Query targets S corporations
The election is the only time the issue can be on the ballot.
By DAVID SKOLNICK
VINDICATOR POLITICS WRITER
YOUNGSTOWN -- Some Mahoning Valley voters will see a question on the November ballot that may leave them scratching their head.
In a number of communities with local income taxes, residents will be asked this question: "Shall the city [or village] continue to tax net profits of S corporations?"
An S corporation, an IRS designation, is similar to a partnership that allows profits to flow through shareholders, said John Mahoney, Ohio Municipal League deputy director. Those profits given to the shareholders are subject to local income taxes, he said.
A law passed by the state Legislature requires communities wanting to continue to tax net profits of S corporations -- which could be law firms, real estate agencies or small partnerships -- to place the question in front of voters on the Nov. 2 ballot, Mahoney said.
The Valley cities and villages with local income taxes putting the question on the November ballot are Canfield, Campbell, Sebring, East Liverpool, East Palestine, Lisbon and Salem.
If the question fails, Canfield will lose about $300,000 annually, said City Manager Charles Tieche.
"If it goes down in defeat, we'd have to either make cuts or increase taxes," he said.
Mahoney said some cities and villages receiving little to no tax net profits from S corporation shareholders are opting to not put the question on the November ballot.
"They look at how much tax revenue they'd lose and if it's not much, they're opting not to collect," he said. "But they may regret it because this is the only year they can do it. The statute says, 'This year or never.'"
Dan Brott, Youngstown income tax commissioner, said the city didn't put the question on the ballot because of the minimal amount of money it collects from the provision.
"There aren't many people who live in the city who collect dividends from S corporations," he said. "We don't tax city residents who receive dividends from businesses outside the city. It's not taxable in the city, and never has been."
skolnick@vindy.com