H. B. No. 602 As Introduced

As Introduced

129th General Assembly

Regular Session

2011-2012

H. B. No. 602

Representatives Lundy, Gerberry

Cosponsors: Representatives Hagan, R., Ramos, Okey, Yuko, Murray, Letson, Phillips, Milkovich, Fende, O'Brien, Antonio, Foley, Clyde, Fedor

A BILL

To amend sections 718.01, 5739.02, 5747.01, and

5751.01 and to repeal sections 126.60, 126.601,

126.602, 126.603, 126.604, and 126.605 of the

Revised Code to eliminate the authority of the

Director of Budget and Management and the Director

of Transportation in regard to Ohio

Turnpike-related outsourcing contracts and to

require the Ohio Turnpike Commission to hold

public hearings on the issue of outsourcing the

Ohio Turnpike.

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

Section 1. That sections 718.01, 5739.02, 5747.01, and	11
5751.01 of the Revised Code be amended to read as follows:	12

Sec. 718.01. (A) As used in this chapter:

(1) "Adjusted federal taxable income" means a C corporation's	14
federal taxable income before net operating losses and special	15
deductions as determined under the Internal Revenue Code, adjusted	16
as follows:	17

(a) Deduct intangible income to the extent included in	18
federal taxable income. The deduction shall be allowed regardless	19
of whether the intangible income relates to assets used in a trade	20
or business or assets held for the production of income.	21

(b) Add an amount equal to five per cent of intangible income	22
deducted under division (A)(1)(a) of this section, but excluding	23
that portion of intangible income directly related to the sale,	24
exchange, or other disposition of property described in section	25
1221 of the Internal Revenue Code;	26

(c) Add any losses allowed as a deduction in the computation	27
of federal taxable income if the losses directly relate to the	28
sale, exchange, or other disposition of an asset described in	29
section 1221 or 1231 of the Internal Revenue Code;	30

(d)(i) Except as provided in division (A)(1)(d)(ii) of this	31
section, deduct income and gain included in federal taxable income	32
to the extent the income and gain directly relate to the sale,	33
exchange, or other disposition of an asset described in section	34
1221 or 1231 of the Internal Revenue Code;	35

(ii) Division (A)(1)(d)(i) of this section does not apply to	36
the extent the income or gain is income or gain described in	37
section 1245 or 1250 of the Internal Revenue Code.	38

(e) Add taxes on or measured by net income allowed as a	39
deduction in the computation of federal taxable income;	40

(f) In the case of a real estate investment trust and	41
regulated investment company, add all amounts with respect to	42
dividends to, distributions to, or amounts set aside for or	43
credited to the benefit of investors and allowed as a deduction in	44
the computation of federal taxable income;	45

(g) Deduct, to the extent not otherwise deducted or excluded	46
in computing federal taxable income, any income ~~derived from~~	47
~~providing public services under a contract through a project owned~~	48
~~by the state, as described in section 126.604 of the Revised Code~~	49
or derived from a transfer agreement or from the enterprise	50
transferred under that agreement under section 4313.02 of the	51
Revised Code.	52

If the taxpayer is not a C corporation and is not an	53
individual, the taxpayer shall compute adjusted federal taxable	54
income as if the taxpayer were a C corporation, except guaranteed	55
payments and other similar amounts paid or accrued to a partner,	56
former partner, member, or former member shall not be allowed as a	57
deductible expense; amounts paid or accrued to a qualified	58
self-employed retirement plan with respect to an owner or	59
owner-employee of the taxpayer, amounts paid or accrued to or for	60
health insurance for an owner or owner-employee, and amounts paid	61
or accrued to or for life insurance for an owner or owner-employee	62
shall not be allowed as a deduction.	63

Nothing in division (A)(1) of this section shall be construed	64
as allowing the taxpayer to add or deduct any amount more than	65
once or shall be construed as allowing any taxpayer to deduct any	66
amount paid to or accrued for purposes of federal self-employment	67
tax.	68

Nothing in this chapter shall be construed as limiting or	69
removing the ability of any municipal corporation to administer,	70
audit, and enforce the provisions of its municipal income tax.	71

(2) "Internal Revenue Code" means the Internal Revenue Code	72
of 1986, 100 Stat. 2085, 26 U.S.C. 1, as amended.	73

(3) "Schedule C" means internal revenue service schedule C	74
filed by a taxpayer pursuant to the Internal Revenue Code.	75

(4) "Form 2106" means internal revenue service form 2106	76
filed by a taxpayer pursuant to the Internal Revenue Code.	77

(5) "Intangible income" means income of any of the following	78
types: income yield, interest, capital gains, dividends, or other	79
income arising from the ownership, sale, exchange, or other	80
disposition of intangible property including, but not limited to,	81
investments, deposits, money, or credits as those terms are	82
defined in Chapter 5701. of the Revised Code, and patents,	83
copyrights, trademarks, tradenames, investments in real estate	84
investment trusts, investments in regulated investment companies,	85
and appreciation on deferred compensation. "Intangible income"	86
does not include prizes, awards, or other income associated with	87
any lottery winnings or other similar games of chance.	88

(6) "S corporation" means a corporation that has made an	89
election under subchapter S of Chapter 1 of Subtitle A of the	90
Internal Revenue Code for its taxable year.	91

(7) For taxable years beginning on or after January 1, 2004,	92
"net profit" for a taxpayer other than an individual means	93
adjusted federal taxable income and "net profit" for a taxpayer	94
who is an individual means the individual's profit required to be	95
reported on schedule C, schedule E, or schedule F, other than any	96
amount allowed as a deduction under division (E)(2) or (3) of this	97
section or amounts described in division (H) of this section.	98

(8) "Taxpayer" means a person subject to a tax on income	99
levied by a municipal corporation. Except as provided in division	100
(L) of this section, "taxpayer" does not include any person that	101
is a disregarded entity or a qualifying subchapter S subsidiary	102
for federal income tax purposes, but "taxpayer" includes any other	103
person who owns the disregarded entity or qualifying subchapter S	104
subsidiary.	105

(9) "Taxable year" means the corresponding tax reporting	106
period as prescribed for the taxpayer under the Internal Revenue	107
Code.	108

(10) "Tax administrator" means the individual charged with	109
direct responsibility for administration of a tax on income levied	110
by a municipal corporation and includes:	111

(a) The central collection agency and the regional income tax	112
agency and their successors in interest, and other entities	113
organized to perform functions similar to those performed by the	114
central collection agency and the regional income tax agency;	115

(b) A municipal corporation acting as the agent of another	116
municipal corporation; and	117

(c) Persons retained by a municipal corporation to administer	118
a tax levied by the municipal corporation, but only if the	119
municipal corporation does not compensate the person in whole or	120
in part on a contingency basis.	121

(11) "Person" includes individuals, firms, companies,	122
business trusts, estates, trusts, partnerships, limited liability	123
companies, associations, corporations, governmental entities, and	124
any other entity.	125

(12) "Schedule E" means internal revenue service schedule E	126
filed by a taxpayer pursuant to the Internal Revenue Code.	127

(13) "Schedule F" means internal revenue service schedule F	128
filed by a taxpayer pursuant to the Internal Revenue Code.	129

(B) No municipal corporation shall tax income at other than a	130
uniform rate.	131

(C) No municipal corporation shall levy a tax on income at a	132
rate in excess of one per cent without having obtained the	133
approval of the excess by a majority of the electors of the	134
municipality voting on the question at a general, primary, or	135
special election. The legislative authority of the municipal	136
corporation shall file with the board of elections at least ninety	137
days before the day of the election a copy of the ordinance	138
together with a resolution specifying the date the election is to	139
be held and directing the board of elections to conduct the	140
election. The ballot shall be in the following form: "Shall the	141
Ordinance providing for a ... per cent levy on income for (Brief	142
description of the purpose of the proposed levy) be passed?	143

144

		FOR THE INCOME TAX			145
		AGAINST THE INCOME TAX	"		146

147

In the event of an affirmative vote, the proceeds of the levy	148
may be used only for the specified purpose.	149

(D)(1) Except as otherwise provided in this section, no	150
municipal corporation shall exempt from a tax on income	151
compensation for personal services of individuals over eighteen	152
years of age or the net profit from a business or profession.	153

(2)(a) For taxable years beginning on or after January 1,	154
2004, no municipal corporation shall tax the net profit from a	155
business or profession using any base other than the taxpayer's	156
adjusted federal taxable income.	157

(b) Division (D)(2)(a) of this section does not apply to any	158
taxpayer required to file a return under section 5745.03 of the	159
Revised Code or to the net profit from a sole proprietorship.	160

(E)(1) The legislative authority of a municipal corporation	161
may, by ordinance or resolution, exempt from withholding and from	162
a tax on income the following:	163

(a) Compensation arising from the sale, exchange, or other	164
disposition of a stock option, the exercise of a stock option, or	165
the sale, exchange, or other disposition of stock purchased under	166
a stock option; or	167

(b) Compensation attributable to a nonqualified deferred	168
compensation plan or program described in section 3121(v)(2)(C) of	169
the Internal Revenue Code.	170

(2) The legislative authority of a municipal corporation may	171
adopt an ordinance or resolution that allows a taxpayer who is an	172
individual to deduct, in computing the taxpayer's municipal income	173
tax liability, an amount equal to the aggregate amount the	174
taxpayer paid in cash during the taxable year to a health savings	175
account of the taxpayer, to the extent the taxpayer is entitled to	176
deduct that amount on internal revenue service form 1040.	177

(3) The legislative authority of a municipal corporation may	178
adopt an ordinance or resolution that allows a taxpayer who has a	179
net profit from a business or profession that is operated as a	180
sole proprietorship to deduct from that net profit the amount that	181
the taxpayer paid during the taxable year for medical care	182
insurance premiums for the taxpayer, the taxpayer's spouse, and	183
dependents as defined in section 5747.01 of the Revised Code. The	184
deduction shall be allowed to the same extent the taxpayer is	185
entitled to deduct the premiums on internal revenue service form	186
1040. The deduction allowed under this division shall be net of	187
any related premium refunds, related premium reimbursements, or	188
related insurance premium dividends received by the taxpayer	189
during the taxable year.	190

(F) If an individual's taxable income includes income against	191
which the taxpayer has taken a deduction for federal income tax	192
purposes as reportable on the taxpayer's form 2106, and against	193
which a like deduction has not been allowed by the municipal	194
corporation, the municipal corporation shall deduct from the	195
taxpayer's taxable income an amount equal to the deduction shown	196
on such form allowable against such income, to the extent not	197
otherwise so allowed as a deduction by the municipal corporation.	198

(G)(1) In the case of a taxpayer who has a net profit from a	199
business or profession that is operated as a sole proprietorship,	200
no municipal corporation may tax or use as the base for	201
determining the amount of the net profit that shall be considered	202
as having a taxable situs in the municipal corporation, an amount	203
other than the net profit required to be reported by the taxpayer	204
on schedule C or F from such sole proprietorship for the taxable	205
year.	206

(2) In the case of a taxpayer who has a net profit from	207
rental activity required to be reported on schedule E, no	208
municipal corporation may tax or use as the base for determining	209
the amount of the net profit that shall be considered as having a	210
taxable situs in the municipal corporation, an amount other than	211
the net profit from rental activities required to be reported by	212
the taxpayer on schedule E for the taxable year.	213

(H) A municipal corporation shall not tax any of the	214
following:	215

(1) The military pay or allowances of members of the armed	216
forces of the United States and of members of their reserve	217
components, including the Ohio national guard;	218

(2) The income of religious, fraternal, charitable,	219
scientific, literary, or educational institutions to the extent	220
that such income is derived from tax-exempt real estate,	221
tax-exempt tangible or intangible property, or tax-exempt	222
activities;	223

(3) Except as otherwise provided in division (I) of this	224
section, intangible income;	225

(4) Compensation paid under section 3501.28 or 3501.36 of the	226
Revised Code to a person serving as a precinct election official,	227
to the extent that such compensation does not exceed one thousand	228
dollars annually. Such compensation in excess of one thousand	229
dollars may be subjected to taxation by a municipal corporation. A	230
municipal corporation shall not require the payer of such	231
compensation to withhold any tax from that compensation.	232

(5) Compensation paid to an employee of a transit authority,	233
regional transit authority, or regional transit commission created	234
under Chapter 306. of the Revised Code for operating a transit bus	235
or other motor vehicle for the authority or commission in or	236
through the municipal corporation, unless the bus or vehicle is	237
operated on a regularly scheduled route, the operator is subject	238
to such a tax by reason of residence or domicile in the municipal	239
corporation, or the headquarters of the authority or commission is	240
located within the municipal corporation;	241

(6) The income of a public utility, when that public utility	242
is subject to the tax levied under section 5727.24 or 5727.30 of	243
the Revised Code, except a municipal corporation may tax the	244
following, subject to Chapter 5745. of the Revised Code:	245

(a) Beginning January 1, 2002, the income of an electric	246
company or combined company;	247

(b) Beginning January 1, 2004, the income of a telephone	248
company.	249

As used in division (H)(6) of this section, "combined	250
company," "electric company," and "telephone company" have the	251
same meanings as in section 5727.01 of the Revised Code.	252

(7) On and after January 1, 2003, items excluded from federal	253
gross income pursuant to section 107 of the Internal Revenue Code;	254

(8) On and after January 1, 2001, compensation paid to a	255
nonresident individual to the extent prohibited under section	256
718.011 of the Revised Code;	257

(9)(a) Except as provided in division (H)(9)(b) and (c) of	258
this section, an S corporation shareholder's distributive share of	259
net profits of the S corporation, other than any part of the	260
distributive share of net profits that represents wages as defined	261
in section 3121(a) of the Internal Revenue Code or net earnings	262
from self-employment as defined in section 1402(a) of the Internal	263
Revenue Code.	264

(b) If, pursuant to division (H) of former section 718.01 of	265
the Revised Code as it existed before March 11, 2004, a majority	266
of the electors of a municipal corporation voted in favor of the	267
question at an election held on November 4, 2003, the municipal	268
corporation may continue after 2002 to tax an S corporation	269
shareholder's distributive share of net profits of an S	270
corporation.	271

(c) If, on December 6, 2002, a municipal corporation was	272
imposing, assessing, and collecting a tax on an S corporation	273
shareholder's distributive share of net profits of the S	274
corporation to the extent the distributive share would be	275
allocated or apportioned to this state under divisions (B)(1) and	276
(2) of section 5733.05 of the Revised Code if the S corporation	277
were a corporation subject to taxes imposed under Chapter 5733. of	278
the Revised Code, the municipal corporation may continue to impose	279
the tax on such distributive shares to the extent such shares	280
would be so allocated or apportioned to this state only until	281
December 31, 2004, unless a majority of the electors of the	282
municipal corporation voting on the question of continuing to tax	283
such shares after that date vote in favor of that question at an	284
election held November 2, 2004. If a majority of those electors	285
vote in favor of the question, the municipal corporation may	286
continue after December 31, 2004, to impose the tax on such	287
distributive shares only to the extent such shares would be so	288
allocated or apportioned to this state.	289

(d) For the purposes of division (D) of section 718.14 of the	290
Revised Code, a municipal corporation shall be deemed to have	291
elected to tax S corporation shareholders' distributive shares of	292
net profits of the S corporation in the hands of the shareholders	293
if a majority of the electors of a municipal corporation vote in	294
favor of a question at an election held under division (H)(9)(b)	295
or (c) of this section. The municipal corporation shall specify by	296
ordinance or rule that the tax applies to the distributive share	297
of a shareholder of an S corporation in the hands of the	298
shareholder of the S corporation.	299

(10) Employee compensation that is not "qualifying wages" as	300
defined in section 718.03 of the Revised Code;	301

(11) Beginning August 1, 2007, compensation paid to a person	302
employed within the boundaries of a United States air force base	303
under the jurisdiction of the United States air force that is used	304
for the housing of members of the United States air force and is a	305
center for air force operations, unless the person is subject to	306
taxation because of residence or domicile. If the compensation is	307
subject to taxation because of residence or domicile, municipal	308
income tax shall be payable only to the municipal corporation of	309
residence or domicile.	310

(I) Any municipal corporation that taxes any type of	311
intangible income on March 29, 1988, pursuant to Section 3 of	312
Amended Substitute Senate Bill No. 238 of the 116th general	313
assembly, may continue to tax that type of income after 1988 if a	314
majority of the electors of the municipal corporation voting on	315
the question of whether to permit the taxation of that type of	316
intangible income after 1988 vote in favor thereof at an election	317
held on November 8, 1988.	318

(J) Nothing in this section or section 718.02 of the Revised	319
Code shall authorize the levy of any tax on income that a	320
municipal corporation is not authorized to levy under existing	321
laws or shall require a municipal corporation to allow a deduction	322
from taxable income for losses incurred from a sole proprietorship	323
or partnership.	324

(K)(1) Nothing in this chapter prohibits a municipal	325
corporation from allowing, by resolution or ordinance, a net	326
operating loss carryforward.	327

(2) Nothing in this chapter requires a municipal corporation	328
to allow a net operating loss carryforward.	329

(L)(1) A single member limited liability company that is a	330
disregarded entity for federal tax purposes may elect to be a	331
separate taxpayer from its single member in all Ohio municipal	332
corporations in which it either filed as a separate taxpayer or	333
did not file for its taxable year ending in 2003, if all of the	334
following conditions are met:	335

(a) The limited liability company's single member is also a	336
limited liability company;	337

(b) The limited liability company and its single member were	338
formed and doing business in one or more Ohio municipal	339
corporations for at least five years before January 1, 2004;	340

(c) Not later than December 31, 2004, the limited liability	341
company and its single member each make an election to be treated	342
as a separate taxpayer under division (L) of this section;	343

(d) The limited liability company was not formed for the	344
purpose of evading or reducing Ohio municipal corporation income	345
tax liability of the limited liability company or its single	346
member;	347

(e) The Ohio municipal corporation that is the primary place	348
of business of the sole member of the limited liability company	349
consents to the election.	350

(2) For purposes of division (L)(1)(e) of this section, a	351
municipal corporation is the primary place of business of a	352
limited liability company if, for the limited liability company's	353
taxable year ending in 2003, its income tax liability is greater	354
in that municipal corporation than in any other municipal	355
corporation in Ohio, and that tax liability to that municipal	356
corporation for its taxable year ending in 2003 is at least four	357
hundred thousand dollars.	358

Sec. 5739.02. For the purpose of providing revenue with	359
which to meet the needs of the state, for the use of the general	360
revenue fund of the state, for the purpose of securing a thorough	361
and efficient system of common schools throughout the state, for	362
the purpose of affording revenues, in addition to those from	363
general property taxes, permitted under constitutional	364
limitations, and from other sources, for the support of local	365
governmental functions, and for the purpose of reimbursing the	366
state for the expense of administering this chapter, an excise tax	367
is hereby levied on each retail sale made in this state.	368

(A)(1) The tax shall be collected as provided in section	369
5739.025 of the Revised Code. The rate of the tax shall be five	370
and one-half per cent. The tax applies and is collectible when the	371
sale is made, regardless of the time when the price is paid or	372
delivered.	373

(2) In the case of the lease or rental, with a fixed term of	374
more than thirty days or an indefinite term with a minimum period	375
of more than thirty days, of any motor vehicles designed by the	376
manufacturer to carry a load of not more than one ton, watercraft,	377
outboard motor, or aircraft, or of any tangible personal property,	378
other than motor vehicles designed by the manufacturer to carry a	379
load of more than one ton, to be used by the lessee or renter	380
primarily for business purposes, the tax shall be collected by the	381
vendor at the time the lease or rental is consummated and shall be	382
calculated by the vendor on the basis of the total amount to be	383
paid by the lessee or renter under the lease agreement. If the	384
total amount of the consideration for the lease or rental includes	385
amounts that are not calculated at the time the lease or rental is	386
executed, the tax shall be calculated and collected by the vendor	387
at the time such amounts are billed to the lessee or renter. In	388
the case of an open-end lease or rental, the tax shall be	389
calculated by the vendor on the basis of the total amount to be	390
paid during the initial fixed term of the lease or rental, and for	391
each subsequent renewal period as it comes due. As used in this	392
division, "motor vehicle" has the same meaning as in section	393
4501.01 of the Revised Code, and "watercraft" includes an outdrive	394
unit attached to the watercraft.	395

A lease with a renewal clause and a termination penalty or	396
similar provision that applies if the renewal clause is not	397
exercised is presumed to be a sham transaction. In such a case,	398
the tax shall be calculated and paid on the basis of the entire	399
length of the lease period, including any renewal periods, until	400
the termination penalty or similar provision no longer applies.	401
The taxpayer shall bear the burden, by a preponderance of the	402
evidence, that the transaction or series of transactions is not a	403
sham transaction.	404

(3) Except as provided in division (A)(2) of this section, in	405
the case of a sale, the price of which consists in whole or in	406
part of the lease or rental of tangible personal property, the tax	407
shall be measured by the installments of that lease or rental.	408

(4) In the case of a sale of a physical fitness facility	409
service or recreation and sports club service, the price of which	410
consists in whole or in part of a membership for the receipt of	411
the benefit of the service, the tax applicable to the sale shall	412
be measured by the installments thereof.	413

(B) The tax does not apply to the following:

414

(1) Sales to the state or any of its political subdivisions,	415
or to any other state or its political subdivisions if the laws of	416
that state exempt from taxation sales made to this state and its	417
political subdivisions;	418

(2) Sales of food for human consumption off the premises	419
where sold;	420

(3) Sales of food sold to students only in a cafeteria,	421
dormitory, fraternity, or sorority maintained in a private,	422
public, or parochial school, college, or university;	423

(4) Sales of newspapers and of magazine subscriptions and	424
sales or transfers of magazines distributed as controlled	425
circulation publications;	426

(5) The furnishing, preparing, or serving of meals without	427
charge by an employer to an employee provided the employer records	428
the meals as part compensation for services performed or work	429
done;	430

(6) Sales of motor fuel upon receipt, use, distribution, or	431
sale of which in this state a tax is imposed by the law of this	432
state, but this exemption shall not apply to the sale of motor	433
fuel on which a refund of the tax is allowable under division (A)	434
of section 5735.14 of the Revised Code; and the tax commissioner	435
may deduct the amount of tax levied by this section applicable to	436
the price of motor fuel when granting a refund of motor fuel tax	437
pursuant to division (A) of section 5735.14 of the Revised Code	438
and shall cause the amount deducted to be paid into the general	439
revenue fund of this state;	440

(7) Sales of natural gas by a natural gas company, of water	441
by a water-works company, or of steam by a heating company, if in	442
each case the thing sold is delivered to consumers through pipes	443
or conduits, and all sales of communications services by a	444
telegraph company, all terms as defined in section 5727.01 of the	445
Revised Code, and sales of electricity delivered through wires;	446

(8) Casual sales by a person, or auctioneer employed directly	447
by the person to conduct such sales, except as to such sales of	448
motor vehicles, watercraft or outboard motors required to be	449
titled under section 1548.06 of the Revised Code, watercraft	450
documented with the United States coast guard, snowmobiles, and	451
all-purpose vehicles as defined in section 4519.01 of the Revised	452
Code;	453

(9)(a) Sales of services or tangible personal property, other	454
than motor vehicles, mobile homes, and manufactured homes, by	455
churches, organizations exempt from taxation under section	456
501(c)(3) of the Internal Revenue Code of 1986, or nonprofit	457
organizations operated exclusively for charitable purposes as	458
defined in division (B)(12) of this section, provided that the	459
number of days on which such tangible personal property or	460
services, other than items never subject to the tax, are sold does	461
not exceed six in any calendar year, except as otherwise provided	462
in division (B)(9)(b) of this section. If the number of days on	463
which such sales are made exceeds six in any calendar year, the	464
church or organization shall be considered to be engaged in	465
business and all subsequent sales by it shall be subject to the	466
tax. In counting the number of days, all sales by groups within a	467
church or within an organization shall be considered to be sales	468
of that church or organization.	469

(b) The limitation on the number of days on which tax-exempt	470
sales may be made by a church or organization under division	471
(B)(9)(a) of this section does not apply to sales made by student	472
clubs and other groups of students of a primary or secondary	473
school, or a parent-teacher association, booster group, or similar	474
organization that raises money to support or fund curricular or	475
extracurricular activities of a primary or secondary school.	476

(c) Divisions (B)(9)(a) and (b) of this section do not apply	477
to sales by a noncommercial educational radio or television	478
broadcasting station.	479

(10) Sales not within the taxing power of this state under	480
the Constitution of the United States;	481

(11) Except for transactions that are sales under division	482
(B)(3)(r) of section 5739.01 of the Revised Code, the	483
transportation of persons or property, unless the transportation	484
is by a private investigation and security service;	485

(12) Sales of tangible personal property or services to	486
churches, to organizations exempt from taxation under section	487
501(c)(3) of the Internal Revenue Code of 1986, and to any other	488
nonprofit organizations operated exclusively for charitable	489
purposes in this state, no part of the net income of which inures	490
to the benefit of any private shareholder or individual, and no	491
substantial part of the activities of which consists of carrying	492
on propaganda or otherwise attempting to influence legislation;	493
sales to offices administering one or more homes for the aged or	494
one or more hospital facilities exempt under section 140.08 of the	495
Revised Code; and sales to organizations described in division (D)	496
of section 5709.12 of the Revised Code.	497

"Charitable purposes" means the relief of poverty; the	498
improvement of health through the alleviation of illness, disease,	499
or injury; the operation of an organization exclusively for the	500
provision of professional, laundry, printing, and purchasing	501
services to hospitals or charitable institutions; the operation of	502
a home for the aged, as defined in section 5701.13 of the Revised	503
Code; the operation of a radio or television broadcasting station	504
that is licensed by the federal communications commission as a	505
noncommercial educational radio or television station; the	506
operation of a nonprofit animal adoption service or a county	507
humane society; the promotion of education by an institution of	508
learning that maintains a faculty of qualified instructors,	509
teaches regular continuous courses of study, and confers a	510
recognized diploma upon completion of a specific curriculum; the	511
operation of a parent-teacher association, booster group, or	512
similar organization primarily engaged in the promotion and	513
support of the curricular or extracurricular activities of a	514
primary or secondary school; the operation of a community or area	515
center in which presentations in music, dramatics, the arts, and	516
related fields are made in order to foster public interest and	517
education therein; the production of performances in music,	518
dramatics, and the arts; or the promotion of education by an	519
organization engaged in carrying on research in, or the	520
dissemination of, scientific and technological knowledge and	521
information primarily for the public.	522

Nothing in this division shall be deemed to exempt sales to	523
any organization for use in the operation or carrying on of a	524
trade or business, or sales to a home for the aged for use in the	525
operation of independent living facilities as defined in division	526
(A) of section 5709.12 of the Revised Code.	527

(13) Building and construction materials and services sold to	528
construction contractors for incorporation into a structure or	529
improvement to real property under a construction contract with	530
this state or a political subdivision of this state, or with the	531
United States government or any of its agencies; building and	532
construction materials and services sold to construction	533
contractors for incorporation into a structure or improvement to	534
real property that are accepted for ownership by this state or any	535
of its political subdivisions, or by the United States government	536
or any of its agencies at the time of completion of the structures	537
or improvements; building and construction materials sold to	538
construction contractors for incorporation into a horticulture	539
structure or livestock structure for a person engaged in the	540
business of horticulture or producing livestock; building	541
materials and services sold to a construction contractor for	542
incorporation into a house of public worship or religious	543
education, or a building used exclusively for charitable purposes	544
under a construction contract with an organization whose purpose	545
is as described in division (B)(12) of this section; building	546
materials and services sold to a construction contractor for	547
incorporation into a building under a construction contract with	548
an organization exempt from taxation under section 501(c)(3) of	549
the Internal Revenue Code of 1986 when the building is to be used	550
exclusively for the organization's exempt purposes; building and	551
construction materials sold for incorporation into the original	552
construction of a sports facility under section 307.696 of the	553
Revised Code; building and construction materials and services	554
sold to a construction contractor for incorporation into real	555
property outside this state if such materials and services, when	556
sold to a construction contractor in the state in which the real	557
property is located for incorporation into real property in that	558
state, would be exempt from a tax on sales levied by that state;	559
and, until one calendar year after the construction of a	560
convention center that qualifies for property tax exemption under	561
section 5709.084 of the Revised Code is completed, building and	562
construction materials and services sold to a construction	563
contractor for incorporation into the real property comprising	564
that convention center;	565

(14) Sales of ships or vessels or rail rolling stock used or	566
to be used principally in interstate or foreign commerce, and	567
repairs, alterations, fuel, and lubricants for such ships or	568
vessels or rail rolling stock;	569

(15) Sales to persons primarily engaged in any of the	570
activities mentioned in division (B)(42)(a), (g), or (h) of this	571
section, to persons engaged in making retail sales, or to persons	572
who purchase for sale from a manufacturer tangible personal	573
property that was produced by the manufacturer in accordance with	574
specific designs provided by the purchaser, of packages, including	575
material, labels, and parts for packages, and of machinery,	576
equipment, and material for use primarily in packaging tangible	577
personal property produced for sale, including any machinery,	578
equipment, and supplies used to make labels or packages, to	579
prepare packages or products for labeling, or to label packages or	580
products, by or on the order of the person doing the packaging, or	581
sold at retail. "Packages" includes bags, baskets, cartons,	582
crates, boxes, cans, bottles, bindings, wrappings, and other	583
similar devices and containers, but does not include motor	584
vehicles or bulk tanks, trailers, or similar devices attached to	585
motor vehicles. "Packaging" means placing in a package. Division	586
(B)(15) of this section does not apply to persons engaged in	587
highway transportation for hire.	588

(16) Sales of food to persons using supplemental nutrition	589
assistance program benefits to purchase the food. As used in this	590
division, "food" has the same meaning as in 7 U.S.C. 2012 and	591
federal regulations adopted pursuant to the Food and Nutrition Act	592
of 2008.	593

(17) Sales to persons engaged in farming, agriculture,	594
horticulture, or floriculture, of tangible personal property for	595
use or consumption primarily in the production by farming,	596
agriculture, horticulture, or floriculture of other tangible	597
personal property for use or consumption primarily in the	598
production of tangible personal property for sale by farming,	599
agriculture, horticulture, or floriculture; or material and parts	600
for incorporation into any such tangible personal property for use	601
or consumption in production; and of tangible personal property	602
for such use or consumption in the conditioning or holding of	603
products produced by and for such use, consumption, or sale by	604
persons engaged in farming, agriculture, horticulture, or	605
floriculture, except where such property is incorporated into real	606
property;	607

(18) Sales of drugs for a human being that may be dispensed	608
only pursuant to a prescription; insulin as recognized in the	609
official United States pharmacopoeia; urine and blood testing	610
materials when used by diabetics or persons with hypoglycemia to	611
test for glucose or acetone; hypodermic syringes and needles when	612
used by diabetics for insulin injections; epoetin alfa when	613
purchased for use in the treatment of persons with medical	614
disease; hospital beds when purchased by hospitals, nursing homes,	615
or other medical facilities; and medical oxygen and medical	616
oxygen-dispensing equipment when purchased by hospitals, nursing	617
homes, or other medical facilities;	618

(19) Sales of prosthetic devices, durable medical equipment	619
for home use, or mobility enhancing equipment, when made pursuant	620
to a prescription and when such devices or equipment are for use	621
by a human being.	622

(20) Sales of emergency and fire protection vehicles and	623
equipment to nonprofit organizations for use solely in providing	624
fire protection and emergency services, including trauma care and	625
emergency medical services, for political subdivisions of the	626
state;	627

(21) Sales of tangible personal property manufactured in this	628
state, if sold by the manufacturer in this state to a retailer for	629
use in the retail business of the retailer outside of this state	630
and if possession is taken from the manufacturer by the purchaser	631
within this state for the sole purpose of immediately removing the	632
same from this state in a vehicle owned by the purchaser;	633

(22) Sales of services provided by the state or any of its	634
political subdivisions, agencies, instrumentalities, institutions,	635
or authorities, or by governmental entities of the state or any of	636
its political subdivisions, agencies, instrumentalities,	637
institutions, or authorities;	638

(23) Sales of motor vehicles to nonresidents of this state	639
under the circumstances described in division (B) of section	640
5739.029 of the Revised Code;	641

(24) Sales to persons engaged in the preparation of eggs for	642
sale of tangible personal property used or consumed directly in	643
such preparation, including such tangible personal property used	644
for cleaning, sanitizing, preserving, grading, sorting, and	645
classifying by size; packages, including material and parts for	646
packages, and machinery, equipment, and material for use in	647
packaging eggs for sale; and handling and transportation equipment	648
and parts therefor, except motor vehicles licensed to operate on	649
public highways, used in intraplant or interplant transfers or	650
shipment of eggs in the process of preparation for sale, when the	651
plant or plants within or between which such transfers or	652
shipments occur are operated by the same person. "Packages"	653
includes containers, cases, baskets, flats, fillers, filler flats,	654
cartons, closure materials, labels, and labeling materials, and	655
"packaging" means placing therein.	656

(25)(a) Sales of water to a consumer for residential use;

657

(b) Sales of water by a nonprofit corporation engaged	658
exclusively in the treatment, distribution, and sale of water to	659
consumers, if such water is delivered to consumers through pipes	660
or tubing.	661

(26) Fees charged for inspection or reinspection of motor	662
vehicles under section 3704.14 of the Revised Code;	663

(27) Sales to persons licensed to conduct a food service	664
operation pursuant to section 3717.43 of the Revised Code, of	665
tangible personal property primarily used directly for the	666
following:	667

(a) To prepare food for human consumption for sale;

668

(b) To preserve food that has been or will be prepared for	669
human consumption for sale by the food service operator, not	670
including tangible personal property used to display food for	671
selection by the consumer;	672

(c) To clean tangible personal property used to prepare or	673
serve food for human consumption for sale.	674

(28) Sales of animals by nonprofit animal adoption services	675
or county humane societies;	676

(29) Sales of services to a corporation described in division	677
(A) of section 5709.72 of the Revised Code, and sales of tangible	678
personal property that qualifies for exemption from taxation under	679
section 5709.72 of the Revised Code;	680

(30) Sales and installation of agricultural land tile, as	681
defined in division (B)(5)(a) of section 5739.01 of the Revised	682
Code;	683

(31) Sales and erection or installation of portable grain	684
bins, as defined in division (B)(5)(b) of section 5739.01 of the	685
Revised Code;	686

(32) The sale, lease, repair, and maintenance of, parts for,	687
or items attached to or incorporated in, motor vehicles that are	688
primarily used for transporting tangible personal property	689
belonging to others by a person engaged in highway transportation	690
for hire, except for packages and packaging used for the	691
transportation of tangible personal property;	692

(33) Sales to the state headquarters of any veterans'	693
organization in this state that is either incorporated and issued	694
a charter by the congress of the United States or is recognized by	695
the United States veterans administration, for use by the	696
headquarters;	697

(34) Sales to a telecommunications service vendor, mobile	698
telecommunications service vendor, or satellite broadcasting	699
service vendor of tangible personal property and services used	700
directly and primarily in transmitting, receiving, switching, or	701
recording any interactive, one- or two-way electromagnetic	702
communications, including voice, image, data, and information,	703
through the use of any medium, including, but not limited to,	704
poles, wires, cables, switching equipment, computers, and record	705
storage devices and media, and component parts for the tangible	706
personal property. The exemption provided in this division shall	707
be in lieu of all other exemptions under division (B)(42)(a) or	708
(n) of this section to which the vendor may otherwise be entitled,	709
based upon the use of the thing purchased in providing the	710
telecommunications, mobile telecommunications, or satellite	711
broadcasting service.	712

(35)(a) Sales where the purpose of the consumer is to use or	713
consume the things transferred in making retail sales and	714
consisting of newspaper inserts, catalogues, coupons, flyers, gift	715
certificates, or other advertising material that prices and	716
describes tangible personal property offered for retail sale.	717

(b) Sales to direct marketing vendors of preliminary	718
materials such as photographs, artwork, and typesetting that will	719
be used in printing advertising material; and of printed matter	720
that offers free merchandise or chances to win sweepstake prizes	721
and that is mailed to potential customers with advertising	722
material described in division (B)(35)(a) of this section;	723

(c) Sales of equipment such as telephones, computers,	724
facsimile machines, and similar tangible personal property	725
primarily used to accept orders for direct marketing retail sales.	726

(d) Sales of automatic food vending machines that preserve	727
food with a shelf life of forty-five days or less by refrigeration	728
and dispense it to the consumer.	729

For purposes of division (B)(35) of this section, "direct	730
marketing" means the method of selling where consumers order	731
tangible personal property by United States mail, delivery	732
service, or telecommunication and the vendor delivers or ships the	733
tangible personal property sold to the consumer from a warehouse,	734
catalogue distribution center, or similar fulfillment facility by	735
means of the United States mail, delivery service, or common	736
carrier.	737

(36) Sales to a person engaged in the business of	738
horticulture or producing livestock of materials to be	739
incorporated into a horticulture structure or livestock structure;	740

(37) Sales of personal computers, computer monitors, computer	741
keyboards, modems, and other peripheral computer equipment to an	742
individual who is licensed or certified to teach in an elementary	743
or a secondary school in this state for use by that individual in	744
preparation for teaching elementary or secondary school students;	745

(38) Sales to a professional racing team of any of the	746
following:	747

(a) Motor racing vehicles;

748

(b) Repair services for motor racing vehicles;

749

(c) Items of property that are attached to or incorporated in	750
motor racing vehicles, including engines, chassis, and all other	751
components of the vehicles, and all spare, replacement, and	752
rebuilt parts or components of the vehicles; except not including	753
tires, consumable fluids, paint, and accessories consisting of	754
instrumentation sensors and related items added to the vehicle to	755
collect and transmit data by means of telemetry and other forms of	756
communication.	757

(39) Sales of used manufactured homes and used mobile homes,	758
as defined in section 5739.0210 of the Revised Code, made on or	759
after January 1, 2000;	760

(40) Sales of tangible personal property and services to a	761
provider of electricity used or consumed directly and primarily in	762
generating, transmitting, or distributing electricity for use by	763
others, including property that is or is to be incorporated into	764
and will become a part of the consumer's production, transmission,	765
or distribution system and that retains its classification as	766
tangible personal property after incorporation; fuel or power used	767
in the production, transmission, or distribution of electricity;	768
energy conversion equipment as defined in section 5727.01 of the	769
Revised Code; and tangible personal property and services used in	770
the repair and maintenance of the production, transmission, or	771
distribution system, including only those motor vehicles as are	772
specially designed and equipped for such use. The exemption	773
provided in this division shall be in lieu of all other exemptions	774
in division (B)(42)(a) or (n) of this section to which a provider	775
of electricity may otherwise be entitled based on the use of the	776
tangible personal property or service purchased in generating,	777
transmitting, or distributing electricity.	778

(41) Sales to a person providing services under division	779
(B)(3)(r) of section 5739.01 of the Revised Code of tangible	780
personal property and services used directly and primarily in	781
providing taxable services under that section.	782

(42) Sales where the purpose of the purchaser is to do any of	783
the following:	784

(a) To incorporate the thing transferred as a material or a	785
part into tangible personal property to be produced for sale by	786
manufacturing, assembling, processing, or refining; or to use or	787
consume the thing transferred directly in producing tangible	788
personal property for sale by mining, including, without	789
limitation, the extraction from the earth of all substances that	790
are classed geologically as minerals, production of crude oil and	791
natural gas, or directly in the rendition of a public utility	792
service, except that the sales tax levied by this section shall be	793
collected upon all meals, drinks, and food for human consumption	794
sold when transporting persons. Persons engaged in rendering	795
services in the exploration for, and production of, crude oil and	796
natural gas for others are deemed engaged directly in the	797
exploration for, and production of, crude oil and natural gas.	798
This paragraph does not exempt from "retail sale" or "sales at	799
retail" the sale of tangible personal property that is to be	800
incorporated into a structure or improvement to real property.	801

(b) To hold the thing transferred as security for the	802
performance of an obligation of the vendor;	803

(c) To resell, hold, use, or consume the thing transferred as	804
evidence of a contract of insurance;	805

(d) To use or consume the thing directly in commercial	806
fishing;	807

(e) To incorporate the thing transferred as a material or a	808
part into, or to use or consume the thing transferred directly in	809
the production of, magazines distributed as controlled circulation	810
publications;	811

(f) To use or consume the thing transferred in the production	812
and preparation in suitable condition for market and sale of	813
printed, imprinted, overprinted, lithographic, multilithic,	814
blueprinted, photostatic, or other productions or reproductions of	815
written or graphic matter;	816

(g) To use the thing transferred, as described in section	817
5739.011 of the Revised Code, primarily in a manufacturing	818
operation to produce tangible personal property for sale;	819

(h) To use the benefit of a warranty, maintenance or service	820
contract, or similar agreement, as described in division (B)(7) of	821
section 5739.01 of the Revised Code, to repair or maintain	822
tangible personal property, if all of the property that is the	823
subject of the warranty, contract, or agreement would not be	824
subject to the tax imposed by this section;	825

(i) To use the thing transferred as qualified research and	826
development equipment;	827

(j) To use or consume the thing transferred primarily in	828
storing, transporting, mailing, or otherwise handling purchased	829
sales inventory in a warehouse, distribution center, or similar	830
facility when the inventory is primarily distributed outside this	831
state to retail stores of the person who owns or controls the	832
warehouse, distribution center, or similar facility, to retail	833
stores of an affiliated group of which that person is a member, or	834
by means of direct marketing. This division does not apply to	835
motor vehicles registered for operation on the public highways. As	836
used in this division, "affiliated group" has the same meaning as	837
in division (B)(3)(e) of section 5739.01 of the Revised Code and	838
"direct marketing" has the same meaning as in division (B)(35) of	839
this section.	840

(k) To use or consume the thing transferred to fulfill a	841
contractual obligation incurred by a warrantor pursuant to a	842
warranty provided as a part of the price of the tangible personal	843
property sold or by a vendor of a warranty, maintenance or service	844
contract, or similar agreement the provision of which is defined	845
as a sale under division (B)(7) of section 5739.01 of the Revised	846
Code;	847

(l) To use or consume the thing transferred in the production	848
of a newspaper for distribution to the public;	849

(m) To use tangible personal property to perform a service	850
listed in division (B)(3) of section 5739.01 of the Revised Code,	851
if the property is or is to be permanently transferred to the	852
consumer of the service as an integral part of the performance of	853
the service;	854

(n) To use or consume the thing transferred primarily in	855
producing tangible personal property for sale by farming,	856
agriculture, horticulture, or floriculture. Persons engaged in	857
rendering farming, agriculture, horticulture, or floriculture	858
services for others are deemed engaged primarily in farming,	859
agriculture, horticulture, or floriculture. This paragraph does	860
not exempt from "retail sale" or "sales at retail" the sale of	861
tangible personal property that is to be incorporated into a	862
structure or improvement to real property.	863

(o) To use or consume the thing transferred in acquiring,	864
formatting, editing, storing, and disseminating data or	865
information by electronic publishing.	866

As used in division (B)(42) of this section, "thing" includes	867
all transactions included in divisions (B)(3)(a), (b), and (e) of	868
section 5739.01 of the Revised Code.	869

(43) Sales conducted through a coin operated device that	870
activates vacuum equipment or equipment that dispenses water,	871
whether or not in combination with soap or other cleaning agents	872
or wax, to the consumer for the consumer's use on the premises in	873
washing, cleaning, or waxing a motor vehicle, provided no other	874
personal property or personal service is provided as part of the	875
transaction.	876

(44) Sales of replacement and modification parts for engines,	877
airframes, instruments, and interiors in, and paint for, aircraft	878
used primarily in a fractional aircraft ownership program, and	879
sales of services for the repair, modification, and maintenance of	880
such aircraft, and machinery, equipment, and supplies primarily	881
used to provide those services.	882

(45) Sales of telecommunications service that is used	883
directly and primarily to perform the functions of a call center.	884
As used in this division, "call center" means any physical	885
location where telephone calls are placed or received in high	886
volume for the purpose of making sales, marketing, customer	887
service, technical support, or other specialized business	888
activity, and that employs at least fifty individuals that engage	889
in call center activities on a full-time basis, or sufficient	890
individuals to fill fifty full-time equivalent positions.	891

(46) Sales by a telecommunications service vendor of 900	892
service to a subscriber. This division does not apply to	893
information services, as defined in division (FF) of section	894
5739.01 of the Revised Code.	895

(47) Sales of value-added non-voice data service. This	896
division does not apply to any similar service that is not	897
otherwise a telecommunications service.	898

(48)(a) Sales of machinery, equipment, and software to a	899
qualified direct selling entity for use in a warehouse or	900
distribution center primarily for storing, transporting, or	901
otherwise handling inventory that is held for sale to independent	902
salespersons who operate as direct sellers and that is held	903
primarily for distribution outside this state;	904

(b) As used in division (B)(48)(a) of this section:

905

(i) "Direct seller" means a person selling consumer products	906
to individuals for personal or household use and not from a fixed	907
retail location, including selling such product at in-home product	908
demonstrations, parties, and other one-on-one selling.	909

(ii) "Qualified direct selling entity" means an entity	910
selling to direct sellers at the time the entity enters into a tax	911
credit agreement with the tax credit authority pursuant to section	912
122.17 of the Revised Code, provided that the agreement was	913
entered into on or after January 1, 2007. Neither contingencies	914
relevant to the granting of, nor later developments with respect	915
to, the tax credit shall impair the status of the qualified direct	916
selling entity under division (B)(48) of this section after	917
execution of the tax credit agreement by the tax credit authority.	918

(c) Division (B)(48) of this section is limited to machinery,	919
equipment, and software first stored, used, or consumed in this	920
state within the period commencing June 24, 2008, and ending on	921
the date that is five years after that date.	922

(49) Sales of materials, parts, equipment, or engines used in	923
the repair or maintenance of aircraft or avionics systems of such	924
aircraft, and sales of repair, remodeling, replacement, or	925
maintenance services in this state performed on aircraft or on an	926
aircraft's avionics, engine, or component materials or parts. As	927
used in division (B)(49) of this section, "aircraft" means	928
aircraft of more than six thousand pounds maximum certified	929
takeoff weight or used exclusively in general aviation.	930

(50) Sales of full flight simulators that are used for pilot	931
or flight-crew training, sales of repair or replacement parts or	932
components, and sales of repair or maintenance services for such	933
full flight simulators. "Full flight simulator" means a replica of	934
a specific type, or make, model, and series of aircraft cockpit.	935
It includes the assemblage of equipment and computer programs	936
necessary to represent aircraft operations in ground and flight	937
conditions, a visual system providing an out-of-the-cockpit view,	938
and a system that provides cues at least equivalent to those of a	939
three-degree-of-freedom motion system, and has the full range of	940
capabilities of the systems installed in the device as described	941
in appendices A and B of part 60 of chapter 1 of title 14 of the	942
Code of Federal Regulations.	943

(51) Any transfer or lease of tangible personal property	944
~~between the state and a successful proposer in accordance with~~	945
~~sections 126.60 to 126.605 of the Revised Code, provided the~~	946
~~property is part of a project as defined in section 126.60 of the~~	947
~~Revised Code and the state retains ownership of the project or~~	948
~~part thereof that is being transferred or leased,~~ between the	949
state and JobsOhio in accordance with section 4313.02 of the	950
Revised Code.	951

(C) For the purpose of the proper administration of this	952
chapter, and to prevent the evasion of the tax, it is presumed	953
that all sales made in this state are subject to the tax until the	954
contrary is established.	955

(D) The levy of this tax on retail sales of recreation and	956
sports club service shall not prevent a municipal corporation from	957
levying any tax on recreation and sports club dues or on any	958
income generated by recreation and sports club dues.	959

(E) The tax collected by the vendor from the consumer under	960
this chapter is not part of the price, but is a tax collection for	961
the benefit of the state, and of counties levying an additional	962
sales tax pursuant to section 5739.021 or 5739.026 of the Revised	963
Code and of transit authorities levying an additional sales tax	964
pursuant to section 5739.023 of the Revised Code. Except for the	965
discount authorized under section 5739.12 of the Revised Code and	966
the effects of any rounding pursuant to section 5703.055 of the	967
Revised Code, no person other than the state or such a county or	968
transit authority shall derive any benefit from the collection or	969
payment of the tax levied by this section or section 5739.021,	970
5739.023, or 5739.026 of the Revised Code.	971

Sec. 5747.01. Except as otherwise expressly provided or	972
clearly appearing from the context, any term used in this chapter	973
that is not otherwise defined in this section has the same meaning	974
as when used in a comparable context in the laws of the United	975
States relating to federal income taxes or if not used in a	976
comparable context in those laws, has the same meaning as in	977
section 5733.40 of the Revised Code. Any reference in this chapter	978
to the Internal Revenue Code includes other laws of the United	979
States relating to federal income taxes.	980

As used in this chapter:

981

(A) "Adjusted gross income" or "Ohio adjusted gross income"	982
means federal adjusted gross income, as defined and used in the	983
Internal Revenue Code, adjusted as provided in this section:	984

(1) Add interest or dividends on obligations or securities of	985
any state or of any political subdivision or authority of any	986
state, other than this state and its subdivisions and authorities.	987

(2) Add interest or dividends on obligations of any	988
authority, commission, instrumentality, territory, or possession	989
of the United States to the extent that the interest or dividends	990
are exempt from federal income taxes but not from state income	991
taxes.	992

(3) Deduct interest or dividends on obligations of the United	993
States and its territories and possessions or of any authority,	994
commission, or instrumentality of the United States to the extent	995
that the interest or dividends are included in federal adjusted	996
gross income but exempt from state income taxes under the laws of	997
the United States.	998

(4) Deduct disability and survivor's benefits to the extent	999
included in federal adjusted gross income.	1000

(5) Deduct benefits under Title II of the Social Security Act	1001
and tier 1 railroad retirement benefits to the extent included in	1002
federal adjusted gross income under section 86 of the Internal	1003
Revenue Code.	1004

(6) In the case of a taxpayer who is a beneficiary of a trust	1005
that makes an accumulation distribution as defined in section 665	1006
of the Internal Revenue Code, add, for the beneficiary's taxable	1007
years beginning before 2002, the portion, if any, of such	1008
distribution that does not exceed the undistributed net income of	1009
the trust for the three taxable years preceding the taxable year	1010
in which the distribution is made to the extent that the portion	1011
was not included in the trust's taxable income for any of the	1012
trust's taxable years beginning in 2002 or thereafter.	1013
"Undistributed net income of a trust" means the taxable income of	1014
the trust increased by (a)(i) the additions to adjusted gross	1015
income required under division (A) of this section and (ii) the	1016
personal exemptions allowed to the trust pursuant to section	1017
642(b) of the Internal Revenue Code, and decreased by (b)(i) the	1018
deductions to adjusted gross income required under division (A) of	1019
this section, (ii) the amount of federal income taxes attributable	1020
to such income, and (iii) the amount of taxable income that has	1021
been included in the adjusted gross income of a beneficiary by	1022
reason of a prior accumulation distribution. Any undistributed net	1023
income included in the adjusted gross income of a beneficiary	1024
shall reduce the undistributed net income of the trust commencing	1025
with the earliest years of the accumulation period.	1026

(7) Deduct the amount of wages and salaries, if any, not	1027
otherwise allowable as a deduction but that would have been	1028
allowable as a deduction in computing federal adjusted gross	1029
income for the taxable year, had the targeted jobs credit allowed	1030
and determined under sections 38, 51, and 52 of the Internal	1031
Revenue Code not been in effect.	1032

(8) Deduct any interest or interest equivalent on public	1033
obligations and purchase obligations to the extent that the	1034
interest or interest equivalent is included in federal adjusted	1035
gross income.	1036

(9) Add any loss or deduct any gain resulting from the sale,	1037
exchange, or other disposition of public obligations to the extent	1038
that the loss has been deducted or the gain has been included in	1039
computing federal adjusted gross income.	1040

(10) Deduct or add amounts, as provided under section 5747.70	1041
of the Revised Code, related to contributions to variable college	1042
savings program accounts made or tuition units purchased pursuant	1043
to Chapter 3334. of the Revised Code.	1044

(11)(a) Deduct, to the extent not otherwise allowable as a	1045
deduction or exclusion in computing federal or Ohio adjusted gross	1046
income for the taxable year, the amount the taxpayer paid during	1047
the taxable year for medical care insurance and qualified	1048
long-term care insurance for the taxpayer, the taxpayer's spouse,	1049
and dependents. No deduction for medical care insurance under	1050
division (A)(11) of this section shall be allowed either to any	1051
taxpayer who is eligible to participate in any subsidized health	1052
plan maintained by any employer of the taxpayer or of the	1053
taxpayer's spouse, or to any taxpayer who is entitled to, or on	1054
application would be entitled to, benefits under part A of Title	1055
XVIII of the "Social Security Act," 49 Stat. 620 (1935), 42 U.S.C.	1056
301, as amended. For the purposes of division (A)(11)(a) of this	1057
section, "subsidized health plan" means a health plan for which	1058
the employer pays any portion of the plan's cost. The deduction	1059
allowed under division (A)(11)(a) of this section shall be the net	1060
of any related premium refunds, related premium reimbursements, or	1061
related insurance premium dividends received during the taxable	1062
year.	1063

(b) Deduct, to the extent not otherwise deducted or excluded	1064
in computing federal or Ohio adjusted gross income during the	1065
taxable year, the amount the taxpayer paid during the taxable	1066
year, not compensated for by any insurance or otherwise, for	1067
medical care of the taxpayer, the taxpayer's spouse, and	1068
dependents, to the extent the expenses exceed seven and one-half	1069
per cent of the taxpayer's federal adjusted gross income.	1070

(c) Deduct, to the extent not otherwise deducted or excluded	1071
in computing federal or Ohio adjusted gross income, any amount	1072
included in federal adjusted gross income under section 105 or not	1073
excluded under section 106 of the Internal Revenue Code solely	1074
because it relates to an accident and health plan for a person who	1075
otherwise would be a "qualifying relative" and thus a "dependent"	1076
under section 152 of the Internal Revenue Code but for the fact	1077
that the person fails to meet the income and support limitations	1078
under section 152(d)(1)(B) and (C) of the Internal Revenue Code.	1079

(d) For purposes of division (A)(11) of this section,	1080
"medical care" has the meaning given in section 213 of the	1081
Internal Revenue Code, subject to the special rules, limitations,	1082
and exclusions set forth therein, and "qualified long-term care"	1083
has the same meaning given in section 7702B(c) of the Internal	1084
Revenue Code. Solely for purposes of divisions (A)(11)(a) and (c)	1085
of this section, "dependent" includes a person who otherwise would	1086
be a "qualifying relative" and thus a "dependent" under section	1087
152 of the Internal Revenue Code but for the fact that the person	1088
fails to meet the income and support limitations under section	1089
152(d)(1)(B) and (C) of the Internal Revenue Code.	1090

(12)(a) Deduct any amount included in federal adjusted gross	1091
income solely because the amount represents a reimbursement or	1092
refund of expenses that in any year the taxpayer had deducted as	1093
an itemized deduction pursuant to section 63 of the Internal	1094
Revenue Code and applicable United States department of the	1095
treasury regulations. The deduction otherwise allowed under	1096
division (A)(12)(a) of this section shall be reduced to the extent	1097
the reimbursement is attributable to an amount the taxpayer	1098
deducted under this section in any taxable year.	1099

(b) Add any amount not otherwise included in Ohio adjusted	1100
gross income for any taxable year to the extent that the amount is	1101
attributable to the recovery during the taxable year of any amount	1102
deducted or excluded in computing federal or Ohio adjusted gross	1103
income in any taxable year.	1104

(13) Deduct any portion of the deduction described in section	1105
1341(a)(2) of the Internal Revenue Code, for repaying previously	1106
reported income received under a claim of right, that meets both	1107
of the following requirements:	1108

(a) It is allowable for repayment of an item that was	1109
included in the taxpayer's adjusted gross income for a prior	1110
taxable year and did not qualify for a credit under division (A)	1111
or (B) of section 5747.05 of the Revised Code for that year;	1112

(b) It does not otherwise reduce the taxpayer's adjusted	1113
gross income for the current or any other taxable year.	1114

(14) Deduct an amount equal to the deposits made to, and net	1115
investment earnings of, a medical savings account during the	1116
taxable year, in accordance with section 3924.66 of the Revised	1117
Code. The deduction allowed by division (A)(14) of this section	1118
does not apply to medical savings account deposits and earnings	1119
otherwise deducted or excluded for the current or any other	1120
taxable year from the taxpayer's federal adjusted gross income.	1121

(15)(a) Add an amount equal to the funds withdrawn from a	1122
medical savings account during the taxable year, and the net	1123
investment earnings on those funds, when the funds withdrawn were	1124
used for any purpose other than to reimburse an account holder	1125
for, or to pay, eligible medical expenses, in accordance with	1126
section 3924.66 of the Revised Code;	1127

(b) Add the amounts distributed from a medical savings	1128
account under division (A)(2) of section 3924.68 of the Revised	1129
Code during the taxable year.	1130

(16) Add any amount claimed as a credit under section	1131
5747.059 of the Revised Code to the extent that such amount	1132
satisfies either of the following:	1133

(a) The amount was deducted or excluded from the computation	1134
of the taxpayer's federal adjusted gross income as required to be	1135
reported for the taxpayer's taxable year under the Internal	1136
Revenue Code;	1137

(b) The amount resulted in a reduction of the taxpayer's	1138
federal adjusted gross income as required to be reported for any	1139
of the taxpayer's taxable years under the Internal Revenue Code.	1140

(17) Deduct the amount contributed by the taxpayer to an	1141
individual development account program established by a county	1142
department of job and family services pursuant to sections 329.11	1143
to 329.14 of the Revised Code for the purpose of matching funds	1144
deposited by program participants. On request of the tax	1145
commissioner, the taxpayer shall provide any information that, in	1146
the tax commissioner's opinion, is necessary to establish the	1147
amount deducted under division (A)(17) of this section.	1148

(18) Beginning in taxable year 2001 but not for any taxable	1149
year beginning after December 31, 2005, if the taxpayer is married	1150
and files a joint return and the combined federal adjusted gross	1151
income of the taxpayer and the taxpayer's spouse for the taxable	1152
year does not exceed one hundred thousand dollars, or if the	1153
taxpayer is single and has a federal adjusted gross income for the	1154
taxable year not exceeding fifty thousand dollars, deduct amounts	1155
paid during the taxable year for qualified tuition and fees paid	1156
to an eligible institution for the taxpayer, the taxpayer's	1157
spouse, or any dependent of the taxpayer, who is a resident of	1158
this state and is enrolled in or attending a program that	1159
culminates in a degree or diploma at an eligible institution. The	1160
deduction may be claimed only to the extent that qualified tuition	1161
and fees are not otherwise deducted or excluded for any taxable	1162
year from federal or Ohio adjusted gross income. The deduction may	1163
not be claimed for educational expenses for which the taxpayer	1164
claims a credit under section 5747.27 of the Revised Code.	1165

(19) Add any reimbursement received during the taxable year	1166
of any amount the taxpayer deducted under division (A)(18) of this	1167
section in any previous taxable year to the extent the amount is	1168
not otherwise included in Ohio adjusted gross income.	1169

(20)(a)(i) Add five-sixths of the amount of depreciation	1170
expense allowed by subsection (k) of section 168 of the Internal	1171
Revenue Code, including the taxpayer's proportionate or	1172
distributive share of the amount of depreciation expense allowed	1173
by that subsection to a pass-through entity in which the taxpayer	1174
has a direct or indirect ownership interest.	1175

(ii) Add five-sixths of the amount of qualifying section 179	1176
depreciation expense, including a person's proportionate or	1177
distributive share of the amount of qualifying section 179	1178
depreciation expense allowed to any pass-through entity in which	1179
the person has a direct or indirect ownership. For the purposes of	1180
this division, "qualifying section 179 depreciation expense" means	1181
the difference between (I) the amount of depreciation expense	1182
directly or indirectly allowed to the taxpayer under section 179	1183
of the Internal Revenue Code, and (II) the amount of depreciation	1184
expense directly or indirectly allowed to the taxpayer under	1185
section 179 of the Internal Revenue Code as that section existed	1186
on December 31, 2002.	1187

The tax commissioner, under procedures established by the	1188
commissioner, may waive the add-backs related to a pass-through	1189
entity if the taxpayer owns, directly or indirectly, less than	1190
five per cent of the pass-through entity.	1191

(b) Nothing in division (A)(20) of this section shall be	1192
construed to adjust or modify the adjusted basis of any asset.	1193

(c) To the extent the add-back required under division	1194
(A)(20)(a) of this section is attributable to property generating	1195
nonbusiness income or loss allocated under section 5747.20 of the	1196
Revised Code, the add-back shall be sitused to the same location	1197
as the nonbusiness income or loss generated by the property for	1198
the purpose of determining the credit under division (A) of	1199
section 5747.05 of the Revised Code. Otherwise, the add-back shall	1200
be apportioned, subject to one or more of the four alternative	1201
methods of apportionment enumerated in section 5747.21 of the	1202
Revised Code.	1203

(d) For the purposes of division (A) of this section, net	1204
operating loss carryback and carryforward shall not include	1205
five-sixths of the allowance of any net operating loss deduction	1206
carryback or carryforward to the taxable year to the extent such	1207
loss resulted from depreciation allowed by section 168(k) of the	1208
Internal Revenue Code and by the qualifying section 179	1209
depreciation expense amount.	1210

(21)(a) If the taxpayer was required to add an amount under	1211
division (A)(20)(a) of this section for a taxable year, deduct	1212
one-fifth of the amount so added for each of the five succeeding	1213
taxable years.	1214

(b) If the amount deducted under division (A)(21)(a) of this	1215
section is attributable to an add-back allocated under division	1216
(A)(20)(c) of this section, the amount deducted shall be sitused	1217
to the same location. Otherwise, the add-back shall be apportioned	1218
using the apportionment factors for the taxable year in which the	1219
deduction is taken, subject to one or more of the four alternative	1220
methods of apportionment enumerated in section 5747.21 of the	1221
Revised Code.	1222

(c) No deduction is available under division (A)(21)(a) of	1223
this section with regard to any depreciation allowed by section	1224
168(k) of the Internal Revenue Code and by the qualifying section	1225
179 depreciation expense amount to the extent that such	1226
depreciation resulted in or increased a federal net operating loss	1227
carryback or carryforward to a taxable year to which division	1228
(A)(20)(d) of this section does not apply.	1229

(22) Deduct, to the extent not otherwise deducted or excluded	1230
in computing federal or Ohio adjusted gross income for the taxable	1231
year, the amount the taxpayer received during the taxable year as	1232
reimbursement for life insurance premiums under section 5919.31 of	1233
the Revised Code.	1234

(23) Deduct, to the extent not otherwise deducted or excluded	1235
in computing federal or Ohio adjusted gross income for the taxable	1236
year, the amount the taxpayer received during the taxable year as	1237
a death benefit paid by the adjutant general under section 5919.33	1238
of the Revised Code.	1239

(24) Deduct, to the extent included in federal adjusted gross	1240
income and not otherwise allowable as a deduction or exclusion in	1241
computing federal or Ohio adjusted gross income for the taxable	1242
year, military pay and allowances received by the taxpayer during	1243
the taxable year for active duty service in the United States	1244
army, air force, navy, marine corps, or coast guard or reserve	1245
components thereof or the national guard. The deduction may not be	1246
claimed for military pay and allowances received by the taxpayer	1247
while the taxpayer is stationed in this state.	1248

(25) Deduct, to the extent not otherwise allowable as a	1249
deduction or exclusion in computing federal or Ohio adjusted gross	1250
income for the taxable year and not otherwise compensated for by	1251
any other source, the amount of qualified organ donation expenses	1252
incurred by the taxpayer during the taxable year, not to exceed	1253
ten thousand dollars. A taxpayer may deduct qualified organ	1254
donation expenses only once for all taxable years beginning with	1255
taxable years beginning in 2007.	1256

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

1257

(a) "Human organ" means all or any portion of a human liver,	1258
pancreas, kidney, intestine, or lung, and any portion of human	1259
bone marrow.	1260

(b) "Qualified organ donation expenses" means travel	1261
expenses, lodging expenses, and wages and salary forgone by a	1262
taxpayer in connection with the taxpayer's donation, while living,	1263
of one or more of the taxpayer's human organs to another human	1264
being.	1265

(26) Deduct, to the extent not otherwise deducted or excluded	1266
in computing federal or Ohio adjusted gross income for the taxable	1267
year, amounts received by the taxpayer as retired military	1268
personnel pay for service in the United States army, navy, air	1269
force, coast guard, or marine corps or reserve components thereof,	1270
or the national guard, or received by the surviving spouse or	1271
former spouse of such a taxpayer under the survivor benefit plan	1272
on account of such a taxpayer's death. If the taxpayer receives	1273
income on account of retirement paid under the federal civil	1274
service retirement system or federal employees retirement system,	1275
or under any successor retirement program enacted by the congress	1276
of the United States that is established and maintained for	1277
retired employees of the United States government, and such	1278
retirement income is based, in whole or in part, on credit for the	1279
taxpayer's military service, the deduction allowed under this	1280
division shall include only that portion of such retirement income	1281
that is attributable to the taxpayer's military service, to the	1282
extent that portion of such retirement income is otherwise	1283
included in federal adjusted gross income and is not otherwise	1284
deducted under this section. Any amount deducted under division	1285
(A)(26) of this section is not included in a taxpayer's adjusted	1286
gross income for the purposes of section 5747.055 of the Revised	1287
Code. No amount may be deducted under division (A)(26) of this	1288
section on the basis of which a credit was claimed under section	1289
5747.055 of the Revised Code.	1290

(27) Deduct, to the extent not otherwise deducted or excluded	1291
in computing federal or Ohio adjusted gross income for the taxable	1292
year, the amount the taxpayer received during the taxable year	1293
from the military injury relief fund created in section 5101.98 of	1294
the Revised Code.	1295

(28) Deduct, to the extent not otherwise deducted or excluded	1296
in computing federal or Ohio adjusted gross income for the taxable	1297
year, the amount the taxpayer received as a veterans bonus during	1298
the taxable year from the Ohio department of veterans services as	1299
authorized by Section 2r of Article VIII, Ohio Constitution.	1300

(29) Deduct, to the extent not otherwise deducted or excluded	1301
in computing federal or Ohio adjusted gross income for the taxable	1302
year, any loss from wagering transactions that is allowed as an	1303
itemized deduction under section 165 of the Internal Revenue Code	1304
and that the taxpayer deducted in computing federal taxable	1305
income.	1306

(30) Deduct, to the extent not otherwise deducted or excluded	1307
in computing federal or Ohio adjusted gross income for the taxable	1308
year, any income ~~derived from providing public services under a~~	1309
~~contract through a project owned by the state, as described in~~	1310
~~section 126.604 of the Revised Code or~~ derived from a transfer	1311
agreement or from the enterprise transferred under that agreement	1312
under section 4313.02 of the Revised Code.	1313

(31) Deduct, to the extent not otherwise deducted or excluded	1314
in computing federal or Ohio adjusted gross income for the taxable	1315
year, Ohio college opportunity or federal Pell grant amounts	1316
received by the taxpayer or the taxpayer's spouse or dependent	1317
pursuant to section 3333.122 of the Revised Code or 20 U.S.C.	1318
1070a, et seq., and used to pay room or board furnished by the	1319
educational institution for which the grant was awarded at the	1320
institution's facilities, including meal plans administered by the	1321
institution. For the purposes of this division, receipt of a grant	1322
includes the distribution of a grant directly to an educational	1323
institution and the crediting of the grant to the enrollee's	1324
account with the institution.	1325

(B) "Business income" means income, including gain or loss,	1326
arising from transactions, activities, and sources in the regular	1327
course of a trade or business and includes income, gain, or loss	1328
from real property, tangible property, and intangible property if	1329
the acquisition, rental, management, and disposition of the	1330
property constitute integral parts of the regular course of a	1331
trade or business operation. "Business income" includes income,	1332
including gain or loss, from a partial or complete liquidation of	1333
a business, including, but not limited to, gain or loss from the	1334
sale or other disposition of goodwill.	1335

(C) "Nonbusiness income" means all income other than business	1336
income and may include, but is not limited to, compensation, rents	1337
and royalties from real or tangible personal property, capital	1338
gains, interest, dividends and distributions, patent or copyright	1339
royalties, or lottery winnings, prizes, and awards.	1340

(D) "Compensation" means any form of remuneration paid to an	1341
employee for personal services.	1342

(E) "Fiduciary" means a guardian, trustee, executor,	1343
administrator, receiver, conservator, or any other person acting	1344
in any fiduciary capacity for any individual, trust, or estate.	1345

(F) "Fiscal year" means an accounting period of twelve months	1346
ending on the last day of any month other than December.	1347

(G) "Individual" means any natural person.

1348

(H) "Internal Revenue Code" means the "Internal Revenue Code	1349
of 1986," 100 Stat. 2085, 26 U.S.C.A. 1, as amended.	1350

(I) "Resident" means any of the following, provided that	1351
division (I)(3) of this section applies only to taxable years of a	1352
trust beginning in 2002 or thereafter:	1353

(1) An individual who is domiciled in this state, subject to	1354
section 5747.24 of the Revised Code;	1355

(2) The estate of a decedent who at the time of death was	1356
domiciled in this state. The domicile tests of section 5747.24 of	1357
the Revised Code are not controlling for purposes of division	1358
(I)(2) of this section.	1359

(3) A trust that, in whole or part, resides in this state. If	1360
only part of a trust resides in this state, the trust is a	1361
resident only with respect to that part.	1362

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

1363

(a) A trust resides in this state for the trust's current	1364
taxable year to the extent, as described in division (I)(3)(d) of	1365
this section, that the trust consists directly or indirectly, in	1366
whole or in part, of assets, net of any related liabilities, that	1367
were transferred, or caused to be transferred, directly or	1368
indirectly, to the trust by any of the following:	1369

(i) A person, a court, or a governmental entity or	1370
instrumentality on account of the death of a decedent, but only if	1371
the trust is described in division (I)(3)(e)(i) or (ii) of this	1372
section;	1373

(ii) A person who was domiciled in this state for the	1374
purposes of this chapter when the person directly or indirectly	1375
transferred assets to an irrevocable trust, but only if at least	1376
one of the trust's qualifying beneficiaries is domiciled in this	1377
state for the purposes of this chapter during all or some portion	1378
of the trust's current taxable year;	1379

(iii) A person who was domiciled in this state for the	1380
purposes of this chapter when the trust document or instrument or	1381
part of the trust document or instrument became irrevocable, but	1382
only if at least one of the trust's qualifying beneficiaries is a	1383
resident domiciled in this state for the purposes of this chapter	1384
during all or some portion of the trust's current taxable year. If	1385
a trust document or instrument became irrevocable upon the death	1386
of a person who at the time of death was domiciled in this state	1387
for purposes of this chapter, that person is a person described in	1388
division (I)(3)(a)(iii) of this section.	1389

(b) A trust is irrevocable to the extent that the transferor	1390
is not considered to be the owner of the net assets of the trust	1391
under sections 671 to 678 of the Internal Revenue Code.	1392

(c) With respect to a trust other than a charitable lead	1393
trust, "qualifying beneficiary" has the same meaning as "potential	1394
current beneficiary" as defined in section 1361(e)(2) of the	1395
Internal Revenue Code, and with respect to a charitable lead trust	1396
"qualifying beneficiary" is any current, future, or contingent	1397
beneficiary, but with respect to any trust "qualifying	1398
beneficiary" excludes a person or a governmental entity or	1399
instrumentality to any of which a contribution would qualify for	1400
the charitable deduction under section 170 of the Internal Revenue	1401
Code.	1402

(d) For the purposes of division (I)(3)(a) of this section,	1403
the extent to which a trust consists directly or indirectly, in	1404
whole or in part, of assets, net of any related liabilities, that	1405
were transferred directly or indirectly, in whole or part, to the	1406
trust by any of the sources enumerated in that division shall be	1407
ascertained by multiplying the fair market value of the trust's	1408
assets, net of related liabilities, by the qualifying ratio, which	1409
shall be computed as follows:	1410

(i) The first time the trust receives assets, the numerator	1411
of the qualifying ratio is the fair market value of those assets	1412
at that time, net of any related liabilities, from sources	1413
enumerated in division (I)(3)(a) of this section. The denominator	1414
of the qualifying ratio is the fair market value of all the	1415
trust's assets at that time, net of any related liabilities.	1416

(ii) Each subsequent time the trust receives assets, a	1417
revised qualifying ratio shall be computed. The numerator of the	1418
revised qualifying ratio is the sum of (1) the fair market value	1419
of the trust's assets immediately prior to the subsequent	1420
transfer, net of any related liabilities, multiplied by the	1421
qualifying ratio last computed without regard to the subsequent	1422
transfer, and (2) the fair market value of the subsequently	1423
transferred assets at the time transferred, net of any related	1424
liabilities, from sources enumerated in division (I)(3)(a) of this	1425
section. The denominator of the revised qualifying ratio is the	1426
fair market value of all the trust's assets immediately after the	1427
subsequent transfer, net of any related liabilities.	1428

(iii) Whether a transfer to the trust is by or from any of	1429
the sources enumerated in division (I)(3)(a) of this section shall	1430
be ascertained without regard to the domicile of the trust's	1431
beneficiaries.	1432

(e) For the purposes of division (I)(3)(a)(i) of this	1433
section:	1434

(i) A trust is described in division (I)(3)(e)(i) of this	1435
section if the trust is a testamentary trust and the testator of	1436
that testamentary trust was domiciled in this state at the time of	1437
the testator's death for purposes of the taxes levied under	1438
Chapter 5731. of the Revised Code.	1439

(ii) A trust is described in division (I)(3)(e)(ii) of this	1440
section if the transfer is a qualifying transfer described in any	1441
of divisions (I)(3)(f)(i) to (vi) of this section, the trust is an	1442
irrevocable inter vivos trust, and at least one of the trust's	1443
qualifying beneficiaries is domiciled in this state for purposes	1444
of this chapter during all or some portion of the trust's current	1445
taxable year.	1446

(f) For the purposes of division (I)(3)(e)(ii) of this	1447
section, a "qualifying transfer" is a transfer of assets, net of	1448
any related liabilities, directly or indirectly to a trust, if the	1449
transfer is described in any of the following:	1450

(i) The transfer is made to a trust, created by the decedent	1451
before the decedent's death and while the decedent was domiciled	1452
in this state for the purposes of this chapter, and, prior to the	1453
death of the decedent, the trust became irrevocable while the	1454
decedent was domiciled in this state for the purposes of this	1455
chapter.	1456

(ii) The transfer is made to a trust to which the decedent,	1457
prior to the decedent's death, had directly or indirectly	1458
transferred assets, net of any related liabilities, while the	1459
decedent was domiciled in this state for the purposes of this	1460
chapter, and prior to the death of the decedent the trust became	1461
irrevocable while the decedent was domiciled in this state for the	1462
purposes of this chapter.	1463

(iii) The transfer is made on account of a contractual	1464
relationship existing directly or indirectly between the	1465
transferor and either the decedent or the estate of the decedent	1466
at any time prior to the date of the decedent's death, and the	1467
decedent was domiciled in this state at the time of death for	1468
purposes of the taxes levied under Chapter 5731. of the Revised	1469
Code.	1470

(iv) The transfer is made to a trust on account of a	1471
contractual relationship existing directly or indirectly between	1472
the transferor and another person who at the time of the	1473
decedent's death was domiciled in this state for purposes of this	1474
chapter.	1475

(v) The transfer is made to a trust on account of the will of	1476
a testator who was domiciled in this state at the time of the	1477
testator's death for purposes of the taxes levied under Chapter	1478
5731. of the Revised Code.	1479

(vi) The transfer is made to a trust created by or caused to	1480
be created by a court, and the trust was directly or indirectly	1481
created in connection with or as a result of the death of an	1482
individual who, for purposes of the taxes levied under Chapter	1483
5731. of the Revised Code, was domiciled in this state at the time	1484
of the individual's death.	1485

(g) The tax commissioner may adopt rules to ascertain the	1486
part of a trust residing in this state.	1487

(J) "Nonresident" means an individual or estate that is not a	1488
resident. An individual who is a resident for only part of a	1489
taxable year is a nonresident for the remainder of that taxable	1490
year.	1491

(K) "Pass-through entity" has the same meaning as in section	1492
5733.04 of the Revised Code.	1493

(L) "Return" means the notifications and reports required to	1494
be filed pursuant to this chapter for the purpose of reporting the	1495
tax due and includes declarations of estimated tax when so	1496
required.	1497

(M) "Taxable year" means the calendar year or the taxpayer's	1498
fiscal year ending during the calendar year, or fractional part	1499
thereof, upon which the adjusted gross income is calculated	1500
pursuant to this chapter.	1501

(N) "Taxpayer" means any person subject to the tax imposed by	1502
section 5747.02 of the Revised Code or any pass-through entity	1503
that makes the election under division (D) of section 5747.08 of	1504
the Revised Code.	1505

(O) "Dependents" means dependents as defined in the Internal	1506
Revenue Code and as claimed in the taxpayer's federal income tax	1507
return for the taxable year or which the taxpayer would have been	1508
permitted to claim had the taxpayer filed a federal income tax	1509
return.	1510

(P) "Principal county of employment" means, in the case of a	1511
nonresident, the county within the state in which a taxpayer	1512
performs services for an employer or, if those services are	1513
performed in more than one county, the county in which the major	1514
portion of the services are performed.	1515

(Q) As used in sections 5747.50 to 5747.55 of the Revised	1516
Code:	1517

(1) "Subdivision" means any county, municipal corporation,	1518
park district, or township.	1519

(2) "Essential local government purposes" includes all	1520
functions that any subdivision is required by general law to	1521
exercise, including like functions that are exercised under a	1522
charter adopted pursuant to the Ohio Constitution.	1523

(R) "Overpayment" means any amount already paid that exceeds	1524
the figure determined to be the correct amount of the tax.	1525

(S) "Taxable income" or "Ohio taxable income" applies only to	1526
estates and trusts, and means federal taxable income, as defined	1527
and used in the Internal Revenue Code, adjusted as follows:	1528

(1) Add interest or dividends, net of ordinary, necessary,	1529
and reasonable expenses not deducted in computing federal taxable	1530
income, on obligations or securities of any state or of any	1531
political subdivision or authority of any state, other than this	1532
state and its subdivisions and authorities, but only to the extent	1533
that such net amount is not otherwise includible in Ohio taxable	1534
income and is described in either division (S)(1)(a) or (b) of	1535
this section:	1536

(a) The net amount is not attributable to the S portion of an	1537
electing small business trust and has not been distributed to	1538
beneficiaries for the taxable year;	1539

(b) The net amount is attributable to the S portion of an	1540
electing small business trust for the taxable year.	1541

(2) Add interest or dividends, net of ordinary, necessary,	1542
and reasonable expenses not deducted in computing federal taxable	1543
income, on obligations of any authority, commission,	1544
instrumentality, territory, or possession of the United States to	1545
the extent that the interest or dividends are exempt from federal	1546
income taxes but not from state income taxes, but only to the	1547
extent that such net amount is not otherwise includible in Ohio	1548
taxable income and is described in either division (S)(1)(a) or	1549
(b) of this section;	1550

(3) Add the amount of personal exemption allowed to the	1551
estate pursuant to section 642(b) of the Internal Revenue Code;	1552

(4) Deduct interest or dividends, net of related expenses	1553
deducted in computing federal taxable income, on obligations of	1554
the United States and its territories and possessions or of any	1555
authority, commission, or instrumentality of the United States to	1556
the extent that the interest or dividends are exempt from state	1557
taxes under the laws of the United States, but only to the extent	1558
that such amount is included in federal taxable income and is	1559
described in either division (S)(1)(a) or (b) of this section;	1560

(5) Deduct the amount of wages and salaries, if any, not	1561
otherwise allowable as a deduction but that would have been	1562
allowable as a deduction in computing federal taxable income for	1563
the taxable year, had the targeted jobs credit allowed under	1564
sections 38, 51, and 52 of the Internal Revenue Code not been in	1565
effect, but only to the extent such amount relates either to	1566
income included in federal taxable income for the taxable year or	1567
to income of the S portion of an electing small business trust for	1568
the taxable year;	1569

(6) Deduct any interest or interest equivalent, net of	1570
related expenses deducted in computing federal taxable income, on	1571
public obligations and purchase obligations, but only to the	1572
extent that such net amount relates either to income included in	1573
federal taxable income for the taxable year or to income of the S	1574
portion of an electing small business trust for the taxable year;	1575

(7) Add any loss or deduct any gain resulting from sale,	1576
exchange, or other disposition of public obligations to the extent	1577
that such loss has been deducted or such gain has been included in	1578
computing either federal taxable income or income of the S portion	1579
of an electing small business trust for the taxable year;	1580

(8) Except in the case of the final return of an estate, add	1581
any amount deducted by the taxpayer on both its Ohio estate tax	1582
return pursuant to section 5731.14 of the Revised Code, and on its	1583
federal income tax return in determining federal taxable income;	1584

(9)(a) Deduct any amount included in federal taxable income	1585
solely because the amount represents a reimbursement or refund of	1586
expenses that in a previous year the decedent had deducted as an	1587
itemized deduction pursuant to section 63 of the Internal Revenue	1588
Code and applicable treasury regulations. The deduction otherwise	1589
allowed under division (S)(9)(a) of this section shall be reduced	1590
to the extent the reimbursement is attributable to an amount the	1591
taxpayer or decedent deducted under this section in any taxable	1592
year.	1593

(b) Add any amount not otherwise included in Ohio taxable	1594
income for any taxable year to the extent that the amount is	1595
attributable to the recovery during the taxable year of any amount	1596
deducted or excluded in computing federal or Ohio taxable income	1597
in any taxable year, but only to the extent such amount has not	1598
been distributed to beneficiaries for the taxable year.	1599

(10) Deduct any portion of the deduction described in section	1600
1341(a)(2) of the Internal Revenue Code, for repaying previously	1601
reported income received under a claim of right, that meets both	1602
of the following requirements:	1603

(a) It is allowable for repayment of an item that was	1604
included in the taxpayer's taxable income or the decedent's	1605
adjusted gross income for a prior taxable year and did not qualify	1606
for a credit under division (A) or (B) of section 5747.05 of the	1607
Revised Code for that year.	1608

(b) It does not otherwise reduce the taxpayer's taxable	1609
income or the decedent's adjusted gross income for the current or	1610
any other taxable year.	1611

(11) Add any amount claimed as a credit under section	1612
5747.059 of the Revised Code to the extent that the amount	1613
satisfies either of the following:	1614

(a) The amount was deducted or excluded from the computation	1615
of the taxpayer's federal taxable income as required to be	1616
reported for the taxpayer's taxable year under the Internal	1617
Revenue Code;	1618

(b) The amount resulted in a reduction in the taxpayer's	1619
federal taxable income as required to be reported for any of the	1620
taxpayer's taxable years under the Internal Revenue Code.	1621

(12) Deduct any amount, net of related expenses deducted in	1622
computing federal taxable income, that a trust is required to	1623
report as farm income on its federal income tax return, but only	1624
if the assets of the trust include at least ten acres of land	1625
satisfying the definition of "land devoted exclusively to	1626
agricultural use" under section 5713.30 of the Revised Code,	1627
regardless of whether the land is valued for tax purposes as such	1628
land under sections 5713.30 to 5713.38 of the Revised Code. If the	1629
trust is a pass-through entity investor, section 5747.231 of the	1630
Revised Code applies in ascertaining if the trust is eligible to	1631
claim the deduction provided by division (S)(12) of this section	1632
in connection with the pass-through entity's farm income.	1633

Except for farm income attributable to the S portion of an	1634
electing small business trust, the deduction provided by division	1635
(S)(12) of this section is allowed only to the extent that the	1636
trust has not distributed such farm income. Division (S)(12) of	1637
this section applies only to taxable years of a trust beginning in	1638
2002 or thereafter.	1639

(13) Add the net amount of income described in section 641(c)	1640
of the Internal Revenue Code to the extent that amount is not	1641
included in federal taxable income.	1642

(14) Add or deduct the amount the taxpayer would be required	1643
to add or deduct under division (A)(20) or (21) of this section if	1644
the taxpayer's Ohio taxable income were computed in the same	1645
manner as an individual's Ohio adjusted gross income is computed	1646
under this section. In the case of a trust, division (S)(14) of	1647
this section applies only to any of the trust's taxable years	1648
beginning in 2002 or thereafter.	1649

(T) "School district income" and "school district income tax"	1650
have the same meanings as in section 5748.01 of the Revised Code.	1651

(U) As used in divisions (A)(8), (A)(9), (S)(6), and (S)(7)	1652
of this section, "public obligations," "purchase obligations," and	1653
"interest or interest equivalent" have the same meanings as in	1654
section 5709.76 of the Revised Code.	1655

(V) "Limited liability company" means any limited liability	1656
company formed under Chapter 1705. of the Revised Code or under	1657
the laws of any other state.	1658

(W) "Pass-through entity investor" means any person who,	1659
during any portion of a taxable year of a pass-through entity, is	1660
a partner, member, shareholder, or equity investor in that	1661
pass-through entity.	1662

(X) "Banking day" has the same meaning as in section 1304.01	1663
of the Revised Code.	1664

(Y) "Month" means a calendar month.

1665

(Z) "Quarter" means the first three months, the second three	1666
months, the third three months, or the last three months of the	1667
taxpayer's taxable year.	1668

(AA)(1) "Eligible institution" means a state university or	1669
state institution of higher education as defined in section	1670
3345.011 of the Revised Code, or a private, nonprofit college,	1671
university, or other post-secondary institution located in this	1672
state that possesses a certificate of authorization issued by the	1673
Ohio board of regents pursuant to Chapter 1713. of the Revised	1674
Code or a certificate of registration issued by the state board of	1675
career colleges and schools under Chapter 3332. of the Revised	1676
Code.	1677

(2) "Qualified tuition and fees" means tuition and fees	1678
imposed by an eligible institution as a condition of enrollment or	1679
attendance, not exceeding two thousand five hundred dollars in	1680
each of the individual's first two years of post-secondary	1681
education. If the individual is a part-time student, "qualified	1682
tuition and fees" includes tuition and fees paid for the academic	1683
equivalent of the first two years of post-secondary education	1684
during a maximum of five taxable years, not exceeding a total of	1685
five thousand dollars. "Qualified tuition and fees" does not	1686
include:	1687

(a) Expenses for any course or activity involving sports,	1688
games, or hobbies unless the course or activity is part of the	1689
individual's degree or diploma program;	1690

(b) The cost of books, room and board, student activity fees,	1691
athletic fees, insurance expenses, or other expenses unrelated to	1692
the individual's academic course of instruction;	1693

(c) Tuition, fees, or other expenses paid or reimbursed	1694
through an employer, scholarship, grant in aid, or other	1695
educational benefit program.	1696

(BB)(1) "Modified business income" means the business income	1697
included in a trust's Ohio taxable income after such taxable	1698
income is first reduced by the qualifying trust amount, if any.	1699

(2) "Qualifying trust amount" of a trust means capital gains	1700
and losses from the sale, exchange, or other disposition of equity	1701
or ownership interests in, or debt obligations of, a qualifying	1702
investee to the extent included in the trust's Ohio taxable	1703
income, but only if the following requirements are satisfied:	1704

(a) The book value of the qualifying investee's physical	1705
assets in this state and everywhere, as of the last day of the	1706
qualifying investee's fiscal or calendar year ending immediately	1707
prior to the date on which the trust recognizes the gain or loss,	1708
is available to the trust.	1709

(b) The requirements of section 5747.011 of the Revised Code	1710
are satisfied for the trust's taxable year in which the trust	1711
recognizes the gain or loss.	1712

Any gain or loss that is not a qualifying trust amount is	1713
modified business income, qualifying investment income, or	1714
modified nonbusiness income, as the case may be.	1715

(3) "Modified nonbusiness income" means a trust's Ohio	1716
taxable income other than modified business income, other than the	1717
qualifying trust amount, and other than qualifying investment	1718
income, as defined in section 5747.012 of the Revised Code, to the	1719
extent such qualifying investment income is not otherwise part of	1720
modified business income.	1721

(4) "Modified Ohio taxable income" applies only to trusts,	1722
and means the sum of the amounts described in divisions (BB)(4)(a)	1723
to (c) of this section:	1724

(a) The fraction, calculated under section 5747.013, and	1725
applying section 5747.231 of the Revised Code, multiplied by the	1726
sum of the following amounts:	1727

(i) The trust's modified business income;

1728

(ii) The trust's qualifying investment income, as defined in	1729
section 5747.012 of the Revised Code, but only to the extent the	1730
qualifying investment income does not otherwise constitute	1731
modified business income and does not otherwise constitute a	1732
qualifying trust amount.	1733

(b) The qualifying trust amount multiplied by a fraction, the	1734
numerator of which is the sum of the book value of the qualifying	1735
investee's physical assets in this state on the last day of the	1736
qualifying investee's fiscal or calendar year ending immediately	1737
prior to the day on which the trust recognizes the qualifying	1738
trust amount, and the denominator of which is the sum of the book	1739
value of the qualifying investee's total physical assets	1740
everywhere on the last day of the qualifying investee's fiscal or	1741
calendar year ending immediately prior to the day on which the	1742
trust recognizes the qualifying trust amount. If, for a taxable	1743
year, the trust recognizes a qualifying trust amount with respect	1744
to more than one qualifying investee, the amount described in	1745
division (BB)(4)(b) of this section shall equal the sum of the	1746
products so computed for each such qualifying investee.	1747

(c)(i) With respect to a trust or portion of a trust that is	1748
a resident as ascertained in accordance with division (I)(3)(d) of	1749
this section, its modified nonbusiness income.	1750

(ii) With respect to a trust or portion of a trust that is	1751
not a resident as ascertained in accordance with division	1752
(I)(3)(d) of this section, the amount of its modified nonbusiness	1753
income satisfying the descriptions in divisions (B)(2) to (5) of	1754
section 5747.20 of the Revised Code, except as otherwise provided	1755
in division (BB)(4)(c)(ii) of this section. With respect to a	1756
trust or portion of a trust that is not a resident as ascertained	1757
in accordance with division (I)(3)(d) of this section, the trust's	1758
portion of modified nonbusiness income recognized from the sale,	1759
exchange, or other disposition of a debt interest in or equity	1760
interest in a section 5747.212 entity, as defined in section	1761
5747.212 of the Revised Code, without regard to division (A) of	1762
that section, shall not be allocated to this state in accordance	1763
with section 5747.20 of the Revised Code but shall be apportioned	1764
to this state in accordance with division (B) of section 5747.212	1765
of the Revised Code without regard to division (A) of that	1766
section.	1767

If the allocation and apportionment of a trust's income under	1768
divisions (BB)(4)(a) and (c) of this section do not fairly	1769
represent the modified Ohio taxable income of the trust in this	1770
state, the alternative methods described in division (C) of	1771
section 5747.21 of the Revised Code may be applied in the manner	1772
and to the same extent provided in that section.	1773

(5)(a) Except as set forth in division (BB)(5)(b) of this	1774
section, "qualifying investee" means a person in which a trust has	1775
an equity or ownership interest, or a person or unit of government	1776
the debt obligations of either of which are owned by a trust. For	1777
the purposes of division (BB)(2)(a) of this section and for the	1778
purpose of computing the fraction described in division (BB)(4)(b)	1779
of this section, all of the following apply:	1780

(i) If the qualifying investee is a member of a qualifying	1781
controlled group on the last day of the qualifying investee's	1782
fiscal or calendar year ending immediately prior to the date on	1783
which the trust recognizes the gain or loss, then "qualifying	1784
investee" includes all persons in the qualifying controlled group	1785
on such last day.	1786

(ii) If the qualifying investee, or if the qualifying	1787
investee and any members of the qualifying controlled group of	1788
which the qualifying investee is a member on the last day of the	1789
qualifying investee's fiscal or calendar year ending immediately	1790
prior to the date on which the trust recognizes the gain or loss,	1791
separately or cumulatively own, directly or indirectly, on the	1792
last day of the qualifying investee's fiscal or calendar year	1793
ending immediately prior to the date on which the trust recognizes	1794
the qualifying trust amount, more than fifty per cent of the	1795
equity of a pass-through entity, then the qualifying investee and	1796
the other members are deemed to own the proportionate share of the	1797
pass-through entity's physical assets which the pass-through	1798
entity directly or indirectly owns on the last day of the	1799
pass-through entity's calendar or fiscal year ending within or	1800
with the last day of the qualifying investee's fiscal or calendar	1801
year ending immediately prior to the date on which the trust	1802
recognizes the qualifying trust amount.	1803

(iii) For the purposes of division (BB)(5)(a)(iii) of this	1804
section, "upper level pass-through entity" means a pass-through	1805
entity directly or indirectly owning any equity of another	1806
pass-through entity, and "lower level pass-through entity" means	1807
that other pass-through entity.	1808

An upper level pass-through entity, whether or not it is also	1809
a qualifying investee, is deemed to own, on the last day of the	1810
upper level pass-through entity's calendar or fiscal year, the	1811
proportionate share of the lower level pass-through entity's	1812
physical assets that the lower level pass-through entity directly	1813
or indirectly owns on the last day of the lower level pass-through	1814
entity's calendar or fiscal year ending within or with the last	1815
day of the upper level pass-through entity's fiscal or calendar	1816
year. If the upper level pass-through entity directly and	1817
indirectly owns less than fifty per cent of the equity of the	1818
lower level pass-through entity on each day of the upper level	1819
pass-through entity's calendar or fiscal year in which or with	1820
which ends the calendar or fiscal year of the lower level	1821
pass-through entity and if, based upon clear and convincing	1822
evidence, complete information about the location and cost of the	1823
physical assets of the lower pass-through entity is not available	1824
to the upper level pass-through entity, then solely for purposes	1825
of ascertaining if a gain or loss constitutes a qualifying trust	1826
amount, the upper level pass-through entity shall be deemed as	1827
owning no equity of the lower level pass-through entity for each	1828
day during the upper level pass-through entity's calendar or	1829
fiscal year in which or with which ends the lower level	1830
pass-through entity's calendar or fiscal year. Nothing in division	1831
(BB)(5)(a)(iii) of this section shall be construed to provide for	1832
any deduction or exclusion in computing any trust's Ohio taxable	1833
income.	1834

(b) With respect to a trust that is not a resident for the	1835
taxable year and with respect to a part of a trust that is not a	1836
resident for the taxable year, "qualifying investee" for that	1837
taxable year does not include a C corporation if both of the	1838
following apply:	1839

(i) During the taxable year the trust or part of the trust	1840
recognizes a gain or loss from the sale, exchange, or other	1841
disposition of equity or ownership interests in, or debt	1842
obligations of, the C corporation.	1843

(ii) Such gain or loss constitutes nonbusiness income.

1844

(6) "Available" means information is such that a person is	1845
able to learn of the information by the due date plus extensions,	1846
if any, for filing the return for the taxable year in which the	1847
trust recognizes the gain or loss.	1848

(CC) "Qualifying controlled group" has the same meaning as in	1849
section 5733.04 of the Revised Code.	1850

(DD) "Related member" has the same meaning as in section	1851
5733.042 of the Revised Code.	1852

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

1853

(a) "Qualifying person" means any person other than a	1854
qualifying corporation.	1855

(b) "Qualifying corporation" means any person classified for	1856
federal income tax purposes as an association taxable as a	1857
corporation, except either of the following:	1858

(i) A corporation that has made an election under subchapter	1859
S, chapter one, subtitle A, of the Internal Revenue Code for its	1860
taxable year ending within, or on the last day of, the investor's	1861
taxable year;	1862

(ii) A subsidiary that is wholly owned by any corporation	1863
that has made an election under subchapter S, chapter one,	1864
subtitle A of the Internal Revenue Code for its taxable year	1865
ending within, or on the last day of, the investor's taxable year.	1866

(2) For the purposes of this chapter, unless expressly stated	1867
otherwise, no qualifying person indirectly owns any asset directly	1868
or indirectly owned by any qualifying corporation.	1869

(FF) For purposes of this chapter and Chapter 5751. of the	1870
Revised Code:	1871

(1) "Trust" does not include a qualified pre-income tax	1872
trust.	1873

(2) A "qualified pre-income tax trust" is any pre-income tax	1874
trust that makes a qualifying pre-income tax trust election as	1875
described in division (FF)(3) of this section.	1876

(3) A "qualifying pre-income tax trust election" is an	1877
election by a pre-income tax trust to subject to the tax imposed	1878
by section 5751.02 of the Revised Code the pre-income tax trust	1879
and all pass-through entities of which the trust owns or controls,	1880
directly, indirectly, or constructively through related interests,	1881
five per cent or more of the ownership or equity interests. The	1882
trustee shall notify the tax commissioner in writing of the	1883
election on or before April 15, 2006. The election, if timely	1884
made, shall be effective on and after January 1, 2006, and shall	1885
apply for all tax periods and tax years until revoked by the	1886
trustee of the trust.	1887

(4) A "pre-income tax trust" is a trust that satisfies all of	1888
the following requirements:	1889

(a) The document or instrument creating the trust was	1890
executed by the grantor before January 1, 1972;	1891

(b) The trust became irrevocable upon the creation of the	1892
trust; and	1893

(c) The grantor was domiciled in this state at the time the	1894
trust was created.	1895

Sec. 5751.01. As used in this chapter:

1896

(A) "Person" means, but is not limited to, individuals,	1897
combinations of individuals of any form, receivers, assignees,	1898
trustees in bankruptcy, firms, companies, joint-stock companies,	1899
business trusts, estates, partnerships, limited liability	1900
partnerships, limited liability companies, associations, joint	1901
ventures, clubs, societies, for-profit corporations, S	1902
corporations, qualified subchapter S subsidiaries, qualified	1903
subchapter S trusts, trusts, entities that are disregarded for	1904
federal income tax purposes, and any other entities.	1905

(B) "Consolidated elected taxpayer" means a group of two or	1906
more persons treated as a single taxpayer for purposes of this	1907
chapter as the result of an election made under section 5751.011	1908
of the Revised Code.	1909

(C) "Combined taxpayer" means a group of two or more persons	1910
treated as a single taxpayer for purposes of this chapter under	1911
section 5751.012 of the Revised Code.	1912

(D) "Taxpayer" means any person, or any group of persons in	1913
the case of a consolidated elected taxpayer or combined taxpayer	1914
treated as one taxpayer, required to register or pay tax under	1915
this chapter. "Taxpayer" does not include excluded persons.	1916

(E) "Excluded person" means any of the following:

1917

(1) Any person with not more than one hundred fifty thousand	1918
dollars of taxable gross receipts during the calendar year.	1919
Division (E)(1) of this section does not apply to a person that is	1920
a member of a consolidated elected taxpayer;	1921

(2) A public utility that paid the excise tax imposed by	1922
section 5727.24 or 5727.30 of the Revised Code based on one or	1923
more measurement periods that include the entire tax period under	1924
this chapter, except that a public utility that is a combined	1925
company is a taxpayer with regard to the following gross receipts:	1926

(a) Taxable gross receipts directly attributed to a public	1927
utility activity, but not directly attributed to an activity that	1928
is subject to the excise tax imposed by section 5727.24 or 5727.30	1929
of the Revised Code;	1930

(b) Taxable gross receipts that cannot be directly attributed	1931
to any activity, multiplied by a fraction whose numerator is the	1932
taxable gross receipts described in division (E)(2)(a) of this	1933
section and whose denominator is the total taxable gross receipts	1934
that can be directly attributed to any activity;	1935

(c) Except for any differences resulting from the use of an	1936
accrual basis method of accounting for purposes of determining	1937
gross receipts under this chapter and the use of the cash basis	1938
method of accounting for purposes of determining gross receipts	1939
under section 5727.24 of the Revised Code, the gross receipts	1940
directly attributed to the activity of a natural gas company shall	1941
be determined in a manner consistent with division (D) of section	1942
5727.03 of the Revised Code.	1943

As used in division (E)(2) of this section, "combined	1944
company" and "public utility" have the same meanings as in section	1945
5727.01 of the Revised Code.	1946

(3) A financial institution, as defined in section 5725.01 of	1947
the Revised Code, that paid the corporation franchise tax charged	1948
by division (D) of section 5733.06 of the Revised Code based on	1949
one or more taxable years that include the entire tax period under	1950
this chapter;	1951

(4) A dealer in intangibles, as defined in section 5725.01 of	1952
the Revised Code, that paid the dealer in intangibles tax levied	1953
by division (D) of section 5707.03 of the Revised Code based on	1954
one or more measurement periods that include the entire tax period	1955
under this chapter;	1956

(5) A financial holding company as defined in the "Bank	1957
Holding Company Act," 12 U.S.C. 1841(p);	1958

(6) A bank holding company as defined in the "Bank Holding	1959
Company Act," 12 U.S.C. 1841(a);	1960

(7) A savings and loan holding company as defined in the	1961
"Home Owners Loan Act," 12 U.S.C. 1467a(a)(1)(D) that is engaging	1962
only in activities or investments permissible for a financial	1963
holding company under 12 U.S.C. 1843(k);	1964

(8) A person directly or indirectly owned by one or more	1965
financial institutions, financial holding companies, bank holding	1966
companies, or savings and loan holding companies described in	1967
division (E)(3), (5), (6), or (7) of this section that is engaged	1968
in activities permissible for a financial holding company under 12	1969
U.S.C. 1843(k), except that any such person held pursuant to	1970
merchant banking authority under 12 U.S.C. 1843(k)(4)(H) or 12	1971
U.S.C. 1843(k)(4)(I) is not an excluded person, or a person	1972
directly or indirectly owned by one or more insurance companies	1973
described in division (E)(9) of this section that is authorized to	1974
do the business of insurance in this state.	1975

For the purposes of division (E)(8) of this section, a person	1976
owns another person under the following circumstances:	1977

(a) In the case of corporations issuing capital stock, one	1978
corporation owns another corporation if it owns fifty per cent or	1979
more of the other corporation's capital stock with current voting	1980
rights;	1981

(b) In the case of a limited liability company, one person	1982
owns the company if that person's membership interest, as defined	1983
in section 1705.01 of the Revised Code, is fifty per cent or more	1984
of the combined membership interests of all persons owning such	1985
interests in the company;	1986

(c) In the case of a partnership, trust, or other	1987
unincorporated business organization other than a limited	1988
liability company, one person owns the organization if, under the	1989
articles of organization or other instrument governing the affairs	1990
of the organization, that person has a beneficial interest in the	1991
organization's profits, surpluses, losses, or distributions of	1992
fifty per cent or more of the combined beneficial interests of all	1993
persons having such an interest in the organization;	1994

(d) In the case of multiple ownership, the ownership	1995
interests of more than one person may be aggregated to meet the	1996
fifty per cent ownership tests in this division only when each	1997
such owner is described in division (E)(3), (5), (6), or (7) of	1998
this section and is engaged in activities permissible for a	1999
financial holding company under 12 U.S.C. 1843(k) or is a person	2000
directly or indirectly owned by one or more insurance companies	2001
described in division (E)(9) of this section that is authorized to	2002
do the business of insurance in this state.	2003

(9) A domestic insurance company or foreign insurance	2004
company, as defined in section 5725.01 of the Revised Code, that	2005
paid the insurance company premiums tax imposed by section 5725.18	2006
or Chapter 5729. of the Revised Code, or an unauthorized insurance	2007
company whose gross premiums are subject to tax under section	2008
3905.36 of the Revised Code based on one or more measurement	2009
periods that include the entire tax period under this chapter;	2010

(10) A person that solely facilitates or services one or more	2011
securitizations or similar transactions for any person described	2012
in division (E)(3), (5), (6), (7), (8), or (9) of this section, or	2013
a person that solely facilitates or services one or more	2014
securitizations of phase-in-recovery property pursuant to a final	2015
financing order as those terms are defined in section 4928.23 of	2016
the Revised Code. For purposes of this division, "securitization"	2017
means transferring one or more assets to one or more persons and	2018
then issuing securities backed by the right to receive payment	2019
from the asset or assets so transferred.	2020

(11) Except as otherwise provided in this division, a	2021
pre-income tax trust as defined in division (FF)(4) of section	2022
5747.01 of the Revised Code and any pass-through entity of which	2023
such pre-income tax trust owns or controls, directly, indirectly,	2024
or constructively through related interests, more than five per	2025
cent of the ownership or equity interests. If the pre-income tax	2026
trust has made a qualifying pre-income tax trust election under	2027
division (FF)(3) of section 5747.01 of the Revised Code, then the	2028
trust and the pass-through entities of which it owns or controls,	2029
directly, indirectly, or constructively through related interests,	2030
more than five per cent of the ownership or equity interests,	2031
shall not be excluded persons for purposes of the tax imposed	2032
under section 5751.02 of the Revised Code.	2033

(12) Nonprofit organizations or the state and its agencies,	2034
instrumentalities, or political subdivisions.	2035

(F) Except as otherwise provided in divisions (F)(2), (3),	2036
and (4) of this section, "gross receipts" means the total amount	2037
realized by a person, without deduction for the cost of goods sold	2038
or other expenses incurred, that contributes to the production of	2039
gross income of the person, including the fair market value of any	2040
property and any services received, and any debt transferred or	2041
forgiven as consideration.	2042

(1) The following are examples of gross receipts:

2043

(a) Amounts realized from the sale, exchange, or other	2044
disposition of the taxpayer's property to or with another;	2045

(b) Amounts realized from the taxpayer's performance of	2046
services for another;	2047

(c) Amounts realized from another's use or possession of the	2048
taxpayer's property or capital;	2049

(d) Any combination of the foregoing amounts.

2050

(2) "Gross receipts" excludes the following amounts:

2051

(a) Interest income except interest on credit sales;

2052

(b) Dividends and distributions from corporations, and	2053
distributive or proportionate shares of receipts and income from a	2054
pass-through entity as defined under section 5733.04 of the	2055
Revised Code;	2056

(c) Receipts from the sale, exchange, or other disposition of	2057
an asset described in section 1221 or 1231 of the Internal Revenue	2058
Code, without regard to the length of time the person held the	2059
asset. Notwithstanding section 1221 of the Internal Revenue Code,	2060
receipts from hedging transactions also are excluded to the extent	2061
the transactions are entered into primarily to protect a financial	2062
position, such as managing the risk of exposure to (i) foreign	2063
currency fluctuations that affect assets, liabilities, profits,	2064
losses, equity, or investments in foreign operations; (ii)	2065
interest rate fluctuations; or (iii) commodity price fluctuations.	2066
As used in division (F)(2)(c) of this section, "hedging	2067
transaction" has the same meaning as used in section 1221 of the	2068
Internal Revenue Code and also includes transactions accorded	2069
hedge accounting treatment under statement of financial accounting	2070
standards number 133 of the financial accounting standards board.	2071
For the purposes of division (F)(2)(c) of this section, the actual	2072
transfer of title of real or tangible personal property to another	2073
entity is not a hedging transaction.	2074

(d) Proceeds received attributable to the repayment,	2075
maturity, or redemption of the principal of a loan, bond, mutual	2076
fund, certificate of deposit, or marketable instrument;	2077

(e) The principal amount received under a repurchase	2078
agreement or on account of any transaction properly characterized	2079
as a loan to the person;	2080

(f) Contributions received by a trust, plan, or other	2081
arrangement, any of which is described in section 501(a) of the	2082
Internal Revenue Code, or to which Title 26, Subtitle A, Chapter	2083
1, Subchapter (D) of the Internal Revenue Code applies;	2084

(g) Compensation, whether current or deferred, and whether in	2085
cash or in kind, received or to be received by an employee, former	2086
employee, or the employee's legal successor for services rendered	2087
to or for an employer, including reimbursements received by or for	2088
an individual for medical or education expenses, health insurance	2089
premiums, or employee expenses, or on account of a dependent care	2090
spending account, legal services plan, any cafeteria plan	2091
described in section 125 of the Internal Revenue Code, or any	2092
similar employee reimbursement;	2093

(h) Proceeds received from the issuance of the taxpayer's own	2094
stock, options, warrants, puts, or calls, or from the sale of the	2095
taxpayer's treasury stock;	2096

(i) Proceeds received on the account of payments from	2097
insurance policies, except those proceeds received for the loss of	2098
business revenue;	2099

(j) Gifts or charitable contributions received; membership	2100
dues received by trade, professional, homeowners', or condominium	2101
associations; and payments received for educational courses,	2102
meetings, meals, or similar payments to a trade, professional, or	2103
other similar association; and fundraising receipts received by	2104
any person when any excess receipts are donated or used	2105
exclusively for charitable purposes;	2106

(k) Damages received as the result of litigation in excess of	2107
amounts that, if received without litigation, would be gross	2108
receipts;	2109

(l) Property, money, and other amounts received or acquired	2110
by an agent on behalf of another in excess of the agent's	2111
commission, fee, or other remuneration;	2112

(m) Tax refunds, other tax benefit recoveries, and	2113
reimbursements for the tax imposed under this chapter made by	2114
entities that are part of the same combined taxpayer or	2115
consolidated elected taxpayer group, and reimbursements made by	2116
entities that are not members of a combined taxpayer or	2117
consolidated elected taxpayer group that are required to be made	2118
for economic parity among multiple owners of an entity whose tax	2119
obligation under this chapter is required to be reported and paid	2120
entirely by one owner, pursuant to the requirements of sections	2121
5751.011 and 5751.012 of the Revised Code;	2122

(n) Pension reversions;

2123

(o) Contributions to capital;

2124

(p) Sales or use taxes collected as a vendor or an	2125
out-of-state seller on behalf of the taxing jurisdiction from a	2126
consumer or other taxes the taxpayer is required by law to collect	2127
directly from a purchaser and remit to a local, state, or federal	2128
tax authority;	2129

(q) In the case of receipts from the sale of cigarettes or	2130
tobacco products by a wholesale dealer, retail dealer,	2131
distributor, manufacturer, or seller, all as defined in section	2132
5743.01 of the Revised Code, an amount equal to the federal and	2133
state excise taxes paid by any person on or for such cigarettes or	2134
tobacco products under subtitle E of the Internal Revenue Code or	2135
Chapter 5743. of the Revised Code;	2136

(r) In the case of receipts from the sale of motor fuel by a	2137
licensed motor fuel dealer, licensed retail dealer, or licensed	2138
permissive motor fuel dealer, all as defined in section 5735.01 of	2139
the Revised Code, an amount equal to federal and state excise	2140
taxes paid by any person on such motor fuel under section 4081 of	2141
the Internal Revenue Code or Chapter 5735. of the Revised Code;	2142

(s) In the case of receipts from the sale of beer or	2143
intoxicating liquor, as defined in section 4301.01 of the Revised	2144
Code, by a person holding a permit issued under Chapter 4301. or	2145
4303. of the Revised Code, an amount equal to federal and state	2146
excise taxes paid by any person on or for such beer or	2147
intoxicating liquor under subtitle E of the Internal Revenue Code	2148
or Chapter 4301. or 4305. of the Revised Code;	2149

(t) Receipts realized by a new motor vehicle dealer or used	2150
motor vehicle dealer, as defined in section 4517.01 of the Revised	2151
Code, from the sale or other transfer of a motor vehicle, as	2152
defined in that section, to another motor vehicle dealer for the	2153
purpose of resale by the transferee motor vehicle dealer, but only	2154
if the sale or other transfer was based upon the transferee's need	2155
to meet a specific customer's preference for a motor vehicle;	2156

(u) Receipts from a financial institution described in	2157
division (E)(3) of this section for services provided to the	2158
financial institution in connection with the issuance, processing,	2159
servicing, and management of loans or credit accounts, if such	2160
financial institution and the recipient of such receipts have at	2161
least fifty per cent of their ownership interests owned or	2162
controlled, directly or constructively through related interests,	2163
by common owners;	2164

(v) Receipts realized from administering anti-neoplastic	2165
drugs and other cancer chemotherapy, biologicals, therapeutic	2166
agents, and supportive drugs in a physician's office to patients	2167
with cancer;	2168

(w) Funds received or used by a mortgage broker that is not a	2169
dealer in intangibles, other than fees or other consideration,	2170
pursuant to a table-funding mortgage loan or warehouse-lending	2171
mortgage loan. Terms used in division (F)(2)(w) of this section	2172
have the same meanings as in section 1322.01 of the Revised Code,	2173
except "mortgage broker" means a person assisting a buyer in	2174
obtaining a mortgage loan for a fee or other consideration paid by	2175
the buyer or a lender, or a person engaged in table-funding or	2176
warehouse-lending mortgage loans that are first lien mortgage	2177
loans.	2178

(x) Property, money, and other amounts received by a	2179
professional employer organization, as defined in section 4125.01	2180
of the Revised Code, from a client employer, as defined in that	2181
section, in excess of the administrative fee charged by the	2182
professional employer organization to the client employer;	2183

(y) In the case of amounts retained as commissions by a	2184
permit holder under Chapter 3769. of the Revised Code, an amount	2185
equal to the amounts specified under that chapter that must be	2186
paid to or collected by the tax commissioner as a tax and the	2187
amounts specified under that chapter to be used as purse money;	2188

(z) Qualifying distribution center receipts.

2189

(i) For purposes of division (F)(2)(z) of this section:

2190

(I) "Qualifying distribution center receipts" means receipts	2191
of a supplier from qualified property that is delivered to a	2192
qualified distribution center, multiplied by a quantity that	2193
equals one minus the Ohio delivery percentage.	2194

(II) "Qualified property" means tangible personal property	2195
delivered to a qualified distribution center that is shipped to	2196
that qualified distribution center solely for further shipping by	2197
the qualified distribution center to another location in this	2198
state or elsewhere. "Further shipping" includes storing and	2199
repackaging such property into smaller or larger bundles, so long	2200
as such property is not subject to further manufacturing or	2201
processing.	2202

(III) "Qualified distribution center" means a warehouse or	2203
other similar facility in this state that, for the qualifying	2204
year, is operated by a person that is not part of a combined	2205
taxpayer group and that has a qualifying certificate. However, all	2206
warehouses or other similar facilities that are operated by	2207
persons in the same taxpayer group and that are located within one	2208
mile of each other shall be treated as one qualified distribution	2209
center.	2210

(IV) "Qualifying year" means the calendar year to which the	2211
qualifying certificate applies.	2212

(V) "Qualifying period" means the period of the first day of	2213
July of the second year preceding the qualifying year through the	2214
thirtieth day of June of the year preceding the qualifying year.	2215

(VI) "Qualifying certificate" means the certificate issued by	2216
the tax commissioner after the operator of a distribution center	2217
files an annual application with the commissioner. The application	2218
and annual fee shall be filed and paid for each qualified	2219
distribution center on or before the first day of September before	2220
the qualifying year or within forty-five days after the	2221
distribution center opens, whichever is later.	2222

The applicant must substantiate to the commissioner's	2223
satisfaction that, for the qualifying period, all persons	2224
operating the distribution center have more than fifty per cent of	2225
the cost of the qualified property shipped to a location such that	2226
it would be sitused outside this state under the provisions of	2227
division (E) of section 5751.033 of the Revised Code. The	2228
applicant must also substantiate that the distribution center	2229
cumulatively had costs from its suppliers equal to or exceeding	2230
five hundred million dollars during the qualifying period. (For	2231
purposes of division (F)(2)(z)(i)(VI) of this section, "supplier"	2232
excludes any person that is part of the consolidated elected	2233
taxpayer group, if applicable, of the operator of the qualified	2234
distribution center.) The commissioner may require the applicant	2235
to have an independent certified public accountant certify that	2236
the calculation of the minimum thresholds required for a qualified	2237
distribution center by the operator of a distribution center has	2238
been made in accordance with generally accepted accounting	2239
principles. The commissioner shall issue or deny the issuance of a	2240
certificate within sixty days after the receipt of the	2241
application. A denial is subject to appeal under section 5717.02	2242
of the Revised Code. If the operator files a timely appeal under	2243
section 5717.02 of the Revised Code, the operator shall be granted	2244
a qualifying certificate, provided that the operator is liable for	2245
any tax, interest, or penalty upon amounts claimed as qualifying	2246
distribution center receipts, other than those receipts exempt	2247
under division (C)(1) of section 5751.011 of the Revised Code,	2248
that would have otherwise not been owed by its suppliers if the	2249
qualifying certificate was valid.	2250

(VII) "Ohio delivery percentage" means the proportion of the	2251
total property delivered to a destination inside Ohio from the	2252
qualified distribution center during the qualifying period	2253
compared with total deliveries from such distribution center	2254
everywhere during the qualifying period.	2255

(ii) If the distribution center is new and was not open for	2256
the entire qualifying period, the operator of the distribution	2257
center may request that the commissioner grant a qualifying	2258
certificate. If the certificate is granted and it is later	2259
determined that more than fifty per cent of the qualified property	2260
during that year was not shipped to a location such that it would	2261
be sitused outside of this state under the provisions of division	2262
(E) of section 5751.033 of the Revised Code or if it is later	2263
determined that the person that operates the distribution center	2264
had average monthly costs from its suppliers of less than forty	2265
million dollars during that year, then the operator of the	2266
distribution center shall be liable for any tax, interest, or	2267
penalty upon amounts claimed as qualifying distribution center	2268
receipts, other than those receipts exempt under division (C)(1)	2269
of section 5751.011 of the Revised Code, that would have not	2270
otherwise been owed by its suppliers during the qualifying year if	2271
the qualifying certificate was valid. (For purposes of division	2272
(F)(2)(z)(ii) of this section, "supplier" excludes any person that	2273
is part of the consolidated elected taxpayer group, if applicable,	2274
of the operator of the qualified distribution center.)	2275

(iii) When filing an application for a qualifying certificate	2276
under division (F)(2)(z)(i)(VI) of this section, the operator of a	2277
qualified distribution center also shall provide documentation, as	2278
the commissioner requires, for the commissioner to ascertain the	2279
Ohio delivery percentage. The commissioner, upon issuing the	2280
qualifying certificate, also shall certify the Ohio delivery	2281
percentage. The operator of the qualified distribution center may	2282
appeal the commissioner's certification of the Ohio delivery	2283
percentage in the same manner as an appeal is taken from the	2284
denial of a qualifying certificate under division (F)(2)(z)(i)(VI)	2285
of this section.	2286

Within thirty days after all appeals have been exhausted, the	2287
operator of the qualified distribution center shall notify the	2288
affected suppliers of qualified property that such suppliers are	2289
required to file, within sixty days after receiving notice from	2290
the operator of the qualified distribution center, amended reports	2291
for the impacted calendar quarter or quarters or calendar year,	2292
whichever the case may be. Any additional tax liability or tax	2293
overpayment shall be subject to interest but shall not be subject	2294
to the imposition of any penalty so long as the amended returns	2295
are timely filed. The supplier of tangible personal property	2296
delivered to the qualified distribution center shall include in	2297
its report of taxable gross receipts the receipts from the total	2298
sales of property delivered to the qualified distribution center	2299
for the calendar quarter or calendar year, whichever the case may	2300
be, multiplied by the Ohio delivery percentage for the qualifying	2301
year. Nothing in division (F)(2)(z)(iii) of this section shall be	2302
construed as imposing liability on the operator of a qualified	2303
distribution center for the tax imposed by this chapter arising	2304
from any change to the Ohio delivery percentage.	2305

(iv) In the case where the distribution center is new and not	2306
open for the entire qualifying period, the operator shall make a	2307
good faith estimate of an Ohio delivery percentage for use by	2308
suppliers in their reports of taxable gross receipts for the	2309
remainder of the qualifying period. The operator of the facility	2310
shall disclose to the suppliers that such Ohio delivery percentage	2311
is an estimate and is subject to recalculation. By the due date of	2312
the next application for a qualifying certificate, the operator	2313
shall determine the actual Ohio delivery percentage for the	2314
estimated qualifying period and proceed as provided in division	2315
(F)(2)(z)(iii) of this section with respect to the calculation and	2316
recalculation of the Ohio delivery percentage. The supplier is	2317
required to file, within sixty days after receiving notice from	2318
the operator of the qualified distribution center, amended reports	2319
for the impacted calendar quarter or quarters or calendar year,	2320
whichever the case may be. Any additional tax liability or tax	2321
overpayment shall be subject to interest but shall not be subject	2322
to the imposition of any penalty so long as the amended returns	2323
are timely filed.	2324

(v) Qualifying certificates and Ohio delivery percentages	2325
issued by the commissioner shall be open to public inspection and	2326
shall be timely published by the commissioner. A supplier relying	2327
in good faith on a certificate issued under this division shall	2328
not be subject to tax on the qualifying distribution center	2329
receipts under division (F)(2)(z) of this section. A person	2330
receiving a qualifying certificate is responsible for paying the	2331
tax, interest, and penalty upon amounts claimed as qualifying	2332
distribution center receipts that would not otherwise have been	2333
owed by the supplier if the qualifying certificate were available	2334
when it is later determined that the qualifying certificate should	2335
not have been issued because the statutory requirements were in	2336
fact not met.	2337

(vi) The annual fee for a qualifying certificate shall be one	2338
hundred thousand dollars for each qualified distribution center.	2339
If a qualifying certificate is not issued, the annual fee is	2340
subject to refund after the exhaustion of all appeals provided for	2341
in division (F)(2)(z)(i)(VI) of this section. The fee imposed	2342
under this division may be assessed in the same manner as the tax	2343
imposed under this chapter. The first one hundred thousand dollars	2344
of the annual application fees collected each calendar year shall	2345
be credited to the revenue enhancement fund. The remainder of the	2346
annual application fees collected shall be distributed in the same	2347
manner required under section 5751.20 of the Revised Code.	2348

(vii) The tax commissioner may require that adequate security	2349
be posted by the operator of the distribution center on appeal	2350
when the commissioner disagrees that the applicant has met the	2351
minimum thresholds for a qualified distribution center as set	2352
forth in divisions (F)(2)(z)(i)(VI) and (F)(2)(z)(ii) of this	2353
section.	2354

(aa) Receipts of an employer from payroll deductions relating	2355
to the reimbursement of the employer for advancing moneys to an	2356
unrelated third party on an employee's behalf;	2357

(bb) Cash discounts allowed and taken;

2358

(cc) Returns and allowances;

2359

(dd) Bad debts from receipts on the basis of which the tax	2360
imposed by this chapter was paid in a prior quarterly tax payment	2361
period. For the purpose of this division, "bad debts" means any	2362
debts that have become worthless or uncollectible between the	2363
preceding and current quarterly tax payment periods, have been	2364
uncollected for at least six months, and that may be claimed as a	2365
deduction under section 166 of the Internal Revenue Code and the	2366
regulations adopted under that section, or that could be claimed	2367
as such if the taxpayer kept its accounts on the accrual basis.	2368
"Bad debts" does not include repossessed property, uncollectible	2369
amounts on property that remains in the possession of the taxpayer	2370
until the full purchase price is paid, or expenses in attempting	2371
to collect any account receivable or for any portion of the debt	2372
recovered;	2373

(ee) Any amount realized from the sale of an account	2374
receivable to the extent the receipts from the underlying	2375
transaction giving rise to the account receivable were included in	2376
the gross receipts of the taxpayer;	2377

(ff) Any receipts directly attributed ~~to providing public~~	2378
~~services pursuant to sections 126.60 to 126.605 of the Revised~~	2379
~~Code, or any receipts directly attributed~~ to a transfer agreement	2380
or to the enterprise transferred under that agreement under	2381
section 4313.02 of the Revised Code.	2382

(gg)(i) As used in this division:

2383

(I) "Qualified uranium receipts" means receipts from the	2384
sale, exchange, lease, loan, production, processing, or other	2385
disposition of uranium within a uranium enrichment zone certified	2386
by the tax commissioner under division (F)(2)(gg)(ii) of this	2387
section. "Qualified uranium receipts" does not include any	2388
receipts with a situs in this state outside a uranium enrichment	2389
zone certified by the tax commissioner under division	2390
(F)(2)(gg)(ii) of this section.	2391

(II) "Uranium enrichment zone" means all real property that	2392
is part of a uranium enrichment facility licensed by the United	2393
States nuclear regulatory commission and that was or is owned or	2394
controlled by the United States department of energy or its	2395
successor.	2396

(ii) Any person that owns, leases, or operates real or	2397
tangible personal property constituting or located within a	2398
uranium enrichment zone may apply to the tax commissioner to have	2399
the uranium enrichment zone certified for the purpose of excluding	2400
qualified uranium receipts under division (F)(2)(gg) of this	2401
section. The application shall include such information that the	2402
tax commissioner prescribes. Within sixty days after receiving the	2403
application, the tax commissioner shall certify the zone for that	2404
purpose if the commissioner determines that the property qualifies	2405
as a uranium enrichment zone as defined in division (F)(2)(gg) of	2406
this section, or, if the tax commissioner determines that the	2407
property does not qualify, the commissioner shall deny the	2408
application or request additional information from the applicant.	2409
If the tax commissioner denies an application, the commissioner	2410
shall state the reasons for the denial. The applicant may appeal	2411
the denial of an application to the board of tax appeals pursuant	2412
to section 5717.02 of the Revised Code. If the applicant files a	2413
timely appeal, the tax commissioner shall conditionally certify	2414
the applicant's property. The conditional certification shall	2415
expire when all of the applicant's appeals are exhausted. Until	2416
final resolution of the appeal, the applicant shall retain the	2417
applicant's records in accordance with section 5751.12 of the	2418
Revised Code, notwithstanding any time limit on the preservation	2419
of records under that section.	2420

(hh) Amounts realized by licensed motor fuel dealers or	2421
licensed permissive motor fuel dealers from the exchange of	2422
petroleum products, including motor fuel, between such dealers,	2423
provided that delivery of the petroleum products occurs at a	2424
refinery, terminal, pipeline, or marine vessel and that the	2425
exchanging dealers agree neither dealer shall require monetary	2426
compensation from the other for the value of the exchanged	2427
petroleum products other than such compensation for differences in	2428
product location or grade. Division (F)(2)(hh) of this section	2429
does not apply to amounts realized as a result of differences in	2430
location or grade of exchanged petroleum products or from	2431
handling, lubricity, dye, or other additive injections fees,	2432
pipeline security fees, or similar fees. As used in this division,	2433
"motor fuel," "licensed motor fuel dealer," "licensed permissive	2434
motor fuel dealer," and "terminal" have the same meanings as in	2435
section 5735.01 of the Revised Code.	2436

(ii) In the case of amounts collected by a licensed casino	2437
operator from casino gaming, amounts in excess of the casino	2438
operator's gross casino revenue. In this division, "casino	2439
operator" and "casino gaming" have the meanings defined in section	2440
3772.01 of the Revised Code, and "gross casino revenue" has the	2441
meaning defined in section 5753.01 of the Revised Code.	2442

(jj) Any receipts for which the tax imposed by this chapter	2443
is prohibited by the constitution or laws of the United States or	2444
the constitution of this state.	2445

(3) In the case of a taxpayer when acting as a real estate	2446
broker, "gross receipts" includes only the portion of any fee for	2447
the service of a real estate broker, or service of a real estate	2448
salesperson associated with that broker, that is retained by the	2449
broker and not paid to an associated real estate salesperson or	2450
another real estate broker. For the purposes of this division,	2451
"real estate broker" and "real estate salesperson" have the same	2452
meanings as in section 4735.01 of the Revised Code.	2453

(4) A taxpayer's method of accounting for gross receipts for	2454
a tax period shall be the same as the taxpayer's method of	2455
accounting for federal income tax purposes for the taxpayer's	2456
federal taxable year that includes the tax period. If a taxpayer's	2457
method of accounting for federal income tax purposes changes, its	2458
method of accounting for gross receipts under this chapter shall	2459
be changed accordingly.	2460

(G) "Taxable gross receipts" means gross receipts sitused to	2461
this state under section 5751.033 of the Revised Code.	2462

(H) A person has "substantial nexus with this state" if any	2463
of the following applies. The person:	2464

(1) Owns or uses a part or all of its capital in this state;

2465

(2) Holds a certificate of compliance with the laws of this	2466
state authorizing the person to do business in this state;	2467

(3) Has bright-line presence in this state;

2468

(4) Otherwise has nexus with this state to an extent that the	2469
person can be required to remit the tax imposed under this chapter	2470
under the Constitution of the United States.	2471

(I) A person has "bright-line presence" in this state for a	2472
reporting period and for the remaining portion of the calendar	2473
year if any of the following applies. The person:	2474

(1) Has at any time during the calendar year property in this	2475
state with an aggregate value of at least fifty thousand dollars.	2476
For the purpose of division (I)(1) of this section, owned property	2477
is valued at original cost and rented property is valued at eight	2478
times the net annual rental charge.	2479

(2) Has during the calendar year payroll in this state of at	2480
least fifty thousand dollars. Payroll in this state includes all	2481
of the following:	2482

(a) Any amount subject to withholding by the person under	2483
section 5747.06 of the Revised Code;	2484

(b) Any other amount the person pays as compensation to an	2485
individual under the supervision or control of the person for work	2486
done in this state; and	2487

(c) Any amount the person pays for services performed in this	2488
state on its behalf by another.	2489

(3) Has during the calendar year taxable gross receipts of at	2490
least five hundred thousand dollars.	2491

(4) Has at any time during the calendar year within this	2492
state at least twenty-five per cent of the person's total	2493
property, total payroll, or total gross receipts.	2494

(5) Is domiciled in this state as an individual or for	2495
corporate, commercial, or other business purposes.	2496

(J) "Tangible personal property" has the same meaning as in	2497
section 5739.01 of the Revised Code.	2498

(K) "Internal Revenue Code" means the Internal Revenue Code	2499
of 1986, 100 Stat. 2085, 26 U.S.C. 1, as amended. Any term used in	2500
this chapter that is not otherwise defined has the same meaning as	2501
when used in a comparable context in the laws of the United States	2502
relating to federal income taxes unless a different meaning is	2503
clearly required. Any reference in this chapter to the Internal	2504
Revenue Code includes other laws of the United States relating to	2505
federal income taxes.	2506

(L) "Calendar quarter" means a three-month period ending on	2507
the thirty-first day of March, the thirtieth day of June, the	2508
thirtieth day of September, or the thirty-first day of December.	2509

(M) "Tax period" means the calendar quarter or calendar year	2510
on the basis of which a taxpayer is required to pay the tax	2511
imposed under this chapter.	2512

(N) "Calendar year taxpayer" means a taxpayer for which the	2513
tax period is a calendar year.	2514

(O) "Calendar quarter taxpayer" means a taxpayer for which	2515
the tax period is a calendar quarter.	2516

(P) "Agent" means a person authorized by another person to	2517
act on its behalf to undertake a transaction for the other,	2518
including any of the following:	2519

(1) A person receiving a fee to sell financial instruments;

2520

(2) A person retaining only a commission from a transaction	2521
with the other proceeds from the transaction being remitted to	2522
another person;	2523

(3) A person issuing licenses and permits under section	2524
1533.13 of the Revised Code;	2525

(4) A lottery sales agent holding a valid license issued	2526
under section 3770.05 of the Revised Code;	2527

(5) A person acting as an agent of the division of liquor	2528
control under section 4301.17 of the Revised Code.	2529

(Q) "Received" includes amounts accrued under the accrual	2530
method of accounting.	2531

(R) "Reporting person" means a person in a consolidated	2532
elected taxpayer or combined taxpayer group that is designated by	2533
that group to legally bind the group for all filings and tax	2534
liabilities and to receive all legal notices with respect to	2535
matters under this chapter, or, for the purposes of section	2536
5751.04 of the Revised Code, a separate taxpayer that is not a	2537
member of such a group.	2538

Section 2. That existing sections 718.01, 5739.02, 5747.01,	2539
and 5751.01 and sections 126.60, 126.601, 126.602, 126.603,	2540
126.604, and 126.605 of the Revised Code are hereby repealed.	2541

Section 3. It is the intent of the General Assembly in	2542
enacting this act to eliminate all authority granted to the	2543
Director of Budget and Management and the Director of	2544
Transportation in Am. Sub. H.B. 153 of the 129th General Assembly	2545
pertaining to a purchase and sale agreement, lease, service	2546
agreement, franchise agreement, concession agreement, or other	2547
written agreement with respect to the operation or maintenance of	2548
the Ohio Turnpike, and to restore to the Ohio Turnpike Commission	2549
the full exercise of all powers granted to the Commission in the	2550
Revised Code.	2551

The Director of Budget and Management shall terminate any	2552
contract entered into or other action taken under sections 126.60	2553
to 126.605 of the Revised Code prior to their repeal by this act	2554
promptly and in a manner determined to be least costly to the	2555
state and its citizens.	2556

Section 4. The Ohio Turnpike Commission shall hold not less	2557
than four public hearings on the issue of outsourcing the	2558
maintenance and operation of the Ohio Turnpike. The hearings shall	2559
be held in geographically diverse locations in this state that are	2560
within the immediate vicinity of the Ohio Turnpike. The Commission	2561
shall inform the public of each hearing by causing an appropriate	2562
notice to be published on the Commission's internet web site and	2563
in a newspaper of general circulation in the county in which the	2564
hearing is to be held. Notice shall be published not less than one	2565
week prior to the date of the hearing. Additionally, the	2566
Commission shall send notice to the Governor and the presiding	2567
officers and minority leaders of the Senate and House of	2568
Representatives of the public hearing schedule and locations.	2569

The Commission shall hold the first hearing within thirty	2570
days of the effective date of this act and shall conclude the last	2571
hearing not more than ninety days after the effective date of this	2572
act. At each hearing, the Commission shall afford any person that	2573
may be affected by the potential outsourcing of the maintenance	2574
and operation of the Ohio Turnpike the opportunity to comment on	2575
such a course of action and the opportunity to present material to	2576
the Commission in support of the person's position. Upon the	2577
conclusion of the last hearing, the Commission shall compile any	2578
materials submitted to it during the hearings and prepare a report	2579
that summarizes the comments of persons who appeared at the	2580
hearings. The Commission shall present the report to the Governor	2581
and the presiding officers and minority leaders of the Senate and	2582
House of Representatives not later than thirty days after the date	2583
of the last hearing.	2584

Section 5. The General Assembly, applying the principle	2585
stated in division (B) of section 1.52 of the Revised Code that	2586
amendments are to be harmonized if reasonably capable of	2587
simultaneous operation, finds that the following sections,	2588
presented in this act as composites of the sections as amended by	2589
the acts indicated, are the resulting versions of the sections in	2590
effect prior to the effective date of the sections as presented in	2591
this act:	2592

Section 5739.02 of the Revised Code as amended by both Am.	2593
Sub. H.B. 487 and Am. Sub. H.B. 508 of the 129th General Assembly.	2594

Section 5747.01 of the Revised Code as amended by both Am.	2595
Sub. H.B. 153 and Am. H.B. 167 of the 129th General Assembly.	2596

Section 5751.01 of the Revised Code as amended by both Am.	2597
Sub. H.B. 508 and Am. Sub. S.B. 315 of the 129th General Assembly.	2598