Council discusses business tax collection decreases and mandatory income tax filing | News, Sports, Jobs

Marietta Deputy Tax Administrator Bonnie Duff speaks to Marietta City Council members Thursday about a decrease in business tax collections for 2024 during a Finance Committee meeting. (Photo by Michelle Dillon)

Marietta City Council members discussed a downturn in business tax collections and possible mandatory municipal income tax filing Thursday.

During a Finance Committee meeting, City Deputy Tax Administrator Bonnie Duff spoke with council about a decrease in business tax collections for the city.

Finance Committee Chair and Ward 1 Councilman Michael Scales called the tax a business income tax and the Ohio Department of Taxation’s website calls it the municipal net profit (MNP) tax. The rate for this tax in Marietta is 1.85% according to city tax year 2023 business tax forms.

The tax has “been majorly impacted by the state legislature” in relation to a business’ profits and losses, Scales said, and after talking to Duff about it he is “very very concerned about this one because it can have a major long term impact on our funding.”

Duff discussed the reasons why the amount the city is receiving for the tax for 2024 is lower than what it received in 2023.

She said the first reason the collections are down is businesses can file with the Ohio Department of Taxation and that is “where we lost a lot of our profit, through the state.”

From 2018-2022 businesses in Ohio were allowed to deduct 50% of their operating losses from the net profits amount on their tax form and as of 2023 they can deduct 100% of their operating losses, according to Duff. She said the 100% deduction will last through 2027.

Scales pointed out there is a carryover too for the deduction, so even if a business has a profit one year if it has losses the previous year it can carry the losses over.

Duff called the deduction “our biggest number one concern” and said they are mandatory so there is nothing the city can do about it. Duff shared information about how the deduction has affected the city’s MNP tax collections so far for 2024.

“Right now we’re down, as of today, in the businesses, we’re down $422,000,” she said. “Last year, current year to date, we were up $894,000.”

She said that they were down $489,000 in the amount they collected as of June compared to June 2023. She also said the amount the city received from the state of Ohio for the tax was $337,000 in August 2023 and is $120,000 as of this August.

“Basically the state is coming in and taking our money,” Duff said.

Businesses have an extension to pay the taxes until Nov. 15 so she does not know the true extent of what the amount collected for the MNP tax will be yet, she said.

Scales expressed his concern over what effect all of this will have on the city.

“So basically ladies and gentlemen, this is going to have a major impact on the years going out for the next four or five,” he said, adding the general fund will be impacted the most by this, followed by the street fund.

The state and other municipalities are being affected by the deduction too, according to Duff. She said the state of Ohio has collected 8.4% less in the tax since April because of the 100% loss deduction. She also said she called the city of Athens and they are down about $400,000 or $500,000 and the cities of Caldwell and Cambrdige are saying the same thing.

“The state, I mean they’re predicting this is going to hurt every municipality,” Duff said.

After Nov. 15 she will have a better projection of the amount the city will collect in the MNP tax, Duff said.

The discussion at the meeting then turned to mandatory municipal income tax filing for people who live and work in Marietta.

Duff shared her thoughts on the matter.

“First of all we would require additional manpower,” Duff said.

She said her department is down a person right now because one of her workers left because she thought the city was going to switch municipal income tax collections to an outside contractor.

She does not believe mandatory filing will be cost effective in the long run and she is concerned about the effect it would have on citizens who have non taxable income, like retirees, Duff said.

Duff proposed some ways to help increase the amount of people who file their municipal income tax returns.

The Belpre-Marietta Health Department and the city’s water and engineering departments are willing to work with the municipal income tax office to give them reports pertaining to residents in the city, Duff said.

She also said they could insert a reminder about filing a return in city water bills.

Scales suggested reconvening in February to see where the city stands on the issue of mandatory municipal income tax filing.

Then council voted to go into executive session for the purpose of preparing for, conducting or reviewing negotiations or bargaining sessions with public employees concerning their compensation or other terms and conditions of their employment.

The next Finance Committee meeting will be 5:30 p.m. Aug. 26 in Room 10 of the Marietta Armory.