As Re-Referred by the House Rules and Reference Committee

126th General Assembly Regular Session 2005-2006

Sub. H. B. No. 73

Representatives Trakas, Kilbane, Latta, Gibbs, Blessing, Collier, Schaffer, Blasdel, Hagan, Brinkman, Gilb, Ujvagi, Taylor 

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A BILL

To amend sections 5747.01, 5747.24, and 5748.01, and

1

to repeal section 5747.25 of the Revised Code to

2

increase the amount of time an individual may

3

spend in Ohio before being presumed to be a

4

resident for income tax purposes and to apply the

5

residency test to active-duty military personnel.

6

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

Section 1. That sections 5747.01, 5747.24, and 5748.01 of the	7
Revised Code be amended to read as follows:	8

Sec. 5747.01.  Except as otherwise expressly provided or	9
clearly appearing from the context, any term used in this chapter	10
that is not otherwise defined in this section has the same meaning	11
as when used in a comparable context in the laws of the United	12
States relating to federal income taxes or if not used in a	13
comparable context in those laws, has the same meaning as in	14
section 5733.40 of the Revised Code. Any reference in this chapter	15
to the Internal Revenue Code includes other laws of the United	16
States relating to federal income taxes.	17

As used in this chapter:

18

(A) "Adjusted gross income" or "Ohio adjusted gross income"	19
means federal adjusted gross income, as defined and used in the	20
Internal Revenue Code, adjusted as provided in this section:	21

(1) Add interest or dividends on obligations or securities of	22
any state or of any political subdivision or authority of any	23
state, other than this state and its subdivisions and authorities.	24

(2) Add interest or dividends on obligations of any	25
authority, commission, instrumentality, territory, or possession	26
of the United States to the extent that the interest or dividends	27
are exempt from federal income taxes but not from state income	28
taxes.	29

(3) Deduct interest or dividends on obligations of the United	30
States and its territories and possessions or of any authority,	31
commission, or instrumentality of the United States to the extent	32
that the interest or dividends are included in federal adjusted	33
gross income but exempt from state income taxes under the laws of	34
the United States.	35

(4) Deduct disability and survivor's benefits to the extent	36
included in federal adjusted gross income.	37

(5) Deduct benefits under Title II of the Social Security Act	38
and tier 1 railroad retirement benefits to the extent included in	39
federal adjusted gross income under section 86 of the Internal	40
Revenue Code.	41

(6) In the case of a taxpayer who is a beneficiary of a trust	42
that makes an accumulation distribution as defined in section 665	43
of the Internal Revenue Code, add, for the beneficiary's taxable	44
years beginning before 2002, the portion, if any, of such	45
distribution that does not exceed the undistributed net income of	46
the trust for the three taxable years preceding the taxable year	47
in which the distribution is made to the extent that the portion	48
was not included in the trust's taxable income for any of the	49
trust's taxable years beginning in 2002 or thereafter.	50
"Undistributed net income of a trust" means the taxable income of	51
the trust increased by (a)(i) the additions to adjusted gross	52
income required under division (A) of this section and (ii) the	53
personal exemptions allowed to the trust pursuant to section	54
642(b) of the Internal Revenue Code, and decreased by (b)(i) the	55
deductions to adjusted gross income required under division (A) of	56
this section, (ii) the amount of federal income taxes attributable	57
to such income, and (iii) the amount of taxable income that has	58
been included in the adjusted gross income of a beneficiary by	59
reason of a prior accumulation distribution. Any undistributed net	60
income included in the adjusted gross income of a beneficiary	61
shall reduce the undistributed net income of the trust commencing	62
with the earliest years of the accumulation period.	63

(7) Deduct the amount of wages and salaries, if any, not	64
otherwise allowable as a deduction but that would have been	65
allowable as a deduction in computing federal adjusted gross	66
income for the taxable year, had the targeted jobs credit allowed	67
and determined under sections 38, 51, and 52 of the Internal	68
Revenue Code not been in effect.	69

(8) Deduct any interest or interest equivalent on public	70
obligations and purchase obligations to the extent that the	71
interest or interest equivalent is included in federal adjusted	72
gross income.	73

(9) Add any loss or deduct any gain resulting from the sale,	74
exchange, or other disposition of public obligations to the extent	75
that the loss has been deducted or the gain has been included in	76
computing federal adjusted gross income.	77

(10) Deduct or add amounts, as provided under section	78
5747.70 of the Revised Code, related to contributions to variable	79
college savings program accounts made or tuition units purchased	80
pursuant to Chapter 3334. of the Revised Code.	81

(11)(a) Deduct, to the extent not otherwise allowable as a	82
deduction or exclusion in computing federal or Ohio adjusted gross	83
income for the taxable year, the amount the taxpayer paid during	84
the taxable year for medical care insurance and qualified	85
long-term care insurance for the taxpayer, the taxpayer's spouse,	86
and dependents. No deduction for medical care insurance under	87
division (A)(11) of this section shall be allowed either to any	88
taxpayer who is eligible to participate in any subsidized health	89
plan maintained by any employer of the taxpayer or of the	90
taxpayer's spouse, or to any taxpayer who is entitled to, or on	91
application would be entitled to, benefits under part A of Title	92
XVIII of the "Social Security Act," 49 Stat. 620 (1935), 42 U.S.C.	93
301, as amended. For the purposes of division (A)(11)(a) of this	94
section, "subsidized health plan" means a health plan for which	95
the employer pays any portion of the plan's cost. The deduction	96
allowed under division (A)(11)(a) of this section shall be the net	97
of any related premium refunds, related premium reimbursements, or	98
related insurance premium dividends received during the taxable	99
year.	100

(b) Deduct, to the extent not otherwise deducted or excluded	101
in computing federal or Ohio adjusted gross income during the	102
taxable year, the amount the taxpayer paid during the taxable	103
year, not compensated for by any insurance or otherwise, for	104
medical care of the taxpayer, the taxpayer's spouse, and	105
dependents, to the extent the expenses exceed seven and one-half	106
per cent of the taxpayer's federal adjusted gross income.	107

(c) For purposes of division (A)(11) of this section,	108
"medical care" has the meaning given in section 213 of the	109
Internal Revenue Code, subject to the special rules, limitations,	110
and exclusions set forth therein, and "qualified long-term care"	111
has the same meaning given in section 7702(B)(b)B(c) of the	112
Internal Revenue Code.	113

(12)(a) Deduct any amount included in federal adjusted gross	114
income solely because the amount represents a reimbursement or	115
refund of expenses that in any year the taxpayer had deducted as	116
an itemized deduction pursuant to section 63 of the Internal	117
Revenue Code and applicable United States department of the	118
treasury regulations. The deduction otherwise allowed under	119
division (A)(12)(a) of this section shall be reduced to the extent	120
the reimbursement is attributable to an amount the taxpayer	121
deducted under this section in any taxable year.	122

(b) Add any amount not otherwise included in Ohio adjusted	123
gross income for any taxable year to the extent that the amount is	124
attributable to the recovery during the taxable year of any amount	125
deducted or excluded in computing federal or Ohio adjusted gross	126
income in any taxable year.	127

(13) Deduct any portion of the deduction described in section	128
1341(a)(2) of the Internal Revenue Code, for repaying previously	129
reported income received under a claim of right, that meets both	130
of the following requirements:	131

(a) It is allowable for repayment of an item that was	132
included in the taxpayer's adjusted gross income for a prior	133
taxable year and did not qualify for a credit under division (A)	134
or (B) of section 5747.05 of the Revised Code for that year;	135

(b) It does not otherwise reduce the taxpayer's adjusted	136
gross income for the current or any other taxable year.	137

(14) Deduct an amount equal to the deposits made to, and net	138
investment earnings of, a medical savings account during the	139
taxable year, in accordance with section 3924.66 of the Revised	140
Code. The deduction allowed by division (A)(14) of this section	141
does not apply to medical savings account deposits and earnings	142
otherwise deducted or excluded for the current or any other	143
taxable year from the taxpayer's federal adjusted gross income.	144

(15)(a) Add an amount equal to the funds withdrawn from a	145
medical savings account during the taxable year, and the net	146
investment earnings on those funds, when the funds withdrawn were	147
used for any purpose other than to reimburse an account holder	148
for, or to pay, eligible medical expenses, in accordance with	149
section 3924.66 of the Revised Code;	150

(b) Add the amounts distributed from a medical savings	151
account under division (A)(2) of section 3924.68 of the Revised	152
Code during the taxable year.	153

(16) Add any amount claimed as a credit under section	154
5747.059 of the Revised Code to the extent that such amount	155
satisfies either of the following:	156

(a) The amount was deducted or excluded from the computation	157
of the taxpayer's federal adjusted gross income as required to be	158
reported for the taxpayer's taxable year under the Internal	159
Revenue Code;	160

(b) The amount resulted in a reduction of the taxpayer's	161
federal adjusted gross income as required to be reported for any	162
of the taxpayer's taxable years under the Internal Revenue Code.	163

(17) Deduct the amount contributed by the taxpayer to an	164
individual development account program established by a county	165
department of job and family services pursuant to sections 329.11	166
to 329.14 of the Revised Code for the purpose of matching funds	167
deposited by program participants. On request of the tax	168
commissioner, the taxpayer shall provide any information that, in	169
the tax commissioner's opinion, is necessary to establish the	170
amount deducted under division (A)(17) of this section.	171

(18) Beginning in taxable year 2001 but not for any taxable	172
year beginning after December 31, 2005, if the taxpayer is married	173
and files a joint return and the combined federal adjusted gross	174
income of the taxpayer and the taxpayer's spouse for the taxable	175
year does not exceed one hundred thousand dollars, or if the	176
taxpayer is single and has a federal adjusted gross income for the	177
taxable year not exceeding fifty thousand dollars, deduct amounts	178
paid during the taxable year for qualified tuition and fees paid	179
to an eligible institution for the taxpayer, the taxpayer's	180
spouse, or any dependent of the taxpayer, who is a resident of	181
this state and is enrolled in or attending a program that	182
culminates in a degree or diploma at an eligible institution. The	183
deduction may be claimed only to the extent that qualified tuition	184
and fees are not otherwise deducted or excluded for any taxable	185
year from federal or Ohio adjusted gross income. The deduction may	186
not be claimed for educational expenses for which the taxpayer	187
claims a credit under section 5747.27 of the Revised Code.	188

(19) Add any reimbursement received during the taxable year	189
of any amount the taxpayer deducted under division (A)(18) of this	190
section in any previous taxable year to the extent the amount is	191
not otherwise included in Ohio adjusted gross income.	192

(20)(a)(i) Add five-sixths of the amount of depreciation	193
expense allowed by subsection (k) of section 168 of the Internal	194
Revenue Code, including the taxpayer's proportionate or	195
distributive share of the amount of depreciation expense allowed	196
by that subsection to a pass-through entity in which the taxpayer	197
has a direct or indirect ownership interest.	198

(ii) Add five-sixths of the amount of qualifying section 179	199
depreciation expense, including a person's proportionate or	200
distributive share of the amount of qualifying section 179	201
depreciation expense allowed to any pass-through entity in which	202
the person has a direct or indirect ownership. For the purposes of	203
this division, "qualifying section 179 depreciation expense" means	204
the difference between (I) the amount of depreciation expense	205
directly or indirectly allowed to the taxpayer under section 179	206
of the Internal Revenue Code, and (II) the amount of depreciation	207
expense directly or indirectly allowed to the taxpayer under	208
section 179 of the Internal Revenue Code as that section existed	209
on December 31, 2002.	210

The tax commissioner, under procedures established by the	211
commissioner, may waive the add-backs related to a pass-through	212
entity if the taxpayer owns, directly or indirectly, less than	213
five per cent of the pass-through entity.	214

(b) Nothing in division (A)(20) of this section shall be	215
construed to adjust or modify the adjusted basis of any asset.	216

(c) To the extent the add-back required under division	217
(A)(20)(a) of this section is attributable to property generating	218
nonbusiness income or loss allocated under section 5747.20 of the	219
Revised Code, the add-back shall be sitused to the same location	220
as the nonbusiness income or loss generated by the property for	221
the purpose of determining the credit under division (A) of	222
section 5747.05 of the Revised Code. Otherwise, the add-back shall	223
be apportioned, subject to one or more of the four alternative	224
methods of apportionment enumerated in section 5747.21 of the	225
Revised Code.	226

(d) For the purposes of division (A) of this section, net	227
operating loss carryback and carryforward shall not include	228
five-sixths of the allowance of any net operating loss deduction	229
carryback or carryforward to the taxable year to the extent such	230
loss resulted from depreciation allowed by section 168(k) of the	231
Internal Revenue Code and by the qualifying section 179	232
depreciation expense amount.	233

(21)(a) If the taxpayer was required to add an amount under	234
division (A)(20)(a) of this section for a taxable year, deduct	235
one-fifth of the amount so added for each of the five succeeding	236
taxable years.	237

(b) If the amount deducted under division (A)(21)(a) of this	238
section is attributable to an add-back allocated under division	239
(A)(20)(c) of this section, the amount deducted shall be sitused	240
to the same location. Otherwise, the add-back shall be apportioned	241
using the apportionment factors for the taxable year in which the	242
deduction is taken, subject to one or more of the four alternative	243
methods of apportionment enumerated in section 5747.21 of the	244
Revised Code.	245

(c) No deduction is available under division (A)(21)(a) of	246
this section with regard to any depreciation allowed by section	247
168(k) of the Internal Revenue Code and by the qualifying section	248
179 depreciation expense amount to the extent that such	249
depreciation resulted in or increased a federal net operating loss	250
carryback or carryforward to a taxable year to which division	251
(A)(20)(d) of this section does not apply.	252

(B) "Business income" means income, including gain or loss,	253
arising from transactions, activities, and sources in the regular	254
course of a trade or business and includes income, gain, or loss	255
from real property, tangible property, and intangible property if	256
the acquisition, rental, management, and disposition of the	257
property constitute integral parts of the regular course of a	258
trade or business operation. "Business income" includes income,	259
including gain or loss, from a partial or complete liquidation of	260
a business, including, but not limited to, gain or loss from the	261
sale or other disposition of goodwill.	262

(C) "Nonbusiness income" means all income other than business	263
income and may include, but is not limited to, compensation, rents	264
and royalties from real or tangible personal property, capital	265
gains, interest, dividends and distributions, patent or copyright	266
royalties, or lottery winnings, prizes, and awards.	267

(D) "Compensation" means any form of remuneration paid to an	268
employee for personal services.	269

(E) "Fiduciary" means a guardian, trustee, executor,	270
administrator, receiver, conservator, or any other person acting	271
in any fiduciary capacity for any individual, trust, or estate.	272

(F) "Fiscal year" means an accounting period of twelve months	273
ending on the last day of any month other than December.	274

(G) "Individual" means any natural person.

275

(H) "Internal Revenue Code" means the "Internal Revenue Code	276
of 1986," 100 Stat. 2085, 26 U.S.C.A. 1, as amended.	277

(I) "Resident" means any of the following, provided that	278
division (I)(3) of this section applies only to taxable years of a	279
trust beginning in 2002 or thereafter:	280

(1) An individual who is domiciled in this state, subject to	281
section 5747.24 of the Revised Code;	282

(2) The estate of a decedent who at the time of death was	283
domiciled in this state. The domicile tests of section 5747.24 of	284
the Revised Code and any election under section 5747.25 of the	285
Revised Code are not controlling for purposes of division (I)(2)	286
of this section.	287

(3) A trust that, in whole or part, resides in this state. If	288
only part of a trust resides in this state, the trust is a	289
resident only with respect to that part.	290

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

291

(a) A trust resides in this state for the trust's current	292
taxable year to the extent, as described in division (I)(3)(d) of	293
this section, that the trust consists directly or indirectly, in	294
whole or in part, of assets, net of any related liabilities, that	295
were transferred, or caused to be transferred, directly or	296
indirectly, to the trust by any of the following:	297

(i) A person, a court, or a governmental entity or	298
instrumentality on account of the death of a decedent, but only if	299
the trust is described in division (I)(3)(e)(i) or (ii) of this	300
section;	301

(ii) A person who was domiciled in this state for the	302
purposes of this chapter when the person directly or indirectly	303
transferred assets to an irrevocable trust, but only if at least	304
one of the trust's qualifying beneficiaries is domiciled in this	305
state for the purposes of this chapter during all or some portion	306
of the trust's current taxable year;	307

(iii) A person who was domiciled in this state for the	308
purposes of this chapter when the trust document or instrument or	309
part of the trust document or instrument became irrevocable, but	310
only if at least one of the trust's qualifying beneficiaries is a	311
resident domiciled in this state for the purposes of this chapter	312
during all or some portion of the trust's current taxable year. If	313
a trust document or instrument became irrevocable upon the death	314
of a person who at the time of death was domiciled in this state	315
for purposes of this chapter, that person is a person described in	316
division (I)(3)(a)(iii) of this section.	317

(b) A trust is irrevocable to the extent that the transferor	318
is not considered to be the owner of the net assets of the trust	319
under sections 671 to 678 of the Internal Revenue Code.	320

(c) With respect to a trust other than a charitable lead	321
trust, "qualifying beneficiary" has the same meaning as "potential	322
current beneficiary" as defined in section 1361(e)(2) of the	323
Internal Revenue Code, and with respect to a charitable lead trust	324
"qualifying beneficiary" is any current, future, or contingent	325
beneficiary, but with respect to any trust "qualifying	326
beneficiary" excludes a person or a governmental entity or	327
instrumentality to any of which a contribution would qualify for	328
the charitable deduction under section 170 of the Internal Revenue	329
Code.	330

(d) For the purposes of division (I)(3)(a) of this section,	331
the extent to which a trust consists directly or indirectly, in	332
whole or in part, of assets, net of any related liabilities, that	333
were transferred directly or indirectly, in whole or part, to the	334
trust by any of the sources enumerated in that division shall be	335
ascertained by multiplying the fair market value of the trust's	336
assets, net of related liabilities, by the qualifying ratio, which	337
shall be computed as follows:	338

(i) The first time the trust receives assets, the numerator	339
of the qualifying ratio is the fair market value of those assets	340
at that time, net of any related liabilities, from sources	341
enumerated in division (I)(3)(a) of this section. The denominator	342
of the qualifying ratio is the fair market value of all the	343
trust's assets at that time, net of any related liabilities.	344

(ii) Each subsequent time the trust receives assets, a	345
revised qualifying ratio shall be computed. The numerator of the	346
revised qualifying ratio is the sum of (1) the fair market value	347
of the trust's assets immediately prior to the subsequent	348
transfer, net of any related liabilities, multiplied by the	349
qualifying ratio last computed without regard to the subsequent	350
transfer, and (2) the fair market value of the subsequently	351
transferred assets at the time transferred, net of any related	352
liabilities, from sources enumerated in division (I)(3)(a) of this	353
section. The denominator of the revised qualifying ratio is the	354
fair market value of all the trust's assets immediately after the	355
subsequent transfer, net of any related liabilities.	356

(iii) Whether a transfer to the trust is by or from any of	357
the sources enumerated in division (I)(3)(a) of this section shall	358
be ascertained without regard to the domicile of the trust's	359
beneficiaries.	360

(e) For the purposes of division (I)(3)(a)(i) of this	361
section:	362

(i) A trust is described in division (I)(3)(e)(i) of this	363
section if the trust is a testamentary trust and the testator of	364
that testamentary trust was domiciled in this state at the time of	365
the testator's death for purposes of the taxes levied under	366
Chapter 5731. of the Revised Code.	367

(ii) A trust is described in division (I)(3)(e)(ii) of this	368
section if the transfer is a qualifying transfer described in any	369
of divisions (I)(3)(f)(i) to (vi) of this section, the trust is an	370
irrevocable inter vivos trust, and at least one of the trust's	371
qualifying beneficiaries is domiciled in this state for purposes	372
of this chapter during all or some portion of the trust's current	373
taxable year.	374

(f) For the purposes of division (I)(3)(e)(ii) of this	375
section, a "qualifying transfer" is a transfer of assets, net of	376
any related liabilities, directly or indirectly to a trust, if the	377
transfer is described in any of the following:	378

(i) The transfer is made to a trust, created by the decedent	379
before the decedent's death and while the decedent was domiciled	380
in this state for the purposes of this chapter, and, prior to the	381
death of the decedent, the trust became irrevocable while the	382
decedent was domiciled in this state for the purposes of this	383
chapter.	384

(ii) The transfer is made to a trust to which the decedent,	385
prior to the decedent's death, had directly or indirectly	386
transferred assets, net of any related liabilities, while the	387
decedent was domiciled in this state for the purposes of this	388
chapter, and prior to the death of the decedent the trust became	389
irrevocable while the decedent was domiciled in this state for the	390
purposes of this chapter.	391

(iii) The transfer is made on account of a contractual	392
relationship existing directly or indirectly between the	393
transferor and either the decedent or the estate of the decedent	394
at any time prior to the date of the decedent's death, and the	395
decedent was domiciled in this state at the time of death for	396
purposes of the taxes levied under Chapter 5731. of the Revised	397
Code.	398

(iv) The transfer is made to a trust on account of a	399
contractual relationship existing directly or indirectly between	400
the transferor and another person who at the time of the	401
decedent's death was domiciled in this state for purposes of this	402
chapter.	403

(v) The transfer is made to a trust on account of the will of	404
a testator.	405

(vi) The transfer is made to a trust created by or caused to	406
be created by a court, and the trust was directly or indirectly	407
created in connection with or as a result of the death of an	408
individual who, for purposes of the taxes levied under Chapter	409
5731. of the Revised Code, was domiciled in this state at the time	410
of the individual's death.	411

(g) The tax commissioner may adopt rules to ascertain the	412
part of a trust residing in this state.	413

(J) "Nonresident" means an individual or estate that is not a	414
resident. An individual who is a resident for only part of a	415
taxable year is a nonresident for the remainder of that taxable	416
year.	417

(K) "Pass-through entity" has the same meaning as in section	418
5733.04 of the Revised Code.	419

(L) "Return" means the notifications and reports required to	420
be filed pursuant to this chapter for the purpose of reporting the	421
tax due and includes declarations of estimated tax when so	422
required.	423

(M) "Taxable year" means the calendar year or the taxpayer's	424
fiscal year ending during the calendar year, or fractional part	425
thereof, upon which the adjusted gross income is calculated	426
pursuant to this chapter.	427

(N) "Taxpayer" means any person subject to the tax imposed by	428
section 5747.02 of the Revised Code or any pass-through entity	429
that makes the election under division (D) of section 5747.08 of	430
the Revised Code.	431

(O) "Dependents" means dependents as defined in the Internal	432
Revenue Code and as claimed in the taxpayer's federal income tax	433
return for the taxable year or which the taxpayer would have been	434
permitted to claim had the taxpayer filed a federal income tax	435
return.	436

(P) "Principal county of employment" means, in the case of a	437
nonresident, the county within the state in which a taxpayer	438
performs services for an employer or, if those services are	439
performed in more than one county, the county in which the major	440
portion of the services are performed.	441

(Q) As used in sections 5747.50 to 5747.55 of the Revised	442
Code:	443

(1) "Subdivision" means any county, municipal corporation,	444
park district, or township.	445

(2) "Essential local government purposes" includes all	446
functions that any subdivision is required by general law to	447
exercise, including like functions that are exercised under a	448
charter adopted pursuant to the Ohio Constitution.	449

(R) "Overpayment" means any amount already paid that exceeds	450
the figure determined to be the correct amount of the tax.	451

(S) "Taxable income" or "Ohio taxable income" applies only to	452
estates and trusts, and means federal taxable income, as defined	453
and used in the Internal Revenue Code, adjusted as follows:	454

(1) Add interest or dividends, net of ordinary, necessary,	455
and reasonable expenses not deducted in computing federal taxable	456
income, on obligations or securities of any state or of any	457
political subdivision or authority of any state, other than this	458
state and its subdivisions and authorities, but only to the extent	459
that such net amount is not otherwise includible in Ohio taxable	460
income and is described in either division (S)(1)(a) or (b) of	461
this section:	462

(a) The net amount is not attributable to the S portion of an	463
electing small business trust and has not been distributed to	464
beneficiaries for the taxable year;	465

(b) The net amount is attributable to the S portion of an	466
electing small business trust for the taxable year.	467

(2) Add interest or dividends, net of ordinary, necessary,	468
and reasonable expenses not deducted in computing federal taxable	469
income, on obligations of any authority, commission,	470
instrumentality, territory, or possession of the United States to	471
the extent that the interest or dividends are exempt from federal	472
income taxes but not from state income taxes, but only to the	473
extent that such net amount is not otherwise includible in Ohio	474
taxable income and is described in either division (S)(1)(a) or	475
(b) of this section;	476

(3) Add the amount of personal exemption allowed to the	477
estate pursuant to section 642(b) of the Internal Revenue Code;	478

(4) Deduct interest or dividends, net of related expenses	479
deducted in computing federal taxable income, on obligations of	480
the United States and its territories and possessions or of any	481
authority, commission, or instrumentality of the United States to	482
the extent that the interest or dividends are exempt from state	483
taxes under the laws of the United States, but only to the extent	484
that such amount is included in federal taxable income and is	485
described in either division (S)(1)(a) or (b) of this section;	486

(5) Deduct the amount of wages and salaries, if any, not	487
otherwise allowable as a deduction but that would have been	488
allowable as a deduction in computing federal taxable income for	489
the taxable year, had the targeted jobs credit allowed under	490
sections 38, 51, and 52 of the Internal Revenue Code not been in	491
effect, but only to the extent such amount relates either to	492
income included in federal taxable income for the taxable year or	493
to income of the S portion of an electing small business trust for	494
the taxable year;	495

(6) Deduct any interest or interest equivalent, net of	496
related expenses deducted in computing federal taxable income, on	497
public obligations and purchase obligations, but only to the	498
extent that such net amount relates either to income included in	499
federal taxable income for the taxable year or to income of the S	500
portion of an electing small business trust for the taxable year;	501

(7) Add any loss or deduct any gain resulting from sale,	502
exchange, or other disposition of public obligations to the extent	503
that such loss has been deducted or such gain has been included in	504
computing either federal taxable income or income of the S portion	505
of an electing small business trust for the taxable year;	506

(8) Except in the case of the final return of an estate, add	507
any amount deducted by the taxpayer on both its Ohio estate tax	508
return pursuant to section 5731.14 of the Revised Code, and on its	509
federal income tax return in determining federal taxable income;	510

(9)(a) Deduct any amount included in federal taxable income	511
solely because the amount represents a reimbursement or refund of	512
expenses that in a previous year the decedent had deducted as an	513
itemized deduction pursuant to section 63 of the Internal Revenue	514
Code and applicable treasury regulations. The deduction otherwise	515
allowed under division (S)(9)(a) of this section shall be reduced	516
to the extent the reimbursement is attributable to an amount the	517
taxpayer or decedent deducted under this section in any taxable	518
year.	519

(b) Add any amount not otherwise included in Ohio taxable	520
income for any taxable year to the extent that the amount is	521
attributable to the recovery during the taxable year of any amount	522
deducted or excluded in computing federal or Ohio taxable income	523
in any taxable year, but only to the extent such amount has not	524
been distributed to beneficiaries for the taxable year.	525

(10) Deduct any portion of the deduction described in section	526
1341(a)(2) of the Internal Revenue Code, for repaying previously	527
reported income received under a claim of right, that meets both	528
of the following requirements:	529

(a) It is allowable for repayment of an item that was	530
included in the taxpayer's taxable income or the decedent's	531
adjusted gross income for a prior taxable year and did not qualify	532
for a credit under division (A) or (B) of section 5747.05 of the	533
Revised Code for that year.	534

(b) It does not otherwise reduce the taxpayer's taxable	535
income or the decedent's adjusted gross income for the current or	536
any other taxable year.	537

(11) Add any amount claimed as a credit under section	538
5747.059 of the Revised Code to the extent that the amount	539
satisfies either of the following:	540

(a) The amount was deducted or excluded from the computation	541
of the taxpayer's federal taxable income as required to be	542
reported for the taxpayer's taxable year under the Internal	543
Revenue Code;	544

(b) The amount resulted in a reduction in the taxpayer's	545
federal taxable income as required to be reported for any of the	546
taxpayer's taxable years under the Internal Revenue Code.	547

(12) Deduct any amount, net of related expenses deducted in	548
computing federal taxable income, that a trust is required to	549
report as farm income on its federal income tax return, but only	550
if the assets of the trust include at least ten acres of land	551
satisfying the definition of "land devoted exclusively to	552
agricultural use" under section 5713.30 of the Revised Code,	553
regardless of whether the land is valued for tax purposes as such	554
land under sections 5713.30 to 5713.38 of the Revised Code. If the	555
trust is a pass-thoughpass-through entity investor, section	556
5747.231 of the Revised Code applies in ascertaining if the trust	557
is eligible to claim the deduction provided by division (S)(12) of	558
this section in connection with the pass-through entity's farm	559
income.	560

Except for farm income attributable to the S portion of an	561
electing small business trust, the deduction provided by division	562
(S)(12) of this section is allowed only to the extent that the	563
trust has not distributed such farm income. Division (S)(12) of	564
this section applies only to taxable years of a trust beginning in	565
2002 or thereafter.	566

(13) Add the net amount of income described in section 641(c)	567
of the Internal Revenue Code to the extent that amount is not	568
included in federal taxable income.	569

(14) Add or deduct the amount the taxpayer would be required	570
to add or deduct under division (A)(20) or (21) of this section if	571
the taxpayer's Ohio taxable income were computed in the same	572
manner as an individual's Ohio adjusted gross income is computed	573
under this section. In the case of a trust, division (S)(14) of	574
this section applies only to any of the trust's taxable years	575
beginning in 2002 or thereafter.	576

(T) "School district income" and "school district income tax"	577
have the same meanings as in section 5748.01 of the Revised Code.	578

(U) As used in divisions (A)(8), (A)(9), (S)(6), and (S)(7)	579
of this section, "public obligations," "purchase obligations," and	580
"interest or interest equivalent" have the same meanings as in	581
section 5709.76 of the Revised Code.	582

(V) "Limited liability company" means any limited liability	583
company formed under Chapter 1705. of the Revised Code or under	584
the laws of any other state.	585

(W) "Pass-through entity investor" means any person who,	586
during any portion of a taxable year of a pass-through entity, is	587
a partner, member, shareholder, or equity investor in that	588
pass-through entity.	589

(X) "Banking day" has the same meaning as in section 1304.01	590
of the Revised Code.	591

(Y) "Month" means a calendar month.

592

(Z) "Quarter" means the first three months, the second three	593
months, the third three months, or the last three months of the	594
taxpayer's taxable year.	595

(AA)(1) "Eligible institution" means a state university or	596
state institution of higher education as defined in section	597
3345.011 of the Revised Code, or a private, nonprofit college,	598
university, or other post-secondary institution located in this	599
state that possesses a certificate of authorization issued by the	600
Ohio board of regents pursuant to Chapter 1713. of the Revised	601
Code or a certificate of registration issued by the state board of	602
career colleges and schools under Chapter 3332. of the Revised	603
Code.	604

(2) "Qualified tuition and fees" means tuition and fees	605
imposed by an eligible institution as a condition of enrollment or	606
attendance, not exceeding two thousand five hundred dollars in	607
each of the individual's first two years of post-secondary	608
education. If the individual is a part-time student, "qualified	609
tuition and fees" includes tuition and fees paid for the academic	610
equivalent of the first two years of post-secondary education	611
during a maximum of five taxable years, not exceeding a total of	612
five thousand dollars. "Qualified tuition and fees" does not	613
include:	614

(a) Expenses for any course or activity involving sports,	615
games, or hobbies unless the course or activity is part of the	616
individual's degree or diploma program;	617

(b) The cost of books, room and board, student activity fees,	618
athletic fees, insurance expenses, or other expenses unrelated to	619
the individual's academic course of instruction;	620

(c) Tuition, fees, or other expenses paid or reimbursed	621
through an employer, scholarship, grant in aid, or other	622
educational benefit program.	623

(BB)(1) "Modified business income" means the business income	624
included in a trust's Ohio taxable income after such taxable	625
income is first reduced by the qualifying trust amount, if any.	626

(2) "Qualifying trust amount" of a trust means capital gains	627
and losses from the sale, exchange, or other disposition of equity	628
or ownership interests in, or debt obligations of, a qualifying	629
investee to the extent included in the trust's Ohio taxable	630
income, but only if the following requirements are satisfied:	631

(a) The book value of the qualifying investee's physical	632
assets in this state and everywhere, as of the last day of the	633
qualifying investee's fiscal or calendar year ending immediately	634
prior to the date on which the trust recognizes the gain or loss,	635
is available to the trust.	636

(b) The requirements of section 5747.011 of the Revised Code	637
are satisfied for the trust's taxable year in which the trust	638
recognizes the gain or loss.	639

Any gain or loss that is not a qualifying trust amount is	640
modified business income, qualifying investment income, or	641
modified nonbusiness income, as the case may be.	642

(3) "Modified nonbusiness income" means a trust's Ohio	643
taxable income other than modified business income, other than the	644
qualifying trust amount, and other than qualifying investment	645
income, as defined in section 5747.012 of the Revised Code, to the	646
extent such qualifying investment income is not otherwise part of	647
modified business income.	648

(4) "Modified Ohio taxable income" applies only to trusts,	649
and means the sum of the amounts described in divisions (BB)(4)(a)	650
to (c) of this section:	651

(a) The fraction, calculated under section 5747.013, and	652
applying section 5747.231 of the Revised Code, multiplied by the	653
sum of the following amounts:	654

(i) The trust's modified business income;

655

(ii) The trust's qualifying investment income, as defined in	656
section 5747.012 of the Revised Code, but only to the extent the	657
qualifying investment income does not otherwise constitute	658
modified business income and does not otherwise constitute a	659
qualifying trust amount.	660

(b) The qualifying trust amount multiplied by a fraction, the	661
numerator of which is the sum of the book value of the qualifying	662
investee's physical assets in this state on the last day of the	663
qualifying investee's fiscal or calendar year ending immediately	664
prior to the day on which the trust recognizes the qualifying	665
trust amount, and the denominator of which is the sum of the book	666
value of the qualifying investee's total physical assets	667
everywhere on the last day of the qualifying investee's fiscal or	668
calendar year ending immediately prior to the day on which the	669
trust recognizes the qualifying trust amount. If, for a taxable	670
year, the trust recognizes a qualifying trust amount with respect	671
to more than one qualifying investee, the amount described in	672
division (BB)(4)(b) of this section shall equal the sum of the	673
products so computed for each such qualifying investee.	674

(c)(i) With respect to a trust or portion of a trust that is	675
a resident as ascertained in accordance with division (I)(3)(d) of	676
this section, its modified nonbusiness income.	677

(ii) With respect to a trust or portion of a trust that is	678
not a resident as ascertained in accordance with division	679
(I)(3)(d) of this section, the amount of its modified nonbusiness	680
income satisfying the descriptions in divisions (B)(2) to (5) of	681
section 5747.20 of the Revised Code.	682

If the allocation and apportionment of a trust's income under	683
divisions (BB)(4)(a) and (c) of this section do not fairly	684
represent the modified Ohio taxable income of the trust in this	685
state, the alternative methods described in division (C) of	686
section 5747.21 of the Revised Code may be applied in the manner	687
and to the same extent provided in that section.	688

(5)(a) Except as set forth in division (BB)(5)(b) of this	689
section, "qualifying investee" means a person in which a trust has	690
an equity or ownership interest, or a person or unit of government	691
the debt obligations of either of which are owned by a trust. For	692
the purposes of division (BB)(2)(a) of this section and for the	693
purpose of computing the fraction described in division (BB)(4)(b)	694
of this section, all of the following apply:	695

(i) If the qualifying investee is a member of a qualifying	696
controlled group on the last day of the qualifying investee's	697
fiscal or calendar year ending immediately prior to the date on	698
which the trust recognizes the gain or loss, then "qualifying	699
investee" includes all persons in the qualifying controlled group	700
on such last day.	701

(ii) If the qualifying investee, or if the qualifying	702
investee and any members of the qualifying controlled group of	703
which the qualifying investee is a member on the last day of the	704
qualifying investee's fiscal or calendar year ending immediately	705
prior to the date on which the trust recognizes the gain or loss,	706
separately or cumulatively own, directly or indirectly, on the	707
last day of the qualifying investee's fiscal or calendar year	708
ending immediately prior to the date on which the trust recognizes	709
the qualifying trust amount, more than fifty per cent of the	710
equity of a pass-through entity, then the qualifying investee and	711
the other members are deemed to own the proportionate share of the	712
pass-through entity's physical assets which the pass-through	713
entity directly or indirectly owns on the last day of the	714
pass-through entity's calendar or fiscal year ending within or	715
with the last day of the qualifying investee's fiscal or calendar	716
year ending immediately prior to the date on which the trust	717
recognizes the qualifying trust amount.	718

(iii) For the purposes of division (BB)(5)(a)(iii) of this	719
section, "upper level pass-through entity" means a pass-through	720
entity directly or indirectly owning any equity of another	721
pass-through entity, and "lower level pass-through entity" means	722
that other pass-through entity.	723

An upper level pass-through entity, whether or not it is also	724
a qualifying investee, is deemed to own, on the last day of the	725
upper level pass-through entity's calendar or fiscal year, the	726
proportionate share of the lower level pass-through entity's	727
physical assets that the lower level pass-through entity directly	728
or indirectly owns on the last day of the lower level pass-through	729
entity's calendar or fiscal year ending within or with the last	730
day of the upper level pass-through entity's fiscal or calendar	731
year. If the upper level pass-through entity directly and	732
indirectly owns less than fifty per cent of the equity of the	733
lower level pass-through entity on each day of the upper level	734
pass-through entity's calendar or fiscal year in which or with	735
which ends the calendar or fiscal year of the lower level	736
pass-through entity and if, based upon clear and convincing	737
evidence, complete information about the location and cost of the	738
physical assets of the lower pass-through entity is not available	739
to the upper level pass-through entity, then solely for purposes	740
of ascertaining if a gain or loss constitutes a qualifying trust	741
amount, the upper level pass-through entity shall be deemed as	742
owning no equity of the lower level pass-through entity for each	743
day during the upper level pass-through entity's calendar or	744
fiscal year in which or with which ends the lower level	745
pass-through entity's calendar or fiscal year. Nothing in division	746
(BB)(5)(a)(iii) of this section shall be construed to provide for	747
any deduction or exclusion in computing any trust's Ohio taxable	748
income.	749

(b) With respect to a trust that is not a resident for the	750
taxable year and with respect to a part of a trust that is not a	751
resident for the taxable year, "qualifying investee" for that	752
taxable year does not include a C corporation if both of the	753
following apply:	754

(i) During the taxable year the trust or part of the trust	755
recognizes a gain or loss from the sale, exchange, or other	756
disposition of equity or ownership interests in, or debt	757
obligations of, the C corporation.	758

(ii) Such gain or loss constitutes nonbusiness income.

759

(6) "Available" means information is such that a person is	760
able to learn of the information by the due date plus extensions,	761
if any, for filing the return for the taxable year in which the	762
trust recognizes the gain or loss.	763

(CC) "Qualifying controlled group" has the same meaning as in	764
section 5733.04 of the Revised Code.	765

(DD) "Related member" has the same meaning as in section	766
5733.042 of the Revised Code.	767

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

768

(a) "Qualifying person" means any person other than a	769
qualifying corporation.	770

(b) "Qualifying corporation" means any person classified for	771
federal income tax purposes as an association taxable as a	772
corporation, except either of the following:	773

(i) A corporation that has made an election under subchapter	774
S, chapter one, subtitle A, of the Internal Revenue Code for its	775
taxable year ending within, or on the last day of, the investor's	776
taxable year;	777

(ii) A subsidiary that is wholly owned by any corporation	778
that has made an election under subchapter S, chapter one,	779
subtitle A of the Internal Revenue Code for its taxable year	780
ending within, or on the last day of, the investor's taxable year.	781

(2) For the purposes of this chapter, unless expressly stated	782
otherwise, no qualifying person indirectly owns any asset directly	783
or indirectly owned by any qualifying corporation.	784

Sec. 5747.24.  This section is to be usedapplied solely for	785
the purposes of Chapters 5747. and 5748. of the Revised Code. This	786
section applies to individuals, including individuals who are	787
serving on active duty service in the United States army, air	788
force, navy, marine corps, or coast guard, reserve components	789
thereof, or national guard during the individual's taxable year,	790
notwithstanding a declaration or indication of residency in this	791
state in the "state of legal residence" form (department of	792
defense form 2058) or other declaration of a home of record	793
serving the same purpose as that form.	794

(A)(1) As used in this section and section 5747.25 of the	795
Revised Code:	796

(a) Except as otherwise provided in division (A)(2) of this	797
section, an individual "has one contact period in this state" if	798
the individual is away overnight from the individual's abode	799
located outside this state and while away overnight from that	800
abode spends at least some portion, however minimal, of each of	801
two consecutive days in this state.	802

(b) An individual is considered to be "away overnight from	803
the individual's abode located outside this state" if the	804
individual is away from the individual's abode located outside	805
this state for a continuous period of time, however minimal,	806
beginning at any time on one day and ending at any time on the	807
next day.	808

(c) "Medical hardship" includes circumstances under which the	809
individual or a member of the individual's immediate or extended	810
family is admitted as a patient into a hospital located in this	811
state, examined in this state by a medical professional, admitted	812
into a nursing home in this state, receiving nursing care in this	813
state while staying in a dwelling located in this state, or	814
otherwise receiving ongoing, necessary medical care in this state.	815
"Medical hardship" includes receiving treatment or care for acute	816
or chronic illness or obstetric treatment or care.	817

(d) "Medical professional" means a person licensed under	818
Chapter 4715., 4723., 4725., 4729., 4730., 4731., 4732., 4734.,	819
4753., 4755., 4757., 4759., 4760., 4761., 4762., or 4773. of the	820
Revised Code.	821

(e) "Immediate or extended family" of an individual means the	822
individual's spouse, children, grandchildren, parents,	823
grandparents, siblings, in-laws, or any of the individual's	824
dependents.	825

(2) Up to thirtyAny periods that would otherwise constitute	826
contact periods under division (A)(1)(a) of this section shall not	827
be considered contact periods during a taxable year if the	828
individual spends any portion of either day of each such contact	829
period for one or more of the following purposes:	830

(a) Toto provide services for no consideration or to raise	831
funds for an organization described in section 501(c)(3) of the	832
Internal Revenue Code, or to serve for no consideration on a body	833
serving a public or philanthropic purpose, including a study	834
committee or other body formed or dedicated to examine matters of	835
interest to the general public or to make recommendations	836
regarding such matters. "Consideration" does not include any	837
reimbursement of the individual's actual expenses directly or	838
indirectly related to such activity.	839

(b) To attend to a medical hardship involving the individual	840
or a member of the individual's immediate or extended family or to	841
attend a funeral involving a member of the individual's immediate	842
or extended family.	843

(B) An individual who during a taxable year has no more than	844
one hundred twentyeighty-two contact periods in this state, which	845
need not be consecutive, and who during the entire taxable year	846
has at least one abode outside this state, is presumed to be not	847
domiciled in this state during the taxable year. The tax	848
commissioner, in writing and by personal service or certified	849
mail, return receipt requested, may request a statement from an	850
individual verifying that the individual was not domiciled in this	851
state under this division during the taxable year. The	852
commissioner shall not make such a request after the expiration of	853
the period, if any, within which the commissioner may make an	854
assessment under section 5747.13 of the Revised Code against the	855
individual for the taxable year. Within sixty days after receiving	856
the commissioner's request, the individual shall submit a written	857
statement to the commissioner stating both of the following:	858

(1) During the entire taxable year, the individual was not	859
domiciled in this state;	860

(2) During the entire taxable year, the individual had at	861
least one abode outside this state.	862

The presumption that the individual was not domiciled in this	863
state is irrebuttable unless either the individual fails to timely	864
submit the statement as required or the statement is fraudulent.	865
If the individual fails to timely submit the statement as	866
required, the individual is presumed under division (C) of this	867
section to have been domiciled in this state the entire taxable	868
year.	869

In the case of an individual who dies, the personal	870
representative of the estate of the deceased individual may comply	871
with this division by making to the best of the representative's	872
knowledge and belief the statement under this division with	873
respect to the deceased individual, and submitting the statement	874
to the commissioner within sixty days after receiving the	875
commissioner's request for it.	876

An individual or personal representative of an estate who	877
knowingly makes a false statement under this division is guilty of	878
perjury under section 2921.11 of the Revised Code.	879

(C) An individual who during a taxable year has less than one	880
hundred eighty-three contact periods in this state, which need not	881
be consecutive, and who is not irrebuttably presumed under	882
division (B) of this section to be not domiciled in this state	883
with respect to that taxable year, is presumed to be domiciled in	884
this state for the entire taxable year. An individual can rebut	885
this presumption for any portion of the taxable year only with a	886
preponderance of the evidence to the contrary. An individual who	887
rebuts the presumption under this division for any portion of the	888
taxable year is presumed to be domiciled in this state for the	889
remainder of the taxable year for which the individual does not	890
provide a preponderance of the evidence to the contrary.	891

(D) An individual who during a taxable year has at least one	892
hundred eighty-three contact periods in this state, which need not	893
be consecutive, is presumed to be domiciled in this state for the	894
entire taxable year. An individual can rebut this presumption for	895
any portion of the taxable year only with clear and convincing	896
evidence to the contrary. An individual who rebuts the presumption	897
under this division for any portion of the taxable year is	898
presumed to be domiciled in this state for the remainder of the	899
taxable year for which the individual does not provide clear and	900
convincing evidence to the contrary.	901

(E)(D) If the tax commissioner challenges the number of	902
contact periods an individual claims to have in this state during	903
a taxable year, the individual bears the burden of proof to verify	904
such number, by a preponderance of the evidence. An individual	905
challenged by the commissioner is presumed to have a contact	906
period in this state for any period for which hethe individual	907
does not prove by a preponderance of the evidence that the	908
individual had no such contact period.	909

Sec. 5748.01.  As used in this chapter:

910

(A) "School district income tax" means an income tax adopted	911
under one of the following:	912

(1) Former section 5748.03 of the Revised Code as it existed	913
prior to its repeal by Amended Substitute House Bill No. 291 of	914
the 115th general assembly;	915

(2) Section 5748.03 of the Revised Code as enacted in	916
Substitute Senate Bill No. 28 of the 118th general assembly;	917

(3) Section 5748.08 of the Revised Code as enacted in Amended	918
Substitute Senate Bill No. 17 of the 122nd general assembly.	919

(B) "Individual" means an individual subject to the tax	920
levied by section 5747.02 of the Revised Code.	921

(C) "Estate" means an estate subject to the tax levied by	922
section 5747.02 of the Revised Code.	923

(D) "Taxable year" means a taxable year as defined in	924
division (M) of section 5747.01 of the Revised Code.	925

(E) "Taxable income" means:

926

(1) In the case of an individual, one of the following, as	927
specified in the resolution imposing the tax:	928

(a) Ohio adjusted gross income for the taxable year as	929
defined in division (A) of section 5747.01 of the Revised Code,	930
less the exemptions provided by section 5747.02 of the Revised	931
Code;	932

(b) Wages, salaries, tips, and other employee compensation to	933
the extent included in Ohio adjusted gross income as defined in	934
section 5747.01 of the Revised Code, and net earnings from	935
self-employment, as defined in section 1402(a) of the Internal	936
Revenue Code, to the extent included in Ohio adjusted gross	937
income.	938

(2) In the case of an estate, taxable income for the taxable	939
year as defined in division (S) of section 5747.01 of the Revised	940
Code.	941

(F) Except as provided in section 5747.25 of the Revised	942
Code, "resident""Resident" of the school district means:	943

(1) An individual who is a resident of this state as defined	944
in division (I) of section 5747.01 of the Revised Code during all	945
or a portion of the taxable year and who, during all or a portion	946
of such period of state residency, is domiciled in the school	947
district or lives in and maintains a permanent place of abode in	948
the school district;	949

(2) An estate of a decedent who, at the time of death, was	950
domiciled in the school district.	951

(G) "School district income" means:

952

(1) With respect to an individual, the portion of the taxable	953
income of an individual that is received by the individual during	954
the portion of the taxable year that the individual is a resident	955
of the school district and the school district income tax is in	956
effect in that school district. An individual may have school	957
district income with respect to more than one school district.	958

(2) With respect to an estate, the taxable income of the	959
estate for the portion of the taxable year that the school	960
district income tax is in effect in that school district.	961

(H) "Taxpayer" means an individual or estate having school	962
district income upon which a school district income tax is	963
imposed.	964

(I) "School district purposes" means any of the purposes for	965
which a tax may be levied pursuant to section 5705.21 of the	966
Revised Code.	967

Section 2. That existing sections 5747.01, 5747.24, and	968
5748.01, and section 5747.25 of the Revised Code are hereby	969
repealed.	970

Section 3. Sections 1 and 2 of this act apply to taxable	971
years beginning on or after January 1, 2006.	972