[HISTORY: Adopted by the Borough Council of the Borough of Lake City 12-1-1953
by Ord. No. 90, effective 1-1-1954; amended
in its entirety 5-14-2007 by Ord. No. 377-07.
Subsequent amendments noted where applicable.]
This chapter shall be known as the "Earned Income Tax Ordinance." The
provisions hereof shall become effective on the first day of January 2007
A.D., and the tax shall continue in force on a calendar year or a taxpayer
fiscal year basis, without annual reenactment, unless the rate of the tax
is subsequently changed. Changes in rate become effective on the date specified
in the amending ordinance.
As used in this chapter, the following terms shall have the meanings
indicated:
A partnership, limited partnership, or any other unincorporated group
of two or more persons.
The Borough Council of the Borough of Lake City.
Any enterprise, activity, profession or any other undertaking of
an unincorporated nature conducted for profit or ordinarily conducted for
profit whether by a person, partnership, association, or any other entity.
A corporation or joint-stock association organized under the laws
of the United States, the Commonwealth of Pennsylvania, or any other state,
territory, foreign country or dependency.
The calendar year for which the tax is levied.
The place where one lives and has his permanent home and to which
he has the intention of returning whenever he is absent. Actual residence
is not necessarily the domicile, for a domicile is the fixed place of abode
which, in the intention of the taxpayer, is permanent rather that transitory.
A domicile is the voluntarily fixed place of habitation of a person, not for
a mere special or limited purpose, but with the present intention of making
a permanent home, until some event occurs to induce him to adopt some other
permanent home. In the case of businesses, or associations, the domicile is
that place considered as the center of business affairs and the place where
its functions are discharged.
Compensation, including salaries, wages, commission, bonuses and incentive
payments, whether based on profits or otherwise, fees, tips and similar remuneration
for services rendered, whether in cash or in property, such as:
Items of remuneration received, directly or through an agent, in cash
or in property, based on payroll periods or piecework, for services rendered
as an employee or casual employee, agent or officer of an individual, partnership,
business or nonprofit corporation, or government agency. These items include
salaries, wages, commissions, bonuses, stock options, incentive payments,
fees, tips, dismissal, termination or severance payments, early retirement
incentive payments and other additional compensation contingent upon retirement,
including payments in excess of the scheduled or customary salaries provided
for those who are not terminating service, rewards, vacation and holiday pay,
paid leaves of absence, payments for unused vacation or sick leave, tax assumed
by the employer, signing bonuses, amounts received under employee benefit
plans and deferred compensation arrangements.
Scholarships, stipends, grants and fellowships, if services are rendered
in connection therewith. When used in this subsection, the following words
have the following meanings, unless the context clearly indicates otherwise:
FELLOWSHIP STIPEND or FELLOWSHIP AWARDA fixed sum of money paid periodically for services or to defray expenses to a graduate student who is enrolled in a graduate degree program at a university.
GRANT-IN-AID FINANCIALSupport given by a public agency or private institution to an individual to further the individual's education.
POSTDOCTORAL RESEARCH FELLOWSHIP STIPEND or POSTDOCTORAL RESEARCH FELLOWSHIP AWARDA fixed sum of money paid periodically for service or to defray expenses of an individual who has obtained a doctoral degree at a university and is conducting research at a research facility.
SCHOLARSHIPA grant-in-aid to a student.
Other forms of remuneration characterized as taxable compensation by
the Tax Reform Code of 1971, as amended, and its implementing regulations,
as amended, and any future amendments to said Code and/or its implementing
regulations.
Compensation does not include:
Periodic payments for sickness and disability other than the regular
wages received during a period of sickness or disability; or
Disability, retirement or other payments arising under workmen's
compensation acts, occupational disease acts and similar legislation by any
government; or
Payments commonly recognized as old-age or retirement benefits paid
to persons retired after reaching a specific age or after a stated period
of employment; or
Payments commonly known as public assistance, or unemployment compensation
payments by any governmental agency; or
Payments to reimburse actual expenses; or
Payments made by employers or labor unions for employee benefit programs
covering hospitalization, sickness, disability or death, supplemental employment
benefits or strike benefits, subject to certain conditions identified in the
Tax Reform Code of 1971, as amended, and its implementing regulation; or
Any compensation received by United States servicemen serving in a combat
zone; or
Payments received by a foster parent for in-home care of foster children
from an agency of the commonwealth or a political subdivision thereof, or
an organization tax exempt from federal tax under Section 501(c)(3) of the
Internal Revenue Code of 1954, which is licensed by the commonwealth or a
political subdivision thereof as a placement agency; or
Payments made by employers or labor unions for employee benefit programs
covering social security or retirement; or
Personal use of an employer's owned or leased property or of employer-provided
services.
A person, partnership, association, corporation, institution, governmental
body or unit or agency, or any other entity employing one or more persons
for a salary, wage, commission or other compensation.
Person, public employee or private agency designated by governing
body to collect and administer the tax on earned income and net profits.
The net income for the operation of a business, profession, or other
activity, except corporations, after provision for all costs and expenses
incurred in the conduct thereof, to be determined either on a cash or accrual
basis in accordance with generally accepted accounting principles and practices,
as defined in the Tax Reform Code of 1971, as amended, its implementing regulations,
and any subsequent amendments to said Code and/or regulations. Net profits
do not include income which is not paid for services provided and which is
in the nature of earnings from an investment.
To constitute net profits, all of the following must apply.
The gross profits shall be derived from one of the following:
The marketing of a product or service to customers on a commercial basis
or from securities employed as working capital in the business operations.
Accounts and notes receivable from sales of products or services in
the ordinary course of the business operations.
Assets which serve an operational function in the ordinary course of
business operations.
The marketing activity shall be conducted with the manifest objective
of achieving profitable operations.
The marketing objective shall be conducted with regularity and continuity
and may not be limited or exclusive.
In computing net profits, a deduction will not be allowed for any item
of cost, expense or liability derived or incurred in connection with or attributable
to any of the following:
The ownership or disposition of assets that are held for investment
purposes or otherwise serve an investment function.
The trading in securities for personal purposes and not for the accounts
of customers.
The sale, discontinuation or abandonment of a business or segment thereof.
Any tax imposed on, or measured by, gross or net earned or unearned
income.
An isolated or nonrecurring transaction which is not a normal or routine
business activity.
Choosing to form a partnership or other entity or to associate with
other, receiving and reporting income or gain as the income of the partnership,
entity or associates or dividing the same among its partners, beneficial owners
or associates or the trading in securities for the benefit of shareholders,
partners, members or associates does not of itself make the income of the
partnership, entity or associates net profits.
For purposes of this section, only the following participants in the
stock, securities, options, derivatives, futures or commodities market are
engaged in marketing of a product or service to customers:
Those who maintain or provide a market place or facilities for bringing
together purchasers and sellers of these financial investment products.
Those who are licensed to act as their customer's agents and charge
a negotiated commission for executing transactions and do not take title to
the particular portion they buy or sell.
Those who devote managerial attention to the financial investment products
holdings of others, or who employ other persons to assist them in that management,
in the capacity of a licensed investment advisor.
Licensed dealers, including financial investment product specialists and market makers, if the conditions in Subsection E(4)(a) through (d) are met:
The dealer maintains an inventory of financial investment products with
the objective of reselling his inventories at a profit to customers or operates
as a specialist or market maker.
The dealer makes market by quoting the bid and ask prices at which he
is willing to buy and sell the financial investment products and by buying
directly from or selling directly to customers.
The dealer's profit is determined in whole or in part by a markup
based on cost.
The dealer elects to inventory securities held for resale to customers
or uses the mark-to-market system of accounting.
Underwriters who facilitate initial sales of financial investment products
by acting either as licensed dealers in a principal capacity or as brokers
in an agency capacity.
When a person operates as an investor or trader with respect to a portion
of that person's activities and as a market establishment, broker, investment
counselor or dealer with respect to the rest, this section applies only to
the operations as a market establishment, broker, investment counselor or
dealer.
For taxpayers engaged in the business, profession or activity of farming,
the term shall not include:
Any interest earnings generated from any monetary accounts or investment
instruments of the farming business;
Any gain on the sale of farm machinery;
Any gain on the sale of livestock held 12 months or more for draft,
breeding or dairy purposes; and
Any gain on the sale of other capital assets of the farm.
A person, partnership, association or other entity domiciled outside
the taxing district.
A natural person.
The calendar year before the current year.
A person, partnership, association or other entity domiciled in the
taxing district.
The calendar year following the current year.
The Borough of Lake City, Erie County, Pennsylvania.
A person, partnership, association, or any other entity, required
hereunder to file a return of earned income or net profits, or to pay a tax
thereon.
A.
A tax for general revenue purposes is hereby reimposed
in the amount of 1% earned income received and to net profits earned by residents
and nonresidents of the Borough of Lake City, beginning on the first day of
January 2007, and continuing for each taxable year thereafter.
B.
Except as otherwise provided in Section 14 of the Local
Tax Enabling Act, 53 P.S. § 6914, as amended, allowing for crediting
or deductions for duplication of taxes, in the event the school district in
which the Borough is situate shall impose, or continue to impose, an earned
income tax under the authority of the Act on residents or businesses domiciled
within that Borough during the same year or part of year, then the tax herein
imposed shall be subject to the sharing provision from the day such duplication
becomes effective.
A.
Net profits.
(1)
Every taxpayer making net profits shall, on or before
April 15 of the current year, make and file with the officer on a form prescribed
or approved by the officer, a declaration of his estimated net profits during
the period beginning January 1 and ending December 31 of the current year,
and pay to the officer in four quarterly installments, as nearly equal as
possible, the tax due thereon as follows:
(2)
Any taxpayer who first anticipates any net profit after
April 15 of the current year shall make and file the declaration hereinabove
required on or before June 15 of the current year, September 15 of the current
year, or December 31 of the current year, whichever of these dates next follows
the date on which the taxpayer first anticipates such net profits, and pay
to the officer in installments, as nearly equal as possible, the tax due thereon,
on or before the quarterly payment dates which remain after the filing of
the declaration.
(3)
Every taxpayer shall, on or before April 15 of the succeeding
year, make and file with the officer on a form prescribed or approved by the
officer a final return and reconciliation showing the amount of net profits
earned during the period beginning January 1 of the current year and ending
December 31 of the current year, the total amount of tax due thereon and the
total amount of tax paid thereon. At the time of filing the final return,
the taxpayer shall pay to the officer the balance of the tax due or shall
make demand for refund or credit in the case of overpayment.
(4)
Any taxpayer may, in lieu of paying the fourth quarterly
installment of his estimated tax, elect to make and file with the officer
on or before January 31 of the succeeding year, the final return as hereinabove
required.
(5)
The officer is hereby authorized to provide by regulation
for the making and filing of adjusted declarations of estimated net profits,
and for the payments of the estimated tax in cases where a taxpayer who has
filed the declaration hereinabove required, anticipated additional net profits
not previously declared or finds that he has overestimated his anticipated
net profits.
(6)
Every taxpayer who discontinues business prior to December
31 of the current year shall, within 30 days after the discontinuance of business,
file his final return as hereinabove required and pay the tax due.
B.
Earned income.
(1)
Annual earned income tax return. Every taxpayer shall,
on or before April 15 of the succeeding year, make and file with the officer
on a form prescribed or approved by the officer a final return showing the
amount of earned income received during the period beginning January 1 of
the current year and ending December 31 of the current year. Such final return
shall also show the total amount of tax due thereon, the amount of tax paid
thereon, and the amount of tax thereon that has been withheld pursuant to
the provision relating to the collection at source and the balance of tax
due. At the time of filing the final return, the taxpayer shall pay the balance
of the tax due or shall make demand for refund or credit in the case of overpayment.
(2)
Earned income not subject to withholding. Every taxpayer
who is employed for a salary, wage, commission, or other compensation and
who received any earned income not subject to the provisions relating to collection
at source shall make and file with the officer on a form prescribed or approved
by the officer a quarterly return on or before April 30 of the current year,
July 31 of the current year, October 31 of the current year, and January 31
of the succeeding year, setting forth the aggregate amount of earned income
not subject to withholding by him during the three-month periods ending March
31 of the current year, June 30 of the current year, September 30 of the current
year, and December 31 of the current year, respectively, and subject to the
tax, together with such other information as the officer may require. Every
taxpayer making such returns shall, at the time of filing thereof, pay to
the officer the amount of tax shown as due thereon.
C.
Death of taxpayer. In the event of the death of a taxpayer
during a taxable period, his personal representative shall file his return
on or before the 15th day of April of the year following the date of death
and on or before such date shall pay any tax due from such decreased taxpayer
under this chapter or demand refund in the case of overpayment.
D.
Guardian of taxpayer. Should a guardian of the estate
be appointed for a taxpayer, such guardian shall be imputed with the same
duties and responsibilities as the taxpayer would have regarding the reporting
and paying of taxes under this chapter.
A.
Every employer having an office, factory, workshop, branch,
warehouse, or other place of business within the Borough who employs one or
more persons, other than domestic servants, for a salary, wage, commission
or other compensation, who has not previously registered, shall, with 15 days
after becoming an employer, register with the officer, his name and address
and such other information as the officer may require.
B.
Every employer having an office, factory workshop, branch,
warehouse, or other place of business within the Borough who employs one or
more person, other than domestic servants, for a salary, wage, commission,
or other compensation, shall deduct, at the time of payment thereof, the tax
imposed by this chapter on the earned income due to his employment, and shall,
on or before April 30 of the current year, July 31 of the current year, October
31 of the current year and January 31 of the succeeding year, file a return
and pay to the officer the amount of taxes deducted during the preceding three-month
periods ending March 31 of the current year, June 30 of the current year,
September 30 of the current year, and December 31 of the current year, respectively.
Such return unless otherwise agreed upon between the officer and the employer
shall show the name and social security number of each such employee, the
earned income of such employee during such preceding three-month period, the
tax deducted therefrom, the political subdivisions imposing the tax upon such
employee, the complete address of each and every employee subject to withholding,
the total earned income of all such employees during such preceding three-month
period, and the total tax deducted therefrom and paid with the return.
C.
Any employer who for two of the preceding four quarterly
periods has failed to deduct the proper tax, or any part thereof, or has failed
to pay over the proper amount of tax to the taxing authority, may be required
by the officer to file his return and pay the tax monthly. In such cases,
payments of tax shall be made to the officer on or before the last day of
the month succeeding the month for which the tax was withheld.
D.
On or before February 28 of the succeeding year, every
employer shall file with the officer:
(1)
An annual return showing the total amount of earned income
paid, the total amount of tax deducted, and the total amount of tax paid to
the officer for the period beginning January 1 of the current year and ending
December 31 of the current year.
(2)
A return withholding statement for each employee employed
during all or any part of the period beginning January 1 of the current year
and ending December 31 of the current year, setting forth the employee's
name, address and social security number, the amount of earned income paid
to the employee during said period, the amount of tax deducted, the political
subdivisions imposing the tax upon such employee, and the amount of tax paid
to the officer. Every employer shall furnish two copies of the individual
return to the employee for whom it is filed.
E.
Every employer who discontinues business prior to December
31 of the current year shall, within 30 days after the discontinuance of business,
file the returns and withholding statements hereinabove required and pay the
tax due.
F.
Except as otherwise provided herein, every employer who
willfully or negligently fails or omits to make the deductions required by
this section shall be liable for payment of the taxes which he was required
to withhold to the extent that such taxes have not been recovered from the
employee.
G.
Notwithstanding the foregoing, no employer shall be held
liable for failure to withhold earned income taxes or for the payment of such
withheld tax money to a political subdivision other than the Borough if such
failure to withhold or such incorrect transmittal of withheld taxes arises
from incorrect information as to the employee's place of residence submitted
by the employee, nor shall an employer be liable for failure to withhold earned
income taxes, or to make reports of wages, salaries, commissions or other
compensation of his/its employees, unless the official continuing register
of all earned income taxes levied under the authority of the Local Tax Enabling
Act, as amended, maintained and supplemented annually by the Department of
Community and Economic Development, lists the Borough's levying of the
earned income tax.
H.
The failure or omission of any employer to make the deductions
required by this section shall not relieve any employee from the payment of
tax or from complying with the requirements of the chapter relating to the
filing of declarations and returns.
A.
The Borough Council, by resolution, shall appoint the
officer.
B.
It shall be the duty of the officer to collect and receive
the taxes, fines and penalties imposed by this chapter. It shall also be his
duty to keep a record showing the amount received by him from each person
or business paying the tax and the date of such receipt.
C.
Each officer, before entering upon his official duties,
shall give and acknowledge a bond to the Borough. If the Borough shall, by
ordinance, designate any bond previously given by the officer as adequate,
such bond shall be sufficient to satisfy the requirements of this subsection.
Each such bond shall be joint and several with one or more corporate sureties
which shall be surety companies authorized to do business in this commonwealth
and duly licensed by the Insurance Commission of this commonwealth. Each bond
shall be conditioned upon the faithful discharge by the officer, his clerks,
assistants, appointees of all trusts confided in him by virtue of his office,
upon the faithful execution of all duties required of him by virtue of his
office, upon the just and faithful accounting or payment over, according to
law, of all monies and all balances thereof paid to, received or held by him
by virtue of his office upon the delivery to his successor or successors in
office of all books, papers, documents, or other official things held in right
of his office.
(1)
Each such bond shall be taken in the name of the Borough
of Lake City and shall be for the use of the Borough appointing the officer,
and for the use of such other person or persons for whom money shall be collected
or received, or as his or her interest shall otherwise appear, in case of
breach of any of the conditions thereof by the acts or neglect of the principal
of the bond.
(2)
The Borough, or any person, may sue upon the said bond
in its own or his own name for its or his own use.
(3)
Each such bond shall contain the name or names of the
surety company or companies bound thereon. The Borough shall fix the amount
of the bond at an amount equal to the maximum amount of taxes which may be
in the possession of the officer at any given time. The Borough may at any
time, upon cause shown and due notice to the officer, and his surety or sureties,
require or allow the substitution or the addition of a surety company acceptable
to the Borough for the purpose of making the bond sufficient in the amount,
without releasing the surety or sureties first approved from any accrued liability
or previous action on such bond. The Borough shall designate the custodian
of the bond required to be given by the officer.
D.
The officer charged with the administration and enforcement
of the provisions of the chapter is herby empowered to prescribe, adopt, promulgate,
and enforce rules and regulations relating to any matter pertaining to the
administration and enforcement of the this chapter including provisions for
the reexamination and correction of declarations and returns and of payments
alleged or found to be incorrect, or as to which any overpayment is claimed
or found to have occurred, and to make refunds in case of overpayment, for
any period of time not to exceed six years subsequent to the date of payment
of the sum involved, and to prescribe forms necessary for the administration
of this chapter. No rule or regulation of any kind shall be enforceable unless
it has been approved by ordinance by the Borough Council. A copy of such rules
and regulations currently in force shall be available for public inspection.
E.
The officer shall refund, on petition of and proof by
the taxpayer, earned income tax paid on the taxpayer's ordinary and necessary
business expenses to the extent that such expenses are not paid by the taxpayer's
employer.
F.
The officer and agent designated by him are hereby authorized
to examine the books, papers, and records of any employer or of any taxpayer
or of any person whom the officer reasonably believes to be an employer or
taxpayer, in order to verify the accuracy of any declaration or return or,
if no declaration or return was filed, to ascertain the tax due. Every employer
and every taxpayer and every person whom the officer reasonably believes to
be an employer or taxpayer is hereby directed and required to give to the
officer, or to any agent designated by him, the means, facilities and opportunities
for such examination and investigation as hereby authorized. The officer shall
have such power to subpoena books, records and papers of the employer or taxpayer
as may be found in authority of the Commonwealth of Pennsylvania.
G.
Any information gained by the officer, his agents, or
by any other official or agent of the Borough as a result of any declarations,
returns, investigations, hearings or verifications required or authorized
by the chapter shall be confidential, except for official purposes and except
in accordance with a proper judicial order, or as otherwise provided by law.
H.
The officer is authorized to establish different filing,
reporting and payment dates for taxpayers whose fiscal years do not coincide
with the calendar year.
A.
The officer may sue in the name of the Borough for the
recovery of taxes due and unpaid under this chapter.
B.
Any suit brought to recover the tax imposed by this chapter
shall be begun within three years after such tax is due, or within three years
after the declaration or return has been filed, whichever date is later; provided,
however, that this limitation shall not prevent the institution of a suit
for the collection of any tax due or determined to be due in the following
cases:
(1)
Where no declaration or return was filed by any person
although a declaration or return was required to be filed by him under provisions
of the chapter, there shall be no limitation.
(2)
Where an examination of the declaration or return filed
by any person, or of other evidence relating to such declaration or return
in the possession of the officer, reveals a fraudulent evasion of taxes, there
shall be no limitation.
(3)
In the case of substantial understatement of tax liability
of 25% or more and no fraud, the suit shall begin within six years.
(4)
Where any person has deducted taxes under the provisions
of this chapter and has failed to pay the amounts so deducted to the officer,
or where any person has willfully failed or omitted to make the deductions
required by this section, there shall be no limitation.
(5)
This section shall not be construed to limit the Borough
Council from recovering delinquent taxes by any other means provided by the
Act.
C.
The officer may sue for recovery of an erroneous refund,
provided such suit is begun two years after making such refund, except that
the suit may be brought within five years if it appears that any part of the
refund was induced by fraud or misrepresentation of material fact.
A.
If for any reason the tax is not paid when due, interest
at the rate of 6% per annum on the amount of said tax, and an additional penalty
of 1/2 of 1% of the amount of the unpaid tax for each month or fraction thereof
during which the tax remains unpaid, shall be added and collected. Where suit
is brought for the recovery of any such tax, the person liable therefor shall,
in addition, be liable for the costs of collection and the interest and penalties
herein imposed.
B.
Notwithstanding the provisions of Subsection A, the Borough may, by ordinance, establish a one-time period during which interest or interest and penalties that would otherwise be imposed for the nonreporting or underreporting of earned income tax liabilities for the nonpayment of earned income taxes previously imposed and due shall be waived in total or in part if the taxpayer voluntarily files delinquent returns and pay the taxes in full during the period so established. The Borough shall adopt regulations to implement the provisions of this subsection.
C.
The provisions of Subsection B shall not affect or terminate any petitions, investigations, prosecutions or other proceedings pending under the provisions of this chapter, or prevent the commencement or further prosecution of any proceedings by the proper authorities for violations of this chapter. No proceedings shall, however, be commenced on the basis of delinquent returns filed pursuant to Subsection B if the returns are determined to be substantially true and correct and the taxes are paid in full within the prescribed time.
A.
Any person who fails, neglects, or refuses to make any
declaration or return required by this chapter, any employer who fails, neglects
or refuses to register or to pay the tax deducted from his employees or fails,
neglects or refuses to deduct or withhold the tax from his employees, any
person who refuses to permit the officer or any agent designated by him to
examine his books, records, and papers, and any person who knowingly makes
any incomplete, false or fraudulent return or attempts to do anything whatsoever
to avoid the full disclosure of the amount of his net profits or earned income
in order to avoid the payment of the whole or any part of the tax imposed
by this chapter, shall, upon conviction thereof before any justice of the
peace, alderman or magistrate, or court of competent jurisdiction in Erie
County, be sentenced to pay a fine of not more than $500 for each offense,
and costs, and in default of payment of said payment of said fine and costs
be imprisoned for a period not exceeding 30 days.
B.
Any person who divulges any information which is confidential
under the provisions of the chapter, shall, upon conviction thereof before
any district justice, or court of competent jurisdiction, be sentenced to
pay a fine of not more than $500 for each offense, and costs, and in default
of payment of said fines and costs be imprisoned for a period not exceeding
30 days.
C.
The penalties imposed under this section shall be in
addition to any other penalty imposed by any other section of the chapter.
D.
The failure of any person to receive or procure forms
required for making the declaration or returns required by this chapter shall
not excuse him from making such declaration or return.
This chapter is adopted pursuant to the authority conferred by the Act
of December 31, 1965, P.L. 1257; 53 P.S. § 6901, as amended.
It is hereby declared to be the intent of the Borough Council that this
chapter replace in its entirety all prior ordinances adopted by, motions approved,
or other actions taken by, the Borough Council of the Lake City Borough levying
an earned income tax, and/or in any manner affecting the specific terms or
provisions of said earned income tax as levied, the provisions of which shall
remain in full force and effect for each year thereafter, without annual reenactment
unless the rate of tax is subsequently changed.
