As Introduced

129th General Assembly Regular Session 2011-2012

H. B. No. 258

Representatives Grossman, Dovilla 

Cosponsors: Representatives Kozlowski, Slaby, Combs, Stinziano, Stebelton, Baker 

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A BILL

To amend sections 4139.03, 4139.05, and 5747.01 and

1

to enact sections 5747.81 and 5747.82 of the

2

Revised Code to exempt from taxation for five

3

years the earned income of an individual who

4

obtains journeyperson status or a baccalaureate

5

degree and works in Ohio, and to prohibit the

6

Apprenticeship Council from adopting standards for

7

apprenticeship ratios that are stricter than those

8

requirements specified in the federal regulations

9

governing apprenticeship programs and from

10

discriminating against open or merit shops.

11

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

Section 1. That sections 4139.03, 4139.05, and 5747.01 be	12
amended and sections 5747.81 and 5747.82 of the Revised Code be	13
enacted to read as follows:	14

Sec. 4139.03.  The apprenticeship council may establish	15
minimum standards for apprenticeship programs and may formulate	16
policies and issue rules as may be necessary to carry out the	17
purpose of sections 4139.01 to 4139.06 of the Revised Code. If the	18
council adopts minimum standards for apprenticeship programs, the	19
council shall not impose any requirements to specify apprentice to	20
journeyperson ratios that are stricter than those requirements	21
specified in regulations adopted by the United States secretary of	22
labor pursuant to the "National Apprenticeship Act," 50 Stat. 664,	23
29 U.S.C. 50, as amended. In adopting those standards, the council	24
shall not prescribe requirements that discriminate against an	25
employer that operates an open or merit shop, unless the council	26
is required to adopt such a requirement to comply with the	27
regulations adopted by the United States secretary of labor	28
pursuant to the "National Apprenticeship Act," 50 Stat. 664, 29	29
U.S.C. 50, as amended. The council shall determine the date and	30
place of its meetings and shall prescribe its own rules of	31
procedure.	32

Sec. 4139.05. (A) The executive secretary of the	33
apprenticeship council has the following duties:	34

(A)(1) Encourage the voluntary participation of employers and	35
employees in the furtherance of the objective of sections 4139.01	36
to 4139.06 of the Revised Code;	37

(B)(2) Register any apprenticeship programs and agreements	38
that meet the minimum standards established by the council;	39

(C)(3) Terminate or cancel on the authority of the council	40
any registered apprenticeship programs and agreements not in	41
accordance with the provisions of such standards;	42

(D)(4) Keep a record of apprenticeship programs and their	43
disposition;	44

(E)(5) Issue certificate of completion of apprenticeship in	45
accordance with the council's standards;	46

(F)(6) Devise all necessary procedures and records;

47

(G)(7) Prepare statistical reports regarding apprenticeship	48
training;	49

(H)(8) Issue information related to apprenticeship;

50

(I)(9) Perform such other duties as the council may direct.

51

(B) The executive secretary, when registering an	52
apprenticeship program or agreement under division (A)(2) of this	53
section, shall not discriminate against an employer because that	54
employer operates an open or merit shop.	55

Sec. 5747.01.  Except as otherwise expressly provided or	56
clearly appearing from the context, any term used in this chapter	57
that is not otherwise defined in this section has the same meaning	58
as when used in a comparable context in the laws of the United	59
States relating to federal income taxes or if not used in a	60
comparable context in those laws, has the same meaning as in	61
section 5733.40 of the Revised Code. Any reference in this chapter	62
to the Internal Revenue Code includes other laws of the United	63
States relating to federal income taxes.	64

As used in this chapter:

65

(A) "Adjusted gross income" or "Ohio adjusted gross income"	66
means federal adjusted gross income, as defined and used in the	67
Internal Revenue Code, adjusted as provided in this section:	68

(1) Add interest or dividends on obligations or securities of	69
any state or of any political subdivision or authority of any	70
state, other than this state and its subdivisions and authorities.	71

(2) Add interest or dividends on obligations of any	72
authority, commission, instrumentality, territory, or possession	73
of the United States to the extent that the interest or dividends	74
are exempt from federal income taxes but not from state income	75
taxes.	76

(3) Deduct interest or dividends on obligations of the United	77
States and its territories and possessions or of any authority,	78
commission, or instrumentality of the United States to the extent	79
that the interest or dividends are included in federal adjusted	80
gross income but exempt from state income taxes under the laws of	81
the United States.	82

(4) Deduct disability and survivor's benefits to the extent	83
included in federal adjusted gross income.	84

(5) Deduct benefits under Title II of the Social Security Act	85
and tier 1 railroad retirement benefits to the extent included in	86
federal adjusted gross income under section 86 of the Internal	87
Revenue Code.	88

(6) In the case of a taxpayer who is a beneficiary of a trust	89
that makes an accumulation distribution as defined in section 665	90
of the Internal Revenue Code, add, for the beneficiary's taxable	91
years beginning before 2002, the portion, if any, of such	92
distribution that does not exceed the undistributed net income of	93
the trust for the three taxable years preceding the taxable year	94
in which the distribution is made to the extent that the portion	95
was not included in the trust's taxable income for any of the	96
trust's taxable years beginning in 2002 or thereafter.	97
"Undistributed net income of a trust" means the taxable income of	98
the trust increased by (a)(i) the additions to adjusted gross	99
income required under division (A) of this section and (ii) the	100
personal exemptions allowed to the trust pursuant to section	101
642(b) of the Internal Revenue Code, and decreased by (b)(i) the	102
deductions to adjusted gross income required under division (A) of	103
this section, (ii) the amount of federal income taxes attributable	104
to such income, and (iii) the amount of taxable income that has	105
been included in the adjusted gross income of a beneficiary by	106
reason of a prior accumulation distribution. Any undistributed net	107
income included in the adjusted gross income of a beneficiary	108
shall reduce the undistributed net income of the trust commencing	109
with the earliest years of the accumulation period.	110

(7) Deduct the amount of wages and salaries, if any, not	111
otherwise allowable as a deduction but that would have been	112
allowable as a deduction in computing federal adjusted gross	113
income for the taxable year, had the targeted jobs credit allowed	114
and determined under sections 38, 51, and 52 of the Internal	115
Revenue Code not been in effect.	116

(8) Deduct any interest or interest equivalent on public	117
obligations and purchase obligations to the extent that the	118
interest or interest equivalent is included in federal adjusted	119
gross income.	120

(9) Add any loss or deduct any gain resulting from the sale,	121
exchange, or other disposition of public obligations to the extent	122
that the loss has been deducted or the gain has been included in	123
computing federal adjusted gross income.	124

(10) Deduct or add amounts, as provided under section 5747.70	125
of the Revised Code, related to contributions to variable college	126
savings program accounts made or tuition units purchased pursuant	127
to Chapter 3334. of the Revised Code.	128

(11)(a) Deduct, to the extent not otherwise allowable as a	129
deduction or exclusion in computing federal or Ohio adjusted gross	130
income for the taxable year, the amount the taxpayer paid during	131
the taxable year for medical care insurance and qualified	132
long-term care insurance for the taxpayer, the taxpayer's spouse,	133
and dependents. No deduction for medical care insurance under	134
division (A)(11) of this section shall be allowed either to any	135
taxpayer who is eligible to participate in any subsidized health	136
plan maintained by any employer of the taxpayer or of the	137
taxpayer's spouse, or to any taxpayer who is entitled to, or on	138
application would be entitled to, benefits under part A of Title	139
XVIII of the "Social Security Act," 49 Stat. 620 (1935), 42 U.S.C.	140
301, as amended. For the purposes of division (A)(11)(a) of this	141
section, "subsidized health plan" means a health plan for which	142
the employer pays any portion of the plan's cost. The deduction	143
allowed under division (A)(11)(a) of this section shall be the net	144
of any related premium refunds, related premium reimbursements, or	145
related insurance premium dividends received during the taxable	146
year.	147

(b) Deduct, to the extent not otherwise deducted or excluded	148
in computing federal or Ohio adjusted gross income during the	149
taxable year, the amount the taxpayer paid during the taxable	150
year, not compensated for by any insurance or otherwise, for	151
medical care of the taxpayer, the taxpayer's spouse, and	152
dependents, to the extent the expenses exceed seven and one-half	153
per cent of the taxpayer's federal adjusted gross income.	154

(c) Deduct, to the extent not otherwise deducted or excluded	155
in computing federal or Ohio adjusted gross income, any amount	156
included in federal adjusted gross income under section 105 or not	157
excluded under section 106 of the Internal Revenue Code solely	158
because it relates to an accident and health plan for a person who	159
otherwise would be a "qualifying relative" and thus a "dependent"	160
under section 152 of the Internal Revenue Code but for the fact	161
that the person fails to meet the income and support limitations	162
under section 152(d)(1)(B) and (C) of the Internal Revenue Code.	163

(d) For purposes of division (A)(11) of this section,	164
"medical care" has the meaning given in section 213 of the	165
Internal Revenue Code, subject to the special rules, limitations,	166
and exclusions set forth therein, and "qualified long-term care"	167
has the same meaning given in section 7702B(c) of the Internal	168
Revenue Code. Solely for purposes of divisions (A)(11)(a) and (c)	169
of this section, "dependent" includes a person who otherwise would	170
be a "qualifying relative" and thus a "dependent" under section	171
152 of the Internal Revenue Code but for the fact that the person	172
fails to meet the income and support limitations under section	173
152(d)(1)(B) and (C) of the Internal Revenue Code.	174

(12)(a) Deduct any amount included in federal adjusted gross	175
income solely because the amount represents a reimbursement or	176
refund of expenses that in any year the taxpayer had deducted as	177
an itemized deduction pursuant to section 63 of the Internal	178
Revenue Code and applicable United States department of the	179
treasury regulations. The deduction otherwise allowed under	180
division (A)(12)(a) of this section shall be reduced to the extent	181
the reimbursement is attributable to an amount the taxpayer	182
deducted under this section in any taxable year.	183

(b) Add any amount not otherwise included in Ohio adjusted	184
gross income for any taxable year to the extent that the amount is	185
attributable to the recovery during the taxable year of any amount	186
deducted or excluded in computing federal or Ohio adjusted gross	187
income in any taxable year.	188

(13) Deduct any portion of the deduction described in section	189
1341(a)(2) of the Internal Revenue Code, for repaying previously	190
reported income received under a claim of right, that meets both	191
of the following requirements:	192

(a) It is allowable for repayment of an item that was	193
included in the taxpayer's adjusted gross income for a prior	194
taxable year and did not qualify for a credit under division (A)	195
or (B) of section 5747.05 of the Revised Code for that year;	196

(b) It does not otherwise reduce the taxpayer's adjusted	197
gross income for the current or any other taxable year.	198

(14) Deduct an amount equal to the deposits made to, and net	199
investment earnings of, a medical savings account during the	200
taxable year, in accordance with section 3924.66 of the Revised	201
Code. The deduction allowed by division (A)(14) of this section	202
does not apply to medical savings account deposits and earnings	203
otherwise deducted or excluded for the current or any other	204
taxable year from the taxpayer's federal adjusted gross income.	205

(15)(a) Add an amount equal to the funds withdrawn from a	206
medical savings account during the taxable year, and the net	207
investment earnings on those funds, when the funds withdrawn were	208
used for any purpose other than to reimburse an account holder	209
for, or to pay, eligible medical expenses, in accordance with	210
section 3924.66 of the Revised Code;	211

(b) Add the amounts distributed from a medical savings	212
account under division (A)(2) of section 3924.68 of the Revised	213
Code during the taxable year.	214

(16) Add any amount claimed as a credit under section	215
5747.059 of the Revised Code to the extent that such amount	216
satisfies either of the following:	217

(a) The amount was deducted or excluded from the computation	218
of the taxpayer's federal adjusted gross income as required to be	219
reported for the taxpayer's taxable year under the Internal	220
Revenue Code;	221

(b) The amount resulted in a reduction of the taxpayer's	222
federal adjusted gross income as required to be reported for any	223
of the taxpayer's taxable years under the Internal Revenue Code.	224

(17) Deduct the amount contributed by the taxpayer to an	225
individual development account program established by a county	226
department of job and family services pursuant to sections 329.11	227
to 329.14 of the Revised Code for the purpose of matching funds	228
deposited by program participants. On request of the tax	229
commissioner, the taxpayer shall provide any information that, in	230
the tax commissioner's opinion, is necessary to establish the	231
amount deducted under division (A)(17) of this section.	232

(18) Beginning in taxable year 2001 but not for any taxable	233
year beginning after December 31, 2005, if the taxpayer is married	234
and files a joint return and the combined federal adjusted gross	235
income of the taxpayer and the taxpayer's spouse for the taxable	236
year does not exceed one hundred thousand dollars, or if the	237
taxpayer is single and has a federal adjusted gross income for the	238
taxable year not exceeding fifty thousand dollars, deduct amounts	239
paid during the taxable year for qualified tuition and fees paid	240
to an eligible institution for the taxpayer, the taxpayer's	241
spouse, or any dependent of the taxpayer, who is a resident of	242
this state and is enrolled in or attending a program that	243
culminates in a degree or diploma at an eligible institution. The	244
deduction may be claimed only to the extent that qualified tuition	245
and fees are not otherwise deducted or excluded for any taxable	246
year from federal or Ohio adjusted gross income. The deduction may	247
not be claimed for educational expenses for which the taxpayer	248
claims a credit under section 5747.27 of the Revised Code.	249

(19) Add any reimbursement received during the taxable year	250
of any amount the taxpayer deducted under division (A)(18) of this	251
section in any previous taxable year to the extent the amount is	252
not otherwise included in Ohio adjusted gross income.	253

(20)(a)(i) Add five-sixths of the amount of depreciation	254
expense allowed by subsection (k) of section 168 of the Internal	255
Revenue Code, including the taxpayer's proportionate or	256
distributive share of the amount of depreciation expense allowed	257
by that subsection to a pass-through entity in which the taxpayer	258
has a direct or indirect ownership interest.	259

(ii) Add five-sixths of the amount of qualifying section 179	260
depreciation expense, including a person's proportionate or	261
distributive share of the amount of qualifying section 179	262
depreciation expense allowed to any pass-through entity in which	263
the person has a direct or indirect ownership. For the purposes of	264
this division, "qualifying section 179 depreciation expense" means	265
the difference between (I) the amount of depreciation expense	266
directly or indirectly allowed to the taxpayer under section 179	267
of the Internal Revenue Code, and (II) the amount of depreciation	268
expense directly or indirectly allowed to the taxpayer under	269
section 179 of the Internal Revenue Code as that section existed	270
on December 31, 2002.	271

The tax commissioner, under procedures established by the	272
commissioner, may waive the add-backs related to a pass-through	273
entity if the taxpayer owns, directly or indirectly, less than	274
five per cent of the pass-through entity.	275

(b) Nothing in division (A)(20) of this section shall be	276
construed to adjust or modify the adjusted basis of any asset.	277

(c) To the extent the add-back required under division	278
(A)(20)(a) of this section is attributable to property generating	279
nonbusiness income or loss allocated under section 5747.20 of the	280
Revised Code, the add-back shall be sitused to the same location	281
as the nonbusiness income or loss generated by the property for	282
the purpose of determining the credit under division (A) of	283
section 5747.05 of the Revised Code. Otherwise, the add-back shall	284
be apportioned, subject to one or more of the four alternative	285
methods of apportionment enumerated in section 5747.21 of the	286
Revised Code.	287

(d) For the purposes of division (A) of this section, net	288
operating loss carryback and carryforward shall not include	289
five-sixths of the allowance of any net operating loss deduction	290
carryback or carryforward to the taxable year to the extent such	291
loss resulted from depreciation allowed by section 168(k) of the	292
Internal Revenue Code and by the qualifying section 179	293
depreciation expense amount.	294

(21)(a) If the taxpayer was required to add an amount under	295
division (A)(20)(a) of this section for a taxable year, deduct	296
one-fifth of the amount so added for each of the five succeeding	297
taxable years.	298

(b) If the amount deducted under division (A)(21)(a) of this	299
section is attributable to an add-back allocated under division	300
(A)(20)(c) of this section, the amount deducted shall be sitused	301
to the same location. Otherwise, the add-back shall be apportioned	302
using the apportionment factors for the taxable year in which the	303
deduction is taken, subject to one or more of the four alternative	304
methods of apportionment enumerated in section 5747.21 of the	305
Revised Code.	306

(c) No deduction is available under division (A)(21)(a) of	307
this section with regard to any depreciation allowed by section	308
168(k) of the Internal Revenue Code and by the qualifying section	309
179 depreciation expense amount to the extent that such	310
depreciation resulted in or increased a federal net operating loss	311
carryback or carryforward to a taxable year to which division	312
(A)(20)(d) of this section does not apply.	313

(22) Deduct, to the extent not otherwise deducted or excluded	314
in computing federal or Ohio adjusted gross income for the taxable	315
year, the amount the taxpayer received during the taxable year as	316
reimbursement for life insurance premiums under section 5919.31 of	317
the Revised Code.	318

(23) Deduct, to the extent not otherwise deducted or excluded	319
in computing federal or Ohio adjusted gross income for the taxable	320
year, the amount the taxpayer received during the taxable year as	321
a death benefit paid by the adjutant general under section 5919.33	322
of the Revised Code.	323

(24) Deduct, to the extent included in federal adjusted gross	324
income and not otherwise allowable as a deduction or exclusion in	325
computing federal or Ohio adjusted gross income for the taxable	326
year, military pay and allowances received by the taxpayer during	327
the taxable year for active duty service in the United States	328
army, air force, navy, marine corps, or coast guard or reserve	329
components thereof or the national guard. The deduction may not be	330
claimed for military pay and allowances received by the taxpayer	331
while the taxpayer is stationed in this state.	332

(25) Deduct, to the extent not otherwise allowable as a	333
deduction or exclusion in computing federal or Ohio adjusted gross	334
income for the taxable year and not otherwise compensated for by	335
any other source, the amount of qualified organ donation expenses	336
incurred by the taxpayer during the taxable year, not to exceed	337
ten thousand dollars. A taxpayer may deduct qualified organ	338
donation expenses only once for all taxable years beginning with	339
taxable years beginning in 2007.	340

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

341

(a) "Human organ" means all or any portion of a human liver,	342
pancreas, kidney, intestine, or lung, and any portion of human	343
bone marrow.	344

(b) "Qualified organ donation expenses" means travel	345
expenses, lodging expenses, and wages and salary forgone by a	346
taxpayer in connection with the taxpayer's donation, while living,	347
of one or more of the taxpayer's human organs to another human	348
being.	349

(26) Deduct, to the extent not otherwise deducted or excluded	350
in computing federal or Ohio adjusted gross income for the taxable	351
year, amounts received by the taxpayer as retired military	352
personnel pay for service in the United States army, navy, air	353
force, coast guard, or marine corps or reserve components thereof,	354
or the national guard, or received by the surviving spouse or	355
former spouse of such a taxpayer under the survivor benefit plan	356
on account of such a taxpayer's death. If the taxpayer receives	357
income on account of retirement paid under the federal civil	358
service retirement system or federal employees retirement system,	359
or under any successor retirement program enacted by the congress	360
of the United States that is established and maintained for	361
retired employees of the United States government, and such	362
retirement income is based, in whole or in part, on credit for the	363
taxpayer's military service, the deduction allowed under this	364
division shall include only that portion of such retirement income	365
that is attributable to the taxpayer's military service, to the	366
extent that portion of such retirement income is otherwise	367
included in federal adjusted gross income and is not otherwise	368
deducted under this section. Any amount deducted under division	369
(A)(26) of this section is not included in a taxpayer's adjusted	370
gross income for the purposes of section 5747.055 of the Revised	371
Code. No amount may be deducted under division (A)(26) of this	372
section on the basis of which a credit was claimed under section	373
5747.055 of the Revised Code.	374

(27) Deduct, to the extent not otherwise deducted or excluded	375
in computing federal or Ohio adjusted gross income for the taxable	376
year, the amount the taxpayer received during the taxable year	377
from the military injury relief fund created in section 5101.98 of	378
the Revised Code.	379

(28) Deduct, to the extent not otherwise deducted or excluded	380
in computing federal or Ohio adjusted gross income for the taxable	381
year, the amount the taxpayer received as a veterans bonus during	382
the taxable year from the Ohio department of veterans services as	383
authorized by Section 2r of Article VIII, Ohio Constitution.	384

(29) Deduct, to the extent not otherwise deducted or excluded	385
in computing federal or Ohio adjusted gross income for the taxable	386
year, any loss from wagering transactions that is allowed as an	387
itemized deduction under section 165 of the Internal Revenue Code	388
and that the taxpayer deducted in computing federal taxable	389
income.	390

(30) Deduct the amount allowed under section 5747.81 of the	391
Revised Code.	392

(31) Deduct the amount allowed under section 5747.82 of the	393
Revised Code.	394

(B) "Business income" means income, including gain or loss,	395
arising from transactions, activities, and sources in the regular	396
course of a trade or business and includes income, gain, or loss	397
from real property, tangible property, and intangible property if	398
the acquisition, rental, management, and disposition of the	399
property constitute integral parts of the regular course of a	400
trade or business operation. "Business income" includes income,	401
including gain or loss, from a partial or complete liquidation of	402
a business, including, but not limited to, gain or loss from the	403
sale or other disposition of goodwill.	404

(C) "Nonbusiness income" means all income other than business	405
income and may include, but is not limited to, compensation, rents	406
and royalties from real or tangible personal property, capital	407
gains, interest, dividends and distributions, patent or copyright	408
royalties, or lottery winnings, prizes, and awards.	409

(D) "Compensation" means any form of remuneration paid to an	410
employee for personal services.	411

(E) "Fiduciary" means a guardian, trustee, executor,	412
administrator, receiver, conservator, or any other person acting	413
in any fiduciary capacity for any individual, trust, or estate.	414

(F) "Fiscal year" means an accounting period of twelve months	415
ending on the last day of any month other than December.	416

(G) "Individual" means any natural person.

417

(H) "Internal Revenue Code" means the "Internal Revenue Code	418
of 1986," 100 Stat. 2085, 26 U.S.C.A. 1, as amended.	419

(I) "Resident" means any of the following, provided that	420
division (I)(3) of this section applies only to taxable years of a	421
trust beginning in 2002 or thereafter:	422

(1) An individual who is domiciled in this state, subject to	423
section 5747.24 of the Revised Code;	424

(2) The estate of a decedent who at the time of death was	425
domiciled in this state. The domicile tests of section 5747.24 of	426
the Revised Code are not controlling for purposes of division	427
(I)(2) of this section.	428

(3) A trust that, in whole or part, resides in this state. If	429
only part of a trust resides in this state, the trust is a	430
resident only with respect to that part.	431

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

432

(a) A trust resides in this state for the trust's current	433
taxable year to the extent, as described in division (I)(3)(d) of	434
this section, that the trust consists directly or indirectly, in	435
whole or in part, of assets, net of any related liabilities, that	436
were transferred, or caused to be transferred, directly or	437
indirectly, to the trust by any of the following:	438

(i) A person, a court, or a governmental entity or	439
instrumentality on account of the death of a decedent, but only if	440
the trust is described in division (I)(3)(e)(i) or (ii) of this	441
section;	442

(ii) A person who was domiciled in this state for the	443
purposes of this chapter when the person directly or indirectly	444
transferred assets to an irrevocable trust, but only if at least	445
one of the trust's qualifying beneficiaries is domiciled in this	446
state for the purposes of this chapter during all or some portion	447
of the trust's current taxable year;	448

(iii) A person who was domiciled in this state for the	449
purposes of this chapter when the trust document or instrument or	450
part of the trust document or instrument became irrevocable, but	451
only if at least one of the trust's qualifying beneficiaries is a	452
resident domiciled in this state for the purposes of this chapter	453
during all or some portion of the trust's current taxable year. If	454
a trust document or instrument became irrevocable upon the death	455
of a person who at the time of death was domiciled in this state	456
for purposes of this chapter, that person is a person described in	457
division (I)(3)(a)(iii) of this section.	458

(b) A trust is irrevocable to the extent that the transferor	459
is not considered to be the owner of the net assets of the trust	460
under sections 671 to 678 of the Internal Revenue Code.	461

(c) With respect to a trust other than a charitable lead	462
trust, "qualifying beneficiary" has the same meaning as "potential	463
current beneficiary" as defined in section 1361(e)(2) of the	464
Internal Revenue Code, and with respect to a charitable lead trust	465
"qualifying beneficiary" is any current, future, or contingent	466
beneficiary, but with respect to any trust "qualifying	467
beneficiary" excludes a person or a governmental entity or	468
instrumentality to any of which a contribution would qualify for	469
the charitable deduction under section 170 of the Internal Revenue	470
Code.	471

(d) For the purposes of division (I)(3)(a) of this section,	472
the extent to which a trust consists directly or indirectly, in	473
whole or in part, of assets, net of any related liabilities, that	474
were transferred directly or indirectly, in whole or part, to the	475
trust by any of the sources enumerated in that division shall be	476
ascertained by multiplying the fair market value of the trust's	477
assets, net of related liabilities, by the qualifying ratio, which	478
shall be computed as follows:	479

(i) The first time the trust receives assets, the numerator	480
of the qualifying ratio is the fair market value of those assets	481
at that time, net of any related liabilities, from sources	482
enumerated in division (I)(3)(a) of this section. The denominator	483
of the qualifying ratio is the fair market value of all the	484
trust's assets at that time, net of any related liabilities.	485

(ii) Each subsequent time the trust receives assets, a	486
revised qualifying ratio shall be computed. The numerator of the	487
revised qualifying ratio is the sum of (1) the fair market value	488
of the trust's assets immediately prior to the subsequent	489
transfer, net of any related liabilities, multiplied by the	490
qualifying ratio last computed without regard to the subsequent	491
transfer, and (2) the fair market value of the subsequently	492
transferred assets at the time transferred, net of any related	493
liabilities, from sources enumerated in division (I)(3)(a) of this	494
section. The denominator of the revised qualifying ratio is the	495
fair market value of all the trust's assets immediately after the	496
subsequent transfer, net of any related liabilities.	497

(iii) Whether a transfer to the trust is by or from any of	498
the sources enumerated in division (I)(3)(a) of this section shall	499
be ascertained without regard to the domicile of the trust's	500
beneficiaries.	501

(e) For the purposes of division (I)(3)(a)(i) of this	502
section:	503

(i) A trust is described in division (I)(3)(e)(i) of this	504
section if the trust is a testamentary trust and the testator of	505
that testamentary trust was domiciled in this state at the time of	506
the testator's death for purposes of the taxes levied under	507
Chapter 5731. of the Revised Code.	508

(ii) A trust is described in division (I)(3)(e)(ii) of this	509
section if the transfer is a qualifying transfer described in any	510
of divisions (I)(3)(f)(i) to (vi) of this section, the trust is an	511
irrevocable inter vivos trust, and at least one of the trust's	512
qualifying beneficiaries is domiciled in this state for purposes	513
of this chapter during all or some portion of the trust's current	514
taxable year.	515

(f) For the purposes of division (I)(3)(e)(ii) of this	516
section, a "qualifying transfer" is a transfer of assets, net of	517
any related liabilities, directly or indirectly to a trust, if the	518
transfer is described in any of the following:	519

(i) The transfer is made to a trust, created by the decedent	520
before the decedent's death and while the decedent was domiciled	521
in this state for the purposes of this chapter, and, prior to the	522
death of the decedent, the trust became irrevocable while the	523
decedent was domiciled in this state for the purposes of this	524
chapter.	525

(ii) The transfer is made to a trust to which the decedent,	526
prior to the decedent's death, had directly or indirectly	527
transferred assets, net of any related liabilities, while the	528
decedent was domiciled in this state for the purposes of this	529
chapter, and prior to the death of the decedent the trust became	530
irrevocable while the decedent was domiciled in this state for the	531
purposes of this chapter.	532

(iii) The transfer is made on account of a contractual	533
relationship existing directly or indirectly between the	534
transferor and either the decedent or the estate of the decedent	535
at any time prior to the date of the decedent's death, and the	536
decedent was domiciled in this state at the time of death for	537
purposes of the taxes levied under Chapter 5731. of the Revised	538
Code.	539

(iv) The transfer is made to a trust on account of a	540
contractual relationship existing directly or indirectly between	541
the transferor and another person who at the time of the	542
decedent's death was domiciled in this state for purposes of this	543
chapter.	544

(v) The transfer is made to a trust on account of the will of	545
a testator who was domiciled in this state at the time of the	546
testator's death for purposes of the taxes levied under Chapter	547
5731. of the Revised Code.	548

(vi) The transfer is made to a trust created by or caused to	549
be created by a court, and the trust was directly or indirectly	550
created in connection with or as a result of the death of an	551
individual who, for purposes of the taxes levied under Chapter	552
5731. of the Revised Code, was domiciled in this state at the time	553
of the individual's death.	554

(g) The tax commissioner may adopt rules to ascertain the	555
part of a trust residing in this state.	556

(J) "Nonresident" means an individual or estate that is not a	557
resident. An individual who is a resident for only part of a	558
taxable year is a nonresident for the remainder of that taxable	559
year.	560

(K) "Pass-through entity" has the same meaning as in section	561
5733.04 of the Revised Code.	562

(L) "Return" means the notifications and reports required to	563
be filed pursuant to this chapter for the purpose of reporting the	564
tax due and includes declarations of estimated tax when so	565
required.	566

(M) "Taxable year" means the calendar year or the taxpayer's	567
fiscal year ending during the calendar year, or fractional part	568
thereof, upon which the adjusted gross income is calculated	569
pursuant to this chapter.	570

(N) "Taxpayer" means any person subject to the tax imposed by	571
section 5747.02 of the Revised Code or any pass-through entity	572
that makes the election under division (D) of section 5747.08 of	573
the Revised Code.	574

(O) "Dependents" means dependents as defined in the Internal	575
Revenue Code and as claimed in the taxpayer's federal income tax	576
return for the taxable year or which the taxpayer would have been	577
permitted to claim had the taxpayer filed a federal income tax	578
return.	579

(P) "Principal county of employment" means, in the case of a	580
nonresident, the county within the state in which a taxpayer	581
performs services for an employer or, if those services are	582
performed in more than one county, the county in which the major	583
portion of the services are performed.	584

(Q) As used in sections 5747.50 to 5747.55 of the Revised	585
Code:	586

(1) "Subdivision" means any county, municipal corporation,	587
park district, or township.	588

(2) "Essential local government purposes" includes all	589
functions that any subdivision is required by general law to	590
exercise, including like functions that are exercised under a	591
charter adopted pursuant to the Ohio Constitution.	592

(R) "Overpayment" means any amount already paid that exceeds	593
the figure determined to be the correct amount of the tax.	594

(S) "Taxable income" or "Ohio taxable income" applies only to	595
estates and trusts, and means federal taxable income, as defined	596
and used in the Internal Revenue Code, adjusted as follows:	597

(1) Add interest or dividends, net of ordinary, necessary,	598
and reasonable expenses not deducted in computing federal taxable	599
income, on obligations or securities of any state or of any	600
political subdivision or authority of any state, other than this	601
state and its subdivisions and authorities, but only to the extent	602
that such net amount is not otherwise includible in Ohio taxable	603
income and is described in either division (S)(1)(a) or (b) of	604
this section:	605

(a) The net amount is not attributable to the S portion of an	606
electing small business trust and has not been distributed to	607
beneficiaries for the taxable year;	608

(b) The net amount is attributable to the S portion of an	609
electing small business trust for the taxable year.	610

(2) Add interest or dividends, net of ordinary, necessary,	611
and reasonable expenses not deducted in computing federal taxable	612
income, on obligations of any authority, commission,	613
instrumentality, territory, or possession of the United States to	614
the extent that the interest or dividends are exempt from federal	615
income taxes but not from state income taxes, but only to the	616
extent that such net amount is not otherwise includible in Ohio	617
taxable income and is described in either division (S)(1)(a) or	618
(b) of this section;	619

(3) Add the amount of personal exemption allowed to the	620
estate pursuant to section 642(b) of the Internal Revenue Code;	621

(4) Deduct interest or dividends, net of related expenses	622
deducted in computing federal taxable income, on obligations of	623
the United States and its territories and possessions or of any	624
authority, commission, or instrumentality of the United States to	625
the extent that the interest or dividends are exempt from state	626
taxes under the laws of the United States, but only to the extent	627
that such amount is included in federal taxable income and is	628
described in either division (S)(1)(a) or (b) of this section;	629

(5) Deduct the amount of wages and salaries, if any, not	630
otherwise allowable as a deduction but that would have been	631
allowable as a deduction in computing federal taxable income for	632
the taxable year, had the targeted jobs credit allowed under	633
sections 38, 51, and 52 of the Internal Revenue Code not been in	634
effect, but only to the extent such amount relates either to	635
income included in federal taxable income for the taxable year or	636
to income of the S portion of an electing small business trust for	637
the taxable year;	638

(6) Deduct any interest or interest equivalent, net of	639
related expenses deducted in computing federal taxable income, on	640
public obligations and purchase obligations, but only to the	641
extent that such net amount relates either to income included in	642
federal taxable income for the taxable year or to income of the S	643
portion of an electing small business trust for the taxable year;	644

(7) Add any loss or deduct any gain resulting from sale,	645
exchange, or other disposition of public obligations to the extent	646
that such loss has been deducted or such gain has been included in	647
computing either federal taxable income or income of the S portion	648
of an electing small business trust for the taxable year;	649

(8) Except in the case of the final return of an estate, add	650
any amount deducted by the taxpayer on both its Ohio estate tax	651
return pursuant to section 5731.14 of the Revised Code, and on its	652
federal income tax return in determining federal taxable income;	653

(9)(a) Deduct any amount included in federal taxable income	654
solely because the amount represents a reimbursement or refund of	655
expenses that in a previous year the decedent had deducted as an	656
itemized deduction pursuant to section 63 of the Internal Revenue	657
Code and applicable treasury regulations. The deduction otherwise	658
allowed under division (S)(9)(a) of this section shall be reduced	659
to the extent the reimbursement is attributable to an amount the	660
taxpayer or decedent deducted under this section in any taxable	661
year.	662

(b) Add any amount not otherwise included in Ohio taxable	663
income for any taxable year to the extent that the amount is	664
attributable to the recovery during the taxable year of any amount	665
deducted or excluded in computing federal or Ohio taxable income	666
in any taxable year, but only to the extent such amount has not	667
been distributed to beneficiaries for the taxable year.	668

(10) Deduct any portion of the deduction described in section	669
1341(a)(2) of the Internal Revenue Code, for repaying previously	670
reported income received under a claim of right, that meets both	671
of the following requirements:	672

(a) It is allowable for repayment of an item that was	673
included in the taxpayer's taxable income or the decedent's	674
adjusted gross income for a prior taxable year and did not qualify	675
for a credit under division (A) or (B) of section 5747.05 of the	676
Revised Code for that year.	677

(b) It does not otherwise reduce the taxpayer's taxable	678
income or the decedent's adjusted gross income for the current or	679
any other taxable year.	680

(11) Add any amount claimed as a credit under section	681
5747.059 of the Revised Code to the extent that the amount	682
satisfies either of the following:	683

(a) The amount was deducted or excluded from the computation	684
of the taxpayer's federal taxable income as required to be	685
reported for the taxpayer's taxable year under the Internal	686
Revenue Code;	687

(b) The amount resulted in a reduction in the taxpayer's	688
federal taxable income as required to be reported for any of the	689
taxpayer's taxable years under the Internal Revenue Code.	690

(12) Deduct any amount, net of related expenses deducted in	691
computing federal taxable income, that a trust is required to	692
report as farm income on its federal income tax return, but only	693
if the assets of the trust include at least ten acres of land	694
satisfying the definition of "land devoted exclusively to	695
agricultural use" under section 5713.30 of the Revised Code,	696
regardless of whether the land is valued for tax purposes as such	697
land under sections 5713.30 to 5713.38 of the Revised Code. If the	698
trust is a pass-through entity investor, section 5747.231 of the	699
Revised Code applies in ascertaining if the trust is eligible to	700
claim the deduction provided by division (S)(12) of this section	701
in connection with the pass-through entity's farm income.	702

Except for farm income attributable to the S portion of an	703
electing small business trust, the deduction provided by division	704
(S)(12) of this section is allowed only to the extent that the	705
trust has not distributed such farm income. Division (S)(12) of	706
this section applies only to taxable years of a trust beginning in	707
2002 or thereafter.	708

(13) Add the net amount of income described in section 641(c)	709
of the Internal Revenue Code to the extent that amount is not	710
included in federal taxable income.	711

(14) Add or deduct the amount the taxpayer would be required	712
to add or deduct under division (A)(20) or (21) of this section if	713
the taxpayer's Ohio taxable income were computed in the same	714
manner as an individual's Ohio adjusted gross income is computed	715
under this section. In the case of a trust, division (S)(14) of	716
this section applies only to any of the trust's taxable years	717
beginning in 2002 or thereafter.	718

(T) "School district income" and "school district income tax"	719
have the same meanings as in section 5748.01 of the Revised Code.	720

(U) As used in divisions (A)(8), (A)(9), (S)(6), and (S)(7)	721
of this section, "public obligations," "purchase obligations," and	722
"interest or interest equivalent" have the same meanings as in	723
section 5709.76 of the Revised Code.	724

(V) "Limited liability company" means any limited liability	725
company formed under Chapter 1705. of the Revised Code or under	726
the laws of any other state.	727

(W) "Pass-through entity investor" means any person who,	728
during any portion of a taxable year of a pass-through entity, is	729
a partner, member, shareholder, or equity investor in that	730
pass-through entity.	731

(X) "Banking day" has the same meaning as in section 1304.01	732
of the Revised Code.	733

(Y) "Month" means a calendar month.

734

(Z) "Quarter" means the first three months, the second three	735
months, the third three months, or the last three months of the	736
taxpayer's taxable year.	737

(AA)(1) "Eligible institution" means a state university or	738
state institution of higher education as defined in section	739
3345.011 of the Revised Code, or a private, nonprofit college,	740
university, or other post-secondary institution located in this	741
state that possesses a certificate of authorization issued by the	742
Ohio board of regents pursuant to Chapter 1713. of the Revised	743
Code or a certificate of registration issued by the state board of	744
career colleges and schools under Chapter 3332. of the Revised	745
Code.	746

(2) "Qualified tuition and fees" means tuition and fees	747
imposed by an eligible institution as a condition of enrollment or	748
attendance, not exceeding two thousand five hundred dollars in	749
each of the individual's first two years of post-secondary	750
education. If the individual is a part-time student, "qualified	751
tuition and fees" includes tuition and fees paid for the academic	752
equivalent of the first two years of post-secondary education	753
during a maximum of five taxable years, not exceeding a total of	754
five thousand dollars. "Qualified tuition and fees" does not	755
include:	756

(a) Expenses for any course or activity involving sports,	757
games, or hobbies unless the course or activity is part of the	758
individual's degree or diploma program;	759

(b) The cost of books, room and board, student activity fees,	760
athletic fees, insurance expenses, or other expenses unrelated to	761
the individual's academic course of instruction;	762

(c) Tuition, fees, or other expenses paid or reimbursed	763
through an employer, scholarship, grant in aid, or other	764
educational benefit program.	765

(BB)(1) "Modified business income" means the business income	766
included in a trust's Ohio taxable income after such taxable	767
income is first reduced by the qualifying trust amount, if any.	768

(2) "Qualifying trust amount" of a trust means capital gains	769
and losses from the sale, exchange, or other disposition of equity	770
or ownership interests in, or debt obligations of, a qualifying	771
investee to the extent included in the trust's Ohio taxable	772
income, but only if the following requirements are satisfied:	773

(a) The book value of the qualifying investee's physical	774
assets in this state and everywhere, as of the last day of the	775
qualifying investee's fiscal or calendar year ending immediately	776
prior to the date on which the trust recognizes the gain or loss,	777
is available to the trust.	778

(b) The requirements of section 5747.011 of the Revised Code	779
are satisfied for the trust's taxable year in which the trust	780
recognizes the gain or loss.	781

Any gain or loss that is not a qualifying trust amount is	782
modified business income, qualifying investment income, or	783
modified nonbusiness income, as the case may be.	784

(3) "Modified nonbusiness income" means a trust's Ohio	785
taxable income other than modified business income, other than the	786
qualifying trust amount, and other than qualifying investment	787
income, as defined in section 5747.012 of the Revised Code, to the	788
extent such qualifying investment income is not otherwise part of	789
modified business income.	790

(4) "Modified Ohio taxable income" applies only to trusts,	791
and means the sum of the amounts described in divisions (BB)(4)(a)	792
to (c) of this section:	793

(a) The fraction, calculated under section 5747.013, and	794
applying section 5747.231 of the Revised Code, multiplied by the	795
sum of the following amounts:	796

(i) The trust's modified business income;

797

(ii) The trust's qualifying investment income, as defined in	798
section 5747.012 of the Revised Code, but only to the extent the	799
qualifying investment income does not otherwise constitute	800
modified business income and does not otherwise constitute a	801
qualifying trust amount.	802

(b) The qualifying trust amount multiplied by a fraction, the	803
numerator of which is the sum of the book value of the qualifying	804
investee's physical assets in this state on the last day of the	805
qualifying investee's fiscal or calendar year ending immediately	806
prior to the day on which the trust recognizes the qualifying	807
trust amount, and the denominator of which is the sum of the book	808
value of the qualifying investee's total physical assets	809
everywhere on the last day of the qualifying investee's fiscal or	810
calendar year ending immediately prior to the day on which the	811
trust recognizes the qualifying trust amount. If, for a taxable	812
year, the trust recognizes a qualifying trust amount with respect	813
to more than one qualifying investee, the amount described in	814
division (BB)(4)(b) of this section shall equal the sum of the	815
products so computed for each such qualifying investee.	816

(c)(i) With respect to a trust or portion of a trust that is	817
a resident as ascertained in accordance with division (I)(3)(d) of	818
this section, its modified nonbusiness income.	819

(ii) With respect to a trust or portion of a trust that is	820
not a resident as ascertained in accordance with division	821
(I)(3)(d) of this section, the amount of its modified nonbusiness	822
income satisfying the descriptions in divisions (B)(2) to (5) of	823
section 5747.20 of the Revised Code, except as otherwise provided	824
in division (BB)(4)(c)(ii) of this section. With respect to a	825
trust or portion of a trust that is not a resident as ascertained	826
in accordance with division (I)(3)(d) of this section, the trust's	827
portion of modified nonbusiness income recognized from the sale,	828
exchange, or other disposition of a debt interest in or equity	829
interest in a section 5747.212 entity, as defined in section	830
5747.212 of the Revised Code, without regard to division (A) of	831
that section, shall not be allocated to this state in accordance	832
with section 5747.20 of the Revised Code but shall be apportioned	833
to this state in accordance with division (B) of section 5747.212	834
of the Revised Code without regard to division (A) of that	835
section.	836

If the allocation and apportionment of a trust's income under	837
divisions (BB)(4)(a) and (c) of this section do not fairly	838
represent the modified Ohio taxable income of the trust in this	839
state, the alternative methods described in division (C) of	840
section 5747.21 of the Revised Code may be applied in the manner	841
and to the same extent provided in that section.	842

(5)(a) Except as set forth in division (BB)(5)(b) of this	843
section, "qualifying investee" means a person in which a trust has	844
an equity or ownership interest, or a person or unit of government	845
the debt obligations of either of which are owned by a trust. For	846
the purposes of division (BB)(2)(a) of this section and for the	847
purpose of computing the fraction described in division (BB)(4)(b)	848
of this section, all of the following apply:	849

(i) If the qualifying investee is a member of a qualifying	850
controlled group on the last day of the qualifying investee's	851
fiscal or calendar year ending immediately prior to the date on	852
which the trust recognizes the gain or loss, then "qualifying	853
investee" includes all persons in the qualifying controlled group	854
on such last day.	855

(ii) If the qualifying investee, or if the qualifying	856
investee and any members of the qualifying controlled group of	857
which the qualifying investee is a member on the last day of the	858
qualifying investee's fiscal or calendar year ending immediately	859
prior to the date on which the trust recognizes the gain or loss,	860
separately or cumulatively own, directly or indirectly, on the	861
last day of the qualifying investee's fiscal or calendar year	862
ending immediately prior to the date on which the trust recognizes	863
the qualifying trust amount, more than fifty per cent of the	864
equity of a pass-through entity, then the qualifying investee and	865
the other members are deemed to own the proportionate share of the	866
pass-through entity's physical assets which the pass-through	867
entity directly or indirectly owns on the last day of the	868
pass-through entity's calendar or fiscal year ending within or	869
with the last day of the qualifying investee's fiscal or calendar	870
year ending immediately prior to the date on which the trust	871
recognizes the qualifying trust amount.	872

(iii) For the purposes of division (BB)(5)(a)(iii) of this	873
section, "upper level pass-through entity" means a pass-through	874
entity directly or indirectly owning any equity of another	875
pass-through entity, and "lower level pass-through entity" means	876
that other pass-through entity.	877

An upper level pass-through entity, whether or not it is also	878
a qualifying investee, is deemed to own, on the last day of the	879
upper level pass-through entity's calendar or fiscal year, the	880
proportionate share of the lower level pass-through entity's	881
physical assets that the lower level pass-through entity directly	882
or indirectly owns on the last day of the lower level pass-through	883
entity's calendar or fiscal year ending within or with the last	884
day of the upper level pass-through entity's fiscal or calendar	885
year. If the upper level pass-through entity directly and	886
indirectly owns less than fifty per cent of the equity of the	887
lower level pass-through entity on each day of the upper level	888
pass-through entity's calendar or fiscal year in which or with	889
which ends the calendar or fiscal year of the lower level	890
pass-through entity and if, based upon clear and convincing	891
evidence, complete information about the location and cost of the	892
physical assets of the lower pass-through entity is not available	893
to the upper level pass-through entity, then solely for purposes	894
of ascertaining if a gain or loss constitutes a qualifying trust	895
amount, the upper level pass-through entity shall be deemed as	896
owning no equity of the lower level pass-through entity for each	897
day during the upper level pass-through entity's calendar or	898
fiscal year in which or with which ends the lower level	899
pass-through entity's calendar or fiscal year. Nothing in division	900
(BB)(5)(a)(iii) of this section shall be construed to provide for	901
any deduction or exclusion in computing any trust's Ohio taxable	902
income.	903

(b) With respect to a trust that is not a resident for the	904
taxable year and with respect to a part of a trust that is not a	905
resident for the taxable year, "qualifying investee" for that	906
taxable year does not include a C corporation if both of the	907
following apply:	908

(i) During the taxable year the trust or part of the trust	909
recognizes a gain or loss from the sale, exchange, or other	910
disposition of equity or ownership interests in, or debt	911
obligations of, the C corporation.	912

(ii) Such gain or loss constitutes nonbusiness income.

913

(6) "Available" means information is such that a person is	914
able to learn of the information by the due date plus extensions,	915
if any, for filing the return for the taxable year in which the	916
trust recognizes the gain or loss.	917

(CC) "Qualifying controlled group" has the same meaning as in	918
section 5733.04 of the Revised Code.	919

(DD) "Related member" has the same meaning as in section	920
5733.042 of the Revised Code.	921

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

922

(a) "Qualifying person" means any person other than a	923
qualifying corporation.	924

(b) "Qualifying corporation" means any person classified for	925
federal income tax purposes as an association taxable as a	926
corporation, except either of the following:	927

(i) A corporation that has made an election under subchapter	928
S, chapter one, subtitle A, of the Internal Revenue Code for its	929
taxable year ending within, or on the last day of, the investor's	930
taxable year;	931

(ii) A subsidiary that is wholly owned by any corporation	932
that has made an election under subchapter S, chapter one,	933
subtitle A of the Internal Revenue Code for its taxable year	934
ending within, or on the last day of, the investor's taxable year.	935

(2) For the purposes of this chapter, unless expressly stated	936
otherwise, no qualifying person indirectly owns any asset directly	937
or indirectly owned by any qualifying corporation.	938

(FF) For purposes of this chapter and Chapter 5751. of the	939
Revised Code:	940

(1) "Trust" does not include a qualified pre-income tax	941
trust.	942

(2) A "qualified pre-income tax trust" is any pre-income tax	943
trust that makes a qualifying pre-income tax trust election as	944
described in division (FF)(3) of this section.	945

(3) A "qualifying pre-income tax trust election" is an	946
election by a pre-income tax trust to subject to the tax imposed	947
by section 5751.02 of the Revised Code the pre-income tax trust	948
and all pass-through entities of which the trust owns or controls,	949
directly, indirectly, or constructively through related interests,	950
five per cent or more of the ownership or equity interests. The	951
trustee shall notify the tax commissioner in writing of the	952
election on or before April 15, 2006. The election, if timely	953
made, shall be effective on and after January 1, 2006, and shall	954
apply for all tax periods and tax years until revoked by the	955
trustee of the trust.	956

(4) A "pre-income tax trust" is a trust that satisfies all of	957
the following requirements:	958

(a) The document or instrument creating the trust was	959
executed by the grantor before January 1, 1972;	960

(b) The trust became irrevocable upon the creation of the	961
trust; and	962

(c) The grantor was domiciled in this state at the time the	963
trust was created.	964

Sec. 5747.81.  (A) If a taxpayer does not claim a deduction	965
under this section for either the taxable year that includes the	966
date of the individual's certificate of completion or the	967
immediately following taxable year, the taxpayer may not claim a	968
deduction under this section for any of the four years thereafter.	969
For the purpose of developing and maintaining a highly qualified	970
workforce and thereby to improve the economic welfare of all	971
Ohioans, an individual who, on or after the effective date of the	972
enactment of this section, completes an apprenticeship program	973
registered with the apprenticeship council created by section	974
4139.02 of the Revised Code may deduct from the individual's	975
federal adjusted gross income for the taxable year the	976
individual's wages, salaries, tips, deferred compensation, and	977
other employee compensation, and net earnings from self-employment	978
as defined in section 1402(a) of the Internal Revenue Code, to the	979
extent such items are not otherwise deducted or excluded in	980
computing federal or Ohio adjusted gross income. The deduction may	981
be made only for the individual's taxable year that includes the	982
date of the individual's certificate of completion of	983
apprenticeship issued pursuant to section 4139.05 of the Revised	984
Code and for the ensuing four taxable years or for the taxable	985
year immediately following the taxable year that includes the date	986
of the certificate and the ensuing four taxable years.	987
Certificates shall be retained for inspection by the tax	988
commissioner until the expiration of four years after the end of	989
the last taxable year the deduction is made. If a taxpayer does	990
not claim a deduction under this section for either the taxable	991
year that includes the date of the individual's certificate of	992
completion or the immediately following taxable year, the taxpayer	993
may not claim a deduction under this section for any of the four	994
years thereafter. Any amount deducted pursuant to this section	995
shall be included in Ohio adjusted gross income for the purpose of	996
determining eligibility for the credit allowed under section	997
5747.056 of the Revised Code. A taxpayer shall not claim a	998
deduction under this section for any taxable year beginning on or	999
after January 1, 2022.	1000

(B) If the tax commissioner finds that a taxpayer who claimed	1001
a deduction under this section for any taxable year is not subject	1002
to the tax levied under section 5747.02 of the Revised Code for	1003
any taxable year for which the taxpayer is otherwise eligible to	1004
claim the deduction, the commissioner shall collect, by assessment	1005
issued under section 5747.13 of the Revised Code, the total amount	1006
by which the deduction reduced the taxpayer's tax for all taxable	1007
years for which the deduction was claimed. The tax reduction shall	1008
be computed by adding the sum of the differences between the	1009
following amounts for each taxable year the taxpayer claimed the	1010
deduction:	1011

(1) The tax that would be due for the taxable year if the	1012
taxpayer's adjusted gross income included the amount deducted	1013
under this section;	1014

(2) The tax paid by the taxpayer for that taxable year.

1015

Sec. 5747.82. (A) As used in this section, "institution of	1016
higher education" means all of the following:	1017

(1) An institution of higher education, as defined in section	1018
3345.12 of the Revised Code;	1019

(2) An institution authorized by the Ohio board of regents	1020
under Chapter 1713. of the Revised Code to grant degrees and that	1021
is accredited by the appropriate regional and professional	1022
accrediting associations within whose jurisdiction it falls;	1023

(3) Private career schools holding program authorizations	1024
issued by the state board of career colleges and schools under	1025
division (C) of section 3332.05 of the Revised Code;	1026

(4) Private institutions exempt from regulation under Chapter	1027
3332. of the Revised Code as prescribed in section 3333.046 of the	1028
Revised Code.	1029

(B)(1) For the purpose of developing and maintaining a highly	1030
qualified workforce and thereby to improve the economic welfare of	1031
all Ohioans, an individual who graduates on or after the effective	1032
date of the enactment of this section from an institution of	1033
higher education with a baccalaureate degree may deduct from the	1034
individual's federal adjusted gross income for the taxable year	1035
the individual's wages, salaries, tips, deferred compensation, and	1036
other employee compensation, and net earnings from self-employment	1037
as defined in section 1402(a) of the Internal Revenue Code, to the	1038
extent such items are not otherwise deducted or excluded in	1039
computing federal or Ohio adjusted gross income. The deduction may	1040
be made for the individual's taxable year that includes the date	1041
of graduation and the ensuing four taxable years or for the	1042
taxable year immediately following the taxable year that includes	1043
the date of graduation and the ensuing four taxable years. If a	1044
taxpayer does not claim the deduction for either the taxable year	1045
that includes the date of the individual's graduation or the	1046
immediately following taxable year, the taxpayer may not claim the	1047
deduction for any of the four taxable years thereafter. Evidence	1048
of graduation shall be retained for inspection by the tax	1049
commissioner until the expiration of four years after the end of	1050
the last taxable year the deduction is made. Any amount deducted	1051
pursuant to this section shall be included in Ohio adjusted gross	1052
income for the purpose of determining eligibility for the credit	1053
allowed under section 5747.056 of the Revised Code. A taxpayer	1054
shall not claim the deduction for taxable years beginning on or	1055
after January 1, 2022.	1056

(C) An individual who is allowed a deduction under division	1057
(A)(31) of section 5747.01 of the Revised Code may elect to defer	1058
the deduction for each taxable year that includes a date on which	1059
the individual is enrolled full time in an institution of higher	1060
education or any institution located outside Ohio designated as an	1061
"institution of higher education" by the Ohio board of regents for	1062
the purpose of this division to pursue a more advanced degree.	1063
Evidence of such enrollment shall be retained for inspection by	1064
the tax commissioner until the expiration of four years after the	1065
end of the last taxable year the deduction is made.	1066

(D) The Ohio board of regents shall identify institutions of	1067
higher education for the purpose of division (A) and (C) of this	1068
section and provide a list of such institutions to the tax	1069
commissioner.	1070

If the tax commissioner finds that a taxpayer who claimed a	1071
deduction under this section for any taxable year is not subject	1072
to the tax levied under section 5747.02 of the Revised Code for	1073
any taxable year for which the taxpayer is otherwise eligible to	1074
claim the deduction, the commissioner shall collect, by assessment	1075
issued under section 5747.13 of the Revised Code, the total amount	1076
by which the deduction reduced the taxpayer's tax for all taxable	1077
years for which the deduction was claimed. The tax reduction shall	1078
be computed in the same manner as prescribed under division (B) of	1079
section 5747.81 of the Revised Code for the deduction allowed by	1080
that section.	1081

Section 2.  That existing sections 4139.03, 4139.05, and	1082
5747.01 of the Revised Code are hereby repealed.	1083

Section 3.  The amendment or enactment by this act of	1084
sections 5747.01, 5747.81, and 5747.82 of the Revised Code applies	1085
to taxable years beginning on or after January 1, 2012.	1086

Section 4.  The Department of Job and Family Services may	1087
publicize the deduction authorized by this act's enactment of	1088
section 5747.81 of the Revised Code to apprenticeship programs and	1089
the general public.	1090

The Board of Regents may publicize the deduction authorized	1091
by this act's enactment of section 5747.82 of the Revised Code to	1092
institutions of higher education and the general public.	1093