As Introduced

130th General Assembly Regular Session 2013-2014

H. B. No. 669

Representative Stinziano 

Cosponsors: Representatives Barborak, Duffey, Rogers, Sheehy 

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A BILL

To amend sections 150.03, 322.02, 5739.02, 5739.03,

1

5747.01, and 5751.01 and to enact sections 195.01

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to 195.14 and 5709.071 of the Revised Code to

3

establish the Startup Ohio initiative in which

4

universities and partnering business may

5

collaborate in tax-free areas near campuses in

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this state to create jobs, attract entrepreneurs,

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and spur academic enrichment and to direct the

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Director of Budget and Management to transfer $100

9

million to the Ohio Venture Capital Program Fund.

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

Section 1. That sections 150.03, 322.02, 5739.02, 5739.03,	11
5747.01, and 5751.01 be amended and sections 195.01, 195.02,	12
195.03, 195.04, 195.05, 195.06, 195.07, 195.08, 195.09, 195.10,	13
195.11, 195.12, 195.13, 195.14, and 5709.071 of the Revised Code	14
be enacted to read as follows:	15

Sec. 150.03. Within ninety days after April 9, 2003, the	16
authority shall establish, and subsequently may modify as it	17
considers necessary, a written investment policy governing the	18
investment of money from the program fund, which is hereby	19
created. The program fund shall consist of the proceeds of loans	20
acquired by a program administrator and money transferred or	21
appropriated to it by the general assembly. The authority is	22
subject to Chapter 119. of the Revised Code with respect to the	23
establishment or modification of the policy. The policy shall meet	24
all the following requirements:	25

(A) It is consistent with the purpose of the program stated	26
in section 150.01 of the Revised Code.	27

(B) Subject to divisions (C), (D), and (E) of this section,	28
it permits the investment of money from the program fund in	29
private, for-profit venture capital funds, including funds of	30
funds, that invest in enterprises in the seed or early stage of	31
business development or established business enterprises	32
developing new methods or technologies, and that demonstrate	33
potential to generate high levels of successful investment	34
performance.	35

(C) It specifies that a program administrator or fund manager	36
employed by the program administrator shall invest not less than	37
seventy-five per cent of program fund money under its investment	38
authority in Ohio-based venture capital funds.	39

(D) It specifies both of the following:

40

(1) That not less than an amount equal to fifty per cent of	41
program fund money invested in any venture capital fund be	42
invested by the venture capital fund in Ohio-based business	43
enterprises;	44

(2) That, commencing with the first program fund commitment	45
to each venture capital fund, the aggregate amount funded into	46
Ohio-based business enterprises by all venture capital funds to	47
which the program fund has committed be not less than the	48
aggregate amount of all program fund money funded into those	49
venture capital funds.	50

(E) It specifies that a program administrator or fund manager	51
employed by the program administrator shall not invest money from	52
the program fund in a venture capital fund to the extent that the	53
total amount of program fund money invested in the venture capital	54
fund, when combined with any program fund money invested in a	55
venture capital fund under the same management as that venture	56
capital fund, exceeds the lesser of the following:	57

(1) Ten million dollars;

58

(2)(a) In the case of an Ohio-based venture capital fund,	59
fifty per cent of the total amount of capital committed to the	60
fund from all sources, after accounting for capital committed from	61
the program fund;	62

(b) In the case of any other venture capital fund, twenty per	63
cent of the total amount of capital committed to the fund from all	64
sources, after accounting for capital committed from the program	65
fund.	66

(F) It specifies that a program administrator or fund manager	67
employed by the program administrator shall not commit capital	68
from the program fund to a venture capital fund until the venture	69
capital fund receives commitment of at least the same amount from	70
other investors in the fund.	71

(G) It specifies the general conditions a private, for-profit	72
investment fund must meet to be selected as a program	73
administrator under section 150.05 of the Revised Code, including,	74
as a significant selection standard, direct experience managing	75
external or nonproprietary capital in private equity fund of funds	76
formats.	77

(H) It specifies the criteria the authority must consider	78
when making a determination under division (B)(1) of section	79
150.04 of the Revised Code.	80

(I) It includes investment standards and general limitations	81
on allowable investments that the authority considers reasonable	82
and necessary to achieve the purposes of this chapter as stated in	83
division (B) of section 150.01 of the Revised Code, minimize the	84
need for the authority to grant tax credits under section 150.07	85
of the Revised Code, ensure compliance of the program	86
administrators with all applicable laws of this state and the	87
United States, and ensure the safety and soundness of investments	88
of money from the program fund.	89

(J) It prohibits the investment of money from the program	90
fund directly in persons other than venture capital funds, except	91
for temporary investment in investment grade debt securities or	92
temporary deposit in interest-bearing accounts or funds pending	93
permanent investment in venture capital funds.	94

Sec. 195.01. As used in this chapter:

95

(A) "University" means a state university as defined in	96
section 3345.011 of the Revised Code, a community college as	97
defined in section 3354.01 of the Revised Code, or a private	98
college or university.	99

(B) "Private college or university" has the same meaning as	100
in section 1713.50 of the Revised Code.	101

(C) "Campus" means land, buildings, or other real property	102
owned or leased by a university.	103

(D) "Business" means a sole proprietorship, a corporation for	104
profit, or a pass-through entity as defined in section 5733.04 of	105
the Revised Code.	106

(E) "Partnering business" means a business that is a party to	107
a partnership contract approved by the startup Ohio board under	108
section 195.08 of the Revised Code. A business is no longer a	109
partnering business when the partnership contract expires.	110

(F) "Partnership contract" means a contract negotiated and	111
agreed to by a university and a partnering business under section	112
195.07 of the Revised Code.	113

(G) "Owner" means a partner of a partnership, a member of a	114
limited liability company, a majority shareholder of an S	115
corporation, a person with a majority ownership interest in a	116
pass-through entity, the sole proprietor of a sole proprietorship,	117
or any officer, employee, or agent with authority to make	118
decisions legally binding upon a business.	119

(H) "Startup space" means vacant land or building space that	120
satisfies the criteria described under section 195.05 of the	121
Revised Code.	122

(I) "New job" means a position filled by one full-time	123
employee performing a particular set of tasks and duties. The	124
position must be new to this state and, except as provided in	125
division (A)(3) of section 195.07 of the Revised Code, the	126
individual filling the position must not have been transferred	127
from a related business or any other business located in this	128
state by means of acquisition, merger, consolidation, or	129
reorganization of a business.	130

(J) "Full-time employee" means an individual who is employed	131
for consideration by a partnering business for at least	132
thirty-five hours a week, or who renders any other standard of	133
service generally accepted by custom or specified by contract as	134
full-time employment.	135

(K) "Startup Ohio board" or "board" means the board appointed	136
under section 195.04 of the Revised Code.	137

(L) "Vacant" means land or building space not occupied by any	138
person or business or used for some other productive purpose. For	139
the purposes of this division, "occupied" means actual,	140
continuous, and exclusive use and possession of land or building	141
space by a person having lawful right to such use and possession.	142

(M) "Appointing authority" means the governor, the president	143
of the senate, or the speaker of the house of representatives.	144

(N) "Startup zone certificate" means a certificate issued to	145
a partnering business by the startup Ohio board under section	146
195.08 of the Revised Code.	147

(O) "Related businesses" are businesses the majority of the	148
ownership interests of which are held directly or indirectly by	149
the same person.	150

(P) "New employee certificate" means a certificate awarded by	151
a partnering business to a full-time employee hired to fill a new	152
job under section 195.09 of the Revised Code.	153

Sec. 195.02.  (A) The startup Ohio initiative is hereby	154
established to facilitate job creation, attract private economic	155
investment, encourage entrepreneurial activity, and create	156
educational enrichment opportunities in this state. The initiative	157
shall be administered by the startup Ohio board in collaboration	158
with universities and partnering businesses in this state.	159

(B) The president or chief executive officer of a university	160
in this state may seek to create a startup zone by identifying	161
startup space and writing a strategic plan to attract one or more	162
businesses to operate in the startup space under a partnership	163
contract with the university. The strategic plan shall include the	164
following:	165

(1) A detailed description of the startup space. The	166
description shall delineate the boundaries of the space and the	167
county treasurer's permanent parcel number associated with each	168
parcel wholly or partially located within the space.	169

(2) An explanation of the university's rationale in choosing	170
the startup space. The university shall consider the following in	171
identifying startup space:	172

(a) The need for economic development in the startup space	173
and the surrounding community. The university shall give	174
preference to underutilized land or buildings, blighted areas, and	175
other neighborhoods that are ready for development but lacking	176
resources to improve infrastructure.	177

(b) The expected effects of developing the startup space on	178
the economic and social welfare of the surrounding community. The	179
university shall endeavor to propose startup space in communities	180
where the positive economic and social impact will be the	181
greatest. The university shall avoid startup space in communities	182
where further development would lead to competition with existing	183
businesses, excessive demand for available public infrastructure,	184
or poorer conditions for individuals living or working nearby.	185

(c) The conduciveness of the startup space to fostering	186
academic enrichment opportunities for students of the university.	187
For the purposes of this division, close proximity of the startup	188
space to academic buildings, recreational areas, housing	189
facilities, and other areas of campus frequented by students; ease	190
of access to the space by public or university transportation; and	191
flexibility of the startup space for accommodating commercial and	192
academic environments contribute positively to the conduciveness	193
of a startup space to fostering academic enrichment.	194

(3) The methodology the university intends to use for the	195
purposes of identifying one or more businesses to operate in the	196
startup space and entering partnership contracts with such	197
businesses. The methodology shall describe the following:	198

(a) The type of business or businesses the university seeks	199
to operate in the startup space. The university shall seek	200
businesses that are unique to the community surrounding the	201
startup space and that cannot reasonably be expected to compete	202
with or otherwise hamper the success of existing businesses in the	203
community.	204

(b) The proposed measures to ensure that partnership	205
contracts with businesses in the startup space align with or	206
further the academic mission of the university;	207

(c) The proposed methods by which the university will consult	208
with affected counties, municipal corporations, townships,	209
economic development agencies, citizens, and university governance	210
in developing and choosing businesses for the startup space. Such	211
methods may include public hearings, focus groups, meetings, phone	212
calls, and other forms of communication.	213

(4) A conflicts of interest policy that, at a minimum,	214
complies with section 195.14 of the Revised Code;	215

(5) Any other information or supporting documents deemed	216
necessary or desirable by the university or the startup Ohio board	217
to fully explain the strategic plan and the proposed startup	218
space.	219

(C) Subject to the limitations prescribed by divisions (B)	220
and (C) of section 195.03 of the Revised Code, the president or	221
chief executive officer of a university may submit or amend a	222
strategic plan for a startup zone under division (B) of this	223
section at any time. A university may submit a strategic plan for	224
more than one startup zone or multiple strategic plans for	225
multiple startup zones simultaneously.	226

Sec. 195.03. (A) The startup Ohio board shall review and	227
consider strategic plans submitted by universities under section	228
195.02 of the Revised Code based on merit and not on the time of	229
submission. The board may approve a strategic plan only by	230
affirmative vote of at least two board members. The board shall	231
consider the following in determining to approve or reject a	232
strategic plan under this section:	233

(1) Compliance of the startup space and the strategic plan	234
with the requirements of this chapter;	235

(2) Reasonableness of the economic and fiscal assumptions	236
contained in the strategic plan and any supporting documents;	237

(3) Likelihood that the proposed startup zone would lead to	238
the creation of new jobs, attract entrepreneurs, and enrich the	239
education of the university's students;	240

(4) Congruence of the strategic plan with the mission and	241
activities of the university;	242

(5) Desirability of the startup space according to the	243
factors described in divisions (B)(2)(a), (b), and (c) of section	244
195.02 of the Revised Code;	245

(6) Practicality and desirability of the university's	246
methodology for identifying and entering partnerships with	247
businesses to operate in the startup space according to the	248
factors described in divisions (B)(3)(a), (b), and (c) of section	249
195.02 of the Revised Code;	250

(7) Geographic balance of the startup space with other	251
startup zones in the state;	252

(8) Variance of urban, rural, and suburban startup zones	253
throughout the state;	254

(9) Participation of a diverse range of universities in the	255
state;	256

(10) Support or opposition of counties, municipal	257
corporations, townships, economic development agencies, citizens,	258
and the governing body of the university.	259

(B) The aggregate area of all startup zones sponsored by a	260
single university and located off campus shall not exceed two	261
hundred thousand square feet.	262

(C) The aggregate area of all startup zones sponsored by	263
private colleges and universities shall not exceed three million	264
square feet.	265

(D) Acceptance of a strategic plan by the startup Ohio board	266
immediately designates the startup space described in the plan as	267
a startup zone. The board shall send written notice of its	268
approval to the university within fourteen days of accepting the	269
plan.	270

(E) If the startup Ohio board rejects the strategic plan, the	271
board shall send written notice to the university that submitted	272
the plan within fourteen days of such determination. The notice	273
shall include the reasons for the board's determination and	274
suggestions for how the strategic plan could be modified to meet	275
the board's approval.	276

Sec. 195.04.  (A) There is hereby created the startup Ohio	277
board consisting of three members with significant expertise and	278
experience in academic-based economic development projects. The	279
governor, the president of the senate, and the speaker of the	280
house of representatives each shall appoint one individual to	281
serve as a member of the board. The board shall do all of the	282
following:	283

(1) Review strategic plans for startup zones submitted by	284
universities under section 195.02 of the Revised Code and	285
determine to accept or to reject the plans;	286

(2) Review and make determinations with respect to	287
partnership contracts between universities and partnering	288
businesses under section 195.08 of the Revised Code;	289

(3) Assist and oversee universities in carrying out strategic	290
plans accepted by the board;	291

(4) Monitor the compliance of universities and partnering	292
businesses with respect to the strategic plan and partnership	293
contract;	294

(5) Evaluate the effectiveness of the startup Ohio initiative	295
in terms of jobs created, private economic investment attracted,	296
and educational enrichment opportunities provided in an annual	297
report submitted to the governor, the president of the senate, and	298
the speaker of the house of representatives.	299

(B) The governor, the president of the senate, and the	300
speaker of the house of representatives shall make initial	301
appointments to the startup Ohio board within ninety days of the	302
effective date of ...B... of the 130th General Assembly. The	303
initial appointees shall serve the following terms of office:	304

(1) The board member appointed by the governor shall serve a	305
term of four years;	306

(2) The board member appointed by the president of the senate	307
shall serve a term of three years;	308

(3) The board member appointed by the speaker of the house of	309
representatives shall serve a term of two years.	310

(C) All board members appointed after the expiration of the	311
initial appointee's term shall serve terms of four years. The	312
terms of office for initial appointees to the startup Ohio board	313
begin on the ninetieth day following the effective date of ...B...	314
of the 130th General Assembly. Subsequent terms of office begin	315
the day that the appointee's predecessor's term expires. If an	316
appointing authority does not appoint a new board member or	317
reappoint the current board member before the expiration of the	318
current board member's term, the current board member shall	319
continue in office until the appointing authority appoints a	320
successor. A board member may serve an unlimited number of	321
consecutive terms if the board member is reappointed by an	322
appointing authority.	323

(D) Startup Ohio board members serve at the pleasure of their	324
appointing authority. Board members may be removed from the	325
position at any time by the member's appointing authority for	326
malfeasance, misfeasance, or nonfeasance in office. A vacancy in	327
an unexpired term on the startup Ohio board shall be filled in the	328
same manner as the initial appointment. A board member appointed	329
to fill a vacancy on the startup Ohio board shall hold office for	330
the remainder of the member's predecessor's term. The presence of	331
two board members constitutes a quorum to conduct the board's	332
business under this chapter. A vacancy on the board does not	333
impair the board from carrying out its business if at least two	334
board members are present.	335

(E) The startup Ohio board is a public body for the purposes	336
of section 121.22 of the Revised Code, and it is a public office	337
for the purposes of section 149.43 of the Revised Code. Board	338
members shall not be considered to be holding a direct or indirect	339
interest in a contract or expenditure of money by a university or	340
a partnering business because of their affiliation with the board.	341
Board members shall not be paid for their service, but may be	342
reimbursed by the director of budget and management from the	343
general revenue fund for reasonable expenses incurred in carrying	344
out their duties under this section.	345

Sec. 195.05.  (A) Startup space shall be located on land or	346
in building space that is vacant at the time the university	347
submits the strategic plan to the startup Ohio board under section	348
195.02 of the Revised Code. The university shall not relocate or	349
eliminate academic programs, administrative programs, offices,	350
housing facilities, dining facilities, athletic facilities, or any	351
other facility, space, or program that actively serves students,	352
faculty, or staff in order to create vacant land or building space	353
for the purposes of this chapter.	354

(B) Except as provided in division (C) of this section,	355
startup space shall be located within one mile of the university's	356
campus. If the startup space is located in a building outside of	357
the university's campus, its area shall not exceed two hundred	358
square feet.	359

(C) A university may apply to the startup Ohio board for	360
special consideration of land or building space that does not meet	361
the criteria described in division (B) of this section. The board	362
may approve such land or building space as startup space if the	363
board determines that such approval is consistent with the	364
purposes of the startup Ohio initiative and that the land or	365
building space otherwise meets the requirements of this section.	366

Sec. 195.06. (A) After the startup Ohio board designates a	367
startup zone under section 195.03 of the Revised Code, the	368
university shall follow the methodology described in its strategic	369
plan to identify and enter a partnership contract with one or more	370
businesses to operate within the startup zone. The business shall	371
meet all of the following criteria:	372

(1) The mission and activities of the business align with or	373
further the academic mission of the university;	374

(2) The business is not a direct or indirect competitor of an	375
existing business located near the startup zone;	376

(3) The business has the capacity to meet the performance	377
benchmarks in the partnership contract;	378

(4) Except as provided in divisions (C) and (D) of this	379
section, the business was not operating in this state at the time	380
of entering the partnership contract or in any of the preceding	381
five years;	382

(5) Except as provided in divisions (C) and (D) of this	383
section, the business is not substantially similar, in terms of	384
ownership and operation, to a business operating in this state at	385
the time of entering the partnership contract or in any of the	386
preceding five years;	387

(6) The business is in compliance with all worker protection	388
and environmental laws and regulations;	389

(7) The business does not owe past due federal, state, or	390
local taxes;	391

(8) The business is not engaged in any of the following	392
commercial activities:	393

(a) Retail;

394

(b) Wholesale;

395

(c) Real estate brokerage or management;

396

(d) Law practice;

397

(e) Medical or dental practice;

398

(f) Hospitality;

399

(g) Finance or financial services;

400

(h) Personal services;

401

(i) Administrative support services;

402

(j) Accountant services;

403

(k) Utility services;

404

(l) Electricity generation or distribution;

405

(m) Natural gas generation or distribution;

406

(n) Insurance.

407

(B) If, after reasonable efforts, the university determines	408
it is not practical to identify and enter a partnership contract	409
with a business using the methodology described in the strategic	410
plan, the university may seek to amend the methodology by	411
submitting a proposed amendment to the startup Ohio board. The	412
board may approve or reject the amendment by a majority vote. The	413
board shall send notice of its determination with respect to the	414
amendment to the university within fourteen days of its	415
determination under this division.	416

(C) Notwithstanding divisions (A)(4) and (5) of this section,	417
a university may enter a partnership contract with a returning	418
business if the contract includes a provision whereby the business	419
agrees to substantially restore all jobs previously moved by the	420
business out of this state. For the purposes of this division,	421
"returning business" means a business that moved jobs out of this	422
state on or before the effective date of ...B... of the 130th	423
General Assembly.	424

(D) Notwithstanding divisions (A)(4) and (5) of this section,	425
a university may enter a partnership contract with an expanding	426
business if the contract contains a provision whereby the business	427
agrees to create new jobs in the startup zone without eliminating	428
or relocating jobs from elsewhere in the state. For the purposes	429
of this division, "expanding business" means a business currently	430
operating in this state that intends to increase its Ohio	431
operations and create new jobs.	432

Sec. 195.07.  After the university has identified a business	433
that meets the criteria prescribed by division (A) of section	434
195.06 of the Revised Code, the university may negotiate the terms	435
of a partnership contract with the business concerning the	436
business's operation in the startup zone.	437

(A) The partnership contract shall include the following	438
terms for the partnering business:	439

(1) An agreement to create new jobs in the startup zone	440
during its first year of operation under the contract and to	441
retain those jobs for the duration of the contract;	442

(2) An agreement not to move existing jobs from another area	443
of the state to the startup zone;	444

(3) An agreement not to cause individuals to transfer	445
employment from a related business located in this state to	446
similar employment with the partnering business in the startup	447
zone. This agreement does not apply if the partnering business	448
demonstrates that the related business did not eliminate the	449
transferring employee's position in this state after the transfer.	450

(4) Specific performance benchmarks, including:

451

(a) The number of new jobs the partnering business agrees to	452
create;	453

(b) A schedule for when the new jobs will be created;

454

(c) The job titles and expected salaries associated with the	455
new jobs.	456

(5) An agreement to share tax returns, employment	457
information, and other documents that the university and the	458
startup Ohio board deem necessary to monitor the partnering	459
business's compliance with the partnership contract;	460

(6) An agreement to collaborate with the university in	461
creating and administering academic enrichment opportunities for	462
the university's students.	463

(B) The partnership contract shall specify the date on which	464
the contract expires. Such date shall be not later than ten years	465
from the date the contract is submitted to the startup Ohio board	466
for approval under section 195.08 of the Revised Code.	467

(C) The partnership contract may include terms additional to	468
but not in derogation of those described in this section. The	469
university or partnering business may seek to include any	470
provisions deemed necessary or desirable to govern the mechanics	471
of their collaboration in the startup zone for business and	472
educational purposes.	473

Sec. 195.08.  (A) After the president or chief executive	474
officer of the university and the owner of the partnering business	475
have agreed to the terms of the partnership contract, the	476
university shall submit a copy of the contract to the startup Ohio	477
board. The board shall review the contract and determine if its	478
terms are consistent with the strategic plan submitted by the	479
university under section 195.02 of the Revised Code and the goals	480
of the startup Ohio initiative. The board may approve or reject	481
the contract by affirmative vote of at least two board members.	482
The board shall send notice of its determination on the contract	483
to the university and the partnering business within fourteen days	484
of voting.	485

(B)(1) If the board votes to approve the contract, the notice	486
shall take the form of a startup zone certificate. The startup	487
zone certificate shall include the following:	488

(a) The name, address, and telephone number of the	489
university;	490

(b) The name, address, telephone number, and social security	491
number or federal tax identification number of the partnering	492
business;	493

(c) The location of the startup zone and the parcel numbers,	494
if any, assigned to parcels in the zone or other legal description	495
of such parcels;	496

(d) The date the partnership contract takes effect and the	497
date it expires.	498

(2) The startup zone certificate shall serve as documentation	499
that the partnership contract has been approved for the purposes	500
of the tax incentives described in section 322.02, section	501
5709.071, division (B)(54) of section 5739.02, division (A)(32) of	502
section 5747.01, and division (F)(2)(jj) of section 5751.01 of the	503
Revised Code.	504

(3) The startup zone certificate expires on the same date the	505
partnership contract expires or is terminated.	506

(4) The board shall transmit a copy of the startup zone	507
certificate to the tax commissioner.	508

(5) Along with the startup zone certificate, the startup Ohio	509
board shall give notice to the partnering business of the number	510
of new employee certificates that the partnering business is	511
authorized to award. Except as provided in division (D) of this	512
section, the number of new employee certificates shall equal the	513
number of new jobs the partnering business agreed to create in the	514
partnership contract.	515

(C) If the board rejects the partnership contract, the notice	516
shall include the reasons for the board's determination and	517
suggestions for ways in which the contract may be revised to meet	518
the approval of the board. The university and the partnering	519
business may amend and resubmit a previously rejected partnership	520
contract to the board at any time.	521

(D) The startup Ohio board shall monitor the issuance and use	522
of new employee certificates under this section and section 195.09	523
of the Revised Code to ensure that not more than ten thousand	524
full-time employees use new employee certificates to claim	525
deductions under division (A)(33) of section 5747.01 of the	526
Revised Code in any taxable year. To comply with this division,	527
the board may reduce the number of new employee certificates a	528
partnering business is authorized to award.	529

(E) A partnering business shall not assign or transfer a	530
startup zone certificate issued under this section to any other	531
person.	532

Sec. 195.09.  (A) A partnering business may award a new	533
employee certificate to any full-time employee hired to fill a new	534
job described in the partnership contract. The new employee	535
certificate shall be in a form prescribed by the startup Ohio	536
board and shall include the name, address, and social security	537
number or federal tax identification number of the employee and	538
the partnering business.	539

(B) Each time a partnering business awards a new employee	540
certificate, it shall transmit a copy of the completed new	541
employee certificate to the startup Ohio board and the tax	542
commissioner.	543

(C) If the partnering business or the full-time employee ends	544
the employment relationship before the expiration of the	545
partnership contract or if the full-time employee is transferred	546
outside the startup zone, the partnering business shall revoke the	547
new employee certificate and transmit notice of such revocation to	548
the board and the commissioner.	549

(D) A partnering business shall not revoke a new employee	550
certificate awarded to any full-time employee for reasons other	551
than those described in division (C) of this section.	552

(E) A full-time employee awarded a new employee certificate	553
under this section may claim an income tax deduction under	554
division (A)(33) of section 5747.01 of the Revised Code. The	555
deduction is based on the income earned by the full-time employee	556
from the partnering business for work performed in the startup	557
zone. The full-time employee may claim the deduction for taxable	558
years ending after the date the new employee certificate is	559
awarded and beginning before the expiration of the partnership	560
contract.	561

(F) A partnering business may apply to the startup Ohio board	562
for authorization to award more new employee certificates than	563
initially authorized under division (B)(5) of section 195.08 of	564
the Revised Code. The board, in its discretion and subject to the	565
limitation prescribed by division (D) of section 195.08 of the	566
Revised Code, may authorize the partnering business to award	567
additional new employee certificates under this section.	568

Sec. 195.10.  (A) If a university determines that a	569
partnering business is not complying with a provision of the	570
partnership contract, the university shall notify the startup Ohio	571
board. The board shall conduct a hearing on the alleged	572
noncompliance and allow opportunities for the university and the	573
partnering business to present testimony at the hearing. At the	574
conclusion of the hearing the board, by affirmative vote of at	575
least two of its members, may do any of the following:	576

(1) Suspend the partnering business's startup zone	577
certificate until the partnering business complies with the terms	578
of the partnership contract;	579

(2) Terminate the partnership contract;

580

(3) Terminate the partnership contract and require the	581
partnering business to refund to the state all or a portion of the	582
amounts realized by the partnering business through the tax	583
incentives described in division (A)(32) of section 5747.01 and	584
division (F)(2)(jj) of section 5751.01 of the Revised Code.	585

(B) In reaching a determination under division (A) of this	586
section, the startup Ohio board shall consider the effect of	587
market conditions on the partnering business's performance under	588
the partnership contract and whether the partnering business	589
continues to maintain other operations in this state.	590

(C) After making a determination under division (A) of this	591
section, the board shall certify the amount to be refunded to the	592
tax commissioner. The commissioner shall make an assessment for	593
that amount against the partnering business under Chapters 5747.	594
and 5751. of the Revised Code.	595

(D) Full-time employees awarded new employee certificates by	596
a partnering business under section 195.09 of the Revised Code	597
shall not be subject to assessment under this section. If the	598
partnering business's partnership contract is terminated under	599
this section, the employee may claim the deduction described in	600
division (A)(33) of section 5747.01 of the Revised Code only for	601
income received before the date the contract is terminated.	602

Sec. 195.11.  (A) The startup Ohio board shall file an annual	603
report to the governor, the president of the senate, and the	604
speaker of the house of representatives on the effectiveness of	605
the startup Ohio initiative. The report shall include the	606
following:	607

(1) A list of the universities that have submitted strategic	608
plans under section 195.02 of the Revised Code;	609

(2) A list of the startup zones approved by the board under	610
section 195.03 of the Revised Code and the location of each;	611

(3) A list of the partnering businesses operating in startup	612
zones and the number of new jobs created by each partnering	613
business;	614

(4) The types of industries represented by partnering	615
businesses operating in startup zones;	616

(5) A list of the noncompliance issues raised by universities	617
under section 195.10 of the Revised Code in the preceding year.	618

(B) The report required under division (A) of this section	619
shall be completed by the first day of each April occurring at	620
least six months after the effective date of ...B... of the 130th	621
General Assembly.	622

(C) The startup Ohio board may request, and universities and	623
partnering businesses shall provide, any information or documents	624
needed by the board to complete the report required by this	625
section.	626

Sec. 195.12.  No university may contract with a partnering	627
business to perform services or work that is similar in nature or	628
in scope to services or work that was performed by employees of	629
the university at any time during the five years preceding the	630
date the partnership contract is submitted to the startup Ohio	631
board under section 195.08 of the Revised Code.	632

Sec. 195.13.  Financial statements and other information	633
submitted by a university or a partnering business to the startup	634
Ohio board, and any information taken by the board for the	635
purposes described in this chapter, are not public records subject	636
to section 149.43 of the Revised Code. However, the startup Ohio	637
board may make use of such information for purposes of issuing	638
public reports or in connection with court proceedings concerning	639
partnership contracts under this chapter.	640

Upon the request of the tax commissioner, the startup Ohio	641
board and the university shall provide the commissioner any	642
statement or other information submitted by or obtained from a	643
partnering business. The commissioner shall preserve the	644
confidentiality of the statement or information.	645

Sec. 195.14.  (A) For the purposes of this section,	646
"interested individual" means a person who is the president or	647
chief executive officer of the university or who is an employee,	648
alumnus, or donor of the university with the ability to influence	649
or make decisions on a partnership contract, and who has, directly	650
or indirectly, through business, investment, or family, any of the	651
following:	652

(1) An ownership or investment interest in a partnering	653
business;	654

(2) A compensation agreement with a partnering business;

655

(3) A potential ownership or investment interest in, or	656
compensation arrangement with, any person with which the	657
university is negotiating a partnership contract. Compensation	658
includes direct and indirect remuneration as well as material	659
gifts or favors.	660

(B) A university participating in the startup Ohio initiative	661
shall adopt a conflicts of interest policy with respect to its	662
activities under this chapter. The conflicts of interest policy	663
shall protect the university's interest when it is considering a	664
partnership contract that might benefit the private interest of an	665
interested individual. The conflicts of interest policy shall	666
include the following:	667

(1) The procedure for interested individuals to disclose a	668
financial interest in a partnering business;	669

(2) The procedure for screening such interested individuals	670
from negotiations on the partnership contract;	671

(3) The procedure for reporting conflicts of interest to the	672
startup Ohio board.	673

(C) If the university determines that an interested	674
individual failed to report a financial interest in a partnering	675
business before the approval of the partnership contract under	676
section 195.08 of the Revised Code, the university shall report	677
such failure to the startup Ohio board. The board shall hold a	678
hearing on the potential conflict of interest and, if the board	679
determines that the partnership contract is not in the	680
university's best interest, may terminate the partnership contract	681
and revoke the partnering business's startup zone certificate.	682

Sec. 322.02.  (A) For the purpose of paying the costs of	683
enforcing and administering the tax and providing additional	684
general revenue for the county, any county may levy and collect a	685
tax to be known as the real property transfer tax on each deed	686
conveying real property or any interest in real property located	687
wholly or partially within the boundaries of the county at a rate	688
not to exceed thirty cents per hundred dollars for each one	689
hundred dollars or fraction thereof of the value of the real	690
property or interest in real property located within the	691
boundaries of the county granted, assigned, transferred, or	692
otherwise conveyed by the deed. The tax shall be levied pursuant	693
to a resolution adopted by the board of county commissioners of	694
the county and, except as provided in division (C) of this section	695
and division (A) of section 322.07 of the Revised Code, shall be	696
levied at a uniform rate upon all deeds as defined in division (D)	697
of section 322.01 of the Revised Code. Prior to the adoption of	698
any such resolution, the board of county commissioners shall	699
conduct two public hearings thereon, the second hearing to be not	700
less than three nor more than ten days after the first. Notice of	701
the date, time, and place of the hearings shall be given by	702
publication in a newspaper of general circulation in the county	703
once a week on the same day of the week for two consecutive weeks	704
or as provided in section 7.16 of the Revised Code. The second	705
publication shall be not less than ten nor more than thirty days	706
prior to the first hearing. The tax shall be levied upon the	707
grantor named in the deed and shall be paid by the grantor for the	708
use of the county to the county auditor at the time of the	709
delivery of the deed as provided in section 319.202 of the Revised	710
Code and prior to the presentation of the deed to the recorder of	711
the county for recording.	712

(B) No resolution levying a real property transfer tax	713
pursuant to this section or a manufactured home transfer tax	714
pursuant to section 322.06 of the Revised Code shall be effective	715
sooner than thirty days following its adoption. Such a resolution	716
is subject to a referendum as provided in sections 305.31 to	717
305.41 of the Revised Code, unless the resolution is adopted as an	718
emergency measure necessary for the immediate preservation of the	719
public peace, health, or safety, in which case it shall go into	720
immediate effect. An emergency measure must receive an affirmative	721
vote of all of the members of the board of commissioners, and	722
shall state the reasons for the necessity. A resolution may direct	723
the board of elections to submit the question of levying the tax	724
to the electors of the county at the next primary or general	725
election in the county occurring not less than ninety days after	726
the resolution is certified to the board. No such resolution shall	727
go into effect unless approved by a majority of those voting upon	728
it.	729

(C) No real property transfer tax levied pursuant to this	730
section shall apply to any deed conveying real property or any	731
interest in real property located within a startup zone to a	732
partnering business holding a valid startup zone certificate. The	733
exemption under this division applies only to conveyances	734
occurring on or after the date the startup zone certificate takes	735
effect and before the certificate expires. As used in this	736
division, "startup zone," "partnering business," and "startup zone	737
certificate" have the same meanings as in section 195.01 of the	738
Revised Code.	739

Sec. 5709.071.  Real property constituting or situated on a	740
parcel designated as a startup zone by the startup Ohio board and	741
used exclusively for that purpose by a university and one or more	742
partnering businesses shall be exempt from taxation for the term	743
of the partnership contract between the university and the	744
partnering business beginning with the tax year that includes the	745
effective date of the contract. This exemption does not apply to	746
any portion of the real property not designated and used	747
exclusively as a startup zone. The exemption does not apply to any	748
tax year ending after the expiration of the partnership contract.	749
For the purposes of this section, "startup zone," "startup Ohio	750
board," "university," "partnership contract," and "partnering	751
business" have the same meanings as in section 195.01 of the	752
Revised Code.	753

Sec. 5739.02.  For the purpose of providing revenue with	754
which to meet the needs of the state, for the use of the general	755
revenue fund of the state, for the purpose of securing a thorough	756
and efficient system of common schools throughout the state, for	757
the purpose of affording revenues, in addition to those from	758
general property taxes, permitted under constitutional	759
limitations, and from other sources, for the support of local	760
governmental functions, and for the purpose of reimbursing the	761
state for the expense of administering this chapter, an excise tax	762
is hereby levied on each retail sale made in this state.	763

(A)(1) The tax shall be collected as provided in section	764
5739.025 of the Revised Code. The rate of the tax shall be five	765
and three-fourths per cent. The tax applies and is collectible	766
when the sale is made, regardless of the time when the price is	767
paid or delivered.	768

(2) In the case of the lease or rental, with a fixed term of	769
more than thirty days or an indefinite term with a minimum period	770
of more than thirty days, of any motor vehicles designed by the	771
manufacturer to carry a load of not more than one ton, watercraft,	772
outboard motor, or aircraft, or of any tangible personal property,	773
other than motor vehicles designed by the manufacturer to carry a	774
load of more than one ton, to be used by the lessee or renter	775
primarily for business purposes, the tax shall be collected by the	776
vendor at the time the lease or rental is consummated and shall be	777
calculated by the vendor on the basis of the total amount to be	778
paid by the lessee or renter under the lease agreement. If the	779
total amount of the consideration for the lease or rental includes	780
amounts that are not calculated at the time the lease or rental is	781
executed, the tax shall be calculated and collected by the vendor	782
at the time such amounts are billed to the lessee or renter. In	783
the case of an open-end lease or rental, the tax shall be	784
calculated by the vendor on the basis of the total amount to be	785
paid during the initial fixed term of the lease or rental, and for	786
each subsequent renewal period as it comes due. As used in this	787
division, "motor vehicle" has the same meaning as in section	788
4501.01 of the Revised Code, and "watercraft" includes an outdrive	789
unit attached to the watercraft.	790

A lease with a renewal clause and a termination penalty or	791
similar provision that applies if the renewal clause is not	792
exercised is presumed to be a sham transaction. In such a case,	793
the tax shall be calculated and paid on the basis of the entire	794
length of the lease period, including any renewal periods, until	795
the termination penalty or similar provision no longer applies.	796
The taxpayer shall bear the burden, by a preponderance of the	797
evidence, that the transaction or series of transactions is not a	798
sham transaction.	799

(3) Except as provided in division (A)(2) of this section, in	800
the case of a sale, the price of which consists in whole or in	801
part of the lease or rental of tangible personal property, the tax	802
shall be measured by the installments of that lease or rental.	803

(4) In the case of a sale of a physical fitness facility	804
service or recreation and sports club service, the price of which	805
consists in whole or in part of a membership for the receipt of	806
the benefit of the service, the tax applicable to the sale shall	807
be measured by the installments thereof.	808

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

809

(1) Sales to the state or any of its political subdivisions,	810
or to any other state or its political subdivisions if the laws of	811
that state exempt from taxation sales made to this state and its	812
political subdivisions;	813

(2) Sales of food for human consumption off the premises	814
where sold;	815

(3) Sales of food sold to students only in a cafeteria,	816
dormitory, fraternity, or sorority maintained in a private,	817
public, or parochial school, college, or university;	818

(4) Sales of newspapers and sales or transfers of magazines	819
distributed as controlled circulation publications;	820

(5) The furnishing, preparing, or serving of meals without	821
charge by an employer to an employee provided the employer records	822
the meals as part compensation for services performed or work	823
done;	824

(6) Sales of motor fuel upon receipt, use, distribution, or	825
sale of which in this state a tax is imposed by the law of this	826
state, but this exemption shall not apply to the sale of motor	827
fuel on which a refund of the tax is allowable under division (A)	828
of section 5735.14 of the Revised Code; and the tax commissioner	829
may deduct the amount of tax levied by this section applicable to	830
the price of motor fuel when granting a refund of motor fuel tax	831
pursuant to division (A) of section 5735.14 of the Revised Code	832
and shall cause the amount deducted to be paid into the general	833
revenue fund of this state;	834

(7) Sales of natural gas by a natural gas company, of water	835
by a water-works company, or of steam by a heating company, if in	836
each case the thing sold is delivered to consumers through pipes	837
or conduits, and all sales of communications services by a	838
telegraph company, all terms as defined in section 5727.01 of the	839
Revised Code, and sales of electricity delivered through wires;	840

(8) Casual sales by a person, or auctioneer employed directly	841
by the person to conduct such sales, except as to such sales of	842
motor vehicles, watercraft or outboard motors required to be	843
titled under section 1548.06 of the Revised Code, watercraft	844
documented with the United States coast guard, snowmobiles, and	845
all-purpose vehicles as defined in section 4519.01 of the Revised	846
Code;	847

(9)(a) Sales of services or tangible personal property, other	848
than motor vehicles, mobile homes, and manufactured homes, by	849
churches, organizations exempt from taxation under section	850
501(c)(3) of the Internal Revenue Code of 1986, or nonprofit	851
organizations operated exclusively for charitable purposes as	852
defined in division (B)(12) of this section, provided that the	853
number of days on which such tangible personal property or	854
services, other than items never subject to the tax, are sold does	855
not exceed six in any calendar year, except as otherwise provided	856
in division (B)(9)(b) of this section. If the number of days on	857
which such sales are made exceeds six in any calendar year, the	858
church or organization shall be considered to be engaged in	859
business and all subsequent sales by it shall be subject to the	860
tax. In counting the number of days, all sales by groups within a	861
church or within an organization shall be considered to be sales	862
of that church or organization.	863

(b) The limitation on the number of days on which tax-exempt	864
sales may be made by a church or organization under division	865
(B)(9)(a) of this section does not apply to sales made by student	866
clubs and other groups of students of a primary or secondary	867
school, or a parent-teacher association, booster group, or similar	868
organization that raises money to support or fund curricular or	869
extracurricular activities of a primary or secondary school.	870

(c) Divisions (B)(9)(a) and (b) of this section do not apply	871
to sales by a noncommercial educational radio or television	872
broadcasting station.	873

(10) Sales not within the taxing power of this state under	874
the Constitution or laws of the United States or the Constitution	875
of this state;	876

(11) Except for transactions that are sales under division	877
(B)(3)(r) of section 5739.01 of the Revised Code, the	878
transportation of persons or property, unless the transportation	879
is by a private investigation and security service;	880

(12) Sales of tangible personal property or services to	881
churches, to organizations exempt from taxation under section	882
501(c)(3) of the Internal Revenue Code of 1986, and to any other	883
nonprofit organizations operated exclusively for charitable	884
purposes in this state, no part of the net income of which inures	885
to the benefit of any private shareholder or individual, and no	886
substantial part of the activities of which consists of carrying	887
on propaganda or otherwise attempting to influence legislation;	888
sales to offices administering one or more homes for the aged or	889
one or more hospital facilities exempt under section 140.08 of the	890
Revised Code; and sales to organizations described in division (D)	891
of section 5709.12 of the Revised Code.	892

"Charitable purposes" means the relief of poverty; the	893
improvement of health through the alleviation of illness, disease,	894
or injury; the operation of an organization exclusively for the	895
provision of professional, laundry, printing, and purchasing	896
services to hospitals or charitable institutions; the operation of	897
a home for the aged, as defined in section 5701.13 of the Revised	898
Code; the operation of a radio or television broadcasting station	899
that is licensed by the federal communications commission as a	900
noncommercial educational radio or television station; the	901
operation of a nonprofit animal adoption service or a county	902
humane society; the promotion of education by an institution of	903
learning that maintains a faculty of qualified instructors,	904
teaches regular continuous courses of study, and confers a	905
recognized diploma upon completion of a specific curriculum; the	906
operation of a parent-teacher association, booster group, or	907
similar organization primarily engaged in the promotion and	908
support of the curricular or extracurricular activities of a	909
primary or secondary school; the operation of a community or area	910
center in which presentations in music, dramatics, the arts, and	911
related fields are made in order to foster public interest and	912
education therein; the production of performances in music,	913
dramatics, and the arts; or the promotion of education by an	914
organization engaged in carrying on research in, or the	915
dissemination of, scientific and technological knowledge and	916
information primarily for the public.	917

Nothing in this division shall be deemed to exempt sales to	918
any organization for use in the operation or carrying on of a	919
trade or business, or sales to a home for the aged for use in the	920
operation of independent living facilities as defined in division	921
(A) of section 5709.12 of the Revised Code.	922

(13) Building and construction materials and services sold to	923
construction contractors for incorporation into a structure or	924
improvement to real property under a construction contract with	925
this state or a political subdivision of this state, or with the	926
United States government or any of its agencies; building and	927
construction materials and services sold to construction	928
contractors for incorporation into a structure or improvement to	929
real property that are accepted for ownership by this state or any	930
of its political subdivisions, or by the United States government	931
or any of its agencies at the time of completion of the structures	932
or improvements; building and construction materials sold to	933
construction contractors for incorporation into a horticulture	934
structure or livestock structure for a person engaged in the	935
business of horticulture or producing livestock; building	936
materials and services sold to a construction contractor for	937
incorporation into a house of public worship or religious	938
education, or a building used exclusively for charitable purposes	939
under a construction contract with an organization whose purpose	940
is as described in division (B)(12) of this section; building	941
materials and services sold to a construction contractor for	942
incorporation into a building under a construction contract with	943
an organization exempt from taxation under section 501(c)(3) of	944
the Internal Revenue Code of 1986 when the building is to be used	945
exclusively for the organization's exempt purposes; building and	946
construction materials sold for incorporation into the original	947
construction of a sports facility under section 307.696 of the	948
Revised Code; building and construction materials and services	949
sold to a construction contractor for incorporation into real	950
property outside this state if such materials and services, when	951
sold to a construction contractor in the state in which the real	952
property is located for incorporation into real property in that	953
state, would be exempt from a tax on sales levied by that state;	954
building and construction materials for incorporation into a	955
transportation facility pursuant to a public-private agreement	956
entered into under sections 5501.70 to 5501.83 of the Revised	957
Code; and, until one calendar year after the construction of a	958
convention center that qualifies for property tax exemption under	959
section 5709.084 of the Revised Code is completed, building and	960
construction materials and services sold to a construction	961
contractor for incorporation into the real property comprising	962
that convention center;	963

(14) Sales of ships or vessels or rail rolling stock used or	964
to be used principally in interstate or foreign commerce, and	965
repairs, alterations, fuel, and lubricants for such ships or	966
vessels or rail rolling stock;	967

(15) Sales to persons primarily engaged in any of the	968
activities mentioned in division (B)(42)(a), (g), or (h) of this	969
section, to persons engaged in making retail sales, or to persons	970
who purchase for sale from a manufacturer tangible personal	971
property that was produced by the manufacturer in accordance with	972
specific designs provided by the purchaser, of packages, including	973
material, labels, and parts for packages, and of machinery,	974
equipment, and material for use primarily in packaging tangible	975
personal property produced for sale, including any machinery,	976
equipment, and supplies used to make labels or packages, to	977
prepare packages or products for labeling, or to label packages or	978
products, by or on the order of the person doing the packaging, or	979
sold at retail. "Packages" includes bags, baskets, cartons,	980
crates, boxes, cans, bottles, bindings, wrappings, and other	981
similar devices and containers, but does not include motor	982
vehicles or bulk tanks, trailers, or similar devices attached to	983
motor vehicles. "Packaging" means placing in a package. Division	984
(B)(15) of this section does not apply to persons engaged in	985
highway transportation for hire.	986

(16) Sales of food to persons using supplemental nutrition	987
assistance program benefits to purchase the food. As used in this	988
division, "food" has the same meaning as in 7 U.S.C. 2012 and	989
federal regulations adopted pursuant to the Food and Nutrition Act	990
of 2008.	991

(17) Sales to persons engaged in farming, agriculture,	992
horticulture, or floriculture, of tangible personal property for	993
use or consumption primarily in the production by farming,	994
agriculture, horticulture, or floriculture of other tangible	995
personal property for use or consumption primarily in the	996
production of tangible personal property for sale by farming,	997
agriculture, horticulture, or floriculture; or material and parts	998
for incorporation into any such tangible personal property for use	999
or consumption in production; and of tangible personal property	1000
for such use or consumption in the conditioning or holding of	1001
products produced by and for such use, consumption, or sale by	1002
persons engaged in farming, agriculture, horticulture, or	1003
floriculture, except where such property is incorporated into real	1004
property;	1005

(18) Sales of drugs for a human being that may be dispensed	1006
only pursuant to a prescription; insulin as recognized in the	1007
official United States pharmacopoeia; urine and blood testing	1008
materials when used by diabetics or persons with hypoglycemia to	1009
test for glucose or acetone; hypodermic syringes and needles when	1010
used by diabetics for insulin injections; epoetin alfa when	1011
purchased for use in the treatment of persons with medical	1012
disease; hospital beds when purchased by hospitals, nursing homes,	1013
or other medical facilities; and medical oxygen and medical	1014
oxygen-dispensing equipment when purchased by hospitals, nursing	1015
homes, or other medical facilities;	1016

(19) Sales of prosthetic devices, durable medical equipment	1017
for home use, or mobility enhancing equipment, when made pursuant	1018
to a prescription and when such devices or equipment are for use	1019
by a human being.	1020

(20) Sales of emergency and fire protection vehicles and	1021
equipment to nonprofit organizations for use solely in providing	1022
fire protection and emergency services, including trauma care and	1023
emergency medical services, for political subdivisions of the	1024
state;	1025

(21) Sales of tangible personal property manufactured in this	1026
state, if sold by the manufacturer in this state to a retailer for	1027
use in the retail business of the retailer outside of this state	1028
and if possession is taken from the manufacturer by the purchaser	1029
within this state for the sole purpose of immediately removing the	1030
same from this state in a vehicle owned by the purchaser;	1031

(22) Sales of services provided by the state or any of its	1032
political subdivisions, agencies, instrumentalities, institutions,	1033
or authorities, or by governmental entities of the state or any of	1034
its political subdivisions, agencies, instrumentalities,	1035
institutions, or authorities;	1036

(23) Sales of motor vehicles to nonresidents of this state	1037
under the circumstances described in division (B) of section	1038
5739.029 of the Revised Code;	1039

(24) Sales to persons engaged in the preparation of eggs for	1040
sale of tangible personal property used or consumed directly in	1041
such preparation, including such tangible personal property used	1042
for cleaning, sanitizing, preserving, grading, sorting, and	1043
classifying by size; packages, including material and parts for	1044
packages, and machinery, equipment, and material for use in	1045
packaging eggs for sale; and handling and transportation equipment	1046
and parts therefor, except motor vehicles licensed to operate on	1047
public highways, used in intraplant or interplant transfers or	1048
shipment of eggs in the process of preparation for sale, when the	1049
plant or plants within or between which such transfers or	1050
shipments occur are operated by the same person. "Packages"	1051
includes containers, cases, baskets, flats, fillers, filler flats,	1052
cartons, closure materials, labels, and labeling materials, and	1053
"packaging" means placing therein.	1054

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

1055

(b) Sales of water by a nonprofit corporation engaged	1056
exclusively in the treatment, distribution, and sale of water to	1057
consumers, if such water is delivered to consumers through pipes	1058
or tubing.	1059

(26) Fees charged for inspection or reinspection of motor	1060
vehicles under section 3704.14 of the Revised Code;	1061

(27) Sales to persons licensed to conduct a food service	1062
operation pursuant to section 3717.43 of the Revised Code, of	1063
tangible personal property primarily used directly for the	1064
following:	1065

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

1066

(b) To preserve food that has been or will be prepared for	1067
human consumption for sale by the food service operator, not	1068
including tangible personal property used to display food for	1069
selection by the consumer;	1070

(c) To clean tangible personal property used to prepare or	1071
serve food for human consumption for sale.	1072

(28) Sales of animals by nonprofit animal adoption services	1073
or county humane societies;	1074

(29) Sales of services to a corporation described in division	1075
(A) of section 5709.72 of the Revised Code, and sales of tangible	1076
personal property that qualifies for exemption from taxation under	1077
section 5709.72 of the Revised Code;	1078

(30) Sales and installation of agricultural land tile, as	1079
defined in division (B)(5)(a) of section 5739.01 of the Revised	1080
Code;	1081

(31) Sales and erection or installation of portable grain	1082
bins, as defined in division (B)(5)(b) of section 5739.01 of the	1083
Revised Code;	1084

(32) The sale, lease, repair, and maintenance of, parts for,	1085
or items attached to or incorporated in, motor vehicles that are	1086
primarily used for transporting tangible personal property	1087
belonging to others by a person engaged in highway transportation	1088
for hire, except for packages and packaging used for the	1089
transportation of tangible personal property;	1090

(33) Sales to the state headquarters of any veterans'	1091
organization in this state that is either incorporated and issued	1092
a charter by the congress of the United States or is recognized by	1093
the United States veterans administration, for use by the	1094
headquarters;	1095

(34) Sales to a telecommunications service vendor, mobile	1096
telecommunications service vendor, or satellite broadcasting	1097
service vendor of tangible personal property and services used	1098
directly and primarily in transmitting, receiving, switching, or	1099
recording any interactive, one- or two-way electromagnetic	1100
communications, including voice, image, data, and information,	1101
through the use of any medium, including, but not limited to,	1102
poles, wires, cables, switching equipment, computers, and record	1103
storage devices and media, and component parts for the tangible	1104
personal property. The exemption provided in this division shall	1105
be in lieu of all other exemptions under division (B)(42)(a) or	1106
(n) of this section to which the vendor may otherwise be entitled,	1107
based upon the use of the thing purchased in providing the	1108
telecommunications, mobile telecommunications, or satellite	1109
broadcasting service.	1110

(35)(a) Sales where the purpose of the consumer is to use or	1111
consume the things transferred in making retail sales and	1112
consisting of newspaper inserts, catalogues, coupons, flyers, gift	1113
certificates, or other advertising material that prices and	1114
describes tangible personal property offered for retail sale.	1115

(b) Sales to direct marketing vendors of preliminary	1116
materials such as photographs, artwork, and typesetting that will	1117
be used in printing advertising material; and of printed matter	1118
that offers free merchandise or chances to win sweepstake prizes	1119
and that is mailed to potential customers with advertising	1120
material described in division (B)(35)(a) of this section;	1121

(c) Sales of equipment such as telephones, computers,	1122
facsimile machines, and similar tangible personal property	1123
primarily used to accept orders for direct marketing retail sales.	1124

(d) Sales of automatic food vending machines that preserve	1125
food with a shelf life of forty-five days or less by refrigeration	1126
and dispense it to the consumer.	1127

For purposes of division (B)(35) of this section, "direct	1128
marketing" means the method of selling where consumers order	1129
tangible personal property by United States mail, delivery	1130
service, or telecommunication and the vendor delivers or ships the	1131
tangible personal property sold to the consumer from a warehouse,	1132
catalogue distribution center, or similar fulfillment facility by	1133
means of the United States mail, delivery service, or common	1134
carrier.	1135

(36) Sales to a person engaged in the business of	1136
horticulture or producing livestock of materials to be	1137
incorporated into a horticulture structure or livestock structure;	1138

(37) Sales of personal computers, computer monitors, computer	1139
keyboards, modems, and other peripheral computer equipment to an	1140
individual who is licensed or certified to teach in an elementary	1141
or a secondary school in this state for use by that individual in	1142
preparation for teaching elementary or secondary school students;	1143

(38) Sales to a professional racing team of any of the	1144
following:	1145

(a) Motor racing vehicles;

1146

(b) Repair services for motor racing vehicles;

1147

(c) Items of property that are attached to or incorporated in	1148
motor racing vehicles, including engines, chassis, and all other	1149
components of the vehicles, and all spare, replacement, and	1150
rebuilt parts or components of the vehicles; except not including	1151
tires, consumable fluids, paint, and accessories consisting of	1152
instrumentation sensors and related items added to the vehicle to	1153
collect and transmit data by means of telemetry and other forms of	1154
communication.	1155

(39) Sales of used manufactured homes and used mobile homes,	1156
as defined in section 5739.0210 of the Revised Code, made on or	1157
after January 1, 2000;	1158

(40) Sales of tangible personal property and services to a	1159
provider of electricity used or consumed directly and primarily in	1160
generating, transmitting, or distributing electricity for use by	1161
others, including property that is or is to be incorporated into	1162
and will become a part of the consumer's production, transmission,	1163
or distribution system and that retains its classification as	1164
tangible personal property after incorporation; fuel or power used	1165
in the production, transmission, or distribution of electricity;	1166
energy conversion equipment as defined in section 5727.01 of the	1167
Revised Code; and tangible personal property and services used in	1168
the repair and maintenance of the production, transmission, or	1169
distribution system, including only those motor vehicles as are	1170
specially designed and equipped for such use. The exemption	1171
provided in this division shall be in lieu of all other exemptions	1172
in division (B)(42)(a) or (n) of this section to which a provider	1173
of electricity may otherwise be entitled based on the use of the	1174
tangible personal property or service purchased in generating,	1175
transmitting, or distributing electricity.	1176

(41) Sales to a person providing services under division	1177
(B)(3)(r) of section 5739.01 of the Revised Code of tangible	1178
personal property and services used directly and primarily in	1179
providing taxable services under that section.	1180

(42) Sales where the purpose of the purchaser is to do any of	1181
the following:	1182

(a) To incorporate the thing transferred as a material or a	1183
part into tangible personal property to be produced for sale by	1184
manufacturing, assembling, processing, or refining; or to use or	1185
consume the thing transferred directly in producing tangible	1186
personal property for sale by mining, including, without	1187
limitation, the extraction from the earth of all substances that	1188
are classed geologically as minerals, production of crude oil and	1189
natural gas, or directly in the rendition of a public utility	1190
service, except that the sales tax levied by this section shall be	1191
collected upon all meals, drinks, and food for human consumption	1192
sold when transporting persons. Persons engaged in rendering	1193
services in the exploration for, and production of, crude oil and	1194
natural gas for others are deemed engaged directly in the	1195
exploration for, and production of, crude oil and natural gas.	1196
This paragraph does not exempt from "retail sale" or "sales at	1197
retail" the sale of tangible personal property that is to be	1198
incorporated into a structure or improvement to real property.	1199

(b) To hold the thing transferred as security for the	1200
performance of an obligation of the vendor;	1201

(c) To resell, hold, use, or consume the thing transferred as	1202
evidence of a contract of insurance;	1203

(d) To use or consume the thing directly in commercial	1204
fishing;	1205

(e) To incorporate the thing transferred as a material or a	1206
part into, or to use or consume the thing transferred directly in	1207
the production of, magazines distributed as controlled circulation	1208
publications;	1209

(f) To use or consume the thing transferred in the production	1210
and preparation in suitable condition for market and sale of	1211
printed, imprinted, overprinted, lithographic, multilithic,	1212
blueprinted, photostatic, or other productions or reproductions of	1213
written or graphic matter;	1214

(g) To use the thing transferred, as described in section	1215
5739.011 of the Revised Code, primarily in a manufacturing	1216
operation to produce tangible personal property for sale;	1217

(h) To use the benefit of a warranty, maintenance or service	1218
contract, or similar agreement, as described in division (B)(7) of	1219
section 5739.01 of the Revised Code, to repair or maintain	1220
tangible personal property, if all of the property that is the	1221
subject of the warranty, contract, or agreement would not be	1222
subject to the tax imposed by this section;	1223

(i) To use the thing transferred as qualified research and	1224
development equipment;	1225

(j) To use or consume the thing transferred primarily in	1226
storing, transporting, mailing, or otherwise handling purchased	1227
sales inventory in a warehouse, distribution center, or similar	1228
facility when the inventory is primarily distributed outside this	1229
state to retail stores of the person who owns or controls the	1230
warehouse, distribution center, or similar facility, to retail	1231
stores of an affiliated group of which that person is a member, or	1232
by means of direct marketing. This division does not apply to	1233
motor vehicles registered for operation on the public highways. As	1234
used in this division, "affiliated group" has the same meaning as	1235
in division (B)(3)(e) of section 5739.01 of the Revised Code and	1236
"direct marketing" has the same meaning as in division (B)(35) of	1237
this section.	1238

(k) To use or consume the thing transferred to fulfill a	1239
contractual obligation incurred by a warrantor pursuant to a	1240
warranty provided as a part of the price of the tangible personal	1241
property sold or by a vendor of a warranty, maintenance or service	1242
contract, or similar agreement the provision of which is defined	1243
as a sale under division (B)(7) of section 5739.01 of the Revised	1244
Code;	1245

(l) To use or consume the thing transferred in the production	1246
of a newspaper for distribution to the public;	1247

(m) To use tangible personal property to perform a service	1248
listed in division (B)(3) of section 5739.01 of the Revised Code,	1249
if the property is or is to be permanently transferred to the	1250
consumer of the service as an integral part of the performance of	1251
the service;	1252

(n) To use or consume the thing transferred primarily in	1253
producing tangible personal property for sale by farming,	1254
agriculture, horticulture, or floriculture. Persons engaged in	1255
rendering farming, agriculture, horticulture, or floriculture	1256
services for others are deemed engaged primarily in farming,	1257
agriculture, horticulture, or floriculture. This paragraph does	1258
not exempt from "retail sale" or "sales at retail" the sale of	1259
tangible personal property that is to be incorporated into a	1260
structure or improvement to real property.	1261

(o) To use or consume the thing transferred in acquiring,	1262
formatting, editing, storing, and disseminating data or	1263
information by electronic publishing.	1264

As used in division (B)(42) of this section, "thing" includes	1265
all transactions included in divisions (B)(3)(a), (b), and (e) of	1266
section 5739.01 of the Revised Code.	1267

(43) Sales conducted through a coin operated device that	1268
activates vacuum equipment or equipment that dispenses water,	1269
whether or not in combination with soap or other cleaning agents	1270
or wax, to the consumer for the consumer's use on the premises in	1271
washing, cleaning, or waxing a motor vehicle, provided no other	1272
personal property or personal service is provided as part of the	1273
transaction.	1274

(44) Sales of replacement and modification parts for engines,	1275
airframes, instruments, and interiors in, and paint for, aircraft	1276
used primarily in a fractional aircraft ownership program, and	1277
sales of services for the repair, modification, and maintenance of	1278
such aircraft, and machinery, equipment, and supplies primarily	1279
used to provide those services.	1280

(45) Sales of telecommunications service that is used	1281
directly and primarily to perform the functions of a call center.	1282
As used in this division, "call center" means any physical	1283
location where telephone calls are placed or received in high	1284
volume for the purpose of making sales, marketing, customer	1285
service, technical support, or other specialized business	1286
activity, and that employs at least fifty individuals that engage	1287
in call center activities on a full-time basis, or sufficient	1288
individuals to fill fifty full-time equivalent positions.	1289

(46) Sales by a telecommunications service vendor of 900	1290
service to a subscriber. This division does not apply to	1291
information services, as defined in division (FF) of section	1292
5739.01 of the Revised Code.	1293

(47) Sales of value-added non-voice data service. This	1294
division does not apply to any similar service that is not	1295
otherwise a telecommunications service.	1296

(48)(a) Sales of machinery, equipment, and software to a	1297
qualified direct selling entity for use in a warehouse or	1298
distribution center primarily for storing, transporting, or	1299
otherwise handling inventory that is held for sale to independent	1300
salespersons who operate as direct sellers and that is held	1301
primarily for distribution outside this state;	1302

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

1303

(i) "Direct seller" means a person selling consumer products	1304
to individuals for personal or household use and not from a fixed	1305
retail location, including selling such product at in-home product	1306
demonstrations, parties, and other one-on-one selling.	1307

(ii) "Qualified direct selling entity" means an entity	1308
selling to direct sellers at the time the entity enters into a tax	1309
credit agreement with the tax credit authority pursuant to section	1310
122.17 of the Revised Code, provided that the agreement was	1311
entered into on or after January 1, 2007. Neither contingencies	1312
relevant to the granting of, nor later developments with respect	1313
to, the tax credit shall impair the status of the qualified direct	1314
selling entity under division (B)(48) of this section after	1315
execution of the tax credit agreement by the tax credit authority.	1316

(c) Division (B)(48) of this section is limited to machinery,	1317
equipment, and software first stored, used, or consumed in this	1318
state within the period commencing June 24, 2008, and ending on	1319
the date that is five years after that date.	1320

(49) Sales of materials, parts, equipment, or engines used in	1321
the repair or maintenance of aircraft or avionics systems of such	1322
aircraft, and sales of repair, remodeling, replacement, or	1323
maintenance services in this state performed on aircraft or on an	1324
aircraft's avionics, engine, or component materials or parts. As	1325
used in division (B)(49) of this section, "aircraft" means	1326
aircraft of more than six thousand pounds maximum certified	1327
takeoff weight or used exclusively in general aviation.	1328

(50) Sales of full flight simulators that are used for pilot	1329
or flight-crew training, sales of repair or replacement parts or	1330
components, and sales of repair or maintenance services for such	1331
full flight simulators. "Full flight simulator" means a replica of	1332
a specific type, or make, model, and series of aircraft cockpit.	1333
It includes the assemblage of equipment and computer programs	1334
necessary to represent aircraft operations in ground and flight	1335
conditions, a visual system providing an out-of-the-cockpit view,	1336
and a system that provides cues at least equivalent to those of a	1337
three-degree-of-freedom motion system, and has the full range of	1338
capabilities of the systems installed in the device as described	1339
in appendices A and B of part 60 of chapter 1 of title 14 of the	1340
Code of Federal Regulations.	1341

(51) Any transfer or lease of tangible personal property	1342
between the state and JobsOhio in accordance with section 4313.02	1343
of the Revised Code.	1344

(52)(a) Sales to a qualifying corporation.

1345

(b) As used in division (B)(52) of this section:

1346

(i) "Qualifying corporation" means a nonprofit corporation	1347
organized in this state that leases from an eligible county land,	1348
buildings, structures, fixtures, and improvements to the land that	1349
are part of or used in a public recreational facility used by a	1350
major league professional athletic team or a class A to class AAA	1351
minor league affiliate of a major league professional athletic	1352
team for a significant portion of the team's home schedule,	1353
provided the following apply:	1354

(I) The facility is leased from the eligible county pursuant	1355
to a lease that requires substantially all of the revenue from the	1356
operation of the business or activity conducted by the nonprofit	1357
corporation at the facility in excess of operating costs, capital	1358
expenditures, and reserves to be paid to the eligible county at	1359
least once per calendar year.	1360

(II) Upon dissolution and liquidation of the nonprofit	1361
corporation, all of its net assets are distributable to the board	1362
of commissioners of the eligible county from which the corporation	1363
leases the facility.	1364

(ii) "Eligible county" has the same meaning as in section	1365
307.695 of the Revised Code.	1366

(53) Sales to or by a cable service provider, video service	1367
provider, or radio or television broadcast station regulated by	1368
the federal government of cable service or programming, video	1369
service or programming, audio service or programming, or	1370
electronically transferred digital audiovisual or audio work. As	1371
used in division (B)(53) of this section, "cable service" and	1372
"cable service provider" have the same meanings as in section	1373
1332.01 of the Revised Code, and "video service," "video service	1374
provider," and "video programming" have the same meanings as in	1375
section 1332.21 of the Revised Code.	1376

(54) Sales to a partnering business holding a valid startup	1377
zone certificate of tangible personal property or services used or	1378
consumed for business operations in a startup zone. The exemption	1379
under division (B)(54) of this section applies only to sales	1380
occurring on or after the date the consumer's startup zone	1381
certificate takes effect and before the certificate expires. As	1382
used in this division, "startup zone certificate," "partnering	1383
business," and "startup zone" have the same meanings as in section	1384
195.01 of the Revised Code.	1385

(C) For the purpose of the proper administration of this	1386
chapter, and to prevent the evasion of the tax, it is presumed	1387
that all sales made in this state are subject to the tax until the	1388
contrary is established.	1389

(D) The levy of this tax on retail sales of recreation and	1390
sports club service shall not prevent a municipal corporation from	1391
levying any tax on recreation and sports club dues or on any	1392
income generated by recreation and sports club dues.	1393

(E) The tax collected by the vendor from the consumer under	1394
this chapter is not part of the price, but is a tax collection for	1395
the benefit of the state, and of counties levying an additional	1396
sales tax pursuant to section 5739.021 or 5739.026 of the Revised	1397
Code and of transit authorities levying an additional sales tax	1398
pursuant to section 5739.023 of the Revised Code. Except for the	1399
discount authorized under section 5739.12 of the Revised Code and	1400
the effects of any rounding pursuant to section 5703.055 of the	1401
Revised Code, no person other than the state or such a county or	1402
transit authority shall derive any benefit from the collection or	1403
payment of the tax levied by this section or section 5739.021,	1404
5739.023, or 5739.026 of the Revised Code.	1405

Sec. 5739.03.  (A) Except as provided in section 5739.05 or	1406
section 5739.051 of the Revised Code, the tax imposed by or	1407
pursuant to section 5739.02, 5739.021, 5739.023, or 5739.026 of	1408
the Revised Code shall be paid by the consumer to the vendor, and	1409
each vendor shall collect from the consumer, as a trustee for the	1410
state of Ohio, the full and exact amount of the tax payable on	1411
each taxable sale, in the manner and at the times provided as	1412
follows:	1413

(1) If the price is, at or prior to the provision of the	1414
service or the delivery of possession of the thing sold to the	1415
consumer, paid in currency passed from hand to hand by the	1416
consumer or the consumer's agent to the vendor or the vendor's	1417
agent, the vendor or the vendor's agent shall collect the tax with	1418
and at the same time as the price;	1419

(2) If the price is otherwise paid or to be paid, the vendor	1420
or the vendor's agent shall, at or prior to the provision of the	1421
service or the delivery of possession of the thing sold to the	1422
consumer, charge the tax imposed by or pursuant to section	1423
5739.02, 5739.021, 5739.023, or 5739.026 of the Revised Code to	1424
the account of the consumer, which amount shall be collected by	1425
the vendor from the consumer in addition to the price. Such sale	1426
shall be reported on and the amount of the tax applicable thereto	1427
shall be remitted with the return for the period in which the sale	1428
is made, and the amount of the tax shall become a legal charge in	1429
favor of the vendor and against the consumer.	1430

(B)(1)(a) If any sale is claimed to be exempt under division	1431
(E) of section 5739.01 of the Revised Code or under section	1432
5739.02 of the Revised Code, with the exception of divisions	1433
(B)(1) to (11) or (28) of section 5739.02 of the Revised Code, the	1434
consumer must provide to the vendor, and the vendor must obtain	1435
from the consumer, a certificate specifying the reason that the	1436
sale is not legally subject to the tax. The certificate shall be	1437
in such form, and shall be provided either in a hard copy form or	1438
electronic form, as the tax commissioner prescribes. If the sale	1439
is claimed to be exempt under division (B)(54) of section 5739.02	1440
of the Revised Code, a copy of the startup zone certificate, as	1441
defined in section 195.01 of the Revised Code, shall function as	1442
the exemption certificate required under this division.	1443

(b) A vendor that obtains a fully completed exemption	1444
certificate from a consumer is relieved of liability for	1445
collecting and remitting tax on any sale covered by that	1446
certificate. If it is determined the exemption was improperly	1447
claimed, the consumer shall be liable for any tax due on that sale	1448
under section 5739.02, 5739.021, 5739.023, or 5739.026 or Chapter	1449
5741. of the Revised Code. Relief under this division from	1450
liability does not apply to any of the following:	1451

(i) A vendor that fraudulently fails to collect tax;

1452

(ii) A vendor that solicits consumers to participate in the	1453
unlawful claim of an exemption;	1454

(iii) A vendor that accepts an exemption certificate from a	1455
consumer that claims an exemption based on who purchases or who	1456
sells property or a service, when the subject of the transaction	1457
sought to be covered by the exemption certificate is actually	1458
received by the consumer at a location operated by the vendor in	1459
this state, and this state has posted to its web site an exemption	1460
certificate form that clearly and affirmatively indicates that the	1461
claimed exemption is not available in this state;	1462

(iv) A vendor that accepts an exemption certificate from a	1463
consumer who claims a multiple points of use exemption under	1464
division (D) of section 5739.033 of the Revised Code, if the item	1465
purchased is tangible personal property, other than prewritten	1466
computer software.	1467

(2) The vendor shall maintain records, including exemption	1468
certificates, of all sales on which a consumer has claimed an	1469
exemption, and provide them to the tax commissioner on request.	1470

(3) The tax commissioner may establish an identification	1471
system whereby the commissioner issues an identification number to	1472
a consumer that is exempt from payment of the tax. The consumer	1473
must present the number to the vendor, if any sale is claimed to	1474
be exempt as provided in this section.	1475

(4) If no certificate is provided or obtained within ninety	1476
days after the date on which such sale is consummated, it shall be	1477
presumed that the tax applies. Failure to have so provided or	1478
obtained a certificate shall not preclude a vendor, within one	1479
hundred twenty days after the tax commissioner gives written	1480
notice of intent to levy an assessment, from either establishing	1481
that the sale is not subject to the tax, or obtaining, in good	1482
faith, a fully completed exemption certificate.	1483

(5) Certificates need not be obtained nor provided where the	1484
identity of the consumer is such that the transaction is never	1485
subject to the tax imposed or where the item of tangible personal	1486
property sold or the service provided is never subject to the tax	1487
imposed, regardless of use, or when the sale is in interstate	1488
commerce.	1489

(6) If a transaction is claimed to be exempt under division	1490
(B)(13) of section 5739.02 of the Revised Code, the contractor	1491
shall obtain certification of the claimed exemption from the	1492
contractee. This certification shall be in addition to an	1493
exemption certificate provided by the contractor to the vendor. A	1494
contractee that provides a certification under this division shall	1495
be deemed to be the consumer of all items purchased by the	1496
contractor under the claim of exemption, if it is subsequently	1497
determined that the exemption is not properly claimed. The	1498
certification shall be in such form as the tax commissioner	1499
prescribes.	1500

(C) As used in this division, "contractee" means a person who	1501
seeks to enter or enters into a contract or agreement with a	1502
contractor or vendor for the construction of real property or for	1503
the sale and installation onto real property of tangible personal	1504
property.	1505

Any contractor or vendor may request from any contractee a	1506
certification of what portion of the property to be transferred	1507
under such contract or agreement is to be incorporated into the	1508
realty and what portion will retain its status as tangible	1509
personal property after installation is completed. The contractor	1510
or vendor shall request the certification by certified mail	1511
delivered to the contractee, return receipt requested. Upon	1512
receipt of such request and prior to entering into the contract or	1513
agreement, the contractee shall provide to the contractor or	1514
vendor a certification sufficiently detailed to enable the	1515
contractor or vendor to ascertain the resulting classification of	1516
all materials purchased or fabricated by the contractor or vendor	1517
and transferred to the contractee. This requirement applies to a	1518
contractee regardless of whether the contractee holds a direct	1519
payment permit under section 5739.031 of the Revised Code or	1520
provides to the contractor or vendor an exemption certificate as	1521
provided under this section.	1522

For the purposes of the taxes levied by this chapter and	1523
Chapter 5741. of the Revised Code, the contractor or vendor may in	1524
good faith rely on the contractee's certification. Notwithstanding	1525
division (B) of section 5739.01 of the Revised Code, if the tax	1526
commissioner determines that certain property certified by the	1527
contractee as tangible personal property pursuant to this division	1528
is, in fact, real property, the contractee shall be considered to	1529
be the consumer of all materials so incorporated into that real	1530
property and shall be liable for the applicable tax, and the	1531
contractor or vendor shall be excused from any liability on those	1532
materials.	1533

If a contractee fails to provide such certification upon the	1534
request of the contractor or vendor, the contractor or vendor	1535
shall comply with the provisions of this chapter and Chapter 5741.	1536
of the Revised Code without the certification. If the tax	1537
commissioner determines that such compliance has been performed in	1538
good faith and that certain property treated as tangible personal	1539
property by the contractor or vendor is, in fact, real property,	1540
the contractee shall be considered to be the consumer of all	1541
materials so incorporated into that real property and shall be	1542
liable for the applicable tax, and the construction contractor or	1543
vendor shall be excused from any liability on those materials.	1544

This division does not apply to any contract or agreement	1545
where the tax commissioner determines as a fact that a	1546
certification under this division was made solely on the decision	1547
or advice of the contractor or vendor.	1548

(D) Notwithstanding division (B) of section 5739.01 of the	1549
Revised Code, whenever the total rate of tax imposed under this	1550
chapter is increased after the date after a construction contract	1551
is entered into, the contractee shall reimburse the construction	1552
contractor for any additional tax paid on tangible property	1553
consumed or services received pursuant to the contract.	1554

(E) A vendor who files a petition for reassessment contesting	1555
the assessment of tax on sales for which the vendor obtained no	1556
valid exemption certificates and for which the vendor failed to	1557
establish that the sales were properly not subject to the tax	1558
during the one-hundred-twenty-day period allowed under division	1559
(B) of this section, may present to the tax commissioner	1560
additional evidence to prove that the sales were properly subject	1561
to a claim of exception or exemption. The vendor shall file such	1562
evidence within ninety days of the receipt by the vendor of the	1563
notice of assessment, except that, upon application and for	1564
reasonable cause, the period for submitting such evidence shall be	1565
extended thirty days.	1566

The commissioner shall consider such additional evidence in	1567
reaching the final determination on the assessment and petition	1568
for reassessment.	1569

(F) Whenever a vendor refunds the price, minus any separately	1570
stated delivery charge, of an item of tangible personal property	1571
on which the tax imposed under this chapter has been paid, the	1572
vendor shall also refund the amount of tax paid, minus the amount	1573
of tax attributable to the delivery charge.	1574

Sec. 5747.01.  Except as otherwise expressly provided or	1575
clearly appearing from the context, any term used in this chapter	1576
that is not otherwise defined in this section has the same meaning	1577
as when used in a comparable context in the laws of the United	1578
States relating to federal income taxes or if not used in a	1579
comparable context in those laws, has the same meaning as in	1580
section 5733.40 of the Revised Code. Any reference in this chapter	1581
to the Internal Revenue Code includes other laws of the United	1582
States relating to federal income taxes.	1583

As used in this chapter:

1584

(A) "Adjusted gross income" or "Ohio adjusted gross income"	1585
means federal adjusted gross income, as defined and used in the	1586
Internal Revenue Code, adjusted as provided in this section:	1587

(1) Add interest or dividends on obligations or securities of	1588
any state or of any political subdivision or authority of any	1589
state, other than this state and its subdivisions and authorities.	1590

(2) Add interest or dividends on obligations of any	1591
authority, commission, instrumentality, territory, or possession	1592
of the United States to the extent that the interest or dividends	1593
are exempt from federal income taxes but not from state income	1594
taxes.	1595

(3) Deduct interest or dividends on obligations of the United	1596
States and its territories and possessions or of any authority,	1597
commission, or instrumentality of the United States to the extent	1598
that the interest or dividends are included in federal adjusted	1599
gross income but exempt from state income taxes under the laws of	1600
the United States.	1601

(4) Deduct disability and survivor's benefits to the extent	1602
included in federal adjusted gross income.	1603

(5) Deduct benefits under Title II of the Social Security Act	1604
and tier 1 railroad retirement benefits to the extent included in	1605
federal adjusted gross income under section 86 of the Internal	1606
Revenue Code.	1607

(6) In the case of a taxpayer who is a beneficiary of a trust	1608
that makes an accumulation distribution as defined in section 665	1609
of the Internal Revenue Code, add, for the beneficiary's taxable	1610
years beginning before 2002, the portion, if any, of such	1611
distribution that does not exceed the undistributed net income of	1612
the trust for the three taxable years preceding the taxable year	1613
in which the distribution is made to the extent that the portion	1614
was not included in the trust's taxable income for any of the	1615
trust's taxable years beginning in 2002 or thereafter.	1616
"Undistributed net income of a trust" means the taxable income of	1617
the trust increased by (a)(i) the additions to adjusted gross	1618
income required under division (A) of this section and (ii) the	1619
personal exemptions allowed to the trust pursuant to section	1620
642(b) of the Internal Revenue Code, and decreased by (b)(i) the	1621
deductions to adjusted gross income required under division (A) of	1622
this section, (ii) the amount of federal income taxes attributable	1623
to such income, and (iii) the amount of taxable income that has	1624
been included in the adjusted gross income of a beneficiary by	1625
reason of a prior accumulation distribution. Any undistributed net	1626
income included in the adjusted gross income of a beneficiary	1627
shall reduce the undistributed net income of the trust commencing	1628
with the earliest years of the accumulation period.	1629

(7) Deduct the amount of wages and salaries, if any, not	1630
otherwise allowable as a deduction but that would have been	1631
allowable as a deduction in computing federal adjusted gross	1632
income for the taxable year, had the targeted jobs credit allowed	1633
and determined under sections 38, 51, and 52 of the Internal	1634
Revenue Code not been in effect.	1635

(8) Deduct any interest or interest equivalent on public	1636
obligations and purchase obligations to the extent that the	1637
interest or interest equivalent is included in federal adjusted	1638
gross income.	1639

(9) Add any loss or deduct any gain resulting from the sale,	1640
exchange, or other disposition of public obligations to the extent	1641
that the loss has been deducted or the gain has been included in	1642
computing federal adjusted gross income.	1643

(10) Deduct or add amounts, as provided under section 5747.70	1644
of the Revised Code, related to contributions to variable college	1645
savings program accounts made or tuition units purchased pursuant	1646
to Chapter 3334. of the Revised Code.	1647

(11)(a) Deduct, to the extent not otherwise allowable as a	1648
deduction or exclusion in computing federal or Ohio adjusted gross	1649
income for the taxable year, the amount the taxpayer paid during	1650
the taxable year for medical care insurance and qualified	1651
long-term care insurance for the taxpayer, the taxpayer's spouse,	1652
and dependents. No deduction for medical care insurance under	1653
division (A)(11) of this section shall be allowed either to any	1654
taxpayer who is eligible to participate in any subsidized health	1655
plan maintained by any employer of the taxpayer or of the	1656
taxpayer's spouse, or to any taxpayer who is entitled to, or on	1657
application would be entitled to, benefits under part A of Title	1658
XVIII of the "Social Security Act," 49 Stat. 620 (1935), 42 U.S.C.	1659
301, as amended. For the purposes of division (A)(11)(a) of this	1660
section, "subsidized health plan" means a health plan for which	1661
the employer pays any portion of the plan's cost. The deduction	1662
allowed under division (A)(11)(a) of this section shall be the net	1663
of any related premium refunds, related premium reimbursements, or	1664
related insurance premium dividends received during the taxable	1665
year.	1666

(b) Deduct, to the extent not otherwise deducted or excluded	1667
in computing federal or Ohio adjusted gross income during the	1668
taxable year, the amount the taxpayer paid during the taxable	1669
year, not compensated for by any insurance or otherwise, for	1670
medical care of the taxpayer, the taxpayer's spouse, and	1671
dependents, to the extent the expenses exceed seven and one-half	1672
per cent of the taxpayer's federal adjusted gross income.	1673

(c) Deduct, to the extent not otherwise deducted or excluded	1674
in computing federal or Ohio adjusted gross income, any amount	1675
included in federal adjusted gross income under section 105 or not	1676
excluded under section 106 of the Internal Revenue Code solely	1677
because it relates to an accident and health plan for a person who	1678
otherwise would be a "qualifying relative" and thus a "dependent"	1679
under section 152 of the Internal Revenue Code but for the fact	1680
that the person fails to meet the income and support limitations	1681
under section 152(d)(1)(B) and (C) of the Internal Revenue Code.	1682

(d) For purposes of division (A)(11) of this section,	1683
"medical care" has the meaning given in section 213 of the	1684
Internal Revenue Code, subject to the special rules, limitations,	1685
and exclusions set forth therein, and "qualified long-term care"	1686
has the same meaning given in section 7702B(c) of the Internal	1687
Revenue Code. Solely for purposes of divisions (A)(11)(a) and (c)	1688
of this section, "dependent" includes a person who otherwise would	1689
be a "qualifying relative" and thus a "dependent" under section	1690
152 of the Internal Revenue Code but for the fact that the person	1691
fails to meet the income and support limitations under section	1692
152(d)(1)(B) and (C) of the Internal Revenue Code.	1693

(12)(a) Deduct any amount included in federal adjusted gross	1694
income solely because the amount represents a reimbursement or	1695
refund of expenses that in any year the taxpayer had deducted as	1696
an itemized deduction pursuant to section 63 of the Internal	1697
Revenue Code and applicable United States department of the	1698
treasury regulations. The deduction otherwise allowed under	1699
division (A)(12)(a) of this section shall be reduced to the extent	1700
the reimbursement is attributable to an amount the taxpayer	1701
deducted under this section in any taxable year.	1702

(b) Add any amount not otherwise included in Ohio adjusted	1703
gross income for any taxable year to the extent that the amount is	1704
attributable to the recovery during the taxable year of any amount	1705
deducted or excluded in computing federal or Ohio adjusted gross	1706
income in any taxable year.	1707

(13) Deduct any portion of the deduction described in section	1708
1341(a)(2) of the Internal Revenue Code, for repaying previously	1709
reported income received under a claim of right, that meets both	1710
of the following requirements:	1711

(a) It is allowable for repayment of an item that was	1712
included in the taxpayer's adjusted gross income for a prior	1713
taxable year and did not qualify for a credit under division (A)	1714
or (B) of section 5747.05 of the Revised Code for that year;	1715

(b) It does not otherwise reduce the taxpayer's adjusted	1716
gross income for the current or any other taxable year.	1717

(14) Deduct an amount equal to the deposits made to, and net	1718
investment earnings of, a medical savings account during the	1719
taxable year, in accordance with section 3924.66 of the Revised	1720
Code. The deduction allowed by division (A)(14) of this section	1721
does not apply to medical savings account deposits and earnings	1722
otherwise deducted or excluded for the current or any other	1723
taxable year from the taxpayer's federal adjusted gross income.	1724

(15)(a) Add an amount equal to the funds withdrawn from a	1725
medical savings account during the taxable year, and the net	1726
investment earnings on those funds, when the funds withdrawn were	1727
used for any purpose other than to reimburse an account holder	1728
for, or to pay, eligible medical expenses, in accordance with	1729
section 3924.66 of the Revised Code;	1730

(b) Add the amounts distributed from a medical savings	1731
account under division (A)(2) of section 3924.68 of the Revised	1732
Code during the taxable year.	1733

(16) Add any amount claimed as a credit under section	1734
5747.059 or 5747.65 of the Revised Code to the extent that such	1735
amount satisfies either of the following:	1736

(a) The amount was deducted or excluded from the computation	1737
of the taxpayer's federal adjusted gross income as required to be	1738
reported for the taxpayer's taxable year under the Internal	1739
Revenue Code;	1740

(b) The amount resulted in a reduction of the taxpayer's	1741
federal adjusted gross income as required to be reported for any	1742
of the taxpayer's taxable years under the Internal Revenue Code.	1743

(17) Deduct the amount contributed by the taxpayer to an	1744
individual development account program established by a county	1745
department of job and family services pursuant to sections 329.11	1746
to 329.14 of the Revised Code for the purpose of matching funds	1747
deposited by program participants. On request of the tax	1748
commissioner, the taxpayer shall provide any information that, in	1749
the tax commissioner's opinion, is necessary to establish the	1750
amount deducted under division (A)(17) of this section.	1751

(18) Beginning in taxable year 2001 but not for any taxable	1752
year beginning after December 31, 2005, if the taxpayer is married	1753
and files a joint return and the combined federal adjusted gross	1754
income of the taxpayer and the taxpayer's spouse for the taxable	1755
year does not exceed one hundred thousand dollars, or if the	1756
taxpayer is single and has a federal adjusted gross income for the	1757
taxable year not exceeding fifty thousand dollars, deduct amounts	1758
paid during the taxable year for qualified tuition and fees paid	1759
to an eligible institution for the taxpayer, the taxpayer's	1760
spouse, or any dependent of the taxpayer, who is a resident of	1761
this state and is enrolled in or attending a program that	1762
culminates in a degree or diploma at an eligible institution. The	1763
deduction may be claimed only to the extent that qualified tuition	1764
and fees are not otherwise deducted or excluded for any taxable	1765
year from federal or Ohio adjusted gross income. The deduction may	1766
not be claimed for educational expenses for which the taxpayer	1767
claims a credit under section 5747.27 of the Revised Code.	1768

(19) Add any reimbursement received during the taxable year	1769
of any amount the taxpayer deducted under division (A)(18) of this	1770
section in any previous taxable year to the extent the amount is	1771
not otherwise included in Ohio adjusted gross income.	1772

(20)(a)(i) Subject to divisions (A)(20)(a)(iii), (iv), and	1773
(v) of this section, add five-sixths of the amount of depreciation	1774
expense allowed by subsection (k) of section 168 of the Internal	1775
Revenue Code, including the taxpayer's proportionate or	1776
distributive share of the amount of depreciation expense allowed	1777
by that subsection to a pass-through entity in which the taxpayer	1778
has a direct or indirect ownership interest.	1779

(ii) Subject to divisions (A)(20)(a)(iii), (iv), and (v) of	1780
this section, add five-sixths of the amount of qualifying section	1781
179 depreciation expense, including the taxpayer's proportionate	1782
or distributive share of the amount of qualifying section 179	1783
depreciation expense allowed to any pass-through entity in which	1784
the taxpayer has a direct or indirect ownership interest.	1785

(iii) Subject to division (A)(20)(a)(v) of this section, for	1786
taxable years beginning in 2012 or thereafter, if the increase in	1787
income taxes withheld by the taxpayer is equal to or greater than	1788
ten per cent of income taxes withheld by the taxpayer during the	1789
taxpayer's immediately preceding taxable year, "two-thirds" shall	1790
be substituted for "five-sixths" for the purpose of divisions	1791
(A)(20)(a)(i) and (ii) of this section.	1792

(iv) Subject to division (A)(20)(a)(v) of this section, for	1793
taxable years beginning in 2012 or thereafter, a taxpayer is not	1794
required to add an amount under division (A)(20) of this section	1795
if the increase in income taxes withheld by the taxpayer and by	1796
any pass-through entity in which the taxpayer has a direct or	1797
indirect ownership interest is equal to or greater than the sum of	1798
(I) the amount of qualifying section 179 depreciation expense and	1799
(II) the amount of depreciation expense allowed to the taxpayer by	1800
subsection (k) of section 168 of the Internal Revenue Code, and	1801
including the taxpayer's proportionate or distributive shares of	1802
such amounts allowed to any such pass-through entities.	1803

(v) If a taxpayer directly or indirectly incurs a net	1804
operating loss for the taxable year for federal income tax	1805
purposes, to the extent such loss resulted from depreciation	1806
expense allowed by subsection (k) of section 168 of the Internal	1807
Revenue Code and by qualifying section 179 depreciation expense,	1808
"the entire" shall be substituted for "five-sixths of the" for the	1809
purpose of divisions (A)(20)(a)(i) and (ii) of this section.	1810

The tax commissioner, under procedures established by the	1811
commissioner, may waive the add-backs related to a pass-through	1812
entity if the taxpayer owns, directly or indirectly, less than	1813
five per cent of the pass-through entity.	1814

(b) Nothing in division (A)(20) of this section shall be	1815
construed to adjust or modify the adjusted basis of any asset.	1816

(c) To the extent the add-back required under division	1817
(A)(20)(a) of this section is attributable to property generating	1818
nonbusiness income or loss allocated under section 5747.20 of the	1819
Revised Code, the add-back shall be sitused to the same location	1820
as the nonbusiness income or loss generated by the property for	1821
the purpose of determining the credit under division (A) of	1822
section 5747.05 of the Revised Code. Otherwise, the add-back shall	1823
be apportioned, subject to one or more of the four alternative	1824
methods of apportionment enumerated in section 5747.21 of the	1825
Revised Code.	1826

(d) For the purposes of division (A)(20)(a)(v) of this	1827
section, net operating loss carryback and carryforward shall not	1828
include the allowance of any net operating loss deduction	1829
carryback or carryforward to the taxable year to the extent such	1830
loss resulted from depreciation allowed by section 168(k) of the	1831
Internal Revenue Code and by the qualifying section 179	1832
depreciation expense amount.	1833

(e) For the purposes of divisions (A)(20) and (21) of this	1834
section:	1835

(i) "Income taxes withheld" means the total amount withheld	1836
and remitted under sections 5747.06 and 5747.07 of the Revised	1837
Code by an employer during the employer's taxable year.	1838

(ii) "Increase in income taxes withheld" means the amount by	1839
which the amount of income taxes withheld by an employer during	1840
the employer's current taxable year exceeds the amount of income	1841
taxes withheld by that employer during the employer's immediately	1842
preceding taxable year.	1843

(iii) "Qualifying section 179 depreciation expense" means the	1844
difference between (I) the amount of depreciation expense directly	1845
or indirectly allowed to a taxpayer under section 179 of the	1846
Internal Revised Code, and (II) the amount of depreciation expense	1847
directly or indirectly allowed to the taxpayer under section 179	1848
of the Internal Revenue Code as that section existed on December	1849
31, 2002.	1850

(21)(a) If the taxpayer was required to add an amount under	1851
division (A)(20)(a) of this section for a taxable year, deduct one	1852
of the following:	1853

(i) One-fifth of the amount so added for each of the five	1854
succeeding taxable years if the amount so added was five-sixths of	1855
qualifying section 179 depreciation expense or depreciation	1856
expense allowed by subsection (k) of section 168 of the Internal	1857
Revenue Code;	1858

(ii) One-half of the amount so added for each of the two	1859
succeeding taxable years if the amount so added was two-thirds of	1860
such depreciation expense;	1861

(iii) One-sixth of the amount so added for each of the six	1862
succeeding taxable years if the entire amount of such depreciation	1863
expense was so added.	1864

(b) If the amount deducted under division (A)(21)(a) of this	1865
section is attributable to an add-back allocated under division	1866
(A)(20)(c) of this section, the amount deducted shall be sitused	1867
to the same location. Otherwise, the add-back shall be apportioned	1868
using the apportionment factors for the taxable year in which the	1869
deduction is taken, subject to one or more of the four alternative	1870
methods of apportionment enumerated in section 5747.21 of the	1871
Revised Code.	1872

(c) No deduction is available under division (A)(21)(a) of	1873
this section with regard to any depreciation allowed by section	1874
168(k) of the Internal Revenue Code and by the qualifying section	1875
179 depreciation expense amount to the extent that such	1876
depreciation results in or increases a federal net operating loss	1877
carryback or carryforward. If no such deduction is available for a	1878
taxable year, the taxpayer may carry forward the amount not	1879
deducted in such taxable year to the next taxable year and add	1880
that amount to any deduction otherwise available under division	1881
(A)(21)(a) of this section for that next taxable year. The	1882
carryforward of amounts not so deducted shall continue until the	1883
entire addition required by division (A)(20)(a) of this section	1884
has been deducted.	1885

(d) No refund shall be allowed as a result of adjustments	1886
made by division (A)(21) of this section.	1887

(22) Deduct, to the extent not otherwise deducted or excluded	1888
in computing federal or Ohio adjusted gross income for the taxable	1889
year, the amount the taxpayer received during the taxable year as	1890
reimbursement for life insurance premiums under section 5919.31 of	1891
the Revised Code.	1892

(23) Deduct, to the extent not otherwise deducted or excluded	1893
in computing federal or Ohio adjusted gross income for the taxable	1894
year, the amount the taxpayer received during the taxable year as	1895
a death benefit paid by the adjutant general under section 5919.33	1896
of the Revised Code.	1897

(24) Deduct, to the extent included in federal adjusted gross	1898
income and not otherwise allowable as a deduction or exclusion in	1899
computing federal or Ohio adjusted gross income for the taxable	1900
year, military pay and allowances received by the taxpayer during	1901
the taxable year for active duty service in the United States	1902
army, air force, navy, marine corps, or coast guard or reserve	1903
components thereof or the national guard. The deduction may not be	1904
claimed for military pay and allowances received by the taxpayer	1905
while the taxpayer is stationed in this state.	1906

(25) Deduct, to the extent not otherwise allowable as a	1907
deduction or exclusion in computing federal or Ohio adjusted gross	1908
income for the taxable year and not otherwise compensated for by	1909
any other source, the amount of qualified organ donation expenses	1910
incurred by the taxpayer during the taxable year, not to exceed	1911
ten thousand dollars. A taxpayer may deduct qualified organ	1912
donation expenses only once for all taxable years beginning with	1913
taxable years beginning in 2007.	1914

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

1915

(a) "Human organ" means all or any portion of a human liver,	1916
pancreas, kidney, intestine, or lung, and any portion of human	1917
bone marrow.	1918

(b) "Qualified organ donation expenses" means travel	1919
expenses, lodging expenses, and wages and salary forgone by a	1920
taxpayer in connection with the taxpayer's donation, while living,	1921
of one or more of the taxpayer's human organs to another human	1922
being.	1923

(26) Deduct, to the extent not otherwise deducted or excluded	1924
in computing federal or Ohio adjusted gross income for the taxable	1925
year, amounts received by the taxpayer as retired personnel pay	1926
for service in the uniformed services or reserve components	1927
thereof, or the national guard, or received by the surviving	1928
spouse or former spouse of such a taxpayer under the survivor	1929
benefit plan on account of such a taxpayer's death. If the	1930
taxpayer receives income on account of retirement paid under the	1931
federal civil service retirement system or federal employees	1932
retirement system, or under any successor retirement program	1933
enacted by the congress of the United States that is established	1934
and maintained for retired employees of the United States	1935
government, and such retirement income is based, in whole or in	1936
part, on credit for the taxpayer's uniformed service, the	1937
deduction allowed under this division shall include only that	1938
portion of such retirement income that is attributable to the	1939
taxpayer's uniformed service, to the extent that portion of such	1940
retirement income is otherwise included in federal adjusted gross	1941
income and is not otherwise deducted under this section. Any	1942
amount deducted under division (A)(26) of this section is not	1943
included in a taxpayer's adjusted gross income for the purposes of	1944
section 5747.055 of the Revised Code. No amount may be deducted	1945
under division (A)(26) of this section on the basis of which a	1946
credit was claimed under section 5747.055 of the Revised Code.	1947

(27) Deduct, to the extent not otherwise deducted or excluded	1948
in computing federal or Ohio adjusted gross income for the taxable	1949
year, the amount the taxpayer received during the taxable year	1950
from the military injury relief fund created in section 5101.98 of	1951
the Revised Code.	1952

(28) Deduct, to the extent not otherwise deducted or excluded	1953
in computing federal or Ohio adjusted gross income for the taxable	1954
year, the amount the taxpayer received as a veterans bonus during	1955
the taxable year from the Ohio department of veterans services as	1956
authorized by Section 2r of Article VIII, Ohio Constitution.	1957

(29) Deduct, to the extent not otherwise deducted or excluded	1958
in computing federal or Ohio adjusted gross income for the taxable	1959
year, any income derived from a transfer agreement or from the	1960
enterprise transferred under that agreement under section 4313.02	1961
of the Revised Code.	1962

(30) Deduct, to the extent not otherwise deducted or excluded	1963
in computing federal or Ohio adjusted gross income for the taxable	1964
year, Ohio college opportunity or federal Pell grant amounts	1965
received by the taxpayer or the taxpayer's spouse or dependent	1966
pursuant to section 3333.122 of the Revised Code or 20 U.S.C.	1967
1070a, et seq., and used to pay room or board furnished by the	1968
educational institution for which the grant was awarded at the	1969
institution's facilities, including meal plans administered by the	1970
institution. For the purposes of this division, receipt of a grant	1971
includes the distribution of a grant directly to an educational	1972
institution and the crediting of the grant to the enrollee's	1973
account with the institution.	1974

(31) Deduct one-half of the taxpayer's Ohio small business	1975
investor income, the deduction not to exceed sixty-two thousand	1976
five hundred dollars for each spouse if spouses file separate	1977
returns under section 5747.08 of the Revised Code or one hundred	1978
twenty-five thousand dollars for all other taxpayers. No	1979
pass-through entity may claim a deduction under this division.	1980

For the purposes of this division, "Ohio small business	1981
investor income" means the portion of a taxpayer's adjusted gross	1982
income that is business income reduced by deductions from business	1983
income and apportioned or allocated to this state under sections	1984
5747.21 and 5747.22 of the Revised Code, to the extent not	1985
otherwise deducted or excluded in computing federal or Ohio	1986
adjusted gross income for the taxable year.	1987

(32)(a) Deduct, to the extent not otherwise deducted or	1988
excluded in computing federal or Ohio adjusted gross income for	1989
the taxable year, business income derived from a partnering	1990
business's operation in a startup zone pursuant to a partnership	1991
contract with a university under Chapter 195. of the Revised Code.	1992
Business income may not be deducted under this division for any	1993
taxable year ending before the startup zone certificate takes	1994
effect or beginning after the expiration or termination of the	1995
certificate. Business income derived from a partnering business's	1996
operations outside the startup zone or beyond the scope of the	1997
partnership contract may not be deducted under this division.	1998

For the purpose of computing the business income derived from	1999
a partnering business's operation in a startup zone, business	2000
income apportioned or allocated to this state under sections	2001
5747.21 and 5747.22 of the Revised Code shall be multiplied by	2002
fifty per cent of the sum of the following fractions:	2003

(i) A fraction computed in the same manner as the property	2004
factor computed under division (B)(2)(a) of section 5733.05 of the	2005
Revised Code except the numerator shall be the average value of	2006
real and tangible personal property used in business in the	2007
startup zone and the denominator shall be the average value of	2008
such property used in business in this state, and except there	2009
shall be no exclusions as otherwise provided under that division;	2010

(ii) A fraction computed in the same manner as the payroll	2011
factor computed under division (B)(2)(b) of section 5733.05 of the	2012
Revised Code except the numerator shall be the compensation paid	2013
for services performed solely in the startup zone and the	2014
denominator shall be the compensation paid in this state as	2015
computed under that division, and except there shall be no	2016
exclusion for employees engaged in qualified research.	2017

(b) Any person claiming a deduction under this division shall	2018
retain a copy of the startup zone certificate for four years	2019
following the end of the taxable year for which the deduction is	2020
claimed, and shall make it available for inspection by the tax	2021
commissioner or an agent thereof upon request.	2022

(c) As used in divisions (A)(32) and (33) of this section,	2023
"startup zone," "partnership contract," "partnering business,"	2024
"startup zone certificate," and "university" have the same	2025
meanings as in section 195.01 of the Revised Code.	2026

(33) Deduct, to the extent not otherwise deducted or excluded	2027
in computing federal or Ohio adjusted gross income for the taxable	2028
year, compensation received from a partnering business for	2029
services performed in a startup zone by the holder of a new	2030
employee certificate awarded by such partnering business under	2031
section 195.09 of the Revised Code. This deduction applies only to	2032
compensation received after the individual was awarded the new	2033
employee certificate and before the expiration of the partnership	2034
contract, the termination of the partnership contract under	2035
section 195.10 of the Revised Code, or the revocation of the new	2036
employee certificate under division (C) of section 195.09 of the	2037
Revised Code, whichever comes first. Compensation received for	2038
services performed outside the startup zone shall not be deducted	2039
under this division. The deduction claimed under this division	2040
shall not exceed two hundred fifty thousand dollars for any	2041
taxable year. An individual claiming a deduction under this	2042
division shall retain the new employee certificate for four years	2043
following the end of the taxable year for which the deduction is	2044
claimed, and shall make it available for inspection by the tax	2045
commissioner or an agent thereof upon request.	2046

As used in this section, "new employee certificate" has the	2047
same meaning as in section 195.01 of the Revised Code.	2048

(B) "Business income" means income, including gain or loss,	2049
arising from transactions, activities, and sources in the regular	2050
course of a trade or business and includes income, gain, or loss	2051
from real property, tangible property, and intangible property if	2052
the acquisition, rental, management, and disposition of the	2053
property constitute integral parts of the regular course of a	2054
trade or business operation. "Business income" includes income,	2055
including gain or loss, from a partial or complete liquidation of	2056
a business, including, but not limited to, gain or loss from the	2057
sale or other disposition of goodwill.	2058

(C) "Nonbusiness income" means all income other than business	2059
income and may include, but is not limited to, compensation, rents	2060
and royalties from real or tangible personal property, capital	2061
gains, interest, dividends and distributions, patent or copyright	2062
royalties, or lottery winnings, prizes, and awards.	2063

(D) "Compensation" means any form of remuneration paid to an	2064
employee for personal services.	2065

(E) "Fiduciary" means a guardian, trustee, executor,	2066
administrator, receiver, conservator, or any other person acting	2067
in any fiduciary capacity for any individual, trust, or estate.	2068

(F) "Fiscal year" means an accounting period of twelve months	2069
ending on the last day of any month other than December.	2070

(G) "Individual" means any natural person.

2071

(H) "Internal Revenue Code" means the "Internal Revenue Code	2072
of 1986," 100 Stat. 2085, 26 U.S.C.A. 1, as amended.	2073

(I) "Resident" means any of the following, provided that	2074
division (I)(3) of this section applies only to taxable years of a	2075
trust beginning in 2002 or thereafter:	2076

(1) An individual who is domiciled in this state, subject to	2077
section 5747.24 of the Revised Code;	2078

(2) The estate of a decedent who at the time of death was	2079
domiciled in this state. The domicile tests of section 5747.24 of	2080
the Revised Code are not controlling for purposes of division	2081
(I)(2) of this section.	2082

(3) A trust that, in whole or part, resides in this state. If	2083
only part of a trust resides in this state, the trust is a	2084
resident only with respect to that part.	2085

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

2086

(a) A trust resides in this state for the trust's current	2087
taxable year to the extent, as described in division (I)(3)(d) of	2088
this section, that the trust consists directly or indirectly, in	2089
whole or in part, of assets, net of any related liabilities, that	2090
were transferred, or caused to be transferred, directly or	2091
indirectly, to the trust by any of the following:	2092

(i) A person, a court, or a governmental entity or	2093
instrumentality on account of the death of a decedent, but only if	2094
the trust is described in division (I)(3)(e)(i) or (ii) of this	2095
section;	2096

(ii) A person who was domiciled in this state for the	2097
purposes of this chapter when the person directly or indirectly	2098
transferred assets to an irrevocable trust, but only if at least	2099
one of the trust's qualifying beneficiaries is domiciled in this	2100
state for the purposes of this chapter during all or some portion	2101
of the trust's current taxable year;	2102

(iii) A person who was domiciled in this state for the	2103
purposes of this chapter when the trust document or instrument or	2104
part of the trust document or instrument became irrevocable, but	2105
only if at least one of the trust's qualifying beneficiaries is a	2106
resident domiciled in this state for the purposes of this chapter	2107
during all or some portion of the trust's current taxable year. If	2108
a trust document or instrument became irrevocable upon the death	2109
of a person who at the time of death was domiciled in this state	2110
for purposes of this chapter, that person is a person described in	2111
division (I)(3)(a)(iii) of this section.	2112

(b) A trust is irrevocable to the extent that the transferor	2113
is not considered to be the owner of the net assets of the trust	2114
under sections 671 to 678 of the Internal Revenue Code.	2115

(c) With respect to a trust other than a charitable lead	2116
trust, "qualifying beneficiary" has the same meaning as "potential	2117
current beneficiary" as defined in section 1361(e)(2) of the	2118
Internal Revenue Code, and with respect to a charitable lead trust	2119
"qualifying beneficiary" is any current, future, or contingent	2120
beneficiary, but with respect to any trust "qualifying	2121
beneficiary" excludes a person or a governmental entity or	2122
instrumentality to any of which a contribution would qualify for	2123
the charitable deduction under section 170 of the Internal Revenue	2124
Code.	2125

(d) For the purposes of division (I)(3)(a) of this section,	2126
the extent to which a trust consists directly or indirectly, in	2127
whole or in part, of assets, net of any related liabilities, that	2128
were transferred directly or indirectly, in whole or part, to the	2129
trust by any of the sources enumerated in that division shall be	2130
ascertained by multiplying the fair market value of the trust's	2131
assets, net of related liabilities, by the qualifying ratio, which	2132
shall be computed as follows:	2133

(i) The first time the trust receives assets, the numerator	2134
of the qualifying ratio is the fair market value of those assets	2135
at that time, net of any related liabilities, from sources	2136
enumerated in division (I)(3)(a) of this section. The denominator	2137
of the qualifying ratio is the fair market value of all the	2138
trust's assets at that time, net of any related liabilities.	2139

(ii) Each subsequent time the trust receives assets, a	2140
revised qualifying ratio shall be computed. The numerator of the	2141
revised qualifying ratio is the sum of (1) the fair market value	2142
of the trust's assets immediately prior to the subsequent	2143
transfer, net of any related liabilities, multiplied by the	2144
qualifying ratio last computed without regard to the subsequent	2145
transfer, and (2) the fair market value of the subsequently	2146
transferred assets at the time transferred, net of any related	2147
liabilities, from sources enumerated in division (I)(3)(a) of this	2148
section. The denominator of the revised qualifying ratio is the	2149
fair market value of all the trust's assets immediately after the	2150
subsequent transfer, net of any related liabilities.	2151

(iii) Whether a transfer to the trust is by or from any of	2152
the sources enumerated in division (I)(3)(a) of this section shall	2153
be ascertained without regard to the domicile of the trust's	2154
beneficiaries.	2155

(e) For the purposes of division (I)(3)(a)(i) of this	2156
section:	2157

(i) A trust is described in division (I)(3)(e)(i) of this	2158
section if the trust is a testamentary trust and the testator of	2159
that testamentary trust was domiciled in this state at the time of	2160
the testator's death for purposes of the taxes levied under	2161
Chapter 5731. of the Revised Code.	2162

(ii) A trust is described in division (I)(3)(e)(ii) of this	2163
section if the transfer is a qualifying transfer described in any	2164
of divisions (I)(3)(f)(i) to (vi) of this section, the trust is an	2165
irrevocable inter vivos trust, and at least one of the trust's	2166
qualifying beneficiaries is domiciled in this state for purposes	2167
of this chapter during all or some portion of the trust's current	2168
taxable year.	2169

(f) For the purposes of division (I)(3)(e)(ii) of this	2170
section, a "qualifying transfer" is a transfer of assets, net of	2171
any related liabilities, directly or indirectly to a trust, if the	2172
transfer is described in any of the following:	2173

(i) The transfer is made to a trust, created by the decedent	2174
before the decedent's death and while the decedent was domiciled	2175
in this state for the purposes of this chapter, and, prior to the	2176
death of the decedent, the trust became irrevocable while the	2177
decedent was domiciled in this state for the purposes of this	2178
chapter.	2179

(ii) The transfer is made to a trust to which the decedent,	2180
prior to the decedent's death, had directly or indirectly	2181
transferred assets, net of any related liabilities, while the	2182
decedent was domiciled in this state for the purposes of this	2183
chapter, and prior to the death of the decedent the trust became	2184
irrevocable while the decedent was domiciled in this state for the	2185
purposes of this chapter.	2186

(iii) The transfer is made on account of a contractual	2187
relationship existing directly or indirectly between the	2188
transferor and either the decedent or the estate of the decedent	2189
at any time prior to the date of the decedent's death, and the	2190
decedent was domiciled in this state at the time of death for	2191
purposes of the taxes levied under Chapter 5731. of the Revised	2192
Code.	2193

(iv) The transfer is made to a trust on account of a	2194
contractual relationship existing directly or indirectly between	2195
the transferor and another person who at the time of the	2196
decedent's death was domiciled in this state for purposes of this	2197
chapter.	2198

(v) The transfer is made to a trust on account of the will of	2199
a testator who was domiciled in this state at the time of the	2200
testator's death for purposes of the taxes levied under Chapter	2201
5731. of the Revised Code.	2202

(vi) The transfer is made to a trust created by or caused to	2203
be created by a court, and the trust was directly or indirectly	2204
created in connection with or as a result of the death of an	2205
individual who, for purposes of the taxes levied under Chapter	2206
5731. of the Revised Code, was domiciled in this state at the time	2207
of the individual's death.	2208

(g) The tax commissioner may adopt rules to ascertain the	2209
part of a trust residing in this state.	2210

(J) "Nonresident" means an individual or estate that is not a	2211
resident. An individual who is a resident for only part of a	2212
taxable year is a nonresident for the remainder of that taxable	2213
year.	2214

(K) "Pass-through entity" has the same meaning as in section	2215
5733.04 of the Revised Code.	2216

(L) "Return" means the notifications and reports required to	2217
be filed pursuant to this chapter for the purpose of reporting the	2218
tax due and includes declarations of estimated tax when so	2219
required.	2220

(M) "Taxable year" means the calendar year or the taxpayer's	2221
fiscal year ending during the calendar year, or fractional part	2222
thereof, upon which the adjusted gross income is calculated	2223
pursuant to this chapter.	2224

(N) "Taxpayer" means any person subject to the tax imposed by	2225
section 5747.02 of the Revised Code or any pass-through entity	2226
that makes the election under division (D) of section 5747.08 of	2227
the Revised Code.	2228

(O) "Dependents" means dependents as defined in the Internal	2229
Revenue Code and as claimed in the taxpayer's federal income tax	2230
return for the taxable year or which the taxpayer would have been	2231
permitted to claim had the taxpayer filed a federal income tax	2232
return.	2233

(P) "Principal county of employment" means, in the case of a	2234
nonresident, the county within the state in which a taxpayer	2235
performs services for an employer or, if those services are	2236
performed in more than one county, the county in which the major	2237
portion of the services are performed.	2238

(Q) As used in sections 5747.50 to 5747.55 of the Revised	2239
Code:	2240

(1) "Subdivision" means any county, municipal corporation,	2241
park district, or township.	2242

(2) "Essential local government purposes" includes all	2243
functions that any subdivision is required by general law to	2244
exercise, including like functions that are exercised under a	2245
charter adopted pursuant to the Ohio Constitution.	2246

(R) "Overpayment" means any amount already paid that exceeds	2247
the figure determined to be the correct amount of the tax.	2248

(S) "Taxable income" or "Ohio taxable income" applies only to	2249
estates and trusts, and means federal taxable income, as defined	2250
and used in the Internal Revenue Code, adjusted as follows:	2251

(1) Add interest or dividends, net of ordinary, necessary,	2252
and reasonable expenses not deducted in computing federal taxable	2253
income, on obligations or securities of any state or of any	2254
political subdivision or authority of any state, other than this	2255
state and its subdivisions and authorities, but only to the extent	2256
that such net amount is not otherwise includible in Ohio taxable	2257
income and is described in either division (S)(1)(a) or (b) of	2258
this section:	2259

(a) The net amount is not attributable to the S portion of an	2260
electing small business trust and has not been distributed to	2261
beneficiaries for the taxable year;	2262

(b) The net amount is attributable to the S portion of an	2263
electing small business trust for the taxable year.	2264

(2) Add interest or dividends, net of ordinary, necessary,	2265
and reasonable expenses not deducted in computing federal taxable	2266
income, on obligations of any authority, commission,	2267
instrumentality, territory, or possession of the United States to	2268
the extent that the interest or dividends are exempt from federal	2269
income taxes but not from state income taxes, but only to the	2270
extent that such net amount is not otherwise includible in Ohio	2271
taxable income and is described in either division (S)(1)(a) or	2272
(b) of this section;	2273

(3) Add the amount of personal exemption allowed to the	2274
estate pursuant to section 642(b) of the Internal Revenue Code;	2275

(4) Deduct interest or dividends, net of related expenses	2276
deducted in computing federal taxable income, on obligations of	2277
the United States and its territories and possessions or of any	2278
authority, commission, or instrumentality of the United States to	2279
the extent that the interest or dividends are exempt from state	2280
taxes under the laws of the United States, but only to the extent	2281
that such amount is included in federal taxable income and is	2282
described in either division (S)(1)(a) or (b) of this section;	2283

(5) Deduct the amount of wages and salaries, if any, not	2284
otherwise allowable as a deduction but that would have been	2285
allowable as a deduction in computing federal taxable income for	2286
the taxable year, had the targeted jobs credit allowed under	2287
sections 38, 51, and 52 of the Internal Revenue Code not been in	2288
effect, but only to the extent such amount relates either to	2289
income included in federal taxable income for the taxable year or	2290
to income of the S portion of an electing small business trust for	2291
the taxable year;	2292

(6) Deduct any interest or interest equivalent, net of	2293
related expenses deducted in computing federal taxable income, on	2294
public obligations and purchase obligations, but only to the	2295
extent that such net amount relates either to income included in	2296
federal taxable income for the taxable year or to income of the S	2297
portion of an electing small business trust for the taxable year;	2298

(7) Add any loss or deduct any gain resulting from sale,	2299
exchange, or other disposition of public obligations to the extent	2300
that such loss has been deducted or such gain has been included in	2301
computing either federal taxable income or income of the S portion	2302
of an electing small business trust for the taxable year;	2303

(8) Except in the case of the final return of an estate, add	2304
any amount deducted by the taxpayer on both its Ohio estate tax	2305
return pursuant to section 5731.14 of the Revised Code, and on its	2306
federal income tax return in determining federal taxable income;	2307

(9)(a) Deduct any amount included in federal taxable income	2308
solely because the amount represents a reimbursement or refund of	2309
expenses that in a previous year the decedent had deducted as an	2310
itemized deduction pursuant to section 63 of the Internal Revenue	2311
Code and applicable treasury regulations. The deduction otherwise	2312
allowed under division (S)(9)(a) of this section shall be reduced	2313
to the extent the reimbursement is attributable to an amount the	2314
taxpayer or decedent deducted under this section in any taxable	2315
year.	2316

(b) Add any amount not otherwise included in Ohio taxable	2317
income for any taxable year to the extent that the amount is	2318
attributable to the recovery during the taxable year of any amount	2319
deducted or excluded in computing federal or Ohio taxable income	2320
in any taxable year, but only to the extent such amount has not	2321
been distributed to beneficiaries for the taxable year.	2322

(10) Deduct any portion of the deduction described in section	2323
1341(a)(2) of the Internal Revenue Code, for repaying previously	2324
reported income received under a claim of right, that meets both	2325
of the following requirements:	2326

(a) It is allowable for repayment of an item that was	2327
included in the taxpayer's taxable income or the decedent's	2328
adjusted gross income for a prior taxable year and did not qualify	2329
for a credit under division (A) or (B) of section 5747.05 of the	2330
Revised Code for that year.	2331

(b) It does not otherwise reduce the taxpayer's taxable	2332
income or the decedent's adjusted gross income for the current or	2333
any other taxable year.	2334

(11) Add any amount claimed as a credit under section	2335
5747.059 or 5747.65 of the Revised Code to the extent that the	2336
amount satisfies either of the following:	2337

(a) The amount was deducted or excluded from the computation	2338
of the taxpayer's federal taxable income as required to be	2339
reported for the taxpayer's taxable year under the Internal	2340
Revenue Code;	2341

(b) The amount resulted in a reduction in the taxpayer's	2342
federal taxable income as required to be reported for any of the	2343
taxpayer's taxable years under the Internal Revenue Code.	2344

(12) Deduct any amount, net of related expenses deducted in	2345
computing federal taxable income, that a trust is required to	2346
report as farm income on its federal income tax return, but only	2347
if the assets of the trust include at least ten acres of land	2348
satisfying the definition of "land devoted exclusively to	2349
agricultural use" under section 5713.30 of the Revised Code,	2350
regardless of whether the land is valued for tax purposes as such	2351
land under sections 5713.30 to 5713.38 of the Revised Code. If the	2352
trust is a pass-through entity investor, section 5747.231 of the	2353
Revised Code applies in ascertaining if the trust is eligible to	2354
claim the deduction provided by division (S)(12) of this section	2355
in connection with the pass-through entity's farm income.	2356

Except for farm income attributable to the S portion of an	2357
electing small business trust, the deduction provided by division	2358
(S)(12) of this section is allowed only to the extent that the	2359
trust has not distributed such farm income. Division (S)(12) of	2360
this section applies only to taxable years of a trust beginning in	2361
2002 or thereafter.	2362

(13) Add the net amount of income described in section 641(c)	2363
of the Internal Revenue Code to the extent that amount is not	2364
included in federal taxable income.	2365

(14) Add or deduct the amount the taxpayer would be required	2366
to add or deduct under division (A)(20) or (21) of this section if	2367
the taxpayer's Ohio taxable income were computed in the same	2368
manner as an individual's Ohio adjusted gross income is computed	2369
under this section. In the case of a trust, division (S)(14) of	2370
this section applies only to any of the trust's taxable years	2371
beginning in 2002 or thereafter.	2372

(T) "School district income" and "school district income tax"	2373
have the same meanings as in section 5748.01 of the Revised Code.	2374

(U) As used in divisions (A)(8), (A)(9), (S)(6), and (S)(7)	2375
of this section, "public obligations," "purchase obligations," and	2376
"interest or interest equivalent" have the same meanings as in	2377
section 5709.76 of the Revised Code.	2378

(V) "Limited liability company" means any limited liability	2379
company formed under Chapter 1705. of the Revised Code or under	2380
the laws of any other state.	2381

(W) "Pass-through entity investor" means any person who,	2382
during any portion of a taxable year of a pass-through entity, is	2383
a partner, member, shareholder, or equity investor in that	2384
pass-through entity.	2385

(X) "Banking day" has the same meaning as in section 1304.01	2386
of the Revised Code.	2387

(Y) "Month" means a calendar month.

2388

(Z) "Quarter" means the first three months, the second three	2389
months, the third three months, or the last three months of the	2390
taxpayer's taxable year.	2391

(AA)(1) "Eligible institution" means a state university or	2392
state institution of higher education as defined in section	2393
3345.011 of the Revised Code, or a private, nonprofit college,	2394
university, or other post-secondary institution located in this	2395
state that possesses a certificate of authorization issued by the	2396
Ohio board of regents pursuant to Chapter 1713. of the Revised	2397
Code or a certificate of registration issued by the state board of	2398
career colleges and schools under Chapter 3332. of the Revised	2399
Code.	2400

(2) "Qualified tuition and fees" means tuition and fees	2401
imposed by an eligible institution as a condition of enrollment or	2402
attendance, not exceeding two thousand five hundred dollars in	2403
each of the individual's first two years of post-secondary	2404
education. If the individual is a part-time student, "qualified	2405
tuition and fees" includes tuition and fees paid for the academic	2406
equivalent of the first two years of post-secondary education	2407
during a maximum of five taxable years, not exceeding a total of	2408
five thousand dollars. "Qualified tuition and fees" does not	2409
include:	2410

(a) Expenses for any course or activity involving sports,	2411
games, or hobbies unless the course or activity is part of the	2412
individual's degree or diploma program;	2413

(b) The cost of books, room and board, student activity fees,	2414
athletic fees, insurance expenses, or other expenses unrelated to	2415
the individual's academic course of instruction;	2416

(c) Tuition, fees, or other expenses paid or reimbursed	2417
through an employer, scholarship, grant in aid, or other	2418
educational benefit program.	2419

(BB)(1) "Modified business income" means the business income	2420
included in a trust's Ohio taxable income after such taxable	2421
income is first reduced by the qualifying trust amount, if any.	2422

(2) "Qualifying trust amount" of a trust means capital gains	2423
and losses from the sale, exchange, or other disposition of equity	2424
or ownership interests in, or debt obligations of, a qualifying	2425
investee to the extent included in the trust's Ohio taxable	2426
income, but only if the following requirements are satisfied:	2427

(a) The book value of the qualifying investee's physical	2428
assets in this state and everywhere, as of the last day of the	2429
qualifying investee's fiscal or calendar year ending immediately	2430
prior to the date on which the trust recognizes the gain or loss,	2431
is available to the trust.	2432

(b) The requirements of section 5747.011 of the Revised Code	2433
are satisfied for the trust's taxable year in which the trust	2434
recognizes the gain or loss.	2435

Any gain or loss that is not a qualifying trust amount is	2436
modified business income, qualifying investment income, or	2437
modified nonbusiness income, as the case may be.	2438

(3) "Modified nonbusiness income" means a trust's Ohio	2439
taxable income other than modified business income, other than the	2440
qualifying trust amount, and other than qualifying investment	2441
income, as defined in section 5747.012 of the Revised Code, to the	2442
extent such qualifying investment income is not otherwise part of	2443
modified business income.	2444

(4) "Modified Ohio taxable income" applies only to trusts,	2445
and means the sum of the amounts described in divisions (BB)(4)(a)	2446
to (c) of this section:	2447

(a) The fraction, calculated under section 5747.013, and	2448
applying section 5747.231 of the Revised Code, multiplied by the	2449
sum of the following amounts:	2450

(i) The trust's modified business income;

2451

(ii) The trust's qualifying investment income, as defined in	2452
section 5747.012 of the Revised Code, but only to the extent the	2453
qualifying investment income does not otherwise constitute	2454
modified business income and does not otherwise constitute a	2455
qualifying trust amount.	2456

(b) The qualifying trust amount multiplied by a fraction, the	2457
numerator of which is the sum of the book value of the qualifying	2458
investee's physical assets in this state on the last day of the	2459
qualifying investee's fiscal or calendar year ending immediately	2460
prior to the day on which the trust recognizes the qualifying	2461
trust amount, and the denominator of which is the sum of the book	2462
value of the qualifying investee's total physical assets	2463
everywhere on the last day of the qualifying investee's fiscal or	2464
calendar year ending immediately prior to the day on which the	2465
trust recognizes the qualifying trust amount. If, for a taxable	2466
year, the trust recognizes a qualifying trust amount with respect	2467
to more than one qualifying investee, the amount described in	2468
division (BB)(4)(b) of this section shall equal the sum of the	2469
products so computed for each such qualifying investee.	2470

(c)(i) With respect to a trust or portion of a trust that is	2471
a resident as ascertained in accordance with division (I)(3)(d) of	2472
this section, its modified nonbusiness income.	2473

(ii) With respect to a trust or portion of a trust that is	2474
not a resident as ascertained in accordance with division	2475
(I)(3)(d) of this section, the amount of its modified nonbusiness	2476
income satisfying the descriptions in divisions (B)(2) to (5) of	2477
section 5747.20 of the Revised Code, except as otherwise provided	2478
in division (BB)(4)(c)(ii) of this section. With respect to a	2479
trust or portion of a trust that is not a resident as ascertained	2480
in accordance with division (I)(3)(d) of this section, the trust's	2481
portion of modified nonbusiness income recognized from the sale,	2482
exchange, or other disposition of a debt interest in or equity	2483
interest in a section 5747.212 entity, as defined in section	2484
5747.212 of the Revised Code, without regard to division (A) of	2485
that section, shall not be allocated to this state in accordance	2486
with section 5747.20 of the Revised Code but shall be apportioned	2487
to this state in accordance with division (B) of section 5747.212	2488
of the Revised Code without regard to division (A) of that	2489
section.	2490

If the allocation and apportionment of a trust's income under	2491
divisions (BB)(4)(a) and (c) of this section do not fairly	2492
represent the modified Ohio taxable income of the trust in this	2493
state, the alternative methods described in division (C) of	2494
section 5747.21 of the Revised Code may be applied in the manner	2495
and to the same extent provided in that section.	2496

(5)(a) Except as set forth in division (BB)(5)(b) of this	2497
section, "qualifying investee" means a person in which a trust has	2498
an equity or ownership interest, or a person or unit of government	2499
the debt obligations of either of which are owned by a trust. For	2500
the purposes of division (BB)(2)(a) of this section and for the	2501
purpose of computing the fraction described in division (BB)(4)(b)	2502
of this section, all of the following apply:	2503

(i) If the qualifying investee is a member of a qualifying	2504
controlled group on the last day of the qualifying investee's	2505
fiscal or calendar year ending immediately prior to the date on	2506
which the trust recognizes the gain or loss, then "qualifying	2507
investee" includes all persons in the qualifying controlled group	2508
on such last day.	2509

(ii) If the qualifying investee, or if the qualifying	2510
investee and any members of the qualifying controlled group of	2511
which the qualifying investee is a member on the last day of the	2512
qualifying investee's fiscal or calendar year ending immediately	2513
prior to the date on which the trust recognizes the gain or loss,	2514
separately or cumulatively own, directly or indirectly, on the	2515
last day of the qualifying investee's fiscal or calendar year	2516
ending immediately prior to the date on which the trust recognizes	2517
the qualifying trust amount, more than fifty per cent of the	2518
equity of a pass-through entity, then the qualifying investee and	2519
the other members are deemed to own the proportionate share of the	2520
pass-through entity's physical assets which the pass-through	2521
entity directly or indirectly owns on the last day of the	2522
pass-through entity's calendar or fiscal year ending within or	2523
with the last day of the qualifying investee's fiscal or calendar	2524
year ending immediately prior to the date on which the trust	2525
recognizes the qualifying trust amount.	2526

(iii) For the purposes of division (BB)(5)(a)(iii) of this	2527
section, "upper level pass-through entity" means a pass-through	2528
entity directly or indirectly owning any equity of another	2529
pass-through entity, and "lower level pass-through entity" means	2530
that other pass-through entity.	2531

An upper level pass-through entity, whether or not it is also	2532
a qualifying investee, is deemed to own, on the last day of the	2533
upper level pass-through entity's calendar or fiscal year, the	2534
proportionate share of the lower level pass-through entity's	2535
physical assets that the lower level pass-through entity directly	2536
or indirectly owns on the last day of the lower level pass-through	2537
entity's calendar or fiscal year ending within or with the last	2538
day of the upper level pass-through entity's fiscal or calendar	2539
year. If the upper level pass-through entity directly and	2540
indirectly owns less than fifty per cent of the equity of the	2541
lower level pass-through entity on each day of the upper level	2542
pass-through entity's calendar or fiscal year in which or with	2543
which ends the calendar or fiscal year of the lower level	2544
pass-through entity and if, based upon clear and convincing	2545
evidence, complete information about the location and cost of the	2546
physical assets of the lower pass-through entity is not available	2547
to the upper level pass-through entity, then solely for purposes	2548
of ascertaining if a gain or loss constitutes a qualifying trust	2549
amount, the upper level pass-through entity shall be deemed as	2550
owning no equity of the lower level pass-through entity for each	2551
day during the upper level pass-through entity's calendar or	2552
fiscal year in which or with which ends the lower level	2553
pass-through entity's calendar or fiscal year. Nothing in division	2554
(BB)(5)(a)(iii) of this section shall be construed to provide for	2555
any deduction or exclusion in computing any trust's Ohio taxable	2556
income.	2557

(b) With respect to a trust that is not a resident for the	2558
taxable year and with respect to a part of a trust that is not a	2559
resident for the taxable year, "qualifying investee" for that	2560
taxable year does not include a C corporation if both of the	2561
following apply:	2562

(i) During the taxable year the trust or part of the trust	2563
recognizes a gain or loss from the sale, exchange, or other	2564
disposition of equity or ownership interests in, or debt	2565
obligations of, the C corporation.	2566

(ii) Such gain or loss constitutes nonbusiness income.

2567

(6) "Available" means information is such that a person is	2568
able to learn of the information by the due date plus extensions,	2569
if any, for filing the return for the taxable year in which the	2570
trust recognizes the gain or loss.	2571

(CC) "Qualifying controlled group" has the same meaning as in	2572
section 5733.04 of the Revised Code.	2573

(DD) "Related member" has the same meaning as in section	2574
5733.042 of the Revised Code.	2575

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

2576

(a) "Qualifying person" means any person other than a	2577
qualifying corporation.	2578

(b) "Qualifying corporation" means any person classified for	2579
federal income tax purposes as an association taxable as a	2580
corporation, except either of the following:	2581

(i) A corporation that has made an election under subchapter	2582
S, chapter one, subtitle A, of the Internal Revenue Code for its	2583
taxable year ending within, or on the last day of, the investor's	2584
taxable year;	2585

(ii) A subsidiary that is wholly owned by any corporation	2586
that has made an election under subchapter S, chapter one,	2587
subtitle A of the Internal Revenue Code for its taxable year	2588
ending within, or on the last day of, the investor's taxable year.	2589

(2) For the purposes of this chapter, unless expressly stated	2590
otherwise, no qualifying person indirectly owns any asset directly	2591
or indirectly owned by any qualifying corporation.	2592

(FF) For purposes of this chapter and Chapter 5751. of the	2593
Revised Code:	2594

(1) "Trust" does not include a qualified pre-income tax	2595
trust.	2596

(2) A "qualified pre-income tax trust" is any pre-income tax	2597
trust that makes a qualifying pre-income tax trust election as	2598
described in division (FF)(3) of this section.	2599

(3) A "qualifying pre-income tax trust election" is an	2600
election by a pre-income tax trust to subject to the tax imposed	2601
by section 5751.02 of the Revised Code the pre-income tax trust	2602
and all pass-through entities of which the trust owns or controls,	2603
directly, indirectly, or constructively through related interests,	2604
five per cent or more of the ownership or equity interests. The	2605
trustee shall notify the tax commissioner in writing of the	2606
election on or before April 15, 2006. The election, if timely	2607
made, shall be effective on and after January 1, 2006, and shall	2608
apply for all tax periods and tax years until revoked by the	2609
trustee of the trust.	2610

(4) A "pre-income tax trust" is a trust that satisfies all of	2611
the following requirements:	2612

(a) The document or instrument creating the trust was	2613
executed by the grantor before January 1, 1972;	2614

(b) The trust became irrevocable upon the creation of the	2615
trust; and	2616

(c) The grantor was domiciled in this state at the time the	2617
trust was created.	2618

(GG) "Uniformed services" has the same meaning as in 10	2619
U.S.C. 101.	2620

Sec. 5751.01.  As used in this chapter:

2621

(A) "Person" means, but is not limited to, individuals,	2622
combinations of individuals of any form, receivers, assignees,	2623
trustees in bankruptcy, firms, companies, joint-stock companies,	2624
business trusts, estates, partnerships, limited liability	2625
partnerships, limited liability companies, associations, joint	2626
ventures, clubs, societies, for-profit corporations, S	2627
corporations, qualified subchapter S subsidiaries, qualified	2628
subchapter S trusts, trusts, entities that are disregarded for	2629
federal income tax purposes, and any other entities.	2630

(B) "Consolidated elected taxpayer" means a group of two or	2631
more persons treated as a single taxpayer for purposes of this	2632
chapter as the result of an election made under section 5751.011	2633
of the Revised Code.	2634

(C) "Combined taxpayer" means a group of two or more persons	2635
treated as a single taxpayer for purposes of this chapter under	2636
section 5751.012 of the Revised Code.	2637

(D) "Taxpayer" means any person, or any group of persons in	2638
the case of a consolidated elected taxpayer or combined taxpayer	2639
treated as one taxpayer, required to register or pay tax under	2640
this chapter. "Taxpayer" does not include excluded persons.	2641

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

2642

(1) Any person with not more than one hundred fifty thousand	2643
dollars of taxable gross receipts during the calendar year.	2644
Division (E)(1) of this section does not apply to a person that is	2645
a member of a consolidated elected taxpayer;	2646

(2) A public utility that paid the excise tax imposed by	2647
section 5727.24 or 5727.30 of the Revised Code based on one or	2648
more measurement periods that include the entire tax period under	2649
this chapter, except that a public utility that is a combined	2650
company is a taxpayer with regard to the following gross receipts:	2651

(a) Taxable gross receipts directly attributed to a public	2652
utility activity, but not directly attributed to an activity that	2653
is subject to the excise tax imposed by section 5727.24 or 5727.30	2654
of the Revised Code;	2655

(b) Taxable gross receipts that cannot be directly attributed	2656
to any activity, multiplied by a fraction whose numerator is the	2657
taxable gross receipts described in division (E)(2)(a) of this	2658
section and whose denominator is the total taxable gross receipts	2659
that can be directly attributed to any activity;	2660

(c) Except for any differences resulting from the use of an	2661
accrual basis method of accounting for purposes of determining	2662
gross receipts under this chapter and the use of the cash basis	2663
method of accounting for purposes of determining gross receipts	2664
under section 5727.24 of the Revised Code, the gross receipts	2665
directly attributed to the activity of a natural gas company shall	2666
be determined in a manner consistent with division (D) of section	2667
5727.03 of the Revised Code.	2668

As used in division (E)(2) of this section, "combined	2669
company" and "public utility" have the same meanings as in section	2670
5727.01 of the Revised Code.	2671

(3) A financial institution, as defined in section 5726.01 of	2672
the Revised Code, that paid the tax imposed by section 5726.02 of	2673
the Revised Code based on one or more taxable years that include	2674
the entire tax period under this chapter;	2675

(4) A person directly or indirectly owned by one or more	2676
financial institutions, as defined in section 5726.01 of the	2677
Revised Code, that paid the tax imposed by section 5726.02 of the	2678
Revised Code based on one or more taxable years that include the	2679
entire tax period under this chapter.	2680

For the purposes of division (E)(4) of this section, a person	2681
owns another person under the following circumstances:	2682

(a) In the case of corporations issuing capital stock, one	2683
corporation owns another corporation if it owns fifty per cent or	2684
more of the other corporation's capital stock with current voting	2685
rights;	2686

(b) In the case of a limited liability company, one person	2687
owns the company if that person's membership interest, as defined	2688
in section 1705.01 of the Revised Code, is fifty per cent or more	2689
of the combined membership interests of all persons owning such	2690
interests in the company;	2691

(c) In the case of a partnership, trust, or other	2692
unincorporated business organization other than a limited	2693
liability company, one person owns the organization if, under the	2694
articles of organization or other instrument governing the affairs	2695
of the organization, that person has a beneficial interest in the	2696
organization's profits, surpluses, losses, or distributions of	2697
fifty per cent or more of the combined beneficial interests of all	2698
persons having such an interest in the organization.	2699

(5) A domestic insurance company or foreign insurance	2700
company, as defined in section 5725.01 of the Revised Code, that	2701
paid the insurance company premiums tax imposed by section 5725.18	2702
or Chapter 5729. of the Revised Code, or an unauthorized insurance	2703
company whose gross premiums are subject to tax under section	2704
3905.36 of the Revised Code based on one or more measurement	2705
periods that include the entire tax period under this chapter;	2706

(6) A person that solely facilitates or services one or more	2707
securitizations of phase-in-recovery property pursuant to a final	2708
financing order as those terms are defined in section 4928.23 of	2709
the Revised Code. For purposes of this division, "securitization"	2710
means transferring one or more assets to one or more persons and	2711
then issuing securities backed by the right to receive payment	2712
from the asset or assets so transferred.	2713

(7) Except as otherwise provided in this division, a	2714
pre-income tax trust as defined in division (FF)(4) of section	2715
5747.01 of the Revised Code and any pass-through entity of which	2716
such pre-income tax trust owns or controls, directly, indirectly,	2717
or constructively through related interests, more than five per	2718
cent of the ownership or equity interests. If the pre-income tax	2719
trust has made a qualifying pre-income tax trust election under	2720
division (FF)(3) of section 5747.01 of the Revised Code, then the	2721
trust and the pass-through entities of which it owns or controls,	2722
directly, indirectly, or constructively through related interests,	2723
more than five per cent of the ownership or equity interests,	2724
shall not be excluded persons for purposes of the tax imposed	2725
under section 5751.02 of the Revised Code.	2726

(8) Nonprofit organizations or the state and its agencies,	2727
instrumentalities, or political subdivisions.	2728

(F) Except as otherwise provided in divisions (F)(2), (3),	2729
and (4) of this section, "gross receipts" means the total amount	2730
realized by a person, without deduction for the cost of goods sold	2731
or other expenses incurred, that contributes to the production of	2732
gross income of the person, including the fair market value of any	2733
property and any services received, and any debt transferred or	2734
forgiven as consideration.	2735

(1) The following are examples of gross receipts:

2736

(a) Amounts realized from the sale, exchange, or other	2737
disposition of the taxpayer's property to or with another;	2738

(b) Amounts realized from the taxpayer's performance of	2739
services for another;	2740

(c) Amounts realized from another's use or possession of the	2741
taxpayer's property or capital;	2742

(d) Any combination of the foregoing amounts.

2743

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

2744

(a) Interest income except interest on credit sales;

2745

(b) Dividends and distributions from corporations, and	2746
distributive or proportionate shares of receipts and income from a	2747
pass-through entity as defined under section 5733.04 of the	2748
Revised Code;	2749

(c) Receipts from the sale, exchange, or other disposition of	2750
an asset described in section 1221 or 1231 of the Internal Revenue	2751
Code, without regard to the length of time the person held the	2752
asset. Notwithstanding section 1221 of the Internal Revenue Code,	2753
receipts from hedging transactions also are excluded to the extent	2754
the transactions are entered into primarily to protect a financial	2755
position, such as managing the risk of exposure to (i) foreign	2756
currency fluctuations that affect assets, liabilities, profits,	2757
losses, equity, or investments in foreign operations; (ii)	2758
interest rate fluctuations; or (iii) commodity price fluctuations.	2759
As used in division (F)(2)(c) of this section, "hedging	2760
transaction" has the same meaning as used in section 1221 of the	2761
Internal Revenue Code and also includes transactions accorded	2762
hedge accounting treatment under statement of financial accounting	2763
standards number 133 of the financial accounting standards board.	2764
For the purposes of division (F)(2)(c) of this section, the actual	2765
transfer of title of real or tangible personal property to another	2766
entity is not a hedging transaction.	2767

(d) Proceeds received attributable to the repayment,	2768
maturity, or redemption of the principal of a loan, bond, mutual	2769
fund, certificate of deposit, or marketable instrument;	2770

(e) The principal amount received under a repurchase	2771
agreement or on account of any transaction properly characterized	2772
as a loan to the person;	2773

(f) Contributions received by a trust, plan, or other	2774
arrangement, any of which is described in section 501(a) of the	2775
Internal Revenue Code, or to which Title 26, Subtitle A, Chapter	2776
1, Subchapter (D) of the Internal Revenue Code applies;	2777

(g) Compensation, whether current or deferred, and whether in	2778
cash or in kind, received or to be received by an employee, former	2779
employee, or the employee's legal successor for services rendered	2780
to or for an employer, including reimbursements received by or for	2781
an individual for medical or education expenses, health insurance	2782
premiums, or employee expenses, or on account of a dependent care	2783
spending account, legal services plan, any cafeteria plan	2784
described in section 125 of the Internal Revenue Code, or any	2785
similar employee reimbursement;	2786

(h) Proceeds received from the issuance of the taxpayer's own	2787
stock, options, warrants, puts, or calls, or from the sale of the	2788
taxpayer's treasury stock;	2789

(i) Proceeds received on the account of payments from	2790
insurance policies, except those proceeds received for the loss of	2791
business revenue;	2792

(j) Gifts or charitable contributions received; membership	2793
dues received by trade, professional, homeowners', or condominium	2794
associations; and payments received for educational courses,	2795
meetings, meals, or similar payments to a trade, professional, or	2796
other similar association; and fundraising receipts received by	2797
any person when any excess receipts are donated or used	2798
exclusively for charitable purposes;	2799

(k) Damages received as the result of litigation in excess of	2800
amounts that, if received without litigation, would be gross	2801
receipts;	2802

(l) Property, money, and other amounts received or acquired	2803
by an agent on behalf of another in excess of the agent's	2804
commission, fee, or other remuneration;	2805

(m) Tax refunds, other tax benefit recoveries, and	2806
reimbursements for the tax imposed under this chapter made by	2807
entities that are part of the same combined taxpayer or	2808
consolidated elected taxpayer group, and reimbursements made by	2809
entities that are not members of a combined taxpayer or	2810
consolidated elected taxpayer group that are required to be made	2811
for economic parity among multiple owners of an entity whose tax	2812
obligation under this chapter is required to be reported and paid	2813
entirely by one owner, pursuant to the requirements of sections	2814
5751.011 and 5751.012 of the Revised Code;	2815

(n) Pension reversions;

2816

(o) Contributions to capital;

2817

(p) Sales or use taxes collected as a vendor or an	2818
out-of-state seller on behalf of the taxing jurisdiction from a	2819
consumer or other taxes the taxpayer is required by law to collect	2820
directly from a purchaser and remit to a local, state, or federal	2821
tax authority;	2822

(q) In the case of receipts from the sale of cigarettes or	2823
tobacco products by a wholesale dealer, retail dealer,	2824
distributor, manufacturer, or seller, all as defined in section	2825
5743.01 of the Revised Code, an amount equal to the federal and	2826
state excise taxes paid by any person on or for such cigarettes or	2827
tobacco products under subtitle E of the Internal Revenue Code or	2828
Chapter 5743. of the Revised Code;	2829

(r) In the case of receipts from the sale, transfer,	2830
exchange, or other disposition of motor fuel as "motor fuel" is	2831
defined in section 5736.01 of the Revised Code, an amount equal to	2832
the value of the motor fuel, including federal and state motor	2833
fuel excise taxes and receipts from billing or invoicing the tax	2834
imposed under section 5736.02 of the Revised Code to another	2835
person;	2836

(s) In the case of receipts from the sale of beer or	2837
intoxicating liquor, as defined in section 4301.01 of the Revised	2838
Code, by a person holding a permit issued under Chapter 4301. or	2839
4303. of the Revised Code, an amount equal to federal and state	2840
excise taxes paid by any person on or for such beer or	2841
intoxicating liquor under subtitle E of the Internal Revenue Code	2842
or Chapter 4301. or 4305. of the Revised Code;	2843

(t) Receipts realized by a new motor vehicle dealer or used	2844
motor vehicle dealer, as defined in section 4517.01 of the Revised	2845
Code, from the sale or other transfer of a motor vehicle, as	2846
defined in that section, to another motor vehicle dealer for the	2847
purpose of resale by the transferee motor vehicle dealer, but only	2848
if the sale or other transfer was based upon the transferee's need	2849
to meet a specific customer's preference for a motor vehicle;	2850

(u) Receipts from a financial institution described in	2851
division (E)(3) of this section for services provided to the	2852
financial institution in connection with the issuance, processing,	2853
servicing, and management of loans or credit accounts, if such	2854
financial institution and the recipient of such receipts have at	2855
least fifty per cent of their ownership interests owned or	2856
controlled, directly or constructively through related interests,	2857
by common owners;	2858

(v) Receipts realized from administering anti-neoplastic	2859
drugs and other cancer chemotherapy, biologicals, therapeutic	2860
agents, and supportive drugs in a physician's office to patients	2861
with cancer;	2862

(w) Funds received or used by a mortgage broker that is not a	2863
dealer in intangibles, other than fees or other consideration,	2864
pursuant to a table-funding mortgage loan or warehouse-lending	2865
mortgage loan. Terms used in division (F)(2)(w) of this section	2866
have the same meanings as in section 1322.01 of the Revised Code,	2867
except "mortgage broker" means a person assisting a buyer in	2868
obtaining a mortgage loan for a fee or other consideration paid by	2869
the buyer or a lender, or a person engaged in table-funding or	2870
warehouse-lending mortgage loans that are first lien mortgage	2871
loans.	2872

(x) Property, money, and other amounts received by a	2873
professional employer organization, as defined in section 4125.01	2874
of the Revised Code, from a client employer, as defined in that	2875
section, in excess of the administrative fee charged by the	2876
professional employer organization to the client employer;	2877

(y) In the case of amounts retained as commissions by a	2878
permit holder under Chapter 3769. of the Revised Code, an amount	2879
equal to the amounts specified under that chapter that must be	2880
paid to or collected by the tax commissioner as a tax and the	2881
amounts specified under that chapter to be used as purse money;	2882

(z) Qualifying distribution center receipts.

2883

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

2884

(I) "Qualifying distribution center receipts" means receipts	2885
of a supplier from qualified property that is delivered to a	2886
qualified distribution center, multiplied by a quantity that	2887
equals one minus the Ohio delivery percentage. If the qualified	2888
distribution center is a refining facility, "supplier" includes	2889
all dealers, brokers, processors, sellers, vendors, cosigners, and	2890
distributors of qualified property.	2891

(II) "Qualified property" means tangible personal property	2892
delivered to a qualified distribution center that is shipped to	2893
that qualified distribution center solely for further shipping by	2894
the qualified distribution center to another location in this	2895
state or elsewhere or, in the case of gold, silver, platinum, or	2896
palladium delivered to a refining facility solely for refining to	2897
a grade and fineness acceptable for delivery to a registered	2898
commodities exchange. "Further shipping" includes storing and	2899
repackaging property into smaller or larger bundles, so long as	2900
the property is not subject to further manufacturing or	2901
processing. "Refining" is limited to extracting impurities from	2902
gold, silver, platinum, or palladium through smelting or some	2903
other process at a refining facility.	2904

(III) "Qualified distribution center" means a warehouse, a	2905
facility similar to a warehouse, or a refining facility in this	2906
state that, for the qualifying year, is operated by a person that	2907
is not part of a combined taxpayer group and that has a qualifying	2908
certificate. All warehouses or facilities similar to warehouses	2909
that are operated by persons in the same taxpayer group and that	2910
are located within one mile of each other shall be treated as one	2911
qualified distribution center. All refining facilities that are	2912
operated by persons in the same taxpayer group and that are	2913
located in the same or adjacent counties may be treated as one	2914
qualified distribution center.	2915

(IV) "Qualifying year" means the calendar year to which the	2916
qualifying certificate applies.	2917

(V) "Qualifying period" means the period of the first day of	2918
July of the second year preceding the qualifying year through the	2919
thirtieth day of June of the year preceding the qualifying year.	2920

(VI) "Qualifying certificate" means the certificate issued by	2921
the tax commissioner after the operator of a distribution center	2922
files an annual application with the commissioner. The application	2923
and annual fee shall be filed and paid for each qualified	2924
distribution center on or before the first day of September before	2925
the qualifying year or within forty-five days after the	2926
distribution center opens, whichever is later.	2927

The applicant must substantiate to the commissioner's	2928
satisfaction that, for the qualifying period, all persons	2929
operating the distribution center have more than fifty per cent of	2930
the cost of the qualified property shipped to a location such that	2931
it would be sitused outside this state under the provisions of	2932
division (E) of section 5751.033 of the Revised Code. The	2933
applicant must also substantiate that the distribution center	2934
cumulatively had costs from its suppliers equal to or exceeding	2935
five hundred million dollars during the qualifying period. (For	2936
purposes of division (F)(2)(z)(i)(VI) of this section, "supplier"	2937
excludes any person that is part of the consolidated elected	2938
taxpayer group, if applicable, of the operator of the qualified	2939
distribution center.) The commissioner may require the applicant	2940
to have an independent certified public accountant certify that	2941
the calculation of the minimum thresholds required for a qualified	2942
distribution center by the operator of a distribution center has	2943
been made in accordance with generally accepted accounting	2944
principles. The commissioner shall issue or deny the issuance of a	2945
certificate within sixty days after the receipt of the	2946
application. A denial is subject to appeal under section 5717.02	2947
of the Revised Code. If the operator files a timely appeal under	2948
section 5717.02 of the Revised Code, the operator shall be granted	2949
a qualifying certificate effective for the remainder of the	2950
qualifying year or until the appeal is finalized, whichever is	2951
earlier. If the operator does not prevail in the appeal, the	2952
operator shall pay the ineligible operator's supplier tax	2953
liability.	2954

(VII) "Ohio delivery percentage" means the proportion of the	2955
total property delivered to a destination inside Ohio from the	2956
qualified distribution center during the qualifying period	2957
compared with total deliveries from such distribution center	2958
everywhere during the qualifying period.	2959

(VIII) "Refining facility" means one or more buildings	2960
located in a county in the Appalachian region of this state as	2961
defined by section 107.21 of the Revised Code and utilized for	2962
refining or smelting gold, silver, platinum, or palladium to a	2963
grade and fineness acceptable for delivery to a registered	2964
commodities exchange.	2965

(IX) "Registered commodities exchange" means a board of	2966
trade, such as New York mercantile exchange, inc. or commodity	2967
exchange, inc., designated as a contract market by the commodity	2968
futures trading commission under the "Commodity Exchange Act," 7	2969
U.S.C. 1 et seq., as amended.	2970

(X) "Ineligible operator's supplier tax liability" means an	2971
amount equal to the tax liability of all suppliers of a	2972
distribution center had the distribution center not been issued a	2973
qualifying certificate for the qualifying year. Ineligible	2974
operator's supplier tax liability shall not include interest or	2975
penalties. The tax commissioner shall determine an ineligible	2976
operator's supplier tax liability based on information that the	2977
commissioner may request from the operator of the distribution	2978
center. An operator shall provide a list of all suppliers of the	2979
distribution center and the corresponding costs of qualified	2980
property for the qualifying year at issue within sixty days of a	2981
request by the commissioner under this division.	2982

(ii)(I) If the distribution center is new and was not open	2983
for the entire qualifying period, the operator of the distribution	2984
center may request that the commissioner grant a qualifying	2985
certificate. If the certificate is granted and it is later	2986
determined that more than fifty per cent of the qualified property	2987
during that year was not shipped to a location such that it would	2988
be sitused outside of this state under the provisions of division	2989
(E) of section 5751.033 of the Revised Code or if it is later	2990
determined that the person that operates the distribution center	2991
had average monthly costs from its suppliers of less than forty	2992
million dollars during that year, then the operator of the	2993
distribution center shall pay the ineligible operator's supplier	2994
tax liability. (For purposes of division (F)(2)(z)(ii) of this	2995
section, "supplier" excludes any person that is part of the	2996
consolidated elected taxpayer group, if applicable, of the	2997
operator of the qualified distribution center.)	2998

(II) The commissioner may grant a qualifying certificate to a	2999
distribution center that does not qualify as a qualified	3000
distribution center for an entire qualifying period if the	3001
operator of the distribution center demonstrates that the business	3002
operations of the distribution center have changed or will change	3003
such that the distribution center will qualify as a qualified	3004
distribution center within thirty-six months after the date the	3005
operator first applies for a certificate. If, at the end of that	3006
thirty-six-month period, the business operations of the	3007
distribution center have not changed such that the distribution	3008
center qualifies as a qualified distribution center, the operator	3009
of the distribution center shall pay the ineligible operator's	3010
supplier tax liability for each year that the distribution center	3011
received a certificate but did not qualify as a qualified	3012
distribution center. For each year the distribution center	3013
receives a certificate under division (F)(2)(z)(ii)(II) of this	3014
section, the distribution center shall pay all applicable fees	3015
required under division (F)(2)(z) of this section and shall submit	3016
an updated business plan showing the progress the distribution	3017
center made toward qualifying as a qualified distribution center	3018
during the preceding year.	3019

(III) An operator may appeal a determination under division	3020
(F)(2)(z)(ii)(I) or (II) of this section that the ineligible	3021
operator is liable for the operator's supplier tax liability as a	3022
result of not qualifying as a qualified distribution center, as	3023
provided in section 5717.02 of the Revised Code.	3024

(iii) When filing an application for a qualifying certificate	3025
under division (F)(2)(z)(i)(VI) of this section, the operator of a	3026
qualified distribution center also shall provide documentation, as	3027
the commissioner requires, for the commissioner to ascertain the	3028
Ohio delivery percentage. The commissioner, upon issuing the	3029
qualifying certificate, also shall certify the Ohio delivery	3030
percentage. The operator of the qualified distribution center may	3031
appeal the commissioner's certification of the Ohio delivery	3032
percentage in the same manner as an appeal is taken from the	3033
denial of a qualifying certificate under division (F)(2)(z)(i)(VI)	3034
of this section.	3035

(iv)(I) In the case where the distribution center is new and	3036
not open for the entire qualifying period, the operator shall make	3037
a good faith estimate of an Ohio delivery percentage for use by	3038
suppliers in their reports of taxable gross receipts for the	3039
remainder of the qualifying period. The operator of the facility	3040
shall disclose to the suppliers that such Ohio delivery percentage	3041
is an estimate and is subject to recalculation. By the due date of	3042
the next application for a qualifying certificate, the operator	3043
shall determine the actual Ohio delivery percentage for the	3044
estimated qualifying period and proceed as provided in division	3045
(F)(2)(z)(iii) of this section with respect to the calculation and	3046
recalculation of the Ohio delivery percentage. The supplier is	3047
required to file, within sixty days after receiving notice from	3048
the operator of the qualified distribution center, amended reports	3049
for the impacted calendar quarter or quarters or calendar year,	3050
whichever the case may be. Any additional tax liability or tax	3051
overpayment shall be subject to interest but shall not be subject	3052
to the imposition of any penalty so long as the amended returns	3053
are timely filed.	3054

(II) The operator of a distribution center that receives a	3055
qualifying certificate under division (F)(2)(z)(ii)(II) of this	3056
section shall make a good faith estimate of the Ohio delivery	3057
percentage that the operator estimates will apply to the	3058
distribution center at the end of the thirty-six-month period	3059
after the operator first applied for a qualifying certificate	3060
under that division. The result of the estimate shall be	3061
multiplied by a factor of one and seventy-five one-hundredths. The	3062
product of that calculation shall be the Ohio delivery percentage	3063
used by suppliers in their reports of taxable gross receipts for	3064
each qualifying year that the distribution center receives a	3065
qualifying certificate under division (F)(2)(z)(ii)(II) of this	3066
section, except that, if the product is less than five per cent,	3067
the Ohio delivery percentage used shall be five per cent and that,	3068
if the product exceeds forty-nine per cent, the Ohio delivery	3069
percentage used shall be forty-nine per cent.	3070

(v) Qualifying certificates and Ohio delivery percentages	3071
issued by the commissioner shall be open to public inspection and	3072
shall be timely published by the commissioner. A supplier relying	3073
in good faith on a certificate issued under this division shall	3074
not be subject to tax on the qualifying distribution center	3075
receipts under division (F)(2)(z) of this section. An operator	3076
receiving a qualifying certificate is liable for the ineligible	3077
operator's supplier tax liability for each year the operator	3078
received a certificate but did not qualify as a qualified	3079
distribution center.	3080

(vi) The annual fee for a qualifying certificate shall be one	3081
hundred thousand dollars for each qualified distribution center.	3082
If a qualifying certificate is not issued, the annual fee is	3083
subject to refund after the exhaustion of all appeals provided for	3084
in division (F)(2)(z)(i)(VI) of this section. The first one	3085
hundred thousand dollars of the annual application fees collected	3086
each calendar year shall be credited to the revenue enhancement	3087
fund. The remainder of the annual application fees collected shall	3088
be distributed in the same manner required under section 5751.20	3089
of the Revised Code.	3090

(vii) The tax commissioner may require that adequate security	3091
be posted by the operator of the distribution center on appeal	3092
when the commissioner disagrees that the applicant has met the	3093
minimum thresholds for a qualified distribution center as set	3094
forth in division (F)(2)(z) of this section.	3095

(aa) Receipts of an employer from payroll deductions relating	3096
to the reimbursement of the employer for advancing moneys to an	3097
unrelated third party on an employee's behalf;	3098

(bb) Cash discounts allowed and taken;

3099

(cc) Returns and allowances;

3100

(dd) Bad debts from receipts on the basis of which the tax	3101
imposed by this chapter was paid in a prior quarterly tax payment	3102
period. For the purpose of this division, "bad debts" means any	3103
debts that have become worthless or uncollectible between the	3104
preceding and current quarterly tax payment periods, have been	3105
uncollected for at least six months, and that may be claimed as a	3106
deduction under section 166 of the Internal Revenue Code and the	3107
regulations adopted under that section, or that could be claimed	3108
as such if the taxpayer kept its accounts on the accrual basis.	3109
"Bad debts" does not include repossessed property, uncollectible	3110
amounts on property that remains in the possession of the taxpayer	3111
until the full purchase price is paid, or expenses in attempting	3112
to collect any account receivable or for any portion of the debt	3113
recovered;	3114

(ee) Any amount realized from the sale of an account	3115
receivable to the extent the receipts from the underlying	3116
transaction giving rise to the account receivable were included in	3117
the gross receipts of the taxpayer;	3118

(ff) Any receipts directly attributed to a transfer agreement	3119
or to the enterprise transferred under that agreement under	3120
section 4313.02 of the Revised Code.	3121

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

3122

(I) "Qualified uranium receipts" means receipts from the	3123
sale, exchange, lease, loan, production, processing, or other	3124
disposition of uranium within a uranium enrichment zone certified	3125
by the tax commissioner under division (F)(2)(gg)(ii) of this	3126
section. "Qualified uranium receipts" does not include any	3127
receipts with a situs in this state outside a uranium enrichment	3128
zone certified by the tax commissioner under division	3129
(F)(2)(gg)(ii) of this section.	3130

(II) "Uranium enrichment zone" means all real property that	3131
is part of a uranium enrichment facility licensed by the United	3132
States nuclear regulatory commission and that was or is owned or	3133
controlled by the United States department of energy or its	3134
successor.	3135

(ii) Any person that owns, leases, or operates real or	3136
tangible personal property constituting or located within a	3137
uranium enrichment zone may apply to the tax commissioner to have	3138
the uranium enrichment zone certified for the purpose of excluding	3139
qualified uranium receipts under division (F)(2)(gg) of this	3140
section. The application shall include such information that the	3141
tax commissioner prescribes. Within sixty days after receiving the	3142
application, the tax commissioner shall certify the zone for that	3143
purpose if the commissioner determines that the property qualifies	3144
as a uranium enrichment zone as defined in division (F)(2)(gg) of	3145
this section, or, if the tax commissioner determines that the	3146
property does not qualify, the commissioner shall deny the	3147
application or request additional information from the applicant.	3148
If the tax commissioner denies an application, the commissioner	3149
shall state the reasons for the denial. The applicant may appeal	3150
the denial of an application to the board of tax appeals pursuant	3151
to section 5717.02 of the Revised Code. If the applicant files a	3152
timely appeal, the tax commissioner shall conditionally certify	3153
the applicant's property. The conditional certification shall	3154
expire when all of the applicant's appeals are exhausted. Until	3155
final resolution of the appeal, the applicant shall retain the	3156
applicant's records in accordance with section 5751.12 of the	3157
Revised Code, notwithstanding any time limit on the preservation	3158
of records under that section.	3159

(hh) In the case of amounts collected by a licensed casino	3160
operator from casino gaming, amounts in excess of the casino	3161
operator's gross casino revenue. In this division, "casino	3162
operator" and "casino gaming" have the meanings defined in section	3163
3772.01 of the Revised Code, and "gross casino revenue" has the	3164
meaning defined in section 5753.01 of the Revised Code.	3165

(ii) Receipts realized from the sale of agricultural	3166
commodities by an agricultural commodity handler, both as defined	3167
in section 926.01 of the Revised Code, that is licensed by the	3168
director of agriculture to handle agricultural commodities in this	3169
state.	3170

(jj) Receipts realized by a partnering business from	3171
business conducted in a startup zone pursuant to a partnership	3172
contract with a university under Chapter 195. of the Revised Code.	3173
Receipts may be excluded under this division only for tax periods	3174
ending on or before the expiration or termination of the	3175
partnership contract. Receipts realized from business conducted	3176
outside the startup zone or beyond the scope of the partnership	3177
contract shall not be excluded under this division. As used in	3178
this division, "startup zone," "partnering business," "partnership	3179
contract," and "university" have the same meanings as in section	3180
195.01 of the Revised Code.	3181

(kk) Any receipts for which the tax imposed by this chapter	3182
is prohibited by the constitution or laws of the United States or	3183
the constitution of this state.	3184

(3) In the case of a taxpayer when acting as a real estate	3185
broker, "gross receipts" includes only the portion of any fee for	3186
the service of a real estate broker, or service of a real estate	3187
salesperson associated with that broker, that is retained by the	3188
broker and not paid to an associated real estate salesperson or	3189
another real estate broker. For the purposes of this division,	3190
"real estate broker" and "real estate salesperson" have the same	3191
meanings as in section 4735.01 of the Revised Code.	3192

(4) A taxpayer's method of accounting for gross receipts for	3193
a tax period shall be the same as the taxpayer's method of	3194
accounting for federal income tax purposes for the taxpayer's	3195
federal taxable year that includes the tax period. If a taxpayer's	3196
method of accounting for federal income tax purposes changes, its	3197
method of accounting for gross receipts under this chapter shall	3198
be changed accordingly.	3199

(G) "Taxable gross receipts" means gross receipts sitused to	3200
this state under section 5751.033 of the Revised Code.	3201

(H) A person has "substantial nexus with this state" if any	3202
of the following applies. The person:	3203

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

3204

(2) Holds a certificate of compliance with the laws of this	3205
state authorizing the person to do business in this state;	3206

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

3207

(4) Otherwise has nexus with this state to an extent that the	3208
person can be required to remit the tax imposed under this chapter	3209
under the Constitution of the United States.	3210

(I) A person has "bright-line presence" in this state for a	3211
reporting period and for the remaining portion of the calendar	3212
year if any of the following applies. The person:	3213

(1) Has at any time during the calendar year property in this	3214
state with an aggregate value of at least fifty thousand dollars.	3215
For the purpose of division (I)(1) of this section, owned property	3216
is valued at original cost and rented property is valued at eight	3217
times the net annual rental charge.	3218

(2) Has during the calendar year payroll in this state of at	3219
least fifty thousand dollars. Payroll in this state includes all	3220
of the following:	3221

(a) Any amount subject to withholding by the person under	3222
section 5747.06 of the Revised Code;	3223

(b) Any other amount the person pays as compensation to an	3224
individual under the supervision or control of the person for work	3225
done in this state; and	3226

(c) Any amount the person pays for services performed in this	3227
state on its behalf by another.	3228

(3) Has during the calendar year taxable gross receipts of at	3229
least five hundred thousand dollars.	3230

(4) Has at any time during the calendar year within this	3231
state at least twenty-five per cent of the person's total	3232
property, total payroll, or total gross receipts.	3233

(5) Is domiciled in this state as an individual or for	3234
corporate, commercial, or other business purposes.	3235

(J) "Tangible personal property" has the same meaning as in	3236
section 5739.01 of the Revised Code.	3237

(K) "Internal Revenue Code" means the Internal Revenue Code	3238
of 1986, 100 Stat. 2085, 26 U.S.C. 1, as amended. Any term used in	3239
this chapter that is not otherwise defined has the same meaning as	3240
when used in a comparable context in the laws of the United States	3241
relating to federal income taxes unless a different meaning is	3242
clearly required. Any reference in this chapter to the Internal	3243
Revenue Code includes other laws of the United States relating to	3244
federal income taxes.	3245

(L) "Calendar quarter" means a three-month period ending on	3246
the thirty-first day of March, the thirtieth day of June, the	3247
thirtieth day of September, or the thirty-first day of December.	3248

(M) "Tax period" means the calendar quarter or calendar year	3249
on the basis of which a taxpayer is required to pay the tax	3250
imposed under this chapter.	3251

(N) "Calendar year taxpayer" means a taxpayer for which the	3252
tax period is a calendar year.	3253

(O) "Calendar quarter taxpayer" means a taxpayer for which	3254
the tax period is a calendar quarter.	3255

(P) "Agent" means a person authorized by another person to	3256
act on its behalf to undertake a transaction for the other,	3257
including any of the following:	3258

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

3259

(2) A person retaining only a commission from a transaction	3260
with the other proceeds from the transaction being remitted to	3261
another person;	3262

(3) A person issuing licenses and permits under section	3263
1533.13 of the Revised Code;	3264

(4) A lottery sales agent holding a valid license issued	3265
under section 3770.05 of the Revised Code;	3266

(5) A person acting as an agent of the division of liquor	3267
control under section 4301.17 of the Revised Code.	3268

(Q) "Received" includes amounts accrued under the accrual	3269
method of accounting.	3270

(R) "Reporting person" means a person in a consolidated	3271
elected taxpayer or combined taxpayer group that is designated by	3272
that group to legally bind the group for all filings and tax	3273
liabilities and to receive all legal notices with respect to	3274
matters under this chapter, or, for the purposes of section	3275
5751.04 of the Revised Code, a separate taxpayer that is not a	3276
member of such a group.	3277

Section 2.  That existing sections 150.03, 322.02, 5739.02,	3278
5739.03, 5747.01, and 5751.01 of the Revised Code are hereby	3279
repealed.	3280

Section 3. By June 30, 2015, the Director of Budget and	3281
Management shall transfer $100,000,000 cash from the General	3282
Revenue Fund to the Program Fund created under section 150.03 of	3283
the Revised Code. The transferred amount shall be used in the same	3284
manner as Program Fund revenue received under Chapter 150. of the	3285
Revised Code, for the purposes described in division (B) of	3286
section 150.01 of the Revised Code, and is hereby appropriated by	3287
the General Assembly.	3288