City to line up with HB 5 and Chapter 718 of the ORC


By Frank Lewis

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Portsmouth City Council gave first reading to an ordinance to amend Chapter 181 of the Codified Ordinances of the city of Portsmouth regarding Municipal Income Tax per House Bill 5 and Chapter 718 of the Ohio Revised Code to take effect in January 2016.

“The basis for the changes were to make uniform tax phase applicable across the board basically in municipal corporations that levy income tax,” Portsmouth City Auditor Trent Williams said. “For one thing, finding the income tax that can and cannot be taxed throughout Ohio cities. Also establishing uniform tax rules and regulations to the extent that that’s possible from one city to another.”

Williams said some of the specific things were Net Operating Loss carried forward for five years, which the city already has. He said that period ranged from zero years to 10 years across Ohio. He said it also deals with people who come into the city to work for a number of days. Williams took the opportunity to give an overview of all of the features of the bill including the necessity to post the Taxpayer Bill of Rights on the city’s website.

HB 5 modifies the “casual” entrant exemption to increase the number of days, from 12 to 20 per year, that an individual may work in a non-principle-place-of-business municipality without incurring income tax liability there, defines a day (preponderance standard – only withhold to one municipality per calendar day), and to further define how the exemption does not apply to professional athletes, entertainers, and public figures.

It provides that the casual entrant rule applies to all compensation, and creates a separate exemption that prohibits the taxation of income of employees of businesses with less than $500,000 in annual revenue by any municipality other than the municipality where the business’ fixed location is located.

It also requires a business that reasonably anticipates that it will be providing services in a municipality for 21 days or more in a calendar year to withhold municipal income taxes in that city for all employees from day one and makes changes to the definition of principal place of work to provide a mechanism to determine how to allocate qualifying wages for employees who work the same number of days in two or more municipal corporations.

“The issue that’s killing all of the cities is the Net Loss carried forward. Some people have zero,” Portsmouth City Manager Derek K. Allen said. “And it got changed to five and it doesn’t impact us because we’re already there. There are cities out there that once that gets put in there they’re going to lose hundreds of thousands of dollars in income tax because companies then can put those losses towards their income tax, where before they didn’t recognize business losses. That was the battle ground right there. It didn’t affect us for once because we were already there at five years.”

Portsmouth City Solicitor John Haas said there are other discussions floating around Columbus that could also have an adverse affect on Portsmouth’s economy.

“What will affect us now is the bill that’s now being discussed in the Legislature now doing away with the city’s ability to tax individuals who do not live in the city,” Haas said. “Even though you work here, if you live outside the city, if this passes, we will not be able to collect income tax from those people.”

Williams cautioned that discussion is not part of House Bill 5, the legislation the city was dealing with in the current ordinance.

Reach Frank Lewis at 740-353-3101, ext. 1928, or on Twitter @franklewis.

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