Bill Text: OH HB98 | 2011-2012 | 129th General Assembly | Introduced

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Bill Title: To reduce the maximum effective income tax rate applicable to unearned income of persons age 70 1/2 years or older to 1%, beginning in 2013.

Spectrum: Partisan Bill (Republican 12-0)

Status: (Introduced - Dead) 2011-02-10 - To Ways & Means [HB98 Detail]

Download: Ohio-2011-HB98-Introduced.html

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As Introduced

129th General Assembly Regular Session 2011-2012

H. B. No. 98

Representative Hollington 

Cosponsors: Representatives Boose, Blair, Gonzales, Martin, Derickson, Kozlowski, Young, Slaby, Ruhl, Combs, Baker 

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A BILL

To amend sections 5747.01, 5747.02, and 5747.055 of

1

the Revised Code to reduce the maximum effective

2

income tax rate applicable to unearned income of

3

persons age 70 1/2 years or older to 1%, beginning

4

in 2013.

5

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

Section 1. That sections 5747.01, 5747.02, and 5747.055 of	6
the Revised Code be amended to read as follows:	7

Sec. 5747.01.  Except as otherwise expressly provided or	8
clearly appearing from the context, any term used in this chapter	9
that is not otherwise defined in this section has the same meaning	10
as when used in a comparable context in the laws of the United	11
States relating to federal income taxes or if not used in a	12
comparable context in those laws, has the same meaning as in	13
section 5733.40 of the Revised Code. Any reference in this chapter	14
to the Internal Revenue Code includes other laws of the United	15
States relating to federal income taxes.	16

As used in this chapter:

17

(A) "Adjusted gross income" or "Ohio adjusted gross income"	18
means federal adjusted gross income, as defined and used in the	19
Internal Revenue Code, adjusted as provided in this section:	20

(1) Add interest or dividends on obligations or securities of	21
any state or of any political subdivision or authority of any	22
state, other than this state and its subdivisions and authorities.	23

(2) Add interest or dividends on obligations of any	24
authority, commission, instrumentality, territory, or possession	25
of the United States to the extent that the interest or dividends	26
are exempt from federal income taxes but not from state income	27
taxes.	28

(3) Deduct interest or dividends on obligations of the United	29
States and its territories and possessions or of any authority,	30
commission, or instrumentality of the United States to the extent	31
that the interest or dividends are included in federal adjusted	32
gross income but exempt from state income taxes under the laws of	33
the United States.	34

(4) Deduct disability and survivor's benefits to the extent	35
included in federal adjusted gross income.	36

(5) Deduct benefits under Title II of the Social Security Act	37
and tier 1 railroad retirement benefits to the extent included in	38
federal adjusted gross income under section 86 of the Internal	39
Revenue Code.	40

(6) In the case of a taxpayer who is a beneficiary of a trust	41
that makes an accumulation distribution as defined in section 665	42
of the Internal Revenue Code, add, for the beneficiary's taxable	43
years beginning before 2002, the portion, if any, of such	44
distribution that does not exceed the undistributed net income of	45
the trust for the three taxable years preceding the taxable year	46
in which the distribution is made to the extent that the portion	47
was not included in the trust's taxable income for any of the	48
trust's taxable years beginning in 2002 or thereafter.	49
"Undistributed net income of a trust" means the taxable income of	50
the trust increased by (a)(i) the additions to adjusted gross	51
income required under division (A) of this section and (ii) the	52
personal exemptions allowed to the trust pursuant to section	53
642(b) of the Internal Revenue Code, and decreased by (b)(i) the	54
deductions to adjusted gross income required under division (A) of	55
this section, (ii) the amount of federal income taxes attributable	56
to such income, and (iii) the amount of taxable income that has	57
been included in the adjusted gross income of a beneficiary by	58
reason of a prior accumulation distribution. Any undistributed net	59
income included in the adjusted gross income of a beneficiary	60
shall reduce the undistributed net income of the trust commencing	61
with the earliest years of the accumulation period.	62

(7) Deduct the amount of wages and salaries, if any, not	63
otherwise allowable as a deduction but that would have been	64
allowable as a deduction in computing federal adjusted gross	65
income for the taxable year, had the targeted jobs credit allowed	66
and determined under sections 38, 51, and 52 of the Internal	67
Revenue Code not been in effect.	68

(8) Deduct any interest or interest equivalent on public	69
obligations and purchase obligations to the extent that the	70
interest or interest equivalent is included in federal adjusted	71
gross income.	72

(9) Add any loss or deduct any gain resulting from the sale,	73
exchange, or other disposition of public obligations to the extent	74
that the loss has been deducted or the gain has been included in	75
computing federal adjusted gross income.	76

(10) Deduct or add amounts, as provided under section 5747.70	77
of the Revised Code, related to contributions to variable college	78
savings program accounts made or tuition units purchased pursuant	79
to Chapter 3334. of the Revised Code.	80

(11)(a) Deduct, to the extent not otherwise allowable as a	81
deduction or exclusion in computing federal or Ohio adjusted gross	82
income for the taxable year, the amount the taxpayer paid during	83
the taxable year for medical care insurance and qualified	84
long-term care insurance for the taxpayer, the taxpayer's spouse,	85
and dependents. No deduction for medical care insurance under	86
division (A)(11) of this section shall be allowed either to any	87
taxpayer who is eligible to participate in any subsidized health	88
plan maintained by any employer of the taxpayer or of the	89
taxpayer's spouse, or to any taxpayer who is entitled to, or on	90
application would be entitled to, benefits under part A of Title	91
XVIII of the "Social Security Act," 49 Stat. 620 (1935), 42 U.S.C.	92
301, as amended. For the purposes of division (A)(11)(a) of this	93
section, "subsidized health plan" means a health plan for which	94
the employer pays any portion of the plan's cost. The deduction	95
allowed under division (A)(11)(a) of this section shall be the net	96
of any related premium refunds, related premium reimbursements, or	97
related insurance premium dividends received during the taxable	98
year.	99

(b) Deduct, to the extent not otherwise deducted or excluded	100
in computing federal or Ohio adjusted gross income during the	101
taxable year, the amount the taxpayer paid during the taxable	102
year, not compensated for by any insurance or otherwise, for	103
medical care of the taxpayer, the taxpayer's spouse, and	104
dependents, to the extent the expenses exceed seven and one-half	105
per cent of the taxpayer's federal adjusted gross income.	106

(c) Deduct, to the extent not otherwise deducted or excluded	107
in computing federal or Ohio adjusted gross income, any amount	108
included in federal adjusted gross income under section 105 or not	109
excluded under section 106 of the Internal Revenue Code solely	110
because it relates to an accident and health plan for a person who	111
otherwise would be a "qualifying relative" and thus a "dependent"	112
under section 152 of the Internal Revenue Code but for the fact	113
that the person fails to meet the income and support limitations	114
under section 152(d)(1)(B) and (C) of the Internal Revenue Code.	115

(d) For purposes of division (A)(11) of this section,	116
"medical care" has the meaning given in section 213 of the	117
Internal Revenue Code, subject to the special rules, limitations,	118
and exclusions set forth therein, and "qualified long-term care"	119
has the same meaning given in section 7702B(c) of the Internal	120
Revenue Code. Solely for purposes of divisions (A)(11)(a) and (c)	121
of this section, "dependent" includes a person who otherwise would	122
be a "qualifying relative" and thus a "dependent" under section	123
152 of the Internal Revenue Code but for the fact that the person	124
fails to meet the income and support limitations under section	125
152(d)(1)(B) and (C) of the Internal Revenue Code.	126

(12)(a) Deduct any amount included in federal adjusted gross	127
income solely because the amount represents a reimbursement or	128
refund of expenses that in any year the taxpayer had deducted as	129
an itemized deduction pursuant to section 63 of the Internal	130
Revenue Code and applicable United States department of the	131
treasury regulations. The deduction otherwise allowed under	132
division (A)(12)(a) of this section shall be reduced to the extent	133
the reimbursement is attributable to an amount the taxpayer	134
deducted under this section in any taxable year.	135

(b) Add any amount not otherwise included in Ohio adjusted	136
gross income for any taxable year to the extent that the amount is	137
attributable to the recovery during the taxable year of any amount	138
deducted or excluded in computing federal or Ohio adjusted gross	139
income in any taxable year.	140

(13) Deduct any portion of the deduction described in section	141
1341(a)(2) of the Internal Revenue Code, for repaying previously	142
reported income received under a claim of right, that meets both	143
of the following requirements:	144

(a) It is allowable for repayment of an item that was	145
included in the taxpayer's adjusted gross income for a prior	146
taxable year and did not qualify for a credit under division (A)	147
or (B) of section 5747.05 of the Revised Code for that year;	148

(b) It does not otherwise reduce the taxpayer's adjusted	149
gross income for the current or any other taxable year.	150

(14) Deduct an amount equal to the deposits made to, and net	151
investment earnings of, a medical savings account during the	152
taxable year, in accordance with section 3924.66 of the Revised	153
Code. The deduction allowed by division (A)(14) of this section	154
does not apply to medical savings account deposits and earnings	155
otherwise deducted or excluded for the current or any other	156
taxable year from the taxpayer's federal adjusted gross income.	157

(15)(a) Add an amount equal to the funds withdrawn from a	158
medical savings account during the taxable year, and the net	159
investment earnings on those funds, when the funds withdrawn were	160
used for any purpose other than to reimburse an account holder	161
for, or to pay, eligible medical expenses, in accordance with	162
section 3924.66 of the Revised Code;	163

(b) Add the amounts distributed from a medical savings	164
account under division (A)(2) of section 3924.68 of the Revised	165
Code during the taxable year.	166

(16) Add any amount claimed as a credit under section	167
5747.059 of the Revised Code to the extent that such amount	168
satisfies either of the following:	169

(a) The amount was deducted or excluded from the computation	170
of the taxpayer's federal adjusted gross income as required to be	171
reported for the taxpayer's taxable year under the Internal	172
Revenue Code;	173

(b) The amount resulted in a reduction of the taxpayer's	174
federal adjusted gross income as required to be reported for any	175
of the taxpayer's taxable years under the Internal Revenue Code.	176

(17) Deduct the amount contributed by the taxpayer to an	177
individual development account program established by a county	178
department of job and family services pursuant to sections 329.11	179
to 329.14 of the Revised Code for the purpose of matching funds	180
deposited by program participants. On request of the tax	181
commissioner, the taxpayer shall provide any information that, in	182
the tax commissioner's opinion, is necessary to establish the	183
amount deducted under division (A)(17) of this section.	184

(18) Beginning in taxable year 2001 but not for any taxable	185
year beginning after December 31, 2005, if the taxpayer is married	186
and files a joint return and the combined federal adjusted gross	187
income of the taxpayer and the taxpayer's spouse for the taxable	188
year does not exceed one hundred thousand dollars, or if the	189
taxpayer is single and has a federal adjusted gross income for the	190
taxable year not exceeding fifty thousand dollars, deduct amounts	191
paid during the taxable year for qualified tuition and fees paid	192
to an eligible institution for the taxpayer, the taxpayer's	193
spouse, or any dependent of the taxpayer, who is a resident of	194
this state and is enrolled in or attending a program that	195
culminates in a degree or diploma at an eligible institution. The	196
deduction may be claimed only to the extent that qualified tuition	197
and fees are not otherwise deducted or excluded for any taxable	198
year from federal or Ohio adjusted gross income. The deduction may	199
not be claimed for educational expenses for which the taxpayer	200
claims a credit under section 5747.27 of the Revised Code.	201

(19) Add any reimbursement received during the taxable year	202
of any amount the taxpayer deducted under division (A)(18) of this	203
section in any previous taxable year to the extent the amount is	204
not otherwise included in Ohio adjusted gross income.	205

(20)(a)(i) Add five-sixths of the amount of depreciation	206
expense allowed by subsection (k) of section 168 of the Internal	207
Revenue Code, including the taxpayer's proportionate or	208
distributive share of the amount of depreciation expense allowed	209
by that subsection to a pass-through entity in which the taxpayer	210
has a direct or indirect ownership interest.	211

(ii) Add five-sixths of the amount of qualifying section 179	212
depreciation expense, including a person's proportionate or	213
distributive share of the amount of qualifying section 179	214
depreciation expense allowed to any pass-through entity in which	215
the person has a direct or indirect ownership. For the purposes of	216
this division, "qualifying section 179 depreciation expense" means	217
the difference between (I) the amount of depreciation expense	218
directly or indirectly allowed to the taxpayer under section 179	219
of the Internal Revenue Code, and (II) the amount of depreciation	220
expense directly or indirectly allowed to the taxpayer under	221
section 179 of the Internal Revenue Code as that section existed	222
on December 31, 2002.	223

The tax commissioner, under procedures established by the	224
commissioner, may waive the add-backs related to a pass-through	225
entity if the taxpayer owns, directly or indirectly, less than	226
five per cent of the pass-through entity.	227

(b) Nothing in division (A)(20) of this section shall be	228
construed to adjust or modify the adjusted basis of any asset.	229

(c) To the extent the add-back required under division	230
(A)(20)(a) of this section is attributable to property generating	231
nonbusiness income or loss allocated under section 5747.20 of the	232
Revised Code, the add-back shall be sitused to the same location	233
as the nonbusiness income or loss generated by the property for	234
the purpose of determining the credit under division (A) of	235
section 5747.05 of the Revised Code. Otherwise, the add-back shall	236
be apportioned, subject to one or more of the four alternative	237
methods of apportionment enumerated in section 5747.21 of the	238
Revised Code.	239

(d) For the purposes of division (A) of this section, net	240
operating loss carryback and carryforward shall not include	241
five-sixths of the allowance of any net operating loss deduction	242
carryback or carryforward to the taxable year to the extent such	243
loss resulted from depreciation allowed by section 168(k) of the	244
Internal Revenue Code and by the qualifying section 179	245
depreciation expense amount.	246

(21)(a) If the taxpayer was required to add an amount under	247
division (A)(20)(a) of this section for a taxable year, deduct	248
one-fifth of the amount so added for each of the five succeeding	249
taxable years.	250

(b) If the amount deducted under division (A)(21)(a) of this	251
section is attributable to an add-back allocated under division	252
(A)(20)(c) of this section, the amount deducted shall be sitused	253
to the same location. Otherwise, the add-back shall be apportioned	254
using the apportionment factors for the taxable year in which the	255
deduction is taken, subject to one or more of the four alternative	256
methods of apportionment enumerated in section 5747.21 of the	257
Revised Code.	258

(c) No deduction is available under division (A)(21)(a) of	259
this section with regard to any depreciation allowed by section	260
168(k) of the Internal Revenue Code and by the qualifying section	261
179 depreciation expense amount to the extent that such	262
depreciation resulted in or increased a federal net operating loss	263
carryback or carryforward to a taxable year to which division	264
(A)(20)(d) of this section does not apply.	265

(22) Deduct, to the extent not otherwise deducted or excluded	266
in computing federal or Ohio adjusted gross income for the taxable	267
year, the amount the taxpayer received during the taxable year as	268
reimbursement for life insurance premiums under section 5919.31 of	269
the Revised Code.	270

(23) Deduct, to the extent not otherwise deducted or excluded	271
in computing federal or Ohio adjusted gross income for the taxable	272
year, the amount the taxpayer received during the taxable year as	273
a death benefit paid by the adjutant general under section 5919.33	274
of the Revised Code.	275

(24) Deduct, to the extent included in federal adjusted gross	276
income and not otherwise allowable as a deduction or exclusion in	277
computing federal or Ohio adjusted gross income for the taxable	278
year, military pay and allowances received by the taxpayer during	279
the taxable year for active duty service in the United States	280
army, air force, navy, marine corps, or coast guard or reserve	281
components thereof or the national guard. The deduction may not be	282
claimed for military pay and allowances received by the taxpayer	283
while the taxpayer is stationed in this state.	284

(25) Deduct, to the extent not otherwise allowable as a	285
deduction or exclusion in computing federal or Ohio adjusted gross	286
income for the taxable year and not otherwise compensated for by	287
any other source, the amount of qualified organ donation expenses	288
incurred by the taxpayer during the taxable year, not to exceed	289
ten thousand dollars. A taxpayer may deduct qualified organ	290
donation expenses only once for all taxable years beginning with	291
taxable years beginning in 2007.	292

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

293

(a) "Human organ" means all or any portion of a human liver,	294
pancreas, kidney, intestine, or lung, and any portion of human	295
bone marrow.	296

(b) "Qualified organ donation expenses" means travel	297
expenses, lodging expenses, and wages and salary forgone by a	298
taxpayer in connection with the taxpayer's donation, while living,	299
of one or more of the taxpayer's human organs to another human	300
being.	301

(26) Deduct, to the extent not otherwise deducted or excluded	302
in computing federal or Ohio adjusted gross income for the taxable	303
year, amounts received by the taxpayer as retired military	304
personnel pay for service in the United States army, navy, air	305
force, coast guard, or marine corps or reserve components thereof,	306
or the national guard, or received by the surviving spouse or	307
former spouse of such a taxpayer under the survivor benefit plan	308
on account of such a taxpayer's death. If the taxpayer receives	309
income on account of retirement paid under the federal civil	310
service retirement system or federal employees retirement system,	311
or under any successor retirement program enacted by the congress	312
of the United States that is established and maintained for	313
retired employees of the United States government, and such	314
retirement income is based, in whole or in part, on credit for the	315
taxpayer's military service, the deduction allowed under this	316
division shall include only that portion of such retirement income	317
that is attributable to the taxpayer's military service, to the	318
extent that portion of such retirement income is otherwise	319
included in federal adjusted gross income and is not otherwise	320
deducted under this section. Any amount deducted under division	321
(A)(26) of this section is not included in a taxpayer's adjusted	322
gross income for the purposes of section 5747.055 of the Revised	323
Code. No amount may be deducted under division (A)(26) of this	324
section on the basis of which a credit was claimed under section	325
5747.055 of the Revised Code.	326

(27) Deduct, to the extent not otherwise deducted or excluded	327
in computing federal or Ohio adjusted gross income for the taxable	328
year, the amount the taxpayer received during the taxable year	329
from the military injury relief fund created in section 5101.98 of	330
the Revised Code.	331

(28) Deduct, to the extent not otherwise deducted or excluded	332
in computing federal or Ohio adjusted gross income for the taxable	333
year, the amount the taxpayer received as a veterans bonus during	334
the taxable year from the Ohio department of veterans services as	335
authorized by Section 2r of Article VIII, Ohio Constitution.	336

(29) Deduct, to the extent not otherwise deducted or excluded	337
in computing federal or Ohio adjusted gross income for the taxable	338
year, any loss from wagering transactions that is allowed as an	339
itemized deduction under section 165 of the Internal Revenue Code	340
and that the taxpayer deducted in computing federal taxable	341
income.	342

(30) In the case of an individual taxpayer who has attained	343
seventy and one-half years of age on or before the last day of the	344
taxpayer's taxable year that begins in or after 2013, the taxpayer	345
may elect to deduct, to the extent not otherwise deducted or	346
excluded in computing federal or Ohio adjusted gross income, all	347
items of income included in federal adjusted gross income that are	348
not earned income. As used in division (A)(30) of this section,	349
"earned income" means wages, salaries, tips, deferred	350
compensation, and other employee compensation, and net earnings	351
from self-employment as defined in section 1402(a) of the Internal	352
Revenue Code.	353

For the purposes of any other section of the Revised Code	354
that refers to "adjusted gross income" as defined in division (A)	355
of this section, the reference shall be considered to include the	356
sum of adjusted gross income and any amount deducted under	357
division (A)(30) of this section, unless the reference expressly	358
provides otherwise or the context clearly indicates otherwise.	359

(B) "Business income" means income, including gain or loss,	360
arising from transactions, activities, and sources in the regular	361
course of a trade or business and includes income, gain, or loss	362
from real property, tangible property, and intangible property if	363
the acquisition, rental, management, and disposition of the	364
property constitute integral parts of the regular course of a	365
trade or business operation. "Business income" includes income,	366
including gain or loss, from a partial or complete liquidation of	367
a business, including, but not limited to, gain or loss from the	368
sale or other disposition of goodwill.	369

(C) "Nonbusiness income" means all income other than business	370
income and may include, but is not limited to, compensation, rents	371
and royalties from real or tangible personal property, capital	372
gains, interest, dividends and distributions, patent or copyright	373
royalties, or lottery winnings, prizes, and awards.	374

(D) "Compensation" means any form of remuneration paid to an	375
employee for personal services.	376

(E) "Fiduciary" means a guardian, trustee, executor,	377
administrator, receiver, conservator, or any other person acting	378
in any fiduciary capacity for any individual, trust, or estate.	379

(F) "Fiscal year" means an accounting period of twelve months	380
ending on the last day of any month other than December.	381

(G) "Individual" means any natural person.

382

(H) "Internal Revenue Code" means the "Internal Revenue Code	383
of 1986," 100 Stat. 2085, 26 U.S.C.A. 1, as amended.	384

(I) "Resident" means any of the following, provided that	385
division (I)(3) of this section applies only to taxable years of a	386
trust beginning in 2002 or thereafter:	387

(1) An individual who is domiciled in this state, subject to	388
section 5747.24 of the Revised Code;	389

(2) The estate of a decedent who at the time of death was	390
domiciled in this state. The domicile tests of section 5747.24 of	391
the Revised Code are not controlling for purposes of division	392
(I)(2) of this section.	393

(3) A trust that, in whole or part, resides in this state. If	394
only part of a trust resides in this state, the trust is a	395
resident only with respect to that part.	396

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

397

(a) A trust resides in this state for the trust's current	398
taxable year to the extent, as described in division (I)(3)(d) of	399
this section, that the trust consists directly or indirectly, in	400
whole or in part, of assets, net of any related liabilities, that	401
were transferred, or caused to be transferred, directly or	402
indirectly, to the trust by any of the following:	403

(i) A person, a court, or a governmental entity or	404
instrumentality on account of the death of a decedent, but only if	405
the trust is described in division (I)(3)(e)(i) or (ii) of this	406
section;	407

(ii) A person who was domiciled in this state for the	408
purposes of this chapter when the person directly or indirectly	409
transferred assets to an irrevocable trust, but only if at least	410
one of the trust's qualifying beneficiaries is domiciled in this	411
state for the purposes of this chapter during all or some portion	412
of the trust's current taxable year;	413

(iii) A person who was domiciled in this state for the	414
purposes of this chapter when the trust document or instrument or	415
part of the trust document or instrument became irrevocable, but	416
only if at least one of the trust's qualifying beneficiaries is a	417
resident domiciled in this state for the purposes of this chapter	418
during all or some portion of the trust's current taxable year. If	419
a trust document or instrument became irrevocable upon the death	420
of a person who at the time of death was domiciled in this state	421
for purposes of this chapter, that person is a person described in	422
division (I)(3)(a)(iii) of this section.	423

(b) A trust is irrevocable to the extent that the transferor	424
is not considered to be the owner of the net assets of the trust	425
under sections 671 to 678 of the Internal Revenue Code.	426

(c) With respect to a trust other than a charitable lead	427
trust, "qualifying beneficiary" has the same meaning as "potential	428
current beneficiary" as defined in section 1361(e)(2) of the	429
Internal Revenue Code, and with respect to a charitable lead trust	430
"qualifying beneficiary" is any current, future, or contingent	431
beneficiary, but with respect to any trust "qualifying	432
beneficiary" excludes a person or a governmental entity or	433
instrumentality to any of which a contribution would qualify for	434
the charitable deduction under section 170 of the Internal Revenue	435
Code.	436

(d) For the purposes of division (I)(3)(a) of this section,	437
the extent to which a trust consists directly or indirectly, in	438
whole or in part, of assets, net of any related liabilities, that	439
were transferred directly or indirectly, in whole or part, to the	440
trust by any of the sources enumerated in that division shall be	441
ascertained by multiplying the fair market value of the trust's	442
assets, net of related liabilities, by the qualifying ratio, which	443
shall be computed as follows:	444

(i) The first time the trust receives assets, the numerator	445
of the qualifying ratio is the fair market value of those assets	446
at that time, net of any related liabilities, from sources	447
enumerated in division (I)(3)(a) of this section. The denominator	448
of the qualifying ratio is the fair market value of all the	449
trust's assets at that time, net of any related liabilities.	450

(ii) Each subsequent time the trust receives assets, a	451
revised qualifying ratio shall be computed. The numerator of the	452
revised qualifying ratio is the sum of (1) the fair market value	453
of the trust's assets immediately prior to the subsequent	454
transfer, net of any related liabilities, multiplied by the	455
qualifying ratio last computed without regard to the subsequent	456
transfer, and (2) the fair market value of the subsequently	457
transferred assets at the time transferred, net of any related	458
liabilities, from sources enumerated in division (I)(3)(a) of this	459
section. The denominator of the revised qualifying ratio is the	460
fair market value of all the trust's assets immediately after the	461
subsequent transfer, net of any related liabilities.	462

(iii) Whether a transfer to the trust is by or from any of	463
the sources enumerated in division (I)(3)(a) of this section shall	464
be ascertained without regard to the domicile of the trust's	465
beneficiaries.	466

(e) For the purposes of division (I)(3)(a)(i) of this	467
section:	468

(i) A trust is described in division (I)(3)(e)(i) of this	469
section if the trust is a testamentary trust and the testator of	470
that testamentary trust was domiciled in this state at the time of	471
the testator's death for purposes of the taxes levied under	472
Chapter 5731. of the Revised Code.	473

(ii) A trust is described in division (I)(3)(e)(ii) of this	474
section if the transfer is a qualifying transfer described in any	475
of divisions (I)(3)(f)(i) to (vi) of this section, the trust is an	476
irrevocable inter vivos trust, and at least one of the trust's	477
qualifying beneficiaries is domiciled in this state for purposes	478
of this chapter during all or some portion of the trust's current	479
taxable year.	480

(f) For the purposes of division (I)(3)(e)(ii) of this	481
section, a "qualifying transfer" is a transfer of assets, net of	482
any related liabilities, directly or indirectly to a trust, if the	483
transfer is described in any of the following:	484

(i) The transfer is made to a trust, created by the decedent	485
before the decedent's death and while the decedent was domiciled	486
in this state for the purposes of this chapter, and, prior to the	487
death of the decedent, the trust became irrevocable while the	488
decedent was domiciled in this state for the purposes of this	489
chapter.	490

(ii) The transfer is made to a trust to which the decedent,	491
prior to the decedent's death, had directly or indirectly	492
transferred assets, net of any related liabilities, while the	493
decedent was domiciled in this state for the purposes of this	494
chapter, and prior to the death of the decedent the trust became	495
irrevocable while the decedent was domiciled in this state for the	496
purposes of this chapter.	497

(iii) The transfer is made on account of a contractual	498
relationship existing directly or indirectly between the	499
transferor and either the decedent or the estate of the decedent	500
at any time prior to the date of the decedent's death, and the	501
decedent was domiciled in this state at the time of death for	502
purposes of the taxes levied under Chapter 5731. of the Revised	503
Code.	504

(iv) The transfer is made to a trust on account of a	505
contractual relationship existing directly or indirectly between	506
the transferor and another person who at the time of the	507
decedent's death was domiciled in this state for purposes of this	508
chapter.	509

(v) The transfer is made to a trust on account of the will of	510
a testator who was domiciled in this state at the time of the	511
testator's death for purposes of the taxes levied under Chapter	512
5731. of the Revised Code.	513

(vi) The transfer is made to a trust created by or caused to	514
be created by a court, and the trust was directly or indirectly	515
created in connection with or as a result of the death of an	516
individual who, for purposes of the taxes levied under Chapter	517
5731. of the Revised Code, was domiciled in this state at the time	518
of the individual's death.	519

(g) The tax commissioner may adopt rules to ascertain the	520
part of a trust residing in this state.	521

(J) "Nonresident" means an individual or estate that is not a	522
resident. An individual who is a resident for only part of a	523
taxable year is a nonresident for the remainder of that taxable	524
year.	525

(K) "Pass-through entity" has the same meaning as in section	526
5733.04 of the Revised Code.	527

(L) "Return" means the notifications and reports required to	528
be filed pursuant to this chapter for the purpose of reporting the	529
tax due and includes declarations of estimated tax when so	530
required.	531

(M) "Taxable year" means the calendar year or the taxpayer's	532
fiscal year ending during the calendar year, or fractional part	533
thereof, upon which the adjusted gross income is calculated	534
pursuant to this chapter.	535

(N) "Taxpayer" means any person subject to the tax imposed by	536
section 5747.02 of the Revised Code or any pass-through entity	537
that makes the election under division (D) of section 5747.08 of	538
the Revised Code.	539

(O) "Dependents" means dependents as defined in the Internal	540
Revenue Code and as claimed in the taxpayer's federal income tax	541
return for the taxable year or which the taxpayer would have been	542
permitted to claim had the taxpayer filed a federal income tax	543
return.	544

(P) "Principal county of employment" means, in the case of a	545
nonresident, the county within the state in which a taxpayer	546
performs services for an employer or, if those services are	547
performed in more than one county, the county in which the major	548
portion of the services are performed.	549

(Q) As used in sections 5747.50 to 5747.55 of the Revised	550
Code:	551

(1) "Subdivision" means any county, municipal corporation,	552
park district, or township.	553

(2) "Essential local government purposes" includes all	554
functions that any subdivision is required by general law to	555
exercise, including like functions that are exercised under a	556
charter adopted pursuant to the Ohio Constitution.	557

(R) "Overpayment" means any amount already paid that exceeds	558
the figure determined to be the correct amount of the tax.	559

(S) "Taxable income" or "Ohio taxable income" applies only to	560
estates and trusts, and means federal taxable income, as defined	561
and used in the Internal Revenue Code, adjusted as follows:	562

(1) Add interest or dividends, net of ordinary, necessary,	563
and reasonable expenses not deducted in computing federal taxable	564
income, on obligations or securities of any state or of any	565
political subdivision or authority of any state, other than this	566
state and its subdivisions and authorities, but only to the extent	567
that such net amount is not otherwise includible in Ohio taxable	568
income and is described in either division (S)(1)(a) or (b) of	569
this section:	570

(a) The net amount is not attributable to the S portion of an	571
electing small business trust and has not been distributed to	572
beneficiaries for the taxable year;	573

(b) The net amount is attributable to the S portion of an	574
electing small business trust for the taxable year.	575

(2) Add interest or dividends, net of ordinary, necessary,	576
and reasonable expenses not deducted in computing federal taxable	577
income, on obligations of any authority, commission,	578
instrumentality, territory, or possession of the United States to	579
the extent that the interest or dividends are exempt from federal	580
income taxes but not from state income taxes, but only to the	581
extent that such net amount is not otherwise includible in Ohio	582
taxable income and is described in either division (S)(1)(a) or	583
(b) of this section;	584

(3) Add the amount of personal exemption allowed to the	585
estate pursuant to section 642(b) of the Internal Revenue Code;	586

(4) Deduct interest or dividends, net of related expenses	587
deducted in computing federal taxable income, on obligations of	588
the United States and its territories and possessions or of any	589
authority, commission, or instrumentality of the United States to	590
the extent that the interest or dividends are exempt from state	591
taxes under the laws of the United States, but only to the extent	592
that such amount is included in federal taxable income and is	593
described in either division (S)(1)(a) or (b) of this section;	594

(5) Deduct the amount of wages and salaries, if any, not	595
otherwise allowable as a deduction but that would have been	596
allowable as a deduction in computing federal taxable income for	597
the taxable year, had the targeted jobs credit allowed under	598
sections 38, 51, and 52 of the Internal Revenue Code not been in	599
effect, but only to the extent such amount relates either to	600
income included in federal taxable income for the taxable year or	601
to income of the S portion of an electing small business trust for	602
the taxable year;	603

(6) Deduct any interest or interest equivalent, net of	604
related expenses deducted in computing federal taxable income, on	605
public obligations and purchase obligations, but only to the	606
extent that such net amount relates either to income included in	607
federal taxable income for the taxable year or to income of the S	608
portion of an electing small business trust for the taxable year;	609

(7) Add any loss or deduct any gain resulting from sale,	610
exchange, or other disposition of public obligations to the extent	611
that such loss has been deducted or such gain has been included in	612
computing either federal taxable income or income of the S portion	613
of an electing small business trust for the taxable year;	614

(8) Except in the case of the final return of an estate, add	615
any amount deducted by the taxpayer on both its Ohio estate tax	616
return pursuant to section 5731.14 of the Revised Code, and on its	617
federal income tax return in determining federal taxable income;	618

(9)(a) Deduct any amount included in federal taxable income	619
solely because the amount represents a reimbursement or refund of	620
expenses that in a previous year the decedent had deducted as an	621
itemized deduction pursuant to section 63 of the Internal Revenue	622
Code and applicable treasury regulations. The deduction otherwise	623
allowed under division (S)(9)(a) of this section shall be reduced	624
to the extent the reimbursement is attributable to an amount the	625
taxpayer or decedent deducted under this section in any taxable	626
year.	627

(b) Add any amount not otherwise included in Ohio taxable	628
income for any taxable year to the extent that the amount is	629
attributable to the recovery during the taxable year of any amount	630
deducted or excluded in computing federal or Ohio taxable income	631
in any taxable year, but only to the extent such amount has not	632
been distributed to beneficiaries for the taxable year.	633

(10) Deduct any portion of the deduction described in section	634
1341(a)(2) of the Internal Revenue Code, for repaying previously	635
reported income received under a claim of right, that meets both	636
of the following requirements:	637

(a) It is allowable for repayment of an item that was	638
included in the taxpayer's taxable income or the decedent's	639
adjusted gross income for a prior taxable year and did not qualify	640
for a credit under division (A) or (B) of section 5747.05 of the	641
Revised Code for that year.	642

(b) It does not otherwise reduce the taxpayer's taxable	643
income or the decedent's adjusted gross income for the current or	644
any other taxable year.	645

(11) Add any amount claimed as a credit under section	646
5747.059 of the Revised Code to the extent that the amount	647
satisfies either of the following:	648

(a) The amount was deducted or excluded from the computation	649
of the taxpayer's federal taxable income as required to be	650
reported for the taxpayer's taxable year under the Internal	651
Revenue Code;	652

(b) The amount resulted in a reduction in the taxpayer's	653
federal taxable income as required to be reported for any of the	654
taxpayer's taxable years under the Internal Revenue Code.	655

(12) Deduct any amount, net of related expenses deducted in	656
computing federal taxable income, that a trust is required to	657
report as farm income on its federal income tax return, but only	658
if the assets of the trust include at least ten acres of land	659
satisfying the definition of "land devoted exclusively to	660
agricultural use" under section 5713.30 of the Revised Code,	661
regardless of whether the land is valued for tax purposes as such	662
land under sections 5713.30 to 5713.38 of the Revised Code. If the	663
trust is a pass-through entity investor, section 5747.231 of the	664
Revised Code applies in ascertaining if the trust is eligible to	665
claim the deduction provided by division (S)(12) of this section	666
in connection with the pass-through entity's farm income.	667

Except for farm income attributable to the S portion of an	668
electing small business trust, the deduction provided by division	669
(S)(12) of this section is allowed only to the extent that the	670
trust has not distributed such farm income. Division (S)(12) of	671
this section applies only to taxable years of a trust beginning in	672
2002 or thereafter.	673

(13) Add the net amount of income described in section 641(c)	674
of the Internal Revenue Code to the extent that amount is not	675
included in federal taxable income.	676

(14) Add or deduct the amount the taxpayer would be required	677
to add or deduct under division (A)(20) or (21) of this section if	678
the taxpayer's Ohio taxable income were computed in the same	679
manner as an individual's Ohio adjusted gross income is computed	680
under this section. In the case of a trust, division (S)(14) of	681
this section applies only to any of the trust's taxable years	682
beginning in 2002 or thereafter.	683

(T) "School district income" and "school district income tax"	684
have the same meanings as in section 5748.01 of the Revised Code.	685

(U) As used in divisions (A)(8), (A)(9), (S)(6), and (S)(7)	686
of this section, "public obligations," "purchase obligations," and	687
"interest or interest equivalent" have the same meanings as in	688
section 5709.76 of the Revised Code.	689

(V) "Limited liability company" means any limited liability	690
company formed under Chapter 1705. of the Revised Code or under	691
the laws of any other state.	692

(W) "Pass-through entity investor" means any person who,	693
during any portion of a taxable year of a pass-through entity, is	694
a partner, member, shareholder, or equity investor in that	695
pass-through entity.	696

(X) "Banking day" has the same meaning as in section 1304.01	697
of the Revised Code.	698

(Y) "Month" means a calendar month.

699

(Z) "Quarter" means the first three months, the second three	700
months, the third three months, or the last three months of the	701
taxpayer's taxable year.	702

(AA)(1) "Eligible institution" means a state university or	703
state institution of higher education as defined in section	704
3345.011 of the Revised Code, or a private, nonprofit college,	705
university, or other post-secondary institution located in this	706
state that possesses a certificate of authorization issued by the	707
Ohio board of regents pursuant to Chapter 1713. of the Revised	708
Code or a certificate of registration issued by the state board of	709
career colleges and schools under Chapter 3332. of the Revised	710
Code.	711

(2) "Qualified tuition and fees" means tuition and fees	712
imposed by an eligible institution as a condition of enrollment or	713
attendance, not exceeding two thousand five hundred dollars in	714
each of the individual's first two years of post-secondary	715
education. If the individual is a part-time student, "qualified	716
tuition and fees" includes tuition and fees paid for the academic	717
equivalent of the first two years of post-secondary education	718
during a maximum of five taxable years, not exceeding a total of	719
five thousand dollars. "Qualified tuition and fees" does not	720
include:	721

(a) Expenses for any course or activity involving sports,	722
games, or hobbies unless the course or activity is part of the	723
individual's degree or diploma program;	724

(b) The cost of books, room and board, student activity fees,	725
athletic fees, insurance expenses, or other expenses unrelated to	726
the individual's academic course of instruction;	727

(c) Tuition, fees, or other expenses paid or reimbursed	728
through an employer, scholarship, grant in aid, or other	729
educational benefit program.	730

(BB)(1) "Modified business income" means the business income	731
included in a trust's Ohio taxable income after such taxable	732
income is first reduced by the qualifying trust amount, if any.	733

(2) "Qualifying trust amount" of a trust means capital gains	734
and losses from the sale, exchange, or other disposition of equity	735
or ownership interests in, or debt obligations of, a qualifying	736
investee to the extent included in the trust's Ohio taxable	737
income, but only if the following requirements are satisfied:	738

(a) The book value of the qualifying investee's physical	739
assets in this state and everywhere, as of the last day of the	740
qualifying investee's fiscal or calendar year ending immediately	741
prior to the date on which the trust recognizes the gain or loss,	742
is available to the trust.	743

(b) The requirements of section 5747.011 of the Revised Code	744
are satisfied for the trust's taxable year in which the trust	745
recognizes the gain or loss.	746

Any gain or loss that is not a qualifying trust amount is	747
modified business income, qualifying investment income, or	748
modified nonbusiness income, as the case may be.	749

(3) "Modified nonbusiness income" means a trust's Ohio	750
taxable income other than modified business income, other than the	751
qualifying trust amount, and other than qualifying investment	752
income, as defined in section 5747.012 of the Revised Code, to the	753
extent such qualifying investment income is not otherwise part of	754
modified business income.	755

(4) "Modified Ohio taxable income" applies only to trusts,	756
and means the sum of the amounts described in divisions (BB)(4)(a)	757
to (c) of this section:	758

(a) The fraction, calculated under section 5747.013, and	759
applying section 5747.231 of the Revised Code, multiplied by the	760
sum of the following amounts:	761

(i) The trust's modified business income;

762

(ii) The trust's qualifying investment income, as defined in	763
section 5747.012 of the Revised Code, but only to the extent the	764
qualifying investment income does not otherwise constitute	765
modified business income and does not otherwise constitute a	766
qualifying trust amount.	767

(b) The qualifying trust amount multiplied by a fraction, the	768
numerator of which is the sum of the book value of the qualifying	769
investee's physical assets in this state on the last day of the	770
qualifying investee's fiscal or calendar year ending immediately	771
prior to the day on which the trust recognizes the qualifying	772
trust amount, and the denominator of which is the sum of the book	773
value of the qualifying investee's total physical assets	774
everywhere on the last day of the qualifying investee's fiscal or	775
calendar year ending immediately prior to the day on which the	776
trust recognizes the qualifying trust amount. If, for a taxable	777
year, the trust recognizes a qualifying trust amount with respect	778
to more than one qualifying investee, the amount described in	779
division (BB)(4)(b) of this section shall equal the sum of the	780
products so computed for each such qualifying investee.	781

(c)(i) With respect to a trust or portion of a trust that is	782
a resident as ascertained in accordance with division (I)(3)(d) of	783
this section, its modified nonbusiness income.	784

(ii) With respect to a trust or portion of a trust that is	785
not a resident as ascertained in accordance with division	786
(I)(3)(d) of this section, the amount of its modified nonbusiness	787
income satisfying the descriptions in divisions (B)(2) to (5) of	788
section 5747.20 of the Revised Code, except as otherwise provided	789
in division (BB)(4)(c)(ii) of this section. With respect to a	790
trust or portion of a trust that is not a resident as ascertained	791
in accordance with division (I)(3)(d) of this section, the trust's	792
portion of modified nonbusiness income recognized from the sale,	793
exchange, or other disposition of a debt interest in or equity	794
interest in a section 5747.212 entity, as defined in section	795
5747.212 of the Revised Code, without regard to division (A) of	796
that section, shall not be allocated to this state in accordance	797
with section 5747.20 of the Revised Code but shall be apportioned	798
to this state in accordance with division (B) of section 5747.212	799
of the Revised Code without regard to division (A) of that	800
section.	801

If the allocation and apportionment of a trust's income under	802
divisions (BB)(4)(a) and (c) of this section do not fairly	803
represent the modified Ohio taxable income of the trust in this	804
state, the alternative methods described in division (C) of	805
section 5747.21 of the Revised Code may be applied in the manner	806
and to the same extent provided in that section.	807

(5)(a) Except as set forth in division (BB)(5)(b) of this	808
section, "qualifying investee" means a person in which a trust has	809
an equity or ownership interest, or a person or unit of government	810
the debt obligations of either of which are owned by a trust. For	811
the purposes of division (BB)(2)(a) of this section and for the	812
purpose of computing the fraction described in division (BB)(4)(b)	813
of this section, all of the following apply:	814

(i) If the qualifying investee is a member of a qualifying	815
controlled group on the last day of the qualifying investee's	816
fiscal or calendar year ending immediately prior to the date on	817
which the trust recognizes the gain or loss, then "qualifying	818
investee" includes all persons in the qualifying controlled group	819
on such last day.	820

(ii) If the qualifying investee, or if the qualifying	821
investee and any members of the qualifying controlled group of	822
which the qualifying investee is a member on the last day of the	823
qualifying investee's fiscal or calendar year ending immediately	824
prior to the date on which the trust recognizes the gain or loss,	825
separately or cumulatively own, directly or indirectly, on the	826
last day of the qualifying investee's fiscal or calendar year	827
ending immediately prior to the date on which the trust recognizes	828
the qualifying trust amount, more than fifty per cent of the	829
equity of a pass-through entity, then the qualifying investee and	830
the other members are deemed to own the proportionate share of the	831
pass-through entity's physical assets which the pass-through	832
entity directly or indirectly owns on the last day of the	833
pass-through entity's calendar or fiscal year ending within or	834
with the last day of the qualifying investee's fiscal or calendar	835
year ending immediately prior to the date on which the trust	836
recognizes the qualifying trust amount.	837

(iii) For the purposes of division (BB)(5)(a)(iii) of this	838
section, "upper level pass-through entity" means a pass-through	839
entity directly or indirectly owning any equity of another	840
pass-through entity, and "lower level pass-through entity" means	841
that other pass-through entity.	842

An upper level pass-through entity, whether or not it is also	843
a qualifying investee, is deemed to own, on the last day of the	844
upper level pass-through entity's calendar or fiscal year, the	845
proportionate share of the lower level pass-through entity's	846
physical assets that the lower level pass-through entity directly	847
or indirectly owns on the last day of the lower level pass-through	848
entity's calendar or fiscal year ending within or with the last	849
day of the upper level pass-through entity's fiscal or calendar	850
year. If the upper level pass-through entity directly and	851
indirectly owns less than fifty per cent of the equity of the	852
lower level pass-through entity on each day of the upper level	853
pass-through entity's calendar or fiscal year in which or with	854
which ends the calendar or fiscal year of the lower level	855
pass-through entity and if, based upon clear and convincing	856
evidence, complete information about the location and cost of the	857
physical assets of the lower pass-through entity is not available	858
to the upper level pass-through entity, then solely for purposes	859
of ascertaining if a gain or loss constitutes a qualifying trust	860
amount, the upper level pass-through entity shall be deemed as	861
owning no equity of the lower level pass-through entity for each	862
day during the upper level pass-through entity's calendar or	863
fiscal year in which or with which ends the lower level	864
pass-through entity's calendar or fiscal year. Nothing in division	865
(BB)(5)(a)(iii) of this section shall be construed to provide for	866
any deduction or exclusion in computing any trust's Ohio taxable	867
income.	868

(b) With respect to a trust that is not a resident for the	869
taxable year and with respect to a part of a trust that is not a	870
resident for the taxable year, "qualifying investee" for that	871
taxable year does not include a C corporation if both of the	872
following apply:	873

(i) During the taxable year the trust or part of the trust	874
recognizes a gain or loss from the sale, exchange, or other	875
disposition of equity or ownership interests in, or debt	876
obligations of, the C corporation.	877

(ii) Such gain or loss constitutes nonbusiness income.

878

(6) "Available" means information is such that a person is	879
able to learn of the information by the due date plus extensions,	880
if any, for filing the return for the taxable year in which the	881
trust recognizes the gain or loss.	882

(CC) "Qualifying controlled group" has the same meaning as in	883
section 5733.04 of the Revised Code.	884

(DD) "Related member" has the same meaning as in section	885
5733.042 of the Revised Code.	886

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

887

(a) "Qualifying person" means any person other than a	888
qualifying corporation.	889

(b) "Qualifying corporation" means any person classified for	890
federal income tax purposes as an association taxable as a	891
corporation, except either of the following:	892

(i) A corporation that has made an election under subchapter	893
S, chapter one, subtitle A, of the Internal Revenue Code for its	894
taxable year ending within, or on the last day of, the investor's	895
taxable year;	896

(ii) A subsidiary that is wholly owned by any corporation	897
that has made an election under subchapter S, chapter one,	898
subtitle A of the Internal Revenue Code for its taxable year	899
ending within, or on the last day of, the investor's taxable year.	900

(2) For the purposes of this chapter, unless expressly stated	901
otherwise, no qualifying person indirectly owns any asset directly	902
or indirectly owned by any qualifying corporation.	903

(FF) For purposes of this chapter and Chapter 5751. of the	904
Revised Code:	905

(1) "Trust" does not include a qualified pre-income tax	906
trust.	907

(2) A "qualified pre-income tax trust" is any pre-income tax	908
trust that makes a qualifying pre-income tax trust election as	909
described in division (FF)(3) of this section.	910

(3) A "qualifying pre-income tax trust election" is an	911
election by a pre-income tax trust to subject to the tax imposed	912
by section 5751.02 of the Revised Code the pre-income tax trust	913
and all pass-through entities of which the trust owns or controls,	914
directly, indirectly, or constructively through related interests,	915
five per cent or more of the ownership or equity interests. The	916
trustee shall notify the tax commissioner in writing of the	917
election on or before April 15, 2006. The election, if timely	918
made, shall be effective on and after January 1, 2006, and shall	919
apply for all tax periods and tax years until revoked by the	920
trustee of the trust.	921

(4) A "pre-income tax trust" is a trust that satisfies all of	922
the following requirements:	923

(a) The document or instrument creating the trust was	924
executed by the grantor before January 1, 1972;	925

(b) The trust became irrevocable upon the creation of the	926
trust; and	927

(c) The grantor was domiciled in this state at the time the	928
trust was created.	929

Sec. 5747.02.  (A) For the purposes of this section,	930
"adjusted gross income" or "Ohio adjusted gross income" excludes	931
any amount deducted under division (A)(30) of section 5747.01 of	932
the Revised Code.	933

For the purpose of providing revenue for the support of	934
schools and local government functions, to provide relief to	935
property taxpayers, to provide revenue for the general revenue	936
fund, and to meet the expenses of administering the tax levied by	937
this chapter, there is hereby levied on every individual, trust,	938
and estate residing in or earning or receiving income in this	939
state, on every individual, trust, and estate earning or receiving	940
lottery winnings, prizes, or awards pursuant to Chapter 3770. of	941
the Revised Code, on every individual, trust, and estate earning	942
or receiving winnings on casino gaming, and on every individual,	943
trust, and estate otherwise having nexus with or in this state	944
under the Constitution of the United States, an annual tax	945
measured in the case of individuals by Ohio adjusted gross income	946
and income subject to the adjustment under division (A)(30) of	947
section 5747.01 of the Revised Code less an exemption for the	948
taxpayer, the taxpayer's spouse, and each dependent as provided in	949
section 5747.025 of the Revised Code; measured in the case of	950
trusts by modified Ohio taxable income under division (D) of this	951
section; and measured in the case of estates by Ohio taxable	952
income. TheFor taxpayers electing the deduction allowed under	953
division (A)(30) of section 5747.01 of the Revised Code, the	954
exemptions provided in section 5747.025 of the Revised Code shall	955
be applied first against adjusted gross income taking account of	956
that deduction. If the sum of the applicable exemptions exceeds	957
such adjusted gross income, the excess shall be applied against	958
the amount deducted under that division to compute the tax under	959
division (A)(3) of this section.	960

The tax imposed by this section on the balance thus obtained	961
is hereby levied as follows:	962

(1) For taxable years beginning in 2004:

963

OHIO ADJUSTED GROSS INCOME LESS EXEMPTIONS (INDIVIDUALS)			964
OR			965
MODIFIED OHIO			966
TAXABLE INCOME (TRUSTS)			967
OR			968
OHIO TAXABLE INCOME (ESTATES)	TAX		969

$5,000 or less		.743%		970
More than $5,000 but not more than $10,000		$37.15 plus 1.486% of the amount in excess of $5,000		971
More than $10,000 but not more than $15,000		$111.45 plus 2.972% of the amount in excess of $10,000		972
More than $15,000 but not more than $20,000		$260.05 plus 3.715% of the amount in excess of $15,000		973
More than $20,000 but not more than $40,000		$445.80 plus 4.457% of the amount in excess of $20,000		974
More than $40,000 but not more than $80,000		$1,337.20 plus 5.201% of the amount in excess of $40,000		975
More than $80,000 but not more than $100,000		$3,417.60 plus 5.943% of the amount in excess of $80,000		976
More than $100,000 but not more than $200,000		$4,606.20 plus 6.9% of the amount in excess of $100,000		977
More than $200,000		$11,506.20 plus 7.5% of the amount in excess of $200,000		978

(2) For taxable years beginning in 2005:

979

OHIO ADJUSTED GROSS INCOME LESS EXEMPTIONS (INDIVIDUALS)			980
OR			981
MODIFIED OHIO			982
TAXABLE INCOME (TRUSTS)			983
OR			984
OHIO TAXABLE INCOME (ESTATES)	TAX		985

$5,000 or less		.712%		986
More than $5,000 but not more than $10,000		$35.60 plus 1.424% of the amount in excess of $5,000		987
More than $10,000 but not more than $15,000		$106.80 plus 2.847% of the amount in excess of $10,000		988
More than $15,000 but not more than $20,000		$249.15 plus 3.559% of the amount in excess of $15,000		989
More than $20,000 but not more than $40,000		$427.10 plus 4.27% of the amount in excess of $20,000		990
More than $40,000 but not more than $80,000		$1,281.10 plus 4.983% of the amount in excess of $40,000		991
More than $80,000 but not more than $100,000		$3,274.30 plus 5.693% of the amount in excess of $80,000		992
More than $100,000 but not more than $200,000		$4,412.90 plus 6.61% of the amount in excess of $100,000		993
More than $200,000		$11,022.90 plus 7.185% of the amount in excess of $200,000		994

(3) For taxable years beginning in 2006:

995

OHIO ADJUSTED GROSS INCOME LESS EXEMPTIONS (INDIVIDUALS)			996
OR			997
MODIFIED OHIO			998
TAXABLE INCOME (TRUSTS)			999
OR			1000
OHIO TAXABLE INCOME (ESTATES)	TAX		1001

$5,000 or less		.681%		1002
More than $5,000 but not more than $10,000		$34.05 plus 1.361% of the amount in excess of $5,000		1003
More than $10,000 but not more than $15,000		$102.10 plus 2.722% of the amount in excess of $10,000		1004
More than $15,000 but not more than $20,000		$238.20 plus 3.403% of the amount in excess of $15,000		1005
More than $20,000 but not more than $40,000		$408.35 plus 4.083% of the amount in excess of $20,000		1006
More than $40,000 but not more than $80,000		$1,224.95 plus 4.764% of the amount in excess of $40,000		1007
More than $80,000 but not more than $100,000		$3,130.55 plus 5.444% of the amount in excess of $80,000		1008
More than $100,000 but not more than $200,000		$4,219.35 plus 6.32% of the amount in excess of $100,000		1009
More than $200,000		$10,539.35 plus 6.87% of the amount in excess of $200,000		1010

(4) For taxable years beginning in 2007:

1011

OHIO ADJUSTED GROSS INCOME LESS EXEMPTIONS (INDIVIDUALS)			1012
OR			1013
MODIFIED OHIO			1014
TAXABLE INCOME (TRUSTS)			1015
OR			1016
OHIO TAXABLE INCOME (ESTATES)	TAX		1017

$5,000 or less		.649%		1018
More than $5,000 but not more than $10,000		$32.45 plus 1.299% of the amount in excess of $5,000		1019
More than $10,000 but not more than $15,000		$97.40 plus 2.598% of the amount in excess of $10,000		1020
More than $15,000 but not more than $20,000		$227.30 plus 3.247% of the amount in excess of $15,000		1021
More than $20,000 but not more than $40,000		$389.65 plus 3.895% of the amount in excess of $20,000		1022
More than $40,000 but not more than $80,000		$1,168.65 plus 4.546% of the amount in excess of $40,000		1023
More than $80,000 but not more than $100,000		$2,987.05 plus 5.194% of the amount in excess of $80,000		1024
More than $100,000 but not more than $200,000		$4,025.85 plus 6.031% of the amount in excess of $100,000		1025
More than $200,000		$10,056.85 plus 6.555% of the amount in excess of $200,000		1026

(5) For taxable years beginning in 2008, 2009, or 2010:

1027

OHIO ADJUSTED GROSS INCOME LESS EXEMPTIONS (INDIVIDUALS)			1028
OR			1029
MODIFIED OHIO			1030
TAXABLE INCOME (TRUSTS)			1031
OR			1032
OHIO TAXABLE INCOME (ESTATES)	TAX		1033

$5,000 or less		.618%		1034
More than $5,000 but not more than $10,000		$30.90 plus 1.236% of the amount in excess of $5,000		1035
More than $10,000 but not more than $15,000		$92.70 plus 2.473% of the amount in excess of $10,000		1036
More than $15,000 but not more than $20,000		$216.35 plus 3.091% of the amount in excess of $15,000		1037
More than $20,000 but not more than $40,000		$370.90 plus 3.708% of the amount in excess of $20,000		1038
More than $40,000 but not more than $80,000		$1,112.50 plus 4.327% of the amount in excess of $40,000		1039
More than $80,000 but not more than $100,000		$2,843.30 plus 4.945% of the amount in excess of $80,000		1040
More than $100,000 but not more than $200,000		$3,832.30 plus 5.741% of the amount in excess of $100,000		1041
More than $200,000		$9,573.30 plus 6.24% of the amount in excess of $200,000		1042

(6)(2) For taxable years beginning in 2011 or thereafterand	1043
2012:	1044

OHIO ADJUSTED GROSS INCOME LESS EXEMPTIONS (INDIVIDUALS)			1045
OR			1046
MODIFIED OHIO			1047
TAXABLE INCOME (TRUSTS)			1048
OR			1049
OHIO TAXABLE INCOME (ESTATES)	TAX		1050

$5,000 or less		.587%		1051
More than $5,000 but not more than $10,000		$29.35 plus 1.174% of the amount in excess of $5,000		1052
More than $10,000 but not more than $15,000		$88.05 plus 2.348% of the amount in excess of $10,000		1053
More than $15,000 but not more than $20,000		$205.45 plus 2.935% of the amount in excess of $15,000		1054
More than $20,000 but not more than $40,000		$352.20 plus 3.521% of the amount in excess of $20,000		1055
More than $40,000 but not more than $80,000		$1,056.40 plus 4.109% of the amount in excess of $40,000		1056
More than $80,000 but not more than $100,000		$2,700.00 plus 4.695% of the amount in excess of $80,000		1057
More than $100,000 but not more than $200,000		$3,639.00 plus 5.451% of the amount in excess of $100,000		1058
More than $200,000		$9,090.00 plus 5.925% of the amount in excess of $200,000		1059

(3) For taxable years beginning in 2013 or thereafter, the	1060
sum of one one-hundredth of the difference between any amount	1061
deducted under division (A)(30) of section 5747.01 of the Revised	1062
Code and any excess personal exemption, plus the following:	1063

OHIO ADJUSTED GROSS INCOME LESS EXEMPTIONS (INDIVIDUALS)			1064
OR			1065
MODIFIED OHIO			1066
TAXABLE INCOME (TRUSTS)			1067
OR			1068
OHIO TAXABLE INCOME (ESTATES)	TAX		1069

$5,000 or less		.587%		1070
More than $5,000 but not more than $10,000		$29.35 plus 1.174% of the amount in excess of $5,000		1071
More than $10,000 but not more than $15,000		$88.05 plus 2.348% of the amount in excess of $10,000		1072
More than $15,000 but not more than $20,000		$205.45 plus 2.935% of the amount in excess of $15,000		1073
More than $20,000 but not more than $40,000		$352.20 plus 3.521% of the amount in excess of $20,000		1074
More than $40,000 but not more than $80,000		$1,056.40 plus 4.109% of the amount in excess of $40,000		1075
More than $80,000 but not more than $100,000		$2,700.00 plus 4.695% of the amount in excess of $80,000		1076
More than $100,000 but not more than $200,000		$3,639.00 plus 5.451% of the amount in excess of $100,000		1077
More than $200,000		$9,090.00 plus 5.925% of the amount in excess of $200,000		1078

In July of each year, beginning in 2010, the tax commissioner	1079
shall adjust the income amounts prescribed in this division by	1080
multiplying the percentage increase in the gross domestic product	1081
deflator computed that year under section 5747.025 of the Revised	1082
Code by each of the income amounts resulting from the adjustment	1083
under this division in the preceding year, adding the resulting	1084
product to the corresponding income amount resulting from the	1085
adjustment in the preceding year, and rounding the resulting sum	1086
to the nearest multiple of fifty dollars. The tax commissioner	1087
also shall recompute each of the tax dollar amounts to the extent	1088
necessary to reflect the adjustment of the income amounts. The	1089
rates of taxation shall not be adjusted.	1090

The adjusted amounts apply to taxable years beginning in the	1091
calendar year in which the adjustments are made. The tax	1092
commissioner shall not make such adjustments in any year in which	1093
the amount resulting from the adjustment would be less than the	1094
amount resulting from the adjustment in the preceding year.	1095

(B) If the director of budget and management makes a	1096
certification to the tax commissioner under division (B) of	1097
section 131.44 of the Revised Code, the amount of tax as	1098
determined under division (A) of this section shall be reduced by	1099
the percentage prescribed in that certification for taxable years	1100
beginning in the calendar year in which that certification is	1101
made.	1102

(C) The levy of this tax on income does not prevent a	1103
municipal corporation, a joint economic development zone created	1104
under section 715.691, or a joint economic development district	1105
created under section 715.70 or 715.71 or sections 715.72 to	1106
715.81 of the Revised Code from levying a tax on income.	1107

(D) This division applies only to taxable years of a trust	1108
beginning in 2002 or thereafter.	1109

(1) The tax imposed by this section on a trust shall be	1110
computed by multiplying the Ohio modified taxable income of the	1111
trust by the rates prescribed by division (A) of this section.	1112

(2) A nonresident trust may claim a credit against the tax	1113
computed under division (D) of this section equal to the lesser of	1114
(1) the tax paid to another state or the District of Columbia on	1115
the nonresident trust's modified nonbusiness income, other than	1116
the portion of the nonresident trust's nonbusiness income that is	1117
qualifying investment income as defined in section 5747.012 of the	1118
Revised Code, or (2) the effective tax rate, based on modified	1119
Ohio taxable income, multiplied by the nonresident trust's	1120
modified nonbusiness income other than the portion of the	1121
nonresident trust's nonbusiness income that is qualifying	1122
investment income. The credit applies before any other applicable	1123
credits.	1124

(3) The credits enumerated in divisions (A)(1) to (13) of	1125
section 5747.98 of the Revised Code do not apply to a trust	1126
subject to division (D) of this section. Any credits enumerated in	1127
other divisions of section 5747.98 of the Revised Code apply to a	1128
trust subject to division (D) of this section. To the extent that	1129
the trust distributes income for the taxable year for which a	1130
credit is available to the trust, the credit shall be shared by	1131
the trust and its beneficiaries. The tax commissioner and the	1132
trust shall be guided by applicable regulations of the United	1133
States treasury regarding the sharing of credits.	1134

(E) For the purposes of this section, "trust" means any trust	1135
described in Subchapter J of Chapter 1 of the Internal Revenue	1136
Code, excluding trusts that are not irrevocable as defined in	1137
division (I)(3)(b) of section 5747.01 of the Revised Code and that	1138
have no modified Ohio taxable income for the taxable year,	1139
charitable remainder trusts, qualified funeral trusts and preneed	1140
funeral contract trusts established pursuant to sections 4717.31	1141
to 4717.38 of the Revised Code that are not qualified funeral	1142
trusts, endowment and perpetual care trusts, qualified settlement	1143
trusts and funds, designated settlement trusts and funds, and	1144
trusts exempted from taxation under section 501(a) of the Internal	1145
Revenue Code.	1146

Sec. 5747.055.  (A) AsA taxpayer who deducted an amount	1147
under division (A)(30) of section 5747.01 of the Revised Code for	1148
a taxable year may not claim a credit under this section for that	1149
taxable year.	1150

As used in this section "retirement income" means retirement	1151
benefits, annuities, or distributions that are made from or	1152
pursuant to a pension, retirement, or profit-sharing plan and	1153
that:	1154

(1) In the case of an individual, are received by the	1155
individual on account of retirement and are included in the	1156
individual's adjusted gross income;	1157

(2) In the case of an estate, are payable to the estate for	1158
the benefit of the surviving spouse of the decedent and are	1159
included in the estate's taxable income.	1160

(B) A credit shall be allowed against the tax imposed by	1161
section 5747.02 of the Revised Code for taxpayers who received	1162
retirement income during the taxable year. Only one such credit	1163
shall be allowed for each return, and the amount of the credit	1164
shall be computed in accordance with the following schedule,	1165
subject to the limitation provided in division (F) of this	1166
section:	1167

AMOUNT OF RETIREMENT INCOME RECEIVED		CREDIT FOR THE		1168
DURING THE TAXABLE YEAR		TAXABLE YEAR		1169
$500 or less		$ 0		1170
Over $500 but not more than $1,500		$ 25		1171
Over $1,500 but not more than $3,000		$ 50		1172
Over $3,000 but not more than $5,000		$ 80		1173
Over $5,000 but not more than $8,000		$130		1174
Over $8,000		$200		1175

(C) At the election of a taxpayer who receives a lump-sum	1176
distribution from a pension, retirement, or profit-sharing plan	1177
within one taxable year, the credit allowed by this section for	1178
that year shall be computed as follows:	1179

(1) Divide the amount of retirement income received during	1180
the taxable year by the taxpayer's expected remaining life on the	1181
last day of the taxable year, as shown by annuity tables issued	1182
under the provisions of the Internal Revenue Code and in effect	1183
for the calendar year that includes the last day of the taxable	1184
year;	1185

(2) Using the quotient thus obtained as the amount of	1186
retirement income received during the taxable year, compute the	1187
credit for the taxable year in accordance with division (B) of	1188
this section;	1189

(3) Multiply the credit thus obtained by the taxpayer's	1190
expected remaining life. The product thus obtained shall be the	1191
credit under this division for the taxable year. A taxpayer who	1192
elects to receive a credit under this division is not entitled to	1193
receive a credit under this section for any subsequent year except	1194
as provided in divisions (D) and (E) of this section.	1195

(D) If the credit under division (C) or (E) of this section	1196
exceeds the tax due for the taxable year after allowing for any	1197
other credit that precedes that credit in the order required under	1198
section 5747.98 of the Revised Code, the taxpayer may elect to	1199
receive a credit for each subsequent taxable year. The amount of	1200
the credit for each such year shall be computed as follows:	1201

(1) Determine the amount by which the unused credit elected	1202
under division (C) or (E) of this section exceeded the tax due for	1203
the taxable year after allowing for any preceding credit in the	1204
required order;	1205

(2) Divide the amount of such excess by one year less than	1206
the taxpayer's expected remaining life on the last day of the	1207
taxable year of the distribution for which the credit was allowed	1208
under division (C) or (E) of this section. The quotient thus	1209
obtained shall be the credit for each subsequent year.	1210

(E) If subsequent to the receipt of a lump-sum distribution	1211
and an election under division (C) of this section an individual	1212
receives another lump-sum distribution within one taxable year,	1213
the taxpayer may elect to receive a credit for that taxable year.	1214
The credit shall equal the lesser of:	1215

(1) A credit computed in the manner prescribed in division	1216
(C) of this section;	1217

(2) The amount of credit, if any, to which the taxpayer would	1218
otherwise be entitled for the taxable year under division (D) of	1219
this section times the taxpayer's expected remaining life on the	1220
last day of the taxable year. A taxpayer who elects to receive a	1221
credit under this division is not entitled to a credit under this	1222
section for any subsequent year except as provided in division (D)	1223
of this section.	1224

(F) In the case of a taxpayer who elected to take an	1225
exclusion under division (A)(1) or (3) of former section 5747.01	1226
of the Revised Code based upon the taxpayer's expected remaining	1227
life, and who was entitled immediately preceding the effective	1228
date of this sectionJuly 1, 1983, under division (A)(2) or (3) of	1229
such section to a further exclusion, any credit computed in	1230
accordance with the schedule in division (B) of this section,	1231
including the credit computed under division (C)(2) of this	1232
section, shall not exceed the credit available upon an amount of	1233
retirement income received during the taxable year equal to the	1234
sum of such former exclusion plus four thousand dollars.	1235

(G) The credits allowed by this section shall be claimed in	1236
the order required under section 5747.98 of the Revised Code. The	1237
tax commissioner may require a taxpayer to furnish any information	1238
necessary to support a claim for credit under this section, and no	1239
credit shall be allowed unless such information is provided.	1240

Section 2. That existing sections 5747.01, 5747.02, and	1241
5747.055 of the Revised Code are hereby repealed.	1242