Bonnie Duff, Marietta’s deputy tax administrator, speaks to Marietta City Council members about a decrease in business tax revenue for 2024 during a Finance Committee meeting on Thursday. (Photo by Michelle Dillon)

Marietta City Council members discussed a decline in business tax revenue and a possible requirement to file a municipal income tax return on Thursday.

During a Finance Committee meeting, the city’s deputy tax administrator, Bonnie Duff, spoke to the council about a decline in the city’s business tax revenue.

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

The tax has “was significantly influenced by the state parliament” in terms of a company’s profits and losses, Scales said, and after talking to Duff about it, he is “I’m very, very concerned about this because it can have a significant impact on our funding in the long term.”

Duff explained the reasons why the amount the city will receive for the tax in 2024 is lower than the amount in 2023.

She said the first reason for the drop in revenue is that businesses can file their tax returns with the Ohio Department of Taxation, and that is “where we lost a large part of our profits, namely through the state.”

According to Duff, from 2018 to 2022, Ohio businesses were allowed to deduct 50% of their operating losses from net income on their tax returns, and starting in 2023, they will be able to deduct 100% of their operating losses. She said the 100% deduction will last through 2027.

Scales pointed out that losses can also be carried forward when deducting. So even if a company made a profit in one year, it can still carry forward losses if it made a loss in the previous year.

Duff called the trigger “Our number one concern” and said they are mandatory, so there is nothing the city can do about it. Duff shared information on how the deduction has so far affected the city’s 2024 MNP tax revenue.

“At the moment we are in the red, as of today, for companies it is 422,000 dollars,” she said. “Last year, this year, we saw an increase of $894,000.”

She said the amount collected in June was $489,000 less than it would be in 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 in August of this year.

“Basically, the state comes and takes our money,” Said Duff.

Companies will be granted an extension to pay taxes until November 15, so they do not yet know the actual amount collected for the MNP tax, she said.

Scales expressed concern about the impact this will have on the city.

“Ladies and gentlemen, this will have a major impact in the next four or five years,” he said, adding that the general fund will be most affected, followed by the road fund.

According to Duff, the state and other municipalities are also affected by the deduction. She said the state of Ohio has collected 8.4% less in taxes since April because the loss deduction is 100%. She also said she called the city of Athens and they have received about $400,000 to $500,000 less, and the cities of Caldwell and Cambridge say the same.

“The state, I mean, they predict that this will hurt every community,” Said Duff.

After Nov. 15, she will have a better forecast of the city’s MNP tax revenue, Duff said.

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

Duff shared her thoughts on the subject.

“First of all, we need additional staff,” Said Duff.

She said her department is currently short one person because one of her employees left because she thought the city would outsource the collection of municipal income taxes to an outside contractor.

She does not believe that mandatory tax filing will pay off in the long run and is concerned about the impact it would have on citizens with tax-free income, such as retirees, Duff said.

Duff suggested several ways to increase the number of people filing their local income tax returns.

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

She also said that a reminder to file a tax return could be included with the city’s water bills.

Scales suggested meeting again in February to discuss the city’s position on the issue of mandatory municipal income tax filing.

The Council then decided to hold a closed session to prepare, conduct or review negotiations or collective bargaining with public employees regarding their remuneration or other terms and conditions of employment.

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