the Internal Revenue Code, or a person to or from whom there is attribution of stock ownership in accordance with Section 1563(e) of the Internal Revenue Code except, for purposes of determining whether a person is a related member under this division, " twenty percent (20%)" shall be substituted for "five percent (5%)" wherever "five percent (5%)" appears in Section 1563(e) of the Internal Revenue Code.

(38) "Resident" means an individual who is domiciled in the municipal corporation as determined under Section 881.03(c).

(39) "S corporation" means a person that has made an election under subchapter/ordinance S of Chapter 1 of Subtitle A of the Internal Revenue Code for its taxable year.

(40) "Schedule C" means Internal Revenue Service Schedule C (Form 1040) filed by a taxpayer pursuant to the Internal Revenue Code.

(41) "Schedule E" means Internal Revenue Service Schedule E (Form 1040) filed by a taxpayer pursuant to the Internal Revenue Code.

(42) "Schedule F" means Internal Revenue Service Schedule F (Form 1040) filed by a taxpayer pursuant to the Internal Revenue Code.

(43) "Single member limited liability company" means a limited liability company that has one direct member.

(44) "Small employer" means any employer that had total revenue of less than five hundred thousand dollars ($500,000) during the preceding taxable year. For purposes of this division, "total revenue" means receipts of any type or kind, including, but not limited to, sales receipts; payments; rents; profits; gains, dividends, and other investment income; compensation; commissions; premiums; money; property; grants; contributions; donations; gifts; program service revenue; patient service revenue; premiums; fees, including premium fees and service fees; tuition payments; unrelated business revenue; reimbursements; any type of payment from a governmental unit, including grants and other allocations; and any other similar receipts reported for Federal income tax purposes or under generally accepted accounting principles. "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.

(45) A. “Tax Administrator” means the individual charged with direct responsibility for administration of an income tax levied by City in accordance with this chapter. Tax Administrator does not include the State Tax Commissioner.

B. “Tax Commissioner” means the tax commissioner appointed under R.C. § 121.03.

(46) "Tax return preparer" means any individual described in Section 7701(a)(36) of the Internal Revenue Code and 26 C.F.R. 301.7701-15.

(47) "Taxable year" means the corresponding tax reporting period as prescribed for the taxpayer under the Internal Revenue Code.

A. "Taxpayer" means a person subject to a tax levied on income by a municipal corporation in accordance with this chapter. "Taxpayer" does not include a grantor trust or, except as provided in division (c)(48)B.1. of this section, a disregarded entity.

B. 1. A single member limited liability company that is a disregarded entity for Federal tax purposes may be a separate taxpayer from its single member in all Ohio municipal corporations in which it either filed as a separate taxpayer or did not file for its taxable year ending in 2003, if all of the following conditions are met:

a. The limited liability company's single member is also a limited liability company.

b. The limited liability company and its single member were formed and doing business in one or more Ohio municipal corporations for at least five years before January 1, 2004.

c. Not later than December 31, 2004, the limited liability company and its single member each made an election to be treated as a separate taxpayer under division (c)(38) of this section as this section existed on December 31, 2004.

d. The limited liability company was not formed for the purpose of evading or reducing Ohio municipal corporation income tax liability of the limited liability company or its single member.

e. The Ohio municipal corporation that was the primary place of business of the sole member of the limited liability company consented to the election.

2. For purposes of division (c)(48)B.2. of this section, a municipal corporation was the primary place of business of a limited liability company if, for the limited liability company's taxable year ending in 2003, its income tax liability was greater in that municipal corporation than in any other municipal corporation in Ohio, and that tax liability to that municipal corporation for its taxable year ending in 2003 was at least four hundred thousand dollars ($400,000).

(49) "Taxpayers' rights and responsibilities" means the rights provided to taxpayers in Sections 881.09, 881.12, 881.13, 881.19(b), 881.20, 881.21, and Ohio R.C. 5717.011 and 5717.03, and the responsibilities of taxpayers to file, report, withhold, remit, and pay municipal income tax and otherwise comply with Ohio R.C. Chapter 718 and resolutions, ordinances, and rules and regulations adopted by City for the imposition and administration of a municipal income tax.

(50) "Video lottery terminal" has the same meaning as in Ohio R.C. 3770.21.

(51) "Video lottery terminal sales agent" means a lottery sales agent licensed under Ohio R.C. Chapter 3770 to conduct video lottery terminals on behalf of the State pursuant to Ohio R.C. 3770.21.

(Ord. 145-15. Passed 11-9-15; Ord. 41-18. Passed 5-29-18.)

881.03 IMPOSITION OF TAX.

The income tax levied by City at a rate of 1.75 percent [1.75%] is levied on the Municipal Taxable Income of every person residing in and/or earning and/or receiving income in City.

(a) Individuals.

(1) For residents of City, the income tax levied herein shall be on all income, salaries, qualifying wages, commissions, and other compensation from whatever source earned or received by the resident, including the resident's distributive share of the net profit of pass- through entities owned directly or indirectly by the resident and any net profit of the resident. This is further detailed in the definition of income (Section 881.02(c)(16)).

(2) For nonresidents, all income, salaries, qualifying wages, commissions, and other compensation from whatever source earned or received by the nonresident for work done, services performed or rendered, or activities conducted in the municipal corporation, including any net profit of the nonresident, but excluding the nonresident's distributive share of the net profit or loss of only pass-through entities owned directly or indirectly by the nonresident.

(3) For residents and nonresidents, income can be reduced to "Municipal Taxable Income" as defined in Section 881.02(c)(21). Exemptions which may apply are specified in Section 881.02(c)(12).

(b) Refundable credit for Nonqualified Deferred Compensation Plan.

(1) A. As used in this division:

1. "Nonqualified deferred compensation plan" means a compensation plan described in Section 3121(v)(2)(C) of the Internal Revenue Code.

2. "Qualifying loss" means the amount of compensation attributable to a taxpayer's nonqualified deferred compensation plan, less the receipt of money and property attributable to distributions from the nonqualified deferred compensation plan. Full loss is sustained if no distribution of money and property is made by the nonqualified deferred compensation plan. The taxpayer sustains a qualifying loss only in the taxable year in which the taxpayer receives the final distribution of money and property pursuant to that nonqualified deferred compensation plan.

2. a. "Qualifying tax rate" means the applicable tax rate for the taxable year for the which the taxpayer paid income tax to City with respect to any portion of the total amount of compensation the payment of which is deferred pursuant to a nonqualified deferred compensation plan.

b. If different tax rates applied for different taxable years, then the "qualifying tax rate" is a weighted average of those different tax rates. The weighted average shall be based upon the tax paid to City each year with respect to the nonqualified deferred compensation plan.

2. "Refundable credit" means the amount of City income tax that was paid on the non-distributed portion, if any, of a nonqualified deferred compensation plan.

B. If, in addition to City, a taxpayer has paid tax to other municipal corporations with respect to the nonqualified deferred compensation plan, the amount of the credit that a taxpayer may claim from each municipal corporation shall be calculated on the basis of each municipal corporation's proportionate share of the total municipal corporation income tax paid by the taxpayer to all municipal corporations with respect to the nonqualified deferred compensation plan.

C. In no case shall the amount of the credit allowed under this section exceed the cumulative income tax that a taxpayer has paid to City for all taxable years with respect to the nonqualified deferred compensation plan.

D. The credit allowed under this division is allowed only to the extent the taxpayer's qualifying loss is attributable to:

1. The insolvency or bankruptcy of the employer who had established the nonqualified deferred compensation plan; or

2. The employee's failure or inability to satisfy all of the employer's terms and conditions necessary to receive the nonqualified deferred compensation.

(1) A. 1. An individual is presumed to be domiciled in City for all or part of a taxable year if the individual was domiciled in City on the last day of the immediately preceding taxable year or if the Tax Administrator reasonably concludes that the individual is domiciled in City for all or part of the taxable year.

2. An individual may rebut the presumption of domicile described in division (c)(1)A.1. of this section if the individual establishes by a preponderance of the evidence that the individual was not domiciled in City for all or part of the taxable year.

B. For the purpose of determining whether an individual is domiciled in City for all or part of a taxable year, factors that may be considered include, but are not limited to, the following:

1. The individual's domicile in other taxable years;

2. The location at which the individual is registered to vote;

3. The address on the individual's driver's license;

4. The location of real estate for which the individual claimed a property tax exemption or reduction allowed on the basis of the individual's residence or domicile;

5. The location and value of abodes owned or leased by the individual;

6. Declarations, written or oral, made by the individual regarding the individual's residency;

7. The primary location at which the individual is employed.

8. The location of educational institutions attended by the individual's dependents as defined in Section 152 of the Internal Revenue Code, to the extent that tuition paid to such educational institution is based on the residency of the individual or the individual's spouse in the municipal corporation where the educational institution is located;

9. The number of contact periods the individual has with City. For the purposes of this division, an individual has one "contact period" with City if the individual is away overnight from the individual's abode located outside of City and while away overnight from that abode spends at least some portion, however minimal, of each of two consecutive days in City.

C. All additional applicable factors are provided in the Rules and Regulations.

(d) Businesses.

(1) This division applies to any taxpayer engaged in a business or profession in City, unless the taxpayer is an individual who resides in City or the taxpayer is an electric company, combined company, or telephone company that is subject to and required to file reports under Ohio R.C. Chapter 5745.

A. Except as otherwise provided in divisions (d)(1)B. and (d)(2) of this section, net profit from a business or profession conducted both within and without the boundaries of City shall be considered as having a taxable situs in City for purposes of municipal income taxation in the same proportion as the average ratio of the following:

1. The average original cost of the real property and tangible personal property owned or used by the taxpayer in the business or profession in City during the taxable period to the average original cost of all of the real and tangible personal property owned or used by the taxpayer in the business or profession during the same period, wherever situated.

As used in the preceding paragraph, tangible personal or real property shall include property rented or leased by the taxpayer and the value of such property shall be determined by multiplying the annual rental thereon by eight;

2. Wages, salaries, and other compensation paid during the taxable period to individuals employed in the business or profession for services performed in City to wages, salaries, and other compensation paid during the same period to individuals employed in the business or profession, wherever the individual's services are performed, excluding compensation from which taxes are not required to be withheld under Section 881.04(b)(1);

3. Total gross receipts of the business or profession from sales and rentals made and services performed during the taxable period in City to total gross receipts of the business or profession during the same period from sales, rentals, and services, wherever made or performed.

B. 1. If the apportionment factors described in division (d)(1)A. of this section do not fairly represent the extent of a taxpayer's business activity in City, the taxpayer may request, or the Tax Administrator of City may require, that the taxpayer use, with respect to all or any portion of the income of the taxpayer, an alternative apportionment method involving one or more of the following:

a. Separate accounting;

b. The exclusion of one or more of the factors;

c. The inclusion of one or more additional factors that would provide for a more fair apportionment of the income of the taxpayer to the municipal corporation;

d. A modification of one or more of the factors.

2. A taxpayer request to use an alternative apportionment method shall be in writing and shall accompany a tax return, timely filed appeal of an assessment, or timely filed amended tax return. The taxpayer may use the requested alternative method unless the Tax Administrator denies the request in an assessment issued within the period prescribed by Section 881.12(a).

3. The Tax Administrator may require a taxpayer to use an alternative apportionment method as described in division (d)(1)B.1. of this section, but only by issuing an assessment to the taxpayer within the period prescribed by Section 881.12(a).

4. Nothing in division (d)(1)B. of this section nullifies or otherwise affects any alternative apportionment arrangement approved by the Tax Administrator or otherwise agreed upon by both the Tax Administrator and taxpayer before January 1, 2016.

C. As used in division (d)(1)A.2. of this section, "wages, salaries, and other compensation" includes only wages, salaries, or other compensation paid to an employee for services performed at any of the following locations:

1. A location that is owned, controlled, or used by, rented to, or under the possession of one of the following:

a. The employer;

b. A vendor, customer, client, or patient of the employer, or a related member of such a vendor, customer, client, or patient;

c. A vendor, customer, client, or patient of a person described in division (d)(1)C.1.b. of this section, or a related member of such a vendor, customer, client, or patient.

2. Any location at which a trial, appeal, hearing, investigation, inquiry, review, court-martial, or similar administrative, judicial, or legislative matter or proceeding is being conducted, provided that the compensation is paid for services performed for, or on behalf of, the employer or that the employee's presence at the location directly or indirectly benefits the employer;

3. Any other location, if the Tax Administrator determines mat the employer directed the employee to perform the services at the other location in lieu of a location described in division (d)(1)C.1. or 2. of this section solely in order to avoid or reduce the employer's municipal income tax liability. If the Tax Administrator makes such a determination, the employer may dispute the determination by establishing, by a preponderance of the evidence, that the Tax Administrator's determination was unreasonable.

D. For the purposes of division (d)(1)A.3. of this section, and except as provided in division (d)(2) of this section, receipts from sales and rentals made and services performed shall be sitused to a municipal corporation as follows:

1. Gross receipts from the sale of tangible personal property shall be sitused to the municipal corporation in which the sale originated. For purposes of this division, a sale of property originates in the City if, regardless of where title passes, the property meets either of the following criteria:

a. The property is shipped to or delivered within City from a stock of goods located within City.

b. The property is delivered within City from a location outside City, provided the taxpayer is regularly engaged through its own employees in the solicitation or promotion of sales within City and the sales result from such solicitation or promotion.

c. The property is shipped from a place within City to purchasers outside City, provided that the taxpayer is not, through its own employees, regularly engaged in the solicitation or promotion of sales at the place where delivery is made.

2. Gross receipts from the sale of services shall be sitused to City to the extent that such services are performed in City.

3. To the extent included in income, gross receipts from the sale of real property located in City shall be sitused to City.

4. To the extent included in income, gross receipts from rents and royalties from real property located in City shall be sitused to City.

5. Gross receipts from rents and royalties from tangible personal property shall be sitused to City based upon the extent to which the tangible personal property is used in City.

E. The net profit received by an individual taxpayer from the rental of real estate owned directly by the individual, or by a disregarded entity owned by the individual, shall be subject to City's tax only if the property generating the net profit is located in City or if the individual taxpayer that receives the net profit is a resident of City. City shall allow such taxpayers to elect to use separate accounting for the purpose of calculating net profit sitused under this division to the municipal corporation in which the property is located.

F. 1. Commissions received by a real estate agent or broker relating to the sale, purchase, or lease of real estate shall be sitused to the municipal corporation in which the real estate is located. Net profit reported by the real estate agent or broker shall be allocated to City, if applicable, based upon the ratio of the commissions the agent or broker received from the sale, purchase, or lease of real estate located in City to the commissions received from the sale, purchase, or lease of real estate everywhere in the taxable year.

2. An individual who is a resident of City shall report the individual's net profit from all real estate activity on the individual's annual tax return for City. The individual may claim a credit for taxes the individual paid on such net profit to another municipal corporation to the extent that such a credit is allowed under City's income tax ordinance.

G. When calculating the ratios described in division (d)(1)A. of this section for the purposes of that division or division (d)(1)B. of this section, the owner of a disregarded entity shall include in the owner's ratios the property, payroll, and gross receipts of such disregarded entity.

H. Intentionally left blank.

I. Intentionally left blank.

(2) A. As used in this division:

1. “Qualifying remote employee or owner” means an individual who is an employee of a taxpayer or who is a partner or member holding an ownership interest in a taxpayer that is treated as a partnership for federal income tax purposes, provided that the individual meets both of the following criteria:

a. The taxpayer has assigned the individual to a qualifying reporting location.

b. The individual is permitted or required to perform services for the taxpayer at a qualifying remote work location.

2. “Qualifying remote work location” means a permanent or temporary location at which an employee or owner chooses or is required to perform services for the taxpayer, other than a reporting location of the taxpayer or any other location owned or controlled by a customer or client of the taxpayer. “Qualifying remote work location” may include the residence of an employee or owner and may be located outside of a municipal corporation that imposes an income tax in accordance with this chapter. An employee or owner may have more than one qualifying remote work location during a taxable year.

3. “Qualifying reporting location” means one of the following:

a. The reporting location in this state at which an employee or owner performs services for the taxpayer on a regular or periodic basis during the taxable year;

b. If no reporting location exists in this state for an employee or owner under division (d)(2)A.4.a.of this section, the reporting location in this state at which the employee's or owner's supervisor regularly or periodically reports during the taxable year;

c. If no reporting location exists in this state for an employee or owner under division (d)(2)A.4.a or (d)(2)A.4.b. of this section, the location that the taxpayer otherwise assigns as the employee's or owner's qualifying reporting location, provided the assignment is made in good faith and is recorded and maintained in the taxpayer's business records. A taxpayer may change the qualifying reporting location designated for an employee or owner under this division at any time.

4. “Reporting location” means either of the following:

a. A permanent or temporary place of doing business, such as an office, warehouse, storefront, construction site, or similar location, that is owned or controlled directly or indirectly by the taxpayer;

b. Any location in this state owned or controlled by a customer or client of the taxpayer, provided that the taxpayer is required to withhold taxes under Section 881.04 of this chapter on qualifying wages paid to an employee for the performance of personal services at that location.

B. For tax years ending on or after December 31, 2023, a taxpayer may elect to apply the provisions of this division to the apportionment of its net profit from a business or profession. For taxpayers that make this election, the provisions of division (d)(l) of this section apply to such apportionment except as otherwise provided in this division.

1. A taxpayer shall make the election allowed under this division in writing on or with the taxpayer's net profit return or, if applicable, a timely filed amended net profit return or a timely filed appeal of an assessment. The election applies to the taxable year for which that return or appeal is filed and for all subsequent taxable years, until the taxpayer revokes the election.

2. The taxpayer shall make the initial election with the tax administrator of each municipal corporation with which, after applying the apportionment provisions authorized in this division, the taxpayer is required to file a net profit tax return for that taxable year. A taxpayer shall not be required to notify the tax administrator of a municipal corporation in which a qualifying remote employee's or owner's qualifying remote work location is located, unless the taxpayer is otherwise required to file a net profit return with that municipal corporation due to business operations that are unrelated to the employee's or owner's activity at the qualifying remote work location.

3. After the taxpayer makes the initial election, the election applies to every municipal corporation in which the taxpayer conducts business. The taxpayer shall not be required to file a net profit return with a municipal corporation solely because a qualifying remote employee's or owner's qualifying remote work location is located in such municipal corporation.

4. Nothing in this division prohibits a taxpayer from making a new election under this division after properly revoking a prior election.

C. For the purpose of calculating the ratios described in division (d)(1)A. of this section, all of the following apply to a taxpayer that has made the election described in division(d)(2)B.:

1. For the purpose of division (d)(1)A.1.of this section, the average original cost of any tangible personal property used by a qualifying remote employee or owner at that individual's qualifying remote work location shall be sitused to that individual's qualifying reporting location.

2. For the purpose of division (d)(1)A.2.of this section, any wages, salaries, and other compensation paid during the taxable period to a qualifying remote employee or owner for services performed at that individual's qualifying remote work location shall be sitused to that individual's qualifying reporting location.

3. For the purpose of division (d)(1)A.3.of this section, and notwithstanding division (F)(4) of this section, any gross receipts of the business or profession from services performed during the taxable period by a qualifying remote employee or owner for services performed at that individual's qualifying remote work location shall be sitused to that individual's qualifying reporting location.

D. Nothing in this division prevents a taxpayer from requesting, or a tax administrator from requiring, that the taxpayer use, with respect to all or a portion of the income of the taxpayer, an alternative apportionment method as described in division (d)(1)B.1. of this section. However, a tax administrator shall not require an alternative apportionment method in such a manner that it would require a taxpayer to file a net profit return with a municipal corporation solely because a qualifying remote employee's or owner's qualifying remote work location is located in that municipal corporation.

E. Except as otherwise provided in this division, nothing in this division is intended to affect the withholding of taxes on qualifying wages pursuant to Section 881.04 of this chapter.

(Ord. 145-15. Passed 11-9-15; Ord. 41-18. Passed 5-29-18; Ord. 64-24. Passed 5-28-24.)

881.04 COLLECTION AT SOURCE.

(a) Withholding Provisions.

(1) Each employer, agent of an employer, or other payer located or doing business in City shall withhold an income tax from the qualifying wages earned and/or received by each employee in City. Except for qualifying wages for which withholding is not required under Section 881.03 or division (a)(2)D. or F. of this section, the tax shall be withheld at the rate, specified in Section 881.01 of this chapter, of 1.75%. An employer, agent of an employer, or other payer shall deduct and withhold the tax from qualifying wages on the date that the employer, agent, or other payer directly, indirectly, or constructively pays the qualifying wages to, or credits the qualifying wages to the benefit of, the employee.

(2) A. Except as provided in division (a)(2)B. of this section, an employer, agent of an employer, or other payer shall remit to the Tax Administrator of City the greater of the income taxes deducted and withheld or the income taxes required to be deducted and withheld by the employer, agent, or other payer according to the following schedule:

1. Taxes required to be deducted and withheld shall be remitted monthly to the Tax Administrator if the total taxes deducted and withheld or required to be deducted and withheld by the employer, agent, or other payer on behalf of City in the preceding calendar year exceeded two thousand three hundred ninety-nine dollars ($2,399), or if the total amount of taxes deducted and withheld or required to be deducted and withheld on behalf of City in any month of the preceding calendar quarter exceeded two hundred dollars ($200.00).

Payment under division (a)(2)A.1. of this section shall be made to the Tax Administrator not later than 15 days after the last day of each month for which the tax was withheld.

2. Any employer, agent of an employer, or other payer not required to make payments under division (a)(1)A.1. of this section of taxes required to be deducted and withheld shall make quarterly payments to the Tax Administrator not later than the last day of the month following the last of each calendar quarter.

3. Intentionally left blank.

B. If the employer, agent of an employer, or other payer is required to make payments electronically for the purpose of paying Federal taxes withheld on payments to employees under Section 6302 of the Internal Revenue Code, 26 C.F.R. 31.6302-1, or any other Federal statute or regulation, the payment shall be made by electronic funds transfer to the Tax Administrator of all taxes deducted and withheld on behalf of City. The payment of tax by electronic funds transfer under this division does not affect an employer's, agent's, or other payer's obligation to file any return as required under this section.

C. An employer, agent of an employer, or other payer shall make and file a return showing the amount of tax withheld by the employer, agent, or other payer from the qualifying wages of each employee and remitted to the Tax Administrator. A return filed by an employer, agent, or other payer under this division shall be accepted by Tax Administrator and City as the return required of an nonresident employee whose sole income subject to the tax under this chapter is the qualifying wages reported by the employee's employer, agent of an employer, or other payer.

D. An employer, agent of an employer, or other payer is not required to withhold City income tax with respect to an individual's disqualifying disposition of an incentive stock option if, at the time of the disqualifying disposition, the individual is not an employee of either the corporation with respect to whose stock the option has been issued or of such corporation's successor entity.

E. 1. An employee is not relieved from liability for a tax by the failure of the employer, agent of an employer, or other payer to withhold the tax as required under this chapter or by the employer's, agent's, or other payer's exemption from the requirement to withhold the tax.

2. The failure of an employer, agent of an employer, or other payer to remit to City the tax withheld relieves the employee from liability for that tax unless the employee colluded with the employer, agent, or other payer in connection with the failure to remit the tax withheld.

F. Compensation deferred before June 26, 2003, is not subject to City income tax or income tax withholding requirement to the extent the deferred compensation does not constitute qualifying wages at the time the deferred compensation is paid or distributed.

G. Each employer, agent of an employer, or other payer required to withhold taxes is liable for the payment of that amount required to be withheld, whether or not such taxes have been withheld, and such amount shall be deemed to be held in trust for City until such time as the withheld amount is remitted to the Tax Administrator.

H. On or before the last day of February of each year, an employer shall file a withholding reconciliation return with the Tax Administrator listing:

1. The names, addresses, and social security numbers of all employees from whose qualifying wages tax was withheld or should have been withheld for City during the preceding calendar year;

2. The amount of tax withheld, if any, from each such employee, the total amount of qualifying wages paid to such employee during the preceding calendar year;

3. The name of every other municipal corporation for which tax was withheld or should have been withheld from such employee during the preceding calendar year;

4. Any other information required for Federal income tax reporting purposes on Internal Revenue Service Form W-2 or its equivalent form with respect to such employee;

5. Other information as may be required by the Tax Administrator.

I. The officer or the employee of the employer, agent of an employer, or other payer with control or direct supervision of or charged with the responsibility for withholding the tax or filing the reports and making payments as required by this section, shall be personally liable for a failure to file a report or pay the tax due as required by this section. The dissolution of an employer, agent of an employer, or other payer does not discharge the officer's or employee's liability for a failure of the employer, agent of an employer, or other payer to file returns or pay any tax due.

J. An employer is required to deduct and withhold City income tax on tips and gratuities received by the employer's employees and constituting qualifying wages, but only to the extent that the tips and gratuities are under the employer's control. For the purposes of this division, a tip or gratuity is under the employer's control if the tip or gratuity is paid by the customer to the employer for subsequent remittance to the employee, or if the customer pays the tip or gratuity by credit card, debit card, or other electronic means.

K. The Tax Administrator shall consider any tax withheld by an employer at the request of an employee, when such tax is not otherwise required to be withheld by this chapter, to be tax required to be withheld and remitted for the purposes of this section.

(b) Occasional Entrant - Withholding.

(1) A. As used in this division:

1. "Employer" includes a person that is a related member to or of an employer.

2. "Fixed location" means a permanent place of doing business in this State, such as an office, warehouse, storefront, or similar location owned or controlled by an employer.

3. "Principal place of work" means the fixed location to which an employee is required to report for employment duties on a regular and ordinary basis. If the employee is not required to report for employment duties on a regular and ordinary basis to a fixed location, "principal place of work" means the worksite location in this State to which the employee is required to report for employment duties on a regular and ordinary basis. If the employee is not required to report for employment duties on a regular and ordinary basis to a fixed location or worksite location, "principal place of work" means the location in this State at which the employee spends the greatest number of days in a calendar year performing services for or on behalf of the employee's employer.

If there is not a single municipal corporation in which the employee spent the "greatest number of days in a calendar year" performing services for or on behalf of the employer, but instead there are two or more municipal corporations in which the employee spent an identical number of days that is greater than the number of days the employee spent in any other municipal corporation, the employer shall allocate any of the employee's qualifying wages subject to division (b)(1)B.1.a. of this section among those two or more municipal corporations. The allocation shall be made using any fair and reasonable method, including, but not limited to, an equal allocation among such municipal corporations or an allocation based upon the time spent or sales made by the employee in each such municipal corporation. A municipal corporation to which qualifying wages are allocated under this division shall be the employee's "principal place of work" with respect to those qualifying wages for the purposes of this section.

For the purposes of this division, the location at which an employee spends a particular day shall be determined in accordance with division (b)(1)B.2. of this section, except that "location" shall be substituted for "municipal corporation" wherever "municipal corporation" appears in that division.

4. "Professional athlete" means an athlete who performs services in a professional athletic event for wages or other remuneration.

5. "Professional entertainer" means a person who performs services in the professional performing arts for wages or other remuneration on a per-event basis.

6. "Public figure" means a person of prominence who performs services at discrete events, such as speeches, public appearances, or similar events, for wages or other remuneration on a per-event basis.

7. "Worksite location" means a construction site or other temporary worksite in this State at which the employer provides services for more than 20 days during the calendar year. "Worksite location" does not include the home of an employee.

B. 1. Subject to divisions (b)(1)C., E., and F. of this section, an employer is not required to withhold City income tax on qualifying wages paid to an employee for the performance of personal services in City if the employee performed such services in City on 20 or fewer days in a calendar year, unless one of the following conditions applies:

a. The employee's principal place of work is located in City.

b. The employee performed services at one or more presumed worksite locations in City.

For the purposes of this division, "presumed worksite location" means a construction site or other temporary worksite in City at which the employer provides or provided services that can reasonably be, or would have been, expected by the employer to last more than 20 days in a calendar year. Services can "reasonably be expected by the employer to last more than 20 days" if either of the following applies at the time the services commence:

i. The nature of the services are such that it will require more than 20 days of the services to complete the services;

ii. The agreement between the employer and its customer to perform services at a location requires the employer to perform the services at the location for more than 20 days.

c. The employee is a resident of City and has requested that the employer withhold tax from the employee's qualifying wages as provided in Section 881.04.

d. The employee is a professional athlete, professional entertainer, or public figure, and the qualifying wages are paid for the performance of services in the employee's capacity as a professional athlete, professional entertainer, or public figure.

2. For the purposes of division (b)(1)B.1. of this section, an employee shall be considered to have spent a day performing services in City only if the employee spent more time performing services for or on behalf of the employer in City than in any other municipal corporation on that day. For the purposes of determining the amount of time an employee spent in a particular location, the time spent performing one or more of the following activities shall be considered to have been spent at the employee's principal place of work:

a. Traveling to the location at which the employee will first perform services for the employer for the day;

b. Traveling from a location at which the employee was performing services for the employer to any other location;

c. Traveling from any location to another location in order to pick up or load, for the purpose of transportation or delivery, property that has been purchased, sold, assembled, fabricated, repaired, refurbished, processed, remanufactured, or improved by the employee's employer;

d. Transporting or delivering property described in division (b)(1)B.2.c. of this section, provided that, upon delivery of the property, the employee does not temporarily or permanently affix the property to real estate owned, used, or controlled by a person other than the employee's employer;

e. Traveling from the location at which the employee makes the employee's final delivery or pick-up for the day to either the employee's principal place of work or a location at which the employee will not perform services for the employer.

C. If the principal place of work of an employee is located in another Ohio municipal corporation that imposes an income tax, the exception from withholding requirements described in division (b)(1)B.1. of this section shall apply only if, with respect to the employee's qualifying wages described in that division, the employer withholds and remits tax on such qualifying wages to that municipal corporation.

D. 1. Except as provided in division (b)(1)D.2. of this section, if, during a calendar year, the number of days an employee spends performing personal services in City exceeds the 20-day threshold, the employer shall withhold and remit tax to City for any subsequent days in that calendar year on which the employer pays qualifying wages to the employee for personal services performed in City.

2. An employer required to begin withholding tax for City under division (b)(1)D.1. of this section may elect to withhold tax for City for the first 20 days on which the employer paid qualifying wages to the employee for personal services performed in City.

E. If an employer's fixed location is City and the employer qualifies as a small employer as defined in Section 881.02, the employer shall withhold municipal income tax on all of the employee's qualifying wages for a taxable year and remit that tax only to City, regardless of the number of days which the employee worked outside the corporate boundaries of City.

To determine whether an employer qualifies as a small employer for a taxable year, a the employer will be required to provide the Tax Administrator with the employer's Federal income tax return for the preceding taxable year.

F. Divisions (b)(1)B.1. and (b)(1)D. of this section shall not apply to the extent that a Tax Administrator and an employer enter into an agreement regarding the manner in which the employer shall comply with the requirements of Section 881.04.

(Ord. 145-15. Passed 11-9-15; Ord. 41-18. Passed 5-29-18.)

881.041 CONTRACTOR REGISTRATION.

An individual, partnership, association, corporation or other entity engaged in the business of construction work in the City shall be required to submit a Regional Income Tax Agency (R.I.T.A.) registration form as provided in Section 1444.08(a)(4) of the Building and Housing Code prior to beginning construction work. The registration shall be filed with the Division of Building Inspection, and a certificate of registration shall be issued. Failure to comply shall be cause for suspension of work by the Division of Building Inspection and/or the Department of Taxation prior to the construction work commencing and/or during the performance of such construction work. Proof of possession of a valid certificate of registration shall be necessary to commence or resume suspended construction work. The certificate of registration may be revoked by the Department of Taxation for failure by the contractor to remain current in the filing of required tax documents, for failure to remain current in the required payment of taxes or for failure to comply with this section.

(Ord. 145-15. Passed 11-9-15.)

881.05 ANNUAL RETURN; FILING.

(a) (1) An annual City income tax return shall be completed and filed by every taxpayer for each taxable year for which the taxpayer is subject to the tax, whether or not a tax is due thereon.

A. The Tax Administrator may accept on behalf of all nonresident individual taxpayers a return filed by an employer, agent of an employer, or other payer under Section 881.05 of this chapter when the nonresident individual taxpayer's sole income subject to the tax is the qualifying wages reported by the employer, agent of an employer, or other payer, and no additional tax is due City.

B. Retirees having no Municipal Taxable Income for City income tax purposes may file with the Tax Administrator a written exemption from these filing requirements on a form prescribed by the Tax Administrator. The written exemption shall indicate the date of retirement and the entity from which retired. The exemption shall be in effect until such time as the retiree receives Municipal Taxable Income taxable to the City, at which time the retiree shall be required to comply with all applicable provisions of this chapter.

(2) If an individual is deceased, any return or notice required of that individual shall be completed and filed by that decedent's executor, administrator, or other person charged with the properly of that decedent.

(3) If an individual is unable to complete and file a return or notice required by City, the return or notice required of that individual shall be completed and filed by the individual's duly authorized agent, guardian, conservator, fiduciary, or other person charged with the care of the person or property of that individual.

(4) Returns or notices required of an estate or a trust shall be completed and filed by the fiduciary of the estate or trust.

(5) City shall permit spouses to file a joint return.

(6) A. Each return required to be filed under this division shall contain the signature of the taxpayer or the taxpayer's duly authorized agent and of the person who prepared the return for the taxpayer. The return shall include the taxpayer's social security number or taxpayer identification number. Each return shall be verified by a declaration under penalty of perjury.

B. The Tax Administrator shall require a taxpayer who is an individual to include, with each annual return, and amended return, copies of the following documents: all of the taxpayer's Internal Revenue Service Form W-2, “Wage and Tax Statements,” including all information reported on the taxpayer's Federal W-2, as well as taxable wages reported or withheld for any municipal corporation; the taxpayer's Internal Revenue Service Form 1040; or, in the case of a return or request required by a qualified municipal corporation, Ohio form IT-1040; and, with respect to an amended tax return, any other documentation necessary to support the adjustments made in the amended return. An individual taxpayer who files the annual return required by this section electronically is not required to provide paper copies of any of the foregoing to the Tax Administrator unless the Tax Administrator requests such copies after the return has been filed.

C. The Tax Administrator may require a taxpayer that is not an individual to include, with each annual net profit return, amended net profit return, or request for refund required under this section, copies of only the following documents: the taxpayer's Internal Revenue Service Form 1041, Form 1065, Form 1120, Form 1120-REIT, Form 1120F, or Form 1120S, and, with respect to an amended tax return or refund request, any other documentation necessary to support the refund request or the adjustments made in the amended return.

A taxpayer that is not an individual and that files an annual net profit return electronically through the Ohio Business Gateway or in some other manner shall either mail the documents required under this division to the Tax Administrator at the time of filing or, if electronic submission is available, submit the documents electronically through the Ohio Business Gateway.

D. After a taxpayer files a tax return, the Tax Administrator may request, and the taxpayer shall provide, any information, statements, or documents required by City to determine and verify the taxpayer's municipal income tax liability. The requirements imposed under division (a)(6) of this section apply regardless of whether the taxpayer files on a generic form or on a form prescribed by the Tax Administrator.

(7) A. 1. Except as otherwise provided in this chapter, each individual income tax return required to be filed under this section shall be completed and filed as required by the Tax Administrator on or before the date prescribed for the filing of State individual income tax returns under division (G) of Section 5747.08 of the ORC. The taxpayer shall complete and file the return or notice on forms prescribed by the Tax Administrator or on generic forms, together with remittance made payable to City. No remittance is required if the net amount due is ten dollars ($10.00) or less.

2. Except as otherwise provided in this chapter, each annual net profit return required to be filed under this section by a taxpayer that is not an individual shall be completed and filed as required by the Tax Administrator on or before the fifteenth day of the fourth month following the end of the taxpayer's taxable year. The taxpayer shall complete and file the return or notice on forms prescribed by the Tax Administrator or on generic forms, together with remittance made payable to the City. No remittance is required if the next amount due is ten dollars ($10.00) or less.

B. Any taxpayer that has duly requested an automatic six-month extension for filing the taxpayer's Federal income tax return shall automatically receive an extension for the filing of City's income tax return. The extended due date of City's income tax return shall be the fifteenth day of the tenth month after the last day of the taxable year to which the return relates. For tax years ending on or after January 1, 2023, the extended due date of City's income tax return for a taxpayer that is not an individual shall be the fifteenth day of the eleventh month after the last day of the taxable year to which the return relates An extension of time to file under this division is not an extension of the time to pay any tax due unless the Tax Administrator grants an extension of that date.

1. A copy of the Federal extension request shall be included with the filing of City's income tax return.

2. A taxpayer that has not requested or received a six-month extension for filing the taxpayer's Federal income tax return may request that the Tax Administrator grant the taxpayer a six-month extension of the date for filing the taxpayer's City income tax return. If the request is received by the Tax Administrator on or before the date the City income tax return is due, the Tax Administrator shall grant the taxpayer's requested extension.

C. If the Tax Commissioner extends for all taxpayers the date for filing State income tax returns under division (G) of Section 5747.08 of the ORC, a taxpayer shall automatically receive an extension for the filing of a City's income tax return. The extended due date of City's income tax return shall be the same as the extended due date of the State income tax return.

D. If the Tax Administrator considers it necessary in order to ensure the payment of the tax imposed by the City, the Tax Administrator may require taxpayers to file returns and make payments otherwise than as provided in this division, including taxpayers not otherwise required to file annual returns.

E. If a taxpayer receives an extension for the filing of a municipal income tax return under division (7)B., C., or D. of this section, the tax administrator shall not make any inquiry or send any notice to the taxpayer with regard to the return on or before the date the taxpayer files the return or on or before the extended due date to file the return, whichever occurs first.

1. If a tax administrator violates division (7)E. of this section, the municipal corporation shall reimburse the taxpayer for any reasonable costs incurred to respond to such inquiry or notice, up to $150.

2. Division (7)E. of this section does not apply to an extension received under division (7)B. of this section if the tax administrator has actual knowledge that the taxpayer failed to file for a federal extension as required to receive the extension under division (7)B. of this section or failed to file for an extension under division (7)B.2. of this section.

F. To the extent that any provision in this division (a)(7) conflicts with any provision in divisions (c)(1), (2), (3), or (4) of this section, the provisions in divisions (c)(1), (2), (3), or (4) prevail.

(8) A. For taxable years beginning after 2015, City shall not require a taxpayer to remit tax with respect to net profits if the net amount due is ten dollars ($10.00) or less.

B. Any taxpayer not required to remit tax to City for a taxable year pursuant to division (a)(8)A. of this section shall file with City an annual net profit return under division (a)(6)C. of this section, unless the provisions of division (a)(8)C. of this section apply.

C. 1. A person may notify the Tax Administrator that the person does not expect to be a taxpayer subject to City income tax ordinance for a taxable year if both the following apply:

a. The person was required to file a tax return with City for the immediately preceding taxable year because the person performed services at a worksite location (as defined in Section 881.04(b)(1)A.7.) within City.

b. The person no longer provides services in City and does not expect to be subject to City income tax for the taxable year.

2. The person shall provide the notice in a signed affidavit that briefly explains the person's circumstances, including the location of the previous worksite location and the last date on which the person performed services or made any sales within City. The affidavit shall also include the following statement: "The affiant has no plans to perform any services within City, make any sales in City, or otherwise become subject to the tax levied by City during the taxable year. If the affiant does become subject to the tax levied by City for the taxable year, the affiant agrees to be considered a taxpayer and to properly comply as a taxpayer with City income tax ordinance and rules and regulations." The person shall sign the affidavit under penalty of perjury.

3. If a person submits an affidavit described in division (a)(8)C.2. of this section the Tax Administrator shall not require the person to file and tax return for the taxable year unless the Tax Administrator possesses information that conflicts with the affidavit or if the circumstances described in the affidavit change.

4. Nothing in division (a)(8)C. of this section prohibits the Tax Administrator from performing an audit of the person.

(9) If a payment under this chapter is made by electronic funds transfer, the payment shall be considered to be made on the date of the timestamp assigned by the first electronic system receiving that payment.

(10) Taxes withheld for the City by an employer, the agent of an employer, or other payer as described in Section 881.04 shall be allowed to the taxpayer as credits against payment of the tax imposed on the taxpayer by City, unless the amounts withheld were not remitted to City and the recipient colluded with the employer, agent, or other payer in connection with the failure to remit the amounts withheld.

(11) Each return required by City to be filed in accordance with this division shall include a box that the taxpayer may check to authorize another person, including a tax return preparer who prepared the return, to communicate with the Tax Administrator about matters pertaining to the return.

(12) The Tax Administrator shall accept for filing a generic form of any income tax return, report, or document required by City, provided that the generic form, once completed and filed, contains all of the information required by ordinance, resolution, or rules and regulations adopted by City or the Tax Administrator, and provided that the taxpayer or tax return preparer filing the generic form otherwise complies with the provisions of this chapter and of City's ordinance, resolution, or rules and regulations governing the filing of returns, reports, or documents.

(b) Filing via Ohio Business Gateway.

(1) Any taxpayer subject to municipal income taxation with respect to the taxpayer's net profit from a business or profession may file City's income tax return, estimated municipal income tax return, or extension for filing a municipal income tax return, and may make payment of amounts shown to be due on such returns, by using the Ohio Business Gateway.

(2) Any employer, agent of an employer, or other payer may report the amount of municipal income tax withheld from qualifying wages, and may make remittance of such amounts, by using the Ohio Business Gateway.

(3) Nothing in this section affects the due dates for filing employer withholding tax returns.

(1) Each member of the national guard of any state and each member of a reserve component of the Armed Forces of the United States called to active duty pursuant to an executive order issued by the President of the United States or an act of the Congress of the United States, and each civilian serving as support personnel in a combat zone or contingency operation in support of the Armed Forces, may apply to the Tax Administrator of City for both an extension of time for filing of the return and an extension of time for payment of taxes required by City during the period of the member's or civilian's duty service, and for 180 days thereafter. The application shall be filed on or before the one hundred eightieth day after the member's or civilian's duty terminates. An applicant shall provide such evidence as the Tax Administrator considers necessary to demonstrate eligibility for the extension.

(2) A. If the Tax Administrator ascertains that an applicant is qualified for an extension under this section, the Tax Administrator shall enter into a contract with the applicant for the payment of the tax in installments that begin on the one hundred eighty-first day after the applicant's active duty or service terminates. The Tax Administrator may prescribe such contract terms as the Tax Administrator considers appropriate. However, taxes pursuant to a contract entered into under this division are not delinquent, and the Tax Administrator shall not require any payments of penalties or interest in connection with those taxes for the extension period.

B. If the Tax Administrator determines that an applicant is qualified for an extension under this section, the applicant shall neither be required to file any return, report, or other tax document nor be required to pay any tax otherwise due to the municipal corporation before the one hundred eighty-first day after the applicant's active duty or service terminates.

C. Taxes paid pursuant to a contract entered into under division (c)(2)A. of this division are not delinquent. The Tax Administrator shall not require any payments of penalties or interest in connection with those taxes for the extension period.

(3) A. Nothing in this division denies to any person described in this division the application of divisions (c)(1) and (2) of this section.

B. 1. A qualifying taxpayer who is eligible for an extension under the Internal Revenue Code shall receive both an extension of time in which to file any return, report, or other tax document and an extension of time in which to make any payment of taxes required by a municipal corporation in accordance with this chapter. The length of any extension granted under division (c)(3)B.1. of this section shall be equal to the length of the corresponding extension that the taxpayer receives under the Internal Revenue Code. As used in this division, "qualifying taxpayer" means a member of the national guard or a member of a reserve component of the Armed Forces of the United States called to active duty pursuant to either an executive order issued by the President of the United States or an act of the Congress of the United States, or a civilian serving as support personnel in a combat zone or contingency operation in support of the armed forces.

2. Taxes whose payment is extended in accordance with division (c)(3)B.1. of this section are not delinquent during the extension period. Such taxes become delinquent on the first day after the expiration of the extension period if the taxes are not paid prior to that date. The Tax Administrator shall not require any payment of penalties or interest in connection with those taxes for the extension period. The Tax Administrator shall not include any period of extension granted under division (a)(7)B.1. of this section in calculating the penalty or interest due on any unpaid tax.

(4) For each taxable year to which division (c) of this section applies to a taxpayer, the provisions of divisions (c)(2)B. and C. of this section, as applicable, apply to the spouse of that taxpayer if the filing status of the spouse and the taxpayer is married filing jointly for that year.

(d) Consolidated Municipal Income Tax Return.

(1) As used in this section:

A. "Affiliated group of corporations" means an affiliated group as defined in Section 1504 of the Internal Revenue Code, except that, if such a group includes at least one incumbent local exchange carrier that is primarily engaged in the business of providing local exchange telephone service in this State, the affiliated group shall not include any incumbent local exchange carrier that would otherwise be included in the group.

B. "Consolidated Federal income tax return" means a consolidated return filed for Federal income tax purposes pursuant to Section 1501 of the Internal Revenue Code.

C. "Consolidated Federal taxable income" means the consolidated taxable income of an affiliated group of corporations, as computed for the purposes of filing a consolidated Federal income tax return, before consideration of net operating losses or special deductions. "Consolidated Federal taxable income" does not include income or loss of an incumbent local exchange carrier that is excluded from the affiliated group under division (c)(1)A. of this section,

D. "Incumbent local exchange carrier" has the same meaning as in Ohio R.C. 4927.01.

E. "Local exchange telephone service" has the same meaning as in Ohio R.C. 5727.01.

(2) A. For taxable years beginning on or after January 1, 2016, a taxpayer that is a member of an affiliated group of corporations may elect to file a consolidated municipal income tax return for a taxable year if at least one member of the affiliated group of corporations is subject to City's income tax in that taxable year, and if the affiliated group of corporations filed a consolidated Federal income tax return with respect to that taxable year. The election is binding for a five-year period beginning with the first taxable year of the initial election unless a change in the reporting method is required under Federal law. The election continues to be binding for each subsequent five-year period unless the taxpayer elects to discontinue filing consolidated municipal income tax returns under division (d)(2)B. of this section or a taxpayer receives permission from the Tax Administrator. The Tax Administrator shall approve such a request for good cause shown.

B. An election to discontinue filing consolidated municipal income tax returns under this section must be made in the first year following the last year of a five-year consolidated municipal income tax return election period in effect under division (d)(2)A. of this section. The election to discontinue filing a consolidated municipal income tax return is binding for a five-year period beginning with the first taxable year of the election.

C. An election made under division (d)(2)A. or B. of this section is binding on all members of the affiliated group of corporations subject to a municipal income tax.

D. When a taxpayer makes the election allowed under R.C. § 718.80, a valid election made by a taxpayer under division (d)(1) or (d)(2) of this section is binding upon the Tax Commissioner for the remainder of the five-year period.

E. When an election is made under R.C. § 718.80 is terminated, a valid election made under R.C. § 718.86 is binding upon the Tax Administrator for the remainder of the five-year period.

(3) A taxpayer that is a member of an affiliated group of corporations that filed a consolidated Federal income tax return for a taxable year shall file a consolidated City income tax return for that taxable year if the Tax Administrator determines, by a preponderance of the evidence, that intercompany transactions have not been conducted at arm's length and that there has been a distortive shifting of income or expenses with regard to allocation of net profits to City. A taxpayer that is required to file a consolidated City income tax return for a taxable year shall file a consolidated City income tax return for all subsequent taxable years, unless the taxpayer requests and receives written permission from the Tax Administrator to file a separate return or a taxpayer has experienced a change in circumstances.

(4) A taxpayer shall prepare a consolidated City income tax return in the same manner as is required under the United States Department of Treasury regulations that prescribe procedures for the preparation of the consolidated Federal income tax return required to be filed by the common parent of the affiliated group of which the taxpayer is a member.

(5) A. Except as otherwise provided in divisions (d)(5)B., C., and D. of this section, corporations that file a consolidated municipal income tax return shall compute adjusted Federal taxable income, as defined in Section 881.02, by substituting "consolidated Federal taxable income" for "Federal taxable income" wherever "Federal taxable income" appears in that division and by substituting "an affiliated group of corporation's" for "a C corporation's" wherever "a C corporation's" appears in that division.

B. No corporation filing a consolidated City income tax return shall make any adjustment otherwise required under Section 881.02(c)(1) to the extent that the item of income or deduction otherwise subject to the adjustment has been eliminated or consolidated in the computation of consolidated Federal taxable income.

C. If the net profit or loss of a pass-through entity having at least eighty percent (80%) of the value of its ownership interest owned or controlled, directly or indirectly, by an affiliated group of corporations is included in that affiliated group's consolidated Federal taxable income for a taxable year, the corporation filing a consolidated City income tax return shall do one of the following with respect to that pass-through entity's net profit or loss for that taxable year:

1. Exclude the pass-through entity's net profit or loss from the consolidated Federal taxable income of the affiliated group and, for the purpose of making the computations required in Section 881.05(d), exclude the property, payroll, and gross receipts of the pass-through entity in the computation of the affiliated group's net profit sitused to a municipal corporation. If the entity's net profit or loss is so excluded, the entity shall be subject to taxation as a separate taxpayer on the basis of the entity's net profits that would otherwise be included in the consolidated Federal taxable income of the affiliated group.

2. Include the pass-through entity's net profit or loss in the consolidated Federal taxable income of the affiliated group and, for the purpose of making the computations required in division Section 881.05(d), include the property, payroll, and gross receipts of the pass-through entity in the computation of the affiliated group's net profit sitused to a municipal corporation. If the entity's net profit or loss is so included, the entity shall not be subject to taxation as a separate taxpayer on the basis of the entity's net profits that are included in the consolidated Federal taxable income of the affiliated group.

D. If the net profit or loss of a pass-through entity having less than eighty percent (80%) of the value of its ownership interest owned or controlled, directly or indirectly, by an affiliated group of corporations is included in that affiliated group's consolidated Federal taxable income for a taxable year, all of the following shall apply:

1. The corporation filing the consolidated municipal income tax return shall exclude the pass-through entity's net profit or loss from the consolidated Federal taxable income of the affiliated group and, for the purposes of making the computations required in Section 881.05(d), exclude the property, payroll, and gross receipts of the pass-through entity in the computation of the affiliated group's net profit sitused to City;

2. The pass-through entity shall be subject to City income taxation as a separate taxpayer in accordance with this chapter on the basis of the entity's net profits that would otherwise be included in the consolidated Federal taxable income of the affiliated group.

(6) Corporations filing a consolidated City income tax return shall make the computations required under Section 881.05(d) by substituting "consolidated Federal taxable income attributable to" for "net profit from" wherever "net profit from" appears in that section and by substituting "affiliated group of corporations" for "taxpayer" wherever "taxpayer" appears in that section.

(7) Each corporation filing a consolidated City income tax return is jointly and severally liable for any tax, interest, penalties, fines, charges, or other amounts imposed by City in accordance with this chapter on the corporation, an affiliated group of which the corporation is a member for any portion of the taxable year, or any one or more members of such an affiliated group.

(8) Corporations and their affiliates that made an election or entered into an agreement with City before January 1, 2016, to file a consolidated or combined tax return with City may continue to file consolidated or combined tax returns in accordance with such election or agreement for taxable years beginning on and after January 1, 2016.

(Ord. 145-15. Passed 11-9-15; Ord. 41-18. Passed 5-29-18; Ord. 64-24. Passed 5-28-24.)

Disclaimer: This Code of Ordinances and/or any other documents that appear on this site may not reflect the most current legislation adopted by the Municipality. American Legal Publishing provides these documents for informational purposes only. These documents should not be relied upon as the definitive authority for local legislation. Additionally, the formatting and pagination of the posted documents varies from the formatting and pagination of the official copy. The official printed copy of a Code of Ordinances should be consulted prior to any action being taken. For further information regarding the official version of any of this Code of Ordinances or other documents posted on this site, please contact the Municipality directly or contact American Legal Publishing toll-free at 800-445-5588.

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