As Introduced

127th General Assembly
Regular Session
2007-2008
H. B. No. 534


Representatives Adams, Collier 

Cosponsors: Representatives Setzer, Wagner, Brinkman, Dolan, Huffman, Fessler, Zehringer, Goodwin, Bacon, Combs, Batchelder, Hottinger, Hite, Uecker, Wachtmann, Widowfield, Coley 

A BILL
To amend sections 5747.02 and 5747.41 of the Revised 1
Code to phase out the personal income tax over ten 2
years.3


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

       Section 1. That sections 5747.02 and 5747.41 of the Revised 4
Code be amended to read as follows:5

       Sec. 5747.02.  (A) For the purpose of providing revenue for6
the support of schools and local government functions, to provide7
relief to property taxpayers, to provide revenue for the general8
revenue fund, and to meet the expenses of administering the tax9
levied by this chapter, there is hereby levied on every10
individual, trust, and estate residing in or earning or receiving11
income in this state, on every individual, trust, and estate12
earning or receiving lottery winnings, prizes, or awards pursuant13
to Chapter 3770. of the Revised Code, and on every individual,14
trust, and estate otherwise having nexus with or in this state15
under the Constitution of the United States, an annual tax16
measured in the case of individuals by Ohio adjusted gross income17
less an exemption for the taxpayer, the taxpayer's spouse, and18
each dependent as provided in section 5747.025 of the Revised19
Code; measured in the case of trusts by modified Ohio taxable20
income under division (D) of this section; and measured in the21
case of estates by Ohio taxable income. The tax imposed by this22
section on the balance thus obtained is hereby levied as follows:23

       (1) For taxable years beginning in 2004:24

OHIO ADJUSTED GROSS INCOME LESS EXEMPTIONS (INDIVIDUALS) 25
OR 26
MODIFIED OHIO 27
TAXABLE INCOME (TRUSTS) 28
OR 29
OHIO TAXABLE INCOME (ESTATES) TAX 30

$5,000 or less .743% 31
More than $5,000 but not more than $10,000 $37.15 plus 1.486% of the amount in excess of $5,000 32
More than $10,000 but not more than $15,000 $111.45 plus 2.972% of the amount in excess of $10,000 33
More than $15,000 but not more than $20,000 $260.05 plus 3.715% of the amount in excess of $15,000 34
More than $20,000 but not more than $40,000 $445.80 plus 4.457% of the amount in excess of $20,000 35
More than $40,000 but not more than $80,000 $1,337.20 plus 5.201% of the amount in excess of $40,000 36
More than $80,000 but not more than $100,000 $3,417.60 plus 5.943% of the amount in excess of $80,000 37
More than $100,000 but not more than $200,000 $4,606.20 plus 6.9% of the amount in excess of $100,000 38
More than $200,000 $11,506.20 plus 7.5% of the amount in excess of $200,000 39

       (2) For taxable years beginning in 2005:40

OHIO ADJUSTED GROSS INCOME LESS EXEMPTIONS (INDIVIDUALS) 41
OR 42
MODIFIED OHIO 43
TAXABLE INCOME (TRUSTS) 44
OR 45
OHIO TAXABLE INCOME (ESTATES) TAX 46

$5,000 or less .712% 47
More than $5,000 but not more than $10,000 $35.60 plus 1.424% of the amount in excess of $5,000 48
More than $10,000 but not more than $15,000 $106.80 plus 2.847% of the amount in excess of $10,000 49
More than $15,000 but not more than $20,000 $249.15 plus 3.559% of the amount in excess of $15,000 50
More than $20,000 but not more than $40,000 $427.10 plus 4.27% of the amount in excess of $20,000 51
More than $40,000 but not more than $80,000 $1,281.10 plus 4.983% of the amount in excess of $40,000 52
More than $80,000 but not more than $100,000 $3,274.30 plus 5.693% of the amount in excess of $80,000 53
More than $100,000 but not more than $200,000 $4,412.90 plus 6.61% of the amount in excess of $100,000 54
More than $200,000 $11,022.90 plus 7.185% of the amount in excess of $200,000 55

       (3) For taxable years beginning in 2006:56

OHIO ADJUSTED GROSS INCOME LESS EXEMPTIONS (INDIVIDUALS) 57
OR 58
MODIFIED OHIO 59
TAXABLE INCOME (TRUSTS) 60
OR 61
OHIO TAXABLE INCOME (ESTATES) TAX 62

$5,000 or less .681% 63
More than $5,000 but not more than $10,000 $34.05 plus 1.361% of the amount in excess of $5,000 64
More than $10,000 but not more than $15,000 $102.10 plus 2.722% of the amount in excess of $10,000 65
More than $15,000 but not more than $20,000 $238.20 plus 3.403% of the amount in excess of $15,000 66
More than $20,000 but not more than $40,000 $408.35 plus 4.083% of the amount in excess of $20,000 67
More than $40,000 but not more than $80,000 $1,224.95 plus 4.764% of the amount in excess of $40,000 68
More than $80,000 but not more than $100,000 $3,130.55 plus 5.444% of the amount in excess of $80,000 69
More than $100,000 but not more than $200,000 $4,219.35 plus 6.32% of the amount in excess of $100,000 70
More than $200,000 $10,539.35 plus 6.87% of the amount in excess of $200,000 71

       (4) For taxable years beginning in 2007:72

OHIO ADJUSTED GROSS INCOME LESS EXEMPTIONS (INDIVIDUALS) 73
OR 74
MODIFIED OHIO 75
TAXABLE INCOME (TRUSTS) 76
OR 77
OHIO TAXABLE INCOME (ESTATES) TAX 78

$5,000 or less .649% 79
More than $5,000 but not more than $10,000 $32.45 plus 1.299% of the amount in excess of $5,000 80
More than $10,000 but not more than $15,000 $97.40 plus 2.598% of the amount in excess of $10,000 81
More than $15,000 but not more than $20,000 $227.30 plus 3.247% of the amount in excess of $15,000 82
More than $20,000 but not more than $40,000 $389.65 plus 3.895% of the amount in excess of $20,000 83
More than $40,000 but not more than $80,000 $1,168.65 plus 4.546% of the amount in excess of $40,000 84
More than $80,000 but not more than $100,000 $2,987.05 plus 5.194% of the amount in excess of $80,000 85
More than $100,000 but not more than $200,000 $4,025.85 plus 6.031% of the amount in excess of $100,000 86
More than $200,000 $10,056.85 plus 6.555% of the amount in excess of $200,000 87

       (5) For taxable years beginning in 2008:88

OHIO ADJUSTED GROSS INCOME LESS EXEMPTIONS (INDIVIDUALS) 89
OR 90
MODIFIED OHIO 91
TAXABLE INCOME (TRUSTS) 92
OR 93
OHIO TAXABLE INCOME (ESTATES) TAX 94

$5,000 or less .618% 95
More than $5,000 but not more than $10,000 $30.90 plus 1.236% of the amount in excess of $5,000 96
More than $10,000 but not more than $15,000 $92.70 plus 2.473% of the amount in excess of $10,000 97
More than $15,000 but not more than $20,000 $216.35 plus 3.091% of the amount in excess of $15,000 98
More than $20,000 but not more than $40,000 $370.90 plus 3.708% of the amount in excess of $20,000 99
More than $40,000 but not more than $80,000 $1,112.50 plus 4.327% of the amount in excess of $40,000 100
More than $80,000 but not more than $100,000 $2,843.30 plus 4.945% of the amount in excess of $80,000 101
More than $100,000 but not more than $200,000 $3,832.30 plus 5.741% of the amount in excess of $100,000 102
More than $200,000 $9,573.30 plus 6.24% of the amount in excess of $200,000 103

       (6) For taxable years beginning in 2009 or thereafter:104

OHIO ADJUSTED GROSS INCOME LESS EXEMPTIONS (INDIVIDUALS) 105
OR 106
MODIFIED OHIO 107
TAXABLE INCOME (TRUSTS) 108
OR 109
OHIO TAXABLE INCOME (ESTATES) TAX 110

$5,000 or less .587% 111
More than $5,000 but not more than $10,000 $29.35 plus 1.174% of the amount in excess of $5,000 112
More than $10,000 but not more than $15,000 $88.05 plus 2.348% of the amount in excess of $10,000 113
More than $15,000 but not more than $20,000 $205.45 plus 2.935% of the amount in excess of $15,000 114
More than $20,000 but not more than $40,000 $352.20 plus 3.521% of the amount in excess of $20,000 115
More than $40,000 but not more than $80,000 $1,056.40 plus 4.109% of the amount in excess of $40,000 116
More than $80,000 but not more than $100,000 $2,700.00 plus 4.695% of the amount in excess of $80,000 117
More than $100,000 but not more than $200,000 $3,639.00 plus 5.451% of the amount in excess of $100,000 118
More than $200,000 $9,090.00 plus 5.925% of the amount in excess of $200,000 119

       In July of each year, beginning in 2010, the tax commissioner120
shall adjust the income amounts prescribed in this division by121
multiplying the percentage increase in the gross domestic product122
deflator computed that year under section 5747.025 of the Revised123
Code by each of the income amounts resulting from the adjustment124
under this division in the preceding year, adding the resulting125
product to the corresponding income amount resulting from the126
adjustment in the preceding year, and rounding the resulting sum127
to the nearest multiple of fifty dollars. The tax commissioner128
also shall recompute each of the tax dollar amounts to the extent129
necessary to reflect the adjustment of the income amounts. The130
rates of taxation shall not be adjusted.131

       The adjusted amounts apply to taxable years beginning in the132
calendar year in which the adjustments are made. The tax133
commissioner shall not make such adjustments in any year in which134
the amount resulting from the adjustment would be less than the135
amount resulting from the adjustment in the preceding year(7) For 136
taxable years beginning in 2010 and thereafter, multiply the tax 137
determined under division (A)(6) of this section, less all credits 138
to which the taxpayer is entitled under this chapter, by the 139
following:140

TAXABLE YEARS BEGINNING IN PER CENT 141
2010 90% 142
2011 80% 143
2012 70% 144
2013 60% 145
2014 50% 146
2015 40% 147
2016 30% 148
2017 20% 149
2018 10% 150
2019 and thereafter 0% 151

       For the purpose of computing the amount of any credit that 152
may be carried forward to an ensuing year under division (A)(7) of 153
this section, a credit is utilized against the tax otherwise due 154
for a taxable year to the extent the credit applies against the 155
tax for that taxable year without regard to the percentage by 156
which the tax due is multiplied under that division.157

       (B) If the director of budget and management makes a158
certification to the tax commissioner under division (B) of159
section 131.44 of the Revised Code, the amount of tax as160
determined under division (A) of this section shall be reduced by161
the percentage prescribed in that certification for taxable years162
beginning in the calendar year in which that certification is163
made.164

       (C) The levy of this tax on income does not prevent a165
municipal corporation, a joint economic development zone created166
under section 715.691, or a joint economic development district167
created under section 715.70 or 715.71 or sections 715.72 to168
715.81 of the Revised Code from levying a tax on income.169

       (D) This division applies only to taxable years of a trust 170
beginning in 2002 or thereafter.171

       (1) The tax imposed by this section on a trust shall be172
computed by multiplying the Ohio modified taxable income of the173
trust by the rates prescribed by division (A) of this section.174

       (2) A credit is allowed against the tax computed under175
division (D) of this section equal to the lesser of (1) the tax176
paid to another state or the District of Columbia on the trust's177
modified nonbusiness income, other than the portion of the trust's 178
nonbusiness income that is qualifying investment income as defined 179
in section 5747.012 of the Revised Code, or (2) the effective tax 180
rate, based on modified Ohio taxable income, multiplied by the181
trust's modified nonbusiness income other than the portion of 182
trust's nonbusiness income that is qualifying investment income. 183
The credit applies before any other applicable credits.184

       (3) The credits enumerated in divisions (A)(1) to (13) of185
section 5747.98 of the Revised Code do not apply to a trust186
subject to this division. Any credits enumerated in other187
divisions of section 5747.98 of the Revised Code apply to a trust188
subject to this division. To the extent that the trust distributes 189
income for the taxable year for which a credit is available to the 190
trust, the credit shall be shared by the trust and its 191
beneficiaries. The tax commissioner and the trust shall be guided 192
by applicable regulations of the United States treasury regarding 193
the sharing of credits.194

       (E) For the purposes of this section, "trust" means any trust 195
described in Subchapter J of Chapter 1 of the Internal Revenue 196
Code, excluding trusts that are not irrevocable as defined in 197
division (I)(3)(b) of section 5747.01 of the Revised Code and that 198
have no modified Ohio taxable income for the taxable year, 199
charitable remainder trusts, qualified funeral trusts and preneed 200
funeral contract trusts established pursuant to section 1111.19 of 201
the Revised Code that are not qualified funeral trusts, endowment 202
and perpetual care trusts, qualified settlement trusts and funds, 203
designated settlement trusts and funds, and trusts exempted from 204
taxation under section 501(a) of the Internal Revenue Code.205

       Sec. 5747.41.  For the same purposes for which the tax is 206
levied under section 5747.02 of the Revised Code, there is hereby 207
levied a withholding tax on every qualifying pass-through entity 208
having at least one qualifying investor who is an individual and 209
on every qualifying trust having at least one qualifying210
beneficiary who is an individual. The tax does not apply to a 211
qualifying entity's qualifying taxable year ending after 2018. The 212
withholding tax imposed by this section is imposed on the sum of 213
the adjusted qualifying amounts of a qualifying pass-through 214
entity's qualifying investors who are individuals and on the sum215
of the adjusted qualifying amounts of a qualifying trust's 216
qualifying beneficiaries, at the rate of five per cent of that 217
sum.218

       The tax imposed by this section applies only if the 219
qualifying entity has nexus with this state under the Constitution 220
of the United States for any portion of the qualifying entity's 221
qualifying taxable year, and the sum of the qualifying entity's 222
adjusted qualifying amounts exceeds one thousand dollars for the 223
qualifying entity's qualifying taxable year.224

       The levy of the tax under this section does not prevent a 225
municipal corporation or a joint economic development district 226
created under section 715.70 or 715.71 or sections 715.72 to 227
715.81 of the Revised Code from levying a tax on income.228

       Section 2. That existing sections 5747.02 and 5747.41 of the 229
Revised Code are hereby repealed.230