Revised net profit tax passes first reading

The Harrison County Fiscal Court approved the first reading of the ordinance streamlining the occupational and net profits tax, including a $15,000 gross income threshold on taxing rental properties.

The move comes after the court has gone back and forth, discussing if and how to place a threshold or exemption on the previously untaxed area.

Tax administrator Melody Wright gave a presentation to magistrates demonstrating how different tax returns would lend to different net profits owed.

One example was a property which fell under the proposed $15,000 gross receipts threshold, with no tax owed.

A second was for three properties which totaled $25,000. Taxes would be applicable on the net profit on that return.

A third alternative was for the same three properties, but with a loss instead of a profit. There would be no tax owed, even though the gross receipts were over $15,000.

Wright said the $15,000 was not an exemption, but rather a test to determine whether rental properties were investments or businesses.

Local landlords had appeared at earlier meetings explaining that the Internal Revenue Service classifies them as investments.

District 8 Magistrate Bradley Copes said he understood Wrights presentation, but didnt agree with the threshold being placed on gross receipts, a position he held at the last meeting.

His idea was to have an exemption on a net profit - he had suggested $5,000 or $10,000 before - to make the tax more fair.

Income is income and profit is profit, he said. If youre taxing one person and not taxing another, theres not a thing fair about it.

Jim Riddell, president of the Cynthiana-Harrison County Landlords Association, said that with a $15,000 threshold in place, inflation would quickly make properties which had been exempt eligible.

If youre going to have the tax and youre going to have some kind of threshold, and wanted it to be even... I think the net would be the best and with a figure thats adequate, he said.

I would love to be able to pay taxes after my expenses that I have on my income, said Wright, referring to the occupational tax, which is 1.5 percent of an employees complete gross income.

She said savvy landlords would be able to manipulate their expenses to avoid the tax.

Harrison County Judge-Executive Alex Barnett said the $15,000 threshold would help the county separate the small landlords - such as those who inherited a house - from the business people.

His contention was the original proposal was the way to go.

District 7 Magistrate Dwayne Florence said the move as a whole was to correct a loophole in the tax.

The reading passed 6-2, with District 1 Magistrate Stanley Lemons and Copes voting against it.

The ordinance will have second reading at the courts March 25 meeting.

In other action, the court:

Discussed Harrison Countys inclusion to the list of counties declared as disaster areas after the Feb. 6 tornado. Magistrates also heard Barnett report that last weekends snow was costly to the county in terms of road department overtime.

Approved the purchase of a 2008 Ford Explorer for the Harrison County Transportation Officer at a cost of $21,175.

Discussed an audit of the Economic Development Authority which had been recently released.

Florence said the court needs to push the EDA to pay off the industrial park property at a faster rate.

Approved $500 to donate to the Harrison County Garden Club to take care of the potted plants downtown.