As Re-Reported by the House Ways and Means 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.

5

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	6
Revised Code be amended to read as follows:	7

Sec. 5747.01.  Except as otherwise expressly provided or	8
clearly appearing from the context, any term used in this chapter	9
that is not otherwise defined in this section has the same meaning	10
as when used in a comparable context in the laws of the United	11
States relating to federal income taxes or if not used in a	12
comparable context in those laws, has the same meaning as in	13
section 5733.40 of the Revised Code. Any reference in this chapter	14
to the Internal Revenue Code includes other laws of the United	15
States relating to federal income taxes.	16

As used in this chapter:

17

(A) "Adjusted gross income" or "Ohio adjusted gross income"	18
means federal adjusted gross income, as defined and used in the	19
Internal Revenue Code, adjusted as provided in this section:	20

(1) Add interest or dividends on obligations or securities of	21
any state or of any political subdivision or authority of any	22
state, other than this state and its subdivisions and authorities.	23

(2) Add interest or dividends on obligations of any	24
authority, commission, instrumentality, territory, or possession	25
of the United States to the extent that the interest or dividends	26
are exempt from federal income taxes but not from state income	27
taxes.	28

(3) Deduct interest or dividends on obligations of the United	29
States and its territories and possessions or of any authority,	30
commission, or instrumentality of the United States to the extent	31
that the interest or dividends are included in federal adjusted	32
gross income but exempt from state income taxes under the laws of	33
the United States.	34

(4) Deduct disability and survivor's benefits to the extent	35
included in federal adjusted gross income.	36

(5) Deduct benefits under Title II of the Social Security Act	37
and tier 1 railroad retirement benefits to the extent included in	38
federal adjusted gross income under section 86 of the Internal	39
Revenue Code.	40

(6) In the case of a taxpayer who is a beneficiary of a trust	41
that makes an accumulation distribution as defined in section 665	42
of the Internal Revenue Code, add, for the beneficiary's taxable	43
years beginning before 2002, the portion, if any, of such	44
distribution that does not exceed the undistributed net income of	45
the trust for the three taxable years preceding the taxable year	46
in which the distribution is made to the extent that the portion	47
was not included in the trust's taxable income for any of the	48
trust's taxable years beginning in 2002 or thereafter.	49
"Undistributed net income of a trust" means the taxable income of	50
the trust increased by (a)(i) the additions to adjusted gross	51
income required under division (A) of this section and (ii) the	52
personal exemptions allowed to the trust pursuant to section	53
642(b) of the Internal Revenue Code, and decreased by (b)(i) the	54
deductions to adjusted gross income required under division (A) of	55
this section, (ii) the amount of federal income taxes attributable	56
to such income, and (iii) the amount of taxable income that has	57
been included in the adjusted gross income of a beneficiary by	58
reason of a prior accumulation distribution. Any undistributed net	59
income included in the adjusted gross income of a beneficiary	60
shall reduce the undistributed net income of the trust commencing	61
with the earliest years of the accumulation period.	62

(7) Deduct the amount of wages and salaries, if any, not	63
otherwise allowable as a deduction but that would have been	64
allowable as a deduction in computing federal adjusted gross	65
income for the taxable year, had the targeted jobs credit allowed	66
and determined under sections 38, 51, and 52 of the Internal	67
Revenue Code not been in effect.	68

(8) Deduct any interest or interest equivalent on public	69
obligations and purchase obligations to the extent that the	70
interest or interest equivalent is included in federal adjusted	71
gross income.	72

(9) Add any loss or deduct any gain resulting from the sale,	73
exchange, or other disposition of public obligations to the extent	74
that the loss has been deducted or the gain has been included in	75
computing federal adjusted gross income.	76

(10) Deduct or add amounts, as provided under section	77
5747.70 of the Revised Code, related to contributions to variable	78
college savings program accounts made or tuition units purchased	79
pursuant to Chapter 3334. of the Revised Code.	80

(11)(a) Deduct, to the extent not otherwise allowable as a	81
deduction or exclusion in computing federal or Ohio adjusted gross	82
income for the taxable year, the amount the taxpayer paid during	83
the taxable year for medical care insurance and qualified	84
long-term care insurance for the taxpayer, the taxpayer's spouse,	85
and dependents. No deduction for medical care insurance under	86
division (A)(11) of this section shall be allowed either to any	87
taxpayer who is eligible to participate in any subsidized health	88
plan maintained by any employer of the taxpayer or of the	89
taxpayer's spouse, or to any taxpayer who is entitled to, or on	90
application would be entitled to, benefits under part A of Title	91
XVIII of the "Social Security Act," 49 Stat. 620 (1935), 42 U.S.C.	92
301, as amended. For the purposes of division (A)(11)(a) of this	93
section, "subsidized health plan" means a health plan for which	94
the employer pays any portion of the plan's cost. The deduction	95
allowed under division (A)(11)(a) of this section shall be the net	96
of any related premium refunds, related premium reimbursements, or	97
related insurance premium dividends received during the taxable	98
year.	99

(b) Deduct, to the extent not otherwise deducted or excluded	100
in computing federal or Ohio adjusted gross income during the	101
taxable year, the amount the taxpayer paid during the taxable	102
year, not compensated for by any insurance or otherwise, for	103
medical care of the taxpayer, the taxpayer's spouse, and	104
dependents, to the extent the expenses exceed seven and one-half	105
per cent of the taxpayer's federal adjusted gross income.	106

(c) For purposes of division (A)(11) of this section,	107
"medical care" has the meaning given in section 213 of the	108
Internal Revenue Code, subject to the special rules, limitations,	109
and exclusions set forth therein, and "qualified long-term care"	110
has the same meaning given in section 7702(B)(b)B(c) of the	111
Internal Revenue Code.	112

(12)(a) Deduct any amount included in federal adjusted gross	113
income solely because the amount represents a reimbursement or	114
refund of expenses that in any year the taxpayer had deducted as	115
an itemized deduction pursuant to section 63 of the Internal	116
Revenue Code and applicable United States department of the	117
treasury regulations. The deduction otherwise allowed under	118
division (A)(12)(a) of this section shall be reduced to the extent	119
the reimbursement is attributable to an amount the taxpayer	120
deducted under this section in any taxable year.	121

(b) Add any amount not otherwise included in Ohio adjusted	122
gross income for any taxable year to the extent that the amount is	123
attributable to the recovery during the taxable year of any amount	124
deducted or excluded in computing federal or Ohio adjusted gross	125
income in any taxable year.	126

(13) Deduct any portion of the deduction described in section	127
1341(a)(2) of the Internal Revenue Code, for repaying previously	128
reported income received under a claim of right, that meets both	129
of the following requirements:	130

(a) It is allowable for repayment of an item that was	131
included in the taxpayer's adjusted gross income for a prior	132
taxable year and did not qualify for a credit under division (A)	133
or (B) of section 5747.05 of the Revised Code for that year;	134

(b) It does not otherwise reduce the taxpayer's adjusted	135
gross income for the current or any other taxable year.	136

(14) Deduct an amount equal to the deposits made to, and net	137
investment earnings of, a medical savings account during the	138
taxable year, in accordance with section 3924.66 of the Revised	139
Code. The deduction allowed by division (A)(14) of this section	140
does not apply to medical savings account deposits and earnings	141
otherwise deducted or excluded for the current or any other	142
taxable year from the taxpayer's federal adjusted gross income.	143

(15)(a) Add an amount equal to the funds withdrawn from a	144
medical savings account during the taxable year, and the net	145
investment earnings on those funds, when the funds withdrawn were	146
used for any purpose other than to reimburse an account holder	147
for, or to pay, eligible medical expenses, in accordance with	148
section 3924.66 of the Revised Code;	149

(b) Add the amounts distributed from a medical savings	150
account under division (A)(2) of section 3924.68 of the Revised	151
Code during the taxable year.	152

(16) Add any amount claimed as a credit under section	153
5747.059 of the Revised Code to the extent that such amount	154
satisfies either of the following:	155

(a) The amount was deducted or excluded from the computation	156
of the taxpayer's federal adjusted gross income as required to be	157
reported for the taxpayer's taxable year under the Internal	158
Revenue Code;	159

(b) The amount resulted in a reduction of the taxpayer's	160
federal adjusted gross income as required to be reported for any	161
of the taxpayer's taxable years under the Internal Revenue Code.	162

(17) Deduct the amount contributed by the taxpayer to an	163
individual development account program established by a county	164
department of job and family services pursuant to sections 329.11	165
to 329.14 of the Revised Code for the purpose of matching funds	166
deposited by program participants. On request of the tax	167
commissioner, the taxpayer shall provide any information that, in	168
the tax commissioner's opinion, is necessary to establish the	169
amount deducted under division (A)(17) of this section.	170

(18) Beginning in taxable year 2001 but not for any taxable	171
year beginning after December 31, 2005, if the taxpayer is married	172
and files a joint return and the combined federal adjusted gross	173
income of the taxpayer and the taxpayer's spouse for the taxable	174
year does not exceed one hundred thousand dollars, or if the	175
taxpayer is single and has a federal adjusted gross income for the	176
taxable year not exceeding fifty thousand dollars, deduct amounts	177
paid during the taxable year for qualified tuition and fees paid	178
to an eligible institution for the taxpayer, the taxpayer's	179
spouse, or any dependent of the taxpayer, who is a resident of	180
this state and is enrolled in or attending a program that	181
culminates in a degree or diploma at an eligible institution. The	182
deduction may be claimed only to the extent that qualified tuition	183
and fees are not otherwise deducted or excluded for any taxable	184
year from federal or Ohio adjusted gross income. The deduction may	185
not be claimed for educational expenses for which the taxpayer	186
claims a credit under section 5747.27 of the Revised Code.	187

(19) Add any reimbursement received during the taxable year	188
of any amount the taxpayer deducted under division (A)(18) of this	189
section in any previous taxable year to the extent the amount is	190
not otherwise included in Ohio adjusted gross income.	191

(20)(a)(i) Add five-sixths of the amount of depreciation	192
expense allowed by subsection (k) of section 168 of the Internal	193
Revenue Code, including the taxpayer's proportionate or	194
distributive share of the amount of depreciation expense allowed	195
by that subsection to a pass-through entity in which the taxpayer	196
has a direct or indirect ownership interest.	197

(ii) Add five-sixths of the amount of qualifying section 179	198
depreciation expense, including a person's proportionate or	199
distributive share of the amount of qualifying section 179	200
depreciation expense allowed to any pass-through entity in which	201
the person has a direct or indirect ownership. For the purposes of	202
this division, "qualifying section 179 depreciation expense" means	203
the difference between (I) the amount of depreciation expense	204
directly or indirectly allowed to the taxpayer under section 179	205
of the Internal Revenue Code, and (II) the amount of depreciation	206
expense directly or indirectly allowed to the taxpayer under	207
section 179 of the Internal Revenue Code as that section existed	208
on December 31, 2002.	209

The tax commissioner, under procedures established by the	210
commissioner, may waive the add-backs related to a pass-through	211
entity if the taxpayer owns, directly or indirectly, less than	212
five per cent of the pass-through entity.	213

(b) Nothing in division (A)(20) of this section shall be	214
construed to adjust or modify the adjusted basis of any asset.	215

(c) To the extent the add-back required under division	216
(A)(20)(a) of this section is attributable to property generating	217
nonbusiness income or loss allocated under section 5747.20 of the	218
Revised Code, the add-back shall be sitused to the same location	219
as the nonbusiness income or loss generated by the property for	220
the purpose of determining the credit under division (A) of	221
section 5747.05 of the Revised Code. Otherwise, the add-back shall	222
be apportioned, subject to one or more of the four alternative	223
methods of apportionment enumerated in section 5747.21 of the	224
Revised Code.	225

(d) For the purposes of division (A) of this section, net	226
operating loss carryback and carryforward shall not include	227
five-sixths of the allowance of any net operating loss deduction	228
carryback or carryforward to the taxable year to the extent such	229
loss resulted from depreciation allowed by section 168(k) of the	230
Internal Revenue Code and by the qualifying section 179	231
depreciation expense amount.	232

(21)(a) If the taxpayer was required to add an amount under	233
division (A)(20)(a) of this section for a taxable year, deduct	234
one-fifth of the amount so added for each of the five succeeding	235
taxable years.	236

(b) If the amount deducted under division (A)(21)(a) of this	237
section is attributable to an add-back allocated under division	238
(A)(20)(c) of this section, the amount deducted shall be sitused	239
to the same location. Otherwise, the add-back shall be apportioned	240
using the apportionment factors for the taxable year in which the	241
deduction is taken, subject to one or more of the four alternative	242
methods of apportionment enumerated in section 5747.21 of the	243
Revised Code.	244

(c) No deduction is available under division (A)(21)(a) of	245
this section with regard to any depreciation allowed by section	246
168(k) of the Internal Revenue Code and by the qualifying section	247
179 depreciation expense amount to the extent that such	248
depreciation resulted in or increased a federal net operating loss	249
carryback or carryforward to a taxable year to which division	250
(A)(20)(d) of this section does not apply.	251

(B) "Business income" means income, including gain or loss,	252
arising from transactions, activities, and sources in the regular	253
course of a trade or business and includes income, gain, or loss	254
from real property, tangible property, and intangible property if	255
the acquisition, rental, management, and disposition of the	256
property constitute integral parts of the regular course of a	257
trade or business operation. "Business income" includes income,	258
including gain or loss, from a partial or complete liquidation of	259
a business, including, but not limited to, gain or loss from the	260
sale or other disposition of goodwill.	261

(C) "Nonbusiness income" means all income other than business	262
income and may include, but is not limited to, compensation, rents	263
and royalties from real or tangible personal property, capital	264
gains, interest, dividends and distributions, patent or copyright	265
royalties, or lottery winnings, prizes, and awards.	266

(D) "Compensation" means any form of remuneration paid to an	267
employee for personal services.	268

(E) "Fiduciary" means a guardian, trustee, executor,	269
administrator, receiver, conservator, or any other person acting	270
in any fiduciary capacity for any individual, trust, or estate.	271

(F) "Fiscal year" means an accounting period of twelve months	272
ending on the last day of any month other than December.	273

(G) "Individual" means any natural person.

274

(H) "Internal Revenue Code" means the "Internal Revenue Code	275
of 1986," 100 Stat. 2085, 26 U.S.C.A. 1, as amended.	276

(I) "Resident" means any of the following, provided that	277
division (I)(3) of this section applies only to taxable years of a	278
trust beginning in 2002 or thereafter:	279

(1) An individual who is domiciled in this state, subject to	280
section 5747.24 of the Revised Code;	281

(2) The estate of a decedent who at the time of death was	282
domiciled in this state. The domicile tests of section 5747.24 of	283
the Revised Code and any election under section 5747.25 of the	284
Revised Code are not controlling for purposes of division (I)(2)	285
of this section.	286

(3) A trust that, in whole or part, resides in this state. If	287
only part of a trust resides in this state, the trust is a	288
resident only with respect to that part.	289

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

290

(a) A trust resides in this state for the trust's current	291
taxable year to the extent, as described in division (I)(3)(d) of	292
this section, that the trust consists directly or indirectly, in	293
whole or in part, of assets, net of any related liabilities, that	294
were transferred, or caused to be transferred, directly or	295
indirectly, to the trust by any of the following:	296

(i) A person, a court, or a governmental entity or	297
instrumentality on account of the death of a decedent, but only if	298
the trust is described in division (I)(3)(e)(i) or (ii) of this	299
section;	300

(ii) A person who was domiciled in this state for the	301
purposes of this chapter when the person directly or indirectly	302
transferred assets to an irrevocable trust, but only if at least	303
one of the trust's qualifying beneficiaries is domiciled in this	304
state for the purposes of this chapter during all or some portion	305
of the trust's current taxable year;	306

(iii) A person who was domiciled in this state for the	307
purposes of this chapter when the trust document or instrument or	308
part of the trust document or instrument became irrevocable, but	309
only if at least one of the trust's qualifying beneficiaries is a	310
resident domiciled in this state for the purposes of this chapter	311
during all or some portion of the trust's current taxable year. If	312
a trust document or instrument became irrevocable upon the death	313
of a person who at the time of death was domiciled in this state	314
for purposes of this chapter, that person is a person described in	315
division (I)(3)(a)(iii) of this section.	316

(b) A trust is irrevocable to the extent that the transferor	317
is not considered to be the owner of the net assets of the trust	318
under sections 671 to 678 of the Internal Revenue Code.	319

(c) With respect to a trust other than a charitable lead	320
trust, "qualifying beneficiary" has the same meaning as "potential	321
current beneficiary" as defined in section 1361(e)(2) of the	322
Internal Revenue Code, and with respect to a charitable lead trust	323
"qualifying beneficiary" is any current, future, or contingent	324
beneficiary, but with respect to any trust "qualifying	325
beneficiary" excludes a person or a governmental entity or	326
instrumentality to any of which a contribution would qualify for	327
the charitable deduction under section 170 of the Internal Revenue	328
Code.	329

(d) For the purposes of division (I)(3)(a) of this section,	330
the extent to which a trust consists directly or indirectly, in	331
whole or in part, of assets, net of any related liabilities, that	332
were transferred directly or indirectly, in whole or part, to the	333
trust by any of the sources enumerated in that division shall be	334
ascertained by multiplying the fair market value of the trust's	335
assets, net of related liabilities, by the qualifying ratio, which	336
shall be computed as follows:	337

(i) The first time the trust receives assets, the numerator	338
of the qualifying ratio is the fair market value of those assets	339
at that time, net of any related liabilities, from sources	340
enumerated in division (I)(3)(a) of this section. The denominator	341
of the qualifying ratio is the fair market value of all the	342
trust's assets at that time, net of any related liabilities.	343

(ii) Each subsequent time the trust receives assets, a	344
revised qualifying ratio shall be computed. The numerator of the	345
revised qualifying ratio is the sum of (1) the fair market value	346
of the trust's assets immediately prior to the subsequent	347
transfer, net of any related liabilities, multiplied by the	348
qualifying ratio last computed without regard to the subsequent	349
transfer, and (2) the fair market value of the subsequently	350
transferred assets at the time transferred, net of any related	351
liabilities, from sources enumerated in division (I)(3)(a) of this	352
section. The denominator of the revised qualifying ratio is the	353
fair market value of all the trust's assets immediately after the	354
subsequent transfer, net of any related liabilities.	355

(iii) Whether a transfer to the trust is by or from any of	356
the sources enumerated in division (I)(3)(a) of this section shall	357
be ascertained without regard to the domicile of the trust's	358
beneficiaries.	359

(e) For the purposes of division (I)(3)(a)(i) of this	360
section:	361

(i) A trust is described in division (I)(3)(e)(i) of this	362
section if the trust is a testamentary trust and the testator of	363
that testamentary trust was domiciled in this state at the time of	364
the testator's death for purposes of the taxes levied under	365
Chapter 5731. of the Revised Code.	366

(ii) A trust is described in division (I)(3)(e)(ii) of this	367
section if the transfer is a qualifying transfer described in any	368
of divisions (I)(3)(f)(i) to (vi) of this section, the trust is an	369
irrevocable inter vivos trust, and at least one of the trust's	370
qualifying beneficiaries is domiciled in this state for purposes	371
of this chapter during all or some portion of the trust's current	372
taxable year.	373

(f) For the purposes of division (I)(3)(e)(ii) of this	374
section, a "qualifying transfer" is a transfer of assets, net of	375
any related liabilities, directly or indirectly to a trust, if the	376
transfer is described in any of the following:	377

(i) The transfer is made to a trust, created by the decedent	378
before the decedent's death and while the decedent was domiciled	379
in this state for the purposes of this chapter, and, prior to the	380
death of the decedent, the trust became irrevocable while the	381
decedent was domiciled in this state for the purposes of this	382
chapter.	383

(ii) The transfer is made to a trust to which the decedent,	384
prior to the decedent's death, had directly or indirectly	385
transferred assets, net of any related liabilities, while the	386
decedent was domiciled in this state for the purposes of this	387
chapter, and prior to the death of the decedent the trust became	388
irrevocable while the decedent was domiciled in this state for the	389
purposes of this chapter.	390

(iii) The transfer is made on account of a contractual	391
relationship existing directly or indirectly between the	392
transferor and either the decedent or the estate of the decedent	393
at any time prior to the date of the decedent's death, and the	394
decedent was domiciled in this state at the time of death for	395
purposes of the taxes levied under Chapter 5731. of the Revised	396
Code.	397

(iv) The transfer is made to a trust on account of a	398
contractual relationship existing directly or indirectly between	399
the transferor and another person who at the time of the	400
decedent's death was domiciled in this state for purposes of this	401
chapter.	402

(v) The transfer is made to a trust on account of the will of	403
a testator.	404

(vi) The transfer is made to a trust created by or caused to	405
be created by a court, and the trust was directly or indirectly	406
created in connection with or as a result of the death of an	407
individual who, for purposes of the taxes levied under Chapter	408
5731. of the Revised Code, was domiciled in this state at the time	409
of the individual's death.	410

(g) The tax commissioner may adopt rules to ascertain the	411
part of a trust residing in this state.	412

(J) "Nonresident" means an individual or estate that is not a	413
resident. An individual who is a resident for only part of a	414
taxable year is a nonresident for the remainder of that taxable	415
year.	416

(K) "Pass-through entity" has the same meaning as in section	417
5733.04 of the Revised Code.	418

(L) "Return" means the notifications and reports required to	419
be filed pursuant to this chapter for the purpose of reporting the	420
tax due and includes declarations of estimated tax when so	421
required.	422

(M) "Taxable year" means the calendar year or the taxpayer's	423
fiscal year ending during the calendar year, or fractional part	424
thereof, upon which the adjusted gross income is calculated	425
pursuant to this chapter.	426

(N) "Taxpayer" means any person subject to the tax imposed by	427
section 5747.02 of the Revised Code or any pass-through entity	428
that makes the election under division (D) of section 5747.08 of	429
the Revised Code.	430

(O) "Dependents" means dependents as defined in the Internal	431
Revenue Code and as claimed in the taxpayer's federal income tax	432
return for the taxable year or which the taxpayer would have been	433
permitted to claim had the taxpayer filed a federal income tax	434
return.	435

(P) "Principal county of employment" means, in the case of a	436
nonresident, the county within the state in which a taxpayer	437
performs services for an employer or, if those services are	438
performed in more than one county, the county in which the major	439
portion of the services are performed.	440

(Q) As used in sections 5747.50 to 5747.55 of the Revised	441
Code:	442

(1) "Subdivision" means any county, municipal corporation,	443
park district, or township.	444

(2) "Essential local government purposes" includes all	445
functions that any subdivision is required by general law to	446
exercise, including like functions that are exercised under a	447
charter adopted pursuant to the Ohio Constitution.	448

(R) "Overpayment" means any amount already paid that exceeds	449
the figure determined to be the correct amount of the tax.	450

(S) "Taxable income" or "Ohio taxable income" applies only to	451
estates and trusts, and means federal taxable income, as defined	452
and used in the Internal Revenue Code, adjusted as follows:	453

(1) Add interest or dividends, net of ordinary, necessary,	454
and reasonable expenses not deducted in computing federal taxable	455
income, on obligations or securities of any state or of any	456
political subdivision or authority of any state, other than this	457
state and its subdivisions and authorities, but only to the extent	458
that such net amount is not otherwise includible in Ohio taxable	459
income and is described in either division (S)(1)(a) or (b) of	460
this section:	461

(a) The net amount is not attributable to the S portion of an	462
electing small business trust and has not been distributed to	463
beneficiaries for the taxable year;	464

(b) The net amount is attributable to the S portion of an	465
electing small business trust for the taxable year.	466

(2) Add interest or dividends, net of ordinary, necessary,	467
and reasonable expenses not deducted in computing federal taxable	468
income, on obligations of any authority, commission,	469
instrumentality, territory, or possession of the United States to	470
the extent that the interest or dividends are exempt from federal	471
income taxes but not from state income taxes, but only to the	472
extent that such net amount is not otherwise includible in Ohio	473
taxable income and is described in either division (S)(1)(a) or	474
(b) of this section;	475

(3) Add the amount of personal exemption allowed to the	476
estate pursuant to section 642(b) of the Internal Revenue Code;	477

(4) Deduct interest or dividends, net of related expenses	478
deducted in computing federal taxable income, on obligations of	479
the United States and its territories and possessions or of any	480
authority, commission, or instrumentality of the United States to	481
the extent that the interest or dividends are exempt from state	482
taxes under the laws of the United States, but only to the extent	483
that such amount is included in federal taxable income and is	484
described in either division (S)(1)(a) or (b) of this section;	485

(5) Deduct the amount of wages and salaries, if any, not	486
otherwise allowable as a deduction but that would have been	487
allowable as a deduction in computing federal taxable income for	488
the taxable year, had the targeted jobs credit allowed under	489
sections 38, 51, and 52 of the Internal Revenue Code not been in	490
effect, but only to the extent such amount relates either to	491
income included in federal taxable income for the taxable year or	492
to income of the S portion of an electing small business trust for	493
the taxable year;	494

(6) Deduct any interest or interest equivalent, net of	495
related expenses deducted in computing federal taxable income, on	496
public obligations and purchase obligations, but only to the	497
extent that such net amount relates either to income included in	498
federal taxable income for the taxable year or to income of the S	499
portion of an electing small business trust for the taxable year;	500

(7) Add any loss or deduct any gain resulting from sale,	501
exchange, or other disposition of public obligations to the extent	502
that such loss has been deducted or such gain has been included in	503
computing either federal taxable income or income of the S portion	504
of an electing small business trust for the taxable year;	505

(8) Except in the case of the final return of an estate, add	506
any amount deducted by the taxpayer on both its Ohio estate tax	507
return pursuant to section 5731.14 of the Revised Code, and on its	508
federal income tax return in determining federal taxable income;	509

(9)(a) Deduct any amount included in federal taxable income	510
solely because the amount represents a reimbursement or refund of	511
expenses that in a previous year the decedent had deducted as an	512
itemized deduction pursuant to section 63 of the Internal Revenue	513
Code and applicable treasury regulations. The deduction otherwise	514
allowed under division (S)(9)(a) of this section shall be reduced	515
to the extent the reimbursement is attributable to an amount the	516
taxpayer or decedent deducted under this section in any taxable	517
year.	518

(b) Add any amount not otherwise included in Ohio taxable	519
income for any taxable year to the extent that the amount is	520
attributable to the recovery during the taxable year of any amount	521
deducted or excluded in computing federal or Ohio taxable income	522
in any taxable year, but only to the extent such amount has not	523
been distributed to beneficiaries for the taxable year.	524

(10) Deduct any portion of the deduction described in section	525
1341(a)(2) of the Internal Revenue Code, for repaying previously	526
reported income received under a claim of right, that meets both	527
of the following requirements:	528

(a) It is allowable for repayment of an item that was	529
included in the taxpayer's taxable income or the decedent's	530
adjusted gross income for a prior taxable year and did not qualify	531
for a credit under division (A) or (B) of section 5747.05 of the	532
Revised Code for that year.	533

(b) It does not otherwise reduce the taxpayer's taxable	534
income or the decedent's adjusted gross income for the current or	535
any other taxable year.	536

(11) Add any amount claimed as a credit under section	537
5747.059 of the Revised Code to the extent that the amount	538
satisfies either of the following:	539

(a) The amount was deducted or excluded from the computation	540
of the taxpayer's federal taxable income as required to be	541
reported for the taxpayer's taxable year under the Internal	542
Revenue Code;	543

(b) The amount resulted in a reduction in the taxpayer's	544
federal taxable income as required to be reported for any of the	545
taxpayer's taxable years under the Internal Revenue Code.	546

(12) Deduct any amount, net of related expenses deducted in	547
computing federal taxable income, that a trust is required to	548
report as farm income on its federal income tax return, but only	549
if the assets of the trust include at least ten acres of land	550
satisfying the definition of "land devoted exclusively to	551
agricultural use" under section 5713.30 of the Revised Code,	552
regardless of whether the land is valued for tax purposes as such	553
land under sections 5713.30 to 5713.38 of the Revised Code. If the	554
trust is a pass-thoughpass-through entity investor, section	555
5747.231 of the Revised Code applies in ascertaining if the trust	556
is eligible to claim the deduction provided by division (S)(12) of	557
this section in connection with the pass-through entity's farm	558
income.	559

Except for farm income attributable to the S portion of an	560
electing small business trust, the deduction provided by division	561
(S)(12) of this section is allowed only to the extent that the	562
trust has not distributed such farm income. Division (S)(12) of	563
this section applies only to taxable years of a trust beginning in	564
2002 or thereafter.	565

(13) Add the net amount of income described in section 641(c)	566
of the Internal Revenue Code to the extent that amount is not	567
included in federal taxable income.	568

(14) Add or deduct the amount the taxpayer would be required	569
to add or deduct under division (A)(20) or (21) of this section if	570
the taxpayer's Ohio taxable income were computed in the same	571
manner as an individual's Ohio adjusted gross income is computed	572
under this section. In the case of a trust, division (S)(14) of	573
this section applies only to any of the trust's taxable years	574
beginning in 2002 or thereafter.	575

(T) "School district income" and "school district income tax"	576
have the same meanings as in section 5748.01 of the Revised Code.	577

(U) As used in divisions (A)(8), (A)(9), (S)(6), and (S)(7)	578
of this section, "public obligations," "purchase obligations," and	579
"interest or interest equivalent" have the same meanings as in	580
section 5709.76 of the Revised Code.	581

(V) "Limited liability company" means any limited liability	582
company formed under Chapter 1705. of the Revised Code or under	583
the laws of any other state.	584

(W) "Pass-through entity investor" means any person who,	585
during any portion of a taxable year of a pass-through entity, is	586
a partner, member, shareholder, or equity investor in that	587
pass-through entity.	588

(X) "Banking day" has the same meaning as in section 1304.01	589
of the Revised Code.	590

(Y) "Month" means a calendar month.

591

(Z) "Quarter" means the first three months, the second three	592
months, the third three months, or the last three months of the	593
taxpayer's taxable year.	594

(AA)(1) "Eligible institution" means a state university or	595
state institution of higher education as defined in section	596
3345.011 of the Revised Code, or a private, nonprofit college,	597
university, or other post-secondary institution located in this	598
state that possesses a certificate of authorization issued by the	599
Ohio board of regents pursuant to Chapter 1713. of the Revised	600
Code or a certificate of registration issued by the state board of	601
career colleges and schools under Chapter 3332. of the Revised	602
Code.	603

(2) "Qualified tuition and fees" means tuition and fees	604
imposed by an eligible institution as a condition of enrollment or	605
attendance, not exceeding two thousand five hundred dollars in	606
each of the individual's first two years of post-secondary	607
education. If the individual is a part-time student, "qualified	608
tuition and fees" includes tuition and fees paid for the academic	609
equivalent of the first two years of post-secondary education	610
during a maximum of five taxable years, not exceeding a total of	611
five thousand dollars. "Qualified tuition and fees" does not	612
include:	613

(a) Expenses for any course or activity involving sports,	614
games, or hobbies unless the course or activity is part of the	615
individual's degree or diploma program;	616

(b) The cost of books, room and board, student activity fees,	617
athletic fees, insurance expenses, or other expenses unrelated to	618
the individual's academic course of instruction;	619

(c) Tuition, fees, or other expenses paid or reimbursed	620
through an employer, scholarship, grant in aid, or other	621
educational benefit program.	622

(BB)(1) "Modified business income" means the business income	623
included in a trust's Ohio taxable income after such taxable	624
income is first reduced by the qualifying trust amount, if any.	625

(2) "Qualifying trust amount" of a trust means capital gains	626
and losses from the sale, exchange, or other disposition of equity	627
or ownership interests in, or debt obligations of, a qualifying	628
investee to the extent included in the trust's Ohio taxable	629
income, but only if the following requirements are satisfied:	630

(a) The book value of the qualifying investee's physical	631
assets in this state and everywhere, as of the last day of the	632
qualifying investee's fiscal or calendar year ending immediately	633
prior to the date on which the trust recognizes the gain or loss,	634
is available to the trust.	635

(b) The requirements of section 5747.011 of the Revised Code	636
are satisfied for the trust's taxable year in which the trust	637
recognizes the gain or loss.	638

Any gain or loss that is not a qualifying trust amount is	639
modified business income, qualifying investment income, or	640
modified nonbusiness income, as the case may be.	641

(3) "Modified nonbusiness income" means a trust's Ohio	642
taxable income other than modified business income, other than the	643
qualifying trust amount, and other than qualifying investment	644
income, as defined in section 5747.012 of the Revised Code, to the	645
extent such qualifying investment income is not otherwise part of	646
modified business income.	647

(4) "Modified Ohio taxable income" applies only to trusts,	648
and means the sum of the amounts described in divisions (BB)(4)(a)	649
to (c) of this section:	650

(a) The fraction, calculated under section 5747.013, and	651
applying section 5747.231 of the Revised Code, multiplied by the	652
sum of the following amounts:	653

(i) The trust's modified business income;

654

(ii) The trust's qualifying investment income, as defined in	655
section 5747.012 of the Revised Code, but only to the extent the	656
qualifying investment income does not otherwise constitute	657
modified business income and does not otherwise constitute a	658
qualifying trust amount.	659

(b) The qualifying trust amount multiplied by a fraction, the	660
numerator of which is the sum of the book value of the qualifying	661
investee's physical assets in this state on the last day of the	662
qualifying investee's fiscal or calendar year ending immediately	663
prior to the day on which the trust recognizes the qualifying	664
trust amount, and the denominator of which is the sum of the book	665
value of the qualifying investee's total physical assets	666
everywhere on the last day of the qualifying investee's fiscal or	667
calendar year ending immediately prior to the day on which the	668
trust recognizes the qualifying trust amount. If, for a taxable	669
year, the trust recognizes a qualifying trust amount with respect	670
to more than one qualifying investee, the amount described in	671
division (BB)(4)(b) of this section shall equal the sum of the	672
products so computed for each such qualifying investee.	673

(c)(i) With respect to a trust or portion of a trust that is	674
a resident as ascertained in accordance with division (I)(3)(d) of	675
this section, its modified nonbusiness income.	676

(ii) With respect to a trust or portion of a trust that is	677
not a resident as ascertained in accordance with division	678
(I)(3)(d) of this section, the amount of its modified nonbusiness	679
income satisfying the descriptions in divisions (B)(2) to (5) of	680
section 5747.20 of the Revised Code.	681

If the allocation and apportionment of a trust's income under	682
divisions (BB)(4)(a) and (c) of this section do not fairly	683
represent the modified Ohio taxable income of the trust in this	684
state, the alternative methods described in division (C) of	685
section 5747.21 of the Revised Code may be applied in the manner	686
and to the same extent provided in that section.	687

(5)(a) Except as set forth in division (BB)(5)(b) of this	688
section, "qualifying investee" means a person in which a trust has	689
an equity or ownership interest, or a person or unit of government	690
the debt obligations of either of which are owned by a trust. For	691
the purposes of division (BB)(2)(a) of this section and for the	692
purpose of computing the fraction described in division (BB)(4)(b)	693
of this section, all of the following apply:	694

(i) If the qualifying investee is a member of a qualifying	695
controlled group on the last day of the qualifying investee's	696
fiscal or calendar year ending immediately prior to the date on	697
which the trust recognizes the gain or loss, then "qualifying	698
investee" includes all persons in the qualifying controlled group	699
on such last day.	700

(ii) If the qualifying investee, or if the qualifying	701
investee and any members of the qualifying controlled group of	702
which the qualifying investee is a member on the last day of the	703
qualifying investee's fiscal or calendar year ending immediately	704
prior to the date on which the trust recognizes the gain or loss,	705
separately or cumulatively own, directly or indirectly, on the	706
last day of the qualifying investee's fiscal or calendar year	707
ending immediately prior to the date on which the trust recognizes	708
the qualifying trust amount, more than fifty per cent of the	709
equity of a pass-through entity, then the qualifying investee and	710
the other members are deemed to own the proportionate share of the	711
pass-through entity's physical assets which the pass-through	712
entity directly or indirectly owns on the last day of the	713
pass-through entity's calendar or fiscal year ending within or	714
with the last day of the qualifying investee's fiscal or calendar	715
year ending immediately prior to the date on which the trust	716
recognizes the qualifying trust amount.	717

(iii) For the purposes of division (BB)(5)(a)(iii) of this	718
section, "upper level pass-through entity" means a pass-through	719
entity directly or indirectly owning any equity of another	720
pass-through entity, and "lower level pass-through entity" means	721
that other pass-through entity.	722

An upper level pass-through entity, whether or not it is also	723
a qualifying investee, is deemed to own, on the last day of the	724
upper level pass-through entity's calendar or fiscal year, the	725
proportionate share of the lower level pass-through entity's	726
physical assets that the lower level pass-through entity directly	727
or indirectly owns on the last day of the lower level pass-through	728
entity's calendar or fiscal year ending within or with the last	729
day of the upper level pass-through entity's fiscal or calendar	730
year. If the upper level pass-through entity directly and	731
indirectly owns less than fifty per cent of the equity of the	732
lower level pass-through entity on each day of the upper level	733
pass-through entity's calendar or fiscal year in which or with	734
which ends the calendar or fiscal year of the lower level	735
pass-through entity and if, based upon clear and convincing	736
evidence, complete information about the location and cost of the	737
physical assets of the lower pass-through entity is not available	738
to the upper level pass-through entity, then solely for purposes	739
of ascertaining if a gain or loss constitutes a qualifying trust	740
amount, the upper level pass-through entity shall be deemed as	741
owning no equity of the lower level pass-through entity for each	742
day during the upper level pass-through entity's calendar or	743
fiscal year in which or with which ends the lower level	744
pass-through entity's calendar or fiscal year. Nothing in division	745
(BB)(5)(a)(iii) of this section shall be construed to provide for	746
any deduction or exclusion in computing any trust's Ohio taxable	747
income.	748

(b) With respect to a trust that is not a resident for the	749
taxable year and with respect to a part of a trust that is not a	750
resident for the taxable year, "qualifying investee" for that	751
taxable year does not include a C corporation if both of the	752
following apply:	753

(i) During the taxable year the trust or part of the trust	754
recognizes a gain or loss from the sale, exchange, or other	755
disposition of equity or ownership interests in, or debt	756
obligations of, the C corporation.	757

(ii) Such gain or loss constitutes nonbusiness income.

758

(6) "Available" means information is such that a person is	759
able to learn of the information by the due date plus extensions,	760
if any, for filing the return for the taxable year in which the	761
trust recognizes the gain or loss.	762

(CC) "Qualifying controlled group" has the same meaning as in	763
section 5733.04 of the Revised Code.	764

(DD) "Related member" has the same meaning as in section	765
5733.042 of the Revised Code.	766

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

767

(a) "Qualifying person" means any person other than a	768
qualifying corporation.	769

(b) "Qualifying corporation" means any person classified for	770
federal income tax purposes as an association taxable as a	771
corporation, except either of the following:	772

(i) A corporation that has made an election under subchapter	773
S, chapter one, subtitle A, of the Internal Revenue Code for its	774
taxable year ending within, or on the last day of, the investor's	775
taxable year;	776

(ii) A subsidiary that is wholly owned by any corporation	777
that has made an election under subchapter S, chapter one,	778
subtitle A of the Internal Revenue Code for its taxable year	779
ending within, or on the last day of, the investor's taxable year.	780

(2) For the purposes of this chapter, unless expressly stated	781
otherwise, no qualifying person indirectly owns any asset directly	782
or indirectly owned by any qualifying corporation.	783

Sec. 5747.24.  This section is to be usedapplied solely for	784
the purposes of Chapters 5747. and 5748. of the Revised Code.	785

(A)(1) As used in this section and section 5747.25 of the	786
Revised Code:	787

(a) Except as otherwise provided in division (A)(2) of this	788
section, an(1) An individual "has one contact period in this	789
state" if the individual is away overnight from the individual's	790
abode located outside this state and while away overnight from	791
that abode spends at least some portion, however minimal, of each	792
of two consecutive days in this state.	793

(b)(2) An individual is considered to be "away overnight from	794
the individual's abode located outside this state" if the	795
individual is away from the individual's abode located outside	796
this state for a continuous period of time, however minimal,	797
beginning at any time on one day and ending at any time on the	798
next day.	799

(c) "Medical hardship" includes circumstances under which the	800
individual or a member of the individual's immediate or extended	801
family is admitted as a patient into a hospital located in this	802
state, examined in this state by a medical professional, admitted	803
into a nursing home in this state, receiving nursing care in this	804
state while staying in a dwelling located in this state, or	805
otherwise receiving ongoing, necessary medical care in this state.	806
"Medical hardship" includes receiving treatment or care for acute	807
or chronic illness or obstetric treatment or care.	808

(d) "Medical professional" means a person licensed under	809
Chapter 4715., 4723., 4725., 4729., 4730., 4731., 4732., 4734.,	810
4753., 4755., 4757., 4759., 4760., 4761., 4762., or 4773. of the	811
Revised Code.	812

(e) "Immediate or extended family" of an individual means the	813
individual's spouse, children, grandchildren, parents,	814
grandparents, siblings, in-laws, or any of the individual's	815
dependents.	816

(2) Up to thirty periods that would otherwise constitute	817
contact periods under division (A)(1)(a) of this section shall not	818
be considered contact periods during a taxable year if the	819
individual spends any portion of either day of each such contact	820
period for one or more of the following purposes:	821

(a) To provide services for no consideration or to raise	822
funds for an organization described in section 501(c)(3) of the	823
Internal Revenue Code. "Consideration" does not include any	824
reimbursement of the individual's actual expenses directly or	825
indirectly related to such activity.	826

(b) To attend to a medical hardship involving the individual	827
or a member of the individual's immediate or extended family or to	828
attend a funeral involving a member of the individual's immediate	829
or extended family.	830

(B) An individual who during a taxable year has no more than	831
one hundred twentyeighty-two contact periods in this state, which	832
need not be consecutive, and who during the entire taxable year	833
has at least one abode outside this state, is presumed to be not	834
domiciled in this state during the taxable year. The tax	835
commissioner, in writing and by personal service or certified	836
mail, return receipt requested, may request a statement from an	837
individual verifying that the individual was not domiciled in this	838
state under this division during the taxable year. The	839
commissioner shall not make such a request after the expiration of	840
the period, if any, within which the commissioner may make an	841
assessment under section 5747.13 of the Revised Code against the	842
individual for the taxable year. Within sixty days after receiving	843
the commissioner's request, the individual shall submit a written	844
statement to the commissioner stating both of the following:	845

(1) During the entire taxable year, the individual was not	846
domiciled in this state;	847

(2) During the entire taxable year, the individual had at	848
least one abode outside this state.	849

The presumption that the individual was not domiciled in this	850
state is irrebuttable unless either the individual fails to timely	851
submit the statement as required or the statement is fraudulent.	852
If the individual fails to timely submit the statement as	853
required, the individual is presumed under division (C) of this	854
section to have been domiciled in this state the entire taxable	855
year.	856

In the case of an individual who dies, the personal	857
representative of the estate of the deceased individual may comply	858
with this division by making to the best of the representative's	859
knowledge and belief the statement under this division with	860
respect to the deceased individual, and submitting the statement	861
to the commissioner within sixty days after receiving the	862
commissioner's request for it.	863

An individual or personal representative of an estate who	864
knowingly makes a false statement under this division is guilty of	865
perjury under section 2921.11 of the Revised Code.	866

(C) An individual who during a taxable year has less than one	867
hundred eighty-three contact periods in this state, which need not	868
be consecutive, and who is not irrebuttably presumed under	869
division (B) of this section to be not domiciled in this state	870
with respect to that taxable year, is presumed to be domiciled in	871
this state for the entire taxable year. An individual can rebut	872
this presumption for any portion of the taxable year only with a	873
preponderance of the evidence to the contrary. An individual who	874
rebuts the presumption under this division for any portion of the	875
taxable year is presumed to be domiciled in this state for the	876
remainder of the taxable year for which the individual does not	877
provide a preponderance of the evidence to the contrary.	878

(D) An individual who during a taxable year has at least one	879
hundred eighty-three contact periods in this state, which need not	880
be consecutive, is presumed to be domiciled in this state for the	881
entire taxable year. An individual can rebut this presumption for	882
any portion of the taxable year only with clear and convincing	883
evidence to the contrary. An individual who rebuts the presumption	884
under this division for any portion of the taxable year is	885
presumed to be domiciled in this state for the remainder of the	886
taxable year for which the individual does not provide clear and	887
convincing evidence to the contrary.	888

(E)(D) If the tax commissioner challenges the number of	889
contact periods an individual claims to have in this state during	890
a taxable year, the individual bears the burden of proof to verify	891
such number, by a preponderance of the evidence. An individual	892
challenged by the commissioner is presumed to have a contact	893
period in this state for any period for which hethe individual	894
does not prove by a preponderance of the evidence that the	895
individual had no such contact period.	896

Sec. 5748.01.  As used in this chapter:

897

(A) "School district income tax" means an income tax adopted	898
under one of the following:	899

(1) Former section 5748.03 of the Revised Code as it existed	900
prior to its repeal by Amended Substitute House Bill No. 291 of	901
the 115th general assembly;	902

(2) Section 5748.03 of the Revised Code as enacted in	903
Substitute Senate Bill No. 28 of the 118th general assembly;	904

(3) Section 5748.08 of the Revised Code as enacted in Amended	905
Substitute Senate Bill No. 17 of the 122nd general assembly.	906

(B) "Individual" means an individual subject to the tax	907
levied by section 5747.02 of the Revised Code.	908

(C) "Estate" means an estate subject to the tax levied by	909
section 5747.02 of the Revised Code.	910

(D) "Taxable year" means a taxable year as defined in	911
division (M) of section 5747.01 of the Revised Code.	912

(E) "Taxable income" means:

913

(1) In the case of an individual, one of the following, as	914
specified in the resolution imposing the tax:	915

(a) Ohio adjusted gross income for the taxable year as	916
defined in division (A) of section 5747.01 of the Revised Code,	917
less the exemptions provided by section 5747.02 of the Revised	918
Code;	919

(b) Wages, salaries, tips, and other employee compensation to	920
the extent included in Ohio adjusted gross income as defined in	921
section 5747.01 of the Revised Code, and net earnings from	922
self-employment, as defined in section 1402(a) of the Internal	923
Revenue Code, to the extent included in Ohio adjusted gross	924
income.	925

(2) In the case of an estate, taxable income for the taxable	926
year as defined in division (S) of section 5747.01 of the Revised	927
Code.	928

(F) Except as provided in section 5747.25 of the Revised	929
Code, "resident""Resident" of the school district means:	930

(1) An individual who is a resident of this state as defined	931
in division (I) of section 5747.01 of the Revised Code during all	932
or a portion of the taxable year and who, during all or a portion	933
of such period of state residency, is domiciled in the school	934
district or lives in and maintains a permanent place of abode in	935
the school district;	936

(2) An estate of a decedent who, at the time of death, was	937
domiciled in the school district.	938

(G) "School district income" means:

939

(1) With respect to an individual, the portion of the taxable	940
income of an individual that is received by the individual during	941
the portion of the taxable year that the individual is a resident	942
of the school district and the school district income tax is in	943
effect in that school district. An individual may have school	944
district income with respect to more than one school district.	945

(2) With respect to an estate, the taxable income of the	946
estate for the portion of the taxable year that the school	947
district income tax is in effect in that school district.	948

(H) "Taxpayer" means an individual or estate having school	949
district income upon which a school district income tax is	950
imposed.	951

(I) "School district purposes" means any of the purposes for	952
which a tax may be levied pursuant to section 5705.21 of the	953
Revised Code.	954

Section 2. That existing sections 5747.01, 5747.24, and	955
5748.01, and section 5747.25 of the Revised Code are hereby	956
repealed.	957

Section 3. Sections 1 and 2 of this act apply to taxable	958
years beginning on or after January 1, 2006.	959