(a) Resident.
(1) In the case of the residents of the city, an annual tax of 1.25% is imposed on all income, salaries, qualifying wages, commissions and other compensation earned, accrued, received or deferred on and after the effective period of this chapter. For the purpose of determining the tax, the source of the earnings and the place or places in or at which the services were rendered is immaterial. All such earnings, wherever earned or paid, are taxable. The location of the place from which the payment is made, or where the payment is received, is immaterial.
A. "Qualifying wages" means wages, as defined in IRC § 3121(a), without regard to any wage limitations, adjusted as follows:
1. Deduct any amount included in wages if the amount constitutes compensation attributable to a plan or program described in IRC § 125.
2. Add the following amounts:
a. Any amount not included in wages solely because the employee was employed by the employer prior to April 1, 1986;
b. Any amount not included in wages because the amount arises from the sale, exchange or other disposition of a stock option, the exercise of a stock option, or the sale, exchange or other disposition of stock purchased under a stock option. This division applies only to those amounts constituting ordinary income.
c. Any amount not included in wages if the amount is an amount described in IRC § 401(k) or § 457. This division applies only to employee contributions and employee deferrals.
d. Any amount that is supplemental unemployment compensation benefits described in IRC § 3402(o)(2) and not included in wages.
B. The definition for "qualifying wage" is effective for taxable years beginning on and after January 1, 2004.
(2) The following is a non-inclusive list of items which are subject to the tax:
A. Income, including but not limited to qualifying wages, commissions and other compensation that is subject to Medicare withholding in accordance with IRC § 3121(a), whether directly or through an agent, and whether in cash or in property for services rendered during the tax period as an officer, director or employee of a corporation (including charitable and other nonprofit organizations), or association or any other entity or person; 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 military pay exempted as stated in § 880.06.
B. Commissions earned by a taxpayer whether directly or through an agent and whether in cash or in property, for services rendered during the effective period of this chapter, regardless of how computed, by whom or whosoever paid.
C. Fees, unless the fees are properly included 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 the individual (e.g., fees which are taxable are those fees received by a director or officer of a corporation).
D. Other compensation includes but is not limited to:
1. Tips received by waiters, waitresses and others;
2. Bonuses;
3. Monetary gifts and gratuities in connection with employment;
4. Compensation paid to domestic servants. See division (a)(2)G. of this section for withholding requirement;
5. Fellowships, grants or stipends paid to a graduate student in the full amount, except that any amount, allocated in writing for tuition, books and laboratory fees, shall be excluded;
6. Dismissal pay, severance pay, reduction-in-force pay, and other forms of termination pay;
7. Incentive payments;
8. If an employer pays into a tax shelter plan on behalf of an employee in lieu of paying the amount as wages, the payments are considered additional compensation to the employee and are subject to withholding tax;
9. Money received from covenants not to compete;
10. Severance pay;
11. Jury fees;
12. Witness fees;
13. Contributions to retirement plans are taxable when deferred. Withholding applies to the full compensation;
14. Income deemed taxable per Federal Code § 89 or its substantial equivalent;
15. Ordinary gains reported on federal Form 4797;
16. Stock options are taxable when exercised. The tax is due to the municipality of the workplace and/or residence (i.e., if full credit is not given by the resident municipality) at the time of the purchase. The amount of taxable income is the difference between the price paid for the stock and the fair market value of the stock at the time of purchase;
17. Disqualifying disposition of an incentive stock option. The taxpayer is responsible for payment of the tax if, at the time of the disqualifying disposition, the municipal income tax was not withheld by the corporation with respect to whose stock the option has been issued.
E. Vacation, sickness, third-party sick pay, or any other types of payments made under a wage or salary continuation plan, including "sub" pay received from a union in lieu of wages during periods of absence from work, which are taxable when paid. Payments made by an employer to an employee during periods of absence from work are taxable when paid and at the tax rate in effect at the time of the payment.
F. 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 compensation shall be included in earnings at their fair market value.
G. In the case of domestics and other employees whose duties require them to live at their place of employment or assignment, board and lodging shall not be considered as taxable compensation. However, domestic servants are subject to the city income tax under this chapter. See § 880.07 for estimated payment requirement.
H. Over-the-road drivers and others with similar situations, reporting to a terminal, office and the like in the city must have a minimum of 25% of their wages withheld and allocated to the city where their terminal, office and the like is located.
I. Income generated from any illegal federal, state or municipal transaction.
J. Lottery, games of chance, gambling and sports winnings are taxable. Deductions shall be allowed against gambling and sports winnings if the taxpayer is considered a professional gambler for federal income tax purposes. If the taxpayer is not considered a professional gambler for federal income tax purposes, a per-prize deduction equal to the amount of income of the prize from lottery, games of chance, gambling, and sports winnings, or a deduction of $1,999.99 per prize, whichever is less, shall be allowed. If the income is payable to the taxpayer in more than one year, the deduction applies only in the first year in which the income is received.
K. When a resident or nonresident receives compensation for services for sales of real estate or insurance from an employer whose situs is the city, that total compensation is taxable at the city's tax rate and is payable to the city. The site of the property sold or residence of the purchaser of insurance has no bearing on the taxing of the compensation.
(b) Nonresident employee.
(1) In the case of individuals who are nonresidents of the city, there is imposed under this chapter an annual tax of 1.25% on all income, salaries, qualifying wages, commissions and the other compensation, earned, accrued, received or deferred on or after the effective date of this chapter, for work done or services rendered or performed within the city, whether the compensation or remuneration is received or earned directly or through an agent and whether paid in cash or property. The location of the place from which payment is made is immaterial.
(2) The items subject to tax under this section are the same as those listed and defined in division (a)(2) of this section that relate to employment. For methods of computing the extent of the work or services performed within the city, and cases involving compensation for personal services partly within and partly outside the city, see § 880.07(c).
(3) Twelve-day occasional entrant rule:
A. A nonresident individual who works in the city 12 or fewer days per year shall be considered an occasional entrant, and shall not be subject to the city municipal income tax for those 12 days. For purposes of the 12-day calculation, any portion of a day worked in the city shall be counted as one day worked in the city.
B. Beginning with the thirteenth day, the employer of the individual shall begin withholding 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 chapter. 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 12 days.
C. If the individual is self-employed, it shall be the responsibility of the individual to remit the appropriate income tax to the city.
D. The 12-day occasional entry rule does not apply to entertainers or professional athletes, their employees or individuals who perform services on their behalf, or to promoters and booking agents of the entertainment events and sporting events.
(c) Resident unincorporated businesses.
(1) In the case of resident unincorporated businesses, professions, enterprises, undertakings or other entities conducted, operated, engaged in, prosecuted or carried on, irrespective of whether the taxpayer has an office or place of business in the city, there is imposed an annual tax of 1.25% on the net profits earned and/or received during the effective period of this chapter attributable to the city, determined by the method or formula provided for in § 880.04, derived from sales made, work done or services performed or rendered and business or other activities conducted in the city.
(2) The tax imposed on resident associations or other unincorporated entities is upon the entities rather than the individual members or owners thereof. For tax on that part of a resident owner's distributive share of net profits not taxed against the entity, see division (d) of this section.
(3) The tax imposed by this chapter is imposed on all resident unincorporated entities having net profits attributable to the city under the method of allocation provided for in this chapter, regardless of where the owner or owners of the resident unincorporated business entity resides.
(4) Resident unincorporated entities owned by one or more persons, all of whom are residents of the city, and having all income allocable to the city or having any income allocable to other municipalities not levying a similar tax, shall disregard the method of allocation provided for in this chapter and pay to the city the tax on the entire net profits thereof. Payment of the tax by the entity on the entire net profits thereof shall constitute payment of all the tax due from the owners or members thereof on their distributive shares of the entity's net profits.
(d) Resident’s distributive share of profits of a resident unincorporated business entity, not attributable to the city. In the case of a resident individual who is a member, partner, shareholder/ owner or part owner of a resident unincorporated entity, there is imposed a 1.25% tax on the individual’s distributive share of net profits earned during the effective period of this chapter not attributable to the city under the method of the allocation provided for in this chapter, and not taxed against the entity; provided, however, that if any portion thereof is allocable to another municipality, credit for tax due or paid to the other municipality shall be claimed in accordance with § 880.10.
(e) Nonresident unincorporated businesses.
(1) In the case of nonresident unincorporated businesses, professions, enterprises, undertakings or other activities conducted, operated, engaged in, prosecuted or carried on, there is imposed an annual tax of 1.25% on the net profits earned and/or received during the effective period of this attributable to the business’s activity derived from activity in the city.
(2) A nonresident unincorporated business entity which has a branch or branches, office or offices and/or store or stores, warehouse, or other place or places in which the entity's business is transacted, located in the city, shall be considered to be conducting, operating, prosecuting or carrying on a trade, business, profession, enterprise, undertaking or other activity to the full extent of the sum total of all transactions originating or consummated in, by or through the city branch, office, store, warehouse or other place of business, including:
A. Billings made on such transactions;
B. Services rendered;
C. Shipments made;
D. Goods, chattels, merchandise and the like sold;
E. Commissions, fees or other remuneration.
(3) In determining the proportion or amount of the taxable net profits of a nonresident unincorporated business entity having a place or places of business within and outside of the city, the business entity may at its option use and apply the business allocation percentage formula set forth in § 880.04(b).
(f) Resident’s share of profits of a nonresident unincorporated business entity not attributable to the city. In the case of a resident individual who is a member, partner, owner or part owner of a nonresident unincorporated entity, there is imposed a 1.25% tax on the individual’s distributive share of net profits earned during the effective period of this chapter not attributable to the owner’s resident community under the method of allocation provided for in this chapter; provided however, that the resident shall be entitled to credit for tax paid to another taxing municipality in accordance with § 880.10.
(g) Corporations.
(1) In the case of a corporation (including S corporation) doing business in the city, whether domestic or foreign, and whether domiciled in the city or elsewhere, there is imposed an annual tax of 1.25% on that part of the net profits earned, accrued and/or received during the effective period of this chapter of such corporations, which is earned by the corporations as a result of work done or services performed or rendered and business or other activities conducted in the city.
(2) The provisions of division (e)(2) of this section are applicable to the corporations.
(3) A corporation doing business both within and outside the city shall, in determining the part of the net profits, which are taxable under this chapter, calculate its net profit attributable to the city in accordance with § 880.04.
(4) Corporations which are required by the provisions of R.C. §§ 5727.38 to 5727.41 to pay an excise tax in any taxable year as defined by this chapter, may exclude that part of their gross receipts upon which the excise tax is paid from their net profits for that taxable year. In this case, expenses incurred in the production of the gross receipts shall not be deducted in computing net profits subject to the tax imposed by the chapter.
(h) Effective period of tax.
(1) The tax imposed by the rate and income taxable section of this chapter shall be levied, collected and paid with respect to income, salaries, wages, bonuses, incentive payments, commissions, fees and other compensation earned during the effective period of this chapter.
(2) The tax imposed by the rate and income taxable section of this chapter, with respect to net profits of trade, businesses, professions, enterprises, undertakings and other activities is on the net profits earned, accrued and/or received during the effective period of this chapter.
(i) Amplification. Net profits ("adjusted federal taxable income") means, for tax years 2004 and later, a C corporation's federal taxable income before net operating losses and special deductions as determined under the Internal Revenue Code, adjusted as follows:
(1) 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.
(2) Add an amount equal to 5% of intangible income deducted under division (i)(1) of this section, but excluding that portion of intangible income directly related to the sale, exchange or other disposition of property described in § 1221 of the Internal Revenue Code.
(3) Add any losses allowed as a deduction in the computation of federal taxable income if the losses directly relate to the sale, exchange, or other disposition of an asset described in IRC § 1221 or § 1231.
(4) A. Except as provided in division (i)(4)B. of this section, 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 IRC § 1221 or § 1231.
B. Division (i)(4)A of this section does not apply to the extent the income or gain is income or gain described in IRC § 1245 or § 1250.
(5) Add taxes on or measured by net income allowed as a deduction in the computation of federal taxable income.
(6) 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.
(7) 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:
A. 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
B. 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.
(j) Consolidated returns.
(1) Any affiliated group which files a consolidated return for federal income tax purposes pursuant to § 1501 of the Internal Revenue Code may file a consolidated return with the city. However, once the affiliated group has elected to file a consolidated return or a separate return with the city, the affiliated group may not change their method of filing in any subsequent tax year without written approval from the city.
(2) In the case of a corporation that carries 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 Finance Director shall require such additional information as he or she may deem 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 the division, branch, factory, office, laboratory or activity of by some other method, he or she shall make such allocation as he or she deems appropriate to produce a fair and proper allocation of net profits to the city.
(k) Loss carry-forward. Loss carry-forward shall not be permitted.
(Ord. 43-2004, passed 12-20-2004; Ord. 48-2005, passed 12-5-2005)