Thursday, October 7, 2004

Mason wants voter OK on its 'S corporation' tax

If approved, city will keep collecting from businesses

By Erica Solvig
Enquirer staff writer

MASON - Voters are being asked to maintain the status quo when it comes to the city's taxing authority this November.

At issue is whether the city should continue taxing income from "S corporations" - a type of small-business partnership with pass-through taxation allowed under federal tax law - as it has been since Mason's tax ordinance was adopted in 1970.

"This is not a new tax," Finance Director Jennifer Heft said. "This just simply allows the city to continue business as we have always done in the past."

The city doesn't know how much cash it would lose if voters say no. The city does not track this type of tax since people lump S corporations' income and losses in with other items such as rental real estate, trusts and partnerships when they file their taxes, Heft said.

An S corporation status means the corporation itself doesn't pay income tax; instead, income taxes are paid by the corporation's owners.

Council was prompted to put the item on the ballot after state legislators passed a law saying communities have to get voters' approval to maintain such a taxing process. Council voted 5-1 to put the issue on the Nov. 2 ballot, with Councilman Tom Grossmann saying no because he feels the tax is unfair.

Mason's not the only community confronted with the issue. Last November, voters in two affluent Hamilton County communities - Wyoming and Indian Hill - renewed their communities' authority to keep taxing S corporations.

The Chamber of Northeast Cincinnati has not taken an official stance on the issue, though President John Harris said he's heard from several S corporation businesspeople who have concerns with the tax.

If Mason voters say no to the issue, Heft says the city will decide what to do once it begins tracking the losses.

"We will lose revenues, but how much we're unsure of," Heft said.



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