(a) Resident Employees. An annual tax as set forth in the Income Tax Ordinance shall be imposed upon the taxable income of all residents of the City. The source of the earnings and the place where work or services were performed is immaterial. All earnings of residents wherever earned or paid are subject to Vandalia taxation. Taxable items include but are not limited to:
(1) Qualifying salaries, wages, commissions, incentive payments, bonuses and other compensation earned, received, accrued or in any other way set apart unto residents of the City whether paid directly or through an agent and whether in cash or in property during the tax period as:
A. An officer, director or employee of a corporation, including charitable and other nonprofit organizations.
B. An employee (as distinguished from a partner or member) of a partnership, association or any form of unincorporated entity owned by two or more persons.
C. An employee (as distinguished from a proprietor) of a business, trade or profession conducted by an individual owner.
D. An officer or employee (whether elected, appointed or commissioned) of the United States Government or any of its agencies or of a corporation created, owned or controlled by the United States Government or of the State of Ohio or any of its political subdivisions or agencies or any foreign country or dependency except military on active duty.
E. An employee of any other entity or person whether based on hourly, daily, weekly, semi-monthly, monthly, annual, unit of production or piece work rates; and whether paid by an individual, partnership, association, corporation, including nonprofit and charitable corporations, governmental administration, agency, authority, board, branch, bureau, department, subdivision, section or unit or any other entity.
(2) Commissions earned, received, accrued or in any other way set apart unto residents of the City whether paid directly or through an agent and whether paid in cash or property regardless of how calculated or by whom paid or where such payment is made.
A. If amounts received as a drawing account exceed the commissions earned, the tax shall be on the gross amounts received, unless the excess is subject to the demand of the employer for repayment.
B. If commissions are included in the net earnings of a trade, business, profession, enterprise or other activity carried on by an unincorporated entity of which the individual receiving such compensation is owner or part owner and therefore subject to the tax through the entity, the individual shall not be subject to the tax on the same commissions.
(3) Amounts received from an employer for expenses and used as such by the individual receiving them are not deemed to be compensation subject to taxation if the employer deducts such expenses or advances from gross income for the purpose of determining net profits taxable under federal law and the employee is not required to include such receipts as income on his or her federal income tax return. However, expense allowances or advances received that are in excess of actual expenses are taxable by the recipient individual employee.
(4) Fees, unless such fees are includable 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 said individual and such net profits are subject to the tax. The term "fees" shall include honorariums, marriage and funeral offerings, gratuities received in the performance of religious ceremonies and other monies received by members of the clergy, evangelists or religious workers.
(5) Other compensation, in addition to items mentioned elsewhere in these Rules and Regulations, including but not limited to bonuses, stipends, tips, other earned income, supplemental unemployment benefits (S.U.B. pay), income from partnerships, estates or trusts, employee contributions to costs of fringe benefits, ordinary gains as reported on Federal Form 4797, recapture of depreciation, vacation pay, farm net income, employer paid premiums for group term life insurance in the same amounts as taxable to the employee for federal tax purposes, contributions made on behalf of employees to tax deferred annuity programs, income from guaranteed annual wage contracts, prizes and gifts of any type if connected with employment, stock options (taxed) when exercised, usually valued at market price less the option price at the date the option is exercised, director fees, income from jury duty, union steward fees, strike pay, profit sharing, uniform, automobile and travel allowances, gambling and lottery winnings, reimbursements in excess of deductible expenses, executor fees, pre-retirement distributions from retirement plans, amounts received from covenants not to compete to the extent includable on the taxpayer's Federal income tax return, other income as taxable for the purpose of Federal income tax including but not limited to employer-provided educational assistance and other types of income earned, received accrued or in any other way set apart or deemed as ordinary income for Federal income tax purposes, including compensation paid to domestic, casual or other types of employees. All qualifying wages appearing on a W-2 shall be considered as taxable to the recipient and will not be excluded from taxable income unless it can be shown to be an exception in accordance with the Income Tax Ordinance and these Rules and Regulations.
(6) In the case of domestic employees or other employees whose duties require them to live at their place of employment or assignment, board and lodging shall not be taxable as wages or compensation.
(7) Sick pay, disability pay, long-term disability pay, vacation pay, wage or salary continuation plan payments and other payments made to an employee by an employer or a third party agent during periods of absence from work are taxable when paid and at the rate in effect at time of payment and may not be excluded from taxable income by an employer, resident or nonresident employee. Disability benefits received from a policy in which the taxpayer has paid the premiums will not be taxable to the City to the extent that the benefits received are a result of such premiums. Benefits from disability policies of which the premiums are partially employer paid and partially employee paid are taxable only on the employer paid portion.
(8) Payments made to an employee by an employer as separation pay, severance pay, termination pay, early retirement incentives and similar pay-outs are taxable when paid.
(9) Employee contributions to retirement plans, including Internal Revenue Code Sections 401(k), 403(b), 457 and other deferred compensation plans, are taxable and are neither excludable nor deductible by the employee. Withholding applies to the employee's full compensation unreduced by an employee's contribution to a retirement or deferral plan. If an employer pays into a tax sheltered or tax deferred plan on behalf of an employee, or makes any similar type payments that may be in lieu of paying additional wages or other compensation, those payments are taxable and subject to withholding.
(10) Contributions made either by or on behalf of an employee to cafeteria-type plans that are includable in Federal Medicare wages, are fully taxable and may not be excluded or deducted from taxable income by either an employee or employer. Federal wage reductions do not cause a fully taxable wage or salary to lose its character as a fully taxable wage or salary subject to the provisions of the City Income Tax Ordinance or these Rules and Regulations, unless such reductions are includable in the calculation of qualifying wage per the Ohio Revised Code. Contributions to the costs of such benefits, when includable in qualifying wages, whether paid directly or through a payroll deduction plan, are not deductible from and should be included in taxable income. Employer-sponsored benefit plans that permit the participant employee to reduce taxable income for Federal income tax purposes are not recognized for City income tax purposes if contributions to such plans arc includable in federal Medicare wages. Such a reduction does not cause the gross wage or salary to lose its character or taxability or withholding requirements for City purposes.
(11) 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 items received by an employee in lieu of additional cash compensation shall be included in earnings at their fair market value. Gifts to employees of a minimal amount that may be given by employers during holidays or other occasions are taxable only to the extent that they are subject to taxation for federal income tax purposes.
(b) Nonresident Employees. An annual tax as set forth in the Income Tax Ordinance shall be imposed on the taxable income of all nonresidents of the City on qualifying salaries, wages, commissions, incentive payments, bonuses, and other compensation earned, received accrued or in any other way set apart unto nonresidents of the City for work done or services performed within the City whether such compensation 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. The items subject to the tax for nonresidents of the City are the same as those listed and defined in these Rules and Regulations as subject to the tax for residents of the City. A nonresident individual who is in the employment of a nonresident business and in the course of said employment works or performs services in the City for 12 or fewer days within a calendar year shall be considered an occasional or casual entrant and shall not be subject to Vandalia income tax for those 12 or fewer days. For the purposes of the 12-day calculation, any portion of a day worked in the City shall be construed and counted as one day worked in the City. If said individual works or performs services in the City for 13 or more days during a calendar year, on the thirteenth day of said calendar year, the individual shall no longer be considered an occasional or casual entrant and shall be subject to taxation on all income earned in the City, including that earned during the first 12 days.
(1) If said individual can be reasonably defined as a professional entertainer, a professional athlete, a promoter of a professional sports or entertainment event or an employee of such a promoter, the herein-defined 12-day occasional or casual entrant provision for nonresidents shall not apply.
(2) Vandalia income tax withheld by a nonresident employer and paid to the City as a result of the employer being subject to withholding rules, as defined in these Rules and Regulations, cannot be refunded to an individual under the 12-day occasional or casual entrant provision.
(c) Resident Unincorporated Businesses. In the case of resident unincorporated businesses, professions, enterprises or other activities conducted, operated or engaged in, irrespective of whether such taxpayer has an office or place of business in the City, there is imposed an annual tax, as set forth in the Income Tax Ordinance, on the net profits earned, received, accrued, set apart or derived from sales made, work done, services performed, or business or other activities conducted in the City.
(1) The tax imposed on resident partnerships, associations, joint ventures or other unincorporated entities owned by two or more persons is upon the entities rather than the individual owners or members.
(2) The tax imposed on a resident unincorporated entity owned by one person is upon the individual owner. Net profits from self-employment, professions, sole proprietorships and other unincorporated entities owned by one person are subject to the tax.
(3) The tax is imposed on all resident unincorporated entities having net profits attributable to the City under the method of allocation provided in the Income Tax Ordinance and in these Rules and Regulations regardless of where the owner or owners of such resident unincorporated business entity reside.
(4) Resident unincorporated entities owned by two or more persons, all of whom are residents of the City, shall disregard any method of allocation and shall be subject to the tax on the entire net profits.
(5) A resident individual who is sole owner of a resident unincorporated entity shall be subject to tax on the entire net profits of said business and shall disregard any method of allocation.
(6) In the case of a resident individual partner, member or part owner of a resident unincorporated business entity, the tax is imposed on said individual's distributive share of net profits earned, received, accrued, set apart or derived by the entity but not attributed to the City under the method of allocation set forth in the Income Tax Ordinance and these Rules and Regulations and not taxed against the entity.
(d) Nonresident Unincorporated Businesses. In the case of nonresident unincorporated businesses, professions, enterprises or other activities conducted, operated or engaged in, there is imposed an annual tax as set forth in the Income Tax Ordinance on the net profits earned, received, accrued, set apart or derived that are attributable to the City.
(1) The tax imposed on nonresident partnerships, associations, joint ventures or other unincorporated entities owned by two or more persons is upon the entities rather than the individual owners or members.
(2) The tax imposed on a nonresident unincorporated entity owned by one person is upon the individual owner.
(3) The tax is imposed on all nonresident unincorporated entities having net profits attributable to the City under the method of allocation provided in the Income Tax Ordinance and in these Rules and Regulations regardless of where the owner or owners of such nonresident unincorporated business entity reside.
(4) Nonresident unincorporated entities owned by two or more persons, all of whom are residents of the City, shall disregard any method of allocation and shall be subject to the tax on the entire net profits. In such case, the tax paid by the entity shall constitute all tax due from the owners or members for their distributive share of net profits. However, an additional return shall be required from such owner or member and such return shall report any taxable income other than the distributive share of net profits from the entity.
(5) A resident individual who is sole owner of a nonresident unincorporated entity shall be subject to tax on the entire net profits of said business and shall disregard any method of allocation.
(6) In the case of a resident individual partner, member or part owner of a nonresident unincorporated business entity, the tax is imposed on said individual's distributive share of net profits earned, received, accrued, set apart or derived by the entity but not attributed to the City under the method of allocation set forth in the Income Tax Ordinance and these Rules and Regulations and not taxed against the entity.
(e) Corporations. In the case of corporations, whether domestic of foreign and whether or not such corporations have an office or place of business in the City, there is imposed an annual tax as set forth by the Income Tax Ordinance on the net profits earned, received, accrued, set apart or derived that are attributable to the City.
(1) There is in the Income Tax Ordinance and these Rules and Regulations a method of allocation that will determine if a corporation is conducting a business or other activity in the City and the amount of net profits subject to taxation by the City.
(2) Corporations required by provisions of the Ohio Revised Code to pay an excise tax may exclude from calculations of net profits subject to the tax imposed by the Income Tax Ordinance, that portion of their gross receipts upon which the excise tax is paid. Accordingly, expenses incurred in the production of such gross receipts shall not be deducted in calculating said net profits subject to the tax.
(3) Distributions to shareholders of S-corporations are not subject to taxation by the City. Conversely, losses derived from S-corporations may not be used to offset other income that may be subject to City taxation.
(4) S-corporations are required to file on an entity basis and pay the tax due on any net profits attributable to the City in the same manner as all other types of corporations that are subject to the tax. The tax is imposed upon the S-corporation net profits attributable to the City per the three-factor business apportionment formula without regard for where the owners, shareholders or members reside.
(f) Royalties. Royalties derived from land leases, coal, gravel and other mineral rights, oil and gas wells whether managed, extracted or operated by the taxpayer individually or through an agent or other representative are subject to taxation by the City. Royalties derived from intangible property, patents and copyrights are not taxable unless the taxpayer's activities produce a publication or other product which results in sales from which royalties are produced. Such items shall be clearly disclosed as an attachment to the City tax return.
(g) Rentals. An annual tax as set forth in the Income Tax Ordinance shall be imposed on rental earnings from all types of real estate or other property that is located within the City and from the rental earnings of City residents no matter where such rental property is located. The owner or owners of the property shall declare and pay the tax thereon. Rental earnings from all types of real estate and other property are not deemed to be earnings from a business, as defined in the Income Tax Ordinance and these Rules and Regulations, if the taxpayer's entire gross rental activity in aggregate is less than three hundred fifty dollars ($350.00) per month.
(1) "Real property", as used in these Rules and Regulations, shall include commercial property, farm property, residential property and any and all other types of real estate or personal property for which rents, payments or remuneration in exchange for the use, possession or control of such property are earned, received, accrued or in any other way set apart.
(2) Individuals having rental losses, but not receiving gross rents that would average three hundred fifty dollars ($350.00) per month or more over a calendar year, must be able to verify that such property was actually available for rent and that the rental amount was set at a reasonable fair market value in order to use such loss to offset other taxable income. Such property is not considered a business for loss offset purposes. However, all rental net gains are taxable without regard for the average monthly rental amount.
(3) In the case of commercial property, the owner shall be considered engaged in a business activity when the rental is based on a percentage of sales, receipts or profits whether or not such rental exceeds three hundred fifty dollars ($350.00) per month.
(4) In the case of farm property, the owner shall be considered engaged in business when he or she shares in the crops or when rental is based on a percentage of gross or net receipts received from the farm whether or not such amounts exceed three hundred fifty dollars ($350.00) per month.
(5) A person who operates a rooming house of five or more rooms available for rent shall be considered to be engaged in business whether or not gross income exceeds three hundred fifty dollars ($350.00) per month.
(6) Rentals received by a taxpayer engaged in the business of buying and selling real estate shall be considered as part of the business income.
(7) In determining the taxable income from rentals, the deductible expense amount shall be of the same nature and amount as properly reported and actually deducted for federal income tax purposes. In the absence of actual books and records, the Income Tax Superintendent may estimate taxable net rental income.
(8) Residents of the City are subject to taxation upon the net income from all rentals regardless of the location of the property.
(9) Nonresidents of the City are subject to taxation on rentals only if the property is located within the City. Nonresidents, in determining whether gross monthly rentals exceed three hundred fifty dollars ($350.00), should take into consideration only those properties located within the City.
(10) Corporations owning or managing real estate or other rental property are taxable only on that portion of income derived from property located within the City.
(11) An individual, business or other entity having a rental property that is subject to the City income tax and who or that subsequently sells such rental property, shall attach Federal Form 4797, page 1 and 2, to the Vandalia return for the year in which the sale is made. Any amount or value realized on a sale, exchange or other disposition of such rental property shall be treated as taxable income to the extent of depreciation allowed or allowable.
(12) The owners of rental property located in the City shall, on or before October 31 of each year, submit a current listing of all renters to the City Income Tax Division. The list shall contain the name, address and date of occupancy of each tenant. Any change in occupancy that occurs during the year must be reported to the Income Tax Division immediately. A form or forms needed in making such reports will be furnished by the Income Tax Division and are available upon request. However, substitute forms are acceptable if such forms contain the applicable information of name, address and date of occupancy of all tenants.
(h) Non-taxable Income. In addition to items mentioned elsewhere in these Rules and Regulations, the following are examples of items that, for the individual recipients, are exempt from the City income tax: interest, dividends, social security benefits, income from federally qualified retirement plans, state unemployment benefits, worker's compensation, proceeds of life insurance policies, active duty military pay, earnings of persons under 18 years of age, capital gains, prizes and gifts not connected with employment, annuity distributions, housing allowances for the clergy to the extent that the allowance is used to provide a home as excluded by Section 107 of the Internal Revenue Code, health and welfare benefits distributed by government, charitable, religious or educational organizations.
(1) Proceeds from an educational scholarship, fellowship or grant is exempt from City income tax only when given for attendance as a student at an accredited college or university and when also exempt for federal income tax purposes.
(2) Alimony is not taxed to the recipient nor is it allowed as a deduction by the payor.
(3) Compensatory insurance proceeds derived from property damage or personal injury settlements are not taxable; however, this exclusion does not apply to any amounts of insurance proceeds paid as a replacement for lost salaries or wages.
(4) Compensation paid under the Ohio Revised Code to a person serving as a precinct election official, to the extent that such compensation is under one thousand dollars ($1,000.00) annually, is exempt from City income tax. The payer of such precinct election official's income of under one thousand dollars ($1,000.00) annually for any individual is not required to withhold the City income tax from that income. However, when such compensation is one thousand dollars ($1,000.00) or more during any calendar year, it is subject to taxation and to withholding on the full amount earned during that tax period.
(5) Compensation paid to an employee of a transit authority, as defined for municipal tax purposes in the Ohio Revised Code, for operating a transit bus or other motor vehicle for such transit authority in or through the City is exempt from the City income tax, unless the bus or vehicle is operated on a regularly scheduled route in the City or the employee has a residence or domicile within the City or the transit authority headquarters is located in the City.
(i) Ordinary and Necessary Expenses. Except as provided in the Income Tax Ordinance or elsewhere in theses Rules and Regulations, all ordinary and necessary expenses of operating a business that have been properly reported for federal income tax purposes and that have been deducted for federal income tax purposes, including reasonable compensation paid to employees, shall be allowed. However, no deduction may be claimed for salary or withdrawal of a proprietor or of the partners, members or other owners of an unincorporated business or enterprise.
(j) Deductibility of Taxes. There shall be no deduction of any taxes imposed by the Income Tax Ordinance or federal, state or any other tax based on income. Nor shall there be a deduction for gift, estate or inheritance taxes or taxes for local benefits or improvements to property. If for any reason the income from a property is not subject to the tax imposed by the Income Tax Ordinance, then taxes and any other expenses of such property are not deductible.
(k) Charitable Contributions. Charitable contributions shall not be deducted in the computation of qualifying wages for the City, nor shall charitable contributions be deducted in the computation of City income tax of an individual taxpayer. Corporations, partnerships and other businesses required to file returns on an entity basis may deduct charitable contributions to the extent that such contributions have been deducted for Federal tax purposes, and providing that such contributions are includable in the computation of adjusted Federal taxable income as reportable to the City. Such contributions must be supported through a Federal form attached to the City return.
(l) Employee Business Expenses. Individual taxpayers having employee expenses which are properly reportable on Federal Form 2106 and which have been taken as a deduction for federal income tax purposes may also be entitled to a deduction for City income tax purposes. The total of such expenses cannot exceed the related income from the employer of whom the expenses were incurred. A copy of Federal Form 2106 and Federal Schedule A must be filed as attachments to the City annual tax return. For City purposes, expenses included on the Form 2106 may not be aggregated; in such case, an itemized listing of expenses must be attached to the City return. Employee business expenses related to income earned in another taxing municipality shall be used to reduce the tax due in such other municipality. In such circumstances, any other city tax credit allowed by the City will reflect the tax due to the other city after the reduction of the Form 2106 expenses.
(m) Moving Expenses. Individual taxpayers having moving expenses which are properly reportable on Federal Form 3903 and which have been taken as a deduction for federal income tax purposes may also be entitled to a deduction for City income tax purposes. The total of such moving expenses cannot exceed any reimbursed amounts received or set apart unto the employee from the employer of whom the expenses were incurred. A copy of Federal Form 3903 and Federal Schedule A must be filed as attachments to the City annual return.
(1) Moving expense reimbursements in excess of actual expenses that are properly reportable on Federal Form 3903 and/or not actually deducted from federal income tax are taxable.
(2) Moving expenses that are not reimbursed by the employer are not deductible.
(n) Expenses Attributable to Non-taxable Income. Expenses attributable to non-taxable income shall not be allowed as a deduction in the computation of income subject to City taxation. Per the Ohio Revised Code, when calculating adjusted Federal tax income, an amount equal to 5% of the tangible income that has been deducted in the adjusted Federal taxable income calculation will be considered as attributable to such non-taxable income and shall not be allowed as a deduction.
(o) Trucking Companies. Net profits derived by trucking companies and other carriers operating under a certificate issued by the P.U.C.O. are not subject to City tax per the Ohio Revised Code exemption of motor carriers. Motor carriers having gross receipts derived both within and without the Ohio Revised Code P.U.C.O. exemption are subject to the tax on that portion of their net profits not subject to the exemption and may not deduct expenses relating to any portion of the exempt amount of gross receipts.
(p) Allocation of Business Profits and Losses.
(1) If a corporate taxpayer doing business both within and without the City, or a nonresident unincorporated taxpayer doing business both within and without the City, has actual and bona fide books and records that accurately reflect the proper percentage of business activities within the City, such taxpayer shall use such records. In the absence of such records, such taxpayer shall use the Three-Factor Business Apportionment Formula as set forth in the Income Tax Ordinance and these Rules and Regulations. If the books and records of the taxpayer are used rather than the business apportionment formula, a statement must accompany the City return explaining the manner in which such apportionment is made in sufficient detail to enable the Superintendent to determine whether the net profit or loss attributable to the City is apportioned with reasonable accuracy.
(2) Where allocation of net profit or loss is necessary and the taxpayer does not have appropriate actual books and records showing such allocation, the three-factor business apportionment formula percentage shall be calculated on the basis of:
A. The original cost of real and tangible personal property within and without the City; and
B. The gross business receipts within and without the City; and
C. The wages earned within and without the City.
(3) Business apportionment formula method:
A. Step 1: Ascertain the percentage which the original cost of real and tangible personal property, including leasehold improvements, owned or used in the business and situated within the City is of the original cost of all real and tangible personal property, including leasehold improvements, owned or used in the business wherever situated, during the period covered by the return.
1. The percentage of taxpayer's real and tangible personal property within the City is determined by dividing the original cost of such property within the City, without deduction of any encumbrances, by the original cost of all such property within and without the City. In determining such percentage, property rented to the taxpayer must be considered. The value of real and tangible personal property rented by the taxpayer shall be determined by multiplying gross annual rents payable by eight.
2. "Gross rents" means the actual sum of money or other form of compensation payable by the taxpayer for the use or possession of property whether designated as a fixed sum or as a percentage of sales or profits or other consideration. Any amounts such as interest, repairs, taxes, insurance or other amounts required to be paid in lieu of rents or as an addition to rents shall be included in gross rents.
B. Step 2: Ascertain the percentage which the gross receipts of the taxpayer derived from sales made, work done and services rendered in the City is of the total gross receipts, wherever derived, during the period covered by the return. The following shall be considered sales and gross receipts derived in the City:
1. All sales of tangible personal property which is shipped from City to purchasers outside 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.
2. All sales of tangible personal property which is delivered to purchasers within the City, regardless of where title passes, even though transported from a point outside Vandalia, if the taxpayer is regularly engaged through its own employees in the solicitation and the sales either directly or indirectly result from such solicitation.
3. All sales of tangible personal property which is delivered within the City regardless of where title passes, if shipped or delivered from an office, store, warehouse, factory, place of storage or other facility or stock of goods within the City.
a. In application of the foregoing paragraphs, a carrier shall be considered the agent of the seller regardless of the F.O.B. point or other conditions of the sale, and the place at which orders are accepted or contracts written shall be immaterial.
b. Solicitation of customers outside the City by mail or phone or fax or electronic means from an office or place of business within the City, or when such solicitation is automatically directed to points outside the City but was ordered or initiated in the City, shall not be considered as solicitation of sales outside the City.
c. Business receipts are not considered to have been derived by the taxpayer outside the City solely because they were payable or actually received outside of the City. Nor shall the fact that deliveries are made outside the City necessarily constitute a sale for which receipts are allowable outside the City.
d. Charges for work done or services performed incident to a sale, whether or not included in the price of the property, shall be considered gross receipts from such a sale.
C. Step 3: Ascertain the percentage which the total wages, salaries, commissions and other compensation of employees within the City is of total wages, salaries commissions and other compensation of all employees within and without the City during the period covered by the return.
1. Salaries and compensation paid to owners or credited to the account of owners or partners during the period covered by the return are considered wages for the purpose of this computation.
2. Wages, salaries and other compensation shall be calculated on the cash or accrual basis in accordance with the method of accounting used in the computation of the entire net income of the taxpayer.
3. For employees who perform services both within and without the City, the amount treated as compensation for services performed within the City shall be deemed to be as follows:
a. In the case of an employee whose compensation depends directly on the volume of business secured, such as a salesperson on a commission basis, the City wages, salaries and other compensation amount is the amount received for the business attributable to the employee's efforts within the City.
b. In the case of an employee whose compensation depends on other results achieved, the amount attributable to the City is the value of the proportion of the total compensation received for services within the City.
c. In the case of an employee compensated on a time basis, the amount of wages, salaries and other compensation attributable to the City is the proportion of the total amount received for working time within the City.
D. Step 4: Add the percentages determined in Step 1, Step 2 and Step 3 and divide the total by the number of percentages used. The result so obtained is the business allocation percentage. In determining the business apportionment percentage through use of the three-factor formula, a factor shall not be excluded from the computation merely because the factor is allocable entirely within or outside of the City. A factor is excluded only when it does not exist anywhere.
(4) The business apportionment formula shall be applied to the entire taxable net profits of the taxpayer, wherever derived, to determine the net profits allocable to the City.
(5) In the event that a just and equitable result cannot be obtained under the standard three-factor formula, the Superintendent may substitute other factors to be used within the formula or prescribe other methods of allocating net income to determine a fair and proper allocation. Application to use substitute factors in the formula or to use a different method to allocate net profits must be made, in writing, to the Superintendent before the end of the taxable year. The application shall state the specific grounds and reasoning on which the substitution of factors or use of a different method is requested. No specific form need be followed in making such application. Once a taxpayer has filed under a substitute method, such method may not be changed unless the Superintendent grants permission for a change.
(q) Nonprofit Organizations. Any charitable, educational, fraternal or other type of nonprofit organization that meets Ohio Revised Code requirements for exemption from the payment of real estate taxes is exempt from the tax imposed by the Income Tax Ordinance. However, any such nonprofit organization is required to file declarations and tax returns and remit the taxes imposed by the Income Tax Ordinance, and otherwise comply with all other aspects of the Income Tax Ordinance as with other for-profit organizations, on all business activities of a type conducted for profit or ordinarily conducted for profit by taxpayers operating for a profit.
(1) The Income Tax Superintendent is authorized to verify forms filed with the federal government by nonprofit organizations relating to or establishing their status for federal tax purposes; and nonprofit organizations will keep copies of such forms available for inspection and verification.
(2) The exemption of the nonprofit organization from the imposition of the tax does not extend to its employees or to its requirement to withhold and remit taxes on salaries, wages, commissions or other compensation paid to its employees.
(r) Recapture of Depreciation. Capital gains and losses from the sale, exchange or other disposition of property shall not be taken into consideration in arriving at net profits earned. However, any amount or value realized on a sale, exchange or other disposition of tangible personal property or real property used in business in excess of book value shall be treated as taxable income to the extent of depreciation allowed or allowable.
(s) Stock Options. Any income or value received from the grant, 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 plan shall be included in the City taxable income of individual taxpayers.
(Ord. 02-24. Passed 12-23-02; Ord. 05-03. Passed 2-7-05; Ord. 09-11. Passed 6-15-09.)