In a recent decision, the Ohio Board of Tax Appeals held that an assessment of municipal income tax by the Regional Income Tax Agency (RITA) was time-barred. After the assessment was upheld by the Streetsboro Board of Tax Review, the taxpayer appealed. Although the general Streetsboro statute of limitations is three years after a return was filed, there is an exception in the case of fraud or when the taxpayer omits a substantial portion of income. In this instance, the assessment would not be timely unless the taxpayer had omitted a “substantial portion of income.” On audit, the RITA had made a couple adjustments to the taxpayer’s 2010 return. The more significant adjustment related to the now-repealed municipal income tax throwback rule. Specifically, RITA argued that the taxpayer incorrectly computed its net profits apportioned to Streetsboro by not throwing back certain gross receipts from sales made from a distribution center in Streetsboro to municipalities in which the taxpayer had not solicited at the location of delivery. The throw-back adjustment increased the amount of income apportionable to Streetsboro, which RITA used to argue that the taxpayer had failed to report a substantial amount of its income. The taxpayer, in contrast, argued that it did not omit reporting any “income” as it properly reported it all of its required federal income amounts. The Board noted that the term “income” was not defined for the 2010 tax year at issue, but that the City Code appeared to distinguish between “income,” “net profits” and “gross receipts.” The Board concluded that the taxpayer properly reported its income information and the assessment was cancelled. Please contact Brandon Erwine at 614-249-1877 with questions on Nestle Prepared Food Company v. City of Streetsboro.