As Introduced

127th General Assembly
Regular Session
2007-2008
S. B. No. 133


Senator Schuring 

Cosponsors: Senators Schaffer, Faber, Mumper, Schuler, Goodman, Coughlin 

A BILL
To amend sections 5747.01 and 5747.02 and to enact 1
section 5747.014 of the Revised Code to reduce the 2
income tax rate on capital gains reinvested in 3
Ohio-based investments.4


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

       Section 1.  That sections 5747.01 and 5747.02 be amended and 5
section 5747.014 of the Revised Code be enacted to read as 6
follows:7

       Sec. 5747.01.  Except as otherwise expressly provided or8
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 United11
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 the19
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 any22
state, other than this state and its subdivisions and authorities.23

       (2) Add interest or dividends on obligations of any24
authority, commission, instrumentality, territory, or possession25
of the United States to the extent that the interest or dividends26
are exempt from federal income taxes but not from state income27
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 extent31
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 extent35
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 Internal39
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 of50
the trust increased by (a)(i) the additions to adjusted gross51
income required under division (A) of this section and (ii) the52
personal exemptions allowed to the trust pursuant to section53
642(b) of the Internal Revenue Code, and decreased by (b)(i) the54
deductions to adjusted gross income required under division (A) of55
this section, (ii) the amount of federal income taxes attributable56
to such income, and (iii) the amount of taxable income that has57
been included in the adjusted gross income of a beneficiary by58
reason of a prior accumulation distribution. Any undistributed net59
income included in the adjusted gross income of a beneficiary60
shall reduce the undistributed net income of the trust commencing61
with the earliest years of the accumulation period.62

       (7) Deduct the amount of wages and salaries, if any, not63
otherwise allowable as a deduction but that would have been64
allowable as a deduction in computing federal adjusted gross65
income for the taxable year, had the targeted jobs credit allowed66
and determined under sections 38, 51, and 52 of the Internal67
Revenue Code not been in effect.68

       (8) Deduct any interest or interest equivalent on public69
obligations and purchase obligations to the extent that the70
interest or interest equivalent is included in federal adjusted71
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 extent74
that the loss has been deducted or the gain has been included in75
computing federal adjusted gross income.76

       (10) Deduct or add amounts, as provided under section77
5747.70 of the Revised Code, related to contributions to variable78
college savings program accounts made or tuition units purchased79
pursuant to Chapter 3334. of the Revised Code.80

       (11)(a) Deduct, to the extent not otherwise allowable as a81
deduction or exclusion in computing federal or Ohio adjusted gross82
income for the taxable year, the amount the taxpayer paid during83
the taxable year for medical care insurance and qualified84
long-term care insurance for the taxpayer, the taxpayer's spouse,85
and dependents. No deduction for medical care insurance under86
division (A)(11) of this section shall be allowed either to any87
taxpayer who is eligible to participate in any subsidized health88
plan maintained by any employer of the taxpayer or of the89
taxpayer's spouse, or to any taxpayer who is entitled to, or on90
application would be entitled to, benefits under part A of Title91
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 this93
section, "subsidized health plan" means a health plan for which94
the employer pays any portion of the plan's cost. The deduction95
allowed under division (A)(11)(a) of this section shall be the net96
of any related premium refunds, related premium reimbursements, or97
related insurance premium dividends received during the taxable98
year.99

       (b) Deduct, to the extent not otherwise deducted or excluded100
in computing federal or Ohio adjusted gross income during the101
taxable year, the amount the taxpayer paid during the taxable102
year, not compensated for by any insurance or otherwise, for103
medical care of the taxpayer, the taxpayer's spouse, and104
dependents, to the extent the expenses exceed seven and one-half105
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 the108
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 7702B(c) of the Internal111
Revenue Code.112

       (12)(a) Deduct any amount included in federal adjusted gross113
income solely because the amount represents a reimbursement or114
refund of expenses that in any year the taxpayer had deducted as115
an itemized deduction pursuant to section 63 of the Internal116
Revenue Code and applicable United States department of the117
treasury regulations. The deduction otherwise allowed under118
division (A)(12)(a) of this section shall be reduced to the extent119
the reimbursement is attributable to an amount the taxpayer120
deducted under this section in any taxable year.121

       (b) Add any amount not otherwise included in Ohio adjusted122
gross income for any taxable year to the extent that the amount is123
attributable to the recovery during the taxable year of any amount124
deducted or excluded in computing federal or Ohio adjusted gross125
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 was131
included in the taxpayer's adjusted gross income for a prior132
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 adjusted135
gross income for the current or any other taxable year.136

       (14) Deduct an amount equal to the deposits made to, and net137
investment earnings of, a medical savings account during the138
taxable year, in accordance with section 3924.66 of the Revised139
Code. The deduction allowed by division (A)(14) of this section140
does not apply to medical savings account deposits and earnings141
otherwise deducted or excluded for the current or any other142
taxable year from the taxpayer's federal adjusted gross income.143

       (15)(a) Add an amount equal to the funds withdrawn from a144
medical savings account during the taxable year, and the net145
investment earnings on those funds, when the funds withdrawn were146
used for any purpose other than to reimburse an account holder147
for, or to pay, eligible medical expenses, in accordance with148
section 3924.66 of the Revised Code;149

       (b) Add the amounts distributed from a medical savings150
account under division (A)(2) of section 3924.68 of the Revised151
Code during the taxable year.152

       (16) Add any amount claimed as a credit under section153
5747.059 of the Revised Code to the extent that such amount154
satisfies either of the following:155

       (a) The amount was deducted or excluded from the computation156
of the taxpayer's federal adjusted gross income as required to be157
reported for the taxpayer's taxable year under the Internal158
Revenue Code;159

       (b) The amount resulted in a reduction of the taxpayer's160
federal adjusted gross income as required to be reported for any161
of the taxpayer's taxable years under the Internal Revenue Code.162

       (17) Deduct the amount contributed by the taxpayer to an163
individual development account program established by a county164
department of job and family services pursuant to sections 329.11165
to 329.14 of the Revised Code for the purpose of matching funds166
deposited by program participants. On request of the tax167
commissioner, the taxpayer shall provide any information that, in168
the tax commissioner's opinion, is necessary to establish the169
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 married172
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 the176
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 that181
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 year188
of any amount the taxpayer deducted under division (A)(18) of this189
section in any previous taxable year to the extent the amount is190
not otherwise included in Ohio adjusted gross income.191

       (20)(a)(i) Add five-sixths of the amount of depreciation192
expense allowed by subsection (k) of section 168 of the Internal193
Revenue Code, including the taxpayer's proportionate or194
distributive share of the amount of depreciation expense allowed195
by that subsection to a pass-through entity in which the taxpayer196
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 be214
construed to adjust or modify the adjusted basis of any asset.215

       (c) To the extent the add-back required under division216
(A)(20)(a) of this section is attributable to property generating217
nonbusiness income or loss allocated under section 5747.20 of the218
Revised Code, the add-back shall be sitused to the same location219
as the nonbusiness income or loss generated by the property for220
the purpose of determining the credit under division (A) of221
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 under233
division (A)(20)(a) of this section for a taxable year, deduct234
one-fifth of the amount so added for each of the five succeeding235
taxable years.236

       (b) If the amount deducted under division (A)(21)(a) of this237
section is attributable to an add-back allocated under division238
(A)(20)(c) of this section, the amount deducted shall be sitused239
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

       (22) Deduct, to the extent not otherwise deducted or excluded 252
in computing federal or Ohio adjusted gross income for the taxable 253
year, the amount the taxpayer received during the taxable year as 254
reimbursement for life insurance premiums under section 5919.31 of 255
the Revised Code.256

        (23) Deduct, to the extent not otherwise deducted or excluded 257
in computing federal or Ohio adjusted gross income for the taxable 258
year, the amount the taxpayer received during the taxable year as 259
a death benefit paid by the adjutant general under section 5919.33 260
of the Revised Code.261

       (24) Deduct, to the extent included in federal adjusted gross 262
income and not otherwise allowable as a deduction or exclusion in 263
computing federal or Ohio adjusted gross income for the taxable 264
year, military pay and allowances received by the taxpayer during 265
the taxable year for active duty service in the United States 266
army, air force, navy, marine corps, or coast guard or reserve 267
components thereof or the national guard. The deduction may not be 268
claimed for military pay and allowances received by the taxpayer 269
while the taxpayer is stationed in this state.270

       (25) Deduct or add amounts, as provided in division (B) of 271
section 5747.014 of the Revised Code, related to Ohio-based 272
reinvestments.273

       (B) "Business income" means income, including gain or loss,274
arising from transactions, activities, and sources in the regular275
course of a trade or business and includes income, gain, or loss276
from real property, tangible property, and intangible property if277
the acquisition, rental, management, and disposition of the278
property constitute integral parts of the regular course of a279
trade or business operation. "Business income" includes income,280
including gain or loss, from a partial or complete liquidation of281
a business, including, but not limited to, gain or loss from the282
sale or other disposition of goodwill.283

       (C) "Nonbusiness income" means all income other than business 284
income and may include, but is not limited to, compensation, rents 285
and royalties from real or tangible personal property, capital 286
gains, interest, dividends and distributions, patent or copyright 287
royalties, or lottery winnings, prizes, and awards.288

       (D) "Compensation" means any form of remuneration paid to an289
employee for personal services.290

       (E) "Fiduciary" means a guardian, trustee, executor,291
administrator, receiver, conservator, or any other person acting292
in any fiduciary capacity for any individual, trust, or estate.293

       (F) "Fiscal year" means an accounting period of twelve months 294
ending on the last day of any month other than December.295

       (G) "Individual" means any natural person.296

       (H) "Internal Revenue Code" means the "Internal Revenue Code297
of 1986," 100 Stat. 2085, 26 U.S.C.A. 1, as amended.298

       (I) "Resident" means any of the following, provided that299
division (I)(3) of this section applies only to taxable years of a300
trust beginning in 2002 or thereafter:301

       (1) An individual who is domiciled in this state, subject to302
section 5747.24 of the Revised Code;303

       (2) The estate of a decedent who at the time of death was304
domiciled in this state. The domicile tests of section 5747.24 of305
the Revised Code are not controlling for purposes of division 306
(I)(2) of this section.307

       (3) A trust that, in whole or part, resides in this state. If308
only part of a trust resides in this state, the trust is a309
resident only with respect to that part.310

       For the purposes of division (I)(3) of this section:311

       (a) A trust resides in this state for the trust's current312
taxable year to the extent, as described in division (I)(3)(d) of313
this section, that the trust consists directly or indirectly, in 314
whole or in part, of assets, net of any related liabilities, that 315
were transferred, or caused to be transferred, directly or 316
indirectly, to the trust by any of the following:317

        (i) A person, a court, or a governmental entity or 318
instrumentality on account of the death of a decedent, but only if 319
the trust is described in division (I)(3)(e)(i) or (ii) of this 320
section;321

       (ii) A person who was domiciled in this state for the 322
purposes of this chapter when the person directly or indirectly 323
transferred assets to an irrevocable trust, but only if at least 324
one of the trust's qualifying beneficiaries is domiciled in this 325
state for the purposes of this chapter during all or some portion 326
of the trust's current taxable year;327

       (iii) A person who was domiciled in this state for the328
purposes of this chapter when the trust document or instrument or329
part of the trust document or instrument became irrevocable, but330
only if at least one of the trust's qualifying beneficiaries is a 331
resident domiciled in this state for the purposes of this chapter332
during all or some portion of the trust's current taxable year. If 333
a trust document or instrument became irrevocable upon the death 334
of a person who at the time of death was domiciled in this state 335
for purposes of this chapter, that person is a person described in 336
division (I)(3)(a)(iii) of this section.337

        (b) A trust is irrevocable to the extent that the transferor 338
is not considered to be the owner of the net assets of the trust 339
under sections 671 to 678 of the Internal Revenue Code.340

       (c) With respect to a trust other than a charitable lead341
trust, "qualifying beneficiary" has the same meaning as "potential342
current beneficiary" as defined in section 1361(e)(2) of the343
Internal Revenue Code, and with respect to a charitable lead trust344
"qualifying beneficiary" is any current, future, or contingent345
beneficiary, but with respect to any trust "qualifying346
beneficiary" excludes a person or a governmental entity or347
instrumentality to any of which a contribution would qualify for348
the charitable deduction under section 170 of the Internal Revenue349
Code.350

        (d) For the purposes of division (I)(3)(a) of this section,351
the extent to which a trust consists directly or indirectly, in352
whole or in part, of assets, net of any related liabilities, that353
were transferred directly or indirectly, in whole or part, to the354
trust by any of the sources enumerated in that division shall be355
ascertained by multiplying the fair market value of the trust's356
assets, net of related liabilities, by the qualifying ratio, which357
shall be computed as follows:358

        (i) The first time the trust receives assets, the numerator359
of the qualifying ratio is the fair market value of those assets360
at that time, net of any related liabilities, from sources361
enumerated in division (I)(3)(a) of this section. The denominator362
of the qualifying ratio is the fair market value of all the363
trust's assets at that time, net of any related liabilities.364

        (ii) Each subsequent time the trust receives assets, a365
revised qualifying ratio shall be computed. The numerator of the366
revised qualifying ratio is the sum of (1) the fair market value367
of the trust's assets immediately prior to the subsequent368
transfer, net of any related liabilities, multiplied by the369
qualifying ratio last computed without regard to the subsequent370
transfer, and (2) the fair market value of the subsequently371
transferred assets at the time transferred, net of any related372
liabilities, from sources enumerated in division (I)(3)(a) of this373
section. The denominator of the revised qualifying ratio is the374
fair market value of all the trust's assets immediately after the375
subsequent transfer, net of any related liabilities.376

       (iii) Whether a transfer to the trust is by or from any of 377
the sources enumerated in division (I)(3)(a) of this section shall 378
be ascertained without regard to the domicile of the trust's 379
beneficiaries.380

        (e) For the purposes of division (I)(3)(a)(i) of this381
section:382

        (i) A trust is described in division (I)(3)(e)(i) of this383
section if the trust is a testamentary trust and the testator of384
that testamentary trust was domiciled in this state at the time of385
the testator's death for purposes of the taxes levied under386
Chapter 5731. of the Revised Code.387

        (ii) A trust is described in division (I)(3)(e)(ii) of this388
section if the transfer is a qualifying transfer described in any389
of divisions (I)(3)(f)(i) to (vi) of this section, the trust is an390
irrevocable inter vivos trust, and at least one of the trust's391
qualifying beneficiaries is domiciled in this state for purposes392
of this chapter during all or some portion of the trust's current393
taxable year.394

        (f) For the purposes of division (I)(3)(e)(ii) of this395
section, a "qualifying transfer" is a transfer of assets, net of396
any related liabilities, directly or indirectly to a trust, if the397
transfer is described in any of the following:398

        (i) The transfer is made to a trust, created by the decedent 399
before the decedent's death and while the decedent was domiciled 400
in this state for the purposes of this chapter, and, prior to the 401
death of the decedent, the trust became irrevocable while the 402
decedent was domiciled in this state for the purposes of this 403
chapter.404

        (ii) The transfer is made to a trust to which the decedent,405
prior to the decedent's death, had directly or indirectly406
transferred assets, net of any related liabilities, while the407
decedent was domiciled in this state for the purposes of this408
chapter, and prior to the death of the decedent the trust became409
irrevocable while the decedent was domiciled in this state for the410
purposes of this chapter.411

        (iii) The transfer is made on account of a contractual412
relationship existing directly or indirectly between the413
transferor and either the decedent or the estate of the decedent414
at any time prior to the date of the decedent's death, and the415
decedent was domiciled in this state at the time of death for416
purposes of the taxes levied under Chapter 5731. of the Revised417
Code.418

        (iv) The transfer is made to a trust on account of a419
contractual relationship existing directly or indirectly between420
the transferor and another person who at the time of the421
decedent's death was domiciled in this state for purposes of this422
chapter.423

        (v) The transfer is made to a trust on account of the will of 424
a testator.425

        (vi) The transfer is made to a trust created by or caused to 426
be created by a court, and the trust was directly or indirectly427
created in connection with or as a result of the death of an428
individual who, for purposes of the taxes levied under Chapter429
5731. of the Revised Code, was domiciled in this state at the time430
of the individual's death.431

       (g) The tax commissioner may adopt rules to ascertain the432
part of a trust residing in this state.433

       (J) "Nonresident" means an individual or estate that is not a 434
resident. An individual who is a resident for only part of a435
taxable year is a nonresident for the remainder of that taxable436
year.437

       (K) "Pass-through entity" has the same meaning as in section438
5733.04 of the Revised Code.439

       (L) "Return" means the notifications and reports required to440
be filed pursuant to this chapter for the purpose of reporting the441
tax due and includes declarations of estimated tax when so442
required.443

       (M) "Taxable year" means the calendar year or the taxpayer's444
fiscal year ending during the calendar year, or fractional part445
thereof, upon which the adjusted gross income is calculated446
pursuant to this chapter.447

       (N) "Taxpayer" means any person subject to the tax imposed by 448
section 5747.02 of the Revised Code or any pass-through entity449
that makes the election under division (D) of section 5747.08 of450
the Revised Code.451

       (O) "Dependents" means dependents as defined in the Internal452
Revenue Code and as claimed in the taxpayer's federal income tax453
return for the taxable year or which the taxpayer would have been454
permitted to claim had the taxpayer filed a federal income tax455
return.456

       (P) "Principal county of employment" means, in the case of a457
nonresident, the county within the state in which a taxpayer458
performs services for an employer or, if those services are459
performed in more than one county, the county in which the major460
portion of the services are performed.461

       (Q) As used in sections 5747.50 to 5747.55 of the Revised462
Code:463

       (1) "Subdivision" means any county, municipal corporation,464
park district, or township.465

       (2) "Essential local government purposes" includes all466
functions that any subdivision is required by general law to467
exercise, including like functions that are exercised under a468
charter adopted pursuant to the Ohio Constitution.469

       (R) "Overpayment" means any amount already paid that exceeds470
the figure determined to be the correct amount of the tax.471

       (S) "Taxable income" or "Ohio taxable income" applies only to 472
estates and trusts, and means federal taxable income, as defined 473
and used in the Internal Revenue Code, adjusted as follows:474

       (1) Add interest or dividends, net of ordinary, necessary,475
and reasonable expenses not deducted in computing federal taxable476
income, on obligations or securities of any state or of any477
political subdivision or authority of any state, other than this478
state and its subdivisions and authorities, but only to the extent 479
that such net amount is not otherwise includible in Ohio taxable 480
income and is described in either division (S)(1)(a) or (b) of 481
this section:482

        (a) The net amount is not attributable to the S portion of an 483
electing small business trust and has not been distributed to484
beneficiaries for the taxable year;485

        (b) The net amount is attributable to the S portion of an486
electing small business trust for the taxable year.487

       (2) Add interest or dividends, net of ordinary, necessary,488
and reasonable expenses not deducted in computing federal taxable489
income, on obligations of any authority, commission,490
instrumentality, territory, or possession of the United States to491
the extent that the interest or dividends are exempt from federal492
income taxes but not from state income taxes, but only to the493
extent that such net amount is not otherwise includible in Ohio494
taxable income and is described in either division (S)(1)(a) or495
(b) of this section;496

       (3) Add the amount of personal exemption allowed to the497
estate pursuant to section 642(b) of the Internal Revenue Code;498

       (4) Deduct interest or dividends, net of related expenses499
deducted in computing federal taxable income, on obligations of500
the United States and its territories and possessions or of any501
authority, commission, or instrumentality of the United States to502
the extent that the interest or dividends are exempt from state503
taxes under the laws of the United States, but only to the extent504
that such amount is included in federal taxable income and is505
described in either division (S)(1)(a) or (b) of this section;506

       (5) Deduct the amount of wages and salaries, if any, not507
otherwise allowable as a deduction but that would have been508
allowable as a deduction in computing federal taxable income for509
the taxable year, had the targeted jobs credit allowed under510
sections 38, 51, and 52 of the Internal Revenue Code not been in511
effect, but only to the extent such amount relates either to512
income included in federal taxable income for the taxable year or513
to income of the S portion of an electing small business trust for514
the taxable year;515

       (6) Deduct any interest or interest equivalent, net of516
related expenses deducted in computing federal taxable income, on517
public obligations and purchase obligations, but only to the518
extent that such net amount relates either to income included in519
federal taxable income for the taxable year or to income of the S520
portion of an electing small business trust for the taxable year;521

       (7) Add any loss or deduct any gain resulting from sale,522
exchange, or other disposition of public obligations to the extent523
that such loss has been deducted or such gain has been included in524
computing either federal taxable income or income of the S portion525
of an electing small business trust for the taxable year;526

       (8) Except in the case of the final return of an estate, add527
any amount deducted by the taxpayer on both its Ohio estate tax528
return pursuant to section 5731.14 of the Revised Code, and on its529
federal income tax return in determining federal taxable income;530

       (9)(a) Deduct any amount included in federal taxable income531
solely because the amount represents a reimbursement or refund of532
expenses that in a previous year the decedent had deducted as an533
itemized deduction pursuant to section 63 of the Internal Revenue534
Code and applicable treasury regulations. The deduction otherwise535
allowed under division (S)(9)(a) of this section shall be reduced536
to the extent the reimbursement is attributable to an amount the537
taxpayer or decedent deducted under this section in any taxable538
year.539

       (b) Add any amount not otherwise included in Ohio taxable540
income for any taxable year to the extent that the amount is541
attributable to the recovery during the taxable year of any amount542
deducted or excluded in computing federal or Ohio taxable income543
in any taxable year, but only to the extent such amount has not544
been distributed to beneficiaries for the taxable year.545

       (10) Deduct any portion of the deduction described in section 546
1341(a)(2) of the Internal Revenue Code, for repaying previously 547
reported income received under a claim of right, that meets both 548
of the following requirements:549

       (a) It is allowable for repayment of an item that was550
included in the taxpayer's taxable income or the decedent's551
adjusted gross income for a prior taxable year and did not qualify552
for a credit under division (A) or (B) of section 5747.05 of the553
Revised Code for that year.554

       (b) It does not otherwise reduce the taxpayer's taxable555
income or the decedent's adjusted gross income for the current or556
any other taxable year.557

       (11) Add any amount claimed as a credit under section558
5747.059 of the Revised Code to the extent that the amount559
satisfies either of the following:560

       (a) The amount was deducted or excluded from the computation561
of the taxpayer's federal taxable income as required to be562
reported for the taxpayer's taxable year under the Internal563
Revenue Code;564

       (b) The amount resulted in a reduction in the taxpayer's565
federal taxable income as required to be reported for any of the566
taxpayer's taxable years under the Internal Revenue Code.567

       (12) Deduct any amount, net of related expenses deducted in568
computing federal taxable income, that a trust is required to569
report as farm income on its federal income tax return, but only570
if the assets of the trust include at least ten acres of land571
satisfying the definition of "land devoted exclusively to572
agricultural use" under section 5713.30 of the Revised Code,573
regardless of whether the land is valued for tax purposes as such574
land under sections 5713.30 to 5713.38 of the Revised Code. If the575
trust is a pass-through entity investor, section 5747.231 of the576
Revised Code applies in ascertaining if the trust is eligible to577
claim the deduction provided by division (S)(12) of this section578
in connection with the pass-through entity's farm income.579

        Except for farm income attributable to the S portion of an580
electing small business trust, the deduction provided by division581
(S)(12) of this section is allowed only to the extent that the582
trust has not distributed such farm income. Division (S)(12) of583
this section applies only to taxable years of a trust beginning in584
2002 or thereafter.585

       (13) Add the net amount of income described in section 641(c)586
of the Internal Revenue Code to the extent that amount is not587
included in federal taxable income.588

       (14) Add or deduct the amount the taxpayer would be required589
to add or deduct under division (A)(20) or (21) of this section if590
the taxpayer's Ohio taxable income were computed in the same591
manner as an individual's Ohio adjusted gross income is computed592
under this section. In the case of a trust, division (S)(14) of593
this section applies only to any of the trust's taxable years594
beginning in 2002 or thereafter.595

       (T) "School district income" and "school district income tax" 596
have the same meanings as in section 5748.01 of the Revised Code.597

       (U) As used in divisions (A)(8), (A)(9), (S)(6), and (S)(7)598
of this section, "public obligations," "purchase obligations," and599
"interest or interest equivalent" have the same meanings as in600
section 5709.76 of the Revised Code.601

       (V) "Limited liability company" means any limited liability602
company formed under Chapter 1705. of the Revised Code or under603
the laws of any other state.604

       (W) "Pass-through entity investor" means any person who,605
during any portion of a taxable year of a pass-through entity, is606
a partner, member, shareholder, or equity investor in that607
pass-through entity.608

       (X) "Banking day" has the same meaning as in section 1304.01609
of the Revised Code.610

       (Y) "Month" means a calendar month.611

       (Z) "Quarter" means the first three months, the second three612
months, the third three months, or the last three months of the613
taxpayer's taxable year.614

       (AA)(1) "Eligible institution" means a state university or615
state institution of higher education as defined in section616
3345.011 of the Revised Code, or a private, nonprofit college,617
university, or other post-secondary institution located in this618
state that possesses a certificate of authorization issued by the619
Ohio board of regents pursuant to Chapter 1713. of the Revised620
Code or a certificate of registration issued by the state board of621
career colleges and schools under Chapter 3332. of the Revised622
Code.623

       (2) "Qualified tuition and fees" means tuition and fees624
imposed by an eligible institution as a condition of enrollment or625
attendance, not exceeding two thousand five hundred dollars in626
each of the individual's first two years of post-secondary627
education. If the individual is a part-time student, "qualified628
tuition and fees" includes tuition and fees paid for the academic629
equivalent of the first two years of post-secondary education630
during a maximum of five taxable years, not exceeding a total of631
five thousand dollars. "Qualified tuition and fees" does not632
include:633

       (a) Expenses for any course or activity involving sports,634
games, or hobbies unless the course or activity is part of the635
individual's degree or diploma program;636

       (b) The cost of books, room and board, student activity fees,637
athletic fees, insurance expenses, or other expenses unrelated to 638
the individual's academic course of instruction;639

       (c) Tuition, fees, or other expenses paid or reimbursed640
through an employer, scholarship, grant in aid, or other641
educational benefit program.642

       (BB)(1) "Modified business income" means the business income643
included in a trust's Ohio taxable income after such taxable644
income is first reduced by the qualifying trust amount, if any.645

       (2) "Qualifying trust amount" of a trust means capital gains646
and losses from the sale, exchange, or other disposition of equity647
or ownership interests in, or debt obligations of, a qualifying648
investee to the extent included in the trust's Ohio taxable 649
income, but only if the following requirements are satisfied:650

        (a) The book value of the qualifying investee's physical 651
assets in this state and everywhere, as of the last day of the 652
qualifying investee's fiscal or calendar year ending immediately 653
prior to the date on which the trust recognizes the gain or loss, 654
is available to the trust.655

       (b) The requirements of section 5747.011 of the Revised Code656
are satisfied for the trust's taxable year in which the trust657
recognizes the gain or loss.658

        Any gain or loss that is not a qualifying trust amount is659
modified business income, qualifying investment income, or660
modified nonbusiness income, as the case may be.661

       (3) "Modified nonbusiness income" means a trust's Ohio662
taxable income other than modified business income, other than the663
qualifying trust amount, and other than qualifying investment664
income, as defined in section 5747.012 of the Revised Code, to the665
extent such qualifying investment income is not otherwise part of666
modified business income.667

       (4) "Modified Ohio taxable income" applies only to trusts,668
and means the sum of the amounts described in divisions (BB)(4)(a) 669
to (c) of this section:670

       (a) The fraction, calculated under section 5747.013, and 671
applying section 5747.231 of the Revised Code, multiplied by the 672
sum of the following amounts:673

        (i) The trust's modified business income;674

        (ii) The trust's qualifying investment income, as defined in 675
section 5747.012 of the Revised Code, but only to the extent the 676
qualifying investment income does not otherwise constitute677
modified business income and does not otherwise constitute a678
qualifying trust amount.679

       (b) The qualifying trust amount multiplied by a fraction, the 680
numerator of which is the sum of the book value of the qualifying 681
investee's physical assets in this state on the last day of the 682
qualifying investee's fiscal or calendar year ending immediately 683
prior to the day on which the trust recognizes the qualifying 684
trust amount, and the denominator of which is the sum of the book 685
value of the qualifying investee's total physical assets 686
everywhere on the last day of the qualifying investee's fiscal or 687
calendar year ending immediately prior to the day on which the 688
trust recognizes the qualifying trust amount. If, for a taxable 689
year, the trust recognizes a qualifying trust amount with respect 690
to more than one qualifying investee, the amount described in 691
division (BB)(4)(b) of this section shall equal the sum of the692
products so computed for each such qualifying investee.693

       (c)(i) With respect to a trust or portion of a trust that is 694
a resident as ascertained in accordance with division (I)(3)(d) of 695
this section, its modified nonbusiness income.696

        (ii) With respect to a trust or portion of a trust that is697
not a resident as ascertained in accordance with division698
(I)(3)(d) of this section, the amount of its modified nonbusiness699
income satisfying the descriptions in divisions (B)(2) to (5) of700
section 5747.20 of the Revised Code, except as otherwise provided 701
in division (BB)(4)(c)(ii) of this section. With respect to a 702
trust or portion of a trust that is not a resident as ascertained 703
in accordance with division (I)(3)(d) of this section, the trust's 704
portion of modified nonbusiness income recognized from the sale, 705
exchange, or other disposition of a debt interest in or equity 706
interest in a section 5747.212 entity, as defined in section 707
5747.212 of the Revised Code, without regard to division (A) of 708
that section, shall not be allocated to this state in accordance 709
with section 5747.20 of the Revised Code but shall be apportioned 710
to this state in accordance with division (B) of section 5747.212 711
of the Revised Code without regard to division (A) of that 712
section.713

       If the allocation and apportionment of a trust's income under714
divisions (BB)(4)(a) and (c) of this section do not fairly715
represent the modified Ohio taxable income of the trust in this716
state, the alternative methods described in division (C) of717
section 5747.21 of the Revised Code may be applied in the manner718
and to the same extent provided in that section.719

       (5)(a) Except as set forth in division (BB)(5)(b) of this 720
section, "qualifying investee" means a person in which a trust has 721
an equity or ownership interest, or a person or unit of government 722
the debt obligations of either of which are owned by a trust. For 723
the purposes of division (BB)(2)(a) of this section and for the 724
purpose of computing the fraction described in division (BB)(4)(b) 725
of this section, all of the following apply:726

        (i) If the qualifying investee is a member of a qualifying727
controlled group on the last day of the qualifying investee's728
fiscal or calendar year ending immediately prior to the date on729
which the trust recognizes the gain or loss, then "qualifying730
investee" includes all persons in the qualifying controlled group731
on such last day.732

        (ii) If the qualifying investee, or if the qualifying733
investee and any members of the qualifying controlled group of734
which the qualifying investee is a member on the last day of the735
qualifying investee's fiscal or calendar year ending immediately736
prior to the date on which the trust recognizes the gain or loss,737
separately or cumulatively own, directly or indirectly, on the738
last day of the qualifying investee's fiscal or calendar year739
ending immediately prior to the date on which the trust recognizes740
the qualifying trust amount, more than fifty per cent of the741
equity of a pass-through entity, then the qualifying investee and742
the other members are deemed to own the proportionate share of the743
pass-through entity's physical assets which the pass-through744
entity directly or indirectly owns on the last day of the745
pass-through entity's calendar or fiscal year ending within or746
with the last day of the qualifying investee's fiscal or calendar747
year ending immediately prior to the date on which the trust748
recognizes the qualifying trust amount.749

        (iii) For the purposes of division (BB)(5)(a)(iii) of this750
section, "upper level pass-through entity" means a pass-through751
entity directly or indirectly owning any equity of another752
pass-through entity, and "lower level pass-through entity" means753
that other pass-through entity.754

        An upper level pass-through entity, whether or not it is also 755
a qualifying investee, is deemed to own, on the last day of the 756
upper level pass-through entity's calendar or fiscal year, the757
proportionate share of the lower level pass-through entity's758
physical assets that the lower level pass-through entity directly759
or indirectly owns on the last day of the lower level pass-through760
entity's calendar or fiscal year ending within or with the last761
day of the upper level pass-through entity's fiscal or calendar762
year. If the upper level pass-through entity directly and763
indirectly owns less than fifty per cent of the equity of the764
lower level pass-through entity on each day of the upper level765
pass-through entity's calendar or fiscal year in which or with766
which ends the calendar or fiscal year of the lower level767
pass-through entity and if, based upon clear and convincing768
evidence, complete information about the location and cost of the769
physical assets of the lower pass-through entity is not available770
to the upper level pass-through entity, then solely for purposes771
of ascertaining if a gain or loss constitutes a qualifying trust772
amount, the upper level pass-through entity shall be deemed as773
owning no equity of the lower level pass-through entity for each774
day during the upper level pass-through entity's calendar or775
fiscal year in which or with which ends the lower level776
pass-through entity's calendar or fiscal year. Nothing in division 777
(BB)(5)(a)(iii) of this section shall be construed to provide for 778
any deduction or exclusion in computing any trust's Ohio taxable 779
income.780

       (b) With respect to a trust that is not a resident for the781
taxable year and with respect to a part of a trust that is not a782
resident for the taxable year, "qualifying investee" for that783
taxable year does not include a C corporation if both of the784
following apply:785

       (i) During the taxable year the trust or part of the trust786
recognizes a gain or loss from the sale, exchange, or other787
disposition of equity or ownership interests in, or debt788
obligations of, the C corporation.789

       (ii) Such gain or loss constitutes nonbusiness income.790

        (6) "Available" means information is such that a person is 791
able to learn of the information by the due date plus extensions, 792
if any, for filing the return for the taxable year in which the 793
trust recognizes the gain or loss.794

        (CC) "Qualifying controlled group" has the same meaning as in 795
section 5733.04 of the Revised Code.796

        (DD) "Related member" has the same meaning as in section797
5733.042 of the Revised Code.798

       (EE)(1) For the purposes of division (EE) of this section: 799

       (a) "Qualifying person" means any person other than a 800
qualifying corporation.801

       (b) "Qualifying corporation" means any person classified for 802
federal income tax purposes as an association taxable as a 803
corporation, except either of the following:804

       (i) A corporation that has made an election under subchapter 805
S, chapter one, subtitle A, of the Internal Revenue Code for its 806
taxable year ending within, or on the last day of, the investor's 807
taxable year;808

       (ii) A subsidiary that is wholly owned by any corporation 809
that has made an election under subchapter S, chapter one, 810
subtitle A of the Internal Revenue Code for its taxable year 811
ending within, or on the last day of, the investor's taxable year.812

       (2) For the purposes of this chapter, unless expressly stated 813
otherwise, no qualifying person indirectly owns any asset directly 814
or indirectly owned by any qualifying corporation.815

       (FF) For purposes of this chapter and Chapter 5751. of the 816
Revised Code:817

       (1) "Trust" does not include a qualified pre-income tax 818
trust.819

       (2) A "qualified pre-income tax trust" is any pre-income tax 820
trust that makes a qualifying pre-income tax trust election as 821
described in division (FF)(3) of this section.822

       (3) A "qualifying pre-income tax trust election" is an 823
election by a pre-income tax trust to subject to the tax imposed 824
by section 5751.02 of the Revised Code the pre-income tax trust 825
and all pass-through entities of which the trust owns or controls, 826
directly, indirectly, or constructively through related interests, 827
five per cent or more of the ownership or equity interests. The 828
trustee shall notify the tax commissioner in writing of the 829
election on or before April 15, 2006. The election, if timely 830
made, shall be effective on and after January 1, 2006, and shall 831
apply for all tax periods and tax years until revoked by the 832
trustee of the trust.833

       (4) A "pre-income tax trust" is a trust that satisfies all of 834
the following requirements:835

       (a) The document or instrument creating the trust was 836
executed by the grantor before January 1, 1972;837

       (b) The trust became irrevocable upon the creation of the 838
trust; and839

       (c) The grantor was domiciled in this state at the time the 840
trust was created.841

       Sec. 5747.014.  (A) For purposes of this section, division 842
(A)(9) of section 5747.01 of the Revised Code, and section 5747.02 843
of the Revised Code:844

       (1) "Modified capital gain" means a capital gain realized 845
from the sale, exchange, or other disposition of non-Ohio-based 846
investments to the extent included in federal adjusted gross 847
income and not otherwise deducted or excluded in computing Ohio 848
adjusted gross income.849

       (2) "Modified capital loss" means a capital loss realized 850
from the sale, exchange, or other disposition of non-Ohio-based 851
investments to the extent included in the computation of federal 852
adjusted gross income.853

       (3) "Net modified capital gain" means the excess of modified 854
capital gains over modified capital losses, plus any capital gain 855
distributions included in federal adjusted gross income but only 856
to the extent the taxpayer can prove to the satisfaction of the 857
tax commissioner that the capital gain distributions relate to the 858
sale, exchange, or other disposition of a non-Ohio-based 859
investment.860

       (4) "Ohio-based reinvestment" means an investment in any of 861
the following:862

        (a) Publicly traded shares of a business incorporated under 863
the laws of this state that maintains its corporate headquarters 864
in this state at the time the taxpayer made the investment;865

        (b) Pass-through entities, the majority of the equity 866
ownership interests of which are owned directly by persons subject 867
to the tax levied under section 5747.02 of the Revised Code at the 868
time the taxpayer made the investment;869

        (c) Public obligations issued by this state or subdivisions, 870
as those terms are defined in section 5709.76 of the Revised Code;871

        (d) Tangible personal property used in business and 872
physically located in this state at the time the taxpayer made the 873
investment;874

       (e) Real property located in this state.875

       (5) A "non-Ohio-based investment" means any investment other 876
than an Ohio-based reinvestment.877

       (B) In computing Ohio adjusted gross income under division 878
(A) of section 5747.01 of the Revised Code, the following amounts 879
shall be deducted or added under division (A)(24) of that section:880

       (1) Deduct Ohio-based reinvestments to the extent not 881
otherwise deducted or excluded in computing federal or Ohio 882
adjusted gross income. The amount deducted under division (B)(1) 883
of this section shall not exceed net modified capital gains for 884
the taxable year.885

       (2)(a) Subject to division (B)(2)(b) of this section, add an 886
amount equal to Ohio-based reinvestments sold or otherwise 887
disposed of during the taxable year and within three years after 888
the Ohio-based reinvestment was made to the extent a deduction was 889
taken for the reinvestment in the current or a prior taxable year, 890
plus ten per cent of that amount, and interest on that amount from 891
the first day of January following the day the Ohio-based 892
reinvestment was made computed at the rate per annum required 893
under section 5703.47 of the Revised Code.894

       For the purposes of division (B)(2)(a) of this section and 895
section 5747.13 of the Revised Code, the return subject to 896
assessment shall be the return for the taxable year that includes 897
the last day of the end of the three-year period beginning on the 898
day the Ohio-based reinvestment was made.899

       (b) Any addition required under division (B)(2)(a) of this 900
section shall be reduced by any amount the taxpayer invests in an 901
Ohio-based reinvestment during the taxable year, ten per cent of 902
that amount, and interest on that amount computed as provided in 903
that division. The amount of the reduction shall not exceed the 904
amount otherwise required to be added under division (B)(2)(a) of 905
this section. No reduction shall be allowed under division 906
(B)(2)(b) of this section for any amount deducted under division 907
(B)(1) of this section for the same taxable year.908

       Sec. 5747.02.  (A) For the purpose of providing revenue for909
the support of schools and local government functions, to provide910
relief to property taxpayers, to provide revenue for the general911
revenue fund, and to meet the expenses of administering the tax912
levied by this chapter, there is hereby levied on every913
individual, trust, and estate residing in or earning or receiving914
income in this state, on every individual, trust, and estate915
earning or receiving lottery winnings, prizes, or awards pursuant916
to Chapter 3770. of the Revised Code, and on every individual,917
trust, and estate otherwise having nexus with or in this state918
under the Constitution of the United States, an annual tax919
measured in the case of individuals by the sum of Ohio adjusted 920
gross income and Ohio-based reinvestments less an exemption for 921
the taxpayer, the taxpayer's spouse, and each dependent as 922
provided in section 5747.025 of the Revised Code; measured in the 923
case of trusts by modified Ohio taxable income under division (D) 924
of this section; and measured in the case of estates by Ohio925
taxable income. The926

       (1) The tax imposed by this section on the balance thus 927
obtained is hereby levied as follows:928

       (1) For taxable years beginning in 2004:929

OHIO ADJUSTED GROSS INCOME LESS EXEMPTIONS (INDIVIDUALS) 930
OR 931
MODIFIED OHIO 932
TAXABLE INCOME (TRUSTS) 933
OR 934
OHIO TAXABLE INCOME (ESTATES) TAX 935

$5,000 or less .743% 936
More than $5,000 but not more than $10,000 $37.15 plus 1.486% of the amount in excess of $5,000 937
More than $10,000 but not more than $15,000 $111.45 plus 2.972% of the amount in excess of $10,000 938
More than $15,000 but not more than $20,000 $260.05 plus 3.715% of the amount in excess of $15,000 939
More than $20,000 but not more than $40,000 $445.80 plus 4.457% of the amount in excess of $20,000 940
More than $40,000 but not more than $80,000 $1,337.20 plus 5.201% of the amount in excess of $40,000 941
More than $80,000 but not more than $100,000 $3,417.60 plus 5.943% of the amount in excess of $80,000 942
More than $100,000 but not more than $200,000 $4,606.20 plus 6.9% of the amount in excess of $100,000 943
More than $200,000 $11,506.20 plus 7.5% of the amount in excess of $200,000 944

       (2) For taxable years beginning in 2005:945

OHIO ADJUSTED GROSS INCOME LESS EXEMPTIONS (INDIVIDUALS) 946
OR 947
MODIFIED OHIO 948
TAXABLE INCOME (TRUSTS) 949
OR 950
OHIO TAXABLE INCOME (ESTATES) TAX 951

$5,000 or less .712% 952
More than $5,000 but not more than $10,000 $35.60 plus 1.424% of the amount in excess of $5,000 953
More than $10,000 but not more than $15,000 $106.80 plus 2.847% of the amount in excess of $10,000 954
More than $15,000 but not more than $20,000 $249.15 plus 3.559% of the amount in excess of $15,000 955
More than $20,000 but not more than $40,000 $427.10 plus 4.27% of the amount in excess of $20,000 956
More than $40,000 but not more than $80,000 $1,281.10 plus 4.983% of the amount in excess of $40,000 957
More than $80,000 but not more than $100,000 $3,274.30 plus 5.693% of the amount in excess of $80,000 958
More than $100,000 but not more than $200,000 $4,412.90 plus 6.61% of the amount in excess of $100,000 959
More than $200,000 $11,022.90 plus 7.185% of the amount in excess of $200,000 960

       (3) For taxable years beginning in 2006:961

OHIO ADJUSTED GROSS INCOME LESS EXEMPTIONS (INDIVIDUALS) 962
OR 963
MODIFIED OHIO 964
TAXABLE INCOME (TRUSTS) 965
OR 966
OHIO TAXABLE INCOME (ESTATES) TAX 967

$5,000 or less .681% 968
More than $5,000 but not more than $10,000 $34.05 plus 1.361% of the amount in excess of $5,000 969
More than $10,000 but not more than $15,000 $102.10 plus 2.722% of the amount in excess of $10,000 970
More than $15,000 but not more than $20,000 $238.20 plus 3.403% of the amount in excess of $15,000 971
More than $20,000 but not more than $40,000 $408.35 plus 4.083% of the amount in excess of $20,000 972
More than $40,000 but not more than $80,000 $1,224.95 plus 4.764% of the amount in excess of $40,000 973
More than $80,000 but not more than $100,000 $3,130.55 plus 5.444% of the amount in excess of $80,000 974
More than $100,000 but not more than $200,000 $4,219.35 plus 6.32% of the amount in excess of $100,000 975
More than $200,000 $10,539.35 plus 6.87% of the amount in excess of $200,000 976

       (4) For taxable years beginning in 2007:977

OHIO ADJUSTED GROSS INCOME LESS EXEMPTIONS (INDIVIDUALS) 978
OR 979
MODIFIED OHIO 980
TAXABLE INCOME (TRUSTS) 981
OR 982
OHIO TAXABLE INCOME (ESTATES) TAX 983

individuals for taxable years beginning in or after 2007 shall be 984
the sum of the tax amounts computed under division (A)(1)(a) and 985
division (A)(1)(b), (c), or (d) of this section where "INCOME" 986
does not include Ohio-based reinvestments, or shall be the tax 987
amount computed under division (A)(1)(b), (c), or (d) of this 988
section where "INCOME" includes Ohio-based reinvestments, 989
whichever computation produces the lower tax amount. If the 990
computation where "INCOME" does not include Ohio-based 991
reinvestments applies, the total amount of exemptions allowed 992
under section 5747.025 of the Revised Code shall be applied first 993
against adjusted gross income, and if the total amount of the 994
exemptions exceeds adjusted gross income, the excess shall be 995
applied against Ohio-based reinvestments. If the computation where 996
"INCOME" includes Ohio-based reinvestments applies, the total 997
amount of exemptions allowed under section 5747.025 of the Revised 998
Code shall be applied against the sum of adjusted gross income and 999
Ohio-based reinvestments.1000

       The tax imposed by this section on estates and trusts for 1001
taxable years beginning in or after 2007 shall be the tax amounts 1002
computed under division (A)(1)(b), (c), or (d) of this section, as 1003
applicable to the taxable year.1004

       (a) The tax imposed on Ohio-based reinvestments of 1005
individuals shall be three per cent of the Ohio-based 1006
reinvestment.1007

       (b) The tax imposed on Ohio adjusted gross income of 1008
individuals, modified Ohio taxable income of trusts, and Ohio 1009
taxable income of estates for taxable years beginning in 2007 1010
shall be computed as follows:1011

INCOME TAX 1012

$5,000 or less .649% 1013
More than $5,000 but not more than $10,000 $32.45 plus 1.299% of the amount in excess of $5,000 1014
More than $10,000 but not more than $15,000 $97.40 plus 2.598% of the amount in excess of $10,000 1015
More than $15,000 but not more than $20,000 $227.30 plus 3.247% of the amount in excess of $15,000 1016
More than $20,000 but not more than $40,000 $389.65 plus 3.895% of the amount in excess of $20,000 1017
More than $40,000 but not more than $80,000 $1,168.65 plus 4.546% of the amount in excess of $40,000 1018
More than $80,000 but not more than $100,000 $2,987.05 plus 5.194% of the amount in excess of $80,000 1019
More than $100,000 but not more than $200,000 $4,025.85 plus 6.031% of the amount in excess of $100,000 1020
More than $200,000 $10,056.85 plus 6.555% of the amount in excess of $200,000 1021

       (5) For taxable years beginning in 2008:1022

OHIO ADJUSTED GROSS INCOME LESS EXEMPTIONS (INDIVIDUALS) 1023
OR 1024
MODIFIED OHIO 1025
TAXABLE INCOME (TRUSTS) 1026
OR 1027
OHIO TAXABLE INCOME (ESTATES) TAX 1028

       (c) The tax imposed on Ohio adjusted gross income of 1029
individuals, modified Ohio taxable income of trusts, and Ohio 1030
taxable income of estates for taxable years beginning in 2008 1031
shall be computed as follows:1032

INCOME TAX 1033

$5,000 or less .618% 1034
More than $5,000 but not more than $10,000 $30.90 plus 1.236% of the amount in excess of $5,000 1035
More than $10,000 but not more than $15,000 $92.70 plus 2.473% of the amount in excess of $10,000 1036
More than $15,000 but not more than $20,000 $216.35 plus 3.091% of the amount in excess of $15,000 1037
More than $20,000 but not more than $40,000 $370.90 plus 3.708% of the amount in excess of $20,000 1038
More than $40,000 but not more than $80,000 $1,112.50 plus 4.327% of the amount in excess of $40,000 1039
More than $80,000 but not more than $100,000 $2,843.30 plus 4.945% of the amount in excess of $80,000 1040
More than $100,000 but not more than $200,000 $3,832.30 plus 5.741% of the amount in excess of $100,000 1041
More than $200,000 $9,573.30 plus 6.24% of the amount in excess of $200,000 1042

       (6) For taxable years beginning in 2009 or thereafter:1043

OHIO ADJUSTED GROSS INCOME LESS EXEMPTIONS (INDIVIDUALS) 1044
OR 1045
MODIFIED OHIO 1046
TAXABLE INCOME (TRUSTS) 1047
OR 1048
OHIO TAXABLE INCOME (ESTATES) TAX 1049

       (d) The tax imposed on Ohio adjusted gross income of 1050
individuals, modified Ohio taxable income of trusts, and Ohio 1051
taxable income of estates for taxable years beginning in or after 1052
2009 shall be computed as follows:1053

INCOME TAX 1054

$5,000 or less .587% 1055
More than $5,000 but not more than $10,000 $29.35 plus 1.174% of the amount in excess of $5,000 1056
More than $10,000 but not more than $15,000 $88.05 plus 2.348% of the amount in excess of $10,000 1057
More than $15,000 but not more than $20,000 $205.45 plus 2.935% of the amount in excess of $15,000 1058
More than $20,000 but not more than $40,000 $352.20 plus 3.521% of the amount in excess of $20,000 1059
More than $40,000 but not more than $80,000 $1,056.40 plus 4.109% of the amount in excess of $40,000 1060
More than $80,000 but not more than $100,000 $2,700.00 plus 4.695% of the amount in excess of $80,000 1061
More than $100,000 but not more than $200,000 $3,639.00 plus 5.451% of the amount in excess of $100,000 1062
More than $200,000 $9,090.00 plus 5.925% of the amount in excess of $200,000 1063

       (2) In July of each year, beginning in 2010, the tax1064
commissioner shall adjust the income amounts prescribed in this1065
division by multiplying the percentage increase in the gross1066
domestic product deflator computed that year under section1067
5747.025 of the Revised Code by each of the income amounts1068
resulting from the adjustment under this division in the preceding1069
year, adding the resulting product to the corresponding income1070
amount resulting from the adjustment in the preceding year, and1071
rounding the resulting sum to the nearest multiple of fifty1072
dollars. The tax commissioner also shall recompute each of the tax 1073
dollar amounts to the extent necessary to reflect the adjustment 1074
of the income amounts. The rates of taxation shall not be 1075
adjusted.1076

       The adjusted amounts apply to taxable years beginning in the1077
calendar year in which the adjustments are made. The tax1078
commissioner shall not make such adjustments in any year in which1079
the amount resulting from the adjustment would be less than the1080
amount resulting from the adjustment in the preceding year.1081

       (B) If the director of budget and management makes a1082
certification to the tax commissioner under division (B) of1083
section 131.44 of the Revised Code, the amount of tax as1084
determined under division (A) of this section shall be reduced by1085
the percentage prescribed in that certification for taxable years1086
beginning in the calendar year in which that certification is1087
made.1088

       (C) The levy of this tax on income does not prevent a1089
municipal corporation, a joint economic development zone created1090
under section 715.691, or a joint economic development district1091
created under section 715.70 or 715.71 or sections 715.72 to1092
715.81 of the Revised Code from levying a tax on income.1093

       (D) This division applies only to taxable years of a trust 1094
beginning in 2002 or thereafter.1095

       (1) The tax imposed by this section on a trust shall be1096
computed by multiplying the Ohio modified taxable income of the1097
trust by the rates prescribed by division (A)(1)(b), (c), or (d)1098
of this section, as applicable to the taxable year.1099

       (2) A credit is allowed against the tax computed under1100
division (D) of this section equal to the lesser of (1) the tax1101
paid to another state or the District of Columbia on the trust's1102
modified nonbusiness income, other than the portion of the trust's 1103
nonbusiness income that is qualifying investment income as defined 1104
in section 5747.012 of the Revised Code, or (2) the effective tax 1105
rate, based on modified Ohio taxable income, multiplied by the1106
trust's modified nonbusiness income other than the portion of 1107
trust's nonbusiness income that is qualifying investment income. 1108
The credit applies before any other applicable credits.1109

       (3) The credits enumerated in divisions (A)(1) to (13) of1110
section 5747.98 of the Revised Code do not apply to a trust1111
subject to this division. Any credits enumerated in other1112
divisions of section 5747.98 of the Revised Code apply to a trust1113
subject to this division. To the extent that the trust distributes 1114
income for the taxable year for which a credit is available to the 1115
trust, the credit shall be shared by the trust and its 1116
beneficiaries. The tax commissioner and the trust shall be guided 1117
by applicable regulations of the United States treasury regarding 1118
the sharing of credits.1119

       (E) For the purposes of this section, "trust" means any trust 1120
described in Subchapter J of Chapter 1 of the Internal Revenue 1121
Code, excluding trusts that are not irrevocable as defined in 1122
division (I)(3)(b) of section 5747.01 of the Revised Code and that 1123
have no modified Ohio taxable income for the taxable year, 1124
charitable remainder trusts, qualified funeral trusts and preneed 1125
funeral contract trusts established pursuant to section 1111.19 of 1126
the Revised Code that are not qualified funeral trusts, endowment 1127
and perpetual care trusts, qualified settlement trusts and funds, 1128
designated settlement trusts and funds, and trusts exempted from 1129
taxation under section 501(a) of the Internal Revenue Code.1130

       Section 2.  That existing sections 5747.01 and 5747.02 of the 1131
Revised Code are hereby repealed.1132

       Section 3. The amendment by this act of sections 5747.01 and 1133
5747.02 of the Revised Code, and the enactment by this act of 1134
section 5747.014 of the Revised Code, apply to taxable years 1135
beginning on or after January 1, 2007.1136