Bill Text: OH HB200 | 2011-2012 | 129th General Assembly | Introduced

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Bill Title: To allow an income tax deduction of up to ten thousand dollars for net capital gains.

Spectrum: Partisan Bill (Republican 4-0)

Status: (Introduced - Dead) 2011-04-12 - To Ways & Means [HB200 Detail]

Download: Ohio-2011-HB200-Introduced.html

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As Introduced

129th General Assembly Regular Session 2011-2012

H. B. No. 200

Representative Beck 

Cosponsors: Representatives Rosenberger, Wachtmann, Young 

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A BILL

To amend section 5747.01 of the Revised Code to allow

1

an income tax deduction of up to ten thousand

2

dollars for net capital gains.

3

BE IT ENACTED BY THE GENERAL ASSEMBLY OF THE STATE OF OHIO:

Section 1. That section 5747.01 of the Revised Code be	4
amended to read as follows:	5

Sec. 5747.01.  Except as otherwise expressly provided or	6
clearly appearing from the context, any term used in this chapter	7
that is not otherwise defined in this section has the same meaning	8
as when used in a comparable context in the laws of the United	9
States relating to federal income taxes or if not used in a	10
comparable context in those laws, has the same meaning as in	11
section 5733.40 of the Revised Code. Any reference in this chapter	12
to the Internal Revenue Code includes other laws of the United	13
States relating to federal income taxes.	14

As used in this chapter:

15

(A) "Adjusted gross income" or "Ohio adjusted gross income"	16
means federal adjusted gross income, as defined and used in the	17
Internal Revenue Code, adjusted as provided in this section:	18

(1) Add interest or dividends on obligations or securities of	19
any state or of any political subdivision or authority of any	20
state, other than this state and its subdivisions and authorities.	21

(2) Add interest or dividends on obligations of any	22
authority, commission, instrumentality, territory, or possession	23
of the United States to the extent that the interest or dividends	24
are exempt from federal income taxes but not from state income	25
taxes.	26

(3) Deduct interest or dividends on obligations of the United	27
States and its territories and possessions or of any authority,	28
commission, or instrumentality of the United States to the extent	29
that the interest or dividends are included in federal adjusted	30
gross income but exempt from state income taxes under the laws of	31
the United States.	32

(4) Deduct disability and survivor's benefits to the extent	33
included in federal adjusted gross income.	34

(5) Deduct benefits under Title II of the Social Security Act	35
and tier 1 railroad retirement benefits to the extent included in	36
federal adjusted gross income under section 86 of the Internal	37
Revenue Code.	38

(6) In the case of a taxpayer who is a beneficiary of a trust	39
that makes an accumulation distribution as defined in section 665	40
of the Internal Revenue Code, add, for the beneficiary's taxable	41
years beginning before 2002, the portion, if any, of such	42
distribution that does not exceed the undistributed net income of	43
the trust for the three taxable years preceding the taxable year	44
in which the distribution is made to the extent that the portion	45
was not included in the trust's taxable income for any of the	46
trust's taxable years beginning in 2002 or thereafter.	47
"Undistributed net income of a trust" means the taxable income of	48
the trust increased by (a)(i) the additions to adjusted gross	49
income required under division (A) of this section and (ii) the	50
personal exemptions allowed to the trust pursuant to section	51
642(b) of the Internal Revenue Code, and decreased by (b)(i) the	52
deductions to adjusted gross income required under division (A) of	53
this section, (ii) the amount of federal income taxes attributable	54
to such income, and (iii) the amount of taxable income that has	55
been included in the adjusted gross income of a beneficiary by	56
reason of a prior accumulation distribution. Any undistributed net	57
income included in the adjusted gross income of a beneficiary	58
shall reduce the undistributed net income of the trust commencing	59
with the earliest years of the accumulation period.	60

(7) Deduct the amount of wages and salaries, if any, not	61
otherwise allowable as a deduction but that would have been	62
allowable as a deduction in computing federal adjusted gross	63
income for the taxable year, had the targeted jobs credit allowed	64
and determined under sections 38, 51, and 52 of the Internal	65
Revenue Code not been in effect.	66

(8) Deduct any interest or interest equivalent on public	67
obligations and purchase obligations to the extent that the	68
interest or interest equivalent is included in federal adjusted	69
gross income.	70

(9) Add any loss or deduct any gain resulting from the sale,	71
exchange, or other disposition of public obligations to the extent	72
that the loss has been deducted or the gain has been included in	73
computing federal adjusted gross income.	74

(10) Deduct or add amounts, as provided under section 5747.70	75
of the Revised Code, related to contributions to variable college	76
savings program accounts made or tuition units purchased pursuant	77
to Chapter 3334. of the Revised Code.	78

(11)(a) Deduct, to the extent not otherwise allowable as a	79
deduction or exclusion in computing federal or Ohio adjusted gross	80
income for the taxable year, the amount the taxpayer paid during	81
the taxable year for medical care insurance and qualified	82
long-term care insurance for the taxpayer, the taxpayer's spouse,	83
and dependents. No deduction for medical care insurance under	84
division (A)(11) of this section shall be allowed either to any	85
taxpayer who is eligible to participate in any subsidized health	86
plan maintained by any employer of the taxpayer or of the	87
taxpayer's spouse, or to any taxpayer who is entitled to, or on	88
application would be entitled to, benefits under part A of Title	89
XVIII of the "Social Security Act," 49 Stat. 620 (1935), 42 U.S.C.	90
301, as amended. For the purposes of division (A)(11)(a) of this	91
section, "subsidized health plan" means a health plan for which	92
the employer pays any portion of the plan's cost. The deduction	93
allowed under division (A)(11)(a) of this section shall be the net	94
of any related premium refunds, related premium reimbursements, or	95
related insurance premium dividends received during the taxable	96
year.	97

(b) Deduct, to the extent not otherwise deducted or excluded	98
in computing federal or Ohio adjusted gross income during the	99
taxable year, the amount the taxpayer paid during the taxable	100
year, not compensated for by any insurance or otherwise, for	101
medical care of the taxpayer, the taxpayer's spouse, and	102
dependents, to the extent the expenses exceed seven and one-half	103
per cent of the taxpayer's federal adjusted gross income.	104

(c) Deduct, to the extent not otherwise deducted or excluded	105
in computing federal or Ohio adjusted gross income, any amount	106
included in federal adjusted gross income under section 105 or not	107
excluded under section 106 of the Internal Revenue Code solely	108
because it relates to an accident and health plan for a person who	109
otherwise would be a "qualifying relative" and thus a "dependent"	110
under section 152 of the Internal Revenue Code but for the fact	111
that the person fails to meet the income and support limitations	112
under section 152(d)(1)(B) and (C) of the Internal Revenue Code.	113

(d) For purposes of division (A)(11) of this section,	114
"medical care" has the meaning given in section 213 of the	115
Internal Revenue Code, subject to the special rules, limitations,	116
and exclusions set forth therein, and "qualified long-term care"	117
has the same meaning given in section 7702B(c) of the Internal	118
Revenue Code. Solely for purposes of divisions (A)(11)(a) and (c)	119
of this section, "dependent" includes a person who otherwise would	120
be a "qualifying relative" and thus a "dependent" under section	121
152 of the Internal Revenue Code but for the fact that the person	122
fails to meet the income and support limitations under section	123
152(d)(1)(B) and (C) of the Internal Revenue Code.	124

(12)(a) Deduct any amount included in federal adjusted gross	125
income solely because the amount represents a reimbursement or	126
refund of expenses that in any year the taxpayer had deducted as	127
an itemized deduction pursuant to section 63 of the Internal	128
Revenue Code and applicable United States department of the	129
treasury regulations. The deduction otherwise allowed under	130
division (A)(12)(a) of this section shall be reduced to the extent	131
the reimbursement is attributable to an amount the taxpayer	132
deducted under this section in any taxable year.	133

(b) Add any amount not otherwise included in Ohio adjusted	134
gross income for any taxable year to the extent that the amount is	135
attributable to the recovery during the taxable year of any amount	136
deducted or excluded in computing federal or Ohio adjusted gross	137
income in any taxable year.	138

(13) Deduct any portion of the deduction described in section	139
1341(a)(2) of the Internal Revenue Code, for repaying previously	140
reported income received under a claim of right, that meets both	141
of the following requirements:	142

(a) It is allowable for repayment of an item that was	143
included in the taxpayer's adjusted gross income for a prior	144
taxable year and did not qualify for a credit under division (A)	145
or (B) of section 5747.05 of the Revised Code for that year;	146

(b) It does not otherwise reduce the taxpayer's adjusted	147
gross income for the current or any other taxable year.	148

(14) Deduct an amount equal to the deposits made to, and net	149
investment earnings of, a medical savings account during the	150
taxable year, in accordance with section 3924.66 of the Revised	151
Code. The deduction allowed by division (A)(14) of this section	152
does not apply to medical savings account deposits and earnings	153
otherwise deducted or excluded for the current or any other	154
taxable year from the taxpayer's federal adjusted gross income.	155

(15)(a) Add an amount equal to the funds withdrawn from a	156
medical savings account during the taxable year, and the net	157
investment earnings on those funds, when the funds withdrawn were	158
used for any purpose other than to reimburse an account holder	159
for, or to pay, eligible medical expenses, in accordance with	160
section 3924.66 of the Revised Code;	161

(b) Add the amounts distributed from a medical savings	162
account under division (A)(2) of section 3924.68 of the Revised	163
Code during the taxable year.	164

(16) Add any amount claimed as a credit under section	165
5747.059 of the Revised Code to the extent that such amount	166
satisfies either of the following:	167

(a) The amount was deducted or excluded from the computation	168
of the taxpayer's federal adjusted gross income as required to be	169
reported for the taxpayer's taxable year under the Internal	170
Revenue Code;	171

(b) The amount resulted in a reduction of the taxpayer's	172
federal adjusted gross income as required to be reported for any	173
of the taxpayer's taxable years under the Internal Revenue Code.	174

(17) Deduct the amount contributed by the taxpayer to an	175
individual development account program established by a county	176
department of job and family services pursuant to sections 329.11	177
to 329.14 of the Revised Code for the purpose of matching funds	178
deposited by program participants. On request of the tax	179
commissioner, the taxpayer shall provide any information that, in	180
the tax commissioner's opinion, is necessary to establish the	181
amount deducted under division (A)(17) of this section.	182

(18) Beginning in taxable year 2001 but not for any taxable	183
year beginning after December 31, 2005, if the taxpayer is married	184
and files a joint return and the combined federal adjusted gross	185
income of the taxpayer and the taxpayer's spouse for the taxable	186
year does not exceed one hundred thousand dollars, or if the	187
taxpayer is single and has a federal adjusted gross income for the	188
taxable year not exceeding fifty thousand dollars, deduct amounts	189
paid during the taxable year for qualified tuition and fees paid	190
to an eligible institution for the taxpayer, the taxpayer's	191
spouse, or any dependent of the taxpayer, who is a resident of	192
this state and is enrolled in or attending a program that	193
culminates in a degree or diploma at an eligible institution. The	194
deduction may be claimed only to the extent that qualified tuition	195
and fees are not otherwise deducted or excluded for any taxable	196
year from federal or Ohio adjusted gross income. The deduction may	197
not be claimed for educational expenses for which the taxpayer	198
claims a credit under section 5747.27 of the Revised Code.	199

(19) Add any reimbursement received during the taxable year	200
of any amount the taxpayer deducted under division (A)(18) of this	201
section in any previous taxable year to the extent the amount is	202
not otherwise included in Ohio adjusted gross income.	203

(20)(a)(i) Add five-sixths of the amount of depreciation	204
expense allowed by subsection (k) of section 168 of the Internal	205
Revenue Code, including the taxpayer's proportionate or	206
distributive share of the amount of depreciation expense allowed	207
by that subsection to a pass-through entity in which the taxpayer	208
has a direct or indirect ownership interest.	209

(ii) Add five-sixths of the amount of qualifying section 179	210
depreciation expense, including a person's proportionate or	211
distributive share of the amount of qualifying section 179	212
depreciation expense allowed to any pass-through entity in which	213
the person has a direct or indirect ownership. For the purposes of	214
this division, "qualifying section 179 depreciation expense" means	215
the difference between (I) the amount of depreciation expense	216
directly or indirectly allowed to the taxpayer under section 179	217
of the Internal Revenue Code, and (II) the amount of depreciation	218
expense directly or indirectly allowed to the taxpayer under	219
section 179 of the Internal Revenue Code as that section existed	220
on December 31, 2002.	221

The tax commissioner, under procedures established by the	222
commissioner, may waive the add-backs related to a pass-through	223
entity if the taxpayer owns, directly or indirectly, less than	224
five per cent of the pass-through entity.	225

(b) Nothing in division (A)(20) of this section shall be	226
construed to adjust or modify the adjusted basis of any asset.	227

(c) To the extent the add-back required under division	228
(A)(20)(a) of this section is attributable to property generating	229
nonbusiness income or loss allocated under section 5747.20 of the	230
Revised Code, the add-back shall be sitused to the same location	231
as the nonbusiness income or loss generated by the property for	232
the purpose of determining the credit under division (A) of	233
section 5747.05 of the Revised Code. Otherwise, the add-back shall	234
be apportioned, subject to one or more of the four alternative	235
methods of apportionment enumerated in section 5747.21 of the	236
Revised Code.	237

(d) For the purposes of division (A) of this section, net	238
operating loss carryback and carryforward shall not include	239
five-sixths of the allowance of any net operating loss deduction	240
carryback or carryforward to the taxable year to the extent such	241
loss resulted from depreciation allowed by section 168(k) of the	242
Internal Revenue Code and by the qualifying section 179	243
depreciation expense amount.	244

(21)(a) If the taxpayer was required to add an amount under	245
division (A)(20)(a) of this section for a taxable year, deduct	246
one-fifth of the amount so added for each of the five succeeding	247
taxable years.	248

(b) If the amount deducted under division (A)(21)(a) of this	249
section is attributable to an add-back allocated under division	250
(A)(20)(c) of this section, the amount deducted shall be sitused	251
to the same location. Otherwise, the add-back shall be apportioned	252
using the apportionment factors for the taxable year in which the	253
deduction is taken, subject to one or more of the four alternative	254
methods of apportionment enumerated in section 5747.21 of the	255
Revised Code.	256

(c) No deduction is available under division (A)(21)(a) of	257
this section with regard to any depreciation allowed by section	258
168(k) of the Internal Revenue Code and by the qualifying section	259
179 depreciation expense amount to the extent that such	260
depreciation resulted in or increased a federal net operating loss	261
carryback or carryforward to a taxable year to which division	262
(A)(20)(d) of this section does not apply.	263

(22) Deduct, to the extent not otherwise deducted or excluded	264
in computing federal or Ohio adjusted gross income for the taxable	265
year, the amount the taxpayer received during the taxable year as	266
reimbursement for life insurance premiums under section 5919.31 of	267
the Revised Code.	268

(23) Deduct, to the extent not otherwise deducted or excluded	269
in computing federal or Ohio adjusted gross income for the taxable	270
year, the amount the taxpayer received during the taxable year as	271
a death benefit paid by the adjutant general under section 5919.33	272
of the Revised Code.	273

(24) Deduct, to the extent included in federal adjusted gross	274
income and not otherwise allowable as a deduction or exclusion in	275
computing federal or Ohio adjusted gross income for the taxable	276
year, military pay and allowances received by the taxpayer during	277
the taxable year for active duty service in the United States	278
army, air force, navy, marine corps, or coast guard or reserve	279
components thereof or the national guard. The deduction may not be	280
claimed for military pay and allowances received by the taxpayer	281
while the taxpayer is stationed in this state.	282

(25) Deduct, to the extent not otherwise allowable as a	283
deduction or exclusion in computing federal or Ohio adjusted gross	284
income for the taxable year and not otherwise compensated for by	285
any other source, the amount of qualified organ donation expenses	286
incurred by the taxpayer during the taxable year, not to exceed	287
ten thousand dollars. A taxpayer may deduct qualified organ	288
donation expenses only once for all taxable years beginning with	289
taxable years beginning in 2007.	290

For the purposes of division (A)(25) of this section:

291

(a) "Human organ" means all or any portion of a human liver,	292
pancreas, kidney, intestine, or lung, and any portion of human	293
bone marrow.	294

(b) "Qualified organ donation expenses" means travel	295
expenses, lodging expenses, and wages and salary forgone by a	296
taxpayer in connection with the taxpayer's donation, while living,	297
of one or more of the taxpayer's human organs to another human	298
being.	299

(26) Deduct, to the extent not otherwise deducted or excluded	300
in computing federal or Ohio adjusted gross income for the taxable	301
year, amounts received by the taxpayer as retired military	302
personnel pay for service in the United States army, navy, air	303
force, coast guard, or marine corps or reserve components thereof,	304
or the national guard, or received by the surviving spouse or	305
former spouse of such a taxpayer under the survivor benefit plan	306
on account of such a taxpayer's death. If the taxpayer receives	307
income on account of retirement paid under the federal civil	308
service retirement system or federal employees retirement system,	309
or under any successor retirement program enacted by the congress	310
of the United States that is established and maintained for	311
retired employees of the United States government, and such	312
retirement income is based, in whole or in part, on credit for the	313
taxpayer's military service, the deduction allowed under this	314
division shall include only that portion of such retirement income	315
that is attributable to the taxpayer's military service, to the	316
extent that portion of such retirement income is otherwise	317
included in federal adjusted gross income and is not otherwise	318
deducted under this section. Any amount deducted under division	319
(A)(26) of this section is not included in a taxpayer's adjusted	320
gross income for the purposes of section 5747.055 of the Revised	321
Code. No amount may be deducted under division (A)(26) of this	322
section on the basis of which a credit was claimed under section	323
5747.055 of the Revised Code.	324

(27) Deduct, to the extent not otherwise deducted or excluded	325
in computing federal or Ohio adjusted gross income for the taxable	326
year, the amount the taxpayer received during the taxable year	327
from the military injury relief fund created in section 5101.98 of	328
the Revised Code.	329

(28) Deduct, to the extent not otherwise deducted or excluded	330
in computing federal or Ohio adjusted gross income for the taxable	331
year, the amount the taxpayer received as a veterans bonus during	332
the taxable year from the Ohio department of veterans services as	333
authorized by Section 2r of Article VIII, Ohio Constitution.	334

(29) Deduct, to the extent not otherwise deducted or excluded	335
in computing federal or Ohio adjusted gross income for the taxable	336
year, any loss from wagering transactions that is allowed as an	337
itemized deduction under section 165 of the Internal Revenue Code	338
and that the taxpayer deducted in computing federal taxable	339
income.	340

(30) Deduct, to the extent not otherwise allowable as a	341
deduction or exclusion in computing federal or Ohio adjusted gross	342
income for the taxable year, the amount of net capital gain	343
realized from the sale, exchange, or other disposition of capital	344
assets, including capital gain distributions, not to exceed ten	345
thousand dollars.	346

(B) "Business income" means income, including gain or loss,	347
arising from transactions, activities, and sources in the regular	348
course of a trade or business and includes income, gain, or loss	349
from real property, tangible property, and intangible property if	350
the acquisition, rental, management, and disposition of the	351
property constitute integral parts of the regular course of a	352
trade or business operation. "Business income" includes income,	353
including gain or loss, from a partial or complete liquidation of	354
a business, including, but not limited to, gain or loss from the	355
sale or other disposition of goodwill.	356

(C) "Nonbusiness income" means all income other than business	357
income and may include, but is not limited to, compensation, rents	358
and royalties from real or tangible personal property, capital	359
gains, interest, dividends and distributions, patent or copyright	360
royalties, or lottery winnings, prizes, and awards.	361

(D) "Compensation" means any form of remuneration paid to an	362
employee for personal services.	363

(E) "Fiduciary" means a guardian, trustee, executor,	364
administrator, receiver, conservator, or any other person acting	365
in any fiduciary capacity for any individual, trust, or estate.	366

(F) "Fiscal year" means an accounting period of twelve months	367
ending on the last day of any month other than December.	368

(G) "Individual" means any natural person.

369

(H) "Internal Revenue Code" means the "Internal Revenue Code	370
of 1986," 100 Stat. 2085, 26 U.S.C.A. 1, as amended.	371

(I) "Resident" means any of the following, provided that	372
division (I)(3) of this section applies only to taxable years of a	373
trust beginning in 2002 or thereafter:	374

(1) An individual who is domiciled in this state, subject to	375
section 5747.24 of the Revised Code;	376

(2) The estate of a decedent who at the time of death was	377
domiciled in this state. The domicile tests of section 5747.24 of	378
the Revised Code are not controlling for purposes of division	379
(I)(2) of this section.	380

(3) A trust that, in whole or part, resides in this state. If	381
only part of a trust resides in this state, the trust is a	382
resident only with respect to that part.	383

For the purposes of division (I)(3) of this section:

384

(a) A trust resides in this state for the trust's current	385
taxable year to the extent, as described in division (I)(3)(d) of	386
this section, that the trust consists directly or indirectly, in	387
whole or in part, of assets, net of any related liabilities, that	388
were transferred, or caused to be transferred, directly or	389
indirectly, to the trust by any of the following:	390

(i) A person, a court, or a governmental entity or	391
instrumentality on account of the death of a decedent, but only if	392
the trust is described in division (I)(3)(e)(i) or (ii) of this	393
section;	394

(ii) A person who was domiciled in this state for the	395
purposes of this chapter when the person directly or indirectly	396
transferred assets to an irrevocable trust, but only if at least	397
one of the trust's qualifying beneficiaries is domiciled in this	398
state for the purposes of this chapter during all or some portion	399
of the trust's current taxable year;	400

(iii) A person who was domiciled in this state for the	401
purposes of this chapter when the trust document or instrument or	402
part of the trust document or instrument became irrevocable, but	403
only if at least one of the trust's qualifying beneficiaries is a	404
resident domiciled in this state for the purposes of this chapter	405
during all or some portion of the trust's current taxable year. If	406
a trust document or instrument became irrevocable upon the death	407
of a person who at the time of death was domiciled in this state	408
for purposes of this chapter, that person is a person described in	409
division (I)(3)(a)(iii) of this section.	410

(b) A trust is irrevocable to the extent that the transferor	411
is not considered to be the owner of the net assets of the trust	412
under sections 671 to 678 of the Internal Revenue Code.	413

(c) With respect to a trust other than a charitable lead	414
trust, "qualifying beneficiary" has the same meaning as "potential	415
current beneficiary" as defined in section 1361(e)(2) of the	416
Internal Revenue Code, and with respect to a charitable lead trust	417
"qualifying beneficiary" is any current, future, or contingent	418
beneficiary, but with respect to any trust "qualifying	419
beneficiary" excludes a person or a governmental entity or	420
instrumentality to any of which a contribution would qualify for	421
the charitable deduction under section 170 of the Internal Revenue	422
Code.	423

(d) For the purposes of division (I)(3)(a) of this section,	424
the extent to which a trust consists directly or indirectly, in	425
whole or in part, of assets, net of any related liabilities, that	426
were transferred directly or indirectly, in whole or part, to the	427
trust by any of the sources enumerated in that division shall be	428
ascertained by multiplying the fair market value of the trust's	429
assets, net of related liabilities, by the qualifying ratio, which	430
shall be computed as follows:	431

(i) The first time the trust receives assets, the numerator	432
of the qualifying ratio is the fair market value of those assets	433
at that time, net of any related liabilities, from sources	434
enumerated in division (I)(3)(a) of this section. The denominator	435
of the qualifying ratio is the fair market value of all the	436
trust's assets at that time, net of any related liabilities.	437

(ii) Each subsequent time the trust receives assets, a	438
revised qualifying ratio shall be computed. The numerator of the	439
revised qualifying ratio is the sum of (1) the fair market value	440
of the trust's assets immediately prior to the subsequent	441
transfer, net of any related liabilities, multiplied by the	442
qualifying ratio last computed without regard to the subsequent	443
transfer, and (2) the fair market value of the subsequently	444
transferred assets at the time transferred, net of any related	445
liabilities, from sources enumerated in division (I)(3)(a) of this	446
section. The denominator of the revised qualifying ratio is the	447
fair market value of all the trust's assets immediately after the	448
subsequent transfer, net of any related liabilities.	449

(iii) Whether a transfer to the trust is by or from any of	450
the sources enumerated in division (I)(3)(a) of this section shall	451
be ascertained without regard to the domicile of the trust's	452
beneficiaries.	453

(e) For the purposes of division (I)(3)(a)(i) of this	454
section:	455

(i) A trust is described in division (I)(3)(e)(i) of this	456
section if the trust is a testamentary trust and the testator of	457
that testamentary trust was domiciled in this state at the time of	458
the testator's death for purposes of the taxes levied under	459
Chapter 5731. of the Revised Code.	460

(ii) A trust is described in division (I)(3)(e)(ii) of this	461
section if the transfer is a qualifying transfer described in any	462
of divisions (I)(3)(f)(i) to (vi) of this section, the trust is an	463
irrevocable inter vivos trust, and at least one of the trust's	464
qualifying beneficiaries is domiciled in this state for purposes	465
of this chapter during all or some portion of the trust's current	466
taxable year.	467

(f) For the purposes of division (I)(3)(e)(ii) of this	468
section, a "qualifying transfer" is a transfer of assets, net of	469
any related liabilities, directly or indirectly to a trust, if the	470
transfer is described in any of the following:	471

(i) The transfer is made to a trust, created by the decedent	472
before the decedent's death and while the decedent was domiciled	473
in this state for the purposes of this chapter, and, prior to the	474
death of the decedent, the trust became irrevocable while the	475
decedent was domiciled in this state for the purposes of this	476
chapter.	477

(ii) The transfer is made to a trust to which the decedent,	478
prior to the decedent's death, had directly or indirectly	479
transferred assets, net of any related liabilities, while the	480
decedent was domiciled in this state for the purposes of this	481
chapter, and prior to the death of the decedent the trust became	482
irrevocable while the decedent was domiciled in this state for the	483
purposes of this chapter.	484

(iii) The transfer is made on account of a contractual	485
relationship existing directly or indirectly between the	486
transferor and either the decedent or the estate of the decedent	487
at any time prior to the date of the decedent's death, and the	488
decedent was domiciled in this state at the time of death for	489
purposes of the taxes levied under Chapter 5731. of the Revised	490
Code.	491

(iv) The transfer is made to a trust on account of a	492
contractual relationship existing directly or indirectly between	493
the transferor and another person who at the time of the	494
decedent's death was domiciled in this state for purposes of this	495
chapter.	496

(v) The transfer is made to a trust on account of the will of	497
a testator who was domiciled in this state at the time of the	498
testator's death for purposes of the taxes levied under Chapter	499
5731. of the Revised Code.	500

(vi) The transfer is made to a trust created by or caused to	501
be created by a court, and the trust was directly or indirectly	502
created in connection with or as a result of the death of an	503
individual who, for purposes of the taxes levied under Chapter	504
5731. of the Revised Code, was domiciled in this state at the time	505
of the individual's death.	506

(g) The tax commissioner may adopt rules to ascertain the	507
part of a trust residing in this state.	508

(J) "Nonresident" means an individual or estate that is not a	509
resident. An individual who is a resident for only part of a	510
taxable year is a nonresident for the remainder of that taxable	511
year.	512

(K) "Pass-through entity" has the same meaning as in section	513
5733.04 of the Revised Code.	514

(L) "Return" means the notifications and reports required to	515
be filed pursuant to this chapter for the purpose of reporting the	516
tax due and includes declarations of estimated tax when so	517
required.	518

(M) "Taxable year" means the calendar year or the taxpayer's	519
fiscal year ending during the calendar year, or fractional part	520
thereof, upon which the adjusted gross income is calculated	521
pursuant to this chapter.	522

(N) "Taxpayer" means any person subject to the tax imposed by	523
section 5747.02 of the Revised Code or any pass-through entity	524
that makes the election under division (D) of section 5747.08 of	525
the Revised Code.	526

(O) "Dependents" means dependents as defined in the Internal	527
Revenue Code and as claimed in the taxpayer's federal income tax	528
return for the taxable year or which the taxpayer would have been	529
permitted to claim had the taxpayer filed a federal income tax	530
return.	531

(P) "Principal county of employment" means, in the case of a	532
nonresident, the county within the state in which a taxpayer	533
performs services for an employer or, if those services are	534
performed in more than one county, the county in which the major	535
portion of the services are performed.	536

(Q) As used in sections 5747.50 to 5747.55 of the Revised	537
Code:	538

(1) "Subdivision" means any county, municipal corporation,	539
park district, or township.	540

(2) "Essential local government purposes" includes all	541
functions that any subdivision is required by general law to	542
exercise, including like functions that are exercised under a	543
charter adopted pursuant to the Ohio Constitution.	544

(R) "Overpayment" means any amount already paid that exceeds	545
the figure determined to be the correct amount of the tax.	546

(S) "Taxable income" or "Ohio taxable income" applies only to	547
estates and trusts, and means federal taxable income, as defined	548
and used in the Internal Revenue Code, adjusted as follows:	549

(1) Add interest or dividends, net of ordinary, necessary,	550
and reasonable expenses not deducted in computing federal taxable	551
income, on obligations or securities of any state or of any	552
political subdivision or authority of any state, other than this	553
state and its subdivisions and authorities, but only to the extent	554
that such net amount is not otherwise includible in Ohio taxable	555
income and is described in either division (S)(1)(a) or (b) of	556
this section:	557

(a) The net amount is not attributable to the S portion of an	558
electing small business trust and has not been distributed to	559
beneficiaries for the taxable year;	560

(b) The net amount is attributable to the S portion of an	561
electing small business trust for the taxable year.	562

(2) Add interest or dividends, net of ordinary, necessary,	563
and reasonable expenses not deducted in computing federal taxable	564
income, on obligations of any authority, commission,	565
instrumentality, territory, or possession of the United States to	566
the extent that the interest or dividends are exempt from federal	567
income taxes but not from state income taxes, but only to the	568
extent that such net amount is not otherwise includible in Ohio	569
taxable income and is described in either division (S)(1)(a) or	570
(b) of this section;	571

(3) Add the amount of personal exemption allowed to the	572
estate pursuant to section 642(b) of the Internal Revenue Code;	573

(4) Deduct interest or dividends, net of related expenses	574
deducted in computing federal taxable income, on obligations of	575
the United States and its territories and possessions or of any	576
authority, commission, or instrumentality of the United States to	577
the extent that the interest or dividends are exempt from state	578
taxes under the laws of the United States, but only to the extent	579
that such amount is included in federal taxable income and is	580
described in either division (S)(1)(a) or (b) of this section;	581

(5) Deduct the amount of wages and salaries, if any, not	582
otherwise allowable as a deduction but that would have been	583
allowable as a deduction in computing federal taxable income for	584
the taxable year, had the targeted jobs credit allowed under	585
sections 38, 51, and 52 of the Internal Revenue Code not been in	586
effect, but only to the extent such amount relates either to	587
income included in federal taxable income for the taxable year or	588
to income of the S portion of an electing small business trust for	589
the taxable year;	590

(6) Deduct any interest or interest equivalent, net of	591
related expenses deducted in computing federal taxable income, on	592
public obligations and purchase obligations, but only to the	593
extent that such net amount relates either to income included in	594
federal taxable income for the taxable year or to income of the S	595
portion of an electing small business trust for the taxable year;	596

(7) Add any loss or deduct any gain resulting from sale,	597
exchange, or other disposition of public obligations to the extent	598
that such loss has been deducted or such gain has been included in	599
computing either federal taxable income or income of the S portion	600
of an electing small business trust for the taxable year;	601

(8) Except in the case of the final return of an estate, add	602
any amount deducted by the taxpayer on both its Ohio estate tax	603
return pursuant to section 5731.14 of the Revised Code, and on its	604
federal income tax return in determining federal taxable income;	605

(9)(a) Deduct any amount included in federal taxable income	606
solely because the amount represents a reimbursement or refund of	607
expenses that in a previous year the decedent had deducted as an	608
itemized deduction pursuant to section 63 of the Internal Revenue	609
Code and applicable treasury regulations. The deduction otherwise	610
allowed under division (S)(9)(a) of this section shall be reduced	611
to the extent the reimbursement is attributable to an amount the	612
taxpayer or decedent deducted under this section in any taxable	613
year.	614

(b) Add any amount not otherwise included in Ohio taxable	615
income for any taxable year to the extent that the amount is	616
attributable to the recovery during the taxable year of any amount	617
deducted or excluded in computing federal or Ohio taxable income	618
in any taxable year, but only to the extent such amount has not	619
been distributed to beneficiaries for the taxable year.	620

(10) Deduct any portion of the deduction described in section	621
1341(a)(2) of the Internal Revenue Code, for repaying previously	622
reported income received under a claim of right, that meets both	623
of the following requirements:	624

(a) It is allowable for repayment of an item that was	625
included in the taxpayer's taxable income or the decedent's	626
adjusted gross income for a prior taxable year and did not qualify	627
for a credit under division (A) or (B) of section 5747.05 of the	628
Revised Code for that year.	629

(b) It does not otherwise reduce the taxpayer's taxable	630
income or the decedent's adjusted gross income for the current or	631
any other taxable year.	632

(11) Add any amount claimed as a credit under section	633
5747.059 of the Revised Code to the extent that the amount	634
satisfies either of the following:	635

(a) The amount was deducted or excluded from the computation	636
of the taxpayer's federal taxable income as required to be	637
reported for the taxpayer's taxable year under the Internal	638
Revenue Code;	639

(b) The amount resulted in a reduction in the taxpayer's	640
federal taxable income as required to be reported for any of the	641
taxpayer's taxable years under the Internal Revenue Code.	642

(12) Deduct any amount, net of related expenses deducted in	643
computing federal taxable income, that a trust is required to	644
report as farm income on its federal income tax return, but only	645
if the assets of the trust include at least ten acres of land	646
satisfying the definition of "land devoted exclusively to	647
agricultural use" under section 5713.30 of the Revised Code,	648
regardless of whether the land is valued for tax purposes as such	649
land under sections 5713.30 to 5713.38 of the Revised Code. If the	650
trust is a pass-through entity investor, section 5747.231 of the	651
Revised Code applies in ascertaining if the trust is eligible to	652
claim the deduction provided by division (S)(12) of this section	653
in connection with the pass-through entity's farm income.	654

Except for farm income attributable to the S portion of an	655
electing small business trust, the deduction provided by division	656
(S)(12) of this section is allowed only to the extent that the	657
trust has not distributed such farm income. Division (S)(12) of	658
this section applies only to taxable years of a trust beginning in	659
2002 or thereafter.	660

(13) Add the net amount of income described in section 641(c)	661
of the Internal Revenue Code to the extent that amount is not	662
included in federal taxable income.	663

(14) Add or deduct the amount the taxpayer would be required	664
to add or deduct under division (A)(20) or (21) of this section if	665
the taxpayer's Ohio taxable income were computed in the same	666
manner as an individual's Ohio adjusted gross income is computed	667
under this section. In the case of a trust, division (S)(14) of	668
this section applies only to any of the trust's taxable years	669
beginning in 2002 or thereafter.	670

(15) Deduct, to the extent not otherwise allowable as a	671
deduction or exclusion in computing federal or Ohio taxable	672
income, the amount of net capital gain realized from the sale,	673
exchange, or other disposition of capital assets, including	674
capital gain distributions, not to exceed ten thousand dollars.	675

(T) "School district income" and "school district income tax"	676
have the same meanings as in section 5748.01 of the Revised Code.	677

(U) As used in divisions (A)(8), (A)(9), (S)(6), and (S)(7)	678
of this section, "public obligations," "purchase obligations," and	679
"interest or interest equivalent" have the same meanings as in	680
section 5709.76 of the Revised Code.	681

(V) "Limited liability company" means any limited liability	682
company formed under Chapter 1705. of the Revised Code or under	683
the laws of any other state.	684

(W) "Pass-through entity investor" means any person who,	685
during any portion of a taxable year of a pass-through entity, is	686
a partner, member, shareholder, or equity investor in that	687
pass-through entity.	688

(X) "Banking day" has the same meaning as in section 1304.01	689
of the Revised Code.	690

(Y) "Month" means a calendar month.

691

(Z) "Quarter" means the first three months, the second three	692
months, the third three months, or the last three months of the	693
taxpayer's taxable year.	694

(AA)(1) "Eligible institution" means a state university or	695
state institution of higher education as defined in section	696
3345.011 of the Revised Code, or a private, nonprofit college,	697
university, or other post-secondary institution located in this	698
state that possesses a certificate of authorization issued by the	699
Ohio board of regents pursuant to Chapter 1713. of the Revised	700
Code or a certificate of registration issued by the state board of	701
career colleges and schools under Chapter 3332. of the Revised	702
Code.	703

(2) "Qualified tuition and fees" means tuition and fees	704
imposed by an eligible institution as a condition of enrollment or	705
attendance, not exceeding two thousand five hundred dollars in	706
each of the individual's first two years of post-secondary	707
education. If the individual is a part-time student, "qualified	708
tuition and fees" includes tuition and fees paid for the academic	709
equivalent of the first two years of post-secondary education	710
during a maximum of five taxable years, not exceeding a total of	711
five thousand dollars. "Qualified tuition and fees" does not	712
include:	713

(a) Expenses for any course or activity involving sports,	714
games, or hobbies unless the course or activity is part of the	715
individual's degree or diploma program;	716

(b) The cost of books, room and board, student activity fees,	717
athletic fees, insurance expenses, or other expenses unrelated to	718
the individual's academic course of instruction;	719

(c) Tuition, fees, or other expenses paid or reimbursed	720
through an employer, scholarship, grant in aid, or other	721
educational benefit program.	722

(BB)(1) "Modified business income" means the business income	723
included in a trust's Ohio taxable income after such taxable	724
income is first reduced by the qualifying trust amount, if any.	725

(2) "Qualifying trust amount" of a trust means capital gains	726
and losses from the sale, exchange, or other disposition of equity	727
or ownership interests in, or debt obligations of, a qualifying	728
investee to the extent included in the trust's Ohio taxable	729
income, but only if the following requirements are satisfied:	730

(a) The book value of the qualifying investee's physical	731
assets in this state and everywhere, as of the last day of the	732
qualifying investee's fiscal or calendar year ending immediately	733
prior to the date on which the trust recognizes the gain or loss,	734
is available to the trust.	735

(b) The requirements of section 5747.011 of the Revised Code	736
are satisfied for the trust's taxable year in which the trust	737
recognizes the gain or loss.	738

Any gain or loss that is not a qualifying trust amount is	739
modified business income, qualifying investment income, or	740
modified nonbusiness income, as the case may be.	741

(3) "Modified nonbusiness income" means a trust's Ohio	742
taxable income other than modified business income, other than the	743
qualifying trust amount, and other than qualifying investment	744
income, as defined in section 5747.012 of the Revised Code, to the	745
extent such qualifying investment income is not otherwise part of	746
modified business income.	747

(4) "Modified Ohio taxable income" applies only to trusts,	748
and means the sum of the amounts described in divisions (BB)(4)(a)	749
to (c) of this section:	750

(a) The fraction, calculated under section 5747.013, and	751
applying section 5747.231 of the Revised Code, multiplied by the	752
sum of the following amounts:	753

(i) The trust's modified business income;

754

(ii) The trust's qualifying investment income, as defined in	755
section 5747.012 of the Revised Code, but only to the extent the	756
qualifying investment income does not otherwise constitute	757
modified business income and does not otherwise constitute a	758
qualifying trust amount.	759

(b) The qualifying trust amount multiplied by a fraction, the	760
numerator of which is the sum of the book value of the qualifying	761
investee's physical assets in this state on the last day of the	762
qualifying investee's fiscal or calendar year ending immediately	763
prior to the day on which the trust recognizes the qualifying	764
trust amount, and the denominator of which is the sum of the book	765
value of the qualifying investee's total physical assets	766
everywhere on the last day of the qualifying investee's fiscal or	767
calendar year ending immediately prior to the day on which the	768
trust recognizes the qualifying trust amount. If, for a taxable	769
year, the trust recognizes a qualifying trust amount with respect	770
to more than one qualifying investee, the amount described in	771
division (BB)(4)(b) of this section shall equal the sum of the	772
products so computed for each such qualifying investee.	773

(c)(i) With respect to a trust or portion of a trust that is	774
a resident as ascertained in accordance with division (I)(3)(d) of	775
this section, its modified nonbusiness income.	776

(ii) With respect to a trust or portion of a trust that is	777
not a resident as ascertained in accordance with division	778
(I)(3)(d) of this section, the amount of its modified nonbusiness	779
income satisfying the descriptions in divisions (B)(2) to (5) of	780
section 5747.20 of the Revised Code, except as otherwise provided	781
in division (BB)(4)(c)(ii) of this section. With respect to a	782
trust or portion of a trust that is not a resident as ascertained	783
in accordance with division (I)(3)(d) of this section, the trust's	784
portion of modified nonbusiness income recognized from the sale,	785
exchange, or other disposition of a debt interest in or equity	786
interest in a section 5747.212 entity, as defined in section	787
5747.212 of the Revised Code, without regard to division (A) of	788
that section, shall not be allocated to this state in accordance	789
with section 5747.20 of the Revised Code but shall be apportioned	790
to this state in accordance with division (B) of section 5747.212	791
of the Revised Code without regard to division (A) of that	792
section.	793

If the allocation and apportionment of a trust's income under	794
divisions (BB)(4)(a) and (c) of this section do not fairly	795
represent the modified Ohio taxable income of the trust in this	796
state, the alternative methods described in division (C) of	797
section 5747.21 of the Revised Code may be applied in the manner	798
and to the same extent provided in that section.	799

(5)(a) Except as set forth in division (BB)(5)(b) of this	800
section, "qualifying investee" means a person in which a trust has	801
an equity or ownership interest, or a person or unit of government	802
the debt obligations of either of which are owned by a trust. For	803
the purposes of division (BB)(2)(a) of this section and for the	804
purpose of computing the fraction described in division (BB)(4)(b)	805
of this section, all of the following apply:	806

(i) If the qualifying investee is a member of a qualifying	807
controlled group on the last day of the qualifying investee's	808
fiscal or calendar year ending immediately prior to the date on	809
which the trust recognizes the gain or loss, then "qualifying	810
investee" includes all persons in the qualifying controlled group	811
on such last day.	812

(ii) If the qualifying investee, or if the qualifying	813
investee and any members of the qualifying controlled group of	814
which the qualifying investee is a member on the last day of the	815
qualifying investee's fiscal or calendar year ending immediately	816
prior to the date on which the trust recognizes the gain or loss,	817
separately or cumulatively own, directly or indirectly, on the	818
last day of the qualifying investee's fiscal or calendar year	819
ending immediately prior to the date on which the trust recognizes	820
the qualifying trust amount, more than fifty per cent of the	821
equity of a pass-through entity, then the qualifying investee and	822
the other members are deemed to own the proportionate share of the	823
pass-through entity's physical assets which the pass-through	824
entity directly or indirectly owns on the last day of the	825
pass-through entity's calendar or fiscal year ending within or	826
with the last day of the qualifying investee's fiscal or calendar	827
year ending immediately prior to the date on which the trust	828
recognizes the qualifying trust amount.	829

(iii) For the purposes of division (BB)(5)(a)(iii) of this	830
section, "upper level pass-through entity" means a pass-through	831
entity directly or indirectly owning any equity of another	832
pass-through entity, and "lower level pass-through entity" means	833
that other pass-through entity.	834

An upper level pass-through entity, whether or not it is also	835
a qualifying investee, is deemed to own, on the last day of the	836
upper level pass-through entity's calendar or fiscal year, the	837
proportionate share of the lower level pass-through entity's	838
physical assets that the lower level pass-through entity directly	839
or indirectly owns on the last day of the lower level pass-through	840
entity's calendar or fiscal year ending within or with the last	841
day of the upper level pass-through entity's fiscal or calendar	842
year. If the upper level pass-through entity directly and	843
indirectly owns less than fifty per cent of the equity of the	844
lower level pass-through entity on each day of the upper level	845
pass-through entity's calendar or fiscal year in which or with	846
which ends the calendar or fiscal year of the lower level	847
pass-through entity and if, based upon clear and convincing	848
evidence, complete information about the location and cost of the	849
physical assets of the lower pass-through entity is not available	850
to the upper level pass-through entity, then solely for purposes	851
of ascertaining if a gain or loss constitutes a qualifying trust	852
amount, the upper level pass-through entity shall be deemed as	853
owning no equity of the lower level pass-through entity for each	854
day during the upper level pass-through entity's calendar or	855
fiscal year in which or with which ends the lower level	856
pass-through entity's calendar or fiscal year. Nothing in division	857
(BB)(5)(a)(iii) of this section shall be construed to provide for	858
any deduction or exclusion in computing any trust's Ohio taxable	859
income.	860

(b) With respect to a trust that is not a resident for the	861
taxable year and with respect to a part of a trust that is not a	862
resident for the taxable year, "qualifying investee" for that	863
taxable year does not include a C corporation if both of the	864
following apply:	865

(i) During the taxable year the trust or part of the trust	866
recognizes a gain or loss from the sale, exchange, or other	867
disposition of equity or ownership interests in, or debt	868
obligations of, the C corporation.	869

(ii) Such gain or loss constitutes nonbusiness income.

870

(6) "Available" means information is such that a person is	871
able to learn of the information by the due date plus extensions,	872
if any, for filing the return for the taxable year in which the	873
trust recognizes the gain or loss.	874

(CC) "Qualifying controlled group" has the same meaning as in	875
section 5733.04 of the Revised Code.	876

(DD) "Related member" has the same meaning as in section	877
5733.042 of the Revised Code.	878

(EE)(1) For the purposes of division (EE) of this section:

879

(a) "Qualifying person" means any person other than a	880
qualifying corporation.	881

(b) "Qualifying corporation" means any person classified for	882
federal income tax purposes as an association taxable as a	883
corporation, except either of the following:	884

(i) A corporation that has made an election under subchapter	885
S, chapter one, subtitle A, of the Internal Revenue Code for its	886
taxable year ending within, or on the last day of, the investor's	887
taxable year;	888

(ii) A subsidiary that is wholly owned by any corporation	889
that has made an election under subchapter S, chapter one,	890
subtitle A of the Internal Revenue Code for its taxable year	891
ending within, or on the last day of, the investor's taxable year.	892

(2) For the purposes of this chapter, unless expressly stated	893
otherwise, no qualifying person indirectly owns any asset directly	894
or indirectly owned by any qualifying corporation.	895

(FF) For purposes of this chapter and Chapter 5751. of the	896
Revised Code:	897

(1) "Trust" does not include a qualified pre-income tax	898
trust.	899

(2) A "qualified pre-income tax trust" is any pre-income tax	900
trust that makes a qualifying pre-income tax trust election as	901
described in division (FF)(3) of this section.	902

(3) A "qualifying pre-income tax trust election" is an	903
election by a pre-income tax trust to subject to the tax imposed	904
by section 5751.02 of the Revised Code the pre-income tax trust	905
and all pass-through entities of which the trust owns or controls,	906
directly, indirectly, or constructively through related interests,	907
five per cent or more of the ownership or equity interests. The	908
trustee shall notify the tax commissioner in writing of the	909
election on or before April 15, 2006. The election, if timely	910
made, shall be effective on and after January 1, 2006, and shall	911
apply for all tax periods and tax years until revoked by the	912
trustee of the trust.	913

(4) A "pre-income tax trust" is a trust that satisfies all of	914
the following requirements:	915

(a) The document or instrument creating the trust was	916
executed by the grantor before January 1, 1972;	917

(b) The trust became irrevocable upon the creation of the	918
trust; and	919

(c) The grantor was domiciled in this state at the time the	920
trust was created.	921

Section 2. That existing section 5747.01 of the Revised Code	922
is hereby repealed.	923

Section 3. The amendment by this act of section 5747.01 of	924
the Revised Code applies to taxable years ending on or after the	925
effective date of this act.	926