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| To amend sections 5747.01, 5747.011, 5747.012, | 1 |
| 5747.02, and 5748.01, and to repeal sections | 2 |
| 5747.24 and 5747.25 of the Revised Code to | 3 |
| establish new income tax domicile tests. | 4 |
| Section 1. That sections 5747.01, 5747.011, 5747.012, | 5 |
| 5747.02, and 5748.01 of the Revised Code be amended to read as | 6 |
| follows: | 7 |
| Sec. 5747.01. Except as otherwise expressly provided or | 8 |
| clearly appearing from the context, any term used in this chapter | 9 |
| has the same meaning as when used in a comparable context in the | 10 |
| laws of the United States relating to federal income taxes. Any | 11 |
| reference in this chapter to the Internal Revenue Code includes | 12 |
| other laws of the United States relating to federal income taxes. | 13 |
| As used in this chapter: | 14 |
| (A) "Adjusted gross income" or "Ohio adjusted gross income" | 15 |
| means federal adjusted gross income, as defined and used in the | 16 |
| Internal Revenue Code, adjusted as provided in this section: | 17 |
| (1) Add interest or dividends on obligations or securities of | 18 |
| any state or of any political subdivision or authority of any | 19 |
| state, other than this state and its subdivisions and authorities. | 20 |
| (2) Add interest or dividends on obligations of any | 21 |
| authority, commission, instrumentality, territory, or possession | 22 |
| of the United States to the extent that the interest or dividends | 23 |
| are exempt from federal income taxes but not from state income | 24 |
| taxes. | 25 |
| (3) Deduct interest or dividends on obligations of the United | 26 |
| States and its territories and possessions or of any authority, | 27 |
| commission, or instrumentality of the United States to the extent | 28 |
| that the interest or dividends are included in federal adjusted | 29 |
| gross income but exempt from state income taxes under the laws of | 30 |
| the United States. | 31 |
| (4) Deduct disability and survivor's benefits to the extent | 32 |
| included in federal adjusted gross income. | 33 |
| (5) Deduct benefits under Title II of the Social Security Act | 34 |
| and tier 1 railroad retirement benefits to the extent included in | 35 |
| federal adjusted gross income under section 86 of the Internal | 36 |
| Revenue Code. | 37 |
| (6) In the case of a taxpayer who is a beneficiary of a trust | 38 |
| that makes an accumulation distribution as defined in section 665 | 39 |
| of the Internal Revenue Code, add, for the beneficiary's taxable | 40 |
| years beginning before 2002 or after 2004, the portion, if any, of | 41 |
| such distribution that does not exceed the undistributed net | 42 |
| income of the trust for the three taxable years preceding the | 43 |
| taxable year in which the distribution is made to the extent that | 44 |
| the portion was not included in the trust's taxable income for any | 45 |
| of the trust's taxable years beginning in 2002, 2003, or 2004. | 46 |
| "Undistributed net income of a trust" means the taxable income of | 47 |
| the trust increased by (a)(i) the additions to adjusted gross | 48 |
| income required under division (A) of this section and (ii) the | 49 |
| personal exemptions allowed to the trust pursuant to section | 50 |
| 642(b) of the Internal Revenue Code, and decreased by (b)(i) the | 51 |
| deductions to adjusted gross income required under division (A) of | 52 |
| this section, (ii) the amount of federal income taxes attributable | 53 |
| to such income, and (iii) the amount of taxable income that has | 54 |
| been included in the adjusted gross income of a beneficiary by | 55 |
| reason of a prior accumulation distribution. Any undistributed net | 56 |
| income included in the adjusted gross income of a beneficiary | 57 |
| shall reduce the undistributed net income of the trust commencing | 58 |
| with the earliest years of the accumulation period. | 59 |
| (7) Deduct the amount of wages and salaries, if any, not | 60 |
| otherwise allowable as a deduction but that would have been | 61 |
| allowable as a deduction in computing federal adjusted gross | 62 |
| income for the taxable year, had the targeted jobs credit allowed | 63 |
| and determined under sections 38, 51, and 52 of the Internal | 64 |
| Revenue Code not been in effect. | 65 |
| (8) Deduct any interest or interest equivalent on public | 66 |
| obligations and purchase obligations to the extent that the | 67 |
| interest or interest equivalent is included in federal adjusted | 68 |
| gross income. | 69 |
| (9) Add any loss or deduct any gain resulting from the sale, | 70 |
| exchange, or other disposition of public obligations to the extent | 71 |
| that the loss has been deducted or the gain has been included in | 72 |
| computing federal adjusted gross income. | 73 |
| (10) Deduct or add amounts, as provided under section 5747.70 | 74 |
| of the Revised Code, related to contributions to variable college | 75 |
| savings program accounts made or tuition credits purchased | 76 |
| pursuant to Chapter 3334. of the Revised Code. | 77 |
| (11)(a) Deduct, to the extent not otherwise allowable as a | 78 |
| deduction or exclusion in computing federal or Ohio adjusted gross | 79 |
| income for the taxable year, the amount the taxpayer paid during | 80 |
| the taxable year for medical care insurance and qualified | 81 |
| long-term care insurance for the taxpayer, the taxpayer's spouse, | 82 |
| and dependents. No deduction for medical care insurance under | 83 |
| division (A)(11) of this section shall be allowed either to any | 84 |
| taxpayer who is eligible to participate in any subsidized health | 85 |
| plan maintained by any employer of the taxpayer or of the | 86 |
| taxpayer's spouse, or to any taxpayer who is entitled to, or on | 87 |
| application would be entitled to, benefits under part A of Title | 88 |
| XVIII of the "Social Security Act," 49 Stat. 620 (1935), 42 U.S.C. | 89 |
| 301, as amended. For the purposes of division (A)(11)(a) of this | 90 |
| section, "subsidized health plan" means a health plan for which | 91 |
| the employer pays any portion of the plan's cost. The deduction | 92 |
| allowed under division (A)(11)(a) of this section shall be the net | 93 |
| of any related premium refunds, related premium reimbursements, or | 94 |
| related insurance premium dividends received during the taxable | 95 |
| year. | 96 |
| (b) Deduct, to the extent not otherwise deducted or excluded | 97 |
| in computing federal or Ohio adjusted gross income during the | 98 |
| taxable year, the amount the taxpayer paid during the taxable | 99 |
| year, not compensated for by any insurance or otherwise, for | 100 |
| medical care of the taxpayer, the taxpayer's spouse, and | 101 |
| dependents, to the extent the expenses exceed seven and one-half | 102 |
| per cent of the taxpayer's federal adjusted gross income. | 103 |
| (c) For purposes of division (A)(11) of this section, | 104 |
| "medical care" has the meaning given in section 213 of the | 105 |
| Internal Revenue Code, subject to the special rules, limitations, | 106 |
| and exclusions set forth therein, and "qualified long-term care" | 107 |
| has the same meaning given in section 7702(B)(b) of the Internal | 108 |
| Revenue Code. | 109 |
| (12)(a) Deduct any amount included in federal adjusted gross | 110 |
| income solely because the amount represents a reimbursement or | 111 |
| refund of expenses that in any year the taxpayer had deducted as | 112 |
| an itemized deduction pursuant to section 63 of the Internal | 113 |
| Revenue Code and applicable United States department of the | 114 |
| treasury regulations. The deduction otherwise allowed under | 115 |
| division (A)(12)(a) of this section shall be reduced to the extent | 116 |
| the reimbursement is attributable to an amount the taxpayer | 117 |
| deducted under this section in any taxable year. | 118 |
| (b) Add any amount not otherwise included in Ohio adjusted | 119 |
| gross income for any taxable year to the extent that the amount is | 120 |
| attributable to the recovery during the taxable year of any amount | 121 |
| deducted or excluded in computing federal or Ohio adjusted gross | 122 |
| income in any taxable year. | 123 |
| (13) Deduct any portion of the deduction described in section | 124 |
| 1341(a)(2) of the Internal Revenue Code, for repaying previously | 125 |
| reported income received under a claim of right, that meets both | 126 |
| of the following requirements: | 127 |
| (a) It is allowable for repayment of an item that was | 128 |
| included in the taxpayer's adjusted gross income for a prior | 129 |
| taxable year and did not qualify for a credit under division (A) | 130 |
| or (B) of section 5747.05 of the Revised Code for that year; | 131 |
| (b) It does not otherwise reduce the taxpayer's adjusted | 132 |
| gross income for the current or any other taxable year. | 133 |
| (14) Deduct an amount equal to the deposits made to, and net | 134 |
| investment earnings of, a medical savings account during the | 135 |
| taxable year, in accordance with section 3924.66 of the Revised | 136 |
| Code. The deduction allowed by division (A)(14) of this section | 137 |
| does not apply to medical savings account deposits and earnings | 138 |
| otherwise deducted or excluded for the current or any other | 139 |
| taxable year from the taxpayer's federal adjusted gross income. | 140 |
| (15)(a) Add an amount equal to the funds withdrawn from a | 141 |
| medical savings account during the taxable year, and the net | 142 |
| investment earnings on those funds, when the funds withdrawn were | 143 |
| used for any purpose other than to reimburse an account holder | 144 |
| for, or to pay, eligible medical expenses, in accordance with | 145 |
| section 3924.66 of the Revised Code; | 146 |
| (b) Add the amounts distributed from a medical savings | 147 |
| account under division (A)(2) of section 3924.68 of the Revised | 148 |
| Code during the taxable year. | 149 |
| (16) Add any amount claimed as a credit under section | 150 |
| 5747.059 of the Revised Code to the extent that such amount | 151 |
| satisfies either of the following: | 152 |
| (a) The amount was deducted or excluded from the computation | 153 |
| of the taxpayer's federal adjusted gross income as required to be | 154 |
| reported for the taxpayer's taxable year under the Internal | 155 |
| Revenue Code; | 156 |
| (b) The amount resulted in a reduction of the taxpayer's | 157 |
| federal adjusted gross income as required to be reported for any | 158 |
| of the taxpayer's taxable years under the Internal Revenue Code. | 159 |
| (17) Deduct the amount contributed by the taxpayer to an | 160 |
| individual development account program established by a county | 161 |
| department of job and family services pursuant to sections 329.11 | 162 |
| to 329.14 of the Revised Code for the purpose of matching funds | 163 |
| deposited by program participants. On request of the tax | 164 |
| commissioner, the taxpayer shall provide any information that, in | 165 |
| the tax commissioner's opinion, is necessary to establish the | 166 |
| amount deducted under division (A)(17) of this section. | 167 |
| (18) Beginning in taxable year 2001, if the taxpayer is | 168 |
| married and files a joint return and the combined federal adjusted | 169 |
| gross income of the taxpayer and the taxpayer's spouse for the | 170 |
| taxable year does not exceed one hundred thousand dollars, or if | 171 |
| the taxpayer is single and has a federal adjusted gross income for | 172 |
| the taxable year not exceeding fifty thousand dollars, deduct | 173 |
| amounts paid during the taxable year for qualified tuition and | 174 |
| fees paid to an eligible institution for the taxpayer, the | 175 |
| taxpayer's spouse, or any dependent of the taxpayer, who is a | 176 |
| resident of this state and is enrolled in or attending a program | 177 |
| that culminates in a degree or diploma at an eligible institution. | 178 |
| The deduction may be claimed only to the extent that qualified | 179 |
| tuition and fees are not otherwise deducted or excluded for any | 180 |
| taxable year from federal or Ohio adjusted gross income. The | 181 |
| deduction may not be claimed for educational expenses for which | 182 |
| the taxpayer claims a credit under section 5747.27 of the Revised | 183 |
| Code. | 184 |
| (19) Add any reimbursement received during the taxable year | 185 |
| of any amount the taxpayer deducted under division (A)(18) of this | 186 |
| section in any previous taxable year to the extent the amount is | 187 |
| not otherwise included in Ohio adjusted gross income. | 188 |
| (20)(a)(i) Add five-sixths of the amount of depreciation | 189 |
| expense allowed by subsection (k) of section 168 of the Internal | 190 |
| Revenue Code, including the taxpayer's proportionate or | 191 |
| distributive share of the amount of depreciation expense allowed | 192 |
| by that subsection to a pass-through entity in which the taxpayer | 193 |
| has a direct or indirect ownership interest. | 194 |
| (ii) Add five-sixths of the amount of qualifying section 179 | 195 |
| depreciation expense, including a person's proportionate or | 196 |
| distributive share of the amount of qualifying section 179 | 197 |
| depreciation expense allowed to any pass-through entity in which | 198 |
| the person has a direct or indirect ownership. For the purposes of | 199 |
| this division, "qualifying section 179 depreciation expense" means | 200 |
| the difference between (I) the amount of depreciation expense | 201 |
| directly or indirectly allowed to the taxpayer under section 179 | 202 |
| of the Internal Revenue Code, and (II) the amount of depreciation | 203 |
| expense directly or indirectly allowed to the taxpayer under | 204 |
| section 179 of the Internal Revenue Code as that section existed | 205 |
| on December 31, 2002. | 206 |
| The tax commissioner, under procedures established by the | 207 |
| commissioner, may waive the add-backs related to a pass-through | 208 |
| entity if the taxpayer owns, directly or indirectly, less than | 209 |
| five per cent of the pass-through entity. | 210 |
| (b) Nothing in division (A)(20) of this section shall be | 211 |
| construed to adjust or modify the adjusted basis of any asset. | 212 |
| (c) To the extent the add-back required under division | 213 |
| (A)(20)(a) of this section is attributable to property generating | 214 |
| nonbusiness income or loss allocated under section 5747.20 of the | 215 |
| Revised Code, the add-back shall be sitused to the same location | 216 |
| as the nonbusiness income or loss generated by the property for | 217 |
| the purpose of determining the credit under division (A) of | 218 |
| section 5747.05 of the Revised Code. Otherwise, the add-back shall | 219 |
| be apportioned, subject to one or more of the four alternative | 220 |
| methods of apportionment enumerated in section 5747.21 of the | 221 |
| Revised Code. | 222 |
| (d) For the purposes of division (A) of this section, net | 223 |
| operating loss carryback and carryforward shall not include | 224 |
| five-sixths of the allowance of any net operating loss deduction | 225 |
| carryback or carryforward to the taxable year to the extent such | 226 |
| loss resulted from depreciation allowed by section 168(k) of the | 227 |
| Internal Revenue Code and by the qualifying section 179 | 228 |
| depreciation expense amount. | 229 |
| (21)(a) If the taxpayer was required to add an amount under | 230 |
| division (A)(20)(a) of this section for a taxable year, deduct | 231 |
| one-fifth of the amount so added for each of the five succeeding | 232 |
| taxable years. | 233 |
| (b) If the amount deducted under division (A)(21)(a) of this | 234 |
| section is attributable to an add-back allocated under division | 235 |
| (A)(20)(c) of this section, the amount deducted shall be sitused | 236 |
| to the same location. Otherwise, the add-back shall be apportioned | 237 |
| using the apportionment factors for the taxable year in which the | 238 |
| deduction is taken, subject to one or more of the four alternative | 239 |
| methods of apportionment enumerated in section 5747.21 of the | 240 |
| Revised Code. | 241 |
| (c) No deduction is available under division (A)(21)(a) of | 242 |
| this section with regard to any depreciation allowed by section | 243 |
| 168(k) of the Internal Revenue Code and by the qualifying section | 244 |
| 179 depreciation expense amount to the extent that such | 245 |
| depreciation resulted in or increased a federal net operating loss | 246 |
| carryback or carryforward to a taxable year to which division | 247 |
| (A)(20)(d) of this section does not apply. | 248 |
| (B) "Business income" means income, including gain or loss, | 249 |
| arising from transactions, activities, and sources in the regular | 250 |
| course of a trade or business and includes income, gain, or loss | 251 |
| from real property, tangible property, and intangible property if | 252 |
| the acquisition, rental, management, and disposition of the | 253 |
| property constitute integral parts of the regular course of a | 254 |
| trade or business operation. "Business income" includes income, | 255 |
| including gain or loss, from a partial or complete liquidation of | 256 |
| a business, including, but not limited to, gain or loss from the | 257 |
| sale or other disposition of goodwill. | 258 |
| (C) "Nonbusiness income" means all income other than business | 259 |
| income and may include, but is not limited to, compensation, rents | 260 |
| and royalties from real or tangible personal property, capital | 261 |
| gains, interest, dividends and distributions, patent or copyright | 262 |
| royalties, or lottery winnings, prizes, and awards. | 263 |
| (D) "Compensation" means any form of remuneration paid to an | 264 |
| employee for personal services. | 265 |
| (E) "Fiduciary" means a guardian, trustee, executor, | 266 |
| administrator, receiver, conservator, or any other person acting | 267 |
| in any fiduciary capacity for any individual, trust, or estate. | 268 |
| (F) "Fiscal year" means an accounting period of twelve months | 269 |
| ending on the last day of any month other than December. | 270 |
| (G) "Individual" means any natural person. | 271 |
| (H) "Internal Revenue Code" means the "Internal Revenue Code | 272 |
| of 1986," 100 Stat. 2085, 26 U.S.C.A. 1, as amended. | 273 |
| (I) "Resident" means any of the following, provided that | 274 |
|
division (I) | 275 |
| of a trust beginning in 2002, 2003, or 2004: | 276 |
| (1) An individual who is domiciled in this state | 277 |
| 278 |
| (2) An individual who lives in and maintains a permanent | 279 |
| place of abode in this state, and who does not maintain a | 280 |
| permanent place of abode elsewhere, unless such individual, in the | 281 |
| aggregate, lives more than one hundred eighty-three days of the | 282 |
| taxable year outside this state; | 283 |
| (3) The estate of a decedent who at the time of death was | 284 |
|
domiciled in this state | 285 |
| 286 | |
| 287 | |
| 288 |
| | 289 |
| If only part of a trust resides in this state, the trust is a | 290 |
| resident only with respect to that part. | 291 |
| For the purposes of
division (I) | 292 |
| (a) A trust resides in this state for the trust's current | 293 |
|
taxable year to
the extent, as described in division (I) | 294 |
| of this section, that the trust consists directly or indirectly, | 295 |
| in whole or in part, of assets, net of any related liabilities, | 296 |
| that were transferred, or caused to be transferred, directly or | 297 |
| indirectly, to the trust by any of the following: | 298 |
| (i) A person, a court, or a governmental entity or | 299 |
| instrumentality on account of the death of a decedent, but only if | 300 |
| the trust is described in division (I) | 301 |
| section; | 302 |
| (ii) A person who was domiciled in this state for the | 303 |
| purposes of this chapter when the person directly or indirectly | 304 |
| transferred assets to an irrevocable trust, but only if at least | 305 |
| one of the trust's qualifying beneficiaries is domiciled in this | 306 |
| state for the purposes of this chapter during all or some portion | 307 |
| of the trust's current taxable year; | 308 |
| (iii) A person who was domiciled in this state for the | 309 |
| purposes of this chapter when the trust document or instrument or | 310 |
| part of the trust document or instrument became irrevocable, but | 311 |
| only if at least one of the trust's qualifying beneficiaries is a | 312 |
| resident domiciled in this state for the purposes of this chapter | 313 |
| during all or some portion of the trust's current taxable year. | 314 |
| (b) A trust is irrevocable to the extent that the transferor | 315 |
| is not considered to be the owner of the net assets of the trust | 316 |
| under sections 671 to 678 of the Internal Revenue Code. | 317 |
| (c) With respect to a trust other than a charitable lead | 318 |
| trust, "qualifying beneficiary" has the same meaning as "potential | 319 |
| current beneficiary" as defined in section 1361(e)(2) of the | 320 |
| Internal Revenue Code, and with respect to a charitable lead trust | 321 |
| "qualifying beneficiary" is any current, future, or contingent | 322 |
| beneficiary, but with respect to any trust "qualifying | 323 |
| beneficiary" excludes a person or a governmental entity or | 324 |
| instrumentality to any of which a contribution would qualify for | 325 |
| the charitable deduction under section 170 of the Internal Revenue | 326 |
| Code. | 327 |
|
(d) For the purposes of division (I) | 328 |
| section, the extent to which a trust consists directly or | 329 |
| indirectly, in whole or in part, of assets, net of any related | 330 |
| liabilities, that were transferred directly or indirectly, in | 331 |
| whole or part, to the trust by any of the sources enumerated in | 332 |
| that division shall be ascertained by multiplying the fair market | 333 |
| value of the trust's assets, net of related liabilities, by the | 334 |
| qualifying ratio, which shall be computed as follows: | 335 |
| (i) The first time the trust receives assets, the numerator | 336 |
| of the qualifying ratio is the fair market value of those assets | 337 |
| at that time, net of any related liabilities, from sources | 338 |
|
enumerated in division (I) | 339 |
| denominator of the qualifying ratio is the fair market value of | 340 |
| all the trust's assets at that time, net of any related | 341 |
| liabilities. | 342 |
| (ii) Each subsequent time the trust receives assets, a | 343 |
| revised qualifying ratio shall be computed. The numerator of the | 344 |
| revised qualifying ratio is the sum of (1) the fair market value | 345 |
| of the trust's assets immediately prior to the subsequent | 346 |
| transfer, net of any related liabilities, multiplied by the | 347 |
| qualifying ratio last computed without regard to the subsequent | 348 |
| transfer, and (2) the fair market value of the subsequently | 349 |
| transferred assets at the time transferred, net of any related | 350 |
|
liabilities, from sources enumerated in division (I) | 351 |
| this section. The denominator of the revised qualifying ratio is | 352 |
| the fair market value of all the trust's assets immediately after | 353 |
| the subsequent transfer, net of any related liabilities. | 354 |
|
(e) For the purposes of division (I) | 355 |
| section: | 356 |
|
(i) A trust is described in division (I) | 357 |
| section if the trust is a testamentary trust and the testator of | 358 |
| that testamentary trust was domiciled in this state at the time of | 359 |
| the testator's death for purposes of the taxes levied under | 360 |
| Chapter 5731. of the Revised Code. | 361 |
|
(ii) A trust is described in division (I) | 362 |
| this section if the transfer is a qualifying transfer described in | 363 |
| any
of divisions (I) | 364 |
| trust is an irrevocable inter vivos trust, and at least one of the | 365 |
| trust's qualifying beneficiaries is domiciled in this state for | 366 |
| purposes of this chapter during all or some portion of the trust's | 367 |
| current taxable year. | 368 |
|
(f) For the purposes of division (I) | 369 |
| section, a "qualifying transfer" is a transfer of assets, net of | 370 |
| any related liabilities, directly or indirectly to a trust, if the | 371 |
| transfer is described in any of the following: | 372 |
| (i) The transfer is made to a trust, created by the decedent | 373 |
| before the decedent's death and while the decedent was domiciled | 374 |
| in this state for the purposes of this chapter, and, prior to the | 375 |
| death of the decedent, the trust became irrevocable while the | 376 |
| decedent was domiciled in this state for the purposes of this | 377 |
| chapter. | 378 |
| (ii) The transfer is made to a trust to which the decedent, | 379 |
| prior to the decedent's death, had directly or indirectly | 380 |
| transferred assets, net of any related liabilities, while the | 381 |
| decedent was domiciled in this state for the purposes of this | 382 |
| chapter, and prior to the death of the decedent the trust became | 383 |
| irrevocable while the decedent was domiciled in this state for the | 384 |
| purposes of this chapter. | 385 |
| (iii) The transfer is made on account of a contractual | 386 |
| relationship existing directly or indirectly between the | 387 |
| transferor and either the decedent or the estate of the decedent | 388 |
| at any time prior to the date of the decedent's death, and the | 389 |
| decedent was domiciled in this state at the time of death for | 390 |
| purposes of the taxes levied under Chapter 5731. of the Revised | 391 |
| Code. | 392 |
| (iv) The transfer is made to a trust on account of a | 393 |
| contractual relationship existing directly or indirectly between | 394 |
| the transferor and another person who at the time of the | 395 |
| decedent's death was domiciled in this state for purposes of this | 396 |
| chapter. | 397 |
| (v) The transfer is made to a trust on account of the will of | 398 |
| a testator. | 399 |
| (vi) The transfer is made to a trust created by or caused to | 400 |
| be created by a court, and the trust was directly or indirectly | 401 |
| created in connection with or as a result of the death of an | 402 |
| individual who, for purposes of the taxes levied under Chapter | 403 |
| 5731. of the Revised Code, was domiciled in this state at the time | 404 |
| of the individual's death. | 405 |
| (g) The tax commissioner may adopt rules to ascertain the | 406 |
| part of a trust residing in this state. | 407 |
| (J) "Nonresident" means an individual or estate that is not a | 408 |
| resident. An individual who is a resident for only part of a | 409 |
| taxable year is a nonresident for the remainder of that taxable | 410 |
| year. | 411 |
| (K) "Pass-through entity" has the same meaning as in section | 412 |
| 5733.04 of the Revised Code. | 413 |
| (L) "Return" means the notifications and reports required to | 414 |
| be filed pursuant to this chapter for the purpose of reporting the | 415 |
| tax due and includes declarations of estimated tax when so | 416 |
| required. | 417 |
| (M) "Taxable year" means the calendar year or the taxpayer's | 418 |
| fiscal year ending during the calendar year, or fractional part | 419 |
| thereof, upon which the adjusted gross income is calculated | 420 |
| pursuant to this chapter. | 421 |
| (N) "Taxpayer" means any person subject to the tax imposed by | 422 |
| section 5747.02 of the Revised Code or any pass-through entity | 423 |
| that makes the election under division (D) of section 5747.08 of | 424 |
| the Revised Code. | 425 |
| (O) "Dependents" means dependents as defined in the Internal | 426 |
| Revenue Code and as claimed in the taxpayer's federal income tax | 427 |
| return for the taxable year or which the taxpayer would have been | 428 |
| permitted to claim had the taxpayer filed a federal income tax | 429 |
| return. | 430 |
| (P) "Principal county of employment" means, in the case of a | 431 |
| nonresident, the county within the state in which a taxpayer | 432 |
| performs services for an employer or, if those services are | 433 |
| performed in more than one county, the county in which the major | 434 |
| portion of the services are performed. | 435 |
| (Q) As used in sections 5747.50 to 5747.55 of the Revised | 436 |
| Code: | 437 |
| (1) "Subdivision" means any county, municipal corporation, | 438 |
| park district, or township. | 439 |
| (2) "Essential local government purposes" includes all | 440 |
| functions that any subdivision is required by general law to | 441 |
| exercise, including like functions that are exercised under a | 442 |
| charter adopted pursuant to the Ohio Constitution. | 443 |
| (R) "Overpayment" means any amount already paid that exceeds | 444 |
| the figure determined to be the correct amount of the tax. | 445 |
| (S) "Taxable income" or "Ohio taxable income" applies only to | 446 |
| estates and trusts, and means federal taxable income, as defined | 447 |
| and used in the Internal Revenue Code, adjusted as follows: | 448 |
| (1) Add interest or dividends, net of ordinary, necessary, | 449 |
| and reasonable expenses not deducted in computing federal taxable | 450 |
| income, on obligations or securities of any state or of any | 451 |
| political subdivision or authority of any state, other than this | 452 |
| state and its subdivisions and authorities, but only to the extent | 453 |
| that such net amount is not otherwise includible in Ohio taxable | 454 |
| income and is described in either division (S)(1)(a) or (b) of | 455 |
| this section: | 456 |
| (a) The net amount is not attributable to the S portion of an | 457 |
| electing small business trust and has not been distributed to | 458 |
| beneficiaries for the taxable year; | 459 |
| (b) The net amount is attributable to the S portion of an | 460 |
| electing small business trust for the taxable year. | 461 |
| (2) Add interest or dividends, net of ordinary, necessary, | 462 |
| and reasonable expenses not deducted in computing federal taxable | 463 |
| income, on obligations of any authority, commission, | 464 |
| instrumentality, territory, or possession of the United States to | 465 |
| the extent that the interest or dividends are exempt from federal | 466 |
| income taxes but not from state income taxes, but only to the | 467 |
| extent that such net amount is not otherwise includible in Ohio | 468 |
| taxable income and is described in either division (S)(1)(a) or | 469 |
| (b) of this section; | 470 |
| (3) Add the amount of personal exemption allowed to the | 471 |
| estate pursuant to section 642(b) of the Internal Revenue Code; | 472 |
| (4) Deduct interest or dividends, net of related expenses | 473 |
| deducted in computing federal taxable income, on obligations of | 474 |
| the United States and its territories and possessions or of any | 475 |
| authority, commission, or instrumentality of the United States to | 476 |
| the extent that the interest or dividends are exempt from state | 477 |
| taxes under the laws of the United States, but only to the extent | 478 |
| that such amount is included in federal taxable income and is | 479 |
| described in either division (S)(1)(a) or (b) of this section; | 480 |
| (5) Deduct the amount of wages and salaries, if any, not | 481 |
| otherwise allowable as a deduction but that would have been | 482 |
| allowable as a deduction in computing federal taxable income for | 483 |
| the taxable year, had the targeted jobs credit allowed under | 484 |
| sections 38, 51, and 52 of the Internal Revenue Code not been in | 485 |
| effect, but only to the extent such amount relates either to | 486 |
| income included in federal taxable income for the taxable year or | 487 |
| to income of the S portion of an electing small business trust for | 488 |
| the taxable year; | 489 |
| (6) Deduct any interest or interest equivalent, net of | 490 |
| related expenses deducted in computing federal taxable income, on | 491 |
| public obligations and purchase obligations, but only to the | 492 |
| extent that such net amount relates either to income included in | 493 |
| federal taxable income for the taxable year or to income of the S | 494 |
| portion of an electing small business trust for the taxable year; | 495 |
| (7) Add any loss or deduct any gain resulting from sale, | 496 |
| exchange, or other disposition of public obligations to the extent | 497 |
| that such loss has been deducted or such gain has been included in | 498 |
| computing either federal taxable income or income of the S portion | 499 |
| of an electing small business trust for the taxable year; | 500 |
| (8) Except in the case of the final return of an estate, add | 501 |
| any amount deducted by the taxpayer on both its Ohio estate tax | 502 |
| return pursuant to section 5731.14 of the Revised Code, and on its | 503 |
| federal income tax return in determining federal taxable income; | 504 |
| (9)(a) Deduct any amount included in federal taxable income | 505 |
| solely because the amount represents a reimbursement or refund of | 506 |
| expenses that in a previous year the decedent had deducted as an | 507 |
| itemized deduction pursuant to section 63 of the Internal Revenue | 508 |
| Code and applicable treasury regulations. The deduction otherwise | 509 |
| allowed under division (S)(9)(a) of this section shall be reduced | 510 |
| to the extent the reimbursement is attributable to an amount the | 511 |
| taxpayer or decedent deducted under this section in any taxable | 512 |
| year. | 513 |
| (b) Add any amount not otherwise included in Ohio taxable | 514 |
| income for any taxable year to the extent that the amount is | 515 |
| attributable to the recovery during the taxable year of any amount | 516 |
| deducted or excluded in computing federal or Ohio taxable income | 517 |
| in any taxable year, but only to the extent such amount has not | 518 |
| been distributed to beneficiaries for the taxable year. | 519 |
| (10) Deduct any portion of the deduction described in section | 520 |
| 1341(a)(2) of the Internal Revenue Code, for repaying previously | 521 |
| reported income received under a claim of right, that meets both | 522 |
| of the following requirements: | 523 |
| (a) It is allowable for repayment of an item that was | 524 |
| included in the taxpayer's taxable income or the decedent's | 525 |
| adjusted gross income for a prior taxable year and did not qualify | 526 |
| for a credit under division (A) or (B) of section 5747.05 of the | 527 |
| Revised Code for that year. | 528 |
| (b) It does not otherwise reduce the taxpayer's taxable | 529 |
| income or the decedent's adjusted gross income for the current or | 530 |
| any other taxable year. | 531 |
| (11) Add any amount claimed as a credit under section | 532 |
| 5747.059 of the Revised Code to the extent that the amount | 533 |
| satisfies either of the following: | 534 |
| (a) The amount was deducted or excluded from the computation | 535 |
| of the taxpayer's federal taxable income as required to be | 536 |
| reported for the taxpayer's taxable year under the Internal | 537 |
| Revenue Code; | 538 |
| (b) The amount resulted in a reduction in the taxpayer's | 539 |
| federal taxable income as required to be reported for any of the | 540 |
| taxpayer's taxable years under the Internal Revenue Code. | 541 |
| (12) Deduct any amount, net of related expenses deducted in | 542 |
| computing federal taxable income, that a trust is required to | 543 |
| report as farm income on its federal income tax return, but only | 544 |
| if the assets of the trust include at least ten acres of land | 545 |
| satisfying the definition of "land devoted exclusively to | 546 |
| agricultural use" under section 5713.30 of the Revised Code, | 547 |
| regardless of whether the land is valued for tax purposes as such | 548 |
| land under sections 5713.30 to 5713.38 of the Revised Code. If the | 549 |
| trust is a pass-though entity investor, section 5747.231 of the | 550 |
| Revised Code applies in ascertaining if the trust is eligible to | 551 |
| claim the deduction provided by division (S)(12) of this section | 552 |
| in connection with the pass-through entity's farm income. | 553 |
| Except for farm income attributable to the S portion of an | 554 |
| electing small business trust, the deduction provided by division | 555 |
| (S)(12) of this section is allowed only to the extent that the | 556 |
| trust has not distributed such farm income. Division (S)(12) of | 557 |
| this section applies only to taxable years of a trust beginning in | 558 |
| 2002, 2003, or 2004. | 559 |
| (13) Add the net amount of income described in section 641(c) | 560 |
| of the Internal Revenue Code to the extent that amount is not | 561 |
| included in federal taxable income. | 562 |
| (14) Add or deduct the amount the taxpayer would be required | 563 |
| to add or deduct under division (A)(20) or (21) of this section if | 564 |
| the taxpayer's Ohio taxable income were computed in the same | 565 |
| manner as an individual's Ohio adjusted gross income is computed | 566 |
| under this section. In the case of a trust, division (S)(14) of | 567 |
| this section applies only to any of the trust's taxable years | 568 |
| beginning in 2002, 2003, or 2004. | 569 |
| (T) "School district income" and "school district income tax" | 570 |
| have the same meanings as in section 5748.01 of the Revised Code. | 571 |
| (U) As used in divisions (A)(8), (A)(9), (S)(6), and (S)(7) | 572 |
| of this section, "public obligations," "purchase obligations," and | 573 |
| "interest or interest equivalent" have the same meanings as in | 574 |
| section 5709.76 of the Revised Code. | 575 |
| (V) "Limited liability company" means any limited liability | 576 |
| company formed under Chapter 1705. of the Revised Code or under | 577 |
| the laws of any other state. | 578 |
| (W) "Pass-through entity investor" means any person who, | 579 |
| during any portion of a taxable year of a pass-through entity, is | 580 |
| a partner, member, shareholder, or equity investor in that | 581 |
| pass-through entity. | 582 |
| (X) "Banking day" has the same meaning as in section 1304.01 | 583 |
| of the Revised Code. | 584 |
| (Y) "Month" means a calendar month. | 585 |
| (Z) "Quarter" means the first three months, the second three | 586 |
| months, the third three months, or the last three months of the | 587 |
| taxpayer's taxable year. | 588 |
| (AA)(1) "Eligible institution" means a state university or | 589 |
| state institution of higher education as defined in section | 590 |
| 3345.011 of the Revised Code, or a private, nonprofit college, | 591 |
| university, or other post-secondary institution located in this | 592 |
| state that possesses a certificate of authorization issued by the | 593 |
| Ohio board of regents pursuant to Chapter 1713. of the Revised | 594 |
| Code or a certificate of registration issued by the state board of | 595 |
| career colleges and schools under Chapter 3332. of the Revised | 596 |
| Code. | 597 |
| (2) "Qualified tuition and fees" means tuition and fees | 598 |
| imposed by an eligible institution as a condition of enrollment or | 599 |
| attendance, not exceeding two thousand five hundred dollars in | 600 |
| each of the individual's first two years of post-secondary | 601 |
| education. If the individual is a part-time student, "qualified | 602 |
| tuition and fees" includes tuition and fees paid for the academic | 603 |
| equivalent of the first two years of post-secondary education | 604 |
| during a maximum of five taxable years, not exceeding a total of | 605 |
| five thousand dollars. "Qualified tuition and fees" does not | 606 |
| include: | 607 |
| (a) Expenses for any course or activity involving sports, | 608 |
| games, or hobbies unless the course or activity is part of the | 609 |
| individual's degree or diploma program; | 610 |
| (b) The cost of books, room and board, student activity fees, | 611 |
| athletic fees, insurance expenses, or other expenses unrelated to | 612 |
| the individual's academic course of instruction; | 613 |
| (c) Tuition, fees, or other expenses paid or reimbursed | 614 |
| through an employer, scholarship, grant in aid, or other | 615 |
| educational benefit program. | 616 |
| (BB)(1) "Modified business income" means the business income | 617 |
| included in a trust's Ohio taxable income after such taxable | 618 |
| income is first reduced by the qualifying trust amount, if any. | 619 |
| (2) "Qualifying trust amount" of a trust means capital gains | 620 |
| and losses from the sale, exchange, or other disposition of equity | 621 |
| or ownership interests in, or debt obligations of, a qualifying | 622 |
| investee to the extent included in the trust's Ohio taxable | 623 |
| income, but only if the following requirements are satisfied: | 624 |
| (a) The book value of the qualifying investee's physical | 625 |
| assets in this state and everywhere, as of the last day of the | 626 |
| qualifying investee's fiscal or calendar year ending immediately | 627 |
| prior to the date on which the trust recognizes the gain or loss, | 628 |
| is available to the trust. | 629 |
| (b) The requirements of section 5747.011 of the Revised Code | 630 |
| are satisfied for the trust's taxable year in which the trust | 631 |
| recognizes the gain or loss. | 632 |
| Any gain or loss that is not a qualifying trust amount is | 633 |
| modified business income, qualifying investment income, or | 634 |
| modified nonbusiness income, as the case may be. | 635 |
| (3) "Modified nonbusiness income" means a trust's Ohio | 636 |
| taxable income other than modified business income, other than the | 637 |
| qualifying trust amount, and other than qualifying investment | 638 |
| income, as defined in section 5747.012 of the Revised Code, to the | 639 |
| extent such qualifying investment income is not otherwise part of | 640 |
| modified business income. | 641 |
| (4) "Modified Ohio taxable income" applies only to trusts, | 642 |
| and means the sum of the amounts described in divisions (BB)(4)(a) | 643 |
| to (c) of this section: | 644 |
| (a) The fraction, calculated under section 5747.013, and | 645 |
| applying section 5747.231 of the Revised Code, multiplied by the | 646 |
| sum of the following amounts: | 647 |
| (i) The trust's modified business income; | 648 |
| (ii) The trust's qualifying investment income, as defined in | 649 |
| section 5747.012 of the Revised Code, but only to the extent the | 650 |
| qualifying investment income does not otherwise constitute | 651 |
| modified business income and does not otherwise constitute a | 652 |
| qualifying trust amount. | 653 |
| (b) The qualifying trust amount multiplied by a fraction, the | 654 |
| numerator of which is the sum of the book value of the qualifying | 655 |
| investee's physical assets in this state on the last day of the | 656 |
| qualifying investee's fiscal or calendar year ending immediately | 657 |
| prior to the day on which the trust recognizes the qualifying | 658 |
| trust amount, and the denominator of which is the sum of the book | 659 |
| value of the qualifying investee's total physical assets | 660 |
| everywhere on the last day of the qualifying investee's fiscal or | 661 |
| calendar year ending immediately prior to the day on which the | 662 |
| trust recognizes the qualifying trust amount. If, for a taxable | 663 |
| year, the trust recognizes a qualifying trust amount with respect | 664 |
| to more than one qualifying investee, the amount described in | 665 |
| division (BB)(4)(b) of this section shall equal the sum of the | 666 |
| products so computed for each such qualifying investee. | 667 |
| (c)(i) With respect to a trust or portion of a trust that is | 668 |
| a resident as ascertained in accordance
with division (I) | 669 |
| of this section, its modified nonbusiness income. | 670 |
| (ii) With respect to a trust or portion of a trust that is | 671 |
| not a resident as ascertained in accordance with division | 672 |
|
(I) | 673 |
| nonbusiness income satisfying the descriptions in divisions (B)(2) | 674 |
| to (5) of section 5747.20 of the Revised Code. | 675 |
| If the allocation and apportionment of a trust's income under | 676 |
| divisions (BB)(4)(a) and (c) of this section do not fairly | 677 |
| represent the modified Ohio taxable income of the trust in this | 678 |
| state, the alternative methods described in division (C) of | 679 |
| section 5747.21 of the Revised Code may be applied in the manner | 680 |
| and to the same extent provided in that section. | 681 |
| (5)(a) Except as set forth in division (BB)(5)(b) of this | 682 |
| section, "qualifying investee" means a person in which a trust has | 683 |
| an equity or ownership interest, or a person or unit of government | 684 |
| the debt obligations of either of which are owned by a trust. For | 685 |
| the purposes of division (BB)(2)(a) of this section and for the | 686 |
| purpose of computing the fraction described in division (BB)(4)(b) | 687 |
| of this section, all of the following apply: | 688 |
| (i) If the qualifying investee is a member of a qualifying | 689 |
| controlled group on the last day of the qualifying investee's | 690 |
| fiscal or calendar year ending immediately prior to the date on | 691 |
| which the trust recognizes the gain or loss, then "qualifying | 692 |
| investee" includes all persons in the qualifying controlled group | 693 |
| on such last day. | 694 |
| (ii) If the qualifying investee, or if the qualifying | 695 |
| investee and any members of the qualifying controlled group of | 696 |
| which the qualifying investee is a member on the last day of the | 697 |
| qualifying investee's fiscal or calendar year ending immediately | 698 |
| prior to the date on which the trust recognizes the gain or loss, | 699 |
| separately or cumulatively own, directly or indirectly, on the | 700 |
| last day of the qualifying investee's fiscal or calendar year | 701 |
| ending immediately prior to the date on which the trust recognizes | 702 |
| the qualifying trust amount, more than fifty per cent of the | 703 |
| equity of a pass-through entity, then the qualifying investee and | 704 |
| the other members are deemed to own the proportionate share of the | 705 |
| pass-through entity's physical assets which the pass-through | 706 |
| entity directly or indirectly owns on the last day of the | 707 |
| pass-through entity's calendar or fiscal year ending within or | 708 |
| with the last day of the qualifying investee's fiscal or calendar | 709 |
| year ending immediately prior to the date on which the trust | 710 |
| recognizes the qualifying trust amount. | 711 |
| (iii) For the purposes of division (BB)(5)(a)(iii) of this | 712 |
| section, "upper level pass-through entity" means a pass-through | 713 |
| entity directly or indirectly owning any equity of another | 714 |
| pass-through entity, and "lower level pass-through entity" means | 715 |
| that other pass-through entity. | 716 |
| An upper level pass-through entity, whether or not it is also | 717 |
| a qualifying investee, is deemed to own, on the last day of the | 718 |
| upper level pass-through entity's calendar or fiscal year, the | 719 |
| proportionate share of the lower level pass-through entity's | 720 |
| physical assets that the lower level pass-through entity directly | 721 |
| or indirectly owns on the last day of the lower level pass-through | 722 |
| entity's calendar or fiscal year ending within or with the last | 723 |
| day of the upper level pass-through entity's fiscal or calendar | 724 |
| year. If the upper level pass-through entity directly and | 725 |
| indirectly owns less than fifty per cent of the equity of the | 726 |
| lower level pass-through entity on each day of the upper level | 727 |
| pass-through entity's calendar or fiscal year in which or with | 728 |
| which ends the calendar or fiscal year of the lower level | 729 |
| pass-through entity and if, based upon clear and convincing | 730 |
| evidence, complete information about the location and cost of the | 731 |
| physical assets of the lower pass-through entity is not available | 732 |
| to the upper level pass-through entity, then solely for purposes | 733 |
| of ascertaining if a gain or loss constitutes a qualifying trust | 734 |
| amount, the upper level pass-through entity shall be deemed as | 735 |
| owning no equity of the lower level pass-through entity for each | 736 |
| day during the upper level pass-through entity's calendar or | 737 |
| fiscal year in which or with which ends the lower level | 738 |
| pass-through entity's calendar or fiscal year. Nothing in division | 739 |
| (BB)(5)(a)(iii) of this section shall be construed to provide for | 740 |
| any deduction or exclusion in computing any trust's Ohio taxable | 741 |
| income. | 742 |
| (b) With respect to a trust that is not a resident for the | 743 |
| taxable year and with respect to a part of a trust that is not a | 744 |
| resident for the taxable year, "qualifying investee" for that | 745 |
| taxable year does not include a C corporation if both of the | 746 |
| following apply: | 747 |
| (i) During the taxable year the trust or part of the trust | 748 |
| recognizes a gain or loss from the sale, exchange, or other | 749 |
| disposition of equity or ownership interests in, or debt | 750 |
| obligations of, the C corporation. | 751 |
| (ii) Such gain or loss constitutes nonbusiness income. | 752 |
| (6) "Available" means information is such that a person is | 753 |
| able to learn of the information by the due date plus extensions, | 754 |
| if any, for filing the return for the taxable year in which the | 755 |
| trust recognizes the gain or loss. | 756 |
| (CC) "Qualifying controlled group" has the same meaning as in | 757 |
| section 5733.04 of the Revised Code. | 758 |
| (DD) "Related member" has the same meaning as in section | 759 |
| 5733.042 of the Revised Code. | 760 |
| (EE) Any term used in this chapter that is not otherwise | 761 |
| defined in this section and that is not used in a comparable | 762 |
| context in the Internal Revenue Code and other statutes of the | 763 |
| United States relating to federal income taxes has the same | 764 |
| meaning as in section 5733.40 of the Revised Code. | 765 |
| Sec. 5747.011. (A) As used in this section: | 766 |
| (1) "Qualifying closely-held C corporation" means a person | 767 |
| classified for federal income tax purposes as an association taxed | 768 |
| as a corporation and that has more than fifty per cent of the | 769 |
| value of its outstanding stock or equity owned, directly or | 770 |
| indirectly, by or for not more than five qualifying persons. For | 771 |
| the purposes of this division, the ownership of stock shall be | 772 |
| determined under the rules set forth in section 544 of the | 773 |
| Internal Revenue Code. | 774 |
| (2) "Qualifying person" means an individual; an organization | 775 |
| described in section 401(a), 501(c)(17), or 509(a) of the Internal | 776 |
| Revenue Code; or a portion of a trust permanently set aside or to | 777 |
| be used exclusively for the purposes described in section 642(c) | 778 |
| of the Internal Revenue Code or a corresponding provision of a | 779 |
| prior federal income tax law. | 780 |
| (3) "Qualifying limited liability company" means a limited | 781 |
| liability company that is not classified for federal income tax | 782 |
| purposes as an association taxed as a corporation. | 783 |
| (4) "Ownership interest" means the equity or ownership | 784 |
| interest in, or debt obligation of, a "qualifying investee" as | 785 |
| defined in section 5747.01 of the Revised Code. | 786 |
| (5) "Qualifying individual beneficiary" has the same meaning | 787 |
| as qualifying beneficiary as used in division (I) | 788 |
| section 5747.01 of the Revised Code, but is limited to | 789 |
| individuals. | 790 |
| (6) "Family" of an individual means only the individual's | 791 |
| spouse; the individual's ancestors, limited to the individual's | 792 |
| parents, grandparents, and great grandparents; the siblings of | 793 |
| such ancestors, whether by the whole or half blood or by legal | 794 |
| adoption; the lineal descendants of such ancestors and siblings; | 795 |
| persons legally adopted by such ancestors or by such siblings; and | 796 |
| the spouses of such ancestors, siblings, legally adopted persons, | 797 |
| and lineal descendants. | 798 |
| (B) The requirements of this division apply for purposes of | 799 |
| division (BB)(2)(b) of section 5747.01 of the Revised Code and for | 800 |
| the purposes of division (D) of section 5747.012 of the Revised | 801 |
| Code. Gain or loss included in a trust's Ohio taxable income is | 802 |
| not a qualifying trust amount unless the trust's ownership | 803 |
| interest in the qualifying investee is at least five per cent of | 804 |
| the total outstanding ownership interests in such qualifying | 805 |
| investee at any time during the ten-year period ending on the last | 806 |
| day of the trust's taxable year in which the sale, exchange, or | 807 |
| other disposition occurs. Nothing in this section negates the | 808 |
| requirements in division (BB)(2) of section 5747.01 of the Revised | 809 |
| Code. | 810 |
| For the purpose of ascertaining whether the trust's ownership | 811 |
| interest in a qualifying investee is at least five per cent of the | 812 |
| total outstanding ownership interests in such qualifying investee, | 813 |
| the following apply: | 814 |
| (1) On each day, an ownership interest owned, directly or | 815 |
| indirectly, by or for a qualifying closely-held C corporation, an | 816 |
| S corporation, a partnership other than a publicly traded | 817 |
| partnership, a qualifying limited liability company, an estate, or | 818 |
|
a trust that is irrevocable as defined in division (I) | 819 |
| section 5747.01 of the Revised Code is considered as being owned | 820 |
| proportionately on the same day by the equity investors of such | 821 |
| qualifying closely-held C corporation, S corporation, partnership, | 822 |
| or qualifying limited liability company, or by the beneficiaries | 823 |
| of such estate or trust, as the case may be. For the purposes of | 824 |
| division (B)(1) of this section, a beneficiary's proportionate | 825 |
| share of an ownership interest held by a trust shall be | 826 |
| ascertained in accordance with section 544(a)(1) of the Internal | 827 |
| Revenue Code. | 828 |
| (2) On each day, a trust, hereinafter referred to as the | 829 |
| first trust, is considered as owning any ownership interest owned, | 830 |
| directly or indirectly, by or for another trust, hereinafter | 831 |
| referred to as the second trust, if on the same day the second | 832 |
| trust has at least one individual trustee who is either (a) a | 833 |
| trustee of the first trust, or (b) a member of a family that | 834 |
| includes at least one of the trustees of the first trust. | 835 |
| (3) On each day, a trust, hereinafter referred to as the | 836 |
| first trust, is considered as owning any ownership interest owned, | 837 |
| directly or indirectly, by or for another trust, hereinafter | 838 |
| referred to as the second trust, if on the same day the second | 839 |
| trust has at least one qualifying individual beneficiary who is | 840 |
| either (a) a qualifying individual beneficiary of the first trust | 841 |
| or (b) a member of a family which includes a qualifying individual | 842 |
| beneficiary of the first trust. | 843 |
| (4) An ownership interest constructively owned by a person by | 844 |
| reason of the application of division (B)(1) of this section | 845 |
| shall, for the purpose of applying divisions (B)(1) to (3) of this | 846 |
| section, be treated as actually owned by that person. | 847 |
| (5) An ownership interest constructively owned by a trust by | 848 |
| reason of the application of division (B)(2) or (3) of this | 849 |
| section shall not be treated as actually owned by that trust for | 850 |
| purposes of applying divisions (B)(1) to (3) of this section. | 851 |
| (6) If an ownership interest may be considered as owned by a | 852 |
| trust under division (B)(1) or (2) of this section, the ownership | 853 |
| interest shall be considered owned by that trust under division | 854 |
| (B)(2) of this section. | 855 |
| (7) If an ownership interest may be considered as owned by a | 856 |
| trust under division (B)(1) or (3) of this section, the ownership | 857 |
| interest shall be considered owned by that trust under division | 858 |
| (B)(3) of this section. | 859 |
| Sec. 5747.012. This section applies for the purposes of | 860 |
| divisions (BB)(3) and (BB)(4)(a)(ii) of section 5747.01 of the | 861 |
| Revised Code. | 862 |
| (A) As used in this section: | 863 |
| (1)(a) Except as set forth in division (A)(1)(b) of this | 864 |
| section, "qualifying investment income" means the portion of a | 865 |
| qualifying investment pass-through entity's net income | 866 |
| attributable to transaction fees in connection with the | 867 |
| acquisition, ownership, or disposition of intangible property; | 868 |
| loan fees; financing fees; consent fees; waiver fees; application | 869 |
| fees; net management fees; dividend income; interest income; net | 870 |
| capital gains from the sale or exchange or other disposition of | 871 |
| intangible property; and all types and classifications of income | 872 |
| attributable to distributive shares of income from other | 873 |
| pass-through entities. | 874 |
| (b)(i) Notwithstanding division (A)(1)(a) of this section, | 875 |
| "qualifying investment income" does not include any part of the | 876 |
| qualifying investment pass-through entity's net capital gain | 877 |
| which, after the application of section 5747.231 of the Revised | 878 |
| Code with respect to a trust, would also constitute a qualifying | 879 |
| trust amount. | 880 |
| (ii) Notwithstanding division (A)(1)(a) of this section, | 881 |
| "qualifying investment income" does not include any part of the | 882 |
| qualifying investment pass-through entity's net income | 883 |
| attributable to the portion of a distributive share of income | 884 |
| directly or indirectly from another pass-through entity to the | 885 |
| extent such portion constitutes the other pass-through entity's | 886 |
| net capital gain which, after the application of section 5747.231 | 887 |
| of the Revised Code with respect to a trust, would also constitute | 888 |
| a qualifying trust amount. | 889 |
| (2) "Qualifying investment pass-through entity" means an | 890 |
| investment pass-through entity, as defined in section 5733.401 of | 891 |
| the Revised Code, subject to the following qualifications: | 892 |
| (a) "Forty per cent" shall be substituted for "ninety per | 893 |
| cent" wherever "ninety per cent" appears in section 5733.401 of | 894 |
| the Revised Code. | 895 |
| (b) The pass-through entity must have been formed or | 896 |
| organized prior to June 5, 2002. | 897 |
| (c) The qualifying section 5747.012 trust or related persons | 898 |
| to the qualifying section 5747.012 trust must directly or | 899 |
| indirectly own at least five per cent of the equity of the | 900 |
| investment pass-through entity each day of the entity's fiscal or | 901 |
| calendar year ending within or with the last day of the qualifying | 902 |
| section 5747.012 trust's taxable year; | 903 |
| (d) During the investment pass-through entity's calendar or | 904 |
| fiscal year ending within or with the last day of the qualifying | 905 |
| section 5747.012 trust's taxable year, related persons of or to | 906 |
| the qualifying section 5747.012 trust must, on each day of the | 907 |
| investment pass-through entity's year, own directly, or own | 908 |
| through equity investments in other pass-through entities, more | 909 |
| than sixty per cent of the equity of the investment pass-through | 910 |
| entity. | 911 |
| (B) "Qualifying section 5747.012 trust" means a trust | 912 |
| satisfying one of the following: | 913 |
| (1) The trust was created prior to, and was irrevocable on, | 914 |
| June 5, 2002; or | 915 |
| (2) If the trust was created after June 4, 2002, or if the | 916 |
| trust became irrevocable after June 4, 2002, then at least eighty | 917 |
| per cent of the assets transferred to the trust must have been | 918 |
| previously owned by related persons to the trust or by a trust | 919 |
| created prior to June 5, 2002, under which the creator did not | 920 |
| retain the power to change beneficiaries, amend the trust, or | 921 |
| revoke the trust. For purposes of division (B)(2) of this section, | 922 |
| the power to substitute property of equal value shall not be | 923 |
| considered to be a power to change beneficiaries, amend the trust, | 924 |
| or revoke the trust. | 925 |
| (C) For the purposes of this section, "related persons" means | 926 |
| the family of a qualifying individual beneficiary, as defined in | 927 |
| division (A)(5) of section 5747.011 of the Revised Code. For the | 928 |
| purposes of this division, "family" has the same meaning as in | 929 |
| division (A)(6) of section 5747.011 of the Revised Code. | 930 |
| (D) For the purposes of applying divisions (A)(2)(c), | 931 |
| (A)(2)(d), and (B)(2) of this section, the related persons or the | 932 |
| qualifying section 5747.012 trust, as the case may be, shall be | 933 |
| deemed to own the equity of the investment pass-through entity | 934 |
| after the application of division (B) of section 5747.011 of the | 935 |
| Revised Code. | 936 |
| (E) "Irrevocable" has the same meaning as in division | 937 |
|
(I) | 938 |
| (F) Nothing in this section requires any item of income, | 939 |
| gain, or loss not satisfying the definition of qualifying | 940 |
| investment income to be treated as modified nonbusiness income. | 941 |
| Any item of income, gain, or loss that is not qualifying | 942 |
| investment income is modified business income, modified | 943 |
| nonbusiness income, or a qualifying trust amount, as the case may | 944 |
| be. | 945 |
| Sec. 5747.02. (A) For the purpose of providing revenue for | 946 |
| the support of schools and local government functions, to provide | 947 |
| relief to property taxpayers, to provide revenue for the general | 948 |
| revenue fund, and to meet the expenses of administering the tax | 949 |
| levied by this chapter, there is hereby levied on every | 950 |
| individual, trust, and estate residing in or earning or receiving | 951 |
| income in this state, on every individual, trust, and estate | 952 |
| earning or receiving lottery winnings, prizes, or awards pursuant | 953 |
| to Chapter 3770. of the Revised Code, and on every individual, | 954 |
| trust, and estate otherwise having nexus with or in this state | 955 |
| under the Constitution of the United States, an annual tax | 956 |
| measured in the case of individuals by Ohio adjusted gross income | 957 |
| less an exemption for the taxpayer, the taxpayer's spouse, and | 958 |
| each dependent as provided in section 5747.025 of the Revised | 959 |
| Code; measured in the case of trusts by modified Ohio taxable | 960 |
| income under division (D) of this section; and measured in the | 961 |
| case of estates by Ohio taxable income. The tax imposed by this | 962 |
| section on the balance thus obtained is hereby levied as follows: | 963 |
| OHIO ADJUSTED GROSS INCOME LESS EXEMPTIONS (INDIVIDUALS) | 964 | ||
| OR | 965 | ||
| MODIFIED OHIO | 966 | ||
| TAXABLE INCOME (TRUSTS) | 967 | ||
| OR | 968 | ||
| OHIO TAXABLE INCOME (ESTATES) | TAX | 969 |
| $5,000 or less | .743% | 970 | ||
| More than $5,000 but not more than $10,000 | $37.15 plus 1.486% of the amount in excess of $5,000 | 971 | ||
| More than $10,000 but not more than $15,000 | $111.45 plus 2.972% of the amount in excess of $10,000 | 972 | ||
| More than $15,000 but not more than $20,000 | $260.05 plus 3.715% of the amount in excess of $15,000 | 973 | ||
| More than $20,000 but not more than $40,000 | $445.80 plus 4.457% of the amount in excess of $20,000 | 974 | ||
| More than $40,000 but not more than $80,000 | $1,337.20 plus 5.201% of the amount in excess of $40,000 | 975 | ||
| More than $80,000 but not more than $100,000 | $3,417.60 plus 5.943% of the amount in excess of $80,000 | 976 | ||
| More than $100,000 but not more than $200,000 | $4,606.20 plus 6.9% of the amount in excess of $100,000 | 977 | ||
| More than $200,000 | $11,506.20 plus 7.5% of the amount in excess of $200,000 | 978 |
| In July of each year, beginning in 2005, the tax commissioner | 979 |
| shall adjust the income amounts prescribed in this division by | 980 |
| multiplying the percentage increase in the gross domestic product | 981 |
| deflator computed that year under section 5747.025 of the Revised | 982 |
| Code by each of the income amounts resulting from the adjustment | 983 |
| under this division in the preceding year, adding the resulting | 984 |
| product to the corresponding income amount resulting from the | 985 |
| adjustment in the preceding year, and rounding the resulting sum | 986 |
| to the nearest multiple of fifty dollars. The tax commissioner | 987 |
| also shall recompute each of the tax dollar amounts to the extent | 988 |
| necessary to reflect the adjustment of the income amounts. The | 989 |
| rates of taxation shall not be adjusted. | 990 |
| The adjusted amounts apply to taxable years beginning in the | 991 |
| calendar year in which the adjustments are made. The tax | 992 |
| commissioner shall not make such adjustments in any year in which | 993 |
| the amount resulting from the adjustment would be less than the | 994 |
| amount resulting from the adjustment in the preceding year. | 995 |
| (B) If the director of budget and management makes a | 996 |
| certification to the tax commissioner under division (B) of | 997 |
| section 131.44 of the Revised Code, the amount of tax as | 998 |
| determined under division (A) of this section shall be reduced by | 999 |
| the percentage prescribed in that certification for taxable years | 1000 |
| beginning in the calendar year in which that certification is | 1001 |
| made. | 1002 |
| (C) The levy of this tax on income does not prevent a | 1003 |
| municipal corporation, a joint economic development zone created | 1004 |
| under section 715.691, or a joint economic development district | 1005 |
| created under section 715.70 or 715.71 or sections 715.72 to | 1006 |
| 715.81 of the Revised Code from levying a tax on income. | 1007 |
| (D) This division applies only to taxable years of a trust | 1008 |
| beginning in 2002, 2003, or 2004. | 1009 |
| (1) The tax imposed by this section on a trust shall be | 1010 |
| computed by multiplying the Ohio modified taxable income of the | 1011 |
| trust by the rates prescribed by division (A)(2) of this section. | 1012 |
| (2) A credit is allowed against the tax computed under | 1013 |
| division (D) of this section equal to the lesser of (1) the tax | 1014 |
| paid to another state or the District of Columbia on the trust's | 1015 |
| modified nonbusiness income, other than the portion of the trust's | 1016 |
| nonbusiness income that is qualifying investment income as defined | 1017 |
| in section 5747.012 of the Revised Code, or (2) the effective tax | 1018 |
| rate, based on modified Ohio taxable income, multiplied by the | 1019 |
| trust's modified nonbusiness income other than the portion of | 1020 |
| trust's nonbusiness income that is qualifying investment income. | 1021 |
| The credit applies before any other applicable credits. | 1022 |
| (3) The credits enumerated in divisions (A)(1) to (13) of | 1023 |
| section 5747.98 of the Revised Code do not apply to a trust | 1024 |
| subject to this division. Any credits enumerated in other | 1025 |
| divisions of section 5747.98 of the Revised Code apply to a trust | 1026 |
| subject to this division. To the extent that the trust distributes | 1027 |
| income for the taxable year for which a credit is available to the | 1028 |
| trust, the credit shall be shared by the trust and its | 1029 |
| beneficiaries. The tax commissioner and the trust shall be guided | 1030 |
| by applicable regulations of the United States treasury regarding | 1031 |
| the sharing of credits. | 1032 |
| (E) For the purposes of this section, "trust" means any trust | 1033 |
| described in Subchapter J of Chapter 1 of the Internal Revenue | 1034 |
| Code, excluding trusts that are not irrevocable as defined in | 1035 |
| division (I) | 1036 |
| that have no modified Ohio taxable income for the taxable year, | 1037 |
| charitable remainder trusts, qualified funeral trusts and preneed | 1038 |
| funeral contract trusts established pursuant to section 1111.19 of | 1039 |
| the Revised Code that are not qualified funeral trusts, endowment | 1040 |
| and perpetual care trusts, qualified settlement trusts and funds, | 1041 |
| designated settlement trusts and funds, and trusts exempted from | 1042 |
| taxation under section 501(a) of the Internal Revenue Code. | 1043 |
| Sec. 5748.01. As used in this chapter: | 1044 |
| (A) "School district income tax" means an income tax adopted | 1045 |
| under one of the following: | 1046 |
| (1) Former section 5748.03 of the Revised Code as it existed | 1047 |
| prior to its repeal by Amended Substitute House Bill No. 291 of | 1048 |
| the 115th general assembly; | 1049 |
| (2) Section 5748.03 of the Revised Code as enacted in | 1050 |
| Substitute Senate Bill No. 28 of the 118th general assembly; | 1051 |
| (3) Section 5748.08 of the Revised Code as enacted in Amended | 1052 |
| Substitute Senate Bill No. 17 of the 122nd general assembly. | 1053 |
| (B) "Individual" means an individual subject to the tax | 1054 |
| levied by section 5747.02 of the Revised Code. | 1055 |
| (C) "Estate" means an estate subject to the tax levied by | 1056 |
| section 5747.02 of the Revised Code. | 1057 |
| (D) "Taxable year" means a taxable year as defined in | 1058 |
| division (M) of section 5747.01 of the Revised Code. | 1059 |
| (E) "Taxable income" means: | 1060 |
| (1) In the case of an individual, adjusted gross income for | 1061 |
| the taxable year as defined in division (A) of section 5747.01 of | 1062 |
| the Revised Code, less the exemptions provided by section 5747.02 | 1063 |
| of the Revised Code; | 1064 |
| (2) In the case of an estate, taxable income for the taxable | 1065 |
| year as defined in division (S) of section 5747.01 of the Revised | 1066 |
| Code. | 1067 |
| (F) | 1068 |
| 1069 |
| (1) An individual who is a resident of this state as defined | 1070 |
| in division (I) of section 5747.01 of the Revised Code during all | 1071 |
| or a portion of the taxable year and who, during all or a portion | 1072 |
| of such period of state residency, is domiciled in the school | 1073 |
| district or lives in and maintains a permanent place of abode in | 1074 |
| the school district; | 1075 |
| (2) An estate of a decedent who, at the time of death, was | 1076 |
| domiciled in the school district. | 1077 |
| (G) "School district income" means: | 1078 |
| (1) With respect to an individual, the portion of the taxable | 1079 |
| income of an individual that is received by the individual during | 1080 |
| the portion of the taxable year that the individual is a resident | 1081 |
| of the school district and the school district income tax is in | 1082 |
| effect in that school district. An individual may have school | 1083 |
| district income with respect to more than one school district. | 1084 |
| (2) With respect to an estate, the taxable income of the | 1085 |
| estate for the portion of the taxable year that the school | 1086 |
| district income tax is in effect in that school district. | 1087 |
| (H) "Taxpayer" means an individual or estate having school | 1088 |
| district income upon which a school district income tax is | 1089 |
| imposed. | 1090 |
| (I) "School district purposes" means any of the purposes for | 1091 |
| which a tax may be levied pursuant to section 5705.21 of the | 1092 |
| Revised Code. | 1093 |
| Section 2. That existing sections 5747.01, 5747.011, | 1094 |
| 5747.012, 5747.02, and 5748.01, and sections 5747.24 and 5747.25 | 1095 |
| of the Revised Code are hereby repealed. | 1096 |
| Section 3. Sections 1 and 2 of this act apply to taxable | 1097 |
| years beginning on or after January 1, 2005. | 1098 |