Rentals received by the taxpayer are to be included only if and to the extent that the rental, ownership, management or operation of the real estate from which the rentals are derived (whether so rented, managed or operated by taxpayer individually or through agents or other representatives) constitutes a business activity of the taxpayer in whole or in part. Following are the circumstances under which, in any instance, the rental of any real property shall or shall not be deemed to be a business activity:
(a) Where the gross monthly rental of any and all real properties, regardless of number and value, aggregates in excess of $100 per month, it shall be prima facie evidence that the rental, ownership, management or operation of the properties is a business activity of the taxpayer, and the net income of the rental property shall be subject to tax; provided that in 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 the rental exceeds $100 per month; and provided, further, that in case of farm property, the owner shall be considered engaged in a business activity when he or she shares in the 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 $100 per month; and provided, further, that the person who operates a rooming house shall be considered in business whether or not the gross income exceeds $100 per month.
(b) In determining the amount of gross monthly rental of any real property, periods during which (by reason of vacancy or any other cause) rentals are not received shall not be taken into consideration by the taxpayer.
(c) Rentals received by a taxpayer engaged in the business of buying and selling real estate shall be considered as part of business income.
(d) Real property, as the term is used in this chapter, shall include commercial property, residential property, farm property, and any and all other types of real estate.
(e) In determining the taxable net income from rentals, the deductible expense shall be of the same nature, extent and amount as are allowed by the Internal Revenue Service for federal income tax purposes. Passive losses as deemed by the IRS Code are not deductible in this determination.
(f) Residents of the city are subject to taxation upon net income from rentals, to the extent above specified, on all properties located in the city, and on all properties located outside the city, the net income of which is not subject to city income tax in the other community. In the case of residents of the city, if the net income of properties located outside the city is subject to city income tax in another community, then the taxpayer shall be allowed a credit for the amount paid by him or her on his or her behalf in the other municipality. This credit is to be applied only to the extent of the tax assessed by the city. Nonresidents of the city are subject to this taxation only if the real property is situated within the city. Nonresidents, in determining whether gross monthly rentals exceed $100 shall take into consideration only real estate situated within the city.
(g) Income from royalties or copyrights is not to be included.
(Ord. 43-2004, passed 12-20-2004)