(a) Imposition. The annual tax for the purposes specified in Section 881.01 shall be imposed at a uniform rate on and after January 1, 2016, for tax year 2016 and beyond, at the rate of two and one-quarter percent (2.25%) per annum on municipal taxable income for every person residing in or earning or receiving income in the City of Xenia.
(b) Individuals.
(1) For residents of the City, the income tax levied herein shall be on all income, salaries, qualifying wages, commissions, and other compensation from whatever source earned or received by the resident, including the resident's distributive share of the net profit of pass-through entities owned directly or indirectly by the resident and any net profit of the resident. (This is further detailed in the definition of income (Section 881.02(p)).
(2) For nonresidents, all income, salaries, qualifying wages, commissions, and other compensation from whatever source earned or received by the nonresident for work done, services performed or rendered, or activities conducted in the municipal corporation, including any net profit of the nonresident, but excluding the nonresident's distributive share of the net profit or loss of only pass-through entities owned directly or indirectly by the nonresident.
(c) Refundable Credit for Nonqualified Deferred Compensation Plan.
(1) As used in this division:
A. "Nonqualified deferred compensation plan" means a compensation plan described in Section 3121(v)(2)(C) of the Internal Revenue Code.
B. (i) Except as provided in division (c)(1)B.(ii) of this section, "qualifying loss" means the excess, if any, of the total amount of compensation, the payment of which is deferred pursuant to a nonqualified deferred compensation plan over the total amount of income the taxpayer has recognized for federal income tax purposes for all taxable years on a cumulative basis as compensation with respect to the taxpayer's receipt of money and property attributable to distributions in connection with the nonqualified deferred compensation plan.
(ii) If, for one (1) or more taxable years, the taxpayer has not paid to one (1) or more municipal corporations income tax imposed on the entire amount of compensation, the payment of which is deferred pursuant to a nonqualified deferred compensation plan, then "qualifying loss" is the product of the amount resulting from the calculation described in division (c)(1)B.(i) of this section computed without regard to division (c)(1)B.(ii) of this section and a fraction the numerator of which is the portion of such compensation on which the taxpayer has paid income tax to one (1) or more municipal corporations and the denominator of which is the total amount of compensation the payment of which is deferred pursuant to a nonqualified deferred compensation plan.
(iii) With respect to a nonqualified deferred compensation plan, the taxpayer sustains a qualifying loss only in the taxable year in which the taxpayer receives the final distribution of money and property pursuant to that nonqualified deferred compensation plan.
C. "Qualifying tax rate" means the applicable tax rate for the taxable year for which the taxpayer paid income tax to the City with respect to any portion of the total amount of compensation the payment of which is deferred pursuant to a nonqualified deferred compensation plan. If different tax rates applied for different taxable years, then the "qualifying tax rate" is a weighted average of those different tax rates. The weighted average shall be based upon the tax paid to the City each year with respect to the nonqualified deferred compensation plan.
(2) A. Except as provided in division (c)(3) of this section, a refundable credit shall be allowed against the income tax imposed by the City for each qualifying loss sustained by the taxpayer during the taxable year. The amount of the credit shall be equal to the product of the qualifying loss and the qualifying rate.
B. A taxpayer shall claim the credit allowed under this section if the taxpayer paid income tax to the City with respect to the nonqualified deferred compensation plan in one or more taxable years.
C. If the taxpayer paid tax to the City and one or more other municipal corporations with respect to the nonqualified deferred compensation plan, the amount of the credit that the taxpayer may claim from the City shall be calculated on the basis of the City's proportionate share of the total municipal income tax paid by the taxpayer to all municipal corporations with respect to the nonqualified deferred compensation plan.
D. In no case shall the amount of the credit allowed under this section exceed the cumulative income tax that a taxpayer has paid to the City for all taxable years with respect to the nonqualified deferred compensation plan.
(3) A. For the purposes of this section, income tax that has been withheld with respect to a nonqualified deferred compensation plan shall be considered to have been paid by the taxpayer with respect to the nonqualified deferred compensation plan.
B. Any City income tax that has been refunded or otherwise credited for the benefit of the taxpayer with respect to a nonqualified deferred compensation plan shall not be considered to have been paid to the City by the taxpayer.
(4) The credit allowed under this division is allowed only to the extent the taxpayer's qualifying loss is attributable to:
A. The insolvency or bankruptcy of the employer who had established the nonqualified deferred compensation plan; or
B. The employee's failure or inability to satisfy all of the employer's terms and conditions necessary to receive the nonqualified deferred compensation.
(Source: ORC 718.17)
(d) Domicile.
(1) A. An individual is presumed to be domiciled in the City of Xenia for all or part of a taxable year if the individual was domiciled in the City on the last day of the immediately preceding taxable year or if the Tax Administrator reasonably concludes that the individual is domiciled in City for all or part of the taxable year.
B. An individual may rebut the presumption of domicile described in division (d)(1)A. of this section if the individual establishes by a preponderance of evidence that the individual was not domiciled in the City of Xenia for all or part of the taxable year.
(2) For the purpose of determining whether an individual is domiciled in the City for all or part of a taxable year, factors that may be considered include, but are not limited to, the following:
A. The individual's domicile in other taxable years;
B. The location at which the individual is registered to vote;
C. The address on the individual's driver's license;
D. The location of real estate for which the individual claimed a property tax exemption or reduction allowed on the basis of the individual's residence or domicile;
E. The location and value of abodes owned or leased by the individual;
F. Declarations, written or oral, made by the individual regarding the individual's residency;
G. The primary location at which the individual is employed;
H. The location of educational institutions attended by the individual's dependents as defined in Section 152 of the Internal Revenue Code, to the extent that tuition paid to such educational institution is based on the residency of the individual or the individual's spouse in the municipal corporation where the educational institution is located; and/or
I. The number of contact periods the individual has with the City. For the purposes of this division, an individual has one "contact period" with the City if the individual is away overnight from the individual's abode located outside of the City and while away overnight from that abode spends at least some portion, however minimal, of each of two (2) consecutive days in the City.
(3) Additional applicable factors set forth in ORC 718.012 or as may be set forth in the Rules and Regulations authorized by Section 881.22 of this Chapter.
(Source: ORC 718.012)
(e) Businesses. This division applies to any taxpayer engaged in a business or profession in the City, unless the taxpayer is an individual who resides in the City or the taxpayer is an electric company, combined company, or telephone company that is subject to and required to file reports under ORC Chapter 5745.
(1) Except as otherwise provided in divisions (e)(2) and (g) of this section, net profit from a business or profession conducted both within and without the boundaries of the City shall be considered as having a taxable situs in the City for purposes of municipal income taxation in the same proportion as the average ratio of the following:
A. The average original cost of the real property 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 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. As used in this division (e)(1)A., tangible personal or real property shall include property rented or leased by the taxpayer and the value of such property shall be determined by multiplying the annual rental thereon by eight (8);
B. Wages, salaries, and other compensation paid during the taxable period to individuals employed in the business or profession for services performed in the City to wages, salaries, and other compensation paid during the same period to individuals employed in the business or profession, wherever the individual's services are performed, excluding compensation from which taxes are not required to be withheld under Section 881.04(b);
C. Total gross receipts of the business or profession from sales and rentals made and services performed during the taxable period in the City to total gross receipts of the business or profession during the same period from sales, rentals, and services, wherever made or performed.
(2) A. If the apportionment factors described in division (e)(1) of this section do not fairly represent the extent of a taxpayer's business activity in the City, the taxpayer may request, or the Tax Administrator may require, that the taxpayer use, with respect to all or any portion of the income of the taxpayer, an alternative apportionment method involving one or more of the following:
(i) Separate accounting;
(ii) The exclusion of one or more of the factors;
(iii) The inclusion of one or more additional factors that would provide for a fairer apportionment of the income of the taxpayer to the municipal corporation; or
(iv) Modification of one or more of the factors.
B. A taxpayer request to use an alternative apportionment method shall be in writing and shall accompany a tax return, timely filed appeal of an assessment, or timely filed amended tax return. The taxpayer may use the requested alternative method unless the Tax Administrator denies the request in an assessment issued within the period prescribed by Section 881.12(a).
C. The Tax Administrator may require a taxpayer to use an alternative apportionment method as described in division (e)(2)A. of this section, but only by issuing an assessment to the taxpayer within the period prescribed by Section 881.12(a).
D. Nothing in this division (e)(2) nullifies or otherwise affects any alternative apportionment arrangement approved by the Tax Administrator or otherwise agreed upon by both the Tax Administrator and taxpayer before January 1, 2016.
(3) As used in division (e)(1)B. of this section, "wages, salaries, and other compensation" includes only wages, salaries, or other compensation paid to an employee for services performed at any of the following locations:
A. A location that is owned, controlled, or used by, rented to, or under the possession of one of the following:
(i) The employer;
(ii) A vendor, customer, client, or patient of the employer, or a related member of such a vendor, customer, client, or patient;
(iii) A vendor, customer, client, or patient of a person described in division (e)(3)A.(ii) of this section, or a related member of such a vendor, customer, client, or patient.
B. Any location at which a trial, appeal, hearing, investigation, inquiry, review, court-martial, or similar administrative, judicial, or legislative matter or proceeding is being conducted, provided that the compensation is paid for services performed for, or on behalf of, the employer or that the employee's presence at the location directly or indirectly benefits the employer;
C. Any other location, if the Tax Administrator determines that the employer directed the employee to perform the services at the other location in lieu of a location described in division (e)(3)A. or B. of this section solely in order to avoid or reduce the employer's municipal income tax liability. If the Tax Administrator makes such a determination, the employer may dispute the determination by establishing, by a preponderance of the evidence, that the Tax Administrator's determination was unreasonable.
(4) For the purposes of division (e)(1)C. of this section, except as provided in division (g) of this section, receipts from sales and rentals made and services performed shall be sitused to a municipal corporation as follows:
A. Gross receipts from the sale of tangible personal property shall be sitused to the municipal corporation only if, regardless of where title passes, the property meets either of the following criteria:
(i) The property is shipped to or delivered within the City from a stock of goods located within the City.
(ii) The property is delivered within the City from a location outside the City, provided 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.
B. Gross receipts from the sale of services shall be sitused to the City to the extent that such services are performed in the City.
C. To the extent included in income, gross receipts from the sale of real property located in the City shall be sitused to the City.
D. To the extent included in income, gross receipts from rents and royalties from real property located in the City shall be sitused to the City.
E. Gross receipts from rents and royalties from tangible personal property shall be sitused to the City based upon the extent to which the tangible personal property is used in the City.
(5) The net profit received by an individual taxpayer from the rental of real estate owned directly by the individual, or by a disregarded entity owned by the individual, shall be subject to the City's tax if the property generating the net profit is located in the City or if the individual taxpayer that receives the net profit is a resident of the City. The City shall allow such taxpayers to elect to use separate accounting for the purpose of calculating net profit sitused under this division to the municipal corporation in which the property is located.
(6) A. Except as provided in division (e)(6)B. of this section, commissions received by a real estate agent or broker relating to the sale, purchase, or lease of real estate shall be sitused to the municipal corporation in which the real estate is located. Net profit reported by the real estate agent or broker shall be allocated to the City, if applicable, based upon the ratio of the commissions the agent or broker received from the sale, purchase, or lease of real estate located in the City to the commissions received from the sale, purchase, or lease of real estate everywhere in the taxable year.
B. An individual who is a resident of the City shall report the individual's net profit from all real estate activity on the individual's annual tax return for the City. The individual may claim a credit for taxes the individual paid on such net profit to another municipal corporation to the extent that such a credit is allowed under this Chapter.
(7) When calculating the ratios described in division (e)(1) of this section for the purposes of that division or division (e)(2) of this section, the owner of a disregarded entity shall include in the owner's ratios the property, payroll, and gross receipts of such disregarded entity.
(Source: ORC 718.02)
(8) Tax Credit for Businesses that Foster New Jobs in Ohio: The City, by ordinance, may grant a refundable or nonrefundable credit against its tax on income to a taxpayer to foster job creation in the City. If a credit is granted under this section, it shall be measured as a percentage of the new income tax revenue the City derives from new employees of the taxpayer and shall be for a term not exceeding fifteen (15) years. Before the City passes an ordinance granting a credit, the City and the taxpayer shall enter into an agreement specifying all the conditions of the credit.
(Source: ORC 718.15)
(9) Tax Credit to Foster Job Retention: The City, by ordinance, may grant a refundable or nonrefundable credit against its tax on income to a taxpayer for the purpose of fostering job retention in the City. If a credit is granted under this section, it shall be measured as a percentage of the income tax revenue the City derives from the retained employees of the taxpayer and shall be for a term not exceeding fifteen (15) years. Before the City passes an ordinance allowing such a credit, the City and the taxpayer shall enter into an agreement specifying all the conditions of the credit.
(Source: ORC 718.151)
(f) Exemption for Member or Employee of General Assembly and Certain Judges.
(1) The City shall be permitted to levy a tax on the income of any member or employee of the Ohio General Assembly, including the Lieutenant Governor, whose income is received as a result of services rendered as such member or employee and is paid from appropriated funds of the state, only if the City is the municipal corporation of residence for such member or employee.
(2) The City shall be permitted to levy a tax on the income of the Chief Justice or a Justice of the Supreme Court received as a result of services rendered as the Chief Justice or Justice only if the City is the municipal corporation of residence of such Justice. The City shall only be permitted to levy a tax on the income of a judge sitting by assignment of the Chief Justice or on the income of a district court of appeals judge sitting in multiple locations within the district, received as a result of services rendered as a judge, only if the City is the municipal corporation of residence of such judge.
(Source: ORC 718.50)
(g) Taxpayer Election for Remote Employees or Owner's Qualifying Remote Work Location.
(1) As used in this division:
A. "Qualifying remote employee or owner" means an individual who is an employee of a taxpayer or who is a partner or member holding an ownership interest in a taxpayer that is treated as a partnership for federal income tax purposes, provided that the individual meets both of the following criteria:
(i) The taxpayer has assigned the individual to a qualifying reporting location.
(ii) The individual is permitted or required to perform services for the taxpayer at a qualifying remote work location.
B. "Qualifying remote work location" means a permanent or temporary location at which an employee or owner chooses or is required to perform services for the taxpayer, other than a reporting location of the taxpayer or any other location owned or controlled by a customer or client of the taxpayer. "Qualifying remote work location" may include the residence of an employee or owner and may be located outside of a municipal corporation that imposes an income tax in accordance with this Chapter. An employee or owner may have more than one qualifying remote work location during a taxable year.
C. "Reporting location" means either of the following:
(i) A permanent or temporary place of doing business, such as an office, warehouse, storefront, construction site, or similar location, that is owned or controlled directly or indirectly by the taxpayer;
(ii) Any location in this state owned or controlled by a customer or client of the taxpayer, provided that the taxpayer is required to withhold taxes under Section 881.04 of this Chapter, on qualifying wages paid to an employee for the performance of personal services at that location.
D. "Qualifying reporting location" means one of the following:
(i) The reporting location in this state at which an employee or owner performs services for the taxpayer on a regular or periodic basis during the taxable year;
(ii) If no reporting location exists in this state for an employee or owner under division (g)(1)D.(i) of this section, the reporting location in this state at which the employee's or owner's supervisor regularly or periodically reports during the taxable year;
(iii) If no reporting location exists in this state for an employee or owner under division (g)(1)D.(i) or (ii) of this section, the location that the taxpayer otherwise assigns as the employee's or owner's qualifying reporting location, provided the assignment is made in good faith and is recorded and maintained in the taxpayer's business records. A taxpayer may change the qualifying reporting location designated for an employee or owner under this division at any time.
(2) A. For tax years ending on or after December 31, 2023, a taxpayer may elect to apply the provisions of this division to the apportionment of its net profit from a business or profession. For taxpayers that make this election, the provisions of division (e) of this section apply to such apportionment except as otherwise provided in this division.
B. A taxpayer shall make the election allowed under this division in writing on or with the taxpayer's net profit return or, if applicable, a timely filed amended net profit return or a timely filed appeal of an assessment. The election applies to the taxable year for which that return or appeal is filed and for all subsequent taxable years, until the taxpayer revokes the election.
C. The taxpayer shall make the initial election with the City's Tax Administrator if, after applying the apportionment provisions authorized in this division, the taxpayer is required to file a net profit tax return for that taxable year. A taxpayer shall not be required to notify the Tax Administrator if a qualifying remote employee's or owner's qualifying remote work location is located in the City, unless the taxpayer is otherwise required to file a net profit return with the City due to business operations that are unrelated to the employee's or owner's activity at the qualifying remote work location.
D. The taxpayer shall not be required to file a net profit return with the City solely because a qualifying remote employee's or owner's qualifying remote work location is located in the City.
E. Nothing in this division prohibits a taxpayer from making a new election under this division after properly revoking a prior election.
(3) For the purpose of calculating the ratios described in division (e)(1) of this section, all of the following apply to a taxpayer that has made the election described in division (g)(2):
A. For the purpose of division (e)(1)A. of this section, the average original cost of any tangible personal property used by a qualifying remote employee or owner at that individual's qualifying remote work location shall be sitused to that individual's qualifying reporting location.
B. For the purpose of division (e)(1)B. of this section, any wages, salaries, and other compensation paid during the taxable period to a qualifying remote employee or owner for services performed at that individual's qualifying remote work location shall be sitused to that individual's qualifying reporting location.
C. For the purpose of division (e)(1)C. of this section, and notwithstanding division (e)(4) of this section, any gross receipts of the business or profession from services performed during the taxable period by a qualifying remote employee or owner for services performed at that individual's qualifying remote work location shall be sitused to that individual's qualifying reporting location.
(4) Nothing in this division prevents a taxpayer from requesting, or the Tax Administrator from requiring, that the taxpayer use, with respect to all or a portion of the income of the taxpayer, an alternative apportionment method as described in division (e)(2) of this section. However, the Tax Administrator shall not require an alternative apportionment method in such a manner that it would require a taxpayer to file a net profit return with the City solely because a qualifying remote employee's or owner's qualifying remote work location is located in the City.
(5) Except as otherwise provided in this division, nothing in this division is intended to affect the withholding of taxes on qualifying wages pursuant to Section 881.04 of this Chapter.
(Source: ORC 718.021)
(Ord. 15-33. Adopted 07/23/15; Ord. 2018-08. Adopted 02/22/18; Ord. 2020-10. Adopted 04/23/20; Ord. 2023-31. Adopted 11/21/23)