(a) Subject to the provisions of Section 890.17, an annual tax for the purposes specified in Section 890.01 shall be levied on and after July 1, 1967, at the rate of 1% per year, and on and after April 1, 1975, at the rate of 1.25% per year, and on and after January 1, 2002, at the rate of 1.75% per year, upon the following:
(1) On all compensation, qualifying wages and/or taxable income (unless specifically exempted by this chapter) earned, received, accrued or otherwise set apart to residents of the City, a JEDZ or JEDD.
(2) On all compensation, qualifying wages and/or taxable income (unless specifically exempted by this chapter) earned, received, accrued or otherwise set apart to nonresidents of the City for sales made, work done or services performed or rendered within the City, JEDZ or JEDD.
(3) On the portion attributable to the City, JEDZ or JEDD of the net profits earned, received, accrued or in any other way set apart unto all resident unincorporated businesses, pass-through entities, professions or other activities derived from sales made, work done or services performed or rendered and business or other activities conducted in the City, JEDZ or JEDD.
(4) On the portion of the distributive share of the net profits earned, received, accrued or in any other way set apart unto a resident partner, member or owner of a resident association, pass-through entity or unincorporated business entity not attributable to the City, JEDZ or JEDD and not levied against such association, pass-through entity or unincorporated business entity, NOTE: For purposes of a JEDZ or JEDD income tax levy, the distributive share of the net profits earned, received, accrued or in any other way set apart unto a resident owner/member of an S corporation shall not be taxed at the owner/member level.
(5) On the portion attributable to the City, JEDZ or JEDD of the net profits earned, received, accrued or in any other way set apart unto all nonresident unincorporated businesses, associations, pass-through entities, professions or other activities, derived from sales made, work done or services performed or rendered and business or other activities conducted in the City, JEDZ or JEDD, whether or not such unincorporated business, association, pass-through entity, profession or other entity has a place of business in the City, JEDZ or JEDD. NOTE: For purposes of a JEDZ or JEDD income tax levy, an S corporation's net profits taxable to a JEDZ or JEDD will be treated as a corporation for filing and payment purposes.
(6) On the portion of the distributive share, whether or not distributed, of the net profits earned, received, accrued or in any other way set apart unto a resident partner, member or owner of a nonresident association, pass-through entity, unincorporated business entity or a resident shareholder of a nonresident S corporation, not attributable to the City, JEDZ or JEDD and not levied against such association or unincorporated business entity. NOTE: For purposes of a JEDZ or JEDD income tax levy, an S corporation is treated as a corporation for tax filing and payment purposes.
(7) On the net profits of all corporations, estates and trusts, derived from sales made, work done, services rendered or performed and business or other activities conducted in the City, JEDZ or JEDD, whether or not such corporations, estates, and trusts have their principal or any place of business located in the City, JEDZ or JEDD.
(8) On a resident shareholder's distributive share, whether distributed or not, of net profits of a subchapter S corporation to the extent the distributive share would be allocated or apportioned to this State under Ohio R.C. 5733.05(B)(1) and (2) if the S corporation is a corporation subject to taxes imposed under Ohio R.C. Chapter 5733. The tax imposed by this paragraph is effective for all accounting periods commencing on or after January 1, 2002. NOTE: This section does not apply for purposes of a JEDZ or JEDD income tax levy.
(9) On all income received, by residents of the City, JEDZ or JEDD, as gambling winnings as reported on Internal Revenue Service form W-2G, Form 5754 and/or any other form required by the Internal Revenue Service that reports winnings from gambling, prizes and lottery winnings.
(b) Form 2106, Employee Business Expenses. An employee who pays his business expenses from his wages, salaries, commissions or other compensation, without reimbursement from his employer, may deduct from his gross qualifying wages, salaries, commissions or other compensation business expenses reported on Federal Form 2106, but only to the extent that such expenses were directly incurred in earning the income subject to the tax imposed by this chapter. Deduction shall be allocated first to the City, JEDZ or JEDD where the employment occurred, whether or not a refund from the employment municipality, JEDZ or JEDD was requested or received. Substantiation of expenses reported is required.
(c) Allocation of Net Profits (Businesses Both in and Outside the City, or Jedd Boundaries. This section does not apply to taxpayers that are subject to and required to file reports under Ohio R.C. 5745.03 and individuals who are residents of the City, JEDZ or JEDD. Net profit from a business or profession conducted both within and without the boundaries of a municipal corporation, JEDZ or JEDD shall be considered as having a taxable situs in such municipal corporation, JEDZ or JEDD for purposes of municipal, JEDZ or JEDD income taxation in the same proportion as the average ratio of the following:
(1) Multiply the entire net profits of the business by a business apportionment percentage to be determined by:
A. The average original cost of the real and tangible personal property owned or used by the taxpayer in the business or profession in such municipal corporation, JEDZ or JEDD 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.
B. Wages, salaries and other compensation paid during the taxable period to persons employed in the business or profession for services performed in such municipal corporation, JEDZ or JEDD to wages, salaries, and other compensation paid during the same period to persons employed in the business or profession, wherever their services are performed, excluding compensation that is not taxable by the municipal corporation, JEDZ or JEDD under Ohio R.C. 718.011.
C. Gross receipts of the business or profession from sales made and services performed during the taxable period in such municipal corporation, JEDZ or JEDD to gross receipts of the business or profession during the same period from sales and services wherever made or performed.
D. Adding together the percentages determined in accordance with divisions (c)(1)A., B., and C. hereof, or such of the aforesaid percentages as are applicable to the particular taxpayer and dividing the total so obtained by the number of percentages used in deriving such total.
1. A factor is applicable even though it may be apportioned entirely in or outside the City, JEDZ or JEDD.
2. Provided however, that in the event a just and equitable result cannot be obtained under the formula provided for herein, the Tax Administrator, upon application of the taxpayer, shall have the authority to substitute other factors or methods calculated to effect a fair and proper apportionment.
(2) As used in this division (c), “ sales made in a municipal corporation,” “JEDZ” or “JEDD” mean:
A. All sales of tangible personal property delivered within such municipal corporation, JEDZ or JEDD regardless of where title passes if shipped or delivered from a stock of goods within such municipal corporation, JEDZ or JEDD;
B. All sales of tangible personal property delivered within such municipal corporation, JEDZ or JEDD regardless of where title passes even though transported from a point outside such municipal corporation, JEDZ or JEDD if the taxpayer is regularly engaged through its own employees in the solicitation or promotion of sales within such municipal corporation, JEDZ or JEDD and the sales result from such solicitation or promotion;
C. All sales of tangible personal property shipped from a place within such municipal corporation, JEDZ or JEDD to purchasers outside such municipal corporation, JEDZ or JEDD 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.
(d) Net Operating Loss.
(1) For the purpose of this tax if a net operating loss has been sustained in any taxable year, such losses may not be carried forward or backward to any other taxable year.
(2) The net operating loss of any association, pass-through entity or unincorporated business activity may not be used to offset salaries, wages, commissions, other compensation or other miscellaneous non-business taxable income.
(3) Commencing with taxable years beginning January 1, 2002, if a taxpayer is engaged in two or more taxable associations, pass-through entities or unincorporated business activities to be included in the same return, the net loss of one association or unincorporated business activity (except any portion of a loss separately reportable for City tax purposes to another taxing entity) may be used to offset the profits of another for purposes of arriving at overall net profits from association or unincorporated business activities. For purposes of a JEDZ or JEDD income tax levy, pass-through net loss derived by residents of a JEDZ or JEDD shall not be an allowable loss against any other business net profits included on the same or separate tax return. The portion of a loss allowed to be deducted by a resident, from the operation of a business or rental property shall be calculated as follows:
A. If the business or rental property is located within the corporate boundaries of the City, JEDZ or JEDD, or is in a jurisdiction that has no municipal, or JEDZ or JEDD income tax, the entire loss may be deducted against the same or other unincorporated business or rental profits.
B. If the business or rental property is located outside the corporate boundaries of the City, JEDZ or JEDD but is located in a jurisdiction that has a municipal, JEDZ or JEDD income tax, the amount of loss shall be calculated using the following methods, whichever applies:
1. If the tax rate of the other taxing jurisdiction is 1% or more, multiply the loss applicable to that other City, JEDZ or JEDD by 57.14% to determine the amount of loss that can be deducted against the same or other unincorporated business or rental profits that will be reported on the same Income Tax Return.
2. If the tax rate of the other taxing jurisdiction is less than 1%, the amount of loss shall be calculated using the following formula:
Step A - Subtract the tax rate of the other municipality, JEDZ or JEDD from the tax rate of the City, or a JEDZ or JEDD.
Step B - Divide the result by the tax rate of City, a JEDZ or JEDD.
Step C - Multiply the business loss by the result of Step B. This is the portion of the loss that can be deducted against the same or other unincorporated business or rental profits that will be reported on the same City, JEDZ or JEDD tax return.
3. Entities subject to current year loss limitations pursuant to the Internal Revenue Code shall report and use the total loss in the current year. Loss limited by the I.R.C. in one year shall not be carried forward or backward to another year. Loss is subject to the provisions in Section 890.03(d)(3).
(e) 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.
(2) Once a consolidated return has been filed for any taxable year, consolidated returns shall continue to be filed in subsequent years unless permission in writing is granted by the Tax Administrator to file separate returns or until a corporation is no longer associated with other corporations(s).
(f) Rental Income from Real Property. Rental income from real property shall be taxed as follows:
(1) The rental, ownership, management or operation of rental property shall be considered a business, regardless of whether the property is residential, commercial or farm property and therefore subject to the requirements of this chapter, including the filing of tax returns on rentals that sustain a net operating loss.
(2) Rental income received by a taxpayer engaged in the business of buying and selling real estate shall be considered as part of business income.
(3) Real property, as the term is used in this chapter, shall include commercial, residential, farm property and any other types of real estate.
(4) In determining the taxable income from rentals, the deductible expenses shall be of the same nature, extent and amount as allowed by the Internal Revenue Service for federal tax purposes with the exception that loss limitations are not applicable for tax purposes.
(5) Residents of the City, JEDZ or JEDD, are subject to taxation upon the net income from rental property regardless of where the property is located.
(6) Nonresidents of the City, JEDZ or JEDD, are subject to taxation only if the real property is situated within the City corporation, JEDZ or JEDD limits.
(7) To be considered nontaxable as ground rentals, the property must be under perpetual leasehold by the terms of which the lessor performs no services of any type, including the payment of taxes on the property.
(8) Corporations owning or managing real estate are taxed only on that portion of income derived from property located in the City, JEDZ or JEDD,
(9) Rooms rented and boarding houses shall constitute a business activity and shall be reported by all property owners for property located in the City, JEDZ or JEDD, and/or by a resident with rented rooms or boarding houses located outside the City, JEDZ or JEDD.
(g) Patents and Copyrights. Income from a patent or a copyright is not taxable if the income is subject to the State intangible tax. Such items shall be clearly disclosed on an attachment to be filed with the City tax return.
(h) Exemptions. The tax provided for in subsection (a) hereof shall not be levied upon the following:
(1) Pay or allowance of active members of the Armed Forces of the United States by the person rendering such service or as a result of another person rendering such service. However, spouses or other family members not on active duty will be subject to all provisions of this chapter;
(2) Welfare benefits, pension payments received as a result of retirement and reported on Form 1099-R or similar Federal form, State unemployment compensation, social security benefits, worker's compensation;
(3) Proceeds of insurance paid by reason of death of the insured; retirement disability benefits, annuities, or gratuities not in the nature of compensation for services rendered from whatever source derived;
(4) Alimony received;
(5) Income, dues, contributions and receipts from casual entertainment, amusements, sports events and health and welfare activities received by religious, fraternal, bona fide charitable, scientific, literary or educational institutions or organizations, labor unions, lodges and similar organizations;
(6) Any association, organization, corporation, club or trust which is exempt from Federal taxes on income by reason of its charitable, religious, educational, literary or scientific purpose; any such association or organization falling in this category shall be required to file declarations and final returns and remit the taxes levied under this chapter on all net profits from activities, the income from which is not specifically exempt from taxation under Ohio R.C. 718.01.
(7) Gains from involuntary conversion, cancellations of indebtedness, interest on Federal obligations, dividend income subject to the Ohio intangible property tax, interest income from institutions which pay the Ohio intangible property tax thereon and income of a decedent's estate during the period of administration (except such income from the operation of a business);
(8) The income of individuals under 18 years of age. All provisions of this chapter apply on and after an individual's eighteenth birthday.
(9) In the case of a minister of the gospel, gross income does not include the rental value of a home furnished to him as part of his compensation; or the rental allowance paid to him as part of his compensation, to the extent used by him to rent or provide a home.
(10) Salaries, wages, commissions, other compensation, other income 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.
(11) Salaries, wages, commissions, other compensation, other income and net profits, including interest and dividends as provided in Ohio R.C. 718.01, 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, JEDZ or JEDD, to impose net income taxes.
(12) On or after, January 1, 2001, compensation paid to a nonresident individual for personal services performed by the individual in the City, JEDZ or JEDD, on 12 or fewer days in a calendar year unless one of the following applies:
A. The individual is the employee of another person; the principal place of business of the individual's employer is located in another municipal corporation, JEDZ or JEDD in this State that imposes a tax applying to the compensation paid to the individual for services performed on those days; and the individual is not liable to that other municipal corporation, JEDZ or JEDD for tax on the compensation paid for such services.
B. The individual is a professional entertainer or professional athlete, the promoter of a professional entertainment or sports event and their employees.
For purposes of the 12-day calculation, any portion of a day worked in the City, JEDZ or JEDD, shall be counted as one day worked in the City, JEDZ or JEDD. This section is effective January 1, 2001.
(13) Compensation paid under Ohio R.C. 3501.28 or 3501.36 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 subject to taxation. The payer of such compensation is not required to withhold the City, JEDZ or JEDD tax from that compensation.
(14) Compensation paid to an employee of a transit authority, regional transit authority, or a regional transit commission created under Ohio R.C. Chapter 306 for operating a transit bus or other motor vehicle for the authority or commission in or through the Municipality, JEDZ or JEDD, unless the bus or vehicle is operated on a regularly scheduled route, the operator is subject to such tax by reason of residence or domicile in the Municipality, JEDZ or JEDD, or the headquarters of the authority or commission is located within the Municipality, JEDZ or JEDD.
(15) The income of a public utility, when that public utility is subject to the tax levied under Ohio R.C. 5727.24 or 5727.30, except a municipal corporation, JEDZ or JEDD may tax the following, subject to Ohio R.C. Chapter 5745: a. The income of an electric company or combined company; b. The income of a telephone company.
As used in division (h)(15) of this section, “combined company”, “electric company”, and “telephone company” have the same meanings as in Ohio R.C. 5727.01.
(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.67-80. Passed 6-30-67; Ord. 73-28. Passed 3-5-73; Ord. 75-8. Passed 1-6-75; Ord 88-51. Passed 11-7-88; Ord. 92-59. Passed 11-2-92; Ord. 94-42. Passed 9-6-94; Ord. 01-52. Passed 11-19-01; Ord. 04-21. Passed 7-6-04; Ord. 05-48. Passed 9-6-05; Ord. 08-39. Passed 12-1-08; Ord. 09-71. Passed 12-21-09.)