CHAPTER 890
Earned Income Tax Regulations Effective Through December 31, 2015
   EDITOR'S NOTE: The City enters into agreements from time to time with the City of Cleveland providing for the collection of the Earned Income Tax by the Central Collection Agency. Copies of the latest relevant legislation and agreements may be obtained, at cost, from the Clerk of Council.
890.01   Purpose.
890.02   Definitions.
890.03   Levy of tax.
890.04   Determination of allocation of tax.
890.05   Exemptions.
890.06   Returns.
890.07   Payment of tax.
890.08   Collection of unpaid taxes and refunds of overpayment.
890.09   Credit for tax paid to another municipality.
890.10   Disbursement of receipts of tax collection.
890.11   Duties and authority of the Administrator.
890.12   Board of Review.
890.13   Interest and penalties.
890.14   Violations.
890.15   Limitation on prosecutions.
890.16   Failure to procure forms not excuse.
890.17   Separability.
890.99   Penalty.
   CROSS REFERENCES
   Power to levy income tax - see Ohio Const., Art. XII, § 3, Art. XII, §5, Art. XVIII, §3 ; CHTR. Art. XII, § 12.02
   Limitation on rate of taxation - see CHTR. Art. VIII, § 8.03
   Payroll deductions - see Ohio R.C. 9.42
   Municipal income taxes - see Ohio R.C. Ch. 718
   890.01   PURPOSE.
   To provide funds for the purposes of road, street and highway construction and improvement, improvement of police protection, improvement of fire protection, improvement and construction of storm drainage and the improvement of general Municipal functions of the City, there shall be and is hereby levied a tax on all salaries, wages, commissions and other compensation and on net profits as provided in this chapter.
(Ord.68-27. Passed 7-23-68.)
   890.02   DEFINITIONS.
   For the purpose of this chapter, terms, phrases, words and their derivatives shall have the meanings given in this section. The singular shall include the plural and the masculine shall include the feminine and the neuter.
   (a)   "Administrator" means the individual designated to administrate and enforce the provisions of this chapter and the Administrator shall be the Fiscal Officer.
(Adopting Ordinance)
   (b)   "Association" means any partnership, limited partnership or any other form of unincorporated enterprise owned by two or more persons.
   (c)   "Board of Review" means the Board created by and constituted as provided in Section 890.12.
   (d)   "Business" means any enterprise, activity, profession or undertaking of any nature conducted for profit or ordinarily conducted for profit, whether by an individual, partnership, association, corporation or any other entity, excluding, however, all nonprofit corporations which are exempt from the payment of Federal Income Tax.
   (e)   "Corporation" means a corporation or joint stock association organized under the laws of the United States, the State or any other state, territory or foreign country or dependency.
   (f)   "Employee" means one who works for wages, salary, commission or other type of compensation in the service of an employer.
   (g)   "Employer" means an individual, partnership, association, corporation, government body, unit or agency, or any other entity, whether or not organized for profit, who or that employs one or more persons on a salary, wage, commission or other basis of compensation.
   (h)   "Fiscal year" means an accounting period of twelve months or less ending on any day other than December 31.
   (i)   "Gross receipts" mean the total income from any source whatever.
   (j)   "Net profits" mean 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 used by the taxpayer for Federal Income Tax purposes without deduction of taxes imposed by this chapter, Federal, State and other taxes based on income, and in the case of an association, without deduction of salaries paid to partners and other owners.
   (k)   "Nonresident" means an individual domiciled outside the City.
   (l)   "Nonresident unincorporated business entity" means an unincorporated business entity not having an office or place of business within the City.
   (m)   "Person" means every natural person, partnership, fiduciary, association or corporation. Whenever used in any clause prescribing and imposing a penalty, the term "person, " as applied to any unincorporated entity, means the partners or members thereof, and as applied to corporations, the officers thereof.
   (n)   "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 regular employees regularly in attendance.
   (o)   "Resident" means an individual domiciled in the City.
   (p)   "Resident unincorporated business entity" means an unincorporated business entity having an office or place of business within the City.
   (q)   "Taxable income" means any and all income earned or received by an individual or an entity, the taxation of which by the City is not prohibited by federal law, state law or specifically exempted under Section 890.05 of this chapter. Wages, salaries, lottery winnings, and other winnings from any and all types of gambling shall be considered taxable income. All employee compensation, before any deduction and/or the net profits from the operator of a business, profession or other enterprise or activity adjusted in accordance with the provisions of this chapter, shall be considered taxable income.
   (r)   "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.
   (s)   "Taxing municipality" means any municipal corporation levying a municipal income tax on salaries, wages, commissions and other compensation earned by individuals, and the net profits earned from the operation of a business, profession or other activity.
   (t)   "Taxpayer" means a person, whether an individual, partnership, association or any corporation or other entity, required under the provisions of this chapter to file a return or pay a tax.
(Ord.68-27. Passed 7-23-68; Ord.2004-0-01. Passed 1-27-04.)
   890.03   LEVY OF TAX.
   (a)   Rate and Income Taxable. There is hereby levied an annual tax for the purposes specified in Section 890.01, imposed at the rate of two percent per year upon the following:
      (1)   On all salaries, wages, commissions, lottery winnings, other gambling winnings, and other compensation earned on or after July 23, 1968 by residents of the City. Lottery and gambling losses are deductible against lottery and gambling winnings. The administration shall provide by rules and regulations the manner in which to determine such losses;
      (2)   On all salaries, wages, commissions and other compensation earned by nonresidents of the City for work done or services performed or rendered within the City;
      (3)   On the portion attributable to the City of the net profits earned of all resident unincorporated business entities or professions or other activities, derived from sales made, work done, services performed or rendered and business or other activities conducted in the City;
      (4)   On the portion of the distributive share of the net profits earned of a resident partner or owner of a resident unincorporated business entity not attributable to the City and not levied against such unincorporated business entity;
      (5)   On the portion attributable to the City of the net profits earned of all nonresident unincorporated business entities, professions or other activities, derived from sales made, work done, services performed or rendered and business and other activities conducted in the City whether or not such unincorporated business entity has an office or place of business in the City;
      (6)   On the portion of the distributive share of the net profits earned of a resident partner or owner of a nonresident unincorporated business entity not attributable to the City and not levied against such unincorporated business entity; and
      (7)   On the portion attributable to the City of the net profits earned of all corporations 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.
   (b)   Effective Period. Such tax shall be levied, collected and paid with respect to the salaries, wages, commissions and other compensation, and with respect to the net profits of businesses, professions or other activities earned on or after April 1, 1987. Such tax shall be in full force and effect on April 1, 1987 and thereafter.
(Ord.86-O-27. Passed 11-19-86; Ord.2004-0-01. Passed 1-27-04.)
   890.04   DETERMINATION OF ALLOCATION OF TAX.
   (a)   Method of Determination. In the taxation of income which is subject to the tax levied in Section 890.03 , if the books and records of a taxpayer conducting a business or profession both within and without the boundaries of the City disclose with reasonable accuracy what portion of his net profits is attributable to that part of the business or profession conducted within the boundaries of the City, then only such portion shall be considered as having a taxable situs in the City for the purposes of Municipal income taxation. The portion of the entire net profits of a taxpayer to be allocated as having been derived from within the City, in the absence of actual records thereof, shall be determined by multiplying the entire net profits by a business allocation percentage to be determined by a three-factor formula of property, payroll and sales, each of which shall be given equal weight, as follows:
      (1)   The average net book value of the real and tangible personal property owned or used by the taxpayer in the business or profession in the City during the taxable period, to the average net book value of all 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 this paragraph, "real property" includes 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 persons employed in the business or profession for services performed in the City, to wages, salaries and other compensation paid during the same period to persons employed in the business or profession, wherever their services are performed; and
      (3)   Gross receipts of the business or profession from sales made and services performed during the taxable period in the City, to gross receipts of the business or profession during the same period from sales and services, wherever made or performed.
   In the event that the foregoing allocation formula does not produce an equitable result, another basis may, under uniform regulations, be substituted so as to produce such result.
   (b)   sales Made in the City. As used in paragraph (a)(3) hereof, "sales made in the City" mean:
      (1)   All sales of tangible personal property which is delivered within the City, regardless of where title passes, if shipped or delivered from a stock of goods within the City;
      (2)   All sales of tangible personal property which is delivered within the City, regardless of where title passes, even though transported from a point outside the City if the taxpayer is regularly engaged through its own employees in the solicitation or promotion of sales within the City and the sales result from such solicitation or promotion; and
      (3)   All sales of tangible personal property which is shipped from a place within the City to purchasers outside of the City, 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)   Total Allocation.Add together the percentages determined in accordance with paragraphs (a)(1), (2) and (3) hereof or those of such percentages as are applicable to the particular taxpayer, and divide the total so obtained by the number of percentages used in deriving such total in order to obtain the business allocation percentage referred to in subsection (a) hereof. A factor is applicable even though it may be allocable entirely in or outside the City.
   (d)   Rentals.
      (1)   Rental income received by a taxpayer shall be included in the computation of net profits from business activities under Section 890.03(a) (3) through (7) only if and to the extent that the rental ownership, management or operation of the real estate from which such rentals are derived (whether so rented, managed or operated by a taxpayer individually or through agents or other representatives) constitutes a business activity of the taxpayer in whole or in part.
      (2)   Where the gross monthly rental of any and all real properties, regardless of number and value, aggregates in excess of one hundred twenty-five dollars ($125.00) per month, it shall be prima-facie evidence that the rental, ownership, management or operation of such properties is a business activity of such taxpayer, and the net income of such rental property shall be subject to tax, provided that in the case of commercial property, the owner shall be considered engaged in a business activity when the rental is based on a fixed or fluctuating percentage of gross or net sales, receipts or profits of the lessee, whether or not such rental exceeds one hundred twenty-five dollars ($125.00) per month. In the case of farm property, the owner shall be considered engaged in a business activity when he shares in crops or when the rental is based on a percentage of the gross or net receipts derived from the farm, whether or not the gross income exceeds such one hundred twenty-five dollars ($125.00) per month. The person who operates a licensed rooming house shall be considered in business whether or not the gross income exceeds such one hundred twenty-five dollars ($125.00) per month.
   (e)   Operating Loss Carry-Forward.
      (1)   The portion of a net operating loss sustained in any taxable year allocable to the City may be applied against the portion of the profit of succeeding tax years allocable to the City until exhausted, but in no event for more than five taxable years immediately following the year in which the loss occurred. No portion of a net operating loss shall be carried back against net profits of any prior year.
      (2)   The portion of net operating loss sustained shall be allocated to the City in the same manner as provided in this chapter for allocating net profits to the City.
      (3)   The Administrator shall provide by rules and regulations the manner in which such net operating loss carry forward shall be determined.
(Ord.68-27. Passed 7-23-68.)
   890.05   EXEMPTIONS.
   The tax levied in Section 890.03 shall not be levied on any of the following:
   (a)   Pay or allowance of active members of the Armed Forces of the United States or the income of religious, fraternal, charitable, scientific, literary or educational institutions to the extent that such income is derived from tax exempt real estate, tax exempt tangible or intangible property or tax exempt activities;
   (b)   Poor relief, unemployment insurance benefits, old age pensions or similar payments including disability benefits received from local or state governments or the Federal government, or charitable, religious or educational organizations;
   (c)   Proceeds of insurance paid by reason of the death of the insured, pensions, disability benefits, annuities or gratuities not in the nature of compensation for services rendered from whatever source derived;
   (d)   Receipts from seasonal or casual entertainment, amusements, sports events and health and welfare activities when any such are conducted by bona fide charitable, religious or educational organizations and associations; (e) Alimony received;
   (f)   Personal earnings of any natural person under 18 years of age;
   (g)   Compensation for personal injuries or for damages to property by way of insurance or otherwise;
   (h)   Interest, dividends and other revenues from intangible property;
   (i)   Gains from involuntary conversion, cancellation of indebtedness, interest on Federal obligations, items of income already taxed by the State from which the City is specifically prohibited from taxing, and income of a decedent's estate during the period of administration (except such income from the operation of a business);
   (j)   Salaries, wages, commissions and other compensation and net profits, the taxation of which is prohibited by the United States Constitution or any act of Congress limiting the power of the states or their political subdivisions to impose net income taxes on income derived from interstate commerce; or
   (k)   Salaries, wages, commissions and other compensation and net profits, the taxation of which is prohibited by the Constitution of the State or any act of the Ohio General Assembly limiting the power of the City to impose net income taxes.
(Ord.68-27. Passed 7-23-68.)
   890.06   RETURNS.
   (a)   Return Required.Each taxpayer, except as provided in this section, shall, whether or not a tax is due thereon, make and file a return on or before April 30 of every year. When the return is made for a fiscal year or other period different from the calendar year, the return shall be filed within four months from the end of such fiscal year or period. The Administrator is hereby authorized to provide by regulation that the return of an employer, showing the amount of tax deducted by such employer from the salary, wages, commissions or other compensation of an employee and paid by him to the Administrator, shall be accepted as the return required of any employee whose sole income, subject to tax levied in Section 890.03 , is such salary, wages, commissions or other compensation.
   (b)   Form and Content of Return. The return shall be filed with the Administrator on a form furnished by or obtainable upon request from such Administrator, setting forth:
      (1)   The aggregate amounts of salaries, wages, commissions, lottery winnings, other gambling winnings, and other compensation earned, and gross income, income from business, profession, other enterprise or activity, less allowable expenses incurred in the acquisition of such gross income earned during the preceding year and subject to such tax;
      (2)   The amount of the tax imposed by this chapter on such earnings and profits; and
      (3)   Such other pertinent statements, information returns or other information as the Administrator may require.
   (c)   Extension of Time for Filing Returns,. The Administrator may extend the time for filing the annual return upon the request of the taxpayer for a period of not to exceed six months, or one month beyond any extension requested of or granted by the Internal Revenue Service for the filing of the Federal Income Tax return. The Administrator may require a tentative return, accompanied by payment of the amount of tax shown to be due thereon by the date the return is normally due. No penalty or interest shall be assessed in those cases in which the return is filed and the final tax paid within the period as extended.
   (d)   Consolidated Return$.
      (1)   Filing of consolidated returns may be permitted or required in accordance with rules and regulations prescribed by the Administrator.
      (2)   In the case of a corporation that carried on transactions with its stockholders or with other corporations related by stock ownership, interlocking directorates or some other method, or in case any person operates a division, branch, factory, office, laboratory or activity within the City constituting a portion only of its total business, the Administrator shall require such additional information as he deems necessary to ascertain whether net profits are properly allocated to the City by reason of transactions with stockholders or with other corporations related by stock ownership, interlocking directorates or transactions with such division, branch, factory, office, laboratory or activity or by some other method, he shall make such allocation as he deems appropriate to produce a fair and proper allocation of net profits to the City.
   (e)   Amended Returns.
      (1)   Where necessary, an amended return shall be filed in order to report additional income and pay any additional tax due or claim a refund of tax overpaid, subject to the requirements, limitations, or both, contained in Sections 890.08 and 890.09. Such amended return shall be on a form obtainable on request from the Administrator. A taxpayer may not change the method of accounting or apportionment of net profits after the due date for filing the original return.
      (2)   Within three months from the final determination of any Federal tax liability affecting the taxpayer's City tax liability, such taxpayer shall make and file an amended City return showing income subject to the City tax based upon such final determination of Federal tax liability and pay any additional tax shown due thereon or make claim for refund of any overpayment.
(Ord.68-27. Passed 7-23-68; Ord.2004-0-01. Passed 1-27-04.)
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