College Students and Lakewood Parents

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robert klann
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Joined: Wed Sep 16, 2009 8:07 am

College Students and Lakewood Parents

Postby robert klann » Tue Mar 14, 2017 8:31 pm

FYI at tax season, City of Lakewood removed the exemption for full time college students. Full time college students are now expected to file and pay local income tax. The exemption I found had been a standard exemption as far back as 2003 when Lakewood was part of R.I.T.A.

Would love if there is a CPA or tax advisor out there who could weigh in on my daughters situation. Goes to school out of state and earned all W2 money out of state. Lived at home maybe a month, probably less, but kept legal address as Lakewood - felt her vote counted more in Ohio than in her college state. Is there some fine print I am glossing over that excludes her income from Lakewood calculation?

Thank you in advance for any tax input.


Bridget Conant
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Re: College Students and Lakewood Parents

Postby Bridget Conant » Tue Mar 14, 2017 8:43 pm

I had to go look and see it to believe it. And you are right, the exemption for college students is NO LONGER on the Exemption form.

http://www.onelakewood.com/wp-content/uploads/2017/02/DecExempt-v16-Update.pdf


When did this change occur. I don't recall any discussion or notice about this.

Guess it's another example of the "nickel and diming" we can expect.


Bridget Conant
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Re: College Students and Lakewood Parents

Postby Bridget Conant » Tue Mar 14, 2017 9:59 pm

I'd hope Dan OMalley would comment.

Are we now taxing college students who work during school? Like they don't already struggle to pay the cost of college?

Why are we nickel and diming like this?

Council wants to make landlords responsible for "turning in" their tenants in case they might possibly not file taxes. Now you're going after college students.

This is unbelievably ridiculous and smacks of desperation.

I thought Jen Pae insisted we could weather the loss of the hospital tax income.

Is this a sign that we cannot?


Michael Deneen
Posts: 1955
Joined: Fri Jul 08, 2005 4:10 pm

Re: College Students and Lakewood Parents

Postby Michael Deneen » Tue Mar 14, 2017 10:03 pm

Bridget Conant wrote:I thought Jen Pae insisted we could weather the loss of the hospital tax income.


Jen Pae is a straight-up liar.
It will become increasingly obvious as the months go by.


Dan OMalley
Posts: 72
Joined: Wed Jun 03, 2015 4:33 pm

Re: College Students and Lakewood Parents

Postby Dan OMalley » Tue Mar 14, 2017 10:48 pm

Unfortunately the elimination of this exemption was mandated by the state of Ohio. A new Ohio law states that cities are no longer able to create such exemptions that aren't uniformly available in other Ohio municipalities. Since this was the case for the full-time student exemption, it was required to go. While we're on the subject, you should know that the governor and state legislature are increasingly regulating - and attempting to entirely take over - municipal tax policy and collection.


Dan O'Malley
Bridget Conant
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Re: College Students and Lakewood Parents

Postby Bridget Conant » Tue Mar 14, 2017 11:02 pm

Thank you for responding! I do appreciate it.

May I ask why it seems to have taken so many by surprise? It doesn't affect me, but I had no idea it was changed.

The mayor likes to use the water bill to "communicate." Perhaps this was something that should have been communicated to the residents prior to tax season?


Bridget Conant
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Re: College Students and Lakewood Parents

Postby Bridget Conant » Wed Mar 15, 2017 7:23 am

Here are details on HB5, which is the Ohio law in effect for 2016 regarding municipal tax

http://www.lsc.ohio.gov/analyses130/h0005-i-130.pdf

I'm not seeing where communities are unable to exempt certain income unless they all do statewide.

The state made certain income exempt that might not have been exempt in some cities, like sick pay from third party payers, and required certain other income (clergy) to be taxed, but nothing says a community cannot have its own exemption for college students unless every community in the state does the same. In fact, it has several sections that indicate communities can exempt income from sources unless the state specially says that income isn't exempt.

Mr O'Malley, can you tell me in more detail why the city believes it cannot exempt college students?


Bridget Conant
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Re: College Students and Lakewood Parents

Postby Bridget Conant » Wed Mar 15, 2017 8:02 am

This uniform de nition of taxable income will necessitate changes for those municipal corporations that currently have a tax base that di ers from the HB 5 de nition of taxable income. For example, municipal corporations that currently tax the cancellation of indebtedness income of an individual may no longer do so for taxable years that begin on or after January 1, 2016, unless the cancellation of indebtedness income is part of the individual’s net pro t from the operation of a trade or business (including the distributive share of net pro t from a pass-through entity). Cancellation of indebtedness income that does not arise from a trade or business is not within the HB 5 de nition of “taxable income” for an individual and is therefore no longer eligible for taxation by a municipal corporation. By contrast, although lottery and other gambling winnings are within the HB 5 de nition of “taxable income,” a municipal corporation may elect to exclude lottery or gambling winnings, or any other type of taxable income, from its taxable income base. The Ohio Supreme Court held in Gesler v. Worthington Income Tax Board of Appeals, Slip Opinion No. 2013-Ohio-4986, that the Ohio General Assembly may limit the types of income on which municipal corporations can levy an income tax, but the General Assembly cannot compel municipal corporations to tax specific items of income


From here:
http://www.publicfinancetaxblog.com/files/2014/12/SPB-Analysis-of-Ohio-HB-5.pdf

Again, the law did require some uniformity in respect to income that should be either taxable or non-taxable across the state, but it appears that there is still the ability to exempt college students.


mjkuhns
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Contact:

Re: College Students and Lakewood Parents

Postby mjkuhns » Wed Mar 15, 2017 8:22 am

Very enlightening, Ms. Conant.

I also hope that someone from city hall can provide more information here.

I know that multiple other council members, and department directors, already have accounts. If any have lost their password:
Don’t panic! While your password cannot be retrieved, it can easily be reset. Visit the login page and click I forgot my password. Follow the instructions and you should be able to log in again shortly.
However, if you are not able to reset your password, contact a board administrator.


:: matt kuhns ::
Bridget Conant
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Re: College Students and Lakewood Parents

Postby Bridget Conant » Wed Mar 15, 2017 8:48 am

I understand HB5 was passed to "simplify" the tax code and insure some uniformity across the state. I do get that. But I do not see anywhere that a municipality cannot choose to exempt the income of college students who do not live at home. In most all cases, these students live out of Lakewood or even out of state so their earnings, however paltry, are not even earned in the city.


Tim Liston
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Joined: Sun Aug 07, 2005 3:10 pm

Re: College Students and Lakewood Parents

Postby Tim Liston » Wed Mar 15, 2017 9:19 am

Dan OMalley says: “Unfortunately the elimination of this exemption was mandated by the state of Ohio.”

This is surely disingenuous. It reminds me of the “dismay” the giant food companies (General Mills, Kellogg, etc.) feel at being prohibited by the State of California from disclosing the GMO content (and non-content!) of their packaged food products. Which prohibition they helped engineer behind the scenes….

I’m vaguely aware of the negotiation taking place between the state of Ohio, one of only about a dozen states that does not prohibit municipalities from levying income taxes, and its municipalities to “streamline” the collection of such taxes. Something tells me that the municipalities will end up with more than they have now. Perhaps eventually they’ll all “have to” start charging at least 2%....

I would be curious to know, as Bridget brought up, if Lakewood really is forced to start collecting tax on W-2 income earned by full-time college students. Seems unlikely. But I would be WAY more interested to know if Lakewood, in the interest of becoming consistent with other Ohio municipalities, will stop collecting tax on S Corp dividends received by Lakewood residents, as last I knew very few municipalities demand taxes on such dividends. And none near us. No municipality levies taxes on C Corp dividends, not even Lakewood.

In the meantime I’ll let my daughter know that 1.5% of the money she earned last summer from an internship won’t be available to pay senior-year tuition or her student loans. Thank you. May I have another….

Oh and I agree with the posters who wonder why we only become aware of such changes second-hand. Lakewood sends me correspondence several times a year regarding my city taxes. Not just vouchers for quarterly estimated payments and such, but also for example to remind me that, effective recently, the city is getting serious about penalties for late payment. But not one letter to my daughter, who has recently filed such exemptions and is surely known to be (or very recently have been) subject to them.


Bridget Conant
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Re: College Students and Lakewood Parents

Postby Bridget Conant » Wed Mar 15, 2017 9:58 am

This case, Gesler v Worthington, determined that a home rule city Does not Have to tax certain income, and may have exemptions. It is cited extensively in regard to HB5.

http://www.vorys.com/publications-1150.html

The Court agreed holding Worthington's decision not to tax schedule C business income was a valid exercise of the powers granted to Worthington by the Ohio Constitution, and that the Ohio General Assembly "cannot command Worthington to impose tax on Schedule C income when Worthington has chosen not to tax that income***."


So, if Lakewood chooses to not tax the income of students residing in the city for no more 16 weeks per year (summer break), which is what the exemption required, then what stops the city from continuing that longstanding practice?

The idea of uniformity across Ohio appears to be addressed in the bill more in terms of using common dates, filing requirements, penalty and estimated tax payment dates so that those operating in multiple municipalities, like a business, can cease to worry about all these administrative differences and follow one schedule.


Dan OMalley
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Joined: Wed Jun 03, 2015 4:33 pm

Re: College Students and Lakewood Parents

Postby Dan OMalley » Wed Mar 15, 2017 10:09 am

Tim Liston wrote:Dan OMalley says: “Unfortunately the elimination of this exemption was mandated by the state of Ohio.”

This is surely disingenuous. It reminds me of the “dismay” the giant food companies (General Mills, Kellogg, etc.) feel at being prohibited by the State of California from disclosing the GMO content (and non-content!) of their packaged food products. Which prohibition they helped engineer behind the scenes….


Really? Because Lakewood officials - many predating my time on council - were quite publicly vocal about their opposition to HB5. Council unanimously passed a resolution to strongly oppose the changes - twice - as a means of making the city's position known and also communicating the dangers of the bill to the public. The prohibition from offering certain exemptions is just one of the many ways HB5 will impact local communities.

Bridget I'm not a lawyer or an accountant but the examples you're citing refer to exempting types of income, not statuses like being a full-time student. It is not a small distinction. I am glad to look into it more but it seems clear to me that we no longer have the latitude to offer this kind of exemption. Again I wish it were not the case.


Dan O'Malley
Bridget Conant
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Joined: Wed Jul 26, 2006 4:22 pm

Re: College Students and Lakewood Parents

Postby Bridget Conant » Wed Mar 15, 2017 10:15 am

It's generally income earned outside the city of Lakewood, not necessarily that they are full time students.

Also, they are technically part time residents. The exemption clearly indicates that they don't reside in the city more than 16 weeks per year.


Bridget Conant
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Joined: Wed Jul 26, 2006 4:22 pm

Re: College Students and Lakewood Parents

Postby Bridget Conant » Wed Mar 15, 2017 12:13 pm

http://onelakewood.com/pdf/Tax/05Instr%20-%20L1.pdf

Here is the instruction form from last year. As noted, there is an exemption for:

6. Full-time college student – Residents of Lakewood who attend an accredited college or university on a full-time basis and do not reside within the city more than 16 consecutive weeks during the year are exempt from paying Lakewood residence tax. Attach proof such as report cards or billing statements for all semesters/quarters of the taxable year.


This is an exemption due to not living in the city for more than 16 weeks, which would cover almost all students who live on or off campus and not at home. You still must show you are a full time student, but that alone isn't the main requirement.



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