Bill Text: OH HB134 | 2011-2012 | 129th General Assembly | Introduced

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Bill Title: To reduce the income tax rate on capital gains reinvested in Ohio-based investments.

Spectrum: Strong Partisan Bill (Republican 11-1)

Status: (Introduced - Dead) 2011-03-01 - To Ways & Means [HB134 Detail]

Download: Ohio-2011-HB134-Introduced.html

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As Introduced

129th General Assembly Regular Session 2011-2012

H. B. No. 134

Representative Schuring 

Cosponsors: Representatives Young, Hall, Adams, J., Combs, Okey, Stebelton, Wachtmann, Mecklenborg, Balderson, Hollington, Slaby 

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A BILL

To amend sections 5747.01 and 5747.02 and to enact

1

section 5747.014 of the Revised Code to reduce the

2

income tax rate on capital gains reinvested in

3

Ohio-based investments.

4

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

Section 1.  That sections 5747.01 and 5747.02 be amended and	5
section 5747.014 of the Revised Code be enacted to read as	6
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) Deduct or add amounts, as provided in division (B) of	343
section 5747.014 of the Revised Code, related to Ohio-based	344
reinvestments.	345

(B) "Business income" means income, including gain or loss,	346
arising from transactions, activities, and sources in the regular	347
course of a trade or business and includes income, gain, or loss	348
from real property, tangible property, and intangible property if	349
the acquisition, rental, management, and disposition of the	350
property constitute integral parts of the regular course of a	351
trade or business operation. "Business income" includes income,	352
including gain or loss, from a partial or complete liquidation of	353
a business, including, but not limited to, gain or loss from the	354
sale or other disposition of goodwill.	355

(C) "Nonbusiness income" means all income other than business	356
income and may include, but is not limited to, compensation, rents	357
and royalties from real or tangible personal property, capital	358
gains, interest, dividends and distributions, patent or copyright	359
royalties, or lottery winnings, prizes, and awards.	360

(D) "Compensation" means any form of remuneration paid to an	361
employee for personal services.	362

(E) "Fiduciary" means a guardian, trustee, executor,	363
administrator, receiver, conservator, or any other person acting	364
in any fiduciary capacity for any individual, trust, or estate.	365

(F) "Fiscal year" means an accounting period of twelve months	366
ending on the last day of any month other than December.	367

(G) "Individual" means any natural person.

368

(H) "Internal Revenue Code" means the "Internal Revenue Code	369
of 1986," 100 Stat. 2085, 26 U.S.C.A. 1, as amended.	370

(I) "Resident" means any of the following, provided that	371
division (I)(3) of this section applies only to taxable years of a	372
trust beginning in 2002 or thereafter:	373

(1) An individual who is domiciled in this state, subject to	374
section 5747.24 of the Revised Code;	375

(2) The estate of a decedent who at the time of death was	376
domiciled in this state. The domicile tests of section 5747.24 of	377
the Revised Code are not controlling for purposes of division	378
(I)(2) of this section.	379

(3) A trust that, in whole or part, resides in this state. If	380
only part of a trust resides in this state, the trust is a	381
resident only with respect to that part.	382

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

383

(a) A trust resides in this state for the trust's current	384
taxable year to the extent, as described in division (I)(3)(d) of	385
this section, that the trust consists directly or indirectly, in	386
whole or in part, of assets, net of any related liabilities, that	387
were transferred, or caused to be transferred, directly or	388
indirectly, to the trust by any of the following:	389

(i) A person, a court, or a governmental entity or	390
instrumentality on account of the death of a decedent, but only if	391
the trust is described in division (I)(3)(e)(i) or (ii) of this	392
section;	393

(ii) A person who was domiciled in this state for the	394
purposes of this chapter when the person directly or indirectly	395
transferred assets to an irrevocable trust, but only if at least	396
one of the trust's qualifying beneficiaries is domiciled in this	397
state for the purposes of this chapter during all or some portion	398
of the trust's current taxable year;	399

(iii) A person who was domiciled in this state for the	400
purposes of this chapter when the trust document or instrument or	401
part of the trust document or instrument became irrevocable, but	402
only if at least one of the trust's qualifying beneficiaries is a	403
resident domiciled in this state for the purposes of this chapter	404
during all or some portion of the trust's current taxable year. If	405
a trust document or instrument became irrevocable upon the death	406
of a person who at the time of death was domiciled in this state	407
for purposes of this chapter, that person is a person described in	408
division (I)(3)(a)(iii) of this section.	409

(b) A trust is irrevocable to the extent that the transferor	410
is not considered to be the owner of the net assets of the trust	411
under sections 671 to 678 of the Internal Revenue Code.	412

(c) With respect to a trust other than a charitable lead	413
trust, "qualifying beneficiary" has the same meaning as "potential	414
current beneficiary" as defined in section 1361(e)(2) of the	415
Internal Revenue Code, and with respect to a charitable lead trust	416
"qualifying beneficiary" is any current, future, or contingent	417
beneficiary, but with respect to any trust "qualifying	418
beneficiary" excludes a person or a governmental entity or	419
instrumentality to any of which a contribution would qualify for	420
the charitable deduction under section 170 of the Internal Revenue	421
Code.	422

(d) For the purposes of division (I)(3)(a) of this section,	423
the extent to which a trust consists directly or indirectly, in	424
whole or in part, of assets, net of any related liabilities, that	425
were transferred directly or indirectly, in whole or part, to the	426
trust by any of the sources enumerated in that division shall be	427
ascertained by multiplying the fair market value of the trust's	428
assets, net of related liabilities, by the qualifying ratio, which	429
shall be computed as follows:	430

(i) The first time the trust receives assets, the numerator	431
of the qualifying ratio is the fair market value of those assets	432
at that time, net of any related liabilities, from sources	433
enumerated in division (I)(3)(a) of this section. The denominator	434
of the qualifying ratio is the fair market value of all the	435
trust's assets at that time, net of any related liabilities.	436

(ii) Each subsequent time the trust receives assets, a	437
revised qualifying ratio shall be computed. The numerator of the	438
revised qualifying ratio is the sum of (1) the fair market value	439
of the trust's assets immediately prior to the subsequent	440
transfer, net of any related liabilities, multiplied by the	441
qualifying ratio last computed without regard to the subsequent	442
transfer, and (2) the fair market value of the subsequently	443
transferred assets at the time transferred, net of any related	444
liabilities, from sources enumerated in division (I)(3)(a) of this	445
section. The denominator of the revised qualifying ratio is the	446
fair market value of all the trust's assets immediately after the	447
subsequent transfer, net of any related liabilities.	448

(iii) Whether a transfer to the trust is by or from any of	449
the sources enumerated in division (I)(3)(a) of this section shall	450
be ascertained without regard to the domicile of the trust's	451
beneficiaries.	452

(e) For the purposes of division (I)(3)(a)(i) of this	453
section:	454

(i) A trust is described in division (I)(3)(e)(i) of this	455
section if the trust is a testamentary trust and the testator of	456
that testamentary trust was domiciled in this state at the time of	457
the testator's death for purposes of the taxes levied under	458
Chapter 5731. of the Revised Code.	459

(ii) A trust is described in division (I)(3)(e)(ii) of this	460
section if the transfer is a qualifying transfer described in any	461
of divisions (I)(3)(f)(i) to (vi) of this section, the trust is an	462
irrevocable inter vivos trust, and at least one of the trust's	463
qualifying beneficiaries is domiciled in this state for purposes	464
of this chapter during all or some portion of the trust's current	465
taxable year.	466

(f) For the purposes of division (I)(3)(e)(ii) of this	467
section, a "qualifying transfer" is a transfer of assets, net of	468
any related liabilities, directly or indirectly to a trust, if the	469
transfer is described in any of the following:	470

(i) The transfer is made to a trust, created by the decedent	471
before the decedent's death and while the decedent was domiciled	472
in this state for the purposes of this chapter, and, prior to the	473
death of the decedent, the trust became irrevocable while the	474
decedent was domiciled in this state for the purposes of this	475
chapter.	476

(ii) The transfer is made to a trust to which the decedent,	477
prior to the decedent's death, had directly or indirectly	478
transferred assets, net of any related liabilities, while the	479
decedent was domiciled in this state for the purposes of this	480
chapter, and prior to the death of the decedent the trust became	481
irrevocable while the decedent was domiciled in this state for the	482
purposes of this chapter.	483

(iii) The transfer is made on account of a contractual	484
relationship existing directly or indirectly between the	485
transferor and either the decedent or the estate of the decedent	486
at any time prior to the date of the decedent's death, and the	487
decedent was domiciled in this state at the time of death for	488
purposes of the taxes levied under Chapter 5731. of the Revised	489
Code.	490

(iv) The transfer is made to a trust on account of a	491
contractual relationship existing directly or indirectly between	492
the transferor and another person who at the time of the	493
decedent's death was domiciled in this state for purposes of this	494
chapter.	495

(v) The transfer is made to a trust on account of the will of	496
a testator who was domiciled in this state at the time of the	497
testator's death for purposes of the taxes levied under Chapter	498
5731. of the Revised Code.	499

(vi) The transfer is made to a trust created by or caused to	500
be created by a court, and the trust was directly or indirectly	501
created in connection with or as a result of the death of an	502
individual who, for purposes of the taxes levied under Chapter	503
5731. of the Revised Code, was domiciled in this state at the time	504
of the individual's death.	505

(g) The tax commissioner may adopt rules to ascertain the	506
part of a trust residing in this state.	507

(J) "Nonresident" means an individual or estate that is not a	508
resident. An individual who is a resident for only part of a	509
taxable year is a nonresident for the remainder of that taxable	510
year.	511

(K) "Pass-through entity" has the same meaning as in section	512
5733.04 of the Revised Code.	513

(L) "Return" means the notifications and reports required to	514
be filed pursuant to this chapter for the purpose of reporting the	515
tax due and includes declarations of estimated tax when so	516
required.	517

(M) "Taxable year" means the calendar year or the taxpayer's	518
fiscal year ending during the calendar year, or fractional part	519
thereof, upon which the adjusted gross income is calculated	520
pursuant to this chapter.	521

(N) "Taxpayer" means any person subject to the tax imposed by	522
section 5747.02 of the Revised Code or any pass-through entity	523
that makes the election under division (D) of section 5747.08 of	524
the Revised Code.	525

(O) "Dependents" means dependents as defined in the Internal	526
Revenue Code and as claimed in the taxpayer's federal income tax	527
return for the taxable year or which the taxpayer would have been	528
permitted to claim had the taxpayer filed a federal income tax	529
return.	530

(P) "Principal county of employment" means, in the case of a	531
nonresident, the county within the state in which a taxpayer	532
performs services for an employer or, if those services are	533
performed in more than one county, the county in which the major	534
portion of the services are performed.	535

(Q) As used in sections 5747.50 to 5747.55 of the Revised	536
Code:	537

(1) "Subdivision" means any county, municipal corporation,	538
park district, or township.	539

(2) "Essential local government purposes" includes all	540
functions that any subdivision is required by general law to	541
exercise, including like functions that are exercised under a	542
charter adopted pursuant to the Ohio Constitution.	543

(R) "Overpayment" means any amount already paid that exceeds	544
the figure determined to be the correct amount of the tax.	545

(S) "Taxable income" or "Ohio taxable income" applies only to	546
estates and trusts, and means federal taxable income, as defined	547
and used in the Internal Revenue Code, adjusted as follows:	548

(1) Add interest or dividends, net of ordinary, necessary,	549
and reasonable expenses not deducted in computing federal taxable	550
income, on obligations or securities of any state or of any	551
political subdivision or authority of any state, other than this	552
state and its subdivisions and authorities, but only to the extent	553
that such net amount is not otherwise includible in Ohio taxable	554
income and is described in either division (S)(1)(a) or (b) of	555
this section:	556

(a) The net amount is not attributable to the S portion of an	557
electing small business trust and has not been distributed to	558
beneficiaries for the taxable year;	559

(b) The net amount is attributable to the S portion of an	560
electing small business trust for the taxable year.	561

(2) Add interest or dividends, net of ordinary, necessary,	562
and reasonable expenses not deducted in computing federal taxable	563
income, on obligations of any authority, commission,	564
instrumentality, territory, or possession of the United States to	565
the extent that the interest or dividends are exempt from federal	566
income taxes but not from state income taxes, but only to the	567
extent that such net amount is not otherwise includible in Ohio	568
taxable income and is described in either division (S)(1)(a) or	569
(b) of this section;	570

(3) Add the amount of personal exemption allowed to the	571
estate pursuant to section 642(b) of the Internal Revenue Code;	572

(4) Deduct interest or dividends, net of related expenses	573
deducted in computing federal taxable income, on obligations of	574
the United States and its territories and possessions or of any	575
authority, commission, or instrumentality of the United States to	576
the extent that the interest or dividends are exempt from state	577
taxes under the laws of the United States, but only to the extent	578
that such amount is included in federal taxable income and is	579
described in either division (S)(1)(a) or (b) of this section;	580

(5) Deduct the amount of wages and salaries, if any, not	581
otherwise allowable as a deduction but that would have been	582
allowable as a deduction in computing federal taxable income for	583
the taxable year, had the targeted jobs credit allowed under	584
sections 38, 51, and 52 of the Internal Revenue Code not been in	585
effect, but only to the extent such amount relates either to	586
income included in federal taxable income for the taxable year or	587
to income of the S portion of an electing small business trust for	588
the taxable year;	589

(6) Deduct any interest or interest equivalent, net of	590
related expenses deducted in computing federal taxable income, on	591
public obligations and purchase obligations, but only to the	592
extent that such net amount relates either to income included in	593
federal taxable income for the taxable year or to income of the S	594
portion of an electing small business trust for the taxable year;	595

(7) Add any loss or deduct any gain resulting from sale,	596
exchange, or other disposition of public obligations to the extent	597
that such loss has been deducted or such gain has been included in	598
computing either federal taxable income or income of the S portion	599
of an electing small business trust for the taxable year;	600

(8) Except in the case of the final return of an estate, add	601
any amount deducted by the taxpayer on both its Ohio estate tax	602
return pursuant to section 5731.14 of the Revised Code, and on its	603
federal income tax return in determining federal taxable income;	604

(9)(a) Deduct any amount included in federal taxable income	605
solely because the amount represents a reimbursement or refund of	606
expenses that in a previous year the decedent had deducted as an	607
itemized deduction pursuant to section 63 of the Internal Revenue	608
Code and applicable treasury regulations. The deduction otherwise	609
allowed under division (S)(9)(a) of this section shall be reduced	610
to the extent the reimbursement is attributable to an amount the	611
taxpayer or decedent deducted under this section in any taxable	612
year.	613

(b) Add any amount not otherwise included in Ohio taxable	614
income for any taxable year to the extent that the amount is	615
attributable to the recovery during the taxable year of any amount	616
deducted or excluded in computing federal or Ohio taxable income	617
in any taxable year, but only to the extent such amount has not	618
been distributed to beneficiaries for the taxable year.	619

(10) Deduct any portion of the deduction described in section	620
1341(a)(2) of the Internal Revenue Code, for repaying previously	621
reported income received under a claim of right, that meets both	622
of the following requirements:	623

(a) It is allowable for repayment of an item that was	624
included in the taxpayer's taxable income or the decedent's	625
adjusted gross income for a prior taxable year and did not qualify	626
for a credit under division (A) or (B) of section 5747.05 of the	627
Revised Code for that year.	628

(b) It does not otherwise reduce the taxpayer's taxable	629
income or the decedent's adjusted gross income for the current or	630
any other taxable year.	631

(11) Add any amount claimed as a credit under section	632
5747.059 of the Revised Code to the extent that the amount	633
satisfies either of the following:	634

(a) The amount was deducted or excluded from the computation	635
of the taxpayer's federal taxable income as required to be	636
reported for the taxpayer's taxable year under the Internal	637
Revenue Code;	638

(b) The amount resulted in a reduction in the taxpayer's	639
federal taxable income as required to be reported for any of the	640
taxpayer's taxable years under the Internal Revenue Code.	641

(12) Deduct any amount, net of related expenses deducted in	642
computing federal taxable income, that a trust is required to	643
report as farm income on its federal income tax return, but only	644
if the assets of the trust include at least ten acres of land	645
satisfying the definition of "land devoted exclusively to	646
agricultural use" under section 5713.30 of the Revised Code,	647
regardless of whether the land is valued for tax purposes as such	648
land under sections 5713.30 to 5713.38 of the Revised Code. If the	649
trust is a pass-through entity investor, section 5747.231 of the	650
Revised Code applies in ascertaining if the trust is eligible to	651
claim the deduction provided by division (S)(12) of this section	652
in connection with the pass-through entity's farm income.	653

Except for farm income attributable to the S portion of an	654
electing small business trust, the deduction provided by division	655
(S)(12) of this section is allowed only to the extent that the	656
trust has not distributed such farm income. Division (S)(12) of	657
this section applies only to taxable years of a trust beginning in	658
2002 or thereafter.	659

(13) Add the net amount of income described in section 641(c)	660
of the Internal Revenue Code to the extent that amount is not	661
included in federal taxable income.	662

(14) Add or deduct the amount the taxpayer would be required	663
to add or deduct under division (A)(20) or (21) of this section if	664
the taxpayer's Ohio taxable income were computed in the same	665
manner as an individual's Ohio adjusted gross income is computed	666
under this section. In the case of a trust, division (S)(14) of	667
this section applies only to any of the trust's taxable years	668
beginning in 2002 or thereafter.	669

(T) "School district income" and "school district income tax"	670
have the same meanings as in section 5748.01 of the Revised Code.	671

(U) As used in divisions (A)(8), (A)(9), (S)(6), and (S)(7)	672
of this section, "public obligations," "purchase obligations," and	673
"interest or interest equivalent" have the same meanings as in	674
section 5709.76 of the Revised Code.	675

(V) "Limited liability company" means any limited liability	676
company formed under Chapter 1705. of the Revised Code or under	677
the laws of any other state.	678

(W) "Pass-through entity investor" means any person who,	679
during any portion of a taxable year of a pass-through entity, is	680
a partner, member, shareholder, or equity investor in that	681
pass-through entity.	682

(X) "Banking day" has the same meaning as in section 1304.01	683
of the Revised Code.	684

(Y) "Month" means a calendar month.

685

(Z) "Quarter" means the first three months, the second three	686
months, the third three months, or the last three months of the	687
taxpayer's taxable year.	688

(AA)(1) "Eligible institution" means a state university or	689
state institution of higher education as defined in section	690
3345.011 of the Revised Code, or a private, nonprofit college,	691
university, or other post-secondary institution located in this	692
state that possesses a certificate of authorization issued by the	693
Ohio board of regents pursuant to Chapter 1713. of the Revised	694
Code or a certificate of registration issued by the state board of	695
career colleges and schools under Chapter 3332. of the Revised	696
Code.	697

(2) "Qualified tuition and fees" means tuition and fees	698
imposed by an eligible institution as a condition of enrollment or	699
attendance, not exceeding two thousand five hundred dollars in	700
each of the individual's first two years of post-secondary	701
education. If the individual is a part-time student, "qualified	702
tuition and fees" includes tuition and fees paid for the academic	703
equivalent of the first two years of post-secondary education	704
during a maximum of five taxable years, not exceeding a total of	705
five thousand dollars. "Qualified tuition and fees" does not	706
include:	707

(a) Expenses for any course or activity involving sports,	708
games, or hobbies unless the course or activity is part of the	709
individual's degree or diploma program;	710

(b) The cost of books, room and board, student activity fees,	711
athletic fees, insurance expenses, or other expenses unrelated to	712
the individual's academic course of instruction;	713

(c) Tuition, fees, or other expenses paid or reimbursed	714
through an employer, scholarship, grant in aid, or other	715
educational benefit program.	716

(BB)(1) "Modified business income" means the business income	717
included in a trust's Ohio taxable income after such taxable	718
income is first reduced by the qualifying trust amount, if any.	719

(2) "Qualifying trust amount" of a trust means capital gains	720
and losses from the sale, exchange, or other disposition of equity	721
or ownership interests in, or debt obligations of, a qualifying	722
investee to the extent included in the trust's Ohio taxable	723
income, but only if the following requirements are satisfied:	724

(a) The book value of the qualifying investee's physical	725
assets in this state and everywhere, as of the last day of the	726
qualifying investee's fiscal or calendar year ending immediately	727
prior to the date on which the trust recognizes the gain or loss,	728
is available to the trust.	729

(b) The requirements of section 5747.011 of the Revised Code	730
are satisfied for the trust's taxable year in which the trust	731
recognizes the gain or loss.	732

Any gain or loss that is not a qualifying trust amount is	733
modified business income, qualifying investment income, or	734
modified nonbusiness income, as the case may be.	735

(3) "Modified nonbusiness income" means a trust's Ohio	736
taxable income other than modified business income, other than the	737
qualifying trust amount, and other than qualifying investment	738
income, as defined in section 5747.012 of the Revised Code, to the	739
extent such qualifying investment income is not otherwise part of	740
modified business income.	741

(4) "Modified Ohio taxable income" applies only to trusts,	742
and means the sum of the amounts described in divisions (BB)(4)(a)	743
to (c) of this section:	744

(a) The fraction, calculated under section 5747.013, and	745
applying section 5747.231 of the Revised Code, multiplied by the	746
sum of the following amounts:	747

(i) The trust's modified business income;

748

(ii) The trust's qualifying investment income, as defined in	749
section 5747.012 of the Revised Code, but only to the extent the	750
qualifying investment income does not otherwise constitute	751
modified business income and does not otherwise constitute a	752
qualifying trust amount.	753

(b) The qualifying trust amount multiplied by a fraction, the	754
numerator of which is the sum of the book value of the qualifying	755
investee's physical assets in this state on the last day of the	756
qualifying investee's fiscal or calendar year ending immediately	757
prior to the day on which the trust recognizes the qualifying	758
trust amount, and the denominator of which is the sum of the book	759
value of the qualifying investee's total physical assets	760
everywhere on the last day of the qualifying investee's fiscal or	761
calendar year ending immediately prior to the day on which the	762
trust recognizes the qualifying trust amount. If, for a taxable	763
year, the trust recognizes a qualifying trust amount with respect	764
to more than one qualifying investee, the amount described in	765
division (BB)(4)(b) of this section shall equal the sum of the	766
products so computed for each such qualifying investee.	767

(c)(i) With respect to a trust or portion of a trust that is	768
a resident as ascertained in accordance with division (I)(3)(d) of	769
this section, its modified nonbusiness income.	770

(ii) With respect to a trust or portion of a trust that is	771
not a resident as ascertained in accordance with division	772
(I)(3)(d) of this section, the amount of its modified nonbusiness	773
income satisfying the descriptions in divisions (B)(2) to (5) of	774
section 5747.20 of the Revised Code, except as otherwise provided	775
in division (BB)(4)(c)(ii) of this section. With respect to a	776
trust or portion of a trust that is not a resident as ascertained	777
in accordance with division (I)(3)(d) of this section, the trust's	778
portion of modified nonbusiness income recognized from the sale,	779
exchange, or other disposition of a debt interest in or equity	780
interest in a section 5747.212 entity, as defined in section	781
5747.212 of the Revised Code, without regard to division (A) of	782
that section, shall not be allocated to this state in accordance	783
with section 5747.20 of the Revised Code but shall be apportioned	784
to this state in accordance with division (B) of section 5747.212	785
of the Revised Code without regard to division (A) of that	786
section.	787

If the allocation and apportionment of a trust's income under	788
divisions (BB)(4)(a) and (c) of this section do not fairly	789
represent the modified Ohio taxable income of the trust in this	790
state, the alternative methods described in division (C) of	791
section 5747.21 of the Revised Code may be applied in the manner	792
and to the same extent provided in that section.	793

(5)(a) Except as set forth in division (BB)(5)(b) of this	794
section, "qualifying investee" means a person in which a trust has	795
an equity or ownership interest, or a person or unit of government	796
the debt obligations of either of which are owned by a trust. For	797
the purposes of division (BB)(2)(a) of this section and for the	798
purpose of computing the fraction described in division (BB)(4)(b)	799
of this section, all of the following apply:	800

(i) If the qualifying investee is a member of a qualifying	801
controlled group on the last day of the qualifying investee's	802
fiscal or calendar year ending immediately prior to the date on	803
which the trust recognizes the gain or loss, then "qualifying	804
investee" includes all persons in the qualifying controlled group	805
on such last day.	806

(ii) If the qualifying investee, or if the qualifying	807
investee and any members of the qualifying controlled group of	808
which the qualifying investee is a member on the last day of the	809
qualifying investee's fiscal or calendar year ending immediately	810
prior to the date on which the trust recognizes the gain or loss,	811
separately or cumulatively own, directly or indirectly, on the	812
last day of the qualifying investee's fiscal or calendar year	813
ending immediately prior to the date on which the trust recognizes	814
the qualifying trust amount, more than fifty per cent of the	815
equity of a pass-through entity, then the qualifying investee and	816
the other members are deemed to own the proportionate share of the	817
pass-through entity's physical assets which the pass-through	818
entity directly or indirectly owns on the last day of the	819
pass-through entity's calendar or fiscal year ending within or	820
with the last day of the qualifying investee's fiscal or calendar	821
year ending immediately prior to the date on which the trust	822
recognizes the qualifying trust amount.	823

(iii) For the purposes of division (BB)(5)(a)(iii) of this	824
section, "upper level pass-through entity" means a pass-through	825
entity directly or indirectly owning any equity of another	826
pass-through entity, and "lower level pass-through entity" means	827
that other pass-through entity.	828

An upper level pass-through entity, whether or not it is also	829
a qualifying investee, is deemed to own, on the last day of the	830
upper level pass-through entity's calendar or fiscal year, the	831
proportionate share of the lower level pass-through entity's	832
physical assets that the lower level pass-through entity directly	833
or indirectly owns on the last day of the lower level pass-through	834
entity's calendar or fiscal year ending within or with the last	835
day of the upper level pass-through entity's fiscal or calendar	836
year. If the upper level pass-through entity directly and	837
indirectly owns less than fifty per cent of the equity of the	838
lower level pass-through entity on each day of the upper level	839
pass-through entity's calendar or fiscal year in which or with	840
which ends the calendar or fiscal year of the lower level	841
pass-through entity and if, based upon clear and convincing	842
evidence, complete information about the location and cost of the	843
physical assets of the lower pass-through entity is not available	844
to the upper level pass-through entity, then solely for purposes	845
of ascertaining if a gain or loss constitutes a qualifying trust	846
amount, the upper level pass-through entity shall be deemed as	847
owning no equity of the lower level pass-through entity for each	848
day during the upper level pass-through entity's calendar or	849
fiscal year in which or with which ends the lower level	850
pass-through entity's calendar or fiscal year. Nothing in division	851
(BB)(5)(a)(iii) of this section shall be construed to provide for	852
any deduction or exclusion in computing any trust's Ohio taxable	853
income.	854

(b) With respect to a trust that is not a resident for the	855
taxable year and with respect to a part of a trust that is not a	856
resident for the taxable year, "qualifying investee" for that	857
taxable year does not include a C corporation if both of the	858
following apply:	859

(i) During the taxable year the trust or part of the trust	860
recognizes a gain or loss from the sale, exchange, or other	861
disposition of equity or ownership interests in, or debt	862
obligations of, the C corporation.	863

(ii) Such gain or loss constitutes nonbusiness income.

864

(6) "Available" means information is such that a person is	865
able to learn of the information by the due date plus extensions,	866
if any, for filing the return for the taxable year in which the	867
trust recognizes the gain or loss.	868

(CC) "Qualifying controlled group" has the same meaning as in	869
section 5733.04 of the Revised Code.	870

(DD) "Related member" has the same meaning as in section	871
5733.042 of the Revised Code.	872

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

873

(a) "Qualifying person" means any person other than a	874
qualifying corporation.	875

(b) "Qualifying corporation" means any person classified for	876
federal income tax purposes as an association taxable as a	877
corporation, except either of the following:	878

(i) A corporation that has made an election under subchapter	879
S, chapter one, subtitle A, of the Internal Revenue Code for its	880
taxable year ending within, or on the last day of, the investor's	881
taxable year;	882

(ii) A subsidiary that is wholly owned by any corporation	883
that has made an election under subchapter S, chapter one,	884
subtitle A of the Internal Revenue Code for its taxable year	885
ending within, or on the last day of, the investor's taxable year.	886

(2) For the purposes of this chapter, unless expressly stated	887
otherwise, no qualifying person indirectly owns any asset directly	888
or indirectly owned by any qualifying corporation.	889

(FF) For purposes of this chapter and Chapter 5751. of the	890
Revised Code:	891

(1) "Trust" does not include a qualified pre-income tax	892
trust.	893

(2) A "qualified pre-income tax trust" is any pre-income tax	894
trust that makes a qualifying pre-income tax trust election as	895
described in division (FF)(3) of this section.	896

(3) A "qualifying pre-income tax trust election" is an	897
election by a pre-income tax trust to subject to the tax imposed	898
by section 5751.02 of the Revised Code the pre-income tax trust	899
and all pass-through entities of which the trust owns or controls,	900
directly, indirectly, or constructively through related interests,	901
five per cent or more of the ownership or equity interests. The	902
trustee shall notify the tax commissioner in writing of the	903
election on or before April 15, 2006. The election, if timely	904
made, shall be effective on and after January 1, 2006, and shall	905
apply for all tax periods and tax years until revoked by the	906
trustee of the trust.	907

(4) A "pre-income tax trust" is a trust that satisfies all of	908
the following requirements:	909

(a) The document or instrument creating the trust was	910
executed by the grantor before January 1, 1972;	911

(b) The trust became irrevocable upon the creation of the	912
trust; and	913

(c) The grantor was domiciled in this state at the time the	914
trust was created.	915

Sec. 5747.014.  (A) For purposes of this section, division	916
(A)(30) of section 5747.01 of the Revised Code, and section	917
5747.02 of the Revised Code:	918

(1) "Modified capital gain" means a capital gain realized	919
from the sale, exchange, or other disposition of non-Ohio-based	920
investments to the extent included in federal adjusted gross	921
income and not otherwise deducted or excluded in computing Ohio	922
adjusted gross income.	923

(2) "Modified capital loss" means a capital loss realized	924
from the sale, exchange, or other disposition of non-Ohio-based	925
investments to the extent included in the computation of federal	926
adjusted gross income.	927

(3) "Net modified capital gain" means the excess of modified	928
capital gains over modified capital losses, plus any capital gain	929
distributions included in federal adjusted gross income but only	930
to the extent the taxpayer can prove to the satisfaction of the	931
tax commissioner that the capital gain distributions relate to the	932
sale, exchange, or other disposition of a non-Ohio-based	933
investment.	934

(4) "Ohio-based reinvestment" means an investment in any of	935
the following:	936

(a) Publicly traded shares of a business incorporated under	937
the laws of this state that maintains its corporate headquarters	938
in this state at the time the taxpayer made the investment;	939

(b) Pass-through entities, the majority of the equity	940
ownership interests of which are owned directly by persons subject	941
to the tax levied under section 5747.02 of the Revised Code at the	942
time the taxpayer made the investment;	943

(c) Public obligations issued by this state or subdivisions,	944
as those terms are defined in section 5709.76 of the Revised Code;	945

(d) Tangible personal property used in business and	946
physically located in this state at the time the taxpayer made the	947
investment;	948

(e) Real property located in this state.

949

(5) A "non-Ohio-based investment" means any investment other	950
than an Ohio-based reinvestment.	951

(B) In computing Ohio adjusted gross income under division	952
(A) of section 5747.01 of the Revised Code, the following amounts	953
shall be deducted or added under division (A)(30) of that section:	954

(1) Deduct Ohio-based reinvestments to the extent not	955
otherwise deducted or excluded in computing federal or Ohio	956
adjusted gross income. The amount deducted under division (B)(1)	957
of this section shall not exceed net modified capital gains for	958
the taxable year.	959

(2)(a) Subject to division (B)(2)(b) of this section, add an	960
amount equal to Ohio-based reinvestments sold or otherwise	961
disposed of during the taxable year and within three years after	962
the Ohio-based reinvestment was made to the extent a deduction was	963
taken for the reinvestment in the current or a prior taxable year,	964
plus ten per cent of that amount, and interest on that amount from	965
the first day of January following the day the Ohio-based	966
reinvestment was made computed at the rate per annum required	967
under section 5703.47 of the Revised Code.	968

For the purposes of division (B)(2)(a) of this section and	969
section 5747.13 of the Revised Code, the return subject to	970
assessment shall be the return for the taxable year that includes	971
the last day of the end of the three-year period beginning on the	972
day the Ohio-based reinvestment was made.	973

(b) Any addition required under division (B)(2)(a) of this	974
section shall be reduced by any amount the taxpayer invests in an	975
Ohio-based reinvestment during the taxable year, ten per cent of	976
that amount, and interest on that amount computed as provided in	977
that division. The amount of the reduction shall not exceed the	978
amount otherwise required to be added under division (B)(2)(a) of	979
this section. No reduction shall be allowed under division	980
(B)(2)(b) of this section for any amount deducted under division	981
(B)(1) of this section for the same taxable year.	982

Sec. 5747.02.  (A) For the purpose of providing revenue for	983
the support of schools and local government functions, to provide	984
relief to property taxpayers, to provide revenue for the general	985
revenue fund, and to meet the expenses of administering the tax	986
levied by this chapter, there is hereby levied on every	987
individual, trust, and estate residing in or earning or receiving	988
income in this state, on every individual, trust, and estate	989
earning or receiving lottery winnings, prizes, or awards pursuant	990
to Chapter 3770. of the Revised Code, on every individual, trust,	991
and estate earning or receiving winnings on casino gaming, and on	992
every individual, trust, and estate otherwise having nexus with or	993
in this state under the Constitution of the United States, an	994
annual tax measured in the case of individuals by the sum of Ohio	995
adjusted gross income and Ohio-based reinvestments less an	996
exemption for the taxpayer, the taxpayer's spouse, and each	997
dependent as provided in section 5747.025 of the Revised Code;	998
measured in the case of trusts by modified Ohio taxable income	999
under division (D) of this section; and measured in the case of	1000
estates by Ohio taxable income. The	1001

(1) The tax imposed by this section on the balance thus	1002
obtained is hereby levied as follows:	1003

(1) For taxable years beginning in 2004:

1004

OHIO ADJUSTED GROSS INCOME LESS EXEMPTIONS (INDIVIDUALS)			1005
OR			1006
MODIFIED OHIO			1007
TAXABLE INCOME (TRUSTS)			1008
OR			1009
OHIO TAXABLE INCOME (ESTATES)	TAX		1010

$5,000 or less		.743%		1011
More than $5,000 but not more than $10,000		$37.15 plus 1.486% of the amount in excess of $5,000		1012
More than $10,000 but not more than $15,000		$111.45 plus 2.972% of the amount in excess of $10,000		1013
More than $15,000 but not more than $20,000		$260.05 plus 3.715% of the amount in excess of $15,000		1014
More than $20,000 but not more than $40,000		$445.80 plus 4.457% of the amount in excess of $20,000		1015
More than $40,000 but not more than $80,000		$1,337.20 plus 5.201% of the amount in excess of $40,000		1016
More than $80,000 but not more than $100,000		$3,417.60 plus 5.943% of the amount in excess of $80,000		1017
More than $100,000 but not more than $200,000		$4,606.20 plus 6.9% of the amount in excess of $100,000		1018
More than $200,000		$11,506.20 plus 7.5% of the amount in excess of $200,000		1019

(2) For taxable years beginning in 2005:

1020

OHIO ADJUSTED GROSS INCOME LESS EXEMPTIONS (INDIVIDUALS)			1021
OR			1022
MODIFIED OHIO			1023
TAXABLE INCOME (TRUSTS)			1024
OR			1025
OHIO TAXABLE INCOME (ESTATES)	TAX		1026

$5,000 or less		.712%		1027
More than $5,000 but not more than $10,000		$35.60 plus 1.424% of the amount in excess of $5,000		1028
More than $10,000 but not more than $15,000		$106.80 plus 2.847% of the amount in excess of $10,000		1029
More than $15,000 but not more than $20,000		$249.15 plus 3.559% of the amount in excess of $15,000		1030
More than $20,000 but not more than $40,000		$427.10 plus 4.27% of the amount in excess of $20,000		1031
More than $40,000 but not more than $80,000		$1,281.10 plus 4.983% of the amount in excess of $40,000		1032
More than $80,000 but not more than $100,000		$3,274.30 plus 5.693% of the amount in excess of $80,000		1033
More than $100,000 but not more than $200,000		$4,412.90 plus 6.61% of the amount in excess of $100,000		1034
More than $200,000		$11,022.90 plus 7.185% of the amount in excess of $200,000		1035

(3) For taxable years beginning in 2006:

1036

OHIO ADJUSTED GROSS INCOME LESS EXEMPTIONS (INDIVIDUALS)			1037
OR			1038
MODIFIED OHIO			1039
TAXABLE INCOME (TRUSTS)			1040
OR			1041
OHIO TAXABLE INCOME (ESTATES)	TAX		1042

$5,000 or less		.681%		1043
More than $5,000 but not more than $10,000		$34.05 plus 1.361% of the amount in excess of $5,000		1044
More than $10,000 but not more than $15,000		$102.10 plus 2.722% of the amount in excess of $10,000		1045
More than $15,000 but not more than $20,000		$238.20 plus 3.403% of the amount in excess of $15,000		1046
More than $20,000 but not more than $40,000		$408.35 plus 4.083% of the amount in excess of $20,000		1047
More than $40,000 but not more than $80,000		$1,224.95 plus 4.764% of the amount in excess of $40,000		1048
More than $80,000 but not more than $100,000		$3,130.55 plus 5.444% of the amount in excess of $80,000		1049
More than $100,000 but not more than $200,000		$4,219.35 plus 6.32% of the amount in excess of $100,000		1050
More than $200,000		$10,539.35 plus 6.87% of the amount in excess of $200,000		1051

(4) For taxable years beginning in 2007:

1052

OHIO ADJUSTED GROSS INCOME LESS EXEMPTIONS (INDIVIDUALS)			1053
OR			1054
MODIFIED OHIO			1055
TAXABLE INCOME (TRUSTS)			1056
OR			1057
OHIO TAXABLE INCOME (ESTATES)	TAX		1058

$5,000 or less		.649%		1059
More than $5,000 but not more than $10,000		$32.45 plus 1.299% of the amount in excess of $5,000		1060
More than $10,000 but not more than $15,000		$97.40 plus 2.598% of the amount in excess of $10,000		1061
More than $15,000 but not more than $20,000		$227.30 plus 3.247% of the amount in excess of $15,000		1062
More than $20,000 but not more than $40,000		$389.65 plus 3.895% of the amount in excess of $20,000		1063
More than $40,000 but not more than $80,000		$1,168.65 plus 4.546% of the amount in excess of $40,000		1064
More than $80,000 but not more than $100,000		$2,987.05 plus 5.194% of the amount in excess of $80,000		1065
More than $100,000 but not more than $200,000		$4,025.85 plus 6.031% of the amount in excess of $100,000		1066
More than $200,000		$10,056.85 plus 6.555% of the amount in excess of $200,000		1067

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

1068

OHIO ADJUSTED GROSS INCOME LESS EXEMPTIONS (INDIVIDUALS)			1069
OR			1070
MODIFIED OHIO			1071
TAXABLE INCOME (TRUSTS)			1072
OR			1073
OHIO TAXABLE INCOME (ESTATES)	TAX		1074

$5,000 or less		.618%		1075
More than $5,000 but not more than $10,000		$30.90 plus 1.236% of the amount in excess of $5,000		1076
More than $10,000 but not more than $15,000		$92.70 plus 2.473% of the amount in excess of $10,000		1077
More than $15,000 but not more than $20,000		$216.35 plus 3.091% of the amount in excess of $15,000		1078
More than $20,000 but not more than $40,000		$370.90 plus 3.708% of the amount in excess of $20,000		1079
More than $40,000 but not more than $80,000		$1,112.50 plus 4.327% of the amount in excess of $40,000		1080
More than $80,000 but not more than $100,000		$2,843.30 plus 4.945% of the amount in excess of $80,000		1081
More than $100,000 but not more than $200,000		$3,832.30 plus 5.741% of the amount in excess of $100,000		1082
More than $200,000		$9,573.30 plus 6.24% of the amount in excess of $200,000		1083

(6) For taxable years beginning in 2011 or thereafter:

1084

OHIO ADJUSTED GROSS INCOME LESS EXEMPTIONS (INDIVIDUALS)			1085
OR			1086
MODIFIED OHIO			1087
TAXABLE INCOME (TRUSTS)			1088
OR			1089
OHIO TAXABLE INCOME (ESTATES)	TAX		1090

individuals for taxable years beginning in or after 2011 shall be	1091
the sum of the tax amounts computed under divisions (A)(1)(a) and	1092
(b) of this section where "INCOME" does not include Ohio-based	1093
reinvestments, or shall be the tax amount computed under division	1094
(A)(1)(b) of this section where "INCOME" includes Ohio-based	1095
reinvestments, whichever computation produces the lower tax	1096
amount. If the computation where "INCOME" does not include	1097
Ohio-based reinvestments applies, the total amount of exemptions	1098
allowed under section 5747.025 of the Revised Code shall be	1099
applied first against adjusted gross income, and if the total	1100
amount of the exemptions exceeds adjusted gross income, the excess	1101
shall be applied against Ohio-based reinvestments. If the	1102
computation where "INCOME" includes Ohio-based reinvestments	1103
applies, the total amount of exemptions allowed under section	1104
5747.025 of the Revised Code shall be applied against the sum of	1105
adjusted gross income and Ohio-based reinvestments.	1106

The tax imposed by this section on estates and trusts for	1107
taxable years beginning in or after 2011 shall be the tax amounts	1108
computed under division (A)(1)(b) of this section.	1109

(a) The tax imposed on Ohio-based reinvestments of	1110
individuals shall be two and one-half per cent of the Ohio-based	1111
reinvestment.	1112

(b) The tax imposed on Ohio adjusted gross income of	1113
individuals, modified Ohio taxable income of trusts, and Ohio	1114
taxable income of estates for taxable years beginning in or after	1115
2011 shall be computed as follows:	1116

INCOME

TAX

1117

$5,000 or less		.587%		1118
More than $5,000 but not more than $10,000		$29.35 plus 1.174% of the amount in excess of $5,000		1119
More than $10,000 but not more than $15,000		$88.05 plus 2.348% of the amount in excess of $10,000		1120
More than $15,000 but not more than $20,000		$205.45 plus 2.935% of the amount in excess of $15,000		1121
More than $20,000 but not more than $40,000		$352.20 plus 3.521% of the amount in excess of $20,000		1122
More than $40,000 but not more than $80,000		$1,056.40 plus 4.109% of the amount in excess of $40,000		1123
More than $80,000 but not more than $100,000		$2,700.00 plus 4.695% of the amount in excess of $80,000		1124
More than $100,000 but not more than $200,000		$3,639.00 plus 5.451% of the amount in excess of $100,000		1125
More than $200,000		$9,090.00 plus 5.925% of the amount in excess of $200,000		1126

(2) In July of each year, beginning in 2010, the tax	1127
commissioner shall adjust the income amounts prescribed in this	1128
division by multiplying the percentage increase in the gross	1129
domestic product deflator computed that year under section	1130
5747.025 of the Revised Code by each of the income amounts	1131
resulting from the adjustment under this division in the preceding	1132
year, adding the resulting product to the corresponding income	1133
amount resulting from the adjustment in the preceding year, and	1134
rounding the resulting sum to the nearest multiple of fifty	1135
dollars. The tax commissioner also shall recompute each of the tax	1136
dollar amounts to the extent necessary to reflect the adjustment	1137
of the income amounts. The rates of taxation shall not be	1138
adjusted.	1139

The adjusted amounts apply to taxable years beginning in the	1140
calendar year in which the adjustments are made. The tax	1141
commissioner shall not make such adjustments in any year in which	1142
the amount resulting from the adjustment would be less than the	1143
amount resulting from the adjustment in the preceding year.	1144

(B) If the director of budget and management makes a	1145
certification to the tax commissioner under division (B) of	1146
section 131.44 of the Revised Code, the amount of tax as	1147
determined under division (A) of this section shall be reduced by	1148
the percentage prescribed in that certification for taxable years	1149
beginning in the calendar year in which that certification is	1150
made.	1151

(C) The levy of this tax on income does not prevent a	1152
municipal corporation, a joint economic development zone created	1153
under section 715.691, or a joint economic development district	1154
created under section 715.70 or 715.71 or sections 715.72 to	1155
715.81 of the Revised Code from levying a tax on income.	1156

(D) This division applies only to taxable years of a trust	1157
beginning in 2002 or thereafter.	1158

(1) The tax imposed by this section on a trust shall be	1159
computed by multiplying the Ohio modified taxable income of the	1160
trust by the rates prescribed by division (A)(1)(b) of this	1161
section.	1162

(2) A nonresident trust may claim a credit against the tax	1163
computed under division (D) of this section equal to the lesser of	1164
(1) the tax paid to another state or the District of Columbia on	1165
the nonresident trust's modified nonbusiness income, other than	1166
the portion of the nonresident trust's nonbusiness income that is	1167
qualifying investment income as defined in section 5747.012 of the	1168
Revised Code, or (2) the effective tax rate, based on modified	1169
Ohio taxable income, multiplied by the nonresident trust's	1170
modified nonbusiness income other than the portion of the	1171
nonresident trust's nonbusiness income that is qualifying	1172
investment income. The credit applies before any other applicable	1173
credits.	1174

(3) The credits enumerated in divisions (A)(1) to (13) of	1175
section 5747.98 of the Revised Code do not apply to a trust	1176
subject to division (D) of this section. Any credits enumerated in	1177
other divisions of section 5747.98 of the Revised Code apply to a	1178
trust subject to division (D) of this section. To the extent that	1179
the trust distributes income for the taxable year for which a	1180
credit is available to the trust, the credit shall be shared by	1181
the trust and its beneficiaries. The tax commissioner and the	1182
trust shall be guided by applicable regulations of the United	1183
States treasury regarding the sharing of credits.	1184

(E) For the purposes of this section, "trust" means any trust	1185
described in Subchapter J of Chapter 1 of the Internal Revenue	1186
Code, excluding trusts that are not irrevocable as defined in	1187
division (I)(3)(b) of section 5747.01 of the Revised Code and that	1188
have no modified Ohio taxable income for the taxable year,	1189
charitable remainder trusts, qualified funeral trusts and preneed	1190
funeral contract trusts established pursuant to sections 4717.31	1191
to 4717.38 of the Revised Code that are not qualified funeral	1192
trusts, endowment and perpetual care trusts, qualified settlement	1193
trusts and funds, designated settlement trusts and funds, and	1194
trusts exempted from taxation under section 501(a) of the Internal	1195
Revenue Code.	1196

Section 2.  That existing sections 5747.01 and 5747.02 of the	1197
Revised Code are hereby repealed.	1198

Section 3. The amendment by this act of sections 5747.01 and	1199
5747.02 of the Revised Code, and the enactment by this act of	1200
section 5747.014 of the Revised Code, apply to taxable years	1201
beginning on or after January 1, 2011.	1202