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Athens’ budget takes another big hit with an unexpected, and substantial, tax refund

By: David Forster
Posted on: Tuesday, December 2, 2025

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ATHENS, Ohio (WOUB) — The city of Athens has been hit with another big, unexpected expense at the end of the year that could impact hiring decisions moving forward.

The City Council learned at its meeting Monday night the city owes a $750,000 income tax refund to a business. This comes just a few weeks after the council approved spending $750,000 to cover medical expenses that ran over budget.

Tax returns are confidential, so the business the city owes the refund to was not named. It appears the refund has to do with what’s known as a net operating loss deduction. This allows a business to take a loss from one year and use it to reduce taxable income in a year the business is profitable.

For example, if a business has a $200,000 loss one year and a $500,000 profit the next, it can use the loss to reduce the profit, bringing it down to $300,000 and thereby lowering the taxes owed.

Businesses pay their income taxes quarterly in advance, based on estimates of what they believe their earnings for the year will be. So if a business ends up using net operating losses from prior years to reduce its tax burden when it files its tax return, it could be owed a refund.

And because net operating loss deductions are good for five years, a business could use several years worth of deductions from losses and apply them to a year with a big profit and substantially reduce its taxable income, resulting in a big refund.

The challenge for the city from a budgeting standpoint is it doesn’t know which businesses might decide in any given year to apply their deductions.

“Is this going to be an unpredictable hit in the future?” Councilmember Alan Swank asked, to which Mayor Steve Patterson acknowledged it could be.

Patterson said he is working with the city auditor to determine where that $750,000 refund will come from. The city could draw from its general fund or some combination of funding sources.

The refund, combined with the $750,000 in medical payments, could result in the city not filling certain positions if there are retirements next year. Patterson said he would take a close look at any positions to determine how critical they are before making decisions about refilling them.

These big hits to the budget come at a time when the city’s revenues are already lagging behind expenses, prompting the City Council to propose a two-tenths of a percent increase in the city income tax.

The council on Monday had a second reading of an ordinance and two resolutions that would put the proposed tax increase on the May ballot. The council will take a vote after the third reading.