Bill Text: OH SB25 | 2009-2010 | 128th General Assembly | Introduced


Bill Title: To increase the amount of unreimbursed medical expenses that an individual may deduct in computing Ohio income tax.

Spectrum: Partisan Bill (Republican 5-0)

Status: (Introduced - Dead) 2009-02-10 - To Ways & Means & Economic Development [SB25 Detail]

Download: Ohio-2009-SB25-Introduced.html
As Introduced

128th General Assembly
Regular Session
2009-2010
S. B. No. 25


Senator Schaffer 

Cosponsors: Senators Wagoner, Gibbs, Buehrer, Schuring 



A BILL
To amend section 5747.01 of the Revised Code to 1
increase the amount of unreimbursed medical 2
expenses that an individual may deduct in 3
computing Ohio income tax.4


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

       Section 1. That section 5747.01 of the Revised Code be 5
amended to read as follows:6

       Sec. 5747.01.  Except as otherwise expressly provided or7
clearly appearing from the context, any term used in this chapter 8
that is not otherwise defined in this section has the same meaning 9
as when used in a comparable context in the laws of the United10
States relating to federal income taxes or if not used in a 11
comparable context in those laws, has the same meaning as in 12
section 5733.40 of the Revised Code. Any reference in this chapter 13
to the Internal Revenue Code includes other laws of the United 14
States relating to federal income taxes.15

       As used in this chapter:16

       (A) "Adjusted gross income" or "Ohio adjusted gross income"17
means federal adjusted gross income, as defined and used in the18
Internal Revenue Code, adjusted as provided in this section:19

       (1) Add interest or dividends on obligations or securities of 20
any state or of any political subdivision or authority of any21
state, other than this state and its subdivisions and authorities.22

       (2) Add interest or dividends on obligations of any23
authority, commission, instrumentality, territory, or possession24
of the United States to the extent that the interest or dividends25
are exempt from federal income taxes but not from state income26
taxes.27

       (3) Deduct interest or dividends on obligations of the United 28
States and its territories and possessions or of any authority, 29
commission, or instrumentality of the United States to the extent30
that the interest or dividends are included in federal adjusted 31
gross income but exempt from state income taxes under the laws of 32
the United States.33

       (4) Deduct disability and survivor's benefits to the extent34
included in federal adjusted gross income.35

       (5) Deduct benefits under Title II of the Social Security Act 36
and tier 1 railroad retirement benefits to the extent included in 37
federal adjusted gross income under section 86 of the Internal38
Revenue Code.39

       (6) In the case of a taxpayer who is a beneficiary of a trust 40
that makes an accumulation distribution as defined in section 665 41
of the Internal Revenue Code, add, for the beneficiary's taxable 42
years beginning before 2002, the portion, if any, of such 43
distribution that does not exceed the undistributed net income of 44
the trust for the three taxable years preceding the taxable year 45
in which the distribution is made to the extent that the portion 46
was not included in the trust's taxable income for any of the 47
trust's taxable years beginning in 2002 or thereafter.48
"Undistributed net income of a trust" means the taxable income of49
the trust increased by (a)(i) the additions to adjusted gross50
income required under division (A) of this section and (ii) the51
personal exemptions allowed to the trust pursuant to section52
642(b) of the Internal Revenue Code, and decreased by (b)(i) the53
deductions to adjusted gross income required under division (A) of54
this section, (ii) the amount of federal income taxes attributable55
to such income, and (iii) the amount of taxable income that has56
been included in the adjusted gross income of a beneficiary by57
reason of a prior accumulation distribution. Any undistributed net58
income included in the adjusted gross income of a beneficiary59
shall reduce the undistributed net income of the trust commencing60
with the earliest years of the accumulation period.61

       (7) Deduct the amount of wages and salaries, if any, not62
otherwise allowable as a deduction but that would have been63
allowable as a deduction in computing federal adjusted gross64
income for the taxable year, had the targeted jobs credit allowed65
and determined under sections 38, 51, and 52 of the Internal66
Revenue Code not been in effect.67

       (8) Deduct any interest or interest equivalent on public68
obligations and purchase obligations to the extent that the69
interest or interest equivalent is included in federal adjusted70
gross income.71

       (9) Add any loss or deduct any gain resulting from the sale,72
exchange, or other disposition of public obligations to the extent73
that the loss has been deducted or the gain has been included in74
computing federal adjusted gross income.75

       (10) Deduct or add amounts, as provided under section76
5747.70 of the Revised Code, related to contributions to variable77
college savings program accounts made or tuition units purchased78
pursuant to Chapter 3334. of the Revised Code.79

       (11)(a) Deduct, to the extent not otherwise allowable as a80
deduction or exclusion in computing federal or Ohio adjusted gross81
income for the taxable year, the amount the taxpayer paid during82
the taxable year for medical care insurance and qualified83
long-term care insurance for the taxpayer, the taxpayer's spouse,84
and dependents. No deduction for medical care insurance under85
division (A)(11) of this section shall be allowed either to any86
taxpayer who is eligible to participate in any subsidized health87
plan maintained by any employer of the taxpayer or of the88
taxpayer's spouse, or to any taxpayer who is entitled to, or on89
application would be entitled to, benefits under part A of Title90
XVIII of the "Social Security Act," 49 Stat. 620 (1935), 42 U.S.C.91
301, as amended. For the purposes of division (A)(11)(a) of this92
section, "subsidized health plan" means a health plan for which93
the employer pays any portion of the plan's cost. The deduction94
allowed under division (A)(11)(a) of this section shall be the net95
of any related premium refunds, related premium reimbursements, or96
related insurance premium dividends received during the taxable97
year.98

       (b) Deduct, to the extent not otherwise deducted or excluded99
in computing federal or Ohio adjusted gross income during the100
taxable year, the amount the taxpayer paid during the taxable101
year, not compensated for by any insurance or otherwise, for102
medical care of the taxpayer, the taxpayer's spouse, and103
dependents, to the extent the expenses exceed seven and one-half104
one per cent of the taxpayer's federal adjusted gross income.105

       (c) For purposes of division (A)(11) of this section,106
"medical care" has the meaning given in section 213 of the107
Internal Revenue Code, subject to the special rules, limitations,108
and exclusions set forth therein, and "qualified long-term care"109
has the same meaning given in section 7702B(c) of the Internal110
Revenue Code.111

       (12)(a) Deduct any amount included in federal adjusted gross112
income solely because the amount represents a reimbursement or113
refund of expenses that in any year the taxpayer had deducted as114
an itemized deduction pursuant to section 63 of the Internal115
Revenue Code and applicable United States department of the116
treasury regulations. The deduction otherwise allowed under117
division (A)(12)(a) of this section shall be reduced to the extent118
the reimbursement is attributable to an amount the taxpayer119
deducted under this section in any taxable year.120

       (b) Add any amount not otherwise included in Ohio adjusted121
gross income for any taxable year to the extent that the amount is122
attributable to the recovery during the taxable year of any amount123
deducted or excluded in computing federal or Ohio adjusted gross124
income in any taxable year.125

       (13) Deduct any portion of the deduction described in section 126
1341(a)(2) of the Internal Revenue Code, for repaying previously 127
reported income received under a claim of right, that meets both 128
of the following requirements:129

       (a) It is allowable for repayment of an item that was130
included in the taxpayer's adjusted gross income for a prior131
taxable year and did not qualify for a credit under division (A)132
or (B) of section 5747.05 of the Revised Code for that year;133

       (b) It does not otherwise reduce the taxpayer's adjusted134
gross income for the current or any other taxable year.135

       (14) Deduct an amount equal to the deposits made to, and net136
investment earnings of, a medical savings account during the137
taxable year, in accordance with section 3924.66 of the Revised138
Code. The deduction allowed by division (A)(14) of this section139
does not apply to medical savings account deposits and earnings140
otherwise deducted or excluded for the current or any other141
taxable year from the taxpayer's federal adjusted gross income.142

       (15)(a) Add an amount equal to the funds withdrawn from a143
medical savings account during the taxable year, and the net144
investment earnings on those funds, when the funds withdrawn were145
used for any purpose other than to reimburse an account holder146
for, or to pay, eligible medical expenses, in accordance with147
section 3924.66 of the Revised Code;148

       (b) Add the amounts distributed from a medical savings149
account under division (A)(2) of section 3924.68 of the Revised150
Code during the taxable year.151

       (16) Add any amount claimed as a credit under section152
5747.059 of the Revised Code to the extent that such amount153
satisfies either of the following:154

       (a) The amount was deducted or excluded from the computation155
of the taxpayer's federal adjusted gross income as required to be156
reported for the taxpayer's taxable year under the Internal157
Revenue Code;158

       (b) The amount resulted in a reduction of the taxpayer's159
federal adjusted gross income as required to be reported for any160
of the taxpayer's taxable years under the Internal Revenue Code.161

       (17) Deduct the amount contributed by the taxpayer to an162
individual development account program established by a county163
department of job and family services pursuant to sections 329.11164
to 329.14 of the Revised Code for the purpose of matching funds165
deposited by program participants. On request of the tax166
commissioner, the taxpayer shall provide any information that, in167
the tax commissioner's opinion, is necessary to establish the168
amount deducted under division (A)(17) of this section.169

       (18) Beginning in taxable year 2001 but not for any taxable 170
year beginning after December 31, 2005, if the taxpayer is married171
and files a joint return and the combined federal adjusted gross 172
income of the taxpayer and the taxpayer's spouse for the taxable 173
year does not exceed one hundred thousand dollars, or if the 174
taxpayer is single and has a federal adjusted gross income for the175
taxable year not exceeding fifty thousand dollars, deduct amounts 176
paid during the taxable year for qualified tuition and fees paid 177
to an eligible institution for the taxpayer, the taxpayer's 178
spouse, or any dependent of the taxpayer, who is a resident of 179
this state and is enrolled in or attending a program that180
culminates in a degree or diploma at an eligible institution. The 181
deduction may be claimed only to the extent that qualified tuition 182
and fees are not otherwise deducted or excluded for any taxable 183
year from federal or Ohio adjusted gross income. The deduction may 184
not be claimed for educational expenses for which the taxpayer 185
claims a credit under section 5747.27 of the Revised Code.186

       (19) Add any reimbursement received during the taxable year187
of any amount the taxpayer deducted under division (A)(18) of this188
section in any previous taxable year to the extent the amount is189
not otherwise included in Ohio adjusted gross income.190

       (20)(a)(i) Add five-sixths of the amount of depreciation191
expense allowed by subsection (k) of section 168 of the Internal192
Revenue Code, including the taxpayer's proportionate or193
distributive share of the amount of depreciation expense allowed194
by that subsection to a pass-through entity in which the taxpayer195
has a direct or indirect ownership interest.196

       (ii) Add five-sixths of the amount of qualifying section 179 197
depreciation expense, including a person's proportionate or 198
distributive share of the amount of qualifying section 179 199
depreciation expense allowed to any pass-through entity in which 200
the person has a direct or indirect ownership. For the purposes of 201
this division, "qualifying section 179 depreciation expense" means 202
the difference between (I) the amount of depreciation expense 203
directly or indirectly allowed to the taxpayer under section 179 204
of the Internal Revenue Code, and (II) the amount of depreciation 205
expense directly or indirectly allowed to the taxpayer under 206
section 179 of the Internal Revenue Code as that section existed 207
on December 31, 2002.208

       The tax commissioner, under procedures established by the 209
commissioner, may waive the add-backs related to a pass-through 210
entity if the taxpayer owns, directly or indirectly, less than 211
five per cent of the pass-through entity.212

       (b) Nothing in division (A)(20) of this section shall be213
construed to adjust or modify the adjusted basis of any asset.214

       (c) To the extent the add-back required under division215
(A)(20)(a) of this section is attributable to property generating216
nonbusiness income or loss allocated under section 5747.20 of the217
Revised Code, the add-back shall be sitused to the same location218
as the nonbusiness income or loss generated by the property for219
the purpose of determining the credit under division (A) of220
section 5747.05 of the Revised Code. Otherwise, the add-back shall 221
be apportioned, subject to one or more of the four alternative 222
methods of apportionment enumerated in section 5747.21 of the 223
Revised Code.224

       (d) For the purposes of division (A) of this section, net 225
operating loss carryback and carryforward shall not include 226
five-sixths of the allowance of any net operating loss deduction 227
carryback or carryforward to the taxable year to the extent such 228
loss resulted from depreciation allowed by section 168(k) of the 229
Internal Revenue Code and by the qualifying section 179 230
depreciation expense amount.231

       (21)(a) If the taxpayer was required to add an amount under232
division (A)(20)(a) of this section for a taxable year, deduct233
one-fifth of the amount so added for each of the five succeeding234
taxable years.235

       (b) If the amount deducted under division (A)(21)(a) of this236
section is attributable to an add-back allocated under division237
(A)(20)(c) of this section, the amount deducted shall be sitused238
to the same location. Otherwise, the add-back shall be apportioned 239
using the apportionment factors for the taxable year in which the 240
deduction is taken, subject to one or more of the four alternative 241
methods of apportionment enumerated in section 5747.21 of the 242
Revised Code.243

       (c) No deduction is available under division (A)(21)(a) of 244
this section with regard to any depreciation allowed by section 245
168(k) of the Internal Revenue Code and by the qualifying section 246
179 depreciation expense amount to the extent that such 247
depreciation resulted in or increased a federal net operating loss 248
carryback or carryforward to a taxable year to which division 249
(A)(20)(d) of this section does not apply.250

       (22) Deduct, to the extent not otherwise deducted or excluded 251
in computing federal or Ohio adjusted gross income for the taxable 252
year, the amount the taxpayer received during the taxable year as 253
reimbursement for life insurance premiums under section 5919.31 of 254
the Revised Code.255

        (23) Deduct, to the extent not otherwise deducted or excluded 256
in computing federal or Ohio adjusted gross income for the taxable 257
year, the amount the taxpayer received during the taxable year as 258
a death benefit paid by the adjutant general under section 5919.33 259
of the Revised Code.260

       (24) Deduct, to the extent included in federal adjusted gross 261
income and not otherwise allowable as a deduction or exclusion in 262
computing federal or Ohio adjusted gross income for the taxable 263
year, military pay and allowances received by the taxpayer during 264
the taxable year for active duty service in the United States 265
army, air force, navy, marine corps, or coast guard or reserve 266
components thereof or the national guard. The deduction may not be 267
claimed for military pay and allowances received by the taxpayer 268
while the taxpayer is stationed in this state.269

       (25) Deduct, to the extent not otherwise allowable as a 270
deduction or exclusion in computing federal or Ohio adjusted gross 271
income for the taxable year and not otherwise compensated for by 272
any other source, the amount of qualified organ donation expenses 273
incurred by the taxpayer during the taxable year, not to exceed 274
ten thousand dollars. A taxpayer may deduct qualified organ 275
donation expenses only once for all taxable years beginning with 276
taxable years beginning in 2007.277

       For the purposes of division (A)(25) of this section:278

        (a) "Human organ" means all or any portion of a human liver, 279
pancreas, kidney, intestine, or lung, and any portion of human 280
bone marrow.281

        (b) "Qualified organ donation expenses" means travel 282
expenses, lodging expenses, and wages and salary forgone by a 283
taxpayer in connection with the taxpayer's donation, while living, 284
of one or more of the taxpayer's human organs to another human 285
being.286

       (26) Deduct, to the extent not otherwise deducted or excluded 287
in computing federal or Ohio adjusted gross income for the taxable 288
year, amounts received by the taxpayer as retired military 289
personnel pay for service in the United States army, navy, air 290
force, coast guard, or marine corps or reserve components thereof, 291
or the national guard, or received by the surviving spouse or 292
former spouse of such a taxpayer under the survivor benefit plan 293
on account of such a taxpayer's death. If the taxpayer receives 294
income on account of retirement paid under the federal civil 295
service retirement system or federal employees retirement system, 296
or under any successor retirement program enacted by the congress 297
of the United States that is established and maintained for 298
retired employees of the United States government, and such 299
retirement income is based, in whole or in part, on credit for 300
the taxpayer's military service, the deduction allowed under this 301
division shall include only that portion of such retirement 302
income that is attributable to the taxpayer's military service, 303
to the extent that portion of such retirement income is otherwise 304
included in federal adjusted gross income and is not otherwise 305
deducted under this section. Any amount deducted under division 306
(A)(26) of this section is not included in a taxpayer's 307
adjusted gross income for the purposes of section 5747.055 of 308
the Revised Code. No amount may be deducted under division 309
(A)(26) of this section on the basis of which a credit was 310
claimed under section 5747.055 of the Revised Code.311

       (27) Deduct, to the extent not otherwise deducted or excluded 312
in computing federal or Ohio adjusted gross income for the taxable 313
year, the amount the taxpayer received during the taxable year 314
from the military injury relief fund created in section 5101.98 of 315
the Revised Code.316

       (B) "Business income" means income, including gain or loss,317
arising from transactions, activities, and sources in the regular318
course of a trade or business and includes income, gain, or loss319
from real property, tangible property, and intangible property if320
the acquisition, rental, management, and disposition of the321
property constitute integral parts of the regular course of a322
trade or business operation. "Business income" includes income,323
including gain or loss, from a partial or complete liquidation of324
a business, including, but not limited to, gain or loss from the325
sale or other disposition of goodwill.326

       (C) "Nonbusiness income" means all income other than business 327
income and may include, but is not limited to, compensation, rents 328
and royalties from real or tangible personal property, capital 329
gains, interest, dividends and distributions, patent or copyright 330
royalties, or lottery winnings, prizes, and awards.331

       (D) "Compensation" means any form of remuneration paid to an332
employee for personal services.333

       (E) "Fiduciary" means a guardian, trustee, executor,334
administrator, receiver, conservator, or any other person acting335
in any fiduciary capacity for any individual, trust, or estate.336

       (F) "Fiscal year" means an accounting period of twelve months 337
ending on the last day of any month other than December.338

       (G) "Individual" means any natural person.339

       (H) "Internal Revenue Code" means the "Internal Revenue Code340
of 1986," 100 Stat. 2085, 26 U.S.C.A. 1, as amended.341

       (I) "Resident" means any of the following, provided that342
division (I)(3) of this section applies only to taxable years of a343
trust beginning in 2002 or thereafter:344

       (1) An individual who is domiciled in this state, subject to345
section 5747.24 of the Revised Code;346

       (2) The estate of a decedent who at the time of death was347
domiciled in this state. The domicile tests of section 5747.24 of348
the Revised Code are not controlling for purposes of division 349
(I)(2) of this section.350

       (3) A trust that, in whole or part, resides in this state. If351
only part of a trust resides in this state, the trust is a352
resident only with respect to that part.353

       For the purposes of division (I)(3) of this section:354

       (a) A trust resides in this state for the trust's current355
taxable year to the extent, as described in division (I)(3)(d) of356
this section, that the trust consists directly or indirectly, in 357
whole or in part, of assets, net of any related liabilities, that 358
were transferred, or caused to be transferred, directly or 359
indirectly, to the trust by any of the following:360

        (i) A person, a court, or a governmental entity or 361
instrumentality on account of the death of a decedent, but only if 362
the trust is described in division (I)(3)(e)(i) or (ii) of this 363
section;364

       (ii) A person who was domiciled in this state for the 365
purposes of this chapter when the person directly or indirectly 366
transferred assets to an irrevocable trust, but only if at least 367
one of the trust's qualifying beneficiaries is domiciled in this 368
state for the purposes of this chapter during all or some portion 369
of the trust's current taxable year;370

       (iii) A person who was domiciled in this state for the371
purposes of this chapter when the trust document or instrument or372
part of the trust document or instrument became irrevocable, but373
only if at least one of the trust's qualifying beneficiaries is a 374
resident domiciled in this state for the purposes of this chapter375
during all or some portion of the trust's current taxable year. If 376
a trust document or instrument became irrevocable upon the death 377
of a person who at the time of death was domiciled in this state 378
for purposes of this chapter, that person is a person described in 379
division (I)(3)(a)(iii) of this section.380

        (b) A trust is irrevocable to the extent that the transferor 381
is not considered to be the owner of the net assets of the trust 382
under sections 671 to 678 of the Internal Revenue Code.383

       (c) With respect to a trust other than a charitable lead384
trust, "qualifying beneficiary" has the same meaning as "potential385
current beneficiary" as defined in section 1361(e)(2) of the386
Internal Revenue Code, and with respect to a charitable lead trust387
"qualifying beneficiary" is any current, future, or contingent388
beneficiary, but with respect to any trust "qualifying389
beneficiary" excludes a person or a governmental entity or390
instrumentality to any of which a contribution would qualify for391
the charitable deduction under section 170 of the Internal Revenue392
Code.393

        (d) For the purposes of division (I)(3)(a) of this section,394
the extent to which a trust consists directly or indirectly, in395
whole or in part, of assets, net of any related liabilities, that396
were transferred directly or indirectly, in whole or part, to the397
trust by any of the sources enumerated in that division shall be398
ascertained by multiplying the fair market value of the trust's399
assets, net of related liabilities, by the qualifying ratio, which400
shall be computed as follows:401

        (i) The first time the trust receives assets, the numerator402
of the qualifying ratio is the fair market value of those assets403
at that time, net of any related liabilities, from sources404
enumerated in division (I)(3)(a) of this section. The denominator405
of the qualifying ratio is the fair market value of all the406
trust's assets at that time, net of any related liabilities.407

        (ii) Each subsequent time the trust receives assets, a408
revised qualifying ratio shall be computed. The numerator of the409
revised qualifying ratio is the sum of (1) the fair market value410
of the trust's assets immediately prior to the subsequent411
transfer, net of any related liabilities, multiplied by the412
qualifying ratio last computed without regard to the subsequent413
transfer, and (2) the fair market value of the subsequently414
transferred assets at the time transferred, net of any related415
liabilities, from sources enumerated in division (I)(3)(a) of this416
section. The denominator of the revised qualifying ratio is the417
fair market value of all the trust's assets immediately after the418
subsequent transfer, net of any related liabilities.419

       (iii) Whether a transfer to the trust is by or from any of 420
the sources enumerated in division (I)(3)(a) of this section shall 421
be ascertained without regard to the domicile of the trust's 422
beneficiaries.423

        (e) For the purposes of division (I)(3)(a)(i) of this424
section:425

        (i) A trust is described in division (I)(3)(e)(i) of this426
section if the trust is a testamentary trust and the testator of427
that testamentary trust was domiciled in this state at the time of428
the testator's death for purposes of the taxes levied under429
Chapter 5731. of the Revised Code.430

        (ii) A trust is described in division (I)(3)(e)(ii) of this431
section if the transfer is a qualifying transfer described in any432
of divisions (I)(3)(f)(i) to (vi) of this section, the trust is an433
irrevocable inter vivos trust, and at least one of the trust's434
qualifying beneficiaries is domiciled in this state for purposes435
of this chapter during all or some portion of the trust's current436
taxable year.437

        (f) For the purposes of division (I)(3)(e)(ii) of this438
section, a "qualifying transfer" is a transfer of assets, net of439
any related liabilities, directly or indirectly to a trust, if the440
transfer is described in any of the following:441

        (i) The transfer is made to a trust, created by the decedent 442
before the decedent's death and while the decedent was domiciled 443
in this state for the purposes of this chapter, and, prior to the 444
death of the decedent, the trust became irrevocable while the 445
decedent was domiciled in this state for the purposes of this 446
chapter.447

        (ii) The transfer is made to a trust to which the decedent,448
prior to the decedent's death, had directly or indirectly449
transferred assets, net of any related liabilities, while the450
decedent was domiciled in this state for the purposes of this451
chapter, and prior to the death of the decedent the trust became452
irrevocable while the decedent was domiciled in this state for the453
purposes of this chapter.454

        (iii) The transfer is made on account of a contractual455
relationship existing directly or indirectly between the456
transferor and either the decedent or the estate of the decedent457
at any time prior to the date of the decedent's death, and the458
decedent was domiciled in this state at the time of death for459
purposes of the taxes levied under Chapter 5731. of the Revised460
Code.461

        (iv) The transfer is made to a trust on account of a462
contractual relationship existing directly or indirectly between463
the transferor and another person who at the time of the464
decedent's death was domiciled in this state for purposes of this465
chapter.466

        (v) The transfer is made to a trust on account of the will of 467
a testator.468

        (vi) The transfer is made to a trust created by or caused to 469
be created by a court, and the trust was directly or indirectly470
created in connection with or as a result of the death of an471
individual who, for purposes of the taxes levied under Chapter472
5731. of the Revised Code, was domiciled in this state at the time473
of the individual's death.474

       (g) The tax commissioner may adopt rules to ascertain the475
part of a trust residing in this state.476

       (J) "Nonresident" means an individual or estate that is not a 477
resident. An individual who is a resident for only part of a478
taxable year is a nonresident for the remainder of that taxable479
year.480

       (K) "Pass-through entity" has the same meaning as in section481
5733.04 of the Revised Code.482

       (L) "Return" means the notifications and reports required to483
be filed pursuant to this chapter for the purpose of reporting the484
tax due and includes declarations of estimated tax when so485
required.486

       (M) "Taxable year" means the calendar year or the taxpayer's487
fiscal year ending during the calendar year, or fractional part488
thereof, upon which the adjusted gross income is calculated489
pursuant to this chapter.490

       (N) "Taxpayer" means any person subject to the tax imposed by 491
section 5747.02 of the Revised Code or any pass-through entity492
that makes the election under division (D) of section 5747.08 of493
the Revised Code.494

       (O) "Dependents" means dependents as defined in the Internal495
Revenue Code and as claimed in the taxpayer's federal income tax496
return for the taxable year or which the taxpayer would have been497
permitted to claim had the taxpayer filed a federal income tax498
return.499

       (P) "Principal county of employment" means, in the case of a500
nonresident, the county within the state in which a taxpayer501
performs services for an employer or, if those services are502
performed in more than one county, the county in which the major503
portion of the services are performed.504

       (Q) As used in sections 5747.50 to 5747.55 of the Revised505
Code:506

       (1) "Subdivision" means any county, municipal corporation,507
park district, or township.508

       (2) "Essential local government purposes" includes all509
functions that any subdivision is required by general law to510
exercise, including like functions that are exercised under a511
charter adopted pursuant to the Ohio Constitution.512

       (R) "Overpayment" means any amount already paid that exceeds513
the figure determined to be the correct amount of the tax.514

       (S) "Taxable income" or "Ohio taxable income" applies only to 515
estates and trusts, and means federal taxable income, as defined 516
and used in the Internal Revenue Code, adjusted as follows:517

       (1) Add interest or dividends, net of ordinary, necessary,518
and reasonable expenses not deducted in computing federal taxable519
income, on obligations or securities of any state or of any520
political subdivision or authority of any state, other than this521
state and its subdivisions and authorities, but only to the extent 522
that such net amount is not otherwise includible in Ohio taxable 523
income and is described in either division (S)(1)(a) or (b) of 524
this section:525

        (a) The net amount is not attributable to the S portion of an 526
electing small business trust and has not been distributed to527
beneficiaries for the taxable year;528

        (b) The net amount is attributable to the S portion of an529
electing small business trust for the taxable year.530

       (2) Add interest or dividends, net of ordinary, necessary,531
and reasonable expenses not deducted in computing federal taxable532
income, on obligations of any authority, commission,533
instrumentality, territory, or possession of the United States to534
the extent that the interest or dividends are exempt from federal535
income taxes but not from state income taxes, but only to the536
extent that such net amount is not otherwise includible in Ohio537
taxable income and is described in either division (S)(1)(a) or538
(b) of this section;539

       (3) Add the amount of personal exemption allowed to the540
estate pursuant to section 642(b) of the Internal Revenue Code;541

       (4) Deduct interest or dividends, net of related expenses542
deducted in computing federal taxable income, on obligations of543
the United States and its territories and possessions or of any544
authority, commission, or instrumentality of the United States to545
the extent that the interest or dividends are exempt from state546
taxes under the laws of the United States, but only to the extent547
that such amount is included in federal taxable income and is548
described in either division (S)(1)(a) or (b) of this section;549

       (5) Deduct the amount of wages and salaries, if any, not550
otherwise allowable as a deduction but that would have been551
allowable as a deduction in computing federal taxable income for552
the taxable year, had the targeted jobs credit allowed under553
sections 38, 51, and 52 of the Internal Revenue Code not been in554
effect, but only to the extent such amount relates either to555
income included in federal taxable income for the taxable year or556
to income of the S portion of an electing small business trust for557
the taxable year;558

       (6) Deduct any interest or interest equivalent, net of559
related expenses deducted in computing federal taxable income, on560
public obligations and purchase obligations, but only to the561
extent that such net amount relates either to income included in562
federal taxable income for the taxable year or to income of the S563
portion of an electing small business trust for the taxable year;564

       (7) Add any loss or deduct any gain resulting from sale,565
exchange, or other disposition of public obligations to the extent566
that such loss has been deducted or such gain has been included in567
computing either federal taxable income or income of the S portion568
of an electing small business trust for the taxable year;569

       (8) Except in the case of the final return of an estate, add570
any amount deducted by the taxpayer on both its Ohio estate tax571
return pursuant to section 5731.14 of the Revised Code, and on its572
federal income tax return in determining federal taxable income;573

       (9)(a) Deduct any amount included in federal taxable income574
solely because the amount represents a reimbursement or refund of575
expenses that in a previous year the decedent had deducted as an576
itemized deduction pursuant to section 63 of the Internal Revenue577
Code and applicable treasury regulations. The deduction otherwise578
allowed under division (S)(9)(a) of this section shall be reduced579
to the extent the reimbursement is attributable to an amount the580
taxpayer or decedent deducted under this section in any taxable581
year.582

       (b) Add any amount not otherwise included in Ohio taxable583
income for any taxable year to the extent that the amount is584
attributable to the recovery during the taxable year of any amount585
deducted or excluded in computing federal or Ohio taxable income586
in any taxable year, but only to the extent such amount has not587
been distributed to beneficiaries for the taxable year.588

       (10) Deduct any portion of the deduction described in section 589
1341(a)(2) of the Internal Revenue Code, for repaying previously 590
reported income received under a claim of right, that meets both 591
of the following requirements:592

       (a) It is allowable for repayment of an item that was593
included in the taxpayer's taxable income or the decedent's594
adjusted gross income for a prior taxable year and did not qualify595
for a credit under division (A) or (B) of section 5747.05 of the596
Revised Code for that year.597

       (b) It does not otherwise reduce the taxpayer's taxable598
income or the decedent's adjusted gross income for the current or599
any other taxable year.600

       (11) Add any amount claimed as a credit under section601
5747.059 of the Revised Code to the extent that the amount602
satisfies either of the following:603

       (a) The amount was deducted or excluded from the computation604
of the taxpayer's federal taxable income as required to be605
reported for the taxpayer's taxable year under the Internal606
Revenue Code;607

       (b) The amount resulted in a reduction in the taxpayer's608
federal taxable income as required to be reported for any of the609
taxpayer's taxable years under the Internal Revenue Code.610

       (12) Deduct any amount, net of related expenses deducted in611
computing federal taxable income, that a trust is required to612
report as farm income on its federal income tax return, but only613
if the assets of the trust include at least ten acres of land614
satisfying the definition of "land devoted exclusively to615
agricultural use" under section 5713.30 of the Revised Code,616
regardless of whether the land is valued for tax purposes as such617
land under sections 5713.30 to 5713.38 of the Revised Code. If the618
trust is a pass-through entity investor, section 5747.231 of the619
Revised Code applies in ascertaining if the trust is eligible to620
claim the deduction provided by division (S)(12) of this section621
in connection with the pass-through entity's farm income.622

        Except for farm income attributable to the S portion of an623
electing small business trust, the deduction provided by division624
(S)(12) of this section is allowed only to the extent that the625
trust has not distributed such farm income. Division (S)(12) of626
this section applies only to taxable years of a trust beginning in627
2002 or thereafter.628

       (13) Add the net amount of income described in section 641(c)629
of the Internal Revenue Code to the extent that amount is not630
included in federal taxable income.631

       (14) Add or deduct the amount the taxpayer would be required632
to add or deduct under division (A)(20) or (21) of this section if633
the taxpayer's Ohio taxable income were computed in the same634
manner as an individual's Ohio adjusted gross income is computed635
under this section. In the case of a trust, division (S)(14) of636
this section applies only to any of the trust's taxable years637
beginning in 2002 or thereafter.638

       (T) "School district income" and "school district income tax" 639
have the same meanings as in section 5748.01 of the Revised Code.640

       (U) As used in divisions (A)(8), (A)(9), (S)(6), and (S)(7)641
of this section, "public obligations," "purchase obligations," and642
"interest or interest equivalent" have the same meanings as in643
section 5709.76 of the Revised Code.644

       (V) "Limited liability company" means any limited liability645
company formed under Chapter 1705. of the Revised Code or under646
the laws of any other state.647

       (W) "Pass-through entity investor" means any person who,648
during any portion of a taxable year of a pass-through entity, is649
a partner, member, shareholder, or equity investor in that650
pass-through entity.651

       (X) "Banking day" has the same meaning as in section 1304.01652
of the Revised Code.653

       (Y) "Month" means a calendar month.654

       (Z) "Quarter" means the first three months, the second three655
months, the third three months, or the last three months of the656
taxpayer's taxable year.657

       (AA)(1) "Eligible institution" means a state university or658
state institution of higher education as defined in section659
3345.011 of the Revised Code, or a private, nonprofit college,660
university, or other post-secondary institution located in this661
state that possesses a certificate of authorization issued by the662
Ohio board of regents pursuant to Chapter 1713. of the Revised663
Code or a certificate of registration issued by the state board of664
career colleges and schools under Chapter 3332. of the Revised665
Code.666

       (2) "Qualified tuition and fees" means tuition and fees667
imposed by an eligible institution as a condition of enrollment or668
attendance, not exceeding two thousand five hundred dollars in669
each of the individual's first two years of post-secondary670
education. If the individual is a part-time student, "qualified671
tuition and fees" includes tuition and fees paid for the academic672
equivalent of the first two years of post-secondary education673
during a maximum of five taxable years, not exceeding a total of674
five thousand dollars. "Qualified tuition and fees" does not675
include:676

       (a) Expenses for any course or activity involving sports,677
games, or hobbies unless the course or activity is part of the678
individual's degree or diploma program;679

       (b) The cost of books, room and board, student activity fees,680
athletic fees, insurance expenses, or other expenses unrelated to 681
the individual's academic course of instruction;682

       (c) Tuition, fees, or other expenses paid or reimbursed683
through an employer, scholarship, grant in aid, or other684
educational benefit program.685

       (BB)(1) "Modified business income" means the business income686
included in a trust's Ohio taxable income after such taxable687
income is first reduced by the qualifying trust amount, if any.688

       (2) "Qualifying trust amount" of a trust means capital gains689
and losses from the sale, exchange, or other disposition of equity690
or ownership interests in, or debt obligations of, a qualifying691
investee to the extent included in the trust's Ohio taxable 692
income, but only if the following requirements are satisfied:693

        (a) The book value of the qualifying investee's physical 694
assets in this state and everywhere, as of the last day of the 695
qualifying investee's fiscal or calendar year ending immediately 696
prior to the date on which the trust recognizes the gain or loss, 697
is available to the trust.698

       (b) The requirements of section 5747.011 of the Revised Code699
are satisfied for the trust's taxable year in which the trust700
recognizes the gain or loss.701

        Any gain or loss that is not a qualifying trust amount is702
modified business income, qualifying investment income, or703
modified nonbusiness income, as the case may be.704

       (3) "Modified nonbusiness income" means a trust's Ohio705
taxable income other than modified business income, other than the706
qualifying trust amount, and other than qualifying investment707
income, as defined in section 5747.012 of the Revised Code, to the708
extent such qualifying investment income is not otherwise part of709
modified business income.710

       (4) "Modified Ohio taxable income" applies only to trusts,711
and means the sum of the amounts described in divisions (BB)(4)(a) 712
to (c) of this section:713

       (a) The fraction, calculated under section 5747.013, and 714
applying section 5747.231 of the Revised Code, multiplied by the 715
sum of the following amounts:716

        (i) The trust's modified business income;717

        (ii) The trust's qualifying investment income, as defined in 718
section 5747.012 of the Revised Code, but only to the extent the 719
qualifying investment income does not otherwise constitute720
modified business income and does not otherwise constitute a721
qualifying trust amount.722

       (b) The qualifying trust amount multiplied by a fraction, the 723
numerator of which is the sum of the book value of the qualifying 724
investee's physical assets in this state on the last day of the 725
qualifying investee's fiscal or calendar year ending immediately 726
prior to the day on which the trust recognizes the qualifying 727
trust amount, and the denominator of which is the sum of the book 728
value of the qualifying investee's total physical assets 729
everywhere on the last day of the qualifying investee's fiscal or 730
calendar year ending immediately prior to the day on which the 731
trust recognizes the qualifying trust amount. If, for a taxable 732
year, the trust recognizes a qualifying trust amount with respect 733
to more than one qualifying investee, the amount described in 734
division (BB)(4)(b) of this section shall equal the sum of the735
products so computed for each such qualifying investee.736

       (c)(i) With respect to a trust or portion of a trust that is 737
a resident as ascertained in accordance with division (I)(3)(d) of 738
this section, its modified nonbusiness income.739

        (ii) With respect to a trust or portion of a trust that is740
not a resident as ascertained in accordance with division741
(I)(3)(d) of this section, the amount of its modified nonbusiness742
income satisfying the descriptions in divisions (B)(2) to (5) of743
section 5747.20 of the Revised Code, except as otherwise provided 744
in division (BB)(4)(c)(ii) of this section. With respect to a 745
trust or portion of a trust that is not a resident as ascertained 746
in accordance with division (I)(3)(d) of this section, the trust's 747
portion of modified nonbusiness income recognized from the sale, 748
exchange, or other disposition of a debt interest in or equity 749
interest in a section 5747.212 entity, as defined in section 750
5747.212 of the Revised Code, without regard to division (A) of 751
that section, shall not be allocated to this state in accordance 752
with section 5747.20 of the Revised Code but shall be apportioned 753
to this state in accordance with division (B) of section 5747.212 754
of the Revised Code without regard to division (A) of that 755
section.756

       If the allocation and apportionment of a trust's income under757
divisions (BB)(4)(a) and (c) of this section do not fairly758
represent the modified Ohio taxable income of the trust in this759
state, the alternative methods described in division (C) of760
section 5747.21 of the Revised Code may be applied in the manner761
and to the same extent provided in that section.762

       (5)(a) Except as set forth in division (BB)(5)(b) of this 763
section, "qualifying investee" means a person in which a trust has 764
an equity or ownership interest, or a person or unit of government 765
the debt obligations of either of which are owned by a trust. For 766
the purposes of division (BB)(2)(a) of this section and for the 767
purpose of computing the fraction described in division (BB)(4)(b) 768
of this section, all of the following apply:769

        (i) If the qualifying investee is a member of a qualifying770
controlled group on the last day of the qualifying investee's771
fiscal or calendar year ending immediately prior to the date on772
which the trust recognizes the gain or loss, then "qualifying773
investee" includes all persons in the qualifying controlled group774
on such last day.775

        (ii) If the qualifying investee, or if the qualifying776
investee and any members of the qualifying controlled group of777
which the qualifying investee is a member on the last day of the778
qualifying investee's fiscal or calendar year ending immediately779
prior to the date on which the trust recognizes the gain or loss,780
separately or cumulatively own, directly or indirectly, on the781
last day of the qualifying investee's fiscal or calendar year782
ending immediately prior to the date on which the trust recognizes783
the qualifying trust amount, more than fifty per cent of the784
equity of a pass-through entity, then the qualifying investee and785
the other members are deemed to own the proportionate share of the786
pass-through entity's physical assets which the pass-through787
entity directly or indirectly owns on the last day of the788
pass-through entity's calendar or fiscal year ending within or789
with the last day of the qualifying investee's fiscal or calendar790
year ending immediately prior to the date on which the trust791
recognizes the qualifying trust amount.792

        (iii) For the purposes of division (BB)(5)(a)(iii) of this793
section, "upper level pass-through entity" means a pass-through794
entity directly or indirectly owning any equity of another795
pass-through entity, and "lower level pass-through entity" means796
that other pass-through entity.797

        An upper level pass-through entity, whether or not it is also 798
a qualifying investee, is deemed to own, on the last day of the 799
upper level pass-through entity's calendar or fiscal year, the800
proportionate share of the lower level pass-through entity's801
physical assets that the lower level pass-through entity directly802
or indirectly owns on the last day of the lower level pass-through803
entity's calendar or fiscal year ending within or with the last804
day of the upper level pass-through entity's fiscal or calendar805
year. If the upper level pass-through entity directly and806
indirectly owns less than fifty per cent of the equity of the807
lower level pass-through entity on each day of the upper level808
pass-through entity's calendar or fiscal year in which or with809
which ends the calendar or fiscal year of the lower level810
pass-through entity and if, based upon clear and convincing811
evidence, complete information about the location and cost of the812
physical assets of the lower pass-through entity is not available813
to the upper level pass-through entity, then solely for purposes814
of ascertaining if a gain or loss constitutes a qualifying trust815
amount, the upper level pass-through entity shall be deemed as816
owning no equity of the lower level pass-through entity for each817
day during the upper level pass-through entity's calendar or818
fiscal year in which or with which ends the lower level819
pass-through entity's calendar or fiscal year. Nothing in division 820
(BB)(5)(a)(iii) of this section shall be construed to provide for 821
any deduction or exclusion in computing any trust's Ohio taxable 822
income.823

       (b) With respect to a trust that is not a resident for the824
taxable year and with respect to a part of a trust that is not a825
resident for the taxable year, "qualifying investee" for that826
taxable year does not include a C corporation if both of the827
following apply:828

       (i) During the taxable year the trust or part of the trust829
recognizes a gain or loss from the sale, exchange, or other830
disposition of equity or ownership interests in, or debt831
obligations of, the C corporation.832

       (ii) Such gain or loss constitutes nonbusiness income.833

        (6) "Available" means information is such that a person is 834
able to learn of the information by the due date plus extensions, 835
if any, for filing the return for the taxable year in which the 836
trust recognizes the gain or loss.837

        (CC) "Qualifying controlled group" has the same meaning as in 838
section 5733.04 of the Revised Code.839

        (DD) "Related member" has the same meaning as in section840
5733.042 of the Revised Code.841

       (EE)(1) For the purposes of division (EE) of this section: 842

       (a) "Qualifying person" means any person other than a 843
qualifying corporation.844

       (b) "Qualifying corporation" means any person classified for 845
federal income tax purposes as an association taxable as a 846
corporation, except either of the following:847

       (i) A corporation that has made an election under subchapter 848
S, chapter one, subtitle A, of the Internal Revenue Code for its 849
taxable year ending within, or on the last day of, the investor's 850
taxable year;851

       (ii) A subsidiary that is wholly owned by any corporation 852
that has made an election under subchapter S, chapter one, 853
subtitle A of the Internal Revenue Code for its taxable year 854
ending within, or on the last day of, the investor's taxable year.855

       (2) For the purposes of this chapter, unless expressly stated 856
otherwise, no qualifying person indirectly owns any asset directly 857
or indirectly owned by any qualifying corporation.858

       (FF) For purposes of this chapter and Chapter 5751. of the 859
Revised Code:860

       (1) "Trust" does not include a qualified pre-income tax 861
trust.862

       (2) A "qualified pre-income tax trust" is any pre-income tax 863
trust that makes a qualifying pre-income tax trust election as 864
described in division (FF)(3) of this section.865

       (3) A "qualifying pre-income tax trust election" is an 866
election by a pre-income tax trust to subject to the tax imposed 867
by section 5751.02 of the Revised Code the pre-income tax trust 868
and all pass-through entities of which the trust owns or 869
controls, directly, indirectly, or constructively through related 870
interests, five per cent or more of the ownership or equity 871
interests. The trustee shall notify the tax commissioner in 872
writing of the election on or before April 15, 2006. The 873
election, if timely made, shall be effective on and after January 874
1, 2006, and shall apply for all tax periods and tax years until 875
revoked by the trustee of the trust.876

       (4) A "pre-income tax trust" is a trust that satisfies all of 877
the following requirements:878

       (a) The document or instrument creating the trust was 879
executed by the grantor before January 1, 1972;880

       (b) The trust became irrevocable upon the creation of the 881
trust; and882

       (c) The grantor was domiciled in this state at the time the 883
trust was created.884

       Section 2. That existing section 5747.01 of the Revised Code 885
is hereby repealed.886

       Section 3. The amendment by this act of section 5747.01 of 887
the Revised Code applies to taxable years beginning on or after 888
January 1, 2009.889

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