(a) Bases.
(1) Resident Employee.
A. For the purpose of determining the tax on the earnings of resident taxpayers taxed under Section 171.03(a)(1), the sources of the earnings and the place or places in or at which the services were rendered are immaterial. All such earnings wherever earned or paid are taxable.
B. The following items are subject to the tax:
1. Qualifying wages, bonuses and incentive payments earned by an individual whether directly or through an agent and whether in cash or in property for services rendered during the tax period as:
a. An officer, director or employee of a corporation (including charitable and other non-profit organizations), joint stock association or joint stock company;
b. An employee (as distinguished from a partner or member) of a partnership, limited partnership or any form of unincorporated enterprise owned by two or more persons;
c. An employee (as distinguished from a proprietor) of a business, trade or profession conducted by an individual owner;
d. An officer or employee (whether elected, appointed or commissioned) of the United States Government, or any of its agencies; or of the State of Ohio or any of its political subdivisions or agencies thereof; or any foreign country or dependency--except as provided in Section 171.03(f);
e. An employee of any other entity or person, whether based upon hourly, daily, weekly, semi-monthly, monthly, annual, unit of production or piece work rates; and whether paid by an individual, partnership, association, corporation (including charitable and other non-profit corporations), governmental administration, agency, authority, board, body, branch, bureau, department, division, subdivision, section or unit, or any other entity.
2. Commissions earned by an individual directly or through an agent and whether in cash or in property for services rendered, regardless of how computed or by whom or wheresoever paid.
a. If amounts received as a drawing account exceed the commissions earned, and the excess is not subject to the demand of the employer for repayment, the tax is payable on the amounts received as a drawing account.
b. Amounts received from an employer for expenses, and not as compensation and used as such by the individual receiving them, are not deemed to be compensation if the employer deducts such expenses or advances as such from his gross income for the purpose of determining his net profits taxable under federal law, and the employee is not required to include such receipts as income on his federal tax return.
c. If commissions are included in the net earnings of the trade, business, profession, enterprise or activity, carried on by an unincorporated entity of which the individual receiving such commission is owner or part owner and if it were subject to the tax under paragraph (a)(3) or (a)(4) of Section 171.03, it shall not be taxed under Section 171.03 (a)(1).
3. Fees, unless such fees are properly includable as part of the net profits of a trade, business, profession or enterprise regularly carried on by an unincorporated entity owned or partly owned by such individual and such net profits are subject to the tax under Section 171.03(a)(3).
4. Other compensation, including tips, bonuses or gifts of any type, and including compensation paid to domestic servants, casual employees and other types of employees.
5. Payments made to an employee by an employer as vacation pay or wages under any other wage continuation plan during periods of disability or sickness are taxable when paid. Payments made by third parties (insurance companies) to an employee for sick or disability pay are taxable if the amount appears on a W-2 form and the employer has paid the premium for this insurance coverage.
6. Sums deducted from gross wages or other compensation for retirement purposes (deferred compensation) are taxable.
7. If the income appears on a W-2 form and is not shown to be an exception in accordance with subsection (e) hereof (Exceptions), it shall be considered other compensation and therefore taxable to the individual. This includes, but is not limited to:
a. Tips, bonuses, fees, gifts in lieu of pay, gratuities.
b. Supplemental unemployment compensation benefits described in Section 3402 (o)(2) of the Internal Revenue Code.
c. Strike pay; grievance pay.
d. Incentive payments, no matter how described, including, but not limited to payments to induce early retirement.
e. Severance pay.
f. Car allowance, personal use of employer-provided vehicle.
g. Group term life insurance to the extent taxable to the federal government.
h. Sick pay or disability pay whether paid by the employer to the employee or through a third party.
i. Contributions by an employee or on behalf of an employee from gross wages, into an employee or third party trust or pension plan as permitted by any provision of the Internal Revenue Code which may be excludable from gross wages for federal income tax purposes (401K plans and similar plans).
j. The ordinary income portion of a stock option or employee stock purchase plan to the extent that it is shown on the W-2 as ordinary income and is includable on the taxpayer's federal income tax return.
k. Nonqualified Deferred Compensation Plans or programs described in Section 3121(v)(2)(C) of the Internal Revenue Code.
l. Trusts not made pursuant to employee’s retirement.
C. Where compensation is paid or received in property, its fair market value, at the time of receipt, shall be subject to the tax and to withholding. Board, lodging and similar items received by an employee in lieu of additional cash compensation shall be included in earnings at their fair market value.
1. In the case of domestic and other employees whose duties require them to live at their place of employment or assignment, board and lodging shall not be considered as wages or compensation earned.
2. Rentals given to clergy are not to be considered as income.
(2) Nonresident Employee.
A. In the case of individuals who are not residents, there is imposed under Section 171.03(a)(2), a tax on all qualifying wages, commissions and other compensation, and other taxable income earned or received for work done or services performed or rendered within the Municipality whether such compensation or remuneration is received or earned directly or through an agent and whether paid in cash or in property. The location of the place from which payment is made is immaterial.
B. The items subject to tax under Section 171.03(a)(2) are the same as those listed and defined respecting a resident employee.
C. The Municipality shall not tax the compensation of an individual if all of the following apply:
1. The individual does not reside in the Municipality;
2. The compensation is paid for personal services performed by the individual in the Municipality on twelve (12) or fewer days during the calendar year;
3. In the case of an individual who is an employee, the principal place of business of the individual's employer is located outside the Municipality and the individual pays tax on compensation described in item (2) of this section to the city, if any, in which the employer's principal place of business is located, and no portion of that tax is refunded to the individual;
4. The individual is not a professional entertainer or professional athlete, the promoter of a professional entertainment or sports event, or an employee of such a promoter, all as may be reasonably defined by the Municipality.
D. For purposes of the 12-day calculation, "Day" means any part of a 24-hour calendar day where compensation is earned in the Municipality.
E. Beginning with the thirteenth (13) day, the individual shall no longer be considered an occasional entrant and is liable for taxes on income earned for the first twelve (12) days.
(3) A. Imposition of Tax on Net Profits of Resident Unincorporated Businesses.
1. The tax imposed on resident associations or other unincorporated entities owned by two or more persons is upon the entities rather than the individual members or owners thereof, but the tax imposed on an unincorporated resident entity owned by one person is upon the individual owner.
2. The tax imposed by Section 171.03(a)(3) is imposed on all resident unincorporated entities having net profits attributable to the Municipality under the business apportionment percentage formula provided for, regardless of where the owner or owners of such resident unincorporated business entity reside.
3. Resident associations or unincorporated entities owned exclusively by residents of the Municipality may elect to disregard the business apportionment percentage formula provided for and pay the tax on their entire net profits if no apportionment by the entity to another municipality exists. In such case, the tax paid by the entity shall constitute all tax due from the owners or members of the entity for their distributive share of such net profits; however, an additional return shall be required from any such owner or member having taxable income other than the distributive share of the net profits from the entity.
4. The tax imposed shall not apply to income derived within the Municipality by any person from interstate commerce if the only business activities within the State of Ohio by or on behalf of such person are either or both the following:
a. Solicitation of orders by such person, or his representative, in the State of Ohio for sales of tangible personal property, which orders are sent outside the State of Ohio for approval or rejection, and, if approved, are filled by shipment or delivery from a point outside the State of Ohio; and
b. The solicitation of orders by such person, or his representative in the State of Ohio, in the name of or for the benefit of a prospective customer of such person, if orders by such customer to such person to enable such customer to fill orders resulting from such solicitations are orders described in subsection a. above; provided, however, that the provisions of this subsection shall not apply to any corporation which is incorporated under the laws of the State of Ohio or any individual who is domiciled in or a resident of the State of Ohio. For the purpose of this subsection a person shall not be considered to have engaged in a business activity within the State of Ohio during any taxable year merely by reason of sales in the State of Ohio, or the solicitation of orders for sales within the State of Ohio, of tangible personal property on behalf of such person by one or more independent contractors or by reason of the maintenance of an office within the State of Ohio by one or more independent contractors whose activities on behalf of such person in the State of Ohio consist solely of making sales or soliciting orders for sales of tangible personal property. For the purpose of this subsection the term "independent contractor" means a commission agent, broker, or other independent contractor who is engaged in selling or soliciting orders for sales of tangible personal property for more than one principal and who holds himself out as such in the regular course of his business activities. For the purpose of this subsection, the term "representative" does not include an independent contractor.
B. Imposition of Tax on Resident's Distributive Share of Profits of a Resident Unincorporated Business Entity Not Attributable to the Municipality.
1. A resident individual who is an owner of a resident unincorporated entity shall pay the tax on his entire share of net profits of the resident unincorporated business entity unless allocation to another municipality exists. See Section 171.15 for credits.
2. In the case of a resident individual partner or part owner of a resident unincorporated entity, the tax is imposed on such individual's distributive share of net profits not attributable to the Municipality under the business apportionment percentage formula provided for in Section 171.03(b), and not taxed against the entity.
(4) A. Imposition of Tax on Net Profits of Nonresident Unincorporated Businesses.
1. In the case of nonresident associations or other unincorporated entities, whether or not they have an office or any place of business in the Municipality, the tax is imposed on net profits attributable to the Municipality under the business apportionment percentage formula provided for in Section 171.03(b).
2. The tax imposed on nonresident associations or other unincorporated entities is upon the entities rather than the individual members or owners thereof.
3. The tax imposed by Section 171.03(b) is imposed on all nonresident associations and other unincorporated entities having net profits attributable to the Municipality under the business apportionment percentage formula provided for, regardless of where the owner or owners of such nonresident associations or unincorporated entities reside.
4. Nonresident unincorporated entities owned exclusively by residents of the Municipality may elect to disregard the business apportionment percentage formula provided for and pay the tax on their entire net profits if no apportionment by the entity to another municipality exists. In such case, the tax paid by the entity shall constitute all tax due from the owners or members of the entity for their distributive share of the net profits; however, a return shall be required from such owner or member having taxable income other than the distributive share of the net profits from the entity.
B. Imposition of Tax on Resident's Share of Profits of a Nonresident Unincorporated Business Entity Not Attributable to the Municipality.
1. A resident individual who is an owner of a nonresident unincorporated business entity shall pay the tax on his entire share of net profits of the unincorporated entity. If allocation to another municipality exists, the taxpayer may qualify for credit for tax paid to another municipality under Section 171.15.
2. In the case of a resident individual partner or part owner of a nonresident unincorporated entity, the tax is imposed on such individual's distributive share of net profits not attributable to the Municipality under the business apportionment percentage formula provided for in Section 171.03(b) and not taxed against the entity.
(5) Imposition of Tax on Net Profits of Corporations.
A. In the case of corporations, whether domestic or foreign and whether or not such corporations have an office or place of business in the Municipality, the tax is imposed on the net profits attributable to the Municipality under the business apportionment percentage formula provided for in the Ordinance.
B. In determining whether a corporation is conducting a business or other activity in the Municipality, the provisions of these Regulations shall be applicable.
C. Corporations which are required by the provisions of Ohio Revised Code 5727.38 to 5727.41, inclusive, to pay an excise tax in any taxable year, may exclude that part of their gross receipts upon which the excise tax is paid. In such case, expenses incurred in the production of such gross receipts shall not be deducted in computing net profits subject to the tax imposed by Section 171.03.
(6) Amplification. In amplification of the definition contained herein, but not in limitation thereof, the following additional information respecting net business profits is furnished.
A. Net Profits.
1. “Net profit” for a taxpayer other than an individual means adjusted federal taxable income and “net profit” for a taxpayer who is an individual means the individual’s profit, other than amounts described in Section 171.03(f), required to be reported on Schedule C, Schedule E, or Schedule F.
2. “Adjusted federal taxable income” 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 subsection (a)(1)A. hereof, 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 related to the sale, exchange, or other disposition of an asset described in Section 1221 or 1231 of the Internal Revenue Code;
d. (i) Except as provided in subsection (a)(6)A.2.d.(i) hereof, 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 Sections 1221 or 1231 of the Internal Revenue Code.
(ii) Subsection (a)(6)A.2.d.(i) hereof does not apply to the extent the income or gain is income or gain described in Sections 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 and 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. If the taxpayer is not a C corporation and is not an individual, the taxpayer shall compute adjusted federal taxable income as if the taxpayer were a C corporation, except;
(i) Guaranteed payments and other similar amounts paid or accrued to a partner, former partner, member, or former member shall not be allowed as a deductible expense; and
(ii) Amounts paid or accrued to a qualified self- employed retirement plan with respect to an owner or owner-employee of the taxpayer, amounts paid or accrued to or for health insurance for an owner or owner-employee, and amounts paid or accrued to or for life insurance for an owner or owner-employee shall not be allowed as a deduction.
Nothing in 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.
Nothing in this chapter shall be construed as limiting or removing the ability of any municipal corporation to administer, audit, and enforce the provisions of its municipal income tax.
B. Gross Receipts.
1. Gross receipts shall include, but not be limited to income in the form of commissions, fees, directors’ fees, subpay, profit sharing from nonqualified plans, rentals from real and tangible personal property and other compensation for work or services performed or rendered, as well as any that comes from stock in trade.
2. Gross receipts shall include ordinary income from Form 4797.
C. Expenses.
1. All ordinary and necessary expenses of doing business, including reasonable compensation paid employees, shall be allowed but no deduction may be claimed for salary or withdrawal of a proprietor or of the partners, members or other owners of an unincorporated business or enterprise.
2. If not claimed as part of the cost of goods sold or elsewhere in the return filed, there may be claimed and allowed a reasonable deduction for depreciation, depletion, obsolescence, losses resulting from theft or casualty not compensated for by insurance or otherwise of property used in the trade or business, but the amount may not exceed that recognized for the purpose of the federal income tax. Provided however, that loss on the sale, exchange or other disposition of depreciable property or real estate, used in the taxpayer's business shall not exceed that recognized for the purpose of the federal income tax.
3. Current amortization of emergency facilities under the provisions of the Internal Revenue Code, if recognized as such for federal income tax purposes, may be included as an expense deduction hereunder.
4. Where depreciable property is voluntarily destroyed the cost of demolition of the building, less any increase in the value of the land caused by such demolition, will be allowed as an expense and may be completely taken in the year of demolition or over a period of not to exceed five (5) years.
5. Bad debts in a reasonable amount may be allowed in the year ascertained worthless and charged off, or at the discretion of the Tax Commissioner (if the reserve method is used), as reasonable addition to the reserve may be claimed, but in no event shall the amount exceed the amount allowable for federal income tax purposes.
6. Only taxes directly connected with the business may be claimed as a deduction. If for any reason the income from property is not subject to the tax, then taxes on and other expenses of such property are not deductible. In any event, the following taxes are not deductible from income: (1) the tax under Chapter 171; (2) federal or other taxes based upon income; (3) gift, estate or inheritance taxes; and (4) taxes for local benefit or improvements to property which tend to appreciate the value thereof, and; (5) self-employment taxes for unincorporated businesses or other entities, including credit for employment taxes as allowed for federal tax purposes.
7. If the taxpayer reports income that is non-taxable under Chapter 171 and such amounts are deducted in order to reconcile the municipal return with the taxpayer’s federal return, expenses attributable to this non-taxable income shall not be allowed as a deduction from the remaining taxable income. The expenses attributed to such non-taxable income shall be:
a. Five percent (5%) of the non-taxable income. Non- taxable income given capital gain treatment on the federal return, from which attributable expenses were already deducted, is not subject to the foregoing.
8. An employee who is paid on a commission or other compensation basis and who pays his business expense from his commissions or other compensation, without reimbursement from his employer, may deduct from his gross commissions or other compensations, business expenses allowed by the Internal Revenue Service for federal income tax purposes but only to the extent such expenses are incurred in earning commissions or other compensations subject to the tax imposed by Chapter 171. Business expenses allowed shall be those expenses allowed to be claimed on the federal Form 2106 and upon the request of the Tax Commissioner, verifiable with supporting schedules and/or receipts. No expenses claimed on federal Form Schedule A, Itemized Deductions, shall be allowed and failure to produce the supporting schedules and/or receipts upon request by the Tax Commissioner shall result in disallowance of the expenses in question.
9. Income from the sale or lease of mineral rights are not taxable and expenses or loss in connection therewith are not deductible for tax purposes except in cases where the taxpayer conducts the activities by which the minerals are extracted from the land.
10. Expenses incurred while attending educational courses may not be deducted from wages.
11. Moving expenses included in gross earnings shall be an allowance as a deductible expense. No deduction will be allowed if the taxpayer does not provide the federal Form 3903, “Employee Moving Expenses Information”, for his moving deductions. Only moving expenses incurred, as part of income included in gross earnings, will be allowed.
12. Funds allocated by an employer to an employee's qualified profit sharing, pension or retirement fund are not taxable to the employee.
13. No deduction shall be allowed for self-employed health insurance against income as allowed for federal or state tax purposes for unincorporated entities or the like.
(7) Rental from Real Property.
A. The rental of real estate is ordinarily a business activity, and the income from such rentals is taxable, provided however, where the taxpayer's entire rental activity produces gross rentals of less than two hundred fifty dollars ($250.00) per month, it will be prima-facie evidence that such rental activities are not a business activity. If gross rentals equal or exceed two hundred fifty dollars ($250.00) per month, the entire net income from rentals is taxable. In determining the amount of gross monthly rental of any real property, periods during which, by reason of vacancy or any other cause, rentals are not received shall not be taken into consideration by the taxpayer.
B. Rentals received by a taxpayer engaged in the business of buying and selling real estate shall be considered as part of business income.
C. Real property, as the term is used in these Rules and Regulations, shall include commercial property, residential property, farm property and any and all other types of real estate.
D. In determining the taxable income from rentals, the deductible expenses shall be of the same nature, extent and amount as are allowed by the Internal Revenue Service for federal income tax purposes.
E. Residents of the Municipality are subject to taxation upon the net income from rentals (to the extent above specified), regardless of the location of the real property owned. However, if any such property is located outside the Municipality, and is subject to another municipal income tax, credit shall be claimed in accordance with Section 171.15.
F. Nonresidents of the Municipality are subject to such taxation only if the real property is situated within the Municipality.
G. Businesses owning or managing real estate are taxed only on that portion of income derived from property located in the Municipality.
(8) Royalties. Income in the form of royalties is taxable if the taxpayer's activities produced the publication or other product the sale of which produces the royalties.
(9) Gambling Winnings. Gambling winnings as reported on Internal Revenue Service Form W-2G, Form 5754 and or any other forms required by the Internal Revenue Service that reports winnings from gambling.
(b) Apportionment of Business Profits. A request to change the method of allocation shall be made in writing before the end of the taxable year.
(1) Business Apportionment Percentage Formula.
A. STEP 1. Ascertain the percentage which the original cost of real and tangible personal property, including leasehold improvements, owned or used in the business and situated within the Municipality is of the original cost of all real and tangible personal property including leasehold improvements, owned or used in the business wherever situated, during the period covered by the return.
1. The percentage of the taxpayer's real and tangible personal property within the Municipality is determined by dividing the original cost of such property within the Municipality (without deduction of any encumbrances) by the original cost of all such property within and without the Municipality. In determining such percentage, property rented to the taxpayer as well as real and tangible personal property owned by taxpayer must be considered.
2. The original cost of real and tangible personal property rented by the taxpayer shall be determined by multiplying gross annual rents by eight (8).
3. Gross rents means the actual sum of money or other consideration payable, directly or indirectly by the taxpayer for the use or possession of property and includes:
a. Any amount payable for the use or possession of real and tangible personal property or any part thereof, whether designated as a fixed sum of money or as a percentage of sales or profits or otherwise.
b. Any amount payable as additional rent or in lieu of rent such as interest, taxes, insurance, repairs or other amounts required to be paid by the terms of a lease or other arrangement.
4. A residence may not be considered an office unless a portion thereof is used exclusively for business purposes and is reached by a separate entrance in an exterior wall which does not serve as the entrance to the balance of the building.
B. STEP 2. Ascertain the percentage which the gross receipts of the taxpayer derived from sales made and services rendered in the Municipality is of the total gross receipts wherever derived during the period covered by the return. All resident corporations, unincorporated businesses, or other entities whose principal place of business is within the Municipality, shall be considered a resident Municipal business and be subject to the following provision:
If the sales apportionment percentage is less than one hundred percent (100%), a statement shall be submitted with the return indicating: (1) other municipalities to which sales are apportioned; (2) percentage of sales apportioned to each municipality; (3) whether or not a return was filed and tax paid on the sales apportioned to each municipality. Failure to submit this statement (or when the statement indicates no other municipal tax was filed and paid), shall result in all sales being considered as sales of the Municipality.
1. The following sales shall be considered Municipality sales:
a. All sales of tangible personal property delivered within such municipal corporation regardless of where title passes if shipped or delivered from a stock of goods within such municipal corporation;
b. All sales of tangible personal property delivered within such municipal corporation regardless of where title passes even though transported from a point outside such municipal corporation if the taxpayer is regularly engaged through its own employees in the solicitation or promotion of sales within such municipal corporation and the sales result from such solicitation or promotion;
c. All sales of tangible personal property shipped from a place within such municipal corporation to purchasers outside such municipal corporation regardless of where title passes if the taxpayer is not, through its own employees, regularly engaged in the solicitation or promotion of sales at the place where delivery is made.
C. STEP 3. Ascertain the percentage which the total wages, salaries, commissions and other compensation of employees within the Municipality is of the total wages, salaries, commissions and other compensation of all the taxpayer's employees within and without the Municipality during the period covered by the return.
1. Salaries and reasonable compensation paid owners or credited to the account of owners or partners during the period covered by the return are considered wages for the purpose of this computation.
2. Wages, salaries and other compensation shall be computed on the cash or accrual basis in accordance with the method of accounting used in the computation of the entire net income of the taxpayer.
3. In the case of an employee who performs services both within and without the Municipality the amount treated as compensation for services performed within the Municipality shall be deemed to be:
a. In the case of an employee whose compensation depends directly on the volume of business secured by him, such as a salesman on a commission basis, the amount received by him from the business attributable to his efforts within the Municipality.
b. In the case of an employee whose compensation depends on other results achieved, the proportion of the total compensation received which the value of his services within the Municipality bears to the value of all his services; and
c. In the case of an employee compensated on a time basis, the proportion of the total amount received by him which his working time within the Municipality is of his total working time.
d. Provided however, an employee regularly connected with or working out of a place of business maintained by the taxpayer in the Municipality who performs seventy-five percent (75%) or more of his services within the Municipality be considered an employee within the Municipality.
e. Nonresident professional persons shall use the factor of days spent within the Municipality to total working days.
All employees regularly connected with or working out of a place of business maintained by the taxpayer outside the Municipality who performs twenty-five percent (25%) or less of their services within the Municipality shall be considered employees outside the Municipality. The provisions of this subsection are not applicable in determining the tax liability of a nonresident who works in and outside the Municipality.
D. STEP 4. Add the percentages determined in accordance with Steps 1, 2, and 3 or such of the aforesaid percentages as may be applicable to the particular taxpayer's business and divide the total so obtained by the number of percentages used in ascertaining such total. The result so obtained is the business apportionment percentage. In determining the average percentage, a factor shall not be excluded from the computation merely because such factor is found to be apportioned entirely in or outside the Municipality. A factor is excluded only when it does not exist anywhere.
E. STEP 5. The business apportionment percentage determined in Step 4 above shall be applied to the entire taxable net profits of the taxpayer wherever derived to determine the net profits apportioned to the Municipality.
(2) Substitute Method.
A. In the event a just and equitable result cannot be obtained under the business apportionment percentage formula, the Tax Commissioner, upon application of the taxpayer, may substitute other factors in the business apportionment percentage formula or prescribe other methods of apportioning net income calculated to effect a fair and proper apportionment.
B. Application to the Tax Commissioner to substitute other factors in the business apportionment percentage formula or to use a different method to apportion net profits shall be made in writing before the end of the taxable year and shall state the specific grounds on which the substitution of factors or use of a different method is requested and the relief sought to be obtained. A copy thereof shall be served at the time of filing upon the taxpayer or the Tax Commissioner as the case may be. No specific form need be followed in making such application. Once a taxpayer has filed under a substitute method he must continue to so file until given permission to change by the Tax Commissioner.
C. The decision of the Tax Commissioner on subsections (b)(2)A. and B. hereof may be appealed by the taxpayer to the Board of Review, which shall have the power to adjust, modify or overrule such decision of the Tax Commissioner.
(3) In the case of professional people and others furnishing personal services, if their only place of business is within the Municipality all their net profits shall prima facie be attributable to the Municipality.
(c) Operating Loss Carry Forward.
(1) The portion of a net operating loss to be carried forward shall be determined in the year the net operating loss is sustained, on the basis of the apportionment factors applicable to that year.
The same method of accounting and apportionment must be used in the year to which an operating loss is carried as was used in the year in which the operating loss was sustained.
(2) A short fiscal year [a fiscal year of less than twelve (12) months] brought about by a change in accounting period, a new taxpayer selecting a short fiscal year or a taxpayer operating in the Municipality for less than his full accounting period, shall be considered as a full taxable fiscal year for purposes of loss carry forward.
(3) In any return in which a net operating loss deduction is claimed, a schedule should be attached showing:
A. Year in which net operating loss was sustained.
B. Method of accounting and apportionment used to determine portion of net operating loss apportioned to the Municipality.
C. Amount of net operating loss used as a deduction in prior years.
D. Amount of net operating loss claimed as a deduction in current year.
(4) The net operating loss of a taxpayer which loses its identity through merger, consolidation, etc., shall not be allowed as a carry forward loss deduction to the surviving or new taxpayer.
(d) Consolidated Returns.
(1) A consolidated return may be filed by a group of corporations who are affiliated through stock ownership if that affiliated group filed for the same tax period a consolidated return for federal income tax purposes pursuant to Section 1501 of the Internal Revenue Code. A consolidated return must include all companies which are so affiliated.
(2) Once a consolidated return has been filed for any taxable year the consolidated group must continue to file consolidated returns in subsequent years unless:
A. Permission in writing is granted by the Tax Commissioner to file separate returns.
B. A new corporation other than a corporation created or organized by a member of the group has become a member of the group during the taxable year.
C. A corporation member of the group is sold or exchanged. Liquidating a corporation or merging one of the corporations of the group into another will not qualify the group for filing separate returns.
(e) Exceptions. The following shall not be considered taxable.
(1) Proceeds from welfare benefits, unemployment insurance benefits, pensions, social security benefits, and qualified retirement plans as defined by the Internal Revenue Service.
(2) Proceeds of insurance, annuities, workers' compensation insurance, permanent disability benefits as determined by a physician or government entity, compensation for damages for personal injuries and like reimbursement, not including damages for loss of profits.
(3) Income of any charitable, religious, educational, fraternal or other type of nonprofit association or organization enumerated in Ohio Revised Code 718.01 to the extent that such income is derived from tax exempt real estate, tax exempt tangible or intangible property or tax exempt activities.
(4) Any association or organization falling in the category listed in the preceding paragraph receiving income from non-exempt real estate, tangible or intangible personal property, or business activities of a type ordinarily conducted for profit by taxpayers operating for profit shall not be excluded hereunder.
(5) In the event any association or organization receives taxable income as provided in the preceding paragraph from real or personal property ownership or income producing business located both within and without the corporate limits of the Municipality, it shall calculate its income apportioned to the Municipality under the method or methods provided above.
(6) Interest and dividends from intangible property, and distributions from a decedent's estate or a trust.
(7) Military pay and allowances received as a member of the Armed Forces of the United States.
(9) Income from a fellowship is exempt only when given for attendance as a student at a recognized college or university and exempt for federal income tax purposes.
(10) Alimony is not taxed to the recipient nor is it allowed as a deduction by the payor.
(11) Compensation paid under Section 3501.28 or 3501.36 of the Ohio Revised Code to a person serving as a precinct official, to the extent that such compensation does not exceed one thousand dollars ($1,000) annually. Such compensation in excess of one thousand dollars ($1,000) may be subjected to taxation. The payer of such compensation is not required to withhold Municipal tax from that compensation.
(12) Compensation paid to an employee of a transit authority, regional transit authority, or regional transit commission created under Chapter 306 of the Ohio Revised Code for operating a transit bus or other motor vehicle for the authority or commission in or through the Municipality, unless the bus or vehicle is operated on a regularly scheduled route, the operator is subject to such a tax by reason of residence or domicile in the Municipality, or the headquarters of the authority or commission is located with the Municipality.
(13) The income of a public utility when that public utility is subject to the tax levied under Section 5727.24 or 5727.30 of the Ohio Revised Code, except a municipal corporation may tax the following, subject to Chapter 5745. of the Ohio Revised Code:
A. The income of an electric company or combined company;
B. The income of a telephone company.
C. As used in this section, “combined company”, “electric company”, and “telephone company” have the same meanings as in Section 5727.01 of the Ohio Revised Code.
(14) The rental value of a home furnished to a minister of the gospel as part of his compensation, or the rental allowance paid to a minister of the gospel as part of his compensation, to the extent used by him to rent or provide a home pursuant to Section 107 of the Internal Revenue Code.
(15) Gains from involuntary conversion, cancellation of indebtedness, interest on federal obligations and income of a decedent’s estate during the period of administration (except such income from the operation of a business).
(16) Generally the above noted items in this section are the only forms of income not subject to the tax. Any other income, benefits, or other forms of compensation shall be taxable.
(Ord. 2006-70. Passed 12-14-06.)