If the business owns rental properties, conducts business, performs services, solicits sales, operates, or maintains an office in Findlay, the tax is imposed first on the business based on the income that is attributable to Findlay. Resident individual partners, members, and shareholders must then report their untaxed distributive shares. An LLC taxed as a corporation by the IRS will be taxed as a corporation by Findlay. An LLC owned by only one person will be taxed as a sole proprietorship. (The S corporation shareholder provision was effective January 2002.)
For example, 78 percent of a pass-through entity’s $30,000 loss is attributable to Findlay. The pass-through entity has five individual owners who share losses equally. The entity is required to file a return and report a loss attributable to Findlay of $23,400 ($30,000 x 78%). Each resident individual S corporation shareholder (to the extent the S corporation’s income is apportioned within Ohio), partner, or member is permitted to report a loss of $1,320 [$30,000 x 20% share x (1 – 78%)].
Arlington is prohibited from imposing tax on resident shareholders’ distributive shares from S corporations. Bills originating in both the Ohio House and the Senate established voting requirements available only to communities that were imposing tax on this income by ordinance, rule, or regulation as of December 2002, which the Village was not. Senate Bill 180 of the 124th Ohio General Assembly established a November 2003 voting requirement for distributions from interstate S corporations, followed by House Bill 127 of the 125th Ohio General Assembly that established a November 2004 voting requirement for distributions from intrastate S corporations. As a result, Arlington is eligible to impose tax on S corporations only at the entity level.