CHAPTER 141

Income Tax

 

 

 

141.01      PURPOSE.

 

To provide funds for the purposes of general municipal operations, street maintenance and construction, new equipment and capital improvements, there shall be and is hereby levied a tax on qualifying wages, commissions and other compensation, and on net profits and other taxable income as hereinafter provided. 

 

 

141.02   DEFINITIONS.

 

A.                  As used in this Chapter the following words shall have the meanings ascribed to them in this section, except as and if the context clearly indicates or requires a different meaning.

 

1.      “Adjusted federal taxable income” means a C corporation’s federal taxable income before net operating losses and special deductions as determined under the Internal Revenue Code, adjusted as follows:

 

a.      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;

 

b.      Add an amount equal to five percent (5%) of intangible income deducted under division (A)(1)(a) of this section, but excluding that portion of intangible income directly related to the sale, exchange, or other disposition of property described in section 1221 of the Internal Revenue Code;

 

c.            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 section 1221 or 1231 of the Internal Revenue Code;

d.     

(i)         Except as provided in division (A)(1)(d)(ii) 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 section 1221 or 1231 of the Internal Revenue Code;

 

(ii)        Division (A)(1)(d)(i) of this section does not apply to the extent the income or gain is income or gain described in section 1245 or 1250 of the Internal Revenue Code.

 

e.      Add taxes on or measured by net income allowed as a deduction in the computation of federal taxable income;

 

f.       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;

 

g.      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:

 

(i)         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

 

(ii)        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.

 

Nothing in division (A)(1) of this section shall be construed as allowing the taxpayer to add or deduct any amount more than once or shall be construed as allowing any taxpayer to deduct any amount paid to or accrued for purposes of federal self-employment tax.

 

Nothing in this chapter shall be construed as limiting or removing the ability of any municipal corporation to administer, audit, and enforce the provisions of its municipal income tax.

 

2.      "Association" means a partnership, limited partnership, S corporation or any other form of unincorporated enterprise, owned by one or more persons.

 

3.      "Board of Income Tax Appeal" (Board of Appeals, Board of Adjudication, etc.) means the Board created by and constituted as provided for in section 141.14.

 

4.      "Business" means an enterprise, activity, profession or undertaking of any nature conducted for profit or ordinarily conducted for profit, whether by an individual, partnership, fiduciary, trust, association, corporation or any other entity, including but not limited to the renting or leasing of property, real, personal or mixed.

 

5.      "Corporation" means a corporation or joint stock association organized under the laws of the United States, the State of Ohio, or any other state, territory, or foreign country or dependency.

 

6.      "Domicile" means a principal residence that the taxpayer intends to use for an indefinite time and to which whenever he is absent he intends to return.  A taxpayer has only one domicile even though he may have more than one residence.

 

7.      "Employee" means one who works for wages, salary, commission or other types of compensation in the services of an employer.

 

8.      "Employer" means an individual, partnership, association, corporation, governmental body, unit or agency, or any other entity, whether or not organized for profits, who or that employs one or more persons on a salary, wage, commission or other compensation basis.

 

9.      "Fiscal year" means an accounting period of twelve (12) months or less ending on any day other than December 31.

 

10.    “Form 2106" means Internal Revenue Service Form 2106 filed by a taxpayer pursuant to the Internal Revenue Code.

 

11.     “Form 1099-MISC, Miscellaneous Income” means Internal Revenue Service Form

1099- MISC filed by a taxpayer pursuant to the Internal Revenue Code,

 

12.         “Form W-2G, Certain Gambling Winnings” means Internal Revenue Service Form

 W-2G filed by a taxpayer pursuant to the Internal Revenue Code.

 

13.     “Form 5754, Statement by Person(s) Receiving Gambling Winnings” means Internal Revenue Service Form 5754 filed by a taxpayer pursuant to the Internal Revenue

Code.

 

14.     “Generic form” means an electronic or paper form designed for reporting estimated municipal income taxes and annual municipal income tax liability or for filing a refund claim that is not prescribed by a particular municipal corporation for the reporting of that municipal corporation’s tax on income.

 

15.     “Gross receipts" means total income of taxpayers from whatever source derived.

 

16.     “Income from a pass-through entity” means partnership income of partners, membership interests of members of a limited liability company, distributive shares of shareholders of an S corporation, or other distributive or proportionate ownership shares of income from other pass-through entities.

 

17.    “Intangible income” means income of any of the following types:  income yield, interest, capital gains, dividends, or other income arising from the ownership, sale, exchange, or other disposition of intangible property including, but not limited to, investments, deposits, money, or credits as those terms are defined in Chapter 5701 of the Ohio Revised Code, and patents, copyrights, trademarks, trade names, investments in real estate investment trusts, investments in regulated investment companies, and appreciation on deferred compensation.  “Intangible income” does not include prizes, awards, or other income associated with any lottery winnings or other similar games of chance.

 

18.    "Internal Revenue Code" means the Internal Revenue Code of 1986, 100 Stat. 2085, 26 U.S.C. 1, as amended.

 

19.    "Internet" means the international computer network of both Federal and nonfederal interoperable packet switched data networks, including the graphical sub network known as the World Wide Web.

 

20.    "Joint Economic Development District" means districts created under the Ohio Revised Code sections 715.70 through 715.83, as amended from time to time.

 

21.    “Limited liability company” means a limited liability company formed under Chapter 1705 of the Ohio Revised Code or under the laws of another state.

 

22.    "Municipality" means the City of Marysville.

 

23.    “Net profit” for a taxpayer other than an individual means adjusted federal taxable income and “net profit” for a taxpayer who is an individual means the individual’s profit, other than amounts described in division (F) of section 141.03, required to be reported on schedule C, schedule E, or schedule F.

 

24.    “Nonqualified deferred compensation plan” means a compensation plan described in section 3121(v)(2)(C) of the Internal Revenue Code.

 

25.    "Nonresident" means an individual domiciled outside the Municipality.

 

26.    “Nonresident incorporated business entity” means an incorporated business entity not having an office or place of business within the Municipality.

 

27.    “Nonresident unincorporated business entity” means an unincorporated business entity not having an office or place of business within the Municipality.

 

28.    “Other payer” means any person, other than an individual’s employer or the employer’s agent that pays an individual any amount included in the federal gross income of the individual.

 

29.    “Owner” means a partner of a partnership, a member of a limited liability company, a shareholder of an S corporation, or other person with an ownership interest in a pass-through entity.

 

30.    “Owner’s proportionate share”, with respect to each owner of a pass-through entity, means the ratio of (a) the owner’s income from the pass-through entity that is subject to taxation by the municipal corporation, to (b) the total income from that entity of all owners whose income from the entity is subject to taxation by that municipal corporation.

 

31.    “Pass-through entity” means a partnership, Limited Liability Company, S corporation, or any other class of entity the income or profits from which are given pass-through treatment under the Internal Revenue Code.

32.    “Person” includes individuals, firms, companies, business trusts, estates, trusts, partnerships, limited liability companies, associations, corporations, governmental entities, and any other entity.

 

      33.    "Place of business" means any bona fide office, other than a mere statutory office, factory, warehouse, or other space, which is occupied and used by the taxpayer in carrying on any business activity, individually or through one or more of his regular employees regularly in attendance.

 

34.    “Principal place of business” means in the case of an employer having headquarters’ activities at a place of business within a taxing municipality, the place of business at which the headquarters is situated.  In the case of any employer not having its headquarters’ activities at a place of business within a taxing municipality, the term means the largest place of business located in a taxing municipality.       

 

35.    "Qualified plan" means a retirement plan satisfying the requirements under section 401 of the Internal Revenue Code as amended.

 

36.    “Qualifying wages” means wages, as defined in section 3121(a) of the Internal Revenue Code, without regard to any wage limitations, adjusted in accordance with section 718.03(A) of the Ohio Revised Code.

 

37.    "Resident" means an individual domiciled in the Municipality.

 

38.    “Resident incorporated business entity” means an incorporated business entity whose office; place or operations or business situs is within the Municipality.

 

39.    “Resident unincorporated business entity” means an unincorporated business entity having an office or place of business within the Municipality.

 

40.    "Return preparer" means any person other than a taxpayer that is authorized by a taxpayer to complete or file an income tax return, report, or other document for or on behalf of the taxpayer.

 

41.    "Schedule C" means Internal Revenue Service schedule C filed by a taxpayer pursuant to the Internal Revenue Code.

 

42.    “Schedule E” means Internal Revenue Service schedule E filed by a taxpayer pursuant to the Internal Revenue Code.

 

43.    “Schedule F” means Internal Revenue Service schedule F filed by a taxpayer pursuant to the Internal Revenue Code.

 

44.    “S corporation” means a corporation that has made an election under subchapter S of Chapter 1 of Subtitle A of the Internal Revenue Code for its taxable year.

 

45.     "Tax Administrator" means the person appointed to administer the Municipality’s Income Tax Ordinance and to direct the operation of the Municipal Income Tax Department or the person executing the duties of the Tax Administrator.  This term may include the Finance Director or his appointed designee.

 

46.     “Taxable income” means qualifying wages paid by an employer or employers, compensation for personal services, other income defined by statute as taxable, and/or adjusted federal taxable income from the operation of a business, profession, or other enterprise or activity adjusted in accordance with the provisions of this Chapter.

 

47.    “Taxable year” means the corresponding tax-reporting period as prescribed for the taxpayer under the Internal Revenue Code.  In the case of a return for a fractional part of a year, the period for which such return is required to be made.

 

48.    “Taxing municipality” means a municipality levying a tax on income earned by noresidents working within such municipality or on income earned by its residents.

 

49.    “Taxpayer” means a person subject to a tax on income levied by a municipal corporation.  “Taxpayer” does not include any person that is a disregarded entity or a qualifying subchapter S subsidiary for federal income tax purposes, but “taxpayer” includes any other person who owns the disregarded entity or qualifying subchapter S subsidiary.

 

B.         The singular shall include the plural, the masculine shall include the feminine and the neuter, and all periods set forth shall be inclusive of the first and last mentioned dates.

 

 

141.03   IMPOSITION OF TAX.

 

A.         Basis of Imposition.  Subject to provisions of section 141.01, an annual tax shall be, and is hereby, levied on and after January 1, 1968, at the rate of one per cent (1%) per annum upon the following:

 

1.      On all qualifying wages, salaries, including sick, vacation, severance and any pay as part of an employee buyout or wage continuation plan, commissions, prize moneys, tips and gratuities, other compensation, and other taxable income earned or received by residents of the Municipality;

 

2.      On all qualifying wages, salaries, including sick, vacation, severance and any pay as part of an employee buyout or wage continuation plan commissions, tips and gratuities, other compensation, and other taxable income earned or received by nonresidents for work done, or services performed or rendered, in the Municipality;

 

3.      On the portion attributable to the Municipality of the net profits earned by all resident unincorporated businesses, pass-through entities, professions or other activities, derived from work done or services performed or rendered, and business or other activities conducted in the Municipality.  On the portion of the distributive share of the net profits earned by a resident owner of a resident unincorporated business entity or pass-through entity not attributable to the Municipality and not levied against such unincorporated business entity or pass-through entity.

 

4.      On the portion attributable to the Municipality on the net profits by all nonresident unincorporated businesses, pass-through entities, professions or other activities, derived from work done or services performed or rendered and business or other activities conducted in the Municipality, whether or not such unincorporated business entity has an office or place of business in the Municipality.  On the portion of the distributive share of the net profits earned by a resident owner of a nonresident unincorporated business entity or pass-through entity not attributable to the Municipality and not levied against such unincorporated business entity or pass-through entity.

 

5.      On the portion attributable to the Municipality of the net profits earned by all corporations that are not pass-through entities from work done or services performed or rendered and business or other activities conducted in the Municipality, whether or not such corporations have an office or place of business in the Municipality.

 

6.      On all income received as gambling winnings as reported on IRS 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.         Businesses Both In and Outside the Municipal Boundaries.  This section does not apply to taxpayers that are subject to and required to file reports under Chapter 5745, of the Ohio Revised Code.  Except as otherwise provided in division (D) of this section, net profit from a business or profession conducted both within and without the boundaries of a municipal corporation shall be considered as having a taxable situs in such municipal corporation for purposes of municipal 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 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 the preceding paragraph, 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;

 

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 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 under section 718.011 of the Ohio Revised Code;

 

c.      Gross receipts of the business or profession from sales made and services performed during the taxable period in such municipal corporation 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 subsections  B. 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 Municipality.

 

.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. 

 

C.        As used in division (B) of this section, “sales made in a municipal corporation” mean:

 

1.   All sales of tangible personal property delivered within such municipal corporation regardless of where title passes if shipped or delivered from a stock of goods within such municipal corporation;

 

2.   All sales of tangible personal property delivered within such municipal corporation regardless of where title passes even though transported from a point outside such municipal corporation if the taxpayer is regularly engaged through its own employees in the solicitation or promotion of sales within such municipal corporation and the sales result from such solicitation or promotion;

 

3.   All sales of tangible personal property shipped from a place within such municipal corporation to purchasers outside such municipal corporation 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.        Except as otherwise provided in division (E) of this section, net profit from rental activity not constituting a business or profession shall be subject to tax only by the municipal corporation in which the property generating the net profit is located.

 

E.         This section does not apply to individuals who are residents of the Municipality and, except as otherwise provided in section 718.01 of the Ohio Revised Code, the Municipality may impose a tax on all income earned by residents of the Municipality to the extent allowed by the United States Constitution.

 

F.         Net Operating Loss (NOL).

 

1. The Municipality does not allow a net operating loss carryback or carryforward.

 

2.   The net loss from an unincorporated business activity may not be used to offset salaries, wages, commissions (to the extent that they are reported on form W-2) or other compensation. However, if a taxpayer is engaged in two or more taxable business activities to be included in the same return, the net loss of one unincorporated business activity (except any portion of a loss reportable for municipal income tax purposes to another municipality) may be used to offset the profits of another for purposes of arriving at overall net profits.

 

 

G.        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.  A consolidated return must include all companies that are so affiliated.

 

H.         Exclusions.

 

The provisions of this Chapter shall not be construed as levying a tax upon the following:

 

1.           Proceeds from welfare benefits, unemployment insurance benefits, social security benefits, and qualified retirement plans as defined by the Internal Revenue Service.

 

2.           Proceeds of insurance, annuities, workers’ compensation insurance, permanent disability benefits, compensation for damages for personal injury and like reimbursements, not including damages for loss of profits and wages.

 

3.           Dues, contributions and similar payments received by charitable, religious, educational organizations, or labor unions, trade or professional associations, lodges and similar organizations.

 

4.           Gains from involuntary conversion, cancellation of indebtedness, interest on Federal obligations and income of a decedent’s estate during the period of administration (except such income from the operation of a business).

 

5.           Alimony.

 

6.           Compensation for damage to property by way of insurance or otherwise.

                   

7.                     Interest and dividends from intangible property.

 

8.           Military pay or allowances of members of the Armed Forces of the United States and of members of their reserve components, including the Ohio National Guard (ORC 718.01).      

 

9.           Income of any charitable, educational, fraternal or other type of nonprofit association or organization enumerated in Ohio Revised Code 718.01 to the extent that such income is derived from tax-exempt real estate, tax-exempt tangible or intangible property, or tax-exempt activities.

 

10.         Any association or organization falling in the category listed in the preceding paragraph receiving income from non-exempt real estate, tangible or intangible personal property, or business activities of a type ordinarily conducted for profit by taxpayers operating for profit shall not be excluded hereunder.

 

11.         In the event any association or organization receives taxable income as provided in the preceding paragraph from real or personal property ownership or income producing business located both within and without the corporate limits of the Municipality, it shall calculate its income apportioned to the Municipality under the method or methods provided above.

 

12.         If exempt for federal income tax purposes, fellowship and scholarship grants are excluded from Municipal income tax.

 

13.         The rental value of a home furnished to a minister of the gospel as part of his compensation, or the rental allowance paid to a minister of the gospel as part of his compensation, to the extent used by him to rent or provide a home pursuant to section 107 of the Internal Revenue Code.

 

14.         Compensation paid under section 3501.28 or 3501.36 of the Ohio Revised Code 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 may be subjected to taxation.  The payer of such compensation is not required to withhold Municipal tax from that compensation.

 

15.         Compensation paid to an employee of a transit authority, regional transit authority, or a regional transit commission created under Chapter 306 of the Ohio Revised Code for operating a transit bus or other motor vehicle for the authority or commission in or through the Municipality, 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, or the headquarters of the authority or commission is located within the Municipality.

 

16.         The Municipality shall not tax the compensation paid to a nonresident individual for personal services performed by the individual in the Municipality on twelve (12) or fewer days in a calendar year unless one of the following applies:

 

a.      The individual is an employee of another person, the principal place of business of the individual’s employer is located in another municipality in Ohio that imposes a tax applying to compensation paid to the individual for services paid on those days; and the individual is not liable to that other municipality 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, or an employee of such promoter, all as may be reasonably defined by the Municipality.

 

17.          The income of a public utility, when that public utility is subject to the tax levied under section 5727.24 or 5727.30 of the Ohio Revised Code, except a municipal corporation may tax the following, subject to Chapter 5745. of the Ohio Revised Code:

 

               a.   The income of an electric company or combined company;

 

               b.   The income of a telephone company.

 

               As used in division (F)(17) of this section, “combined company”, “electric company”, and “telephone company” have the same meanings as in section 5727.01 of the Ohio Revised Code.

 

18.          An S corporation shareholder’s distributive share of net profits of the S corporation, other than any part of the distributive share of net profits that represents wages as defined in section 3121(a) of the Internal Revenue Code or net earnings from self-employment as defined in section 1402(a) of the Internal Revenue Code, to the extent such distributive share would not be allocated or apportioned to this state under division (B)(1) and (2) of section 5733.05 of the Ohio Revised Code if the S corporation were a corporation subject to the taxes imposed under Chapter 5733. of the Ohio Revised Code.

 

19.                    Personal earnings of any natural person under eighteen years of age.

 

20.                    On the first one thousand dollars ($1,000) of income received by any mentally retarded or developmentally disabled employee from a sheltered workshop for adults with mental retardation and developmental disabilities operating in compliance with rules, regulations and standards set by the Ohio Department of Mental Retardation and Developmental Disabilities.

 

21.          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.