(A) Credit to residents for tax paid to another municipality.
(1) When the taxable income of a resident of the municipality is subject to a municipal income tax in another municipality on the same income taxable under this chapter, such resident shall be allowed a credit of the amount of income tax paid on such taxable income to the other municipality equal to 50% of the amount obtained by multiplying the lower of the tax rate of such other municipality, or of this municipality, by the taxable income earned in or attributable to the municipality of employment or business activity. Income taxed by another municipality that is offset by a loss is not eligible for credit.
(2) A claim for refund or credit under this section shall be made in such manner as the Commissioner may by regulation provide.
(3) No credit shall be given for any school district income tax.
(B) Refundable credit for qualifying loss.
(1) As used in this division (B):
(a) NONQUALIFIED DEFERRED COMPENSATION PLAN means a compensation plan described in section 3121(v)(2)(C) of the Internal Revenue Code.
(b) 1. Except as provided in division (B)(1)(b)2. of this section, QUALIFYING LOSS means the excess, if any, of the total amount of compensation the payment of which is deferred pursuant to a nonqualified deferred compensation plan over the total amount of income the taxpayer has recognized for federal income tax purposes for all taxable years on a cumulative basis as compensation with respect to the taxpayer’s receipt of money and property attributable to distributions in connection with the nonqualified deferred compensation plan.
2. If, for one or more taxable years, the taxpayer has not paid to one or more municipal corporations income tax imposed on the entire amount of compensation the payment of which is deferred pursuant to a nonqualified deferred compensation plan, then the QUALIFYING LOSS is the product of the amount resulting from the calculation described in division (B)(1)(b)1. of this section computed without regard to division (B)(1)(b)2. of this section and a fraction the numerator of which is the portion of such compensation on which the taxpayer has paid income tax to one or more municipal corporations and the denominator of which is the total amount of compensation the payment of which is deferred pursuant to a nonqualified deferred compensation plan.
3. With respect to a 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.
(c) QUALIFYING TAX RATE means the applicable tax rate for the taxable year for the which the taxpayer paid income tax to a municipal corporation with respect to any portion of the total amount of compensation the payment of which is deferred pursuant to a nonqualified deferred compensation plan. 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 the municipal corporation each year with respect to the nonqualified deferred compensation plan.
(2) (a) Except as provided in division (B)(4) of this section, a refundable credit shall be allowed against the income tax imposed by a municipal corporation for each qualifying loss sustained by a taxpayer during the taxable year. The amount of the credit shall be equal to the product of the qualifying loss and the qualifying tax rate.
(b) A taxpayer shall claim the credit allowed under this division (B) from each municipal corporation to which the taxpayer paid municipal income tax with respect to the nonqualified deferred compensation plan in one or more taxable years.
(c) If a taxpayer has paid tax to more than one municipal corporation 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.
(d) In no case shall the amount of the credit allowed under this division (B) exceed the cumulative income tax that a taxpayer has paid to a municipal corporation for all taxable years with respect to the nonqualified deferred compensation plan.
(3) (a) For purposes of this division (B), municipal corporation income tax that has been withheld with respect to a nonqualified deferred compensation plan shall be considered to have been paid by the taxpayer with respect to the nonqualified deferred compensation plan.
(b) Any municipal income tax that has been refunded or otherwise credited for the benefit of the taxpayer with respect to a nonqualified deferred compensation plan shall not be considered to have been paid to the municipal corporation by the taxpayer.
(4) The credit allowed under this division (B) is allowed only to the extent the taxpayer’s qualifying loss is attributable to:
(a) The insolvency or bankruptcy of the employer who had established the nonqualified deferred compensation plan; or
(b) The employee’s failure or inability to satisfy all of the employer’s terms and conditions necessary to receive the nonqualified deferred compensation.
(C) Credit for person working in joint economic development district or zone. A municipality shall grant a credit against its tax on income to a resident of the municipality who works in a joint economic development zone created under R.C. § 715.691 or a joint economic development district created under R.C. §§ 715.70, 715.71, or 715.72 to the same extent that it grants a credit against its tax on income to its residents who are employed in another municipal corporation, pursuant to division (A) of this section.
(D) Credit for tax beyond statute for obtaining refund.
(1) Income tax that has been deposited or paid to the municipality, but should have been deposited or paid to another municipal corporation, is allowable by the municipality as a refund, but is subject to the three-year limitation on refunds as provided in § 95A.09(F) of this chapter.
(2) Income tax that should have been deposited or paid to the municipality, but was deposited or paid to another municipal corporation, shall be subject to collection and recovery by the municipality. To the extent a refund of such tax or withholding is barred by the limitation on refunds as provided in § 95A.09(F), the municipality will allow a non-refundable credit equal to the tax or withholding paid to the other municipality against the income tax the municipality claims is due. If the municipality’s tax rate is higher, the tax representing the net difference of the tax rates is also subject to collection by the municipality, along with any penalty and interest accruing during the period of nonpayment.
(3) No carryforward of credit will be permitted when the overpayment is beyond the three-year limitation for refunding of same as provided in § 95A.09(F) of this chapter.
(4) Nothing in this division (D) requires a municipality to allow credit for tax paid to another municipal corporation if the municipality has reduced credit for tax paid to another municipal corporation. Division (A) of this section regarding any limitation on credit shall prevail.
(Ord. 8463, passed 11-2-2015)
Statutory reference:
Qualifying loss; refundable credit, see R.C. § 718.021
Second municipality imposing tax after time period allowed for refund, see R.C. § 718.121
Worker in joint economic development zone or district, see R.C. § 718.16