As Introduced

130th General Assembly Regular Session 2013-2014

H. B. No. 601

Representatives Beck, Adams, J. 

Cosponsors: Representatives Retherford, Romanchuk, Brenner 

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A BILL

To amend sections 5725.33 and 5747.01 and to enact

1

section 5747.014 of the Revised Code to authorize

2

taxpayers to continue applying certain expiring

3

federal tax provisions in calculating Ohio income

4

tax, and to declare an emergency.

5

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

Section 1. That sections 5725.33 and 5747.01 be amended and	6
section 5747.014 of the Revised Code be enacted to read as	7
follows:	8

Sec. 5725.33.  (A) Except as otherwise provided in this	9
section, terms used in this section have the same meaning as	10
section 45D of the Internal Revenue Code, any related proposed,	11
temporary or final regulations promulgated under the Internal	12
Revenue Code, any rules or guidance of the internal revenue	13
service or the United States department of the treasury, and any	14
related rules or guidance issued by the community development	15
financial institutions fund of the United States department of the	16
treasury, as such law, regulations, rules, and guidance exist on	17
October 16, 2009.	18

As used in this section:

19

(1) "Adjusted purchase price" means the amount paid for	20
qualified equity investments multiplied by the qualified	21
low-income community investments made by the issuer in projects	22
located in this state as a percentage of the total amount of	23
qualified low-income community investments made by the issuer in	24
projects located in all states on the credit allowance date during	25
the applicable tax year, subject to divisions (B)(1) and (2) of	26
this section.	27

(2) "Applicable percentage" means zero per cent for each of	28
the first two credit allowance dates, seven per cent for the third	29
credit allowance date, and eight per cent for the four following	30
credit allowance dates.	31

(3) "Credit allowance date" means the date, on or after	32
January 1, 2010, a qualified equity investment is made and each of	33
the six anniversary dates thereafter. For qualified equity	34
investments made after October 16, 2009, but before January 1,	35
2010, the initial credit allowance date is January 1, 2010, and	36
each of the six anniversary dates thereafter is on the first day	37
of January of each year.	38

(4) "Qualified active low-income community business" excludes	39
any business that derives or projects to derive fifteen per cent	40
or more of annual revenue from the rental or sale of real	41
property, except any business that is a special purpose entity	42
principally owned by a principal user of that property formed	43
solely for the purpose of renting, either directly or indirectly,	44
or selling real property back to such principal user if such	45
principal user does not derive fifteen per cent or more of its	46
gross annual revenue from the rental or sale of real property.	47

(5) "Qualified community development entity" includes only	48
entities:	49

(a) Thatthat have entered into an allocation agreement with	50
the community development financial institutions fund of the	51
United States department of the treasury with respect to credits	52
authorized by section 45D of the Internal Revenue Code;	53

(b) Whoseand whose service area includes any portion of this	54
state; and	55

(c) That will designate an equity investment in such entities	56
as a qualified equity investment for purposes of both section 45D	57
of the Internal Revenue Code and this section.	58

(6) "Qualified equity investment" is limited to an equity	59
investment in a qualified community development entity that:	60

(a) Is acquired after October 16, 2009, at its original	61
issuance solely in exchange for cash;	62

(b) Has at least eighty-five per cent of its cash purchase	63
price used by the qualified community development entity to make	64
qualified low-income community investments, provided that in the	65
seventh year after a qualified equity investment is made, only	66
seventy-five per cent of such cash purchase price must be used by	67
the qualified community development entity to make qualified	68
low-income community investments; and	69

(c) Is designated by the issuer as a qualified equity	70
investment.	71

"Qualified equity investment" includes any equity investment	72
that would, but for division (A)(6)(a) of this section, be a	73
qualified equity investment in the hands of the taxpayer if such	74
investment was a qualified equity investment in the hands of a	75
prior holder.	76

(B) There is hereby allowed a nonrefundable credit against	77
the tax imposed by section 5725.18 of the Revised Code for an	78
insurance company holding a qualified equity investment on the	79
credit allowance date occurring in the calendar year for which the	80
tax is due. The credit shall equal the applicable percentage of	81
the adjusted purchase price of qualified low-income community	82
investments, subject to divisions (B)(1) and (2) of this section:	83

(1) For the purpose of calculating the amount of qualified	84
low-income community investments held by a qualified community	85
development entity, an investment shall be considered held by a	86
qualified community development entity even if the investment has	87
been sold or repaid, provided that, at any time before the seventh	88
anniversary of the issuance of the qualified equity investment,	89
the qualified community development entity reinvests an amount	90
equal to the capital returned to or received or recovered by the	91
qualified community development entity from the original	92
investment, exclusive of any profits realized and costs incurred	93
in the sale or repayment, in another qualified low-income	94
community investment within twelve months of the receipt of such	95
capital. If the qualified low-income community investment is sold	96
or repaid after the sixth anniversary of the issuance of the	97
qualified equity investment, the qualified low-income community	98
investment shall be considered held by the qualified community	99
development entity through the seventh anniversary of the	100
qualified equity investment's issuance.	101

(2) The qualified low-income community investment made in	102
this state shall equal the sum of the qualified low-income	103
community investments in each qualified active low-income	104
community business in this state, not to exceed two million five	105
hundred sixty-four thousand dollars, in which the qualified	106
community development entity invests, including such investments	107
in any such businesses in this state related to that qualified	108
active low-income community business through majority ownership or	109
control.	110

The credit shall be claimed in the order prescribed by	111
section 5725.98 of the Revised Code. If the amount of the credit	112
exceeds the amount of tax otherwise due after deducting all other	113
credits in that order, the excess may be carried forward and	114
applied to the tax due for not more than four ensuing years.	115

By claiming a tax credit under this section, an insurance	116
company waives its rights under section 5725.222 of the Revised	117
Code with respect to the time limitation for the assessment of	118
taxes as it relates to credits claimed that later become subject	119
to recapture under division (E) of this section.	120

(C) The amount of qualified equity investments on the basis	121
of which credits may be claimed under this section and sections	122
5726.54, 5729.16, and 5733.58 of the Revised Code shall not exceed	123
the amount, estimated by the director of development, that would	124
cause the total amount of credits allowed each fiscal year to	125
exceed ten million dollars, computed without regard to the	126
potential for taxpayers to carry tax credits forward to later	127
years.	128

(D) If any amount of thea federal tax credit allowed for a	129
qualified equity investment for which a credit was received under	130
this section is recaptured under section 45D of the Internal	131
Revenue Code, or if the director of development services	132
determines that an investment for which a tax credit is claimed	133
under this section is not a qualified equity investment or that	134
the proceeds of an investment for which a tax credit is claimed	135
under this section are used to make qualified low-income community	136
investments other than in a qualified active low-income community	137
business, all or a portion of the credit received on account of	138
that investment shall be paid by the insurance company that	139
received the credit to the superintendent of insurance. The amount	140
to be recovered shall be determined by the director of development	141
services pursuant to rules adopted under division (E) of this	142
section. The director shall certify any amount due under this	143
division to the superintendent of insurance, and the	144
superintendent shall notify the treasurer of state of the amount	145
due. Upon notification, the treasurer shall invoice the insurance	146
company for the amount due. The amount due is payable not later	147
than thirty days after the date the treasurer invoices the	148
insurance company. The amount due shall be considered to be tax	149
due under section 5725.18 of the Revised Code, and may be	150
collected by assessment without regard to the time limitations	151
imposed under section 5725.222 of the Revised Code for the	152
assessment of taxes by the superintendent. All amounts collected	153
under this division shall be credited as revenue from the tax	154
levied under section 5725.18 of the Revised Code.	155

(E) The tax credits authorized under this section and	156
sections 5726.54, 5729.16, and 5733.58 of the Revised Code shall	157
be administered by the department of development services. The	158
director of development services, in consultation with the tax	159
commissioner and the superintendent of insurance, pursuant to	160
Chapter 119. of the Revised Code, shall adopt rules for the	161
administration of this section and sections 5726.54, 5729.16, and	162
5733.58 of the Revised Code. The rules shall provide for	163
determining the recovery of credits under division (D) of this	164
section and under sections 5726.54, 5729.16, and 5733.58 of the	165
Revised Code, including prorating the amount of the credit to be	166
recovered on any reasonable basis, the manner in which credits may	167
be allocated among claimants, and the amount of any application or	168
other fees to be charged in connection with a recovery.	169

(F) There is hereby created in the state treasury the new	170
markets tax credit operating fund. The director of development	171
services is authorized to charge reasonable application and other	172
fees in connection with the administration of tax credits	173
authorized by this section and sections 5726.54, 5729.16, and	174
5733.58 of the Revised Code. Any such fees collected shall be	175
credited to the fund. The director of development services shall	176
use money in the fund to pay expenses related to the	177
administration of tax credits authorized under sections 5725.33,	178
5726.54, 5729.16, and 5733.58 of the Revised Code.	179

Sec. 5747.01.  Except as otherwise expressly provided or	180
clearly appearing from the context, any term used in this chapter	181
that is not otherwise defined in this section has the same meaning	182
as when used in a comparable context in the laws of the United	183
States relating to federal income taxes or if not used in a	184
comparable context in those laws, has the same meaning as in	185
section 5733.40 of the Revised Code. Any reference in this chapter	186
to the Internal Revenue Code includes other laws of the United	187
States relating to federal income taxes.	188

As used in this chapter:

189

(A) "Adjusted gross income" or "Ohio adjusted gross income"	190
means federal adjusted gross income, as defined and used in the	191
Internal Revenue Code, adjusted as provided in this section:	192

(1) Add interest or dividends on obligations or securities of	193
any state or of any political subdivision or authority of any	194
state, other than this state and its subdivisions and authorities.	195

(2) Add interest or dividends on obligations of any	196
authority, commission, instrumentality, territory, or possession	197
of the United States to the extent that the interest or dividends	198
are exempt from federal income taxes but not from state income	199
taxes.	200

(3) Deduct interest or dividends on obligations of the United	201
States and its territories and possessions or of any authority,	202
commission, or instrumentality of the United States to the extent	203
that the interest or dividends are included in federal adjusted	204
gross income but exempt from state income taxes under the laws of	205
the United States.	206

(4) Deduct disability and survivor's benefits to the extent	207
included in federal adjusted gross income.	208

(5) Deduct benefits under Title II of the Social Security Act	209
and tier 1 railroad retirement benefits to the extent included in	210
federal adjusted gross income under section 86 of the Internal	211
Revenue Code.	212

(6) In the case of a taxpayer who is a beneficiary of a trust	213
that makes an accumulation distribution as defined in section 665	214
of the Internal Revenue Code, add, for the beneficiary's taxable	215
years beginning before 2002, the portion, if any, of such	216
distribution that does not exceed the undistributed net income of	217
the trust for the three taxable years preceding the taxable year	218
in which the distribution is made to the extent that the portion	219
was not included in the trust's taxable income for any of the	220
trust's taxable years beginning in 2002 or thereafter.	221
"Undistributed net income of a trust" means the taxable income of	222
the trust increased by (a)(i) the additions to adjusted gross	223
income required under division (A) of this section and (ii) the	224
personal exemptions allowed to the trust pursuant to section	225
642(b) of the Internal Revenue Code, and decreased by (b)(i) the	226
deductions to adjusted gross income required under division (A) of	227
this section, (ii) the amount of federal income taxes attributable	228
to such income, and (iii) the amount of taxable income that has	229
been included in the adjusted gross income of a beneficiary by	230
reason of a prior accumulation distribution. Any undistributed net	231
income included in the adjusted gross income of a beneficiary	232
shall reduce the undistributed net income of the trust commencing	233
with the earliest years of the accumulation period.	234

(7) Deduct the amount of wages and salaries, if any, not	235
otherwise allowable as a deduction but that would have been	236
allowable as a deduction in computing federal adjusted gross	237
income for the taxable year, had the targeted jobs credit allowed	238
and determined under sections 38, 51, and 52 of the Internal	239
Revenue Code not been in effect.	240

(8) Deduct any interest or interest equivalent on public	241
obligations and purchase obligations to the extent that the	242
interest or interest equivalent is included in federal adjusted	243
gross income.	244

(9) Add any loss or deduct any gain resulting from the sale,	245
exchange, or other disposition of public obligations to the extent	246
that the loss has been deducted or the gain has been included in	247
computing federal adjusted gross income.	248

(10) Deduct or add amounts, as provided under section 5747.70	249
of the Revised Code, related to contributions to variable college	250
savings program accounts made or tuition units purchased pursuant	251
to Chapter 3334. of the Revised Code.	252

(11)(a) Deduct, to the extent not otherwise allowable as a	253
deduction or exclusion in computing federal or Ohio adjusted gross	254
income for the taxable year, the amount the taxpayer paid during	255
the taxable year for medical care insurance and qualified	256
long-term care insurance for the taxpayer, the taxpayer's spouse,	257
and dependents. No deduction for medical care insurance under	258
division (A)(11) of this section shall be allowed either to any	259
taxpayer who is eligible to participate in any subsidized health	260
plan maintained by any employer of the taxpayer or of the	261
taxpayer's spouse, or to any taxpayer who is entitled to, or on	262
application would be entitled to, benefits under part A of Title	263
XVIII of the "Social Security Act," 49 Stat. 620 (1935), 42 U.S.C.	264
301, as amended. For the purposes of division (A)(11)(a) of this	265
section, "subsidized health plan" means a health plan for which	266
the employer pays any portion of the plan's cost. The deduction	267
allowed under division (A)(11)(a) of this section shall be the net	268
of any related premium refunds, related premium reimbursements, or	269
related insurance premium dividends received during the taxable	270
year.	271

(b) Deduct, to the extent not otherwise deducted or excluded	272
in computing federal or Ohio adjusted gross income during the	273
taxable year, the amount the taxpayer paid during the taxable	274
year, not compensated for by any insurance or otherwise, for	275
medical care of the taxpayer, the taxpayer's spouse, and	276
dependents, to the extent the expenses exceed seven and one-half	277
per cent of the taxpayer's federal adjusted gross income.	278

(c) Deduct, to the extent not otherwise deducted or excluded	279
in computing federal or Ohio adjusted gross income, any amount	280
included in federal adjusted gross income under section 105 or not	281
excluded under section 106 of the Internal Revenue Code solely	282
because it relates to an accident and health plan for a person who	283
otherwise would be a "qualifying relative" and thus a "dependent"	284
under section 152 of the Internal Revenue Code but for the fact	285
that the person fails to meet the income and support limitations	286
under section 152(d)(1)(B) and (C) of the Internal Revenue Code.	287

(d) For purposes of division (A)(11) of this section,	288
"medical care" has the meaning given in section 213 of the	289
Internal Revenue Code, subject to the special rules, limitations,	290
and exclusions set forth therein, and "qualified long-term care"	291
has the same meaning given in section 7702B(c) of the Internal	292
Revenue Code. Solely for purposes of divisions (A)(11)(a) and (c)	293
of this section, "dependent" includes a person who otherwise would	294
be a "qualifying relative" and thus a "dependent" under section	295
152 of the Internal Revenue Code but for the fact that the person	296
fails to meet the income and support limitations under section	297
152(d)(1)(B) and (C) of the Internal Revenue Code.	298

(12)(a) Deduct any amount included in federal adjusted gross	299
income solely because the amount represents a reimbursement or	300
refund of expenses that in any year the taxpayer had deducted as	301
an itemized deduction pursuant to section 63 of the Internal	302
Revenue Code and applicable United States department of the	303
treasury regulations. The deduction otherwise allowed under	304
division (A)(12)(a) of this section shall be reduced to the extent	305
the reimbursement is attributable to an amount the taxpayer	306
deducted under this section in any taxable year.	307

(b) Add any amount not otherwise included in Ohio adjusted	308
gross income for any taxable year to the extent that the amount is	309
attributable to the recovery during the taxable year of any amount	310
deducted or excluded in computing federal or Ohio adjusted gross	311
income in any taxable year.	312

(13) Deduct any portion of the deduction described in section	313
1341(a)(2) of the Internal Revenue Code, for repaying previously	314
reported income received under a claim of right, that meets both	315
of the following requirements:	316

(a) It is allowable for repayment of an item that was	317
included in the taxpayer's adjusted gross income for a prior	318
taxable year and did not qualify for a credit under division (A)	319
or (B) of section 5747.05 of the Revised Code for that year;	320

(b) It does not otherwise reduce the taxpayer's adjusted	321
gross income for the current or any other taxable year.	322

(14) Deduct an amount equal to the deposits made to, and net	323
investment earnings of, a medical savings account during the	324
taxable year, in accordance with section 3924.66 of the Revised	325
Code. The deduction allowed by division (A)(14) of this section	326
does not apply to medical savings account deposits and earnings	327
otherwise deducted or excluded for the current or any other	328
taxable year from the taxpayer's federal adjusted gross income.	329

(15)(a) Add an amount equal to the funds withdrawn from a	330
medical savings account during the taxable year, and the net	331
investment earnings on those funds, when the funds withdrawn were	332
used for any purpose other than to reimburse an account holder	333
for, or to pay, eligible medical expenses, in accordance with	334
section 3924.66 of the Revised Code;	335

(b) Add the amounts distributed from a medical savings	336
account under division (A)(2) of section 3924.68 of the Revised	337
Code during the taxable year.	338

(16) Add any amount claimed as a credit under section	339
5747.059 or 5747.65 of the Revised Code to the extent that such	340
amount satisfies either of the following:	341

(a) The amount was deducted or excluded from the computation	342
of the taxpayer's federal adjusted gross income as required to be	343
reported for the taxpayer's taxable year under the Internal	344
Revenue Code;	345

(b) The amount resulted in a reduction of the taxpayer's	346
federal adjusted gross income as required to be reported for any	347
of the taxpayer's taxable years under the Internal Revenue Code.	348

(17) Deduct the amount contributed by the taxpayer to an	349
individual development account program established by a county	350
department of job and family services pursuant to sections 329.11	351
to 329.14 of the Revised Code for the purpose of matching funds	352
deposited by program participants. On request of the tax	353
commissioner, the taxpayer shall provide any information that, in	354
the tax commissioner's opinion, is necessary to establish the	355
amount deducted under division (A)(17) of this section.	356

(18) Beginning in taxable year 2001 but not for any taxable	357
year beginning after December 31, 2005, if the taxpayer is married	358
and files a joint return and the combined federal adjusted gross	359
income of the taxpayer and the taxpayer's spouse for the taxable	360
year does not exceed one hundred thousand dollars, or if the	361
taxpayer is single and has a federal adjusted gross income for the	362
taxable year not exceeding fifty thousand dollars, deduct amounts	363
paid during the taxable year for qualified tuition and fees paid	364
to an eligible institution for the taxpayer, the taxpayer's	365
spouse, or any dependent of the taxpayer, who is a resident of	366
this state and is enrolled in or attending a program that	367
culminates in a degree or diploma at an eligible institution. The	368
deduction may be claimed only to the extent that qualified tuition	369
and fees are not otherwise deducted or excluded for any taxable	370
year from federal or Ohio adjusted gross income. The deduction may	371
not be claimed for educational expenses for which the taxpayer	372
claims a credit under section 5747.27 of the Revised Code.	373

(19) Add any reimbursement received during the taxable year	374
of any amount the taxpayer deducted under division (A)(18) of this	375
section in any previous taxable year to the extent the amount is	376
not otherwise included in Ohio adjusted gross income.	377

(20)(a)(i) Subject to divisions (A)(20)(a)(iii), (iv), and	378
(v) of this section, add five-sixths of the amount of depreciation	379
expense allowed by subsection (k) of section 168 of the Internal	380
Revenue Code, including the taxpayer's proportionate or	381
distributive share of the amount of depreciation expense allowed	382
by that subsection to a pass-through entity in which the taxpayer	383
has a direct or indirect ownership interest.	384

(ii) Subject to divisions (A)(20)(a)(iii), (iv), and (v) of	385
this section, add five-sixths of the amount of qualifying section	386
179 depreciation expense, including the taxpayer's proportionate	387
or distributive share of the amount of qualifying section 179	388
depreciation expense allowed to any pass-through entity in which	389
the taxpayer has a direct or indirect ownership interest.	390

(iii) Subject to division (A)(20)(a)(v) of this section, for	391
taxable years beginning in 2012 or thereafter, if the increase in	392
income taxes withheld by the taxpayer is equal to or greater than	393
ten per cent of income taxes withheld by the taxpayer during the	394
taxpayer's immediately preceding taxable year, "two-thirds" shall	395
be substituted for "five-sixths" for the purpose of divisions	396
(A)(20)(a)(i) and (ii) of this section.	397

(iv) Subject to division (A)(20)(a)(v) of this section, for	398
taxable years beginning in 2012 or thereafter, a taxpayer is not	399
required to add an amount under division (A)(20) of this section	400
if the increase in income taxes withheld by the taxpayer and by	401
any pass-through entity in which the taxpayer has a direct or	402
indirect ownership interest is equal to or greater than the sum of	403
(I) the amount of qualifying section 179 depreciation expense and	404
(II) the amount of depreciation expense allowed to the taxpayer by	405
subsection (k) of section 168 of the Internal Revenue Code, and	406
including the taxpayer's proportionate or distributive shares of	407
such amounts allowed to any such pass-through entities.	408

(v) If a taxpayer directly or indirectly incurs a net	409
operating loss for the taxable year for federal income tax	410
purposes, to the extent such loss resulted from depreciation	411
expense allowed by subsection (k) of section 168 of the Internal	412
Revenue Code and by qualifying section 179 depreciation expense,	413
"the entire" shall be substituted for "five-sixths of the" for the	414
purpose of divisions (A)(20)(a)(i) and (ii) of this section.	415

The tax commissioner, under procedures established by the	416
commissioner, may waive the add-backs related to a pass-through	417
entity if the taxpayer owns, directly or indirectly, less than	418
five per cent of the pass-through entity.	419

(b) Nothing in division (A)(20) of this section shall be	420
construed to adjust or modify the adjusted basis of any asset.	421

(c) To the extent the add-back required under division	422
(A)(20)(a) of this section is attributable to property generating	423
nonbusiness income or loss allocated under section 5747.20 of the	424
Revised Code, the add-back shall be sitused to the same location	425
as the nonbusiness income or loss generated by the property for	426
the purpose of determining the credit under division (A) of	427
section 5747.05 of the Revised Code. Otherwise, the add-back shall	428
be apportioned, subject to one or more of the four alternative	429
methods of apportionment enumerated in section 5747.21 of the	430
Revised Code.	431

(d) For the purposes of division (A)(20)(a)(v) of this	432
section, net operating loss carryback and carryforward shall not	433
include the allowance of any net operating loss deduction	434
carryback or carryforward to the taxable year to the extent such	435
loss resulted from depreciation allowed by section 168(k) of the	436
Internal Revenue Code and by the qualifying section 179	437
depreciation expense amount.	438

(e) For the purposes of divisions (A)(20) and (21) of this	439
section:	440

(i) "Income taxes withheld" means the total amount withheld	441
and remitted under sections 5747.06 and 5747.07 of the Revised	442
Code by an employer during the employer's taxable year.	443

(ii) "Increase in income taxes withheld" means the amount by	444
which the amount of income taxes withheld by an employer during	445
the employer's current taxable year exceeds the amount of income	446
taxes withheld by that employer during the employer's immediately	447
preceding taxable year.	448

(iii) "Qualifying section 179 depreciation expense" means the	449
difference between (I) the amount of depreciation expense directly	450
or indirectly allowed to a taxpayer under section 179 of the	451
Internal Revised Code, and (II) the amount of depreciation expense	452
directly or indirectly allowed to the taxpayer under section 179	453
of the Internal Revenue Code as that section existed on December	454
31, 2002.	455

(21)(a) If the taxpayer was required to add an amount under	456
division (A)(20)(a) of this section for a taxable year, deduct one	457
of the following:	458

(i) One-fifth of the amount so added for each of the five	459
succeeding taxable years if the amount so added was five-sixths of	460
qualifying section 179 depreciation expense or depreciation	461
expense allowed by subsection (k) of section 168 of the Internal	462
Revenue Code;	463

(ii) One-half of the amount so added for each of the two	464
succeeding taxable years if the amount so added was two-thirds of	465
such depreciation expense;	466

(iii) One-sixth of the amount so added for each of the six	467
succeeding taxable years if the entire amount of such depreciation	468
expense was so added.	469

(b) If the amount deducted under division (A)(21)(a) of this	470
section is attributable to an add-back allocated under division	471
(A)(20)(c) of this section, the amount deducted shall be sitused	472
to the same location. Otherwise, the add-back shall be apportioned	473
using the apportionment factors for the taxable year in which the	474
deduction is taken, subject to one or more of the four alternative	475
methods of apportionment enumerated in section 5747.21 of the	476
Revised Code.	477

(c) No deduction is available under division (A)(21)(a) of	478
this section with regard to any depreciation allowed by section	479
168(k) of the Internal Revenue Code and by the qualifying section	480
179 depreciation expense amount to the extent that such	481
depreciation results in or increases a federal net operating loss	482
carryback or carryforward. If no such deduction is available for a	483
taxable year, the taxpayer may carry forward the amount not	484
deducted in such taxable year to the next taxable year and add	485
that amount to any deduction otherwise available under division	486
(A)(21)(a) of this section for that next taxable year. The	487
carryforward of amounts not so deducted shall continue until the	488
entire addition required by division (A)(20)(a) of this section	489
has been deducted.	490

(d) No refund shall be allowed as a result of adjustments	491
made by division (A)(21) of this section.	492

(22) Deduct, to the extent not otherwise deducted or excluded	493
in computing federal or Ohio adjusted gross income for the taxable	494
year, the amount the taxpayer received during the taxable year as	495
reimbursement for life insurance premiums under section 5919.31 of	496
the Revised Code.	497

(23) Deduct, to the extent not otherwise deducted or excluded	498
in computing federal or Ohio adjusted gross income for the taxable	499
year, the amount the taxpayer received during the taxable year as	500
a death benefit paid by the adjutant general under section 5919.33	501
of the Revised Code.	502

(24) Deduct, to the extent included in federal adjusted gross	503
income and not otherwise allowable as a deduction or exclusion in	504
computing federal or Ohio adjusted gross income for the taxable	505
year, military pay and allowances received by the taxpayer during	506
the taxable year for active duty service in the United States	507
army, air force, navy, marine corps, or coast guard or reserve	508
components thereof or the national guard. The deduction may not be	509
claimed for military pay and allowances received by the taxpayer	510
while the taxpayer is stationed in this state.	511

(25) Deduct, to the extent not otherwise allowable as a	512
deduction or exclusion in computing federal or Ohio adjusted gross	513
income for the taxable year and not otherwise compensated for by	514
any other source, the amount of qualified organ donation expenses	515
incurred by the taxpayer during the taxable year, not to exceed	516
ten thousand dollars. A taxpayer may deduct qualified organ	517
donation expenses only once for all taxable years beginning with	518
taxable years beginning in 2007.	519

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

520

(a) "Human organ" means all or any portion of a human liver,	521
pancreas, kidney, intestine, or lung, and any portion of human	522
bone marrow.	523

(b) "Qualified organ donation expenses" means travel	524
expenses, lodging expenses, and wages and salary forgone by a	525
taxpayer in connection with the taxpayer's donation, while living,	526
of one or more of the taxpayer's human organs to another human	527
being.	528

(26) Deduct, to the extent not otherwise deducted or excluded	529
in computing federal or Ohio adjusted gross income for the taxable	530
year, amounts received by the taxpayer as retired personnel pay	531
for service in the uniformed services or reserve components	532
thereof, or the national guard, or received by the surviving	533
spouse or former spouse of such a taxpayer under the survivor	534
benefit plan on account of such a taxpayer's death. If the	535
taxpayer receives income on account of retirement paid under the	536
federal civil service retirement system or federal employees	537
retirement system, or under any successor retirement program	538
enacted by the congress of the United States that is established	539
and maintained for retired employees of the United States	540
government, and such retirement income is based, in whole or in	541
part, on credit for the taxpayer's uniformed service, the	542
deduction allowed under this division shall include only that	543
portion of such retirement income that is attributable to the	544
taxpayer's uniformed service, to the extent that portion of such	545
retirement income is otherwise included in federal adjusted gross	546
income and is not otherwise deducted under this section. Any	547
amount deducted under division (A)(26) of this section is not	548
included in a taxpayer's adjusted gross income for the purposes of	549
section 5747.055 of the Revised Code. No amount may be deducted	550
under division (A)(26) of this section on the basis of which a	551
credit was claimed under section 5747.055 of the Revised Code.	552

(27) Deduct, to the extent not otherwise deducted or excluded	553
in computing federal or Ohio adjusted gross income for the taxable	554
year, the amount the taxpayer received during the taxable year	555
from the military injury relief fund created in section 5101.98 of	556
the Revised Code.	557

(28) Deduct, to the extent not otherwise deducted or excluded	558
in computing federal or Ohio adjusted gross income for the taxable	559
year, the amount the taxpayer received as a veterans bonus during	560
the taxable year from the Ohio department of veterans services as	561
authorized by Section 2r of Article VIII, Ohio Constitution.	562

(29) Deduct, to the extent not otherwise deducted or excluded	563
in computing federal or Ohio adjusted gross income for the taxable	564
year, any income derived from a transfer agreement or from the	565
enterprise transferred under that agreement under section 4313.02	566
of the Revised Code.	567

(30) Deduct, to the extent not otherwise deducted or excluded	568
in computing federal or Ohio adjusted gross income for the taxable	569
year, Ohio college opportunity or federal Pell grant amounts	570
received by the taxpayer or the taxpayer's spouse or dependent	571
pursuant to section 3333.122 of the Revised Code or 20 U.S.C.	572
1070a, et seq., and used to pay room or board furnished by the	573
educational institution for which the grant was awarded at the	574
institution's facilities, including meal plans administered by the	575
institution. For the purposes of this division, receipt of a grant	576
includes the distribution of a grant directly to an educational	577
institution and the crediting of the grant to the enrollee's	578
account with the institution.	579

(31) Deduct one-half of the taxpayer's Ohio small business	580
investor income, the deduction not to exceed sixty-two thousand	581
five hundred dollars for each spouse if spouses file separate	582
returns under section 5747.08 of the Revised Code or one hundred	583
twenty-five thousand dollars for all other taxpayers. No	584
pass-through entity may claim a deduction under this division.	585

For the purposes of this division, "Ohio small business	586
investor income" means the portion of a taxpayer's adjusted gross	587
income that is business income reduced by deductions from business	588
income and apportioned or allocated to this state under sections	589
5747.21 and 5747.22 of the Revised Code, to the extent not	590
otherwise deducted or excluded in computing federal or Ohio	591
adjusted gross income for the taxable year.	592

(32) Adjust the amount as required in section 5747.014 of the	593
Revised Code.	594

(B) "Business income" means income, including gain or loss,	595
arising from transactions, activities, and sources in the regular	596
course of a trade or business and includes income, gain, or loss	597
from real property, tangible property, and intangible property if	598
the acquisition, rental, management, and disposition of the	599
property constitute integral parts of the regular course of a	600
trade or business operation. "Business income" includes income,	601
including gain or loss, from a partial or complete liquidation of	602
a business, including, but not limited to, gain or loss from the	603
sale or other disposition of goodwill.	604

(C) "Nonbusiness income" means all income other than business	605
income and may include, but is not limited to, compensation, rents	606
and royalties from real or tangible personal property, capital	607
gains, interest, dividends and distributions, patent or copyright	608
royalties, or lottery winnings, prizes, and awards.	609

(D) "Compensation" means any form of remuneration paid to an	610
employee for personal services.	611

(E) "Fiduciary" means a guardian, trustee, executor,	612
administrator, receiver, conservator, or any other person acting	613
in any fiduciary capacity for any individual, trust, or estate.	614

(F) "Fiscal year" means an accounting period of twelve months	615
ending on the last day of any month other than December.	616

(G) "Individual" means any natural person.

617

(H) "Internal Revenue Code" means the "Internal Revenue Code	618
of 1986," 100 Stat. 2085, 26 U.S.C.A. 1, as amended.	619

(I) "Resident" means any of the following, provided that	620
division (I)(3) of this section applies only to taxable years of a	621
trust beginning in 2002 or thereafter:	622

(1) An individual who is domiciled in this state, subject to	623
section 5747.24 of the Revised Code;	624

(2) The estate of a decedent who at the time of death was	625
domiciled in this state. The domicile tests of section 5747.24 of	626
the Revised Code are not controlling for purposes of division	627
(I)(2) of this section.	628

(3) A trust that, in whole or part, resides in this state. If	629
only part of a trust resides in this state, the trust is a	630
resident only with respect to that part.	631

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

632

(a) A trust resides in this state for the trust's current	633
taxable year to the extent, as described in division (I)(3)(d) of	634
this section, that the trust consists directly or indirectly, in	635
whole or in part, of assets, net of any related liabilities, that	636
were transferred, or caused to be transferred, directly or	637
indirectly, to the trust by any of the following:	638

(i) A person, a court, or a governmental entity or	639
instrumentality on account of the death of a decedent, but only if	640
the trust is described in division (I)(3)(e)(i) or (ii) of this	641
section;	642

(ii) A person who was domiciled in this state for the	643
purposes of this chapter when the person directly or indirectly	644
transferred assets to an irrevocable trust, but only if at least	645
one of the trust's qualifying beneficiaries is domiciled in this	646
state for the purposes of this chapter during all or some portion	647
of the trust's current taxable year;	648

(iii) A person who was domiciled in this state for the	649
purposes of this chapter when the trust document or instrument or	650
part of the trust document or instrument became irrevocable, but	651
only if at least one of the trust's qualifying beneficiaries is a	652
resident domiciled in this state for the purposes of this chapter	653
during all or some portion of the trust's current taxable year. If	654
a trust document or instrument became irrevocable upon the death	655
of a person who at the time of death was domiciled in this state	656
for purposes of this chapter, that person is a person described in	657
division (I)(3)(a)(iii) of this section.	658

(b) A trust is irrevocable to the extent that the transferor	659
is not considered to be the owner of the net assets of the trust	660
under sections 671 to 678 of the Internal Revenue Code.	661

(c) With respect to a trust other than a charitable lead	662
trust, "qualifying beneficiary" has the same meaning as "potential	663
current beneficiary" as defined in section 1361(e)(2) of the	664
Internal Revenue Code, and with respect to a charitable lead trust	665
"qualifying beneficiary" is any current, future, or contingent	666
beneficiary, but with respect to any trust "qualifying	667
beneficiary" excludes a person or a governmental entity or	668
instrumentality to any of which a contribution would qualify for	669
the charitable deduction under section 170 of the Internal Revenue	670
Code.	671

(d) For the purposes of division (I)(3)(a) of this section,	672
the extent to which a trust consists directly or indirectly, in	673
whole or in part, of assets, net of any related liabilities, that	674
were transferred directly or indirectly, in whole or part, to the	675
trust by any of the sources enumerated in that division shall be	676
ascertained by multiplying the fair market value of the trust's	677
assets, net of related liabilities, by the qualifying ratio, which	678
shall be computed as follows:	679

(i) The first time the trust receives assets, the numerator	680
of the qualifying ratio is the fair market value of those assets	681
at that time, net of any related liabilities, from sources	682
enumerated in division (I)(3)(a) of this section. The denominator	683
of the qualifying ratio is the fair market value of all the	684
trust's assets at that time, net of any related liabilities.	685

(ii) Each subsequent time the trust receives assets, a	686
revised qualifying ratio shall be computed. The numerator of the	687
revised qualifying ratio is the sum of (1) the fair market value	688
of the trust's assets immediately prior to the subsequent	689
transfer, net of any related liabilities, multiplied by the	690
qualifying ratio last computed without regard to the subsequent	691
transfer, and (2) the fair market value of the subsequently	692
transferred assets at the time transferred, net of any related	693
liabilities, from sources enumerated in division (I)(3)(a) of this	694
section. The denominator of the revised qualifying ratio is the	695
fair market value of all the trust's assets immediately after the	696
subsequent transfer, net of any related liabilities.	697

(iii) Whether a transfer to the trust is by or from any of	698
the sources enumerated in division (I)(3)(a) of this section shall	699
be ascertained without regard to the domicile of the trust's	700
beneficiaries.	701

(e) For the purposes of division (I)(3)(a)(i) of this	702
section:	703

(i) A trust is described in division (I)(3)(e)(i) of this	704
section if the trust is a testamentary trust and the testator of	705
that testamentary trust was domiciled in this state at the time of	706
the testator's death for purposes of the taxes levied under	707
Chapter 5731. of the Revised Code.	708

(ii) A trust is described in division (I)(3)(e)(ii) of this	709
section if the transfer is a qualifying transfer described in any	710
of divisions (I)(3)(f)(i) to (vi) of this section, the trust is an	711
irrevocable inter vivos trust, and at least one of the trust's	712
qualifying beneficiaries is domiciled in this state for purposes	713
of this chapter during all or some portion of the trust's current	714
taxable year.	715

(f) For the purposes of division (I)(3)(e)(ii) of this	716
section, a "qualifying transfer" is a transfer of assets, net of	717
any related liabilities, directly or indirectly to a trust, if the	718
transfer is described in any of the following:	719

(i) The transfer is made to a trust, created by the decedent	720
before the decedent's death and while the decedent was domiciled	721
in this state for the purposes of this chapter, and, prior to the	722
death of the decedent, the trust became irrevocable while the	723
decedent was domiciled in this state for the purposes of this	724
chapter.	725

(ii) The transfer is made to a trust to which the decedent,	726
prior to the decedent's death, had directly or indirectly	727
transferred assets, net of any related liabilities, while the	728
decedent was domiciled in this state for the purposes of this	729
chapter, and prior to the death of the decedent the trust became	730
irrevocable while the decedent was domiciled in this state for the	731
purposes of this chapter.	732

(iii) The transfer is made on account of a contractual	733
relationship existing directly or indirectly between the	734
transferor and either the decedent or the estate of the decedent	735
at any time prior to the date of the decedent's death, and the	736
decedent was domiciled in this state at the time of death for	737
purposes of the taxes levied under Chapter 5731. of the Revised	738
Code.	739

(iv) The transfer is made to a trust on account of a	740
contractual relationship existing directly or indirectly between	741
the transferor and another person who at the time of the	742
decedent's death was domiciled in this state for purposes of this	743
chapter.	744

(v) The transfer is made to a trust on account of the will of	745
a testator who was domiciled in this state at the time of the	746
testator's death for purposes of the taxes levied under Chapter	747
5731. of the Revised Code.	748

(vi) The transfer is made to a trust created by or caused to	749
be created by a court, and the trust was directly or indirectly	750
created in connection with or as a result of the death of an	751
individual who, for purposes of the taxes levied under Chapter	752
5731. of the Revised Code, was domiciled in this state at the time	753
of the individual's death.	754

(g) The tax commissioner may adopt rules to ascertain the	755
part of a trust residing in this state.	756

(J) "Nonresident" means an individual or estate that is not a	757
resident. An individual who is a resident for only part of a	758
taxable year is a nonresident for the remainder of that taxable	759
year.	760

(K) "Pass-through entity" has the same meaning as in section	761
5733.04 of the Revised Code.	762

(L) "Return" means the notifications and reports required to	763
be filed pursuant to this chapter for the purpose of reporting the	764
tax due and includes declarations of estimated tax when so	765
required.	766

(M) "Taxable year" means the calendar year or the taxpayer's	767
fiscal year ending during the calendar year, or fractional part	768
thereof, upon which the adjusted gross income is calculated	769
pursuant to this chapter.	770

(N) "Taxpayer" means any person subject to the tax imposed by	771
section 5747.02 of the Revised Code or any pass-through entity	772
that makes the election under division (D) of section 5747.08 of	773
the Revised Code.	774

(O) "Dependents" means dependents as defined in the Internal	775
Revenue Code and as claimed in the taxpayer's federal income tax	776
return for the taxable year or which the taxpayer would have been	777
permitted to claim had the taxpayer filed a federal income tax	778
return.	779

(P) "Principal county of employment" means, in the case of a	780
nonresident, the county within the state in which a taxpayer	781
performs services for an employer or, if those services are	782
performed in more than one county, the county in which the major	783
portion of the services are performed.	784

(Q) As used in sections 5747.50 to 5747.55 of the Revised	785
Code:	786

(1) "Subdivision" means any county, municipal corporation,	787
park district, or township.	788

(2) "Essential local government purposes" includes all	789
functions that any subdivision is required by general law to	790
exercise, including like functions that are exercised under a	791
charter adopted pursuant to the Ohio Constitution.	792

(R) "Overpayment" means any amount already paid that exceeds	793
the figure determined to be the correct amount of the tax.	794

(S) "Taxable income" or "Ohio taxable income" applies only to	795
estates and trusts, and means federal taxable income, as defined	796
and used in the Internal Revenue Code, adjusted as follows:	797

(1) Add interest or dividends, net of ordinary, necessary,	798
and reasonable expenses not deducted in computing federal taxable	799
income, on obligations or securities of any state or of any	800
political subdivision or authority of any state, other than this	801
state and its subdivisions and authorities, but only to the extent	802
that such net amount is not otherwise includible in Ohio taxable	803
income and is described in either division (S)(1)(a) or (b) of	804
this section:	805

(a) The net amount is not attributable to the S portion of an	806
electing small business trust and has not been distributed to	807
beneficiaries for the taxable year;	808

(b) The net amount is attributable to the S portion of an	809
electing small business trust for the taxable year.	810

(2) Add interest or dividends, net of ordinary, necessary,	811
and reasonable expenses not deducted in computing federal taxable	812
income, on obligations of any authority, commission,	813
instrumentality, territory, or possession of the United States to	814
the extent that the interest or dividends are exempt from federal	815
income taxes but not from state income taxes, but only to the	816
extent that such net amount is not otherwise includible in Ohio	817
taxable income and is described in either division (S)(1)(a) or	818
(b) of this section;	819

(3) Add the amount of personal exemption allowed to the	820
estate pursuant to section 642(b) of the Internal Revenue Code;	821

(4) Deduct interest or dividends, net of related expenses	822
deducted in computing federal taxable income, on obligations of	823
the United States and its territories and possessions or of any	824
authority, commission, or instrumentality of the United States to	825
the extent that the interest or dividends are exempt from state	826
taxes under the laws of the United States, but only to the extent	827
that such amount is included in federal taxable income and is	828
described in either division (S)(1)(a) or (b) of this section;	829

(5) Deduct the amount of wages and salaries, if any, not	830
otherwise allowable as a deduction but that would have been	831
allowable as a deduction in computing federal taxable income for	832
the taxable year, had the targeted jobs credit allowed under	833
sections 38, 51, and 52 of the Internal Revenue Code not been in	834
effect, but only to the extent such amount relates either to	835
income included in federal taxable income for the taxable year or	836
to income of the S portion of an electing small business trust for	837
the taxable year;	838

(6) Deduct any interest or interest equivalent, net of	839
related expenses deducted in computing federal taxable income, on	840
public obligations and purchase obligations, but only to the	841
extent that such net amount relates either to income included in	842
federal taxable income for the taxable year or to income of the S	843
portion of an electing small business trust for the taxable year;	844

(7) Add any loss or deduct any gain resulting from sale,	845
exchange, or other disposition of public obligations to the extent	846
that such loss has been deducted or such gain has been included in	847
computing either federal taxable income or income of the S portion	848
of an electing small business trust for the taxable year;	849

(8) Except in the case of the final return of an estate, add	850
any amount deducted by the taxpayer on both its Ohio estate tax	851
return pursuant to section 5731.14 of the Revised Code, and on its	852
federal income tax return in determining federal taxable income;	853

(9)(a) Deduct any amount included in federal taxable income	854
solely because the amount represents a reimbursement or refund of	855
expenses that in a previous year the decedent had deducted as an	856
itemized deduction pursuant to section 63 of the Internal Revenue	857
Code and applicable treasury regulations. The deduction otherwise	858
allowed under division (S)(9)(a) of this section shall be reduced	859
to the extent the reimbursement is attributable to an amount the	860
taxpayer or decedent deducted under this section in any taxable	861
year.	862

(b) Add any amount not otherwise included in Ohio taxable	863
income for any taxable year to the extent that the amount is	864
attributable to the recovery during the taxable year of any amount	865
deducted or excluded in computing federal or Ohio taxable income	866
in any taxable year, but only to the extent such amount has not	867
been distributed to beneficiaries for the taxable year.	868

(10) Deduct any portion of the deduction described in section	869
1341(a)(2) of the Internal Revenue Code, for repaying previously	870
reported income received under a claim of right, that meets both	871
of the following requirements:	872

(a) It is allowable for repayment of an item that was	873
included in the taxpayer's taxable income or the decedent's	874
adjusted gross income for a prior taxable year and did not qualify	875
for a credit under division (A) or (B) of section 5747.05 of the	876
Revised Code for that year.	877

(b) It does not otherwise reduce the taxpayer's taxable	878
income or the decedent's adjusted gross income for the current or	879
any other taxable year.	880

(11) Add any amount claimed as a credit under section	881
5747.059 or 5747.65 of the Revised Code to the extent that the	882
amount satisfies either of the following:	883

(a) The amount was deducted or excluded from the computation	884
of the taxpayer's federal taxable income as required to be	885
reported for the taxpayer's taxable year under the Internal	886
Revenue Code;	887

(b) The amount resulted in a reduction in the taxpayer's	888
federal taxable income as required to be reported for any of the	889
taxpayer's taxable years under the Internal Revenue Code.	890

(12) Deduct any amount, net of related expenses deducted in	891
computing federal taxable income, that a trust is required to	892
report as farm income on its federal income tax return, but only	893
if the assets of the trust include at least ten acres of land	894
satisfying the definition of "land devoted exclusively to	895
agricultural use" under section 5713.30 of the Revised Code,	896
regardless of whether the land is valued for tax purposes as such	897
land under sections 5713.30 to 5713.38 of the Revised Code. If the	898
trust is a pass-through entity investor, section 5747.231 of the	899
Revised Code applies in ascertaining if the trust is eligible to	900
claim the deduction provided by division (S)(12) of this section	901
in connection with the pass-through entity's farm income.	902

Except for farm income attributable to the S portion of an	903
electing small business trust, the deduction provided by division	904
(S)(12) of this section is allowed only to the extent that the	905
trust has not distributed such farm income. Division (S)(12) of	906
this section applies only to taxable years of a trust beginning in	907
2002 or thereafter.	908

(13) Add the net amount of income described in section 641(c)	909
of the Internal Revenue Code to the extent that amount is not	910
included in federal taxable income.	911

(14) Add or deduct the amount the taxpayer would be required	912
to add or deduct under division (A)(20) or (21) of this section if	913
the taxpayer's Ohio taxable income were computed in the same	914
manner as an individual's Ohio adjusted gross income is computed	915
under this section. In the case of a trust, division (S)(14) of	916
this section applies only to any of the trust's taxable years	917
beginning in 2002 or thereafter.	918

(T) "School district income" and "school district income tax"	919
have the same meanings as in section 5748.01 of the Revised Code.	920

(U) As used in divisions (A)(8), (A)(9), (S)(6), and (S)(7)	921
of this section, "public obligations," "purchase obligations," and	922
"interest or interest equivalent" have the same meanings as in	923
section 5709.76 of the Revised Code.	924

(V) "Limited liability company" means any limited liability	925
company formed under Chapter 1705. of the Revised Code or under	926
the laws of any other state.	927

(W) "Pass-through entity investor" means any person who,	928
during any portion of a taxable year of a pass-through entity, is	929
a partner, member, shareholder, or equity investor in that	930
pass-through entity.	931

(X) "Banking day" has the same meaning as in section 1304.01	932
of the Revised Code.	933

(Y) "Month" means a calendar month.

934

(Z) "Quarter" means the first three months, the second three	935
months, the third three months, or the last three months of the	936
taxpayer's taxable year.	937

(AA)(1) "Eligible institution" means a state university or	938
state institution of higher education as defined in section	939
3345.011 of the Revised Code, or a private, nonprofit college,	940
university, or other post-secondary institution located in this	941
state that possesses a certificate of authorization issued by the	942
Ohio board of regents pursuant to Chapter 1713. of the Revised	943
Code or a certificate of registration issued by the state board of	944
career colleges and schools under Chapter 3332. of the Revised	945
Code.	946

(2) "Qualified tuition and fees" means tuition and fees	947
imposed by an eligible institution as a condition of enrollment or	948
attendance, not exceeding two thousand five hundred dollars in	949
each of the individual's first two years of post-secondary	950
education. If the individual is a part-time student, "qualified	951
tuition and fees" includes tuition and fees paid for the academic	952
equivalent of the first two years of post-secondary education	953
during a maximum of five taxable years, not exceeding a total of	954
five thousand dollars. "Qualified tuition and fees" does not	955
include:	956

(a) Expenses for any course or activity involving sports,	957
games, or hobbies unless the course or activity is part of the	958
individual's degree or diploma program;	959

(b) The cost of books, room and board, student activity fees,	960
athletic fees, insurance expenses, or other expenses unrelated to	961
the individual's academic course of instruction;	962

(c) Tuition, fees, or other expenses paid or reimbursed	963
through an employer, scholarship, grant in aid, or other	964
educational benefit program.	965

(BB)(1) "Modified business income" means the business income	966
included in a trust's Ohio taxable income after such taxable	967
income is first reduced by the qualifying trust amount, if any.	968

(2) "Qualifying trust amount" of a trust means capital gains	969
and losses from the sale, exchange, or other disposition of equity	970
or ownership interests in, or debt obligations of, a qualifying	971
investee to the extent included in the trust's Ohio taxable	972
income, but only if the following requirements are satisfied:	973

(a) The book value of the qualifying investee's physical	974
assets in this state and everywhere, as of the last day of the	975
qualifying investee's fiscal or calendar year ending immediately	976
prior to the date on which the trust recognizes the gain or loss,	977
is available to the trust.	978

(b) The requirements of section 5747.011 of the Revised Code	979
are satisfied for the trust's taxable year in which the trust	980
recognizes the gain or loss.	981

Any gain or loss that is not a qualifying trust amount is	982
modified business income, qualifying investment income, or	983
modified nonbusiness income, as the case may be.	984

(3) "Modified nonbusiness income" means a trust's Ohio	985
taxable income other than modified business income, other than the	986
qualifying trust amount, and other than qualifying investment	987
income, as defined in section 5747.012 of the Revised Code, to the	988
extent such qualifying investment income is not otherwise part of	989
modified business income.	990

(4) "Modified Ohio taxable income" applies only to trusts,	991
and means the sum of the amounts described in divisions (BB)(4)(a)	992
to (c) of this section:	993

(a) The fraction, calculated under section 5747.013, and	994
applying section 5747.231 of the Revised Code, multiplied by the	995
sum of the following amounts:	996

(i) The trust's modified business income;

997

(ii) The trust's qualifying investment income, as defined in	998
section 5747.012 of the Revised Code, but only to the extent the	999
qualifying investment income does not otherwise constitute	1000
modified business income and does not otherwise constitute a	1001
qualifying trust amount.	1002

(b) The qualifying trust amount multiplied by a fraction, the	1003
numerator of which is the sum of the book value of the qualifying	1004
investee's physical assets in this state on the last day of the	1005
qualifying investee's fiscal or calendar year ending immediately	1006
prior to the day on which the trust recognizes the qualifying	1007
trust amount, and the denominator of which is the sum of the book	1008
value of the qualifying investee's total physical assets	1009
everywhere on the last day of the qualifying investee's fiscal or	1010
calendar year ending immediately prior to the day on which the	1011
trust recognizes the qualifying trust amount. If, for a taxable	1012
year, the trust recognizes a qualifying trust amount with respect	1013
to more than one qualifying investee, the amount described in	1014
division (BB)(4)(b) of this section shall equal the sum of the	1015
products so computed for each such qualifying investee.	1016

(c)(i) With respect to a trust or portion of a trust that is	1017
a resident as ascertained in accordance with division (I)(3)(d) of	1018
this section, its modified nonbusiness income.	1019

(ii) With respect to a trust or portion of a trust that is	1020
not a resident as ascertained in accordance with division	1021
(I)(3)(d) of this section, the amount of its modified nonbusiness	1022
income satisfying the descriptions in divisions (B)(2) to (5) of	1023
section 5747.20 of the Revised Code, except as otherwise provided	1024
in division (BB)(4)(c)(ii) of this section. With respect to a	1025
trust or portion of a trust that is not a resident as ascertained	1026
in accordance with division (I)(3)(d) of this section, the trust's	1027
portion of modified nonbusiness income recognized from the sale,	1028
exchange, or other disposition of a debt interest in or equity	1029
interest in a section 5747.212 entity, as defined in section	1030
5747.212 of the Revised Code, without regard to division (A) of	1031
that section, shall not be allocated to this state in accordance	1032
with section 5747.20 of the Revised Code but shall be apportioned	1033
to this state in accordance with division (B) of section 5747.212	1034
of the Revised Code without regard to division (A) of that	1035
section.	1036

If the allocation and apportionment of a trust's income under	1037
divisions (BB)(4)(a) and (c) of this section do not fairly	1038
represent the modified Ohio taxable income of the trust in this	1039
state, the alternative methods described in division (C) of	1040
section 5747.21 of the Revised Code may be applied in the manner	1041
and to the same extent provided in that section.	1042

(5)(a) Except as set forth in division (BB)(5)(b) of this	1043
section, "qualifying investee" means a person in which a trust has	1044
an equity or ownership interest, or a person or unit of government	1045
the debt obligations of either of which are owned by a trust. For	1046
the purposes of division (BB)(2)(a) of this section and for the	1047
purpose of computing the fraction described in division (BB)(4)(b)	1048
of this section, all of the following apply:	1049

(i) If the qualifying investee is a member of a qualifying	1050
controlled group on the last day of the qualifying investee's	1051
fiscal or calendar year ending immediately prior to the date on	1052
which the trust recognizes the gain or loss, then "qualifying	1053
investee" includes all persons in the qualifying controlled group	1054
on such last day.	1055

(ii) If the qualifying investee, or if the qualifying	1056
investee and any members of the qualifying controlled group of	1057
which the qualifying investee is a member on the last day of the	1058
qualifying investee's fiscal or calendar year ending immediately	1059
prior to the date on which the trust recognizes the gain or loss,	1060
separately or cumulatively own, directly or indirectly, on the	1061
last day of the qualifying investee's fiscal or calendar year	1062
ending immediately prior to the date on which the trust recognizes	1063
the qualifying trust amount, more than fifty per cent of the	1064
equity of a pass-through entity, then the qualifying investee and	1065
the other members are deemed to own the proportionate share of the	1066
pass-through entity's physical assets which the pass-through	1067
entity directly or indirectly owns on the last day of the	1068
pass-through entity's calendar or fiscal year ending within or	1069
with the last day of the qualifying investee's fiscal or calendar	1070
year ending immediately prior to the date on which the trust	1071
recognizes the qualifying trust amount.	1072

(iii) For the purposes of division (BB)(5)(a)(iii) of this	1073
section, "upper level pass-through entity" means a pass-through	1074
entity directly or indirectly owning any equity of another	1075
pass-through entity, and "lower level pass-through entity" means	1076
that other pass-through entity.	1077

An upper level pass-through entity, whether or not it is also	1078
a qualifying investee, is deemed to own, on the last day of the	1079
upper level pass-through entity's calendar or fiscal year, the	1080
proportionate share of the lower level pass-through entity's	1081
physical assets that the lower level pass-through entity directly	1082
or indirectly owns on the last day of the lower level pass-through	1083
entity's calendar or fiscal year ending within or with the last	1084
day of the upper level pass-through entity's fiscal or calendar	1085
year. If the upper level pass-through entity directly and	1086
indirectly owns less than fifty per cent of the equity of the	1087
lower level pass-through entity on each day of the upper level	1088
pass-through entity's calendar or fiscal year in which or with	1089
which ends the calendar or fiscal year of the lower level	1090
pass-through entity and if, based upon clear and convincing	1091
evidence, complete information about the location and cost of the	1092
physical assets of the lower pass-through entity is not available	1093
to the upper level pass-through entity, then solely for purposes	1094
of ascertaining if a gain or loss constitutes a qualifying trust	1095
amount, the upper level pass-through entity shall be deemed as	1096
owning no equity of the lower level pass-through entity for each	1097
day during the upper level pass-through entity's calendar or	1098
fiscal year in which or with which ends the lower level	1099
pass-through entity's calendar or fiscal year. Nothing in division	1100
(BB)(5)(a)(iii) of this section shall be construed to provide for	1101
any deduction or exclusion in computing any trust's Ohio taxable	1102
income.	1103

(b) With respect to a trust that is not a resident for the	1104
taxable year and with respect to a part of a trust that is not a	1105
resident for the taxable year, "qualifying investee" for that	1106
taxable year does not include a C corporation if both of the	1107
following apply:	1108

(i) During the taxable year the trust or part of the trust	1109
recognizes a gain or loss from the sale, exchange, or other	1110
disposition of equity or ownership interests in, or debt	1111
obligations of, the C corporation.	1112

(ii) Such gain or loss constitutes nonbusiness income.

1113

(6) "Available" means information is such that a person is	1114
able to learn of the information by the due date plus extensions,	1115
if any, for filing the return for the taxable year in which the	1116
trust recognizes the gain or loss.	1117

(CC) "Qualifying controlled group" has the same meaning as in	1118
section 5733.04 of the Revised Code.	1119

(DD) "Related member" has the same meaning as in section	1120
5733.042 of the Revised Code.	1121

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

1122

(a) "Qualifying person" means any person other than a	1123
qualifying corporation.	1124

(b) "Qualifying corporation" means any person classified for	1125
federal income tax purposes as an association taxable as a	1126
corporation, except either of the following:	1127

(i) A corporation that has made an election under subchapter	1128
S, chapter one, subtitle A, of the Internal Revenue Code for its	1129
taxable year ending within, or on the last day of, the investor's	1130
taxable year;	1131

(ii) A subsidiary that is wholly owned by any corporation	1132
that has made an election under subchapter S, chapter one,	1133
subtitle A of the Internal Revenue Code for its taxable year	1134
ending within, or on the last day of, the investor's taxable year.	1135

(2) For the purposes of this chapter, unless expressly stated	1136
otherwise, no qualifying person indirectly owns any asset directly	1137
or indirectly owned by any qualifying corporation.	1138

(FF) For purposes of this chapter and Chapter 5751. of the	1139
Revised Code:	1140

(1) "Trust" does not include a qualified pre-income tax	1141
trust.	1142

(2) A "qualified pre-income tax trust" is any pre-income tax	1143
trust that makes a qualifying pre-income tax trust election as	1144
described in division (FF)(3) of this section.	1145

(3) A "qualifying pre-income tax trust election" is an	1146
election by a pre-income tax trust to subject to the tax imposed	1147
by section 5751.02 of the Revised Code the pre-income tax trust	1148
and all pass-through entities of which the trust owns or controls,	1149
directly, indirectly, or constructively through related interests,	1150
five per cent or more of the ownership or equity interests. The	1151
trustee shall notify the tax commissioner in writing of the	1152
election on or before April 15, 2006. The election, if timely	1153
made, shall be effective on and after January 1, 2006, and shall	1154
apply for all tax periods and tax years until revoked by the	1155
trustee of the trust.	1156

(4) A "pre-income tax trust" is a trust that satisfies all of	1157
the following requirements:	1158

(a) The document or instrument creating the trust was	1159
executed by the grantor before January 1, 1972;	1160

(b) The trust became irrevocable upon the creation of the	1161
trust; and	1162

(c) The grantor was domiciled in this state at the time the	1163
trust was created.	1164

(GG) "Uniformed services" has the same meaning as in 10	1165
U.S.C. 101.	1166

Sec. 5747.014.  In calculating Ohio adjusted gross income	1167
under section 5747.01 of the Revised Code, a taxpayer may make the	1168
following adjustments:	1169

(A) To the extent not otherwise deducted or excluded in	1170
computing federal or Ohio adjusted gross income for the taxable	1171
year, deduct the following amounts for any taxable year beginning	1172
on or after January 1, 2014:	1173

(1) Expenses of elementary and secondary school teachers that	1174
would have been deductible under section 62 of the Internal	1175
Revenue Code had that deduction applied to taxable years beginning	1176
in or after 2014;	1177

(2) Income from the discharge of indebtedness that would be	1178
excludable from federal adjusted gross income under section 108 of	1179
the Internal Revenue Code disregarding the deadline for the	1180
discharge of such indebtedness prescribed by subparagraph	1181
(a)(1)(E) of that section;	1182

(3) Qualified transportation fringes that would be excludable	1183
from federal adjusted gross income under subsection 132(f) of the	1184
Internal Revenue Code had that exclusion applied on and after	1185
January 1, 2014;	1186

(4) Qualified tuition and related expenses that would be	1187
deductible from federal adjusted gross income under section 222 of	1188
the Internal Revenue Code disregarding the termination date	1189
prescribed by subsection (e) of that section;	1190

(5) Qualified charitable distributions that would be	1191
excludable from federal adjusted gross income under paragraph (8)	1192
of subsection 408(d) of the Internal Revenue Code disregarding the	1193
termination date prescribed by subparagraph (d)(8)(F) of that	1194
section.	1195

(B) Adjust the cost recovery period for race horses	1196
disregarding the dates specified in subclauses (e)(3)(A)(i)(I) and	1197
(II) of section 168 of the Internal Revenue Code.	1198

(C) Adjust cost recovery period for qualified leasehold	1199
improvement property, qualified restaurant property, and qualified	1200
retail improvement property as allowed under subsection 168(e) of	1201
the Internal Revenue Code, disregarding the dates specified in	1202
clauses (e)(3)(E)(iv), (v), and (ix) of that subsection.	1203

(D) Adjust the cost recovery period for motorsports	1204
entertainment complexes as allowed under subsection 168(i) of the	1205
Internal Revenue Code, disregarding the date specified in	1206
subparagraph (i)(15)(D) of that subsection.	1207

(E) Adjust the depreciation for business property on an	1208
Indian reservation as allowed under subsection 168(j) of the	1209
Internal Revenue Code, disregarding the date specified in	1210
paragraph (j)(8) of that subsection.	1211

(F) Adjust the depreciation of qualified property as allowed	1212
by paragraphs (1) and (2) of subsection 168(k) of the Internal	1213
Revenue Code, disregarding the phrases "and before January 1,	1214
2014," "before January 1, 2014," and "before January 1, 2015," in	1215
those paragraphs and, if applicable, in paragraph (6) of	1216
subsection 406(c) of the Internal Revenue Code. If adjustments are	1217
made under division (F) of this section, the adjustments required	1218
under divisions (A)(20) and (21) of section 5747.01 of the Revised	1219
Code shall be made.	1220

(G) Adjust the appreciation deduction and adjusted basis of	1221
qualified second generation biofuel plant property as allowed	1222
under subsection 168(l) of the Internal Revenue Code, disregarding	1223
the date specified in subparagraph (l)(2)(D) of that section.	1224

(H) The adjustments allowed by section 179 of the Internal	1225
Revenue Code as if the election allowed by that section were	1226
allowed for the taxable year and the limitations of subparagraphs	1227
(1)(B) and (2)(B) of subsection (b) of that section applied to the	1228
taxable year, and disregarding, if applicable, the limitations on	1229
taxable years specified in subsection (f) of that section. If	1230
adjustments are made under division (H) of this section, the	1231
adjustments required by divisions (A)(20) and (21) of section	1232
5747.01 of the Revised Code shall be made.	1233

(I) The adjustments for energy efficient commercial building	1234
property allowed by section 179D of the Internal Revenue Code,	1235
disregarding subsection (h) of that section.	1236

(J) The adjustments for qualified advanced mine safety	1237
equipment property allowed by section 179E of the Internal Revenue	1238
Code, disregarding subsection (g) of that section.	1239

(K) The adjustments for qualified film or television	1240
productions allowed by section 181 of the Internal Revenue Code,	1241
disregarding subsection (f) of that section.	1242

(L) The adjustments for income attributable to domestic	1243
production activities in Puerto Rico allowed by paragraph (8) of	1244
subsection 199(d) of the Internal Revenue Code, disregarding	1245
subparagraph (d)(8)(C) of that section.	1246

(M) The exclusion for gain from certain small business stock	1247
allowed by section 1202 of the Internal Revenue Code, applying	1248
subsection (a)(4) of that section, but disregarding the phrase	1249
"and before January 1, 2014."	1250

(N) The adjustments to basis allowed by paragraph (2) of	1251
subsection 1367(a) of the Internal Revenue Code for charitable	1252
contributions, disregarding the December 31, 2013, termination	1253
date prescribed by that paragraph.	1254

(O) Any adjustment to federal gross income that would be	1255
allowed if the designation period of an empowerment zone did not	1256
terminate on December 31, 2013, as provided in paragraph (1) of	1257
subsection 1391(d) of the Internal Revenue Code. This division	1258
does not allow any adjustment for a taxable year beginning after	1259
any earlier termination of the designation period under	1260
subparagraphs (B) and (C) of that paragraph.	1261

Section 2.  That existing sections 5725.33 and 5747.01 of the	1262
Revised Code are hereby repealed.	1263

Section 3. This act is hereby declared to be an emergency	1264
measure necessary for the immediate preservation of the public	1265
peace, health, and safety. The reason for such necessity is to	1266
ensure that Ohio taxpayers continue receiving certain income tax	1267
incentives on their state return for tax year 2014 even if the	1268
corresponding federal incentives are not renewed in time.	1269
Therefore, this act shall go into immediate effect.	1270