SENATORS Carnes, Harris

To amend sections 151.01, 1340.031, 1340.35, and

1

2109.68; to amend, for the purpose of adopting a

2

new section number as indicated in parentheses,

3

section 1340.031 (1339.69); to enact sections

4

1340.40 to 1340.42, 1340.46, 1340.47, 1340.51 to

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1340.53, 1340.57 to 1340.59, 1340.63 to 1340.66,

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1340.70 to 1340.77, 1340.81 to 1340.86, 1340.90,

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and 1340.91; and to repeal sections 1340.01,

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1340.02, 1340.03, 1340.04, 1340.05, 1340.06,

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1340.07, 1340.08, 1340.09, 1340.10, 1340.11,

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1340.12, 1340.13, 2109.66, and 2109.67 of the

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Revised Code to revise Fiduciary Law by adopting

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the Uniform Principal and Income Act (1997)

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regarding the apportionment and distribution of

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income to trust beneficiaries and regarding a

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fiduciary's allocation of receipts and

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disbursements to or between principal and income,

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and by specifying the extent of a trustee's

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liability with respect to authorized adjustments

19

between principal and income, to limit the holding

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in Sherman v. Sherman (1966), 5 Ohio St. 2d 27, to

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modify state bond law, and to declare an

22

emergency.

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

Section 1. That sections 151.01, 1340.031, 1340.35, and	24
2109.68 be amended; section 1340.031 (1339.69), for the purpose of	25
adopting a new section number as indicated in the parentheses be	26
amended; and sections 1340.40, 1340.41, 1340.42, 1340.46, 1340.47,	27
1340.51, 1340.52, 1340.53, 1340.57, 1340.58, 1340.59, 1340.63,	28
1340.64, 1340.65, 1340.66, 1340.70, 1340.71, 1340.72, 1340.73,	29
1340.74, 1340.75, 1340.76, 1340.77, 1340.81, 1340.82, 1340.83,	30
1340.84, 1340.85, 1340.86, 1340.90, and 1340.91 of the Revised	31
Code be enacted to read as follows:	32

Sec. 151.01.  (A) As used in sections 151.01 to 151.09 and	33
151.40 of the Revised Code and in the applicable bond proceedings	34
unless otherwise provided:	35

(1) "Bond proceedings" means the resolutions, orders,	36
agreements, and credit enhancement facilities, and amendments and	37
supplements to them, or any one or more or combination of them,	38
authorizing, awarding, or providing for the terms and conditions	39
applicable to or providing for the security or liquidity of, the	40
particular obligations, and the provisions contained in those	41
obligations.	42

(2) "Bond service fund" means the respective bond service	43
fund created by section 151.03, 151.04, 151.05, 151.06, 151.07,	44
151.08, 151.09, or 151.40 of the Revised Code, and any accounts in	45
that fund, including all moneys and investments, and earnings from	46
investments, credited and to be credited to that fund and accounts	47
as and to the extent provided in the applicable bond proceedings.	48

(3) "Capital facilities" means capital facilities or projects	49
as referred to in section 151.03, 151.04, 151.05, 151.06, 151.07,	50
151.08, 151.09, or 151.40 of the Revised Code.	51

(4) "Costs of capital facilities" means the costs of	52
acquiring, constructing, reconstructing, rehabilitating,	53
remodeling, renovating, enlarging, improving, equipping, or	54
furnishing capital facilities, and of the financing of those	55
costs. "Costs of capital facilities" includes, without limitation,	56
and in addition to costs referred to in section 151.03, 151.04,	57
151.05, 151.06, 151.07, 151.08, 151.09, or 151.40 of the Revised	58
Code, the cost of clearance and preparation of the site and of any	59
land to be used in connection with capital facilities, the cost of	60
any indemnity and surety bonds and premiums on insurance, all	61
related direct administrative expenses and allocable portions of	62
direct costs of the issuing authority, costs of engineering and	63
architectural services, designs, plans, specifications, surveys,	64
and estimates of cost, financing costs, interest on obligations	65
from their date to the time when interest is to be paid from	66
sources other than proceeds of obligations, amounts necessary to	67
establish any reserves as required by the bond proceedings, the	68
reimbursement of all moneys advanced or applied by or borrowed	69
from any person or governmental agency or entity for the payment	70
of any item of costs of capital facilities, and all other expenses	71
necessary or incident to planning or determining feasibility or	72
practicability with respect to capital facilities, and such other	73
expenses as may be necessary or incident to the acquisition,	74
construction, reconstruction, rehabilitation, remodeling,	75
renovation, enlargement, improvement, equipment, and furnishing of	76
capital facilities, the financing of those costs, and the placing	77
of the capital facilities in use and operation, including any one,	78
part of, or combination of those classes of costs and expenses.	79

(5) "Credit enhancement facilities," "financing costs," and	80
"interest" or "interest equivalent" have the same meanings as in	81
section 133.01 of the Revised Code.	82

(6) "Debt service" means principal, including any mandatory	83
sinking fund or redemption requirements for retirement of	84
obligations, interest and other accreted amounts, interest	85
equivalent, and any redemption premium, payable on obligations.	86
If not prohibited by the applicable bond proceedings, debt service	87
includes costs relating to credit enhancement facilities that are	88
related to and represent, or are intended to provide a source of	89
payment of or limitation on, other debt service.	90

(7) "Issuing authority" means the Ohio public facilities	91
commission created in section 151.02 of the Revised Code for	92
obligations issued under section 151.03, 151.04, 151.05, 151.07,	93
or 151.09 of the Revised Code, or the treasurer of state, or the	94
officer who by law performs the functions of that office, for	95
obligations issued under section 151.06, 151.08, or 151.40 of the	96
Revised Code.	97

(8) "Net proceeds" means amounts received from the sale of	98
obligations, excluding amounts used to refund or retire	99
outstanding obligations, amounts required to be deposited into	100
special funds pursuant to the applicable bond proceedings, and	101
amounts to be used to pay financing costs.	102

(9) "Obligations" means bonds, notes, or other evidences of	103
obligation of the state, including any appertaining interest	104
coupons, issued under Section 2k, 2l, 2m, 2n, 2o or 15 of Article	105
VIII, Ohio Constitution, and pursuant to sections 151.01 to	106
151.09 or 151.40 of the Revised Code or other general assembly	107
authorization.	108

(10) "Principal amount" means the aggregate of the amount as	109
stated or provided for in the applicable bond proceedings as the	110
amount on which interest or interest equivalent on particular	111
obligations is initially calculated. Principal amount does not	112
include any premium paid to the state by the initial purchaser of	113
the obligations. "Principal amount" of a capital appreciation	114
bond, as defined in division (C) of section 3334.01 of the Revised	115
Code, means its face amount, and "principal amount" of a zero	116
coupon bond, as defined in division (J) of section 3334.01 of the	117
Revised Code, means the discounted offering price at which the	118
bond is initially sold to the public, disregarding any purchase	119
price discount to the original purchaser, if provided for pursuant	120
to the bond proceedings.	121

(11) "Special funds" or "funds," unless the context indicates	122
otherwise, means the bond service fund, and any other funds,	123
including any reserve funds, created under the bond proceedings	124
and stated to be special funds in those proceedings, including	125
moneys and investments, and earnings from investments, credited	126
and to be credited to the particular fund. Special funds do not	127
include the school building program assistance fund created by	128
section 3318.25 of the Revised Code, the higher education	129
improvement fund created by division (F) of section 154.21 of the	130
Revised Code, the highway capital improvement bond fund created by	131
section 5528.53 of the Revised Code, the state parks and natural	132
resources fund created by section 1557.02 of the Revised Code, the	133
coal research and development fund created by section 1555.15 of	134
the Revised Code, the clean Ohio conservation fund created by	135
section 164.27 of the Revised Code, the clean Ohio revitalization	136
fund created by section 122.658 of the Revised Code, or other	137
funds created by the bond proceedings that are not stated by those	138
proceedings to be special funds.	139

(B) Subject to Section 2l, 2m, 2n, 2o, or 15, and Section	140
17, of Article VIII, Ohio Constitution, the state, by the issuing	141
authority, is authorized to issue and sell, as provided in	142
sections 151.03 to 151.09 or 151.40 of the Revised Code, and in	143
respective aggregate principal amounts as from time to time	144
provided or authorized by the general assembly, general	145
obligations of this state for the purpose of paying costs of	146
capital facilities or projects identified by or pursuant to	147
general assembly action.	148

(C) Each issue of obligations shall be authorized by	149
resolution or order of the issuing authority. The bond	150
proceedings shall provide for or authorize the manner for	151
determining the principal amount or maximum principal amount of	152
obligations of an issue, the principal maturity or maturities, the	153
interest rate or rates, the date of and the dates of payment of	154
interest on the obligations, their denominations, and the place or	155
places of payment of debt service which may be within or outside	156
the state. Unless otherwise provided by law, the latest principal	157
maturity may not be later than the earlier of the thirty-first day	158
of December of the twenty-fifth calendar year after the year of	159
issuance of the particular obligations or of the twenty-fifth	160
calendar year after the year in which the original obligation to	161
pay was issued or entered into. Sections 9.96, 9.98, 9.981,	162
9.982, and 9.983 of the Revised Code apply to obligations. The	163
purpose of the obligations may be stated in the bond proceedings	164
in general terms, such as, as applicable, "financing or assisting	165
in the financing of projects as provided in Section 2l of Article	166
VIII, Ohio Constitution," "financing or assisting in the financing	167
of highway capital improvement projects as provided in Section 2m	168
of Article VIII, Ohio Constitution," "paying costs of capital	169
facilities for a system of common schools throughout the state as	170
authorized by Section 2n of Article VIII, Ohio Constitution,"	171
"paying costs of capital facilities for state-supported and	172
state-assisted institutions of higher education as authorized by	173
Section 2n of Article VIII, Ohio Constitution," "paying costs of	174
coal research and development as authorized by Section 15 of	175
Article VIII, Ohio Constitution," "financing or assisting in the	176
financing of local subdivision capital improvement projects as	177
authorized by Section 2m of Article VIII, Ohio Constitution,"	178
"paying costs of conservation projects as authorized by Section 2o	179
of Article VIII, Ohio Constitution," or "paying costs of	180
revitalization projects as authorized by Section 2o of Article	181
VIII, Ohio Constitution."	182

(D) The issuing authority may appoint or provide for the	183
appointment of paying agents, bond registrars, securities	184
depositories, clearing corporations, and transfer agents, and may	185
without need for any other approval retain or contract for the	186
services of underwriters, investment bankers, financial advisers,	187
accounting experts, marketing, remarketing, indexing, and	188
administrative agents, other consultants, and independent	189
contractors, including printing services, as are necessary in the	190
judgment of the issuing authority to carry out the issuing	191
authority's functions under this chapter. When the issuing	192
authority is the Ohio public facilities commission, the issuing	193
authority also may without need for any other approval retain or	194
contract for the services of attorneys and other professionals for	195
that purpose. Financing costs are payable, as may be provided in	196
the bond proceedings, from the proceeds of the obligations, from	197
special funds, or from other moneys available for the purpose.	198

(E) The bond proceedings may contain additional provisions	199
customary or appropriate to the financing or to the obligations or	200
to particular obligations including, but not limited to,	201
provisions for:	202

(1) The redemption of obligations prior to maturity at the	203
option of the state or of the holder or upon the occurrence of	204
certain conditions, and at particular price or prices and under	205
particular terms and conditions;	206

(2) The form of and other terms of the obligations;

207

(3) The establishment, deposit, investment, and application	208
of special funds, and the safeguarding of moneys on hand or on	209
deposit, in lieu of the applicability of provisions of Chapter	210
131. or 135. of the Revised Code, but subject to any special	211
provisions of sections 151.01 to 151.09 or 151.40 of the Revised	212
Code with respect to the application of particular funds or	213
moneys. Any financial institution that acts as a depository of	214
any moneys in special funds or other funds under the bond	215
proceedings may furnish indemnifying bonds or pledge securities as	216
required by the issuing authority.	217

(4) Any or every provision of the bond proceedings being	218
binding upon the issuing authority and upon such governmental	219
agency or entity, officer, board, commission, authority, agency,	220
department, institution, district, or other person or body as may	221
from time to time be authorized to take actions as may be	222
necessary to perform all or any part of the duty required by the	223
provision;	224

(5) The maintenance of each pledge or instrument comprising	225
part of the bond proceedings until the state has fully paid or	226
provided for the payment of the debt service on the obligations or	227
met other stated conditions;	228

(6) In the event of default in any payments required to be	229
made by the bond proceedings, or by any other agreement of the	230
issuing authority made as part of a contract under which the	231
obligations were issued or secured, including a credit enhancement	232
facility, the enforcement of those payments by mandamus, a suit in	233
equity, an action at law, or any combination of those remedial	234
actions;	235

(7) The rights and remedies of the holders or owners of	236
obligations or of book-entry interests in them, and of third	237
parties under any credit enhancement facility, and provisions for	238
protecting and enforcing those rights and remedies, including	239
limitations on rights of individual holders or owners;	240

(8) The replacement of mutilated, destroyed, lost, or stolen	241
obligations;	242

(9) The funding, refunding, or advance refunding, or other	243
provision for payment, of obligations that will then no longer be	244
outstanding for purposes of this section or of the applicable bond	245
proceedings;	246

(10) Amendment of the bond proceedings;

247

(11) Any other or additional agreements with the owners of	248
obligations, and such other provisions as the issuing authority	249
determines, including limitations, conditions, or qualifications,	250
relating to any of the foregoing.	251

(F) The great seal of the state or a facsimile of it may be	252
affixed to or printed on the obligations. The obligations	253
requiring execution by or for the issuing authority shall be	254
signed as provided in the bond proceedings. Any obligations may	255
be signed by the individual who on the date of execution is the	256
authorized signer although on the date of these obligations that	257
individual is not an authorized signer. In case the individual	258
whose signature or facsimile signature appears on any obligation	259
ceases to be an authorized signer before delivery of the	260
obligation, that signature or facsimile is nevertheless valid and	261
sufficient for all purposes as if that individual had remained the	262
authorized signer until delivery.	263

(G) Obligations are investment securities under Chapter	264
1308. of the Revised Code. Obligations may be issued in bearer or	265
in registered form, registrable as to principal alone or as to	266
both principal and interest, or both, or in certificated or	267
uncertificated form, as the issuing authority determines.	268
Provision may be made for the exchange, conversion, or transfer of	269
obligations and for reasonable charges for registration, exchange,	270
conversion, and transfer. Pending preparation of final	271
obligations, the issuing authority may provide for the issuance of	272
interim instruments to be exchanged for the final obligations.	273

(H) Obligations may be sold at public sale or at private	274
sale, in such manner, and at such price at, above or below par,	275
all as determined by and provided by the issuing authority in the	276
bond proceedings.	277

(I) Except to the extent that rights are restricted by the	278
bond proceedings, any owner of obligations or provider of a credit	279
enhancement facility may by any suitable form of legal proceedings	280
protect and enforce any rights relating to obligations or that	281
facility under the laws of this state or granted by the bond	282
proceedings. Those rights include the right to compel the	283
performance of all applicable duties of the issuing authority and	284
the state. Each duty of the issuing authority and that	285
authority's officers, staff, and employees, and of each state	286
entity or agency, or using district or using institution, and its	287
officers, members, staff, or employees, undertaken pursuant to the	288
bond proceedings, is hereby established as a duty of the entity or	289
individual having authority to perform that duty, specifically	290
enjoined by law and resulting from an office, trust, or station	291
within the meaning of section 2731.01 of the Revised Code. The	292
individuals who are from time to time the issuing authority,	293
members or officers of the issuing authority, or those members'	294
designees acting pursuant to section 154.02 of the Revised Code,	295
or the issuing authority's officers, staff, or employees, are not	296
liable in their personal capacities on any obligations or	297
otherwise under the bond proceedings.	298

(J)(1) Subject to Section 2k, 2l, 2m, 2n, 2o, or 15, and	299
Section 17, of Article VIII, Ohio Constitution and sections 151.01	300
to 151.09 or 151.40 of the Revised Code, the issuing authority	301
may, in addition to the authority referred to in division (B) of	302
this section, authorize and provide for the issuance of:	303

(a) Obligations in the form of bond anticipation notes, and	304
may provide for the renewal of those notes from time to time by	305
the issuance of new notes. The holders of notes or appertaining	306
interest coupons have the right to have debt service on those	307
notes paid solely from the moneys and special funds that are or	308
may be pledged to that payment, including the proceeds of bonds or	309
renewal notes or both, as the issuing authority provides in the	310
bond proceedings authorizing the notes. Notes may be additionally	311
secured by covenants of the issuing authority to the effect that	312
the issuing authority and the state will do all things necessary	313
for the issuance of bonds or renewal notes in such principal	314
amount and upon such terms as may be necessary to provide moneys	315
to pay when due the debt service on the notes, and apply their	316
proceeds to the extent necessary, to make full and timely payment	317
of debt service on the notes as provided in the applicable bond	318
proceedings. In the bond proceedings authorizing the issuance of	319
bond anticipation notes the issuing authority shall set forth for	320
the bonds anticipated an estimated schedule of annual principal	321
payments the latest of which shall be no later than provided in	322
division (C) of this section. While the notes are outstanding	323
there shall be deposited, as shall be provided in the bond	324
proceedings for those notes, from the sources authorized for	325
payment of debt service on the bonds, amounts sufficient to pay	326
the principal of the bonds anticipated as set forth in that	327
estimated schedule during the time the notes are outstanding,	328
which amounts shall be used solely to pay the principal of those	329
notes or of the bonds anticipated.	330

(b) Obligations for the refunding, including funding and	331
retirement, and advance refunding with or without payment or	332
redemption prior to maturity, of any obligations previously	333
issued. Refunding obligations may be issued in amounts sufficient	334
to pay or to provide for repayment of the principal amount,	335
including principal amounts maturing prior to the redemption of	336
the remaining prior obligations, any redemption premium, and	337
interest accrued or to accrue to the maturity or redemption date	338
or dates, payable on the prior obligations, and related financing	339
costs and any expenses incurred or to be incurred in connection	340
with that issuance and refunding. Subject to the applicable bond	341
proceedings, the portion of the proceeds of the sale of refunding	342
obligations issued under division (J)(1)(b) of this section to be	343
applied to debt service on the prior obligations shall be credited	344
to an appropriate separate account in the bond service fund and	345
held in trust for the purpose by the issuing authority or by a	346
corporate trustee. Obligations authorized under this division	347
shall be considered to be issued for those purposes for which the	348
prior obligations were issued.	349

(2) Except as otherwise provided in sections 151.01 to	350
151.09 or 151.40 of the Revised Code, bonds or notes authorized	351
pursuant to division (J) of this section are subject to the	352
provisions of those sections pertaining to obligations generally.	353

(3) The principal amount of refunding or renewal obligations	354
issued pursuant to division (J) of this section shall be in	355
addition to the amount authorized by the general assembly as	356
referred to in division (B) of the following sections: section	357
151.03, 151.04, 151.05, 151.06, 151.07, 151.08, 151.09, or 151.40	358
of the Revised Code.	359

(K) Obligations are lawful investments for banks, savings	360
and loan associations, credit union share guaranty corporations,	361
trust companies, trustees, fiduciaries, insurance companies,	362
including domestic for life and domestic not for life, trustees or	363
other officers having charge of sinking and bond retirement or	364
other special funds of the state and political subdivisions and	365
taxing districts of this state, the sinking fund, the	366
administrator of workers' compensation subject to the approval of	367
the workers' compensation board, the state teachers retirement	368
system, the public employees retirement system, the school	369
employees retirement system, and the Ohio police and fire pension	370
fund, notwithstanding any other provisions of the Revised Code or	371
rules adopted pursuant to those provisions by any state agency	372
with respect to investments by them, and are also acceptable as	373
security for the repayment of the deposit of public moneys. The	374
exemptions from taxation in Ohio as provided for in particular	375
sections of the Ohio Constitution and section 5709.76 of the	376
Revised Code apply to the obligations.	377

(L)(1) Unless otherwise provided or provided for in any	378
applicable bond proceedings, moneys to the credit of or in a	379
special fund shall be disbursed on the order of the issuing	380
authority. No such order is required for the payment, from the	381
bond service fund or other special fund, when due of debt service	382
or required payments under credit enhancement facilities.	383

(2) Payments received by the state under interest rate	384
hedges entered into as credit enhancement facilities under this	385
chapter shall be deposited to the credit of the bond service fund	386
for the obligations to which those credit enhancement facilities	387
relate.	388

(M) The full faith and credit, revenue, and taxing power of	389
the state are and shall be pledged to the timely payment of debt	390
service on outstanding obligations as it comes due, all in	391
accordance with Section 2k, 2l, 2m, 2n, 2o, or 15 of Article VIII,	392
Ohio Constitution, and section 151.03, 151.04, 151.05, 151.06,	393
151.07, 151.08, or 151.09 of the Revised Code. Moneys referred	394
to in Section 5a of Article XII, Ohio Constitution, may not be	395
pledged or used for the payment of debt service except on	396
obligations referred to in section 151.06 of the Revised Code. Net	397
state lottery proceeds, as provided for and referred to in section	398
3770.06 of the Revised Code, may not be pledged or used for the	399
payment of debt service except on obligations referred to in	400
section 151.03 of the Revised Code. The state covenants, and that	401
covenant shall be controlling notwithstanding any other provision	402
of law, that the state and the applicable officers and agencies of	403
the state, including the general assembly, shall, so long as any	404
obligations are outstanding in accordance with their terms,	405
maintain statutory authority for and cause to be levied, collected	406
and applied sufficient pledged excises, taxes, and revenues of the	407
state so that the revenues shall be sufficient in amounts to pay	408
debt service when due, to establish and maintain any reserves and	409
other requirements, and to pay financing costs, including costs of	410
or relating to credit enhancement facilities, all as provided for	411
in the bond proceedings. Those excises, taxes, and revenues are	412
and shall be deemed to be levied and collected, in addition to the	413
purposes otherwise provided for by law, to provide for the payment	414
of debt service and financing costs in accordance with sections	415
151.01 to 151.09 of the Revised Code and the bond proceedings.	416

(N) The general assembly may from time to time repeal or	417
reduce any excise, tax, or other source of revenue pledged to the	418
payment of the debt service pursuant to Section 2k, 2l, 2m, 2n,	419
2o, or 15 of Article VIII, Ohio Constitution, and sections 151.01	420
to 151.09 or 151.40 of the Revised Code, and may levy, collect	421
and apply any new or increased excise, tax, or revenue to meet the	422
pledge, to the payment of debt service on outstanding obligations,	423
of the state's full faith and credit, revenue and taxing power, or	424
of designated revenues and receipts, except fees, excises or taxes	425
referred to in Section 5a of Article XII, Ohio Constitution, for	426
other than obligations referred to in section 151.06 of the	427
Revised Code and except net state lottery proceeds for other than	428
obligations referred to in section 151.03 of the Revised Code.	429
Nothing in division (N) of this section authorizes any impairment	430
of the obligation of this state to levy and collect sufficient	431
excises, taxes, and revenues to pay debt service on obligations	432
outstanding in accordance with their terms.	433

(O) Each bond service fund is a trust fund and is hereby	434
pledged to the payment of debt service on the applicable	435
obligations. Payment of that debt service shall be made or	436
provided for by the issuing authority in accordance with the bond	437
proceedings without necessity for any act of appropriation. The	438
bond proceedings may provide for the establishment of separate	439
accounts in the bond service fund and for the application of those	440
accounts only to debt service on specific obligations, and for	441
other accounts in the bond service fund within the general	442
purposes of that fund.	443

(P) Subject to the bond proceedings pertaining to any	444
obligations then outstanding in accordance with their terms, the	445
issuing authority may in the bond proceedings pledge all, or such	446
portion as the issuing authority determines, of the moneys in the	447
bond service fund to the payment of debt service on particular	448
obligations, and for the establishment and maintenance of any	449
reserves for payment of particular debt service.	450

(Q) The issuing authority shall by the fifteenth day of	451
July of each fiscal year, certify or cause to be certified to the	452
office of budget and management the total amount of moneys	453
required during the current fiscal year to meet in full all debt	454
service on the respective obligations and any related financing	455
costs payable from the applicable bond service fund and not from	456
the proceeds of refunding or renewal obligations. The issuing	457
authority shall make or cause to be made supplemental	458
certifications to the office of budget and management for each	459
debt service payment date and at such other times during each	460
fiscal year as may be provided in the bond proceedings or	461
requested by that office. Debt service, costs of credit	462
enhancement facilities, and other financing costs shall be set	463
forth separately in each certification. If and so long as the	464
moneys to the credit of the bond service fund, together with any	465
other moneys available for the purpose, are insufficient to meet	466
in full all payments when due of the amount required as stated in	467
the certificate or otherwise, the office of budget and management	468
shall at the times as provided in the bond proceedings, and	469
consistent with any particular provisions in sections 151.03 to	470
151.09 and 151.40 of the Revised Code, transfer a sufficient	471
amount to the bond service fund from the pledged revenues in the	472
case of obligations issued pursuant to section 151.40 of the	473
Revised Code, and in the case of other obligations from the	474
revenues derived from excises, taxes, and other revenues,	475
including net state lottery proceeds in the case of obligations	476
referred to in section 151.03 of the Revised Code.	477

(R) Unless otherwise provided in any applicable bond	478
proceedings, moneys to the credit of special funds may be invested	479
by or on behalf of the state only in one or more of the following:	480

(1) Notes, bonds, or other direct obligations of the United	481
States or of any agency or instrumentality of the United States,	482
or in no-front-end-load money market mutual funds consisting	483
exclusively of those obligations, or in repurchase agreements,	484
including those issued by any fiduciary, secured by those	485
obligations, or in collective investment funds consisting	486
exclusively of those obligations;	487

(2) Obligations of this state or any political subdivision	488
of this state;	489

(3) Certificates of deposit of any national bank located in	490
this state and any bank, as defined in section 1101.01 of the	491
Revised Code, subject to inspection by the superintendent of	492
financial institutions;	493

(4) The treasurer of state's pooled investment program under	494
section 135.45 of the Revised Code.	495

The income from investments referred to in division (R) of	496
this section shall, unless otherwise provided in sections 151.01	497
to 151.09 or 151.40 of the Revised Code, be credited to special	498
funds or otherwise as the issuing authority determines in the bond	499
proceedings. Those investments may be sold or exchanged at times	500
as the issuing authority determines, provides for, or authorizes.	501

(S) The treasurer of state shall have responsibility for	502
keeping records, making reports, and making payments, relating to	503
any arbitrage rebate requirements under the applicable bond	504
proceedings.	505

Sec. 1340.031.        Sec. 1339.69.  (A) For purposes of this section,	506
both of the following apply:	507

(1) "Qualified beneficiary" means a beneficiary who is	508
entitled or eligible to receive a distribution of income or	509
principal whether presently or at some future time that is	510
predicated upon the happening of an event that is certain. An	511
event that is certain includes, but is not limited to, the	512
termination of an intervening life estate. If a trust is subject	513
to amendment, appointment, or revocation by the grantor, then only	514
the grantor shall be deemed to be a qualified beneficiary.	515

(2) "Legal representative" includes, but is not limited to, a	516
parent as a natural guardian of a minor child under section	517
2111.08 of the Revised Code, an attorney-at-law, a guardian	518
appointed pursuant to court order, including a guardian of the	519
person or a guardian of the estate, or a guardian ad litem.	520

(B)(1) Not more than once every six months, a qualified	521
beneficiary or, if a qualified beneficiary is under a legal	522
disability, a legal representative of the qualified beneficiary	523
may request in writing that an inter vivos trustee furnish the	524
qualified beneficiary or legal representative a report of the	525
management of the inter vivos trust as provided in this section.	526

(2) Within thirty days after receiving the written request	527
for a report of the management of the inter vivos trust, the inter	528
vivos trustee shall furnish the qualified beneficiary or legal	529
representative that made the request a report that is current to	530
within five months prior to the date of the request and that shows	531
an inventory of the trust property and the receipts credited and	532
expenditures charged to income or principal with respect to the	533
inter vivos trust for the two years prior to the preparation of	534
the report.	535

(3) If the inter vivos trustee does not comply with the	536
request for a report under this section, the qualified beneficiary	537
or legal representative that made the request may file an	538
appropriate action in a court of competent jurisdiction to compel	539
the inter vivos trustee to furnish the report.	540

(B)(C) A current report furnished by an inter vivos trustee	541
under this section or during the usual course of business has	542
binding legal effect regarding matters described or disclosed in	543
the report on the qualified beneficiary who received the report,	544
on the legal representative who received the report on behalf of	545
the qualified beneficiary who is under legal disability, and on	546
the heirs and assigns of the qualified beneficiary who received	547
the report unless, notwithstanding section 2305.22 of the Revised	548
Code, the qualified beneficiary, the legal representative of the	549
qualified beneficiary, or any of the heirs or assigns of the	550
qualified beneficiary institutes an action regarding matters	551
described or disclosed in the report against the inter vivos	552
trustee within two years from the date the report is furnished to	553
the qualified beneficiary or legal representative of the qualified	554
beneficiary.	555

(C)(D) No provision in this section eliminates any other	556
rights or causes of action that a qualified beneficiary of an	557
inter vivos trust, a legal representative of a qualified	558
beneficiary of an inter vivos trust, or any of the heirs or	559
assigns of a qualified beneficiary of an inter vivos trust may	560
have against the inter vivos trustee under any other section of	561
the Revised Code.	562

Sec. 1340.35.  Nothing in section 2109.67, sections 1340.01	563
1340.40 to 1340.131340.91, or any other section of the Revised	564
Code limits or restricts the definition of income in division (A)	565
of section 1340.32 of the Revised Code or limits or restricts a	566
governing board of an institution from requesting, or a trustee	567
from making, distributions from an institutional trust fund in	568
accordance with sections 1340.31 to 1340.37 of the Revised Code.	569

Sec. 1340.40. As used in sections 1340.40 to 1340.91 of the	570
Revised Code:	571

(A) "Accounting period" means a calendar year unless another	572
twelve-month period is selected by a fiduciary. "Accounting	573
period" includes a portion of a calendar year or other	574
twelve-month period that begins when an income interest begins or	575
ends when an income interest ends.	576

(B) "Beneficiary" includes, in the case of a decedent's	577
estate, an heir, legatee, and devisee and, in the case of a trust,	578
an income beneficiary and a remainder beneficiary.	579

(C) "Fiduciary" means a personal representative or a	580
trustee. The term includes an executor, administrator, successor	581
personal representative, special administrator, and a person	582
performing substantially the same function.	583

(D) "Income" means money or property that a fiduciary	584
receives as current return from a principal asset. "Income"	585
includes a portion of receipts from a sale, exchange, or	586
liquidation of a principal asset, to the extent provided in	587
sections 1340.57 to 1340.77 of the Revised Code.	588

(E) "Income beneficiary" means a person to whom net income	589
of a trust is or may be payable.	590

(F) "Income interest" means the right of an income	591
beneficiary to receive all or part of net income, whether the	592
terms of the trust require or authorize it to be distributed in	593
the trustee's discretion.	594

(G) "Mandatory income interest" means the right of an income	595
beneficiary to receive net income that the terms of the trust	596
require the fiduciary to distribute.	597

(H) "Net income" means the total receipts allocated to	598
income during an accounting period minus the disbursements made	599
from income during the period, plus or minus transfers under	600
sections 1340.40 to 1340.91 of the Revised Code to or from income	601
during the period.	602

(I) "Person" means an individual, corporation, business	603
trust, estate, trust, partnership, limited liability company,	604
association, joint venture, or government; governmental	605
subdivision, agency, or instrumentality; public corporation; or	606
any other legal or commercial entity.	607

(J) "Principal" means property held in trust for	608
distribution to a remainder beneficiary when the trust terminates.	609

(K) "Remainder beneficiary" means a person entitled to	610
receive principal when an income interest ends.	611

(L) "Terms of a trust" means the manifestation of the intent	612
of a settlor or decedent with respect to the trust, expressed in a	613
manner that admits of its proof in a judicial proceeding, whether	614
by written or spoken words or by conduct.	615

(M) "Trustee" includes an original, additional, or successor	616
trustee, whether or not appointed or confirmed by a court.	617

Sec. 1340.41. (A) In allocating receipts and disbursements	618
to or between principal and income, and with respect to any matter	619
within the scope of sections 1340.46 to 1340.53 of the Revised	620
Code, all of the following apply:	621

(1) A fiduciary shall administer a trust or estate in	622
accordance with the terms of the trust or the will, even if there	623
is a different provision in sections 1340.40 to 1340.91 of the	624
Revised Code.	625

(2) A fiduciary may administer a trust or estate by the	626
exercise of a discretionary power of administration given to the	627
fiduciary by the terms of the trust or the will, even if the	628
exercise of the power produces a result different from a result	629
required or permitted by any provision of sections 1340.40 to	630
1340.91 of the Revised Code.	631

(3) A fiduciary shall administer a trust or estate in	632
accordance with sections 1340.40 to 1340.91 of the Revised Code if	633
the terms of the trust or the will do not contain a different	634
provision or do not give the fiduciary a discretionary power of	635
administration.	636

(4) A fiduciary shall add a receipt, or charge a	637
disbursement, to principal to the extent that the terms of the	638
trust and any provision of sections 1340.40 to 1340.91 of the	639
Revised Code do not provide for allocating the receipt or	640
disbursement to or between principal and income.	641

(B) In exercising the power to adjust under division (A) of	642
section 1340.42 of the Revised Code or a discretionary power of	643
administration regarding a matter within the scope of sections	644
1340.40 to 1340.91 of the Revised Code, whether granted by the	645
terms of a trust, a will, or a provision of any such section, a	646
fiduciary shall administer a trust or estate impartially, based on	647
what is fair and reasonable to all of the beneficiaries, except to	648
the extent that the terms of the trust or the will clearly	649
manifest an intention that the fiduciary shall or may favor one or	650
more of the beneficiaries. A determination in accordance with	651
sections 1340.40 to 1340.91 of the Revised Code is presumed to be	652
fair and reasonable to all of the beneficiaries.	653

(C) In allocating receipts and disbursements to or between	654
principal and income, a fiduciary may credit a receipt or charge	655
an expenditure to income or principal with respect to a decedent's	656
estate, a trust, or property passing to a trust, that is eligible	657
for a federal estate tax marital deduction or Ohio estate tax	658
marital deduction, or for a federal estate tax charitable	659
deduction or Ohio estate tax charitable deduction, or for a	660
federal gift tax marital deduction or federal gift tax charitable	661
deduction only to the extent that the credit of the receipt or	662
charge of the expenditure will not cause the reduction or loss of	663
the deduction.	664

(D) As used in division (C) of this section:

665

(1) "Federal estate tax charitable deduction" means the	666
estate tax charitable deduction allowed by subtitle B, Chapter 11	667
of the "Internal Revenue Code of 1986," 26 U.S.C.A. 2055, as	668
amended.	669

(2) "Federal estate tax marital deduction" means the estate	670
tax marital deduction allowed by subtitle B, Chapter 11 of the	671
"Internal Revenue Code of 1986," 26 U.S.C.A. 2056, as amended.	672

(3) "Federal gift tax charitable deduction" means the gift	673
tax charitable deduction allowed by subtitle B, Chapter 12 of the	674
"Internal Revenue Code of 1986," 26 U.S.C.A. 2522, as amended.	675

(4) "Federal gift tax marital deduction" means the gift tax	676
marital deduction allowed by subtitle B, Chapter 12 of the	677
"Internal Revenue Code of 1986," 26 U.S.C.A. 2523, as amended.	678

(5) "Ohio estate tax charitable deduction" means the estate	679
tax charitable deduction allowed by division (A) of section	680
5731.17 of the Revised Code.	681

(6) "Ohio estate tax marital deduction" means the estate tax	682
marital deduction allowed by section 5731.15 of the Revised Code.	683

Sec. 1340.42. (A) A trustee may adjust between principal and	684
income to the extent the trustee considers necessary if the	685
trustee invests and manages the trust assets as a prudent	686
investor, the terms of the trust describe the amount that may or	687
must be distributed to a beneficiary by referring to the trust's	688
income, and the trustee determines, after applying division (A) of	689
section 1340.41 of the Revised Code, that the trustee is unable to	690
comply with division (B) of that section.	691

(B) In deciding whether and to what extent to exercise the	692
power conferred by division (A) of this section, a trustee shall	693
consider all factors relevant to the trust and its beneficiaries,	694
including all of the following factors to the extent they are	695
relevant:	696

(1) The nature, purpose, and expected duration of the trust;

697

(2) The intent of the settlor;

698

(3) The identity and circumstances of the beneficiaries;

699

(4) The needs for liquidity, regularity of income, and	700
preservation and appreciation of capital;	701

(5) The assets held in the trust; the extent to which they	702
consist of financial assets, interests in closely held	703
enterprises, tangible and intangible personal property, or real	704
property; the extent to which an asset is used by a beneficiary;	705
and whether an asset was purchased by the trustee or received from	706
the settlor;	707

(6) The net amount allocated to income under sections	708
1340.40, 1340.41, and 1340.46 to 1340.91 of the Revised Code; and	709
the increase or decrease in the value of the principal assets,	710
which the trustee may estimate as to assets for which market	711
values are not readily available;	712

(7) Whether and to what extent the terms of the trust give	713
the trustee the power to invade principal or accumulate income or	714
prohibit the trustee from invading principal or accumulating	715
income, and the extent to which the trustee has exercised a power	716
from time to time to invade principal or accumulate income;	717

(8) The actual and anticipated effect of economic conditions	718
on principal and income and effects of inflation and deflation;	719

(9) The anticipated tax consequences of an adjustment.

720

(C) A trustee shall not make an adjustment if any of the	721
following applies:	722

(1) The adjustment diminishes the income interest in a trust	723
that requires all of the income to be paid at least annually to a	724
spouse and for which an estate tax or gift tax marital deduction	725
would be allowed, in whole or in part, if the trustee did not have	726
the power to make the adjustment.	727

(2) The adjustment reduces the actuarial value of the income	728
interest in a trust to which a person transfers property with the	729
intent to qualify for a gift tax exclusion.	730

(3) The adjustment changes the amount payable to a	731
beneficiary as a fixed annuity or a fixed fraction of the value of	732
the trust assets.	733

(4) The adjustment is from any amount that is permanently	734
set aside for charitable purposes under a will or the terms of a	735
trust unless both income and principal are so set aside.	736

(5) If possessing or exercising the power to make the	737
adjustment causes an individual to be treated as the owner of all	738
or part of the trust for income tax purposes, and the individual	739
would not be treated as the owner if the trustee did not possess	740
the power to make the adjustment;	741

(6) If possessing or exercising the power to make the	742
adjustment causes all or part of the trust assets to be included	743
for estate tax purposes in the estate of an individual who has the	744
power to remove a trustee or appoint a trustee, or both, and the	745
assets would not be included in the estate of the individual if	746
the trustee did not possess the power to make the adjustment;	747

(7) If the trustee is a beneficiary of the trust;

748

(8) If the trustee is not a beneficiary, but the adjustment	749
would benefit the trustee directly or indirectly.	750

(D) If division (C)(5), (6), (7), or (8) of this section	751
applies to a trustee and there is more than one trustee, a	752
cotrustee to whom the provision does not apply may make the	753
adjustment unless the exercise of the power by the remaining	754
trustee or trustees is not permitted by the terms of the trust.	755

(E) A trustee may release the entire power conferred by	756
division (A) of this section or may release only the power to	757
adjust from income to principal or the power to adjust from	758
principal to income if the trustee is uncertain about whether	759
possessing or exercising the power will cause a result described	760
in division (C)(1), (2), (3), (4), (5), (6), or (8) of this	761
section or if the trustee determines that possessing or exercising	762
the power will or may deprive the trust of a tax benefit or impose	763
a tax burden not described in division (C) of this section. The	764
release may be permanent or for a specified period, including a	765
period measured by the life of an individual.	766

(F) Terms of a trust that limit the power of a trustee to	767
make an adjustment between principal and income do not affect the	768
application of this section unless it is clear from the terms of	769
the trust that the terms are intended to deny the trustee the	770
power of adjustment conferred by division (A) of this section.	771

(G) The liability of a trustee relative to the exercise of	772
adjustment authority conferred by divisions (A) to (F) of this	773
section shall be limited in the following manner:	774

(1) Unless a court determines that a trustee has acted in	775
bad faith, no trustee shall be held liable for damages for	776
choosing not to make an adjustment.	777

(2) Unless a court determines that a trustee has acted in	778
bad faith with respect to an adjustment, the sole remedy to be	779
ordered by a court shall be a prospective correction of the	780
adjustment.	781

(3) For purposes of this section, and subject to division	782
(C) of this section, from time to time a trustee may make a	783
safe-harbor adjustment to increase net trust accounting income up	784
to and including an amount equal to four per cent of the trust's	785
fair market value determined as of the first business day of the	786
current year. If a trustee determines to make this safe-harbor	787
adjustment, the propriety of this adjustment shall be conclusively	788
presumed. Nothing in division (G)(3) of this section prohibits any	789
other type of adjustment authorized under any provision of this	790
section.	791

Sec. 1340.46. After a decedent dies, in the case of an	792
estate, or after an income interest in a trust ends, all of the	793
following apply:	794

(A) The fiduciary of the estate or of the terminating income	795
interest shall determine, under the provisions of sections 1340.51	796
to 1340.86 of the Revised Code that apply to trustees and under	797
division (E) of this section, the amount of net income and net	798
principal receipts received from property specifically given to a	799
beneficiary. The fiduciary shall distribute the net income and	800
net principal receipts to the beneficiary that is to receive the	801
specific property.	802

(B) A fiduciary shall determine the remaining net income of	803
a decedent's estate or a terminating income interest under the	804
provisions of sections 1340.51 to 1340.86 of the Revised Code that	805
apply to trustees and by doing all of the following:	806

(1) Including in net income all income from property used to	807
discharge liabilities;	808

(2) Paying from income or principal, in the fiduciary's	809
discretion, fees of attorneys, accountants, and fiduciaries; court	810
costs and other expenses of administration; and interest on death	811
taxes. However, the fiduciary may pay those expenses from income	812
of property passing to a trust for which the fiduciary claims an	813
estate tax marital or charitable deduction only to the extent that	814
the payment of those expenses from income will not cause the	815
reduction or loss of the deduction.	816

(3) Paying from principal all other disbursements made or	817
incurred in connection with the settlement of a decedent's estate	818
or the winding up of a terminating income interest, including	819
debts, funeral expenses, disposition of remains, family	820
allowances, and death taxes and related penalties that are	821
apportioned to the estate or terminating income interest by the	822
will, the terms of the trust, or applicable law.	823

(C) A fiduciary shall distribute to a beneficiary that	824
receives a pecuniary amount outright the interest or any other	825
amount provided by the will, the terms of the trust, or applicable	826
law from net income determined under division (B) of this section	827
or from principal to the extent that net income is insufficient.	828
If a beneficiary is to receive a pecuniary amount outright from a	829
trust after an income interest ends and no interest or other	830
amount is provided for by the terms of the trust or applicable	831
law, the fiduciary shall distribute the interest or other amount	832
to which the beneficiary would be entitled under applicable law if	833
the pecuniary amount were required to be paid under a will.	834

(D) A fiduciary shall distribute the net income remaining	835
after distributions required by division (C) of this section, in	836
the manner described in section 1340.47 of the Revised Code, to	837
all other beneficiaries, including a beneficiary that receives a	838
pecuniary amount in trust, even if the beneficiary holds an	839
unqualified power to withdraw assets from the trust or other	840
presently exercisable, general power of appointment over the	841
trust.	842

(E) A fiduciary shall not reduce principal or income	843
receipts from property described in division (A) of this section	844
because of a payment described in section 1340.81 or 1340.82 of	845
the Revised Code to the extent that the will, the terms of the	846
trust, or applicable law requires the fiduciary to make the	847
payment from assets other than the property or to the extent that	848
the fiduciary recovers or expects to recover the payment from a	849
third party. The net income and principal receipts from the	850
property are determined by including all of the amounts the	851
fiduciary receives or pays with respect to the property, whether	852
those amounts accrued or became due before, on, or after the date	853
of a decedent's death or an income interest's terminating event,	854
and by making a reasonable provision for amounts that the	855
fiduciary believes the estate or terminating income interest may	856
become obligated to pay after the property is distributed.	857

Sec. 1340.47. (A) Each beneficiary described in division (D)	858
of section 1340.46 of the Revised Code is entitled to receive a	859
portion of the net income equal to the beneficiary's fractional	860
interest in undistributed principal assets, using values as of the	861
distribution date. If a fiduciary makes more than one	862
distribution of assets to beneficiaries to whom this section	863
applies, each beneficiary, including one that does not receive	864
part of the distribution, is entitled, as of each distribution	865
date, to the net income the fiduciary has received after the date	866
of the decedent's death or terminating event or earlier	867
distribution date but has not distributed as of the current	868
distribution date.	869

(B) In determining a beneficiary's share of net income for	870
the purpose of this section, all of the following apply:	871

(1) The beneficiary is entitled to receive a portion of the	872
net income equal to the beneficiary's fractional interest in the	873
undistributed principal assets immediately before the distribution	874
date, including assets that later may be sold to meet principal	875
obligations.	876

(2) The beneficiary's fractional interest in the	877
undistributed principal assets must be calculated without regard	878
to property specifically given to a beneficiary and property	879
required to pay pecuniary amounts not in trust.	880

(3) The beneficiary's fractional interest in the	881
undistributed principal assets must be calculated on the basis of	882
the aggregate value of those assets as of the distribution date	883
without reducing the value by any unpaid principal obligation.	884

(4) The distribution date for purposes of this section may	885
be the date as of which the fiduciary calculates the value of the	886
assets if that date is reasonably near the date on which assets	887
are actually distributed.	888

(C) If a fiduciary does not distribute all of the collected	889
but undistributed net income described in divisions (A) and (B) of	890
this section to each person as of a distribution date, the	891
fiduciary shall maintain appropriate records showing the interest	892
of each.	893

(D) To the extent that a fiduciary considers it appropriate,	894
the fiduciary may apply the provisions of divisions (A) to (C) of	895
this section to any net gain or loss, realized after the date of	896
the decedent's death or an income interest termination or earlier	897
distribution date, from the disposition of a principal asset to	898
which such provisions apply.	899

Sec. 1340.51. (A) An income beneficiary is entitled to net	900
income from the date on which the income interest begins. An	901
income interest begins on the date specified in the terms of the	902
trust or, if no date is specified, on the date an asset becomes	903
subject to a trust or successive income interest.	904

(B) An asset becomes subject to a trust on any of the	905
following dates:	906

(1) The date it is transferred to the trust, in the case of	907
an asset that is transferred to a trust during the transferor's	908
life;	909

(2) The date of a testator's death, in the case of an asset	910
that becomes subject to a trust by reason of a will, even if there	911
is an intervening period of administration of the testator's	912
estate;	913

(3) The date of an individual's death, in the case of an	914
asset that is transferred to a fiduciary by a third party because	915
of the individual's death.	916

(C) An asset becomes subject to a successive income interest	917
on the day after the preceding income interest ends, as determined	918
under division (D) of this section, even if there is an	919
intervening period of administration to wind up the preceding	920
income interest.	921

(D) An income interest ends on the day before an income	922
beneficiary dies or another terminating event occurs, or on the	923
last day of a period during which there is no beneficiary to whom	924
a trustee may distribute income.	925

Sec. 1340.52. (A) A trustee shall allocate to principal an	926
income receipt or disbursement other than one to which division	927
(A) of section 1340.46 of the Revised Code applies, if its due	928
date occurs before a decedent dies in the case of an estate or	929
before an income interest begins in the case of a trust or	930
successive income interest.	931

(B) A trustee shall allocate an income receipt or	932
disbursement to income if its due date occurs on or after the date	933
on which a decedent dies or an income interest begins and if it is	934
a periodic due date. An income receipt or disbursement shall be	935
treated as accruing from day to day if its due date is not	936
periodic or it has no due date. The portion of the receipt or	937
disbursement accruing before the date on which a decedent dies or	938
an income interest begins shall be allocated to principal, and the	939
balance shall be allocated to income.	940

(C) For the purposes of this section, an item of income or	941
an obligation is due on the date the payer is required to make a	942
payment. If a payment date is not stated, there is no due date.	943
Distributions to shareholders or other owners from an entity to	944
which section 1340.57 of the Revised Code applies are deemed to be	945
due on the date fixed by the entity for determining who is	946
entitled to receive the distribution or, if no date is fixed, on	947
the declaration date for the distribution. A due date is periodic	948
for receipts or disbursements that must be paid at regular	949
intervals under a lease or an obligation to pay interest or if an	950
entity customarily makes distributions at regular intervals.	951

Sec. 1340.53. (A) As used in this section, "undistributed	952
income" means net income received before the date on which an	953
income interest ends. "Undistributed income" excludes an item of	954
income or expense that is due or accrued or net income that has	955
been added or is required to be added to principal under the terms	956
of the trust.	957

(B) When a mandatory income interest ends, the trustee shall	958
pay to a mandatory income beneficiary that survives that date, or	959
the estate of a deceased mandatory income beneficiary whose death	960
causes the interest to end, the beneficiary's share of the	961
undistributed income that is not disposed of under the terms of	962
the trust, unless the beneficiary has an unqualified power to	963
revoke more than five per cent of the trust immediately before the	964
income interest ends. If the beneficiary has such power, the	965
undistributed income from the portion of the trust that may be	966
revoked shall be added to principal.	967

(C) When a trustee's obligation to pay a fixed annuity or a	968
fixed fraction of the value of the trust's assets ends, the	969
trustee shall prorate the final payment if and to the extent	970
required by applicable law to accomplish a purpose of the trust or	971
its settlor relating to income, gift, estate, or other tax	972
requirements.	973

Sec. 1340.57. (A) As used in this section, "entity" means a	974
corporation, partnership, limited liability company, regulated	975
investment company, real estate investment trust, common trust	976
fund, or any other organization in which a trustee has an interest	977
other than a trust or estate to which section 1340.58 of the	978
Revised Code applies, a business or activity to which section	979
1340.59 of the Revised Code applies, or an asset-backed security	980
to which section 1340.77 of the Revised Code applies.	981

(B) Except as otherwise provided in this section, a trustee	982
shall allocate to income money received from an entity.	983

(C) A trustee shall allocate all of the following receipts	984
from an entity to principal:	985

(1) Property other than money;

986

(2) Money received in one distribution or a series of related	987
distributions in exchange for part or all of a trust's interest in	988
the entity;	989

(3) Money received in total or partial liquidation of the	990
entity;	991

(4) Money received from an entity that is a regulated	992
investment company or a real estate investment trust if the money	993
distributed is a capital gain dividend for federal income tax	994
purposes.	995

(D) Money is received in partial liquidation in either of the	996
following circumstances:	997

(1) To the extent that the entity, at or near the time of a	998
distribution, indicates that it is a distribution in partial	999
liquidation;	1000

(2) If the total amount of money and property received in a	1001
distribution or series of related distributions is greater than	1002
twenty per cent of the entity's gross assets, as shown by the	1003
entity's year-end financial statements immediately preceding the	1004
initial receipt.	1005

(E) Money is not received in partial liquidation, nor shall	1006
it be taken into account under division (D)(2) of this section, to	1007
the extent that it does not exceed the amount of income tax that a	1008
trustee or beneficiary must pay on taxable income of the entity	1009
that distributes the money.	1010

(F) A trustee may rely upon a statement made by an entity	1011
about the source or character of a distribution if the statement	1012
is made at or near the time of distribution by the entity's board	1013
of directors or other person or group of persons authorized to	1014
exercise powers to pay money or transfer property comparable to	1015
those of a corporation's board of directors.	1016

Sec. 1340.58. A trustee shall allocate to income an amount	1017
received as a distribution of income from a trust or an estate in	1018
which the trust has an interest other than a purchased interest,	1019
and shall allocate to principal an amount received as a	1020
distribution of principal from such a trust or estate. If a	1021
trustee purchases an interest in a trust that is an investment	1022
entity, or a decedent or donor transfers an interest in such a	1023
trust to a trustee, section 1340.57 or 1340.77 of the Revised Code	1024
applies to a receipt from the trust.	1025

Sec. 1340.59. (A) If a trust that conducts a business or	1026
other activity determines that it is in the best interest of all	1027
the beneficiaries to account separately for the business or	1028
activity instead of accounting for it as part of the trust's	1029
general accounting records, the trustee may maintain separate	1030
accounting records for its transactions, whether or not its assets	1031
are segregated from other trust assets.	1032

(B) A trustee that accounts separately for a business or	1033
other activity may determine the extent to which its net cash	1034
receipts must be retained for working capital, the acquisition or	1035
replacement of fixed assets, and other reasonably foreseeable	1036
needs of the business or activity, and the extent to which the	1037
remaining net cash receipts are accounted for as principal or	1038
income in the trust's general accounting records. If a trustee	1039
sells assets of the business or other activity, other than in the	1040
ordinary course of the business or activity, the trustee shall	1041
account for the net amount received as principal in the trust's	1042
general accounting records to the extent the trustee determines	1043
that the amount received is no longer required in the conduct of	1044
the business.	1045

(C) Activities for which a trustee may maintain separate	1046
accounting records under this section include all of the	1047
following:	1048

(1) Retail, manufacturing, service, and other traditional	1049
business activities;	1050

(2) Farming;

1051

(3) Raising and selling livestock and other animals;

1052

(4) Management of rental properties;

1053

(5) Extraction of minerals and other natural resources;

1054

(6) Timber operations;

1055

(7) Activities to which section 1340.76 of the Revised Code	1056
applies.	1057

Sec. 1340.63. A trustee shall allocate to principal all of	1058
the following:	1059

(A) To the extent not allocated to income under sections	1060
1340.40 to 1340.91 of the Revised Code, assets received from a	1061
transferor during the transferor's lifetime, a decedent's estate,	1062
a trust with a terminating income interest, or a payer under a	1063
contract naming the trust or its trustee as beneficiary;	1064

(B) Money or other property received from the sale, exchange,	1065
liquidation, or change in form of a principal asset, including	1066
realized profit, subject to sections 1340.57 to 1340.77 of the	1067
Revised Code;	1068

(C) Amounts recovered from third parties to reimburse the	1069
trust because of disbursements described in division (A)(7) of	1070
section 1340.82 of the Revised Code or for other reasons to the	1071
extent not based on the loss of income;	1072

(D) Proceeds of property taken by eminent domain, but a	1073
separate award made for the loss of income with respect to an	1074
accounting period during which a current income beneficiary had a	1075
mandatory income interest is income;	1076

(E) Net income received in an accounting period during which	1077
there is no beneficiary to whom a trustee may or must distribute	1078
income;	1079

(F) Other receipts as provided in sections 1340.70 to 1340.77	1080
of the Revised Code.	1081

Sec. 1340.64. To the extent that a trustee accounts for	1082
receipts from rental property pursuant to this section, the	1083
trustee shall allocate to income an amount received as rent of	1084
real or personal property, including an amount received for	1085
cancellation or renewal of a lease. An amount received as a	1086
refundable deposit, including a security deposit or a deposit that	1087
is to be applied as rent for future periods, shall be added to	1088
principal and held subject to the terms of the lease and shall not	1089
be available for distribution to a beneficiary until the trustee's	1090
contractual obligations have been satisfied with respect to that	1091
amount.	1092

Sec. 1340.65. (A) An amount received as interest, whether	1093
determined at a fixed, variable, or floating rate, on an	1094
obligation to pay money to the trustee, including an amount	1095
received as consideration for prepaying principal, shall be	1096
allocated to income without any provision for amortization of	1097
premium.	1098

(B) A trustee shall allocate to principal an amount received	1099
from the sale, redemption, or other disposition of an obligation	1100
to pay money to the trustee more than one year after the date it	1101
is purchased or acquired by the trustee, including an obligation	1102
whose purchase price or value when it is acquired is less than its	1103
value at maturity. If the obligation matures within one year	1104
after the date it is purchased or acquired by the trustee, an	1105
amount received in excess of its purchase price or its value when	1106
acquired by the trust shall be allocated to income.	1107

(C) This section does not apply to an obligation to which	1108
section 1340.71, 1340.72, 1340.73, 1340.74, 1340.76, or 1340.77 of	1109
the Revised Code applies.	1110

Sec. 1340.66. (A) Except as otherwise provided in division	1111
(B) of this section, a trustee shall allocate to principal the	1112
proceeds of a life insurance policy or other contract in which the	1113
trust or its trustee is named as beneficiary, including a contract	1114
that insures the trust or its trustee against loss for damage to,	1115
destruction of, or loss of title to a trust asset. The trustee	1116
shall allocate dividends on an insurance policy to income if the	1117
premiums on the policy are paid from income, and to principal if	1118
the premiums are paid from principal.	1119

(B) A trustee shall allocate to income proceeds of a	1120
contract that insures the trustee against loss of occupancy or	1121
other use by an income beneficiary, loss of income, or, subject to	1122
section 1340.59 of the Revised Code, loss of profits from a	1123
business.	1124

(C) This section does not apply to a contract to which	1125
section 1340.71 of the Revised Code applies.	1126

Sec. 1340.70. If a trustee determines that an allocation	1128
between principal and income required by section 1340.71, 1340.72,	1129
1340.73, 1340.74, or 1340.77 of the Revised Code is insubstantial,	1130
the trustee may allocate the entire amount to principal unless one	1131
of the circumstances described in division (C) of section 1340.42	1132
of the Revised Code applies to the allocation. This power may be	1133
exercised by a cotrustee in the circumstances described in	1134
division (D) of that section and may be released for the reasons	1135
and in the manner described in division (E) of the section. An	1136
allocation is presumed to be insubstantial if either of the	1137
following applies:	1138

(A) The amount of the allocation would increase or decrease	1139
net income in an accounting period, as determined before the	1140
allocation, by less than ten per cent.	1141

(B) The value of the asset producing the receipt for which	1142
the allocation would be made is less than ten per cent of the	1143
total value of the trust's assets at the beginning of the	1144
accounting period.	1145

Sec. 1340.71. (A) As used in this section, "payment" means a	1146
payment that a trustee may receive over a fixed number of years or	1147
during the life of one or more individuals because of services	1148
rendered or property transferred to the payer in exchange for	1149
future payments. "Payment" includes a payment made in money or	1150
property from the payer's general assets or from a separate fund	1151
created by the payer, including a private or commercial annuity,	1152
an individual retirement account, or a pension, profit-sharing,	1153
stock-bonus, or stock-ownership plan.	1154

(B) To the extent that a payment is characterized as	1155
interest or a dividend or a payment made in lieu of interest or a	1156
dividend, a trustee shall allocate it to income. The trustee	1157
shall allocate to principal the balance of the payment and any	1158
other payment received in the same accounting period that is not	1159
characterized as interest, a dividend, or an equivalent payment.	1160

(C) If no part of a payment is characterized as interest, a	1161
dividend, or an equivalent payment, and all or part of the payment	1162
is required to be made, a trustee shall allocate to income ten per	1163
cent of the part that is required to be made during the accounting	1164
period and the balance to principal. If no part of a payment is	1165
required to be made or the payment received is the entire amount	1166
to which the trustee is entitled, the trustee shall allocate the	1167
entire payment to principal. For purposes of this division, a	1168
payment is not "required to be made" to the extent that it is made	1169
because the trustee exercises a right of withdrawal.	1170

(D) If, to obtain an estate tax marital deduction for a	1171
trust, a trustee must allocate more of a payment to income than is	1172
provided for by this section, the trustee shall allocate to income	1173
the additional amount necessary to obtain the marital deduction.	1174

(E) This section does not apply to payments to which section	1175
1340.72 of the Revised Code applies.	1176

Sec. 1340.72. (A) As used in this section, "liquidating	1177
asset" means an asset whose value will diminish or terminate	1178
because the asset is expected to produce receipts for a period of	1179
limited duration. "Liquidating asset" includes a leasehold,	1180
patent, copyright, royalty right, and right to receive payments	1181
during a period of more than one year under an arrangement that	1182
does not provide for the payment of interest on the unpaid	1183
balance. "Liquidating asset" excludes a payment subject to	1184
section 1340.71 of the Revised Code, resources subject to section	1185
1340.73 of the Revised Code, timber subject to section 1340.74 of	1186
the Revised Code, an activity subject to section 1340.76 of the	1187
Revised Code, an asset subject to section 1340.77 of the Revised	1188
Code, or any asset for which the trustee establishes a reserve for	1189
depreciation under section 1340.83 of the Revised Code.	1190

(B) A trustee shall allocate to income ten per cent of the	1191
receipts from a liquidating asset and the balance to principal.	1192

Sec. 1340.73.  (A) To the extent that a trustee accounts for	1193
receipts from an interest in minerals or other natural resources	1194
pursuant to this section, the trustee shall allocate the receipts	1195
in accordance with all of the following:	1196

(1) If received as nominal delay rental or nominal annual	1197
rent on a lease, a receipt shall be allocated to income.	1198

(2) If received from a production payment, a receipt shall be	1199
allocated to income if and to the extent that the agreement	1200
creating the production payment provides a factor for interest or	1201
its equivalent. The balance shall be allocated to principal.	1202

(3) If an amount received as a royalty, shut-in-well payment,	1203
take-or-pay payment, bonus, or delay rental is more than nominal,	1204
ninety per cent shall be allocated to principal and the balance to	1205
income.	1206

(4) If an amount is received from a working interest or any	1207
other interest not provided for in division (A)(1), (2), or (3) of	1208
this section, ninety per cent of the net amount received shall be	1209
allocated to principal and the balance to income.	1210

(B) An amount received on account of an interest in water	1211
that is renewable shall be allocated to income. If the water is	1212
not renewable, ninety per cent of the amount shall be allocated to	1213
principal and the balance to income.	1214

(C) This section applies whether or not a decedent or donor	1215
was extracting minerals, water, or other natural resources before	1216
the interest became subject to the trust.	1217

(D) If a trust owns an interest in minerals, water, or other	1218
natural resources on the effective date of this section, the	1219
trustee may allocate receipts from the interest as provided in	1220
this section or in the manner used by the trustee before that	1221
date. If the trust acquires an interest in minerals, water, or	1222
other natural resources after the effective date of this section,	1223
the trustee shall allocate receipts from the interest as provided	1224
in this section.	1225

Sec. 1340.74.  (A) To the extent that a trustee accounts for	1226
receipts from the sale of timber and related products pursuant to	1227
this section, the trustee shall allocate the net receipts in	1228
accordance with all of the following:	1229

(1) To income, to the extent that the amount of timber	1230
removed from the land does not exceed the rate of growth of the	1231
timber during the accounting periods in which a beneficiary has a	1232
mandatory income interest;	1233

(2) To principal, to the extent that the amount of timber	1234
removed from the land exceeds the rate of growth of the timber or	1235
the net receipts are from the sale of standing timber;	1236

(3) To or between income and principal, if the net receipts	1237
are from the lease of timberland or from a contract to cut timber	1238
from land owned by a trust, by determining the amount of timber	1239
removed from the land under the lease or contract and applying	1240
divisions (A)(1) and (2) of this section;	1241

(4) To principal, to the extent that advance payments,	1242
bonuses, and other payments are not allocated pursuant to division	1243
(A)(1), (2), or (3) of this section.	1244

(B) In determining net receipts to be allocated pursuant to	1245
division (A) of this section, a trustee shall deduct and transfer	1246
to principal a reasonable amount for depletion.	1247

(C) This section applies whether or not a decedent or	1248
transferor was harvesting timber from the property before it	1249
became subject to the trust.	1250

(D) If a trust owns an interest in timberland on the	1251
effective date of this section, the trustee may allocate net	1252
receipts from the sale of timber and related products as provided	1253
in this section or in the manner used by the trustee before that	1254
date. If the trust acquires an interest in timberland after the	1255
effective date of this section, the trustee shall allocate net	1256
receipts from the sale of timber and related products as provided	1257
in this section.	1258

Sec. 1340.75.  (A) If a marital deduction is allowed for all	1259
or part of a trust whose assets consist substantially of property	1260
that does not provide the spouse with sufficient income from or	1261
use of the trust assets, and if the amounts that the trustee	1262
transfers from principal to income under section 1340.42 of the	1263
Revised Code and distributes to the spouse from principal pursuant	1264
to the terms of the trust are insufficient to provide the spouse	1265
with the beneficial enjoyment required to obtain the marital	1266
deduction, the spouse may require the trustee to make property	1267
productive of income, convert property within a reasonable time,	1268
or exercise the power conferred by division (A) of that section.	1269
The trustee may decide which action or combination of actions to	1270
take.	1271

(B) In cases not governed by division (A) of this section,	1272
proceeds from the sale or other disposition of an asset shall be	1273
principal without regard to the amount of income the asset	1274
produces during any accounting period.	1275

Sec. 1340.76.  (A) As used in this section, "derivative"	1276
means a contract or financial instrument or a combination of	1277
contracts and financial instruments that gives a trust the right	1278
or obligation to participate in some or all changes in the price	1279
of a tangible or intangible asset or group of assets, or changes	1280
in a rate, an index of prices or rates, or other market indicator	1281
for an asset or a group of assets.	1282

(B) To the extent that a trustee does not account under	1283
section 1340.59 of the Revised Code for transactions in	1284
derivatives, the trustee shall allocate to principal receipts from	1285
and disbursements made in connection with those transactions.	1286

(C) If a trustee grants an option to buy property from the	1287
trust, whether or not the trust owns the property when the option	1288
is granted, grants an option that permits another person to sell	1289
property to the trust, or acquires an option to buy property for	1290
the trust or an option to sell an asset owned by the trust, and	1291
the trustee or other owner of the asset is required to deliver the	1292
asset if the option is exercised, an amount received for granting	1293
the option shall be allocated to principal. An amount paid to	1294
acquire the option shall be paid from principal. A gain or loss	1295
realized upon the exercise of an option, including an option	1296
granted to a settlor of the trust for services rendered, shall be	1297
allocated to principal.	1298

Sec. 1340.77.  (A) As used in this section, "asset-backed	1299
security" means an asset whose value is based upon the right it	1300
gives the owner to receive distributions from the proceeds of	1301
financial assets that provide collateral for the security.	1302
"Asset-backed security" includes an asset that gives the owner the	1303
right to receive from the collateral financial assets only the	1304
interest or other current return or only the proceeds other than	1305
interest or current return. "Asset-backed security" excludes an	1306
asset to which section 1340.57 or 1340.71 of the Revised Code	1307
applies.	1308

(B) If a trust receives a payment from interest or other	1309
current return and from other proceeds of the collateral financial	1310
assets, the trustee shall allocate to income the portion of the	1311
payment that the payer identifies as being from interest or other	1312
current return and shall allocate the balance of the payment to	1313
principal.	1314

(C) If a trust receives one or more payments in exchange for	1315
the trust's entire interest in an asset-backed security in one	1316
accounting period, the trustee shall allocate the payments to	1317
principal. If a payment is one of a series of payments that will	1318
result in the liquidation of the trust's interest in the security	1319
over more than one accounting period, the trustee shall allocate	1320
ten per cent of the payment to income and the balance to	1321
principal.	1322

Sec. 1340.81.  A trustee shall make all of the following	1323
disbursements from income to the extent that they are not	1324
disbursements to which division (B)(2) or (3) of section 1340.46	1325
of the Revised Code applies:	1326

(A) One-half of the regular compensation of the trustee and	1327
of any person providing investment advisory or custodial services	1328
to the trustee;	1329

(B) One-half of all expenses for accountings, judicial	1330
proceedings, or other matters that involve both the income and	1331
remainder interests;	1332

(C) All of the other ordinary expenses incurred in connection	1333
with the administration, management, or preservation of trust	1334
property and the distribution of income, including interest,	1335
ordinary repairs, regularly recurring taxes assessed against	1336
principal, and expenses of a proceeding or other matter that	1337
concerns primarily the income interest;	1338

(D) Recurring premiums on insurance covering the loss of a	1339
principal asset or the loss of income from or use of the asset.	1340

Sec. 1340.82.  (A) A trustee shall make all of the following	1341
disbursements from principal:	1342

(1) The remaining one-half of the disbursements described in	1343
divisions (A) and (B) of section 1340.81 of the Revised Code;	1344

(2) All of the trustee's compensation calculated on principal	1345
as a fee for acceptance, distribution, or termination, and	1346
disbursements made to prepare property for sale;	1347

(3) Payments on the principal of a trust debt;

1348

(4) Expenses of a proceeding that concerns primarily	1349
principal, including a proceeding to construe the trust or to	1350
protect the trust or its property;	1351

(5) Premiums paid on a policy of insurance not described in	1352
division (D) of section 1340.81 of the Revised Code of which the	1353
trust is the owner and beneficiary;	1354

(6) Estate, inheritance, and other transfer taxes, including	1355
penalties, apportioned to the trust;	1356

(7) Disbursements related to environmental matters, including	1357
reclamation, assessing environmental conditions, remedying and	1358
removing environmental contamination, monitoring remedial	1359
activities and the release of substances, preventing future	1360
releases of substances, collecting amounts from persons liable or	1361
potentially liable for the costs of those activities, penalties	1362
imposed under environmental laws or regulations and other payments	1363
made to comply with those laws or regulations, statutory or common	1364
law claims by third parties, and defending claims based on	1365
environmental matters.	1366

(B) If a principal asset is encumbered with an obligation	1367
that requires income from that asset to be paid directly to the	1368
creditor, the trustee shall transfer from principal to income an	1369
amount equal to the income paid to the creditor in reduction of	1370
the principal balance of the obligation.	1371

Sec. 1340.83.  (A) As used in this section, "depreciation"	1372
means a reduction in value due to wear, tear, decay, corrosion, or	1373
gradual obsolescence of a fixed asset having a useful life of more	1374
than one year.	1375

(B) A trustee may transfer to principal a reasonable amount	1376
of the net cash receipts from a principal asset that is subject to	1377
depreciation, but shall not transfer any amount for depreciation	1378
under any of the following circumstances:	1379

(1) Any amount for depreciation of that portion of real	1380
property used or available for use by a beneficiary as a residence	1381
or of tangible personal property held or made available for the	1382
personal use or enjoyment of a beneficiary;	1383

(2) Any amount for depreciation during the administration of	1384
a decedent's estate;	1385

(3) Any amount for depreciation under this section if the	1386
trustee is accounting under section 1340.59 of the Revised Code	1387
for the business or activity in which the asset is used.	1388

(C) An amount transferred to principal need not be held as a	1389
separate fund.	1390

Sec. 1340.84.  (A) If a trustee makes or expects to make a	1391
principal disbursement described in this section, the trustee may	1392
transfer an appropriate amount from income to principal in one or	1393
more accounting periods to reimburse principal or to provide a	1394
reserve for future principal disbursements.	1395

(B) Principal disbursements to which division (A) of this	1396
section applies include all of the following, but only to the	1397
extent that the trustee has not been and does not expect to be	1398
reimbursed by a third party:	1399

(1) An amount chargeable to income but paid from principal	1400
because it is unusually large, including extraordinary repairs;	1401

(2) A capital improvement to a principal asset, whether in	1402
the form of changes to an existing asset or the construction of a	1403
new asset, including special assessments;	1404

(3) Disbursements made to prepare property for rental,	1405
including tenant allowances, leasehold improvements, and broker's	1406
commissions;	1407

(4) Periodic payments on an obligation secured by a principal	1408
asset to the extent that the amount transferred from income to	1409
principal for depreciation is less than the periodic payments;	1410

(5) Disbursements described in division (A)(7) of section	1411
1340.82 of the Revised Code.	1412

(C) If the asset whose ownership gives rise to the	1413
disbursements becomes subject to a successive income interest	1414
after an income interest ends, a trustee may continue to transfer	1415
amounts from income to principal as provided in division (A) of	1416
this section.	1417

Sec. 1340.85.  (A) A tax required to be paid by a trustee	1418
based on receipts allocated to income shall be paid from income.	1419

(B) A tax required to be paid by a trustee based on receipts	1420
allocated to principal shall be paid from principal, even if the	1421
tax is called an income tax by the taxing authority.	1422

(C) A tax required to be paid by a trustee on the trust's	1423
share of an entity's taxable income shall be paid proportionately	1424
as follows:	1425

(1) From income, to the extent that receipts from the entity	1426
are allocated to income;	1427

(2) From principal, as follows:

1428

(a) To the extent that receipts from the entity are allocated	1429
to principal; and	1430

(b) To the extent that the trust's share of the entity's	1431
taxable income exceeds the total receipts described in divisions	1432
(C)(1) and (2)(a) of this section.	1433

(D) For purposes of this section, receipts allocated to	1434
principal or income shall be reduced by the amount distributed to	1435
a beneficiary from principal or income for which the trust	1436
receives a deduction in calculating the tax.	1437

Sec. 1340.86.  (A) A fiduciary may make adjustments between	1438
principal and income to offset the shifting of economic interests	1439
or tax benefits between income beneficiaries and remainder	1440
beneficiaries that arise from any of the following:	1441

(1) Elections and decisions, other than those described in	1442
division (B) of this section, that the fiduciary makes from time	1443
to time regarding tax matters;	1444

(2) An income tax or any other tax that is imposed upon the	1445
fiduciary or a beneficiary as a result of a transaction involving	1446
or a distribution from the estate or trust;	1447

(3) The ownership by an estate or trust of an interest in an	1448
entity whose taxable income, whether or not distributed, is	1449
includable in the taxable income of the estate, trust, or	1450
beneficiary.	1451

(B) If the amount of an estate tax marital deduction or	1452
charitable contribution deduction is reduced because a fiduciary	1453
deducts an amount paid from principal for income tax purposes	1454
instead of deducting it for estate tax purposes, and as a result	1455
estate taxes paid from principal are increased and income taxes	1456
paid by an estate, trust, or beneficiary are decreased, each	1457
estate, trust, or beneficiary that benefits from the decrease in	1458
income tax shall reimburse the principal from which the increase	1459
in estate tax is paid. The total reimbursement shall equal the	1460
increase in the estate tax to the extent that the principal used	1461
to pay the increase would have qualified for a marital deduction	1462
or charitable contribution deduction but for the payment. The	1463
proportionate share of the reimbursement for each estate, trust,	1464
or beneficiary whose income taxes are reduced shall be the same as	1465
its proportionate share of the total decrease in income tax. An	1466
estate or trust shall reimburse principal from income.	1467

Sec. 1340.90.  (A) Sections 1340.40 to 1340.91 of the Revised	1468
Code may be cited as the "uniform principal and income act	1469
(1997)."	1470

(B) In applying and construing the "uniform principal and	1471
income act (1997)", consideration shall be given to the need to	1472
promote uniformity of the law with respect to its subject matter	1473
among states that enact the "uniform principal and income act	1474
(1997)".	1475

Sec. 1340.91.  Sections 1340.40 to 1340.90 of the Revised	1476
Code apply to every trust or decedent's estate existing on the	1477
effective date of this section except as otherwise expressly	1478
provided in the will or terms of the trust or in sections 1340.40	1479
to 1340.90 of the Revised Code.	1480

Sec. 2109.68. In all cases not covered by section 2109.66 or	1481
2109.67 of the Revised Code, allocationAllocation of receipts and	1482
expenditures between principal and income by an executor,	1483
administrator, or testamentary trustee shall be as prescribed in	1484
sections 1340.011340.40 to 1340.131340.91 of the Revised Code.	1485

Section 2. That existing sections 151.01, 1340.031, 1340.35,	1486
and 2109.68 and sections 1340.01, 1340.02, 1340.03, 1340.04,	1487
1340.05, 1340.06, 1340.07, 1340.08, 1340.09, 1340.10, 1340.11,	1488
1340.12, 1340.13, 2109.66, and 2109.67 of the Revised Code are	1489
hereby repealed.	1490

Section 3. Division (A) of section 1340.75 of the Revised	1491
Code relating to the duty of a trustee to make property productive	1492
of income, with respect to a trust for which a marital deduction	1493
is allowed, is intended to codify existing fiduciary and trust law	1494
principles.	1495

Section 4. It is the intent of the General Assembly in	1496
enacting section 1340.41 of the Revised Code to limit the	1497
application of the holding in Sherman v. Sherman (1966), 5 Ohio	1498
St. 2d 27, relative to a trustee's allocation of receipts and	1499
disbursements between principal and income of a trust.	1500

Section 5. Sections 1, 2, 3, and 4 of this act, except for	1501
section 151.01 of the Revised Code, shall take effect on January	1502
1, 2003. Section 151.01 of the Revised Code, as amended by this	1503
act, shall take effect at the earliest time permitted by law.	1504

Section 6.  Section 151.01 of the Revised Code is presented	1505
in this act as a composite of the section as amended by both Sub.	1506
H.B. 385 and Am. Sub. H.B. 524 of the 124th General Assembly. The	1507
General Assembly, applying the principle stated in division (B) of	1508
section 1.52 of the Revised Code that amendments are to be	1509
harmonized if reasonably capable of simultaneous operation, finds	1510
that the composite is the resulting version of the section in	1511
effect prior to the effective date of the section as presented in	1512
this act.	1513

Section 7.  This act is hereby declared to be an emergency	1514
measure necessary for the immediate preservation of the public	1515
peace, health, and safety. The reason for such necessity is a	1516
need for swift modification of the state bond law. Therefore,	1517
this act shall go into immediate effect.	1518