181.01 PURPOSES.

There is hereby levied a tax on income, salaries, qualifying wages, commissions and other compensation and on net profits, as provided in this chapter, for the following purposes:

(a) To provide funds for the purposes of general Municipal operation, replacement of equipment and the extension, enlargement and improvement of Municipal services and facilities for the City: one-half percent (0.5%);

(b) To provide funds for the purpose of making capital improvements, improving streets, storm sewers and present recreational facilities, general Municipal improvement of Municipal services and facilities for the City: one-half percent (0.5%);

(d) Effective June 1, 2005, to provide funds for the purpose of operation of all departments and divisions supported through the General Fund: two-tenths percent (0.2%).
(Ord. 7087. Passed 11-10-09.)

181.02 DEFINITIONS.

As used in this chapter, the following definitions shall apply unless the context clearly indicates or requires a different meaning. The singular shall include the plural, and the masculine shall include the feminine and the neuter.

(a) "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, but including subsequent adjustments from required additions and deductions. Pass-through entities must compute "Adjusted Federal Taxable Income" as if the pass-through entity was a "C" corporation. This definition does not apply to any taxpayer required to file a return under Ohio Revised Code (ORC) section 5745.03 or to the net profit from a sole proprietorship. This definition is effective for tax years beginning on or after January 1, 2004.

(b) "Association" means a partnership, limited partnership, limited liability company, or any other form of unincorporated enterprise, but not including S Corporations as defined in the federal tax code, 26 U.S.C. 1361.

(d) "Business" means an enterprise, activity, profession or undertaking of any kind conducted for profit or ordinarily conducted for profit, whether by an individual, partnership, association, corporation or any other entity.

(e) "City" means the City of Defiance, Ohio.

(f) "Corporation" means a corporation, including S Corporations as defined in the federal tax code, 26 U.S.C. 1361, or joint stock association organized under the laws of the United States, the State of Ohio or any other state, territory, foreign country or dependency.

(g) "Domicile" means the permanent legal residence of a taxpayer. A taxpayer may have more than one residence but not more than one domicile.

(h) "Employee" means one who works for income, wages, salary, commission or another type of compensation in the service and under the control of an employer.

(i) "Employer" means an individual, partnership, association, corporation, governmental body, unit or agency or any other entity, whether or not organized for profit, who or that employs one or more persons on an income, salary, wage, commission or other basis of compensation.

(j) "Fiscal year" means an accounting period of twelve months or less ending on any day other than December 31.

(k) "Generic Form" means an electronic or paper form designed for reporting estimated municipal income taxes, and/or annual municipal income tax liability, and/or separate requests for refunds, that contain all the information required on the City's regular tax return, estimated payment, and refund request forms, and are in a similar format that will allow processing of the generic forms without altering the City's procedures for processing forms.

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

(m) "Income" means all monies and compensation in any form, subject to limitations imposed by ORC 718, derived from any source whatsoever, including but not limited to:

(1) All income, qualifying wages, commissions, other compensation and other income from whatever source received by residents of the City.

(2) All salaries, wages, commissions, other compensation and other income from whatsoever source received by nonresidents for work done or services performed or rendered or activities conducted in the City.

(3) The portion attributable to the city of the net profits of all businesses, associations, professions, corporations, or other entities, from sales made, work done, services performed or rendered, and business or other activities conducted in the City.

(n) "Net profits" means, for taxable years prior to 2004, a net gain from the operation of a business, profession, enterprise or other activity after provision for all ordinary and necessary expenses either paid or accrued in accordance with the accounting system (i.e., cash or accrual) used by the taxpayer for Federal income tax purposes without deduction of taxes imposed by an association, without deduction of salaries paid to partners and other owners, and otherwise adjusted to the requirements of this chapter. For taxable years 2004 and later, see "adjusted federal taxable income".

(o) "Nonresident" means an individual domiciled outside the City.

(p) "Nonresident unincorporated business entity" means an unincorporated business entity not having an office or place of business within the City.

(q) "Pass-through entity" means a partnership, S Corporation, Limited Liability Company, or any other class of entity the income or profits from which are given pass-through treatment under the Internal Revenue Code. Unless otherwise specified, for purposes of this ordinance the tax treatment for pass-throughs is the same as "Association".

(r) "Person" means a natural person, partnership, fiduciary, association or corporation. When used in a clause prescribing and imposing a penalty, "person", as applied to an unincorporated entity, means the partners or members thereof and, as applied to a corporation, the officers thereof.

(s) "Place of business" means any bona fide office (other than a mere statutory office), factory, warehouse or other space which is occupied and used by the taxpayer in carrying on any business activity individually or through one or more of his or her regular employees regularly in attendance.

(t) Qualifying wage" means Wages as defined in Section 3121(a) of the Internal Revenue Code, without regard to any wage limitations, but including subsequent adjustments from required additions and deductions. "Qualifying wage" represents employees' income from which municipal tax shall be deducted by the employer, and any wages not considered a part of "qualifying wage" shall not be taxed by a Municipality. This definition is effective January 1, 2004, for taxable years 2004 and later.

(u) "Resident" means an individual domiciled in the City.

(v) "Resident unincorporated business entity" means an unincorporated business entity having an office or place of business within the City.

(w) "Tax Commissioner" means the person so designated and appointed by the Mayor and approved by Council, or the person executing the duties of the "Tax Commissioner".

(x) "Taxable income" means income minus the deductions and credits allowed by this chapter. (See "Income" definition.).

(y) "Taxable year" means the calendar year, or the fiscal year upon the basis of which the net profits are to be computed under this chapter, and, in the case of a return for a fractional part of a year, the period for which such return is required to be made.

(z) "Taxpayer" means a person, whether an individual, partnership, association, corporation, or other entity, required by this chapter to file a return and/or pay a tax.
(Ord. 7087. Passed 11-10-09.)

181.03 IMPOSITION OF TAX.

An annual tax for the purposes specified in Section 181.01 (a) shall be imposed after January 1, 1965, at the rate of one-half percent per year; an annual tax for the purposes specified in Section 181.01(b) shall be imposed on and after January 1, 1982, at the rate of one-half percent per year; an annual tax for the purposes specified in Section 181.01 (c) shall be imposed on and after June 1, 1987, at the rate of three-tenths percent per year; and an annual tax for the purposes specified in Section 181.01(d) shall be imposed on and after June 1, 2005, at the rate of two-tenths percent per year, for a total tax rate of one and one-half percent beginning June 1, 2005. Such taxes shall be imposed upon the following (see Section 181.08 for "Exceptions"):

(a) On all income, qualifying wages, commissions and other compensation earned and/or received by residents of the City.

(b) On all income, qualifying wages, commissions and other compensation earned and/or received by nonresidents of the City for work done or services performed or rendered in the City. Separation pay, termination pay, reduction-in-force pay, and other compensation paid as a result of an employee leaving the service of an employer shall be allocable only to the City.

(1) The City shall not, however, tax the compensation of a non-resident individual who will be deemed to be an occasional entrant if all of the following apply:

A. The compensation is paid for personal services performed by the individual in The City on twelve or fewer days during the calendar year, in which case the individual shall be considered an occasional entrant for purposes of the City income tax. A day is a full day or any fractional part of a day.

B. In the case of an individual who is an employee, the principal place of business of the individual's employer is located outside the City and the individual pays tax on compensation described in Section 181.03(b) to the municipality, if any, in which the employer's principal place of business is located, and no portion of that tax is refunded to the individual.

C. 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 City.

(2) Beginning with the thirteenth day an individual deemed to have been an occasional entrant to the City performs services within the City, the employer of said individual shall begin withholding the City income tax from remuneration paid by the employer to the individual, and shall remit the withheld income tax to the City in accordance with the requirements of this ordinance. Since the individual can no longer be considered to have been an occasional entrant, the employer is further required to remit taxes on income earned in the City by the individual for the first twelve days.

(3) If the individual is self-employed, it shall be the responsibility of the individual to remit the appropriate income tax to the City.

(c) On the portion attributable to the City of the net profits earned by all resident associations, unincorporated business entities, professions or other activities, such net profits derived from sales made, work done, services performed or rendered and business or other activities conducted in the City.

(d) On the portion of the distributive share of the net profits earned and/or received by a resident partner or owner of a resident association or unincorporated business entity not attributable to the City and not levied against such unincorporated business entity;

(e) On the portion attributable to the City of the net profits earned by all nonresident associations, unincorporated business entities, professions or other activities, such net profits derived from sales made, work done, services performed or rendered and business and other activities conducted in the City, whether or not such association or unincorporated business entity has an office or place of business in the City;

(f) On the portion of the distributive share of the net profits earned and/or received by a resident partner or owner of a nonresident association or unincorporated business entity not attributable to the City and not levied against such association or unincorporated business entity; and

(g) On the portion attributable to the City of the net profits earned by all corporations, such net profits derived from sales made, work done, services performed or rendered and business or other activities conducted in the City, whether or not such corporations have an office or place of business in the City.

(h) Deductions on Federal form 2106 are permitted in accordance with Federal guidelines (including the 2% of Adjusted Gross Income formula), but is subject to review and audit by the Defiance Income Tax Department.

(Ord. 7087. Passed 11-10-09.)

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