GALLIPOLIS — Gallipolis City Commissioners passed a new series of ordinances Tuesday to bring the city tax code more in line with that of the state.
“We had to basically adopt a whole new set of ordinances that would allow us to be consistent with House Bill 5,” said Ronnie Lynch, city income tax department representative.
House Bill 5 was passed by state Legislature and went into effect Jan. 1, 2015. It revamps the state tax code and how municipalities can collect income tax from businesses.
“There is a lot of gray area in it. As we’ve had the revised tax code that was roughly 30 pages long, the currently revised one is more than 100,” Lynch said.
Lynch has told the Tribune that colleagues he had spoken with said the state tax code may have had three different interpretations of how it could be applied. Lynch felt the tax code was not as well organized as it might be.
“It’s written so vaguely, a lot of people will interpret it in different ways,” Lynch said in September. “The courts will likely weigh in here and normally they side with the taxpayer.”
Lynch said that an accounting technique called “net loss-carry forward” was being phased in with the passage of House Bill 5. The city, in the past, had not allowed for that.
Net loss-carry forward is an accounting technique that takes the year’s net operating loss for a business entity and applies it to future years’ gains so one can reduce tax liability. Because of this added technique with House Bill 5’s passage, the city is potentially looking at less revenue. If companies have a negative net operating income in one year but no positive negative net operating income in following years, the business could potentially reduce its tax expense for some of the years by applying a loss seen in the first year.
“It’s essentially ordinances that incorporate the languages of House Bill 5,” Lynch said. “There really wasn’t much room for us to make any changes (deviating from House Bill 5). We made a few small changes, but not many.”
The phasing in of the net loss-carry forward technique has been a concern for city officials as they feel it may mean less revenue for city services on an already reportedly tight budget.
Dean Wright can be reached at (740) 446-2342, Ext. 2103.