A new income tax code with sweeping changes is being forced on every city and village in Ohio by Jan. 1.
Oberlin finance director Sal Talarico explained to city council members Monday how the new code will restrict municipalities from levying an income tax unless it meets set requirements.
“They have set a very fine line for us,” he said.
If city officials want to put an income tax levy on the ballot in the future they could be questioned about it, Talarico said: “We don’t have much of a choice.”
The one area where Talarico sees the new code hurting the city is the changes made in the net operating loss caryforward, which allows new businesses to report losses reflecting their startup costs. He said Oberlin has a three year carryforward but the new code requires five years.
“This by far is expected to cost us the most,” siad Talarico, projecting that change alone with mean a $42,000 hit for Oberlin.
The new code will benefit any non-resident employee such as a roofer or paver who works less than 20 days in the city because they will not have to pay taxes.
Talarico said after the 21st day the employees will have to pay taxes retroactively. The city previously allowed up to 12 days of work tax-free.
He is including a provision to the code that will require property owners who rent their homes to provide the city with contact information for the renters periodically throughout the year.
The code changes will also make all winnings from lottery, gambling, and sweepstakes taxable.
“If someone wins $1 million they pay $25,000 to the city,” Talarico said. Oberlin’s previous code would have exempted the first $1 million in winnings from being taxed.
One tax code provision city officials don’t want to touch is an exemption on income taxes for workers under 18 years of age.
The mountain of changes is being mandated by the Ohio General Assembly. Local officials have little say in the decisions, which were passed last year as part of House Bill 5.
Valerie Urbanik can be reached at 440-775-1611 or on Twitter @ValUrbanik.