As Introduced

128th General Assembly
Regular Session
2009-2010
S. B. No. 266


Senator Schuring 

Cosponsors: Senators Wagoner, Cates, Buehrer, Gibbs, Grendell, Goodman, Schaffer, Widener, Faber, Husted 

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 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 5747.70 77
of the Revised Code, related to contributions to variable college 78
savings program accounts made or tuition units purchased pursuant 79
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) Deduct, to the extent not otherwise deducted or excluded 107
in computing federal or Ohio adjusted gross income, any amount 108
included in federal adjusted gross income under section 105 or not 109
excluded under section 106 of the Internal Revenue Code solely 110
because it relates to an accident and health plan for a person who 111
otherwise would be a "qualifying relative" and thus a "dependent" 112
under section 152 of the Internal Revenue Code but for the fact 113
that the person fails to meet the income and support limitations 114
under section 152(d)(1)(B) and (C) of the Internal Revenue Code. 115

       (d) For purposes of division (A)(11) of this section, 116
"medical care" has the meaning given in section 213 of the 117
Internal Revenue Code, subject to the special rules, limitations, 118
and exclusions set forth therein, and "qualified long-term care" 119
has the same meaning given in section 7702B(c) of the Internal 120
Revenue Code. Solely for purposes of divisions (A)(11)(a) and (c) 121
of this section, "dependent" includes a person who otherwise would 122
be a "qualifying relative" and thus a "dependent" under section 123
152 of the Internal Revenue Code but for the fact that the person 124
fails to meet the income and support limitations under section 125
152(d)(1)(B) and (C) of the Internal Revenue Code.126

       (12)(a) Deduct any amount included in federal adjusted gross 127
income solely because the amount represents a reimbursement or 128
refund of expenses that in any year the taxpayer had deducted as 129
an itemized deduction pursuant to section 63 of the Internal 130
Revenue Code and applicable United States department of the 131
treasury regulations. The deduction otherwise allowed under 132
division (A)(12)(a) of this section shall be reduced to the extent 133
the reimbursement is attributable to an amount the taxpayer 134
deducted under this section in any taxable year.135

       (b) Add any amount not otherwise included in Ohio adjusted 136
gross income for any taxable year to the extent that the amount is 137
attributable to the recovery during the taxable year of any amount 138
deducted or excluded in computing federal or Ohio adjusted gross 139
income in any taxable year.140

       (13) Deduct any portion of the deduction described in section 141
1341(a)(2) of the Internal Revenue Code, for repaying previously 142
reported income received under a claim of right, that meets both 143
of the following requirements:144

       (a) It is allowable for repayment of an item that was 145
included in the taxpayer's adjusted gross income for a prior 146
taxable year and did not qualify for a credit under division (A) 147
or (B) of section 5747.05 of the Revised Code for that year;148

       (b) It does not otherwise reduce the taxpayer's adjusted 149
gross income for the current or any other taxable year.150

       (14) Deduct an amount equal to the deposits made to, and net 151
investment earnings of, a medical savings account during the 152
taxable year, in accordance with section 3924.66 of the Revised 153
Code. The deduction allowed by division (A)(14) of this section 154
does not apply to medical savings account deposits and earnings 155
otherwise deducted or excluded for the current or any other 156
taxable year from the taxpayer's federal adjusted gross income.157

       (15)(a) Add an amount equal to the funds withdrawn from a 158
medical savings account during the taxable year, and the net 159
investment earnings on those funds, when the funds withdrawn were 160
used for any purpose other than to reimburse an account holder 161
for, or to pay, eligible medical expenses, in accordance with 162
section 3924.66 of the Revised Code;163

       (b) Add the amounts distributed from a medical savings 164
account under division (A)(2) of section 3924.68 of the Revised 165
Code during the taxable year.166

       (16) Add any amount claimed as a credit under section 167
5747.059 of the Revised Code to the extent that such amount 168
satisfies either of the following:169

       (a) The amount was deducted or excluded from the computation 170
of the taxpayer's federal adjusted gross income as required to be 171
reported for the taxpayer's taxable year under the Internal 172
Revenue Code;173

       (b) The amount resulted in a reduction of the taxpayer's 174
federal adjusted gross income as required to be reported for any 175
of the taxpayer's taxable years under the Internal Revenue Code.176

       (17) Deduct the amount contributed by the taxpayer to an 177
individual development account program established by a county 178
department of job and family services pursuant to sections 329.11 179
to 329.14 of the Revised Code for the purpose of matching funds 180
deposited by program participants. On request of the tax 181
commissioner, the taxpayer shall provide any information that, in 182
the tax commissioner's opinion, is necessary to establish the 183
amount deducted under division (A)(17) of this section.184

       (18) Beginning in taxable year 2001 but not for any taxable 185
year beginning after December 31, 2005, if the taxpayer is married 186
and files a joint return and the combined federal adjusted gross 187
income of the taxpayer and the taxpayer's spouse for the taxable 188
year does not exceed one hundred thousand dollars, or if the 189
taxpayer is single and has a federal adjusted gross income for the 190
taxable year not exceeding fifty thousand dollars, deduct amounts 191
paid during the taxable year for qualified tuition and fees paid 192
to an eligible institution for the taxpayer, the taxpayer's 193
spouse, or any dependent of the taxpayer, who is a resident of 194
this state and is enrolled in or attending a program that 195
culminates in a degree or diploma at an eligible institution. The 196
deduction may be claimed only to the extent that qualified tuition 197
and fees are not otherwise deducted or excluded for any taxable 198
year from federal or Ohio adjusted gross income. The deduction may 199
not be claimed for educational expenses for which the taxpayer 200
claims a credit under section 5747.27 of the Revised Code.201

       (19) Add any reimbursement received during the taxable year 202
of any amount the taxpayer deducted under division (A)(18) of this 203
section in any previous taxable year to the extent the amount is 204
not otherwise included in Ohio adjusted gross income.205

       (20)(a)(i) Add five-sixths of the amount of depreciation 206
expense allowed by subsection (k) of section 168 of the Internal 207
Revenue Code, including the taxpayer's proportionate or 208
distributive share of the amount of depreciation expense allowed 209
by that subsection to a pass-through entity in which the taxpayer 210
has a direct or indirect ownership interest.211

       (ii) Add five-sixths of the amount of qualifying section 179 212
depreciation expense, including a person's proportionate or 213
distributive share of the amount of qualifying section 179 214
depreciation expense allowed to any pass-through entity in which 215
the person has a direct or indirect ownership. For the purposes of 216
this division, "qualifying section 179 depreciation expense" means 217
the difference between (I) the amount of depreciation expense 218
directly or indirectly allowed to the taxpayer under section 179 219
of the Internal Revenue Code, and (II) the amount of depreciation 220
expense directly or indirectly allowed to the taxpayer under 221
section 179 of the Internal Revenue Code as that section existed 222
on December 31, 2002.223

       The tax commissioner, under procedures established by the 224
commissioner, may waive the add-backs related to a pass-through 225
entity if the taxpayer owns, directly or indirectly, less than 226
five per cent of the pass-through entity.227

       (b) Nothing in division (A)(20) of this section shall be 228
construed to adjust or modify the adjusted basis of any asset.229

       (c) To the extent the add-back required under division 230
(A)(20)(a) of this section is attributable to property generating 231
nonbusiness income or loss allocated under section 5747.20 of the 232
Revised Code, the add-back shall be sitused to the same location 233
as the nonbusiness income or loss generated by the property for 234
the purpose of determining the credit under division (A) of 235
section 5747.05 of the Revised Code. Otherwise, the add-back shall 236
be apportioned, subject to one or more of the four alternative 237
methods of apportionment enumerated in section 5747.21 of the 238
Revised Code.239

       (d) For the purposes of division (A) of this section, net 240
operating loss carryback and carryforward shall not include 241
five-sixths of the allowance of any net operating loss deduction 242
carryback or carryforward to the taxable year to the extent such 243
loss resulted from depreciation allowed by section 168(k) of the 244
Internal Revenue Code and by the qualifying section 179 245
depreciation expense amount.246

       (21)(a) If the taxpayer was required to add an amount under 247
division (A)(20)(a) of this section for a taxable year, deduct 248
one-fifth of the amount so added for each of the five succeeding 249
taxable years.250

       (b) If the amount deducted under division (A)(21)(a) of this 251
section is attributable to an add-back allocated under division 252
(A)(20)(c) of this section, the amount deducted shall be sitused 253
to the same location. Otherwise, the add-back shall be apportioned 254
using the apportionment factors for the taxable year in which the 255
deduction is taken, subject to one or more of the four alternative 256
methods of apportionment enumerated in section 5747.21 of the 257
Revised Code.258

       (c) No deduction is available under division (A)(21)(a) of 259
this section with regard to any depreciation allowed by section 260
168(k) of the Internal Revenue Code and by the qualifying section 261
179 depreciation expense amount to the extent that such 262
depreciation resulted in or increased a federal net operating loss 263
carryback or carryforward to a taxable year to which division 264
(A)(20)(d) of this section does not apply.265

       (22) Deduct, to the extent not otherwise deducted or excluded 266
in computing federal or Ohio adjusted gross income for the taxable 267
year, the amount the taxpayer received during the taxable year as 268
reimbursement for life insurance premiums under section 5919.31 of 269
the Revised Code.270

        (23) Deduct, to the extent not otherwise deducted or excluded 271
in computing federal or Ohio adjusted gross income for the taxable 272
year, the amount the taxpayer received during the taxable year as 273
a death benefit paid by the adjutant general under section 5919.33 274
of the Revised Code.275

       (24) Deduct, to the extent included in federal adjusted gross 276
income and not otherwise allowable as a deduction or exclusion in 277
computing federal or Ohio adjusted gross income for the taxable 278
year, military pay and allowances received by the taxpayer during 279
the taxable year for active duty service in the United States 280
army, air force, navy, marine corps, or coast guard or reserve 281
components thereof or the national guard. The deduction may not be 282
claimed for military pay and allowances received by the taxpayer 283
while the taxpayer is stationed in this state.284

       (25) Deduct, to the extent not otherwise allowable as a 285
deduction or exclusion in computing federal or Ohio adjusted gross 286
income for the taxable year and not otherwise compensated for by 287
any other source, the amount of qualified organ donation expenses 288
incurred by the taxpayer during the taxable year, not to exceed 289
ten thousand dollars. A taxpayer may deduct qualified organ 290
donation expenses only once for all taxable years beginning with 291
taxable years beginning in 2007.292

       For the purposes of division (A)(25) of this section:293

        (a) "Human organ" means all or any portion of a human liver, 294
pancreas, kidney, intestine, or lung, and any portion of human 295
bone marrow.296

        (b) "Qualified organ donation expenses" means travel 297
expenses, lodging expenses, and wages and salary forgone by a 298
taxpayer in connection with the taxpayer's donation, while living, 299
of one or more of the taxpayer's human organs to another human 300
being.301

       (26) Deduct, to the extent not otherwise deducted or excluded 302
in computing federal or Ohio adjusted gross income for the taxable 303
year, amounts received by the taxpayer as retired military 304
personnel pay for service in the United States army, navy, air 305
force, coast guard, or marine corps or reserve components thereof, 306
or the national guard, or received by the surviving spouse or 307
former spouse of such a taxpayer under the survivor benefit plan 308
on account of such a taxpayer's death. If the taxpayer receives 309
income on account of retirement paid under the federal civil 310
service retirement system or federal employees retirement system, 311
or under any successor retirement program enacted by the congress 312
of the United States that is established and maintained for 313
retired employees of the United States government, and such 314
retirement income is based, in whole or in part, on credit for the 315
taxpayer's military service, the deduction allowed under this 316
division shall include only that portion of such retirement income 317
that is attributable to the taxpayer's military service, to the 318
extent that portion of such retirement income is otherwise 319
included in federal adjusted gross income and is not otherwise 320
deducted under this section. Any amount deducted under division 321
(A)(26) of this section is not included in a taxpayer's adjusted 322
gross income for the purposes of section 5747.055 of the Revised 323
Code. No amount may be deducted under division (A)(26) of this 324
section on the basis of which a credit was claimed under section 325
5747.055 of the Revised Code.326

       (27) Deduct, to the extent not otherwise deducted or excluded 327
in computing federal or Ohio adjusted gross income for the taxable 328
year, the amount the taxpayer received during the taxable year 329
from the military injury relief fund created in section 5101.98 of 330
the Revised Code.331

       (28) Deduct, to the extent not otherwise deducted or excluded 332
in computing federal or Ohio adjusted gross income for the taxable 333
year, the amount the taxpayer received as a veterans bonus during 334
the taxable year from the Ohio department of veterans services as 335
authorized by Section 2r of Article VIII, Ohio Constitution.336

       (29) Deduct or add amounts, as provided in division (B) of 337
section 5747.014 of the Revised Code, related to Ohio-based 338
reinvestments.339

       (B) "Business income" means income, including gain or loss, 340
arising from transactions, activities, and sources in the regular 341
course of a trade or business and includes income, gain, or loss 342
from real property, tangible property, and intangible property if 343
the acquisition, rental, management, and disposition of the 344
property constitute integral parts of the regular course of a 345
trade or business operation. "Business income" includes income, 346
including gain or loss, from a partial or complete liquidation of 347
a business, including, but not limited to, gain or loss from the 348
sale or other disposition of goodwill.349

       (C) "Nonbusiness income" means all income other than business 350
income and may include, but is not limited to, compensation, rents 351
and royalties from real or tangible personal property, capital 352
gains, interest, dividends and distributions, patent or copyright 353
royalties, or lottery winnings, prizes, and awards.354

       (D) "Compensation" means any form of remuneration paid to an 355
employee for personal services.356

       (E) "Fiduciary" means a guardian, trustee, executor, 357
administrator, receiver, conservator, or any other person acting 358
in any fiduciary capacity for any individual, trust, or estate.359

       (F) "Fiscal year" means an accounting period of twelve months 360
ending on the last day of any month other than December.361

       (G) "Individual" means any natural person.362

       (H) "Internal Revenue Code" means the "Internal Revenue Code 363
of 1986," 100 Stat. 2085, 26 U.S.C.A. 1, as amended.364

       (I) "Resident" means any of the following, provided that 365
division (I)(3) of this section applies only to taxable years of a 366
trust beginning in 2002 or thereafter:367

       (1) An individual who is domiciled in this state, subject to 368
section 5747.24 of the Revised Code;369

       (2) The estate of a decedent who at the time of death was 370
domiciled in this state. The domicile tests of section 5747.24 of 371
the Revised Code are not controlling for purposes of division 372
(I)(2) of this section.373

       (3) A trust that, in whole or part, resides in this state. If 374
only part of a trust resides in this state, the trust is a 375
resident only with respect to that part.376

       For the purposes of division (I)(3) of this section:377

       (a) A trust resides in this state for the trust's current 378
taxable year to the extent, as described in division (I)(3)(d) of 379
this section, that the trust consists directly or indirectly, in 380
whole or in part, of assets, net of any related liabilities, that 381
were transferred, or caused to be transferred, directly or 382
indirectly, to the trust by any of the following:383

        (i) A person, a court, or a governmental entity or 384
instrumentality on account of the death of a decedent, but only if 385
the trust is described in division (I)(3)(e)(i) or (ii) of this 386
section;387

       (ii) A person who was domiciled in this state for the 388
purposes of this chapter when the person directly or indirectly 389
transferred assets to an irrevocable trust, but only if at least 390
one of the trust's qualifying beneficiaries is domiciled in this 391
state for the purposes of this chapter during all or some portion 392
of the trust's current taxable year;393

       (iii) A person who was domiciled in this state for the 394
purposes of this chapter when the trust document or instrument or 395
part of the trust document or instrument became irrevocable, but 396
only if at least one of the trust's qualifying beneficiaries is a 397
resident domiciled in this state for the purposes of this chapter 398
during all or some portion of the trust's current taxable year. If 399
a trust document or instrument became irrevocable upon the death 400
of a person who at the time of death was domiciled in this state 401
for purposes of this chapter, that person is a person described in 402
division (I)(3)(a)(iii) of this section.403

        (b) A trust is irrevocable to the extent that the transferor 404
is not considered to be the owner of the net assets of the trust 405
under sections 671 to 678 of the Internal Revenue Code.406

       (c) With respect to a trust other than a charitable lead 407
trust, "qualifying beneficiary" has the same meaning as "potential 408
current beneficiary" as defined in section 1361(e)(2) of the 409
Internal Revenue Code, and with respect to a charitable lead trust 410
"qualifying beneficiary" is any current, future, or contingent 411
beneficiary, but with respect to any trust "qualifying 412
beneficiary" excludes a person or a governmental entity or 413
instrumentality to any of which a contribution would qualify for 414
the charitable deduction under section 170 of the Internal Revenue 415
Code.416

        (d) For the purposes of division (I)(3)(a) of this section, 417
the extent to which a trust consists directly or indirectly, in 418
whole or in part, of assets, net of any related liabilities, that 419
were transferred directly or indirectly, in whole or part, to the 420
trust by any of the sources enumerated in that division shall be 421
ascertained by multiplying the fair market value of the trust's 422
assets, net of related liabilities, by the qualifying ratio, which 423
shall be computed as follows:424

        (i) The first time the trust receives assets, the numerator 425
of the qualifying ratio is the fair market value of those assets 426
at that time, net of any related liabilities, from sources 427
enumerated in division (I)(3)(a) of this section. The denominator 428
of the qualifying ratio is the fair market value of all the 429
trust's assets at that time, net of any related liabilities.430

        (ii) Each subsequent time the trust receives assets, a 431
revised qualifying ratio shall be computed. The numerator of the 432
revised qualifying ratio is the sum of (1) the fair market value 433
of the trust's assets immediately prior to the subsequent 434
transfer, net of any related liabilities, multiplied by the 435
qualifying ratio last computed without regard to the subsequent 436
transfer, and (2) the fair market value of the subsequently 437
transferred assets at the time transferred, net of any related 438
liabilities, from sources enumerated in division (I)(3)(a) of this 439
section. The denominator of the revised qualifying ratio is the 440
fair market value of all the trust's assets immediately after the 441
subsequent transfer, net of any related liabilities.442

       (iii) Whether a transfer to the trust is by or from any of 443
the sources enumerated in division (I)(3)(a) of this section shall 444
be ascertained without regard to the domicile of the trust's 445
beneficiaries.446

        (e) For the purposes of division (I)(3)(a)(i) of this 447
section:448

        (i) A trust is described in division (I)(3)(e)(i) of this 449
section if the trust is a testamentary trust and the testator of 450
that testamentary trust was domiciled in this state at the time of 451
the testator's death for purposes of the taxes levied under 452
Chapter 5731. of the Revised Code.453

        (ii) A trust is described in division (I)(3)(e)(ii) of this 454
section if the transfer is a qualifying transfer described in any 455
of divisions (I)(3)(f)(i) to (vi) of this section, the trust is an 456
irrevocable inter vivos trust, and at least one of the trust's 457
qualifying beneficiaries is domiciled in this state for purposes 458
of this chapter during all or some portion of the trust's current 459
taxable year.460

        (f) For the purposes of division (I)(3)(e)(ii) of this 461
section, a "qualifying transfer" is a transfer of assets, net of 462
any related liabilities, directly or indirectly to a trust, if the 463
transfer is described in any of the following:464

        (i) The transfer is made to a trust, created by the decedent 465
before the decedent's death and while the decedent was domiciled 466
in this state for the purposes of this chapter, and, prior to the 467
death of the decedent, the trust became irrevocable while the 468
decedent was domiciled in this state for the purposes of this 469
chapter.470

        (ii) The transfer is made to a trust to which the decedent, 471
prior to the decedent's death, had directly or indirectly 472
transferred assets, net of any related liabilities, while the 473
decedent was domiciled in this state for the purposes of this 474
chapter, and prior to the death of the decedent the trust became 475
irrevocable while the decedent was domiciled in this state for the 476
purposes of this chapter.477

        (iii) The transfer is made on account of a contractual 478
relationship existing directly or indirectly between the 479
transferor and either the decedent or the estate of the decedent 480
at any time prior to the date of the decedent's death, and the 481
decedent was domiciled in this state at the time of death for 482
purposes of the taxes levied under Chapter 5731. of the Revised 483
Code.484

        (iv) The transfer is made to a trust on account of a 485
contractual relationship existing directly or indirectly between 486
the transferor and another person who at the time of the 487
decedent's death was domiciled in this state for purposes of this 488
chapter.489

        (v) The transfer is made to a trust on account of the will of 490
a testator who was domiciled in this state at the time of the 491
testator's death for purposes of the taxes levied under Chapter 492
5731. of the Revised Code.493

        (vi) The transfer is made to a trust created by or caused to 494
be created by a court, and the trust was directly or indirectly 495
created in connection with or as a result of the death of an 496
individual who, for purposes of the taxes levied under Chapter 497
5731. of the Revised Code, was domiciled in this state at the time 498
of the individual's death.499

       (g) The tax commissioner may adopt rules to ascertain the 500
part of a trust residing in this state.501

       (J) "Nonresident" means an individual or estate that is not a 502
resident. An individual who is a resident for only part of a 503
taxable year is a nonresident for the remainder of that taxable 504
year.505

       (K) "Pass-through entity" has the same meaning as in section 506
5733.04 of the Revised Code.507

       (L) "Return" means the notifications and reports required to 508
be filed pursuant to this chapter for the purpose of reporting the 509
tax due and includes declarations of estimated tax when so 510
required.511

       (M) "Taxable year" means the calendar year or the taxpayer's 512
fiscal year ending during the calendar year, or fractional part 513
thereof, upon which the adjusted gross income is calculated 514
pursuant to this chapter.515

       (N) "Taxpayer" means any person subject to the tax imposed by 516
section 5747.02 of the Revised Code or any pass-through entity 517
that makes the election under division (D) of section 5747.08 of 518
the Revised Code.519

       (O) "Dependents" means dependents as defined in the Internal 520
Revenue Code and as claimed in the taxpayer's federal income tax 521
return for the taxable year or which the taxpayer would have been 522
permitted to claim had the taxpayer filed a federal income tax 523
return.524

       (P) "Principal county of employment" means, in the case of a 525
nonresident, the county within the state in which a taxpayer 526
performs services for an employer or, if those services are 527
performed in more than one county, the county in which the major 528
portion of the services are performed.529

       (Q) As used in sections 5747.50 to 5747.55 of the Revised 530
Code:531

       (1) "Subdivision" means any county, municipal corporation, 532
park district, or township.533

       (2) "Essential local government purposes" includes all 534
functions that any subdivision is required by general law to 535
exercise, including like functions that are exercised under a 536
charter adopted pursuant to the Ohio Constitution.537

       (R) "Overpayment" means any amount already paid that exceeds 538
the figure determined to be the correct amount of the tax.539

       (S) "Taxable income" or "Ohio taxable income" applies only to 540
estates and trusts, and means federal taxable income, as defined 541
and used in the Internal Revenue Code, adjusted as follows:542

       (1) Add interest or dividends, net of ordinary, necessary, 543
and reasonable expenses not deducted in computing federal taxable 544
income, on obligations or securities of any state or of any 545
political subdivision or authority of any state, other than this 546
state and its subdivisions and authorities, but only to the extent 547
that such net amount is not otherwise includible in Ohio taxable 548
income and is described in either division (S)(1)(a) or (b) of 549
this section:550

        (a) The net amount is not attributable to the S portion of an 551
electing small business trust and has not been distributed to 552
beneficiaries for the taxable year;553

        (b) The net amount is attributable to the S portion of an 554
electing small business trust for the taxable year.555

       (2) Add interest or dividends, net of ordinary, necessary, 556
and reasonable expenses not deducted in computing federal taxable 557
income, on obligations of any authority, commission, 558
instrumentality, territory, or possession of the United States to 559
the extent that the interest or dividends are exempt from federal 560
income taxes but not from state income taxes, but only to the 561
extent that such net amount is not otherwise includible in Ohio 562
taxable income and is described in either division (S)(1)(a) or 563
(b) of this section;564

       (3) Add the amount of personal exemption allowed to the 565
estate pursuant to section 642(b) of the Internal Revenue Code;566

       (4) Deduct interest or dividends, net of related expenses 567
deducted in computing federal taxable income, on obligations of 568
the United States and its territories and possessions or of any 569
authority, commission, or instrumentality of the United States to 570
the extent that the interest or dividends are exempt from state 571
taxes under the laws of the United States, but only to the extent 572
that such amount is included in federal taxable income and is 573
described in either division (S)(1)(a) or (b) of this section;574

       (5) Deduct the amount of wages and salaries, if any, not 575
otherwise allowable as a deduction but that would have been 576
allowable as a deduction in computing federal taxable income for 577
the taxable year, had the targeted jobs credit allowed under 578
sections 38, 51, and 52 of the Internal Revenue Code not been in 579
effect, but only to the extent such amount relates either to 580
income included in federal taxable income for the taxable year or 581
to income of the S portion of an electing small business trust for 582
the taxable year;583

       (6) Deduct any interest or interest equivalent, net of 584
related expenses deducted in computing federal taxable income, on 585
public obligations and purchase obligations, but only to the 586
extent that such net amount relates either to income included in 587
federal taxable income for the taxable year or to income of the S 588
portion of an electing small business trust for the taxable year;589

       (7) Add any loss or deduct any gain resulting from sale, 590
exchange, or other disposition of public obligations to the extent 591
that such loss has been deducted or such gain has been included in 592
computing either federal taxable income or income of the S portion 593
of an electing small business trust for the taxable year;594

       (8) Except in the case of the final return of an estate, add 595
any amount deducted by the taxpayer on both its Ohio estate tax 596
return pursuant to section 5731.14 of the Revised Code, and on its 597
federal income tax return in determining federal taxable income;598

       (9)(a) Deduct any amount included in federal taxable income 599
solely because the amount represents a reimbursement or refund of 600
expenses that in a previous year the decedent had deducted as an 601
itemized deduction pursuant to section 63 of the Internal Revenue 602
Code and applicable treasury regulations. The deduction otherwise 603
allowed under division (S)(9)(a) of this section shall be reduced 604
to the extent the reimbursement is attributable to an amount the 605
taxpayer or decedent deducted under this section in any taxable 606
year.607

       (b) Add any amount not otherwise included in Ohio taxable 608
income for any taxable year to the extent that the amount is 609
attributable to the recovery during the taxable year of any amount 610
deducted or excluded in computing federal or Ohio taxable income 611
in any taxable year, but only to the extent such amount has not 612
been distributed to beneficiaries for the taxable year.613

       (10) Deduct any portion of the deduction described in section 614
1341(a)(2) of the Internal Revenue Code, for repaying previously 615
reported income received under a claim of right, that meets both 616
of the following requirements:617

       (a) It is allowable for repayment of an item that was 618
included in the taxpayer's taxable income or the decedent's 619
adjusted gross income for a prior taxable year and did not qualify 620
for a credit under division (A) or (B) of section 5747.05 of the 621
Revised Code for that year.622

       (b) It does not otherwise reduce the taxpayer's taxable 623
income or the decedent's adjusted gross income for the current or 624
any other taxable year.625

       (11) Add any amount claimed as a credit under section 626
5747.059 of the Revised Code to the extent that the amount 627
satisfies either of the following:628

       (a) The amount was deducted or excluded from the computation 629
of the taxpayer's federal taxable income as required to be 630
reported for the taxpayer's taxable year under the Internal 631
Revenue Code;632

       (b) The amount resulted in a reduction in the taxpayer's 633
federal taxable income as required to be reported for any of the 634
taxpayer's taxable years under the Internal Revenue Code.635

       (12) Deduct any amount, net of related expenses deducted in 636
computing federal taxable income, that a trust is required to 637
report as farm income on its federal income tax return, but only 638
if the assets of the trust include at least ten acres of land 639
satisfying the definition of "land devoted exclusively to 640
agricultural use" under section 5713.30 of the Revised Code, 641
regardless of whether the land is valued for tax purposes as such 642
land under sections 5713.30 to 5713.38 of the Revised Code. If the 643
trust is a pass-through entity investor, section 5747.231 of the 644
Revised Code applies in ascertaining if the trust is eligible to 645
claim the deduction provided by division (S)(12) of this section 646
in connection with the pass-through entity's farm income.647

        Except for farm income attributable to the S portion of an 648
electing small business trust, the deduction provided by division 649
(S)(12) of this section is allowed only to the extent that the 650
trust has not distributed such farm income. Division (S)(12) of 651
this section applies only to taxable years of a trust beginning in 652
2002 or thereafter.653

       (13) Add the net amount of income described in section 641(c) 654
of the Internal Revenue Code to the extent that amount is not 655
included in federal taxable income.656

       (14) Add or deduct the amount the taxpayer would be required 657
to add or deduct under division (A)(20) or (21) of this section if 658
the taxpayer's Ohio taxable income were computed in the same 659
manner as an individual's Ohio adjusted gross income is computed 660
under this section. In the case of a trust, division (S)(14) of 661
this section applies only to any of the trust's taxable years 662
beginning in 2002 or thereafter.663

       (T) "School district income" and "school district income tax" 664
have the same meanings as in section 5748.01 of the Revised Code.665

       (U) As used in divisions (A)(8), (A)(9), (S)(6), and (S)(7) 666
of this section, "public obligations," "purchase obligations," and 667
"interest or interest equivalent" have the same meanings as in 668
section 5709.76 of the Revised Code.669

       (V) "Limited liability company" means any limited liability 670
company formed under Chapter 1705. of the Revised Code or under 671
the laws of any other state.672

       (W) "Pass-through entity investor" means any person who, 673
during any portion of a taxable year of a pass-through entity, is 674
a partner, member, shareholder, or equity investor in that 675
pass-through entity.676

       (X) "Banking day" has the same meaning as in section 1304.01 677
of the Revised Code.678

       (Y) "Month" means a calendar month.679

       (Z) "Quarter" means the first three months, the second three 680
months, the third three months, or the last three months of the 681
taxpayer's taxable year.682

       (AA)(1) "Eligible institution" means a state university or 683
state institution of higher education as defined in section 684
3345.011 of the Revised Code, or a private, nonprofit college, 685
university, or other post-secondary institution located in this 686
state that possesses a certificate of authorization issued by the 687
Ohio board of regents pursuant to Chapter 1713. of the Revised 688
Code or a certificate of registration issued by the state board of 689
career colleges and schools under Chapter 3332. of the Revised 690
Code.691

       (2) "Qualified tuition and fees" means tuition and fees 692
imposed by an eligible institution as a condition of enrollment or 693
attendance, not exceeding two thousand five hundred dollars in 694
each of the individual's first two years of post-secondary 695
education. If the individual is a part-time student, "qualified 696
tuition and fees" includes tuition and fees paid for the academic 697
equivalent of the first two years of post-secondary education 698
during a maximum of five taxable years, not exceeding a total of 699
five thousand dollars. "Qualified tuition and fees" does not 700
include:701

       (a) Expenses for any course or activity involving sports, 702
games, or hobbies unless the course or activity is part of the 703
individual's degree or diploma program;704

       (b) The cost of books, room and board, student activity fees, 705
athletic fees, insurance expenses, or other expenses unrelated to 706
the individual's academic course of instruction;707

       (c) Tuition, fees, or other expenses paid or reimbursed 708
through an employer, scholarship, grant in aid, or other 709
educational benefit program.710

       (BB)(1) "Modified business income" means the business income 711
included in a trust's Ohio taxable income after such taxable 712
income is first reduced by the qualifying trust amount, if any.713

       (2) "Qualifying trust amount" of a trust means capital gains 714
and losses from the sale, exchange, or other disposition of equity 715
or ownership interests in, or debt obligations of, a qualifying 716
investee to the extent included in the trust's Ohio taxable 717
income, but only if the following requirements are satisfied:718

        (a) The book value of the qualifying investee's physical 719
assets in this state and everywhere, as of the last day of the 720
qualifying investee's fiscal or calendar year ending immediately 721
prior to the date on which the trust recognizes the gain or loss, 722
is available to the trust.723

       (b) The requirements of section 5747.011 of the Revised Code 724
are satisfied for the trust's taxable year in which the trust 725
recognizes the gain or loss.726

        Any gain or loss that is not a qualifying trust amount is 727
modified business income, qualifying investment income, or 728
modified nonbusiness income, as the case may be.729

       (3) "Modified nonbusiness income" means a trust's Ohio 730
taxable income other than modified business income, other than the 731
qualifying trust amount, and other than qualifying investment 732
income, as defined in section 5747.012 of the Revised Code, to the 733
extent such qualifying investment income is not otherwise part of 734
modified business income.735

       (4) "Modified Ohio taxable income" applies only to trusts, 736
and means the sum of the amounts described in divisions (BB)(4)(a) 737
to (c) of this section:738

       (a) The fraction, calculated under section 5747.013, and 739
applying section 5747.231 of the Revised Code, multiplied by the 740
sum of the following amounts:741

        (i) The trust's modified business income;742

        (ii) The trust's qualifying investment income, as defined in 743
section 5747.012 of the Revised Code, but only to the extent the 744
qualifying investment income does not otherwise constitute 745
modified business income and does not otherwise constitute a 746
qualifying trust amount.747

       (b) The qualifying trust amount multiplied by a fraction, the 748
numerator of which is the sum of the book value of the qualifying 749
investee's physical assets in this state on the last day of the 750
qualifying investee's fiscal or calendar year ending immediately 751
prior to the day on which the trust recognizes the qualifying 752
trust amount, and the denominator of which is the sum of the book 753
value of the qualifying investee's total physical assets 754
everywhere on the last day of the qualifying investee's fiscal or 755
calendar year ending immediately prior to the day on which the 756
trust recognizes the qualifying trust amount. If, for a taxable 757
year, the trust recognizes a qualifying trust amount with respect 758
to more than one qualifying investee, the amount described in 759
division (BB)(4)(b) of this section shall equal the sum of the 760
products so computed for each such qualifying investee.761

       (c)(i) With respect to a trust or portion of a trust that is 762
a resident as ascertained in accordance with division (I)(3)(d) of 763
this section, its modified nonbusiness income.764

        (ii) With respect to a trust or portion of a trust that is 765
not a resident as ascertained in accordance with division 766
(I)(3)(d) of this section, the amount of its modified nonbusiness 767
income satisfying the descriptions in divisions (B)(2) to (5) of 768
section 5747.20 of the Revised Code, except as otherwise provided 769
in division (BB)(4)(c)(ii) of this section. With respect to a 770
trust or portion of a trust that is not a resident as ascertained 771
in accordance with division (I)(3)(d) of this section, the trust's 772
portion of modified nonbusiness income recognized from the sale, 773
exchange, or other disposition of a debt interest in or equity 774
interest in a section 5747.212 entity, as defined in section 775
5747.212 of the Revised Code, without regard to division (A) of 776
that section, shall not be allocated to this state in accordance 777
with section 5747.20 of the Revised Code but shall be apportioned 778
to this state in accordance with division (B) of section 5747.212 779
of the Revised Code without regard to division (A) of that 780
section.781

       If the allocation and apportionment of a trust's income under 782
divisions (BB)(4)(a) and (c) of this section do not fairly 783
represent the modified Ohio taxable income of the trust in this 784
state, the alternative methods described in division (C) of 785
section 5747.21 of the Revised Code may be applied in the manner 786
and to the same extent provided in that section.787

       (5)(a) Except as set forth in division (BB)(5)(b) of this 788
section, "qualifying investee" means a person in which a trust has 789
an equity or ownership interest, or a person or unit of government 790
the debt obligations of either of which are owned by a trust. For 791
the purposes of division (BB)(2)(a) of this section and for the 792
purpose of computing the fraction described in division (BB)(4)(b) 793
of this section, all of the following apply:794

        (i) If the qualifying investee is a member of a qualifying 795
controlled group on the last day of the qualifying investee's 796
fiscal or calendar year ending immediately prior to the date on 797
which the trust recognizes the gain or loss, then "qualifying 798
investee" includes all persons in the qualifying controlled group 799
on such last day.800

        (ii) If the qualifying investee, or if the qualifying 801
investee and any members of the qualifying controlled group of 802
which the qualifying investee is a member on the last day of the 803
qualifying investee's fiscal or calendar year ending immediately 804
prior to the date on which the trust recognizes the gain or loss, 805
separately or cumulatively own, directly or indirectly, on the 806
last day of the qualifying investee's fiscal or calendar year 807
ending immediately prior to the date on which the trust recognizes 808
the qualifying trust amount, more than fifty per cent of the 809
equity of a pass-through entity, then the qualifying investee and 810
the other members are deemed to own the proportionate share of the 811
pass-through entity's physical assets which the pass-through 812
entity directly or indirectly owns on the last day of the 813
pass-through entity's calendar or fiscal year ending within or 814
with the last day of the qualifying investee's fiscal or calendar 815
year ending immediately prior to the date on which the trust 816
recognizes the qualifying trust amount.817

        (iii) For the purposes of division (BB)(5)(a)(iii) of this 818
section, "upper level pass-through entity" means a pass-through 819
entity directly or indirectly owning any equity of another 820
pass-through entity, and "lower level pass-through entity" means 821
that other pass-through entity.822

        An upper level pass-through entity, whether or not it is also 823
a qualifying investee, is deemed to own, on the last day of the 824
upper level pass-through entity's calendar or fiscal year, the 825
proportionate share of the lower level pass-through entity's 826
physical assets that the lower level pass-through entity directly 827
or indirectly owns on the last day of the lower level pass-through 828
entity's calendar or fiscal year ending within or with the last 829
day of the upper level pass-through entity's fiscal or calendar 830
year. If the upper level pass-through entity directly and 831
indirectly owns less than fifty per cent of the equity of the 832
lower level pass-through entity on each day of the upper level 833
pass-through entity's calendar or fiscal year in which or with 834
which ends the calendar or fiscal year of the lower level 835
pass-through entity and if, based upon clear and convincing 836
evidence, complete information about the location and cost of the 837
physical assets of the lower pass-through entity is not available 838
to the upper level pass-through entity, then solely for purposes 839
of ascertaining if a gain or loss constitutes a qualifying trust 840
amount, the upper level pass-through entity shall be deemed as 841
owning no equity of the lower level pass-through entity for each 842
day during the upper level pass-through entity's calendar or 843
fiscal year in which or with which ends the lower level 844
pass-through entity's calendar or fiscal year. Nothing in division 845
(BB)(5)(a)(iii) of this section shall be construed to provide for 846
any deduction or exclusion in computing any trust's Ohio taxable 847
income.848

       (b) With respect to a trust that is not a resident for the 849
taxable year and with respect to a part of a trust that is not a 850
resident for the taxable year, "qualifying investee" for that 851
taxable year does not include a C corporation if both of the 852
following apply:853

       (i) During the taxable year the trust or part of the trust 854
recognizes a gain or loss from the sale, exchange, or other 855
disposition of equity or ownership interests in, or debt 856
obligations of, the C corporation.857

       (ii) Such gain or loss constitutes nonbusiness income.858

        (6) "Available" means information is such that a person is 859
able to learn of the information by the due date plus extensions, 860
if any, for filing the return for the taxable year in which the 861
trust recognizes the gain or loss.862

        (CC) "Qualifying controlled group" has the same meaning as in 863
section 5733.04 of the Revised Code.864

        (DD) "Related member" has the same meaning as in section 865
5733.042 of the Revised Code.866

       (EE)(1) For the purposes of division (EE) of this section: 867

       (a) "Qualifying person" means any person other than a 868
qualifying corporation.869

       (b) "Qualifying corporation" means any person classified for 870
federal income tax purposes as an association taxable as a 871
corporation, except either of the following:872

       (i) A corporation that has made an election under subchapter 873
S, chapter one, subtitle A, of the Internal Revenue Code for its 874
taxable year ending within, or on the last day of, the investor's 875
taxable year;876

       (ii) A subsidiary that is wholly owned by any corporation 877
that has made an election under subchapter S, chapter one, 878
subtitle A of the Internal Revenue Code for its taxable year 879
ending within, or on the last day of, the investor's taxable year.880

       (2) For the purposes of this chapter, unless expressly stated 881
otherwise, no qualifying person indirectly owns any asset directly 882
or indirectly owned by any qualifying corporation.883

       (FF) For purposes of this chapter and Chapter 5751. of the 884
Revised Code:885

       (1) "Trust" does not include a qualified pre-income tax 886
trust.887

       (2) A "qualified pre-income tax trust" is any pre-income tax 888
trust that makes a qualifying pre-income tax trust election as 889
described in division (FF)(3) of this section.890

       (3) A "qualifying pre-income tax trust election" is an 891
election by a pre-income tax trust to subject to the tax imposed 892
by section 5751.02 of the Revised Code the pre-income tax trust 893
and all pass-through entities of which the trust owns or controls, 894
directly, indirectly, or constructively through related interests, 895
five per cent or more of the ownership or equity interests. The 896
trustee shall notify the tax commissioner in writing of the 897
election on or before April 15, 2006. The election, if timely 898
made, shall be effective on and after January 1, 2006, and shall 899
apply for all tax periods and tax years until revoked by the 900
trustee of the trust.901

       (4) A "pre-income tax trust" is a trust that satisfies all of 902
the following requirements:903

       (a) The document or instrument creating the trust was 904
executed by the grantor before January 1, 1972;905

       (b) The trust became irrevocable upon the creation of the 906
trust; and907

       (c) The grantor was domiciled in this state at the time the 908
trust was created.909

       Sec. 5747.014.  (A) For purposes of this section, division 910
(A)(29) of section 5747.01 of the Revised Code, and section 911
5747.02 of the Revised Code:912

       (1) "Modified capital gain" means a capital gain realized 913
from the sale, exchange, or other disposition of non-Ohio-based 914
investments to the extent included in federal adjusted gross 915
income and not otherwise deducted or excluded in computing Ohio 916
adjusted gross income.917

       (2) "Modified capital loss" means a capital loss realized 918
from the sale, exchange, or other disposition of non-Ohio-based 919
investments to the extent included in the computation of federal 920
adjusted gross income.921

       (3) "Net modified capital gain" means the excess of modified 922
capital gains over modified capital losses, plus any capital gain 923
distributions included in federal adjusted gross income but only 924
to the extent the taxpayer can prove to the satisfaction of the 925
tax commissioner that the capital gain distributions relate to the 926
sale, exchange, or other disposition of a non-Ohio-based 927
investment.928

       (4) "Ohio-based reinvestment" means an investment in any of 929
the following:930

        (a) Publicly traded shares of a business incorporated under 931
the laws of this state that maintains its corporate headquarters 932
in this state at the time the taxpayer made the investment;933

        (b) Pass-through entities, the majority of the equity 934
ownership interests of which are owned directly by persons subject 935
to the tax levied under section 5747.02 of the Revised Code at the 936
time the taxpayer made the investment;937

        (c) Public obligations issued by this state or subdivisions, 938
as those terms are defined in section 5709.76 of the Revised Code;939

        (d) Tangible personal property used in business and 940
physically located in this state at the time the taxpayer made the 941
investment;942

       (e) Real property located in this state.943

       (5) A "non-Ohio-based investment" means any investment other 944
than an Ohio-based reinvestment.945

       (B) In computing Ohio adjusted gross income under division 946
(A) of section 5747.01 of the Revised Code, the following amounts 947
shall be deducted or added under division (A)(29) of that section:948

       (1) Deduct Ohio-based reinvestments to the extent not 949
otherwise deducted or excluded in computing federal or Ohio 950
adjusted gross income. The amount deducted under division (B)(1) 951
of this section shall not exceed net modified capital gains for 952
the taxable year.953

       (2)(a) Subject to division (B)(2)(b) of this section, add an 954
amount equal to Ohio-based reinvestments sold or otherwise 955
disposed of during the taxable year and within three years after 956
the Ohio-based reinvestment was made to the extent a deduction was 957
taken for the reinvestment in the current or a prior taxable year, 958
plus ten per cent of that amount, and interest on that amount from 959
the first day of January following the day the Ohio-based 960
reinvestment was made computed at the rate per annum required 961
under section 5703.47 of the Revised Code.962

       For the purposes of division (B)(2)(a) of this section and 963
section 5747.13 of the Revised Code, the return subject to 964
assessment shall be the return for the taxable year that includes 965
the last day of the end of the three-year period beginning on the 966
day the Ohio-based reinvestment was made.967

       (b) Any addition required under division (B)(2)(a) of this 968
section shall be reduced by any amount the taxpayer invests in an 969
Ohio-based reinvestment during the taxable year, ten per cent of 970
that amount, and interest on that amount computed as provided in 971
that division. The amount of the reduction shall not exceed the 972
amount otherwise required to be added under division (B)(2)(a) of 973
this section. No reduction shall be allowed under division 974
(B)(2)(b) of this section for any amount deducted under division 975
(B)(1) of this section for the same taxable year.976

       Sec. 5747.02.  (A) For the purpose of providing revenue for 977
the support of schools and local government functions, to provide 978
relief to property taxpayers, to provide revenue for the general 979
revenue fund, and to meet the expenses of administering the tax 980
levied by this chapter, there is hereby levied on every 981
individual, trust, and estate residing in or earning or receiving 982
income in this state, on every individual, trust, and estate 983
earning or receiving lottery winnings, prizes, or awards pursuant 984
to Chapter 3770. of the Revised Code, and on every individual, 985
trust, and estate otherwise having nexus with or in this state 986
under the Constitution of the United States, an annual tax 987
measured in the case of individuals by the sum of Ohio adjusted 988
gross income and Ohio-based reinvestments less an exemption for 989
the taxpayer, the taxpayer's spouse, and each dependent as 990
provided in section 5747.025 of the Revised Code; measured in the 991
case of trusts by modified Ohio taxable income under division (D) 992
of this section; and measured in the case of estates by Ohio 993
taxable income. The994

       (1) The tax imposed by this section on the balance thus 995
obtained is hereby levied as follows:996

       (1) For taxable years beginning in 2004:997

OHIO ADJUSTED GROSS INCOME LESS EXEMPTIONS (INDIVIDUALS) 998
OR 999
MODIFIED OHIO 1000
TAXABLE INCOME (TRUSTS) 1001
OR 1002
OHIO TAXABLE INCOME (ESTATES) TAX 1003

$5,000 or less .743% 1004
More than $5,000 but not more than $10,000 $37.15 plus 1.486% of the amount in excess of $5,000 1005
More than $10,000 but not more than $15,000 $111.45 plus 2.972% of the amount in excess of $10,000 1006
More than $15,000 but not more than $20,000 $260.05 plus 3.715% of the amount in excess of $15,000 1007
More than $20,000 but not more than $40,000 $445.80 plus 4.457% of the amount in excess of $20,000 1008
More than $40,000 but not more than $80,000 $1,337.20 plus 5.201% of the amount in excess of $40,000 1009
More than $80,000 but not more than $100,000 $3,417.60 plus 5.943% of the amount in excess of $80,000 1010
More than $100,000 but not more than $200,000 $4,606.20 plus 6.9% of the amount in excess of $100,000 1011
More than $200,000 $11,506.20 plus 7.5% of the amount in excess of $200,000 1012

       (2) For taxable years beginning in 2005:1013

OHIO ADJUSTED GROSS INCOME LESS EXEMPTIONS (INDIVIDUALS) 1014
OR 1015
MODIFIED OHIO 1016
TAXABLE INCOME (TRUSTS) 1017
OR 1018
OHIO TAXABLE INCOME (ESTATES) TAX 1019

$5,000 or less .712% 1020
More than $5,000 but not more than $10,000 $35.60 plus 1.424% of the amount in excess of $5,000 1021
More than $10,000 but not more than $15,000 $106.80 plus 2.847% of the amount in excess of $10,000 1022
More than $15,000 but not more than $20,000 $249.15 plus 3.559% of the amount in excess of $15,000 1023
More than $20,000 but not more than $40,000 $427.10 plus 4.27% of the amount in excess of $20,000 1024
More than $40,000 but not more than $80,000 $1,281.10 plus 4.983% of the amount in excess of $40,000 1025
More than $80,000 but not more than $100,000 $3,274.30 plus 5.693% of the amount in excess of $80,000 1026
More than $100,000 but not more than $200,000 $4,412.90 plus 6.61% of the amount in excess of $100,000 1027
More than $200,000 $11,022.90 plus 7.185% of the amount in excess of $200,000 1028

       (3) For taxable years beginning in 2006:1029

OHIO ADJUSTED GROSS INCOME LESS EXEMPTIONS (INDIVIDUALS) 1030
OR 1031
MODIFIED OHIO 1032
TAXABLE INCOME (TRUSTS) 1033
OR 1034
OHIO TAXABLE INCOME (ESTATES) TAX 1035

$5,000 or less .681% 1036
More than $5,000 but not more than $10,000 $34.05 plus 1.361% of the amount in excess of $5,000 1037
More than $10,000 but not more than $15,000 $102.10 plus 2.722% of the amount in excess of $10,000 1038
More than $15,000 but not more than $20,000 $238.20 plus 3.403% of the amount in excess of $15,000 1039
More than $20,000 but not more than $40,000 $408.35 plus 4.083% of the amount in excess of $20,000 1040
More than $40,000 but not more than $80,000 $1,224.95 plus 4.764% of the amount in excess of $40,000 1041
More than $80,000 but not more than $100,000 $3,130.55 plus 5.444% of the amount in excess of $80,000 1042
More than $100,000 but not more than $200,000 $4,219.35 plus 6.32% of the amount in excess of $100,000 1043
More than $200,000 $10,539.35 plus 6.87% of the amount in excess of $200,000 1044

       (4) For taxable years beginning in 2007:1045

OHIO ADJUSTED GROSS INCOME LESS EXEMPTIONS (INDIVIDUALS) 1046
OR 1047
MODIFIED OHIO 1048
TAXABLE INCOME (TRUSTS) 1049
OR 1050
OHIO TAXABLE INCOME (ESTATES) TAX 1051

$5,000 or less .649% 1052
More than $5,000 but not more than $10,000 $32.45 plus 1.299% of the amount in excess of $5,000 1053
More than $10,000 but not more than $15,000 $97.40 plus 2.598% of the amount in excess of $10,000 1054
More than $15,000 but not more than $20,000 $227.30 plus 3.247% of the amount in excess of $15,000 1055
More than $20,000 but not more than $40,000 $389.65 plus 3.895% of the amount in excess of $20,000 1056
More than $40,000 but not more than $80,000 $1,168.65 plus 4.546% of the amount in excess of $40,000 1057
More than $80,000 but not more than $100,000 $2,987.05 plus 5.194% of the amount in excess of $80,000 1058
More than $100,000 but not more than $200,000 $4,025.85 plus 6.031% of the amount in excess of $100,000 1059
More than $200,000 $10,056.85 plus 6.555% of the amount in excess of $200,000 1060

       (5) For taxable years beginning in 2008, 2009, or 2010:1061

OHIO ADJUSTED GROSS INCOME LESS EXEMPTIONS (INDIVIDUALS) 1062
OR 1063
MODIFIED OHIO 1064
TAXABLE INCOME (TRUSTS) 1065
OR 1066
OHIO TAXABLE INCOME (ESTATES) TAX 1067

individuals for taxable years beginning in or after 2010 shall be 1068
the sum of the tax amounts computed under division (A)(1)(a) and 1069
division (A)(1)(b) or (c) of this section where "INCOME" does not 1070
include Ohio-based reinvestments, or shall be the tax amount 1071
computed under division (A)(1)(b) or (c) of this section where 1072
"INCOME" includes Ohio-based reinvestments, whichever computation 1073
produces the lower tax amount. If the computation where "INCOME" 1074
does not include Ohio-based reinvestments applies, the total 1075
amount of exemptions allowed under section 5747.025 of the Revised 1076
Code shall be applied first against adjusted gross income, and if 1077
the total amount of the exemptions exceeds adjusted gross income, 1078
the excess shall be applied against Ohio-based reinvestments. If 1079
the computation where "INCOME" includes Ohio-based reinvestments 1080
applies, the total amount of exemptions allowed under section 1081
5747.025 of the Revised Code shall be applied against the sum of 1082
adjusted gross income and Ohio-based reinvestments.1083

       The tax imposed by this section on estates and trusts for 1084
taxable years beginning in or after 2010 shall be the tax amounts 1085
computed under division (A)(1)(b) or (c) of this section, as 1086
applicable to the taxable year.1087

       (a) The tax imposed on Ohio-based reinvestments of 1088
individuals shall be two and one-half per cent of the Ohio-based 1089
reinvestment.1090

       (b) The tax imposed on Ohio adjusted gross income of 1091
individuals, modified Ohio taxable income of trusts, and Ohio 1092
taxable income of estates for taxable years beginning in 2010 1093
shall be computed as follows:1094

INCOME TAX 1095

$5,000 or less .618% 1096
More than $5,000 but not more than $10,000 $30.90 plus 1.236% of the amount in excess of $5,000 1097
More than $10,000 but not more than $15,000 $92.70 plus 2.473% of the amount in excess of $10,000 1098
More than $15,000 but not more than $20,000 $216.35 plus 3.091% of the amount in excess of $15,000 1099
More than $20,000 but not more than $40,000 $370.90 plus 3.708% of the amount in excess of $20,000 1100
More than $40,000 but not more than $80,000 $1,112.50 plus 4.327% of the amount in excess of $40,000 1101
More than $80,000 but not more than $100,000 $2,843.30 plus 4.945% of the amount in excess of $80,000 1102
More than $100,000 but not more than $200,000 $3,832.30 plus 5.741% of the amount in excess of $100,000 1103
More than $200,000 $9,573.30 plus 6.24% of the amount in excess of $200,000 1104

       (6) For taxable years beginning in 2011 or thereafter:1105

OHIO ADJUSTED GROSS INCOME LESS EXEMPTIONS (INDIVIDUALS) 1106
OR 1107
MODIFIED OHIO 1108
TAXABLE INCOME (TRUSTS) 1109
OR 1110
OHIO TAXABLE INCOME (ESTATES) TAX 1111

       (c) The tax imposed on Ohio adjusted gross income of 1112
individuals, modified Ohio taxable income of trusts, and Ohio 1113
taxable income of estates for taxable years beginning in or after 1114
2011 shall be computed as follows:1115

INCOME TAX 1116

$5,000 or less .587% 1117
More than $5,000 but not more than $10,000 $29.35 plus 1.174% of the amount in excess of $5,000 1118
More than $10,000 but not more than $15,000 $88.05 plus 2.348% of the amount in excess of $10,000 1119
More than $15,000 but not more than $20,000 $205.45 plus 2.935% of the amount in excess of $15,000 1120
More than $20,000 but not more than $40,000 $352.20 plus 3.521% of the amount in excess of $20,000 1121
More than $40,000 but not more than $80,000 $1,056.40 plus 4.109% of the amount in excess of $40,000 1122
More than $80,000 but not more than $100,000 $2,700.00 plus 4.695% of the amount in excess of $80,000 1123
More than $100,000 but not more than $200,000 $3,639.00 plus 5.451% of the amount in excess of $100,000 1124
More than $200,000 $9,090.00 plus 5.925% of the amount in excess of $200,000 1125

       (2) In July of each year, beginning in 2010, the tax 1126
commissioner shall adjust the income amounts prescribed in this 1127
division by multiplying the percentage increase in the gross 1128
domestic product deflator computed that year under section 1129
5747.025 of the Revised Code by each of the income amounts 1130
resulting from the adjustment under this division in the preceding 1131
year, adding the resulting product to the corresponding income 1132
amount resulting from the adjustment in the preceding year, and 1133
rounding the resulting sum to the nearest multiple of fifty 1134
dollars. The tax commissioner also shall recompute each of the tax 1135
dollar amounts to the extent necessary to reflect the adjustment 1136
of the income amounts. The rates of taxation shall not be 1137
adjusted. 1138

       The adjusted amounts apply to taxable years beginning in the 1139
calendar year in which the adjustments are made. The tax 1140
commissioner shall not make such adjustments in any year in which 1141
the amount resulting from the adjustment would be less than the 1142
amount resulting from the adjustment in the preceding year. 1143

       (B) If the director of budget and management makes a 1144
certification to the tax commissioner under division (B) of 1145
section 131.44 of the Revised Code, the amount of tax as 1146
determined under division (A) of this section shall be reduced by 1147
the percentage prescribed in that certification for taxable years 1148
beginning in the calendar year in which that certification is 1149
made. 1150

       (C) The levy of this tax on income does not prevent a 1151
municipal corporation, a joint economic development zone created 1152
under section 715.691, or a joint economic development district 1153
created under section 715.70 or 715.71 or sections 715.72 to 1154
715.81 of the Revised Code from levying a tax on income. 1155

       (D) This division applies only to taxable years of a trust 1156
beginning in 2002 or thereafter. 1157

       (1) The tax imposed by this section on a trust shall be 1158
computed by multiplying the Ohio modified taxable income of the 1159
trust by the rates prescribed by division (A)(1)(b) or (c) of this 1160
section as applicable to the taxable year. 1161

       (2) A nonresident trust may claim a credit against the tax 1162
computed under division (D) of this section equal to the lesser of 1163
(1) the tax paid to another state or the District of Columbia on 1164
the nonresident trust's modified nonbusiness income, other than 1165
the portion of the nonresident trust's nonbusiness income that is 1166
qualifying investment income as defined in section 5747.012 of the 1167
Revised Code, or (2) the effective tax rate, based on modified 1168
Ohio taxable income, multiplied by the nonresident trust's 1169
modified nonbusiness income other than the portion of the 1170
nonresident trust's nonbusiness income that is qualifying 1171
investment income. The credit applies before any other applicable 1172
credits. 1173

       (3) The credits enumerated in divisions (A)(1) to (13) of 1174
section 5747.98 of the Revised Code do not apply to a trust 1175
subject to division (D) of this section. Any credits enumerated in 1176
other divisions of section 5747.98 of the Revised Code apply to a 1177
trust subject to division (D) of this section. To the extent that 1178
the trust distributes income for the taxable year for which a 1179
credit is available to the trust, the credit shall be shared by 1180
the trust and its beneficiaries. The tax commissioner and the 1181
trust shall be guided by applicable regulations of the United 1182
States treasury regarding the sharing of credits. 1183

       (E) For the purposes of this section, "trust" means any trust 1184
described in Subchapter J of Chapter 1 of the Internal Revenue 1185
Code, excluding trusts that are not irrevocable as defined in 1186
division (I)(3)(b) of section 5747.01 of the Revised Code and that 1187
have no modified Ohio taxable income for the taxable year, 1188
charitable remainder trusts, qualified funeral trusts and preneed 1189
funeral contract trusts established pursuant to sections 4717.31 1190
to 4717.38 of the Revised Code that are not qualified funeral 1191
trusts, endowment and perpetual care trusts, qualified settlement 1192
trusts and funds, designated settlement trusts and funds, and 1193
trusts exempted from taxation under section 501(a) of the Internal 1194
Revenue Code. 1195

       Section 2.  That existing sections 5747.01 and 5747.02 of the 1196
Revised Code are hereby repealed.1197

       Section 3. The amendment by this act of sections 5747.01 and 1198
5747.02 of the Revised Code, and the enactment by this act of 1199
section 5747.014 of the Revised Code, apply to taxable years 1200
beginning on or after January 1, 2010.1201