As Introduced

130th General Assembly Regular Session 2013-2014

S. B. No. 170

Senator Kearney 

Cosponsor: Senator Turner 

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A BILL

To amend section 5747.01 of the Revised Code to allow

1

an income tax deduction for amounts spent by law

2

enforcement officials for items used in

3

furtherance of official law enforcement

4

activities.

5

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

Section 1.  That section 5747.01 of the Revised Code be	6
amended to read as follows:	7

Sec. 5747.01.  Except as otherwise expressly provided or	8
clearly appearing from the context, any term used in this chapter	9
that is not otherwise defined in this section has the same meaning	10
as when used in a comparable context in the laws of the United	11
States relating to federal income taxes or if not used in a	12
comparable context in those laws, has the same meaning as in	13
section 5733.40 of the Revised Code. Any reference in this chapter	14
to the Internal Revenue Code includes other laws of the United	15
States relating to federal income taxes.	16

As used in this chapter:

17

(A) "Adjusted gross income" or "Ohio adjusted gross income"	18
means federal adjusted gross income, as defined and used in the	19
Internal Revenue Code, adjusted as provided in this section:	20

(1) Add interest or dividends on obligations or securities of	21
any state or of any political subdivision or authority of any	22
state, other than this state and its subdivisions and authorities.	23

(2) Add interest or dividends on obligations of any	24
authority, commission, instrumentality, territory, or possession	25
of the United States to the extent that the interest or dividends	26
are exempt from federal income taxes but not from state income	27
taxes.	28

(3) Deduct interest or dividends on obligations of the United	29
States and its territories and possessions or of any authority,	30
commission, or instrumentality of the United States to the extent	31
that the interest or dividends are included in federal adjusted	32
gross income but exempt from state income taxes under the laws of	33
the United States.	34

(4) Deduct disability and survivor's benefits to the extent	35
included in federal adjusted gross income.	36

(5) Deduct benefits under Title II of the Social Security Act	37
and tier 1 railroad retirement benefits to the extent included in	38
federal adjusted gross income under section 86 of the Internal	39
Revenue Code.	40

(6) In the case of a taxpayer who is a beneficiary of a trust	41
that makes an accumulation distribution as defined in section 665	42
of the Internal Revenue Code, add, for the beneficiary's taxable	43
years beginning before 2002, the portion, if any, of such	44
distribution that does not exceed the undistributed net income of	45
the trust for the three taxable years preceding the taxable year	46
in which the distribution is made to the extent that the portion	47
was not included in the trust's taxable income for any of the	48
trust's taxable years beginning in 2002 or thereafter.	49
"Undistributed net income of a trust" means the taxable income of	50
the trust increased by (a)(i) the additions to adjusted gross	51
income required under division (A) of this section and (ii) the	52
personal exemptions allowed to the trust pursuant to section	53
642(b) of the Internal Revenue Code, and decreased by (b)(i) the	54
deductions to adjusted gross income required under division (A) of	55
this section, (ii) the amount of federal income taxes attributable	56
to such income, and (iii) the amount of taxable income that has	57
been included in the adjusted gross income of a beneficiary by	58
reason of a prior accumulation distribution. Any undistributed net	59
income included in the adjusted gross income of a beneficiary	60
shall reduce the undistributed net income of the trust commencing	61
with the earliest years of the accumulation period.	62

(7) Deduct the amount of wages and salaries, if any, not	63
otherwise allowable as a deduction but that would have been	64
allowable as a deduction in computing federal adjusted gross	65
income for the taxable year, had the targeted jobs credit allowed	66
and determined under sections 38, 51, and 52 of the Internal	67
Revenue Code not been in effect.	68

(8) Deduct any interest or interest equivalent on public	69
obligations and purchase obligations to the extent that the	70
interest or interest equivalent is included in federal adjusted	71
gross income.	72

(9) Add any loss or deduct any gain resulting from the sale,	73
exchange, or other disposition of public obligations to the extent	74
that the loss has been deducted or the gain has been included in	75
computing federal adjusted gross income.	76

(10) Deduct or add amounts, as provided under section 5747.70	77
of the Revised Code, related to contributions to variable college	78
savings program accounts made or tuition units purchased pursuant	79
to Chapter 3334. of the Revised Code.	80

(11)(a) Deduct, to the extent not otherwise allowable as a	81
deduction or exclusion in computing federal or Ohio adjusted gross	82
income for the taxable year, the amount the taxpayer paid during	83
the taxable year for medical care insurance and qualified	84
long-term care insurance for the taxpayer, the taxpayer's spouse,	85
and dependents. No deduction for medical care insurance under	86
division (A)(11) of this section shall be allowed either to any	87
taxpayer who is eligible to participate in any subsidized health	88
plan maintained by any employer of the taxpayer or of the	89
taxpayer's spouse, or to any taxpayer who is entitled to, or on	90
application would be entitled to, benefits under part A of Title	91
XVIII of the "Social Security Act," 49 Stat. 620 (1935), 42 U.S.C.	92
301, as amended. For the purposes of division (A)(11)(a) of this	93
section, "subsidized health plan" means a health plan for which	94
the employer pays any portion of the plan's cost. The deduction	95
allowed under division (A)(11)(a) of this section shall be the net	96
of any related premium refunds, related premium reimbursements, or	97
related insurance premium dividends received during the taxable	98
year.	99

(b) Deduct, to the extent not otherwise deducted or excluded	100
in computing federal or Ohio adjusted gross income during the	101
taxable year, the amount the taxpayer paid during the taxable	102
year, not compensated for by any insurance or otherwise, for	103
medical care of the taxpayer, the taxpayer's spouse, and	104
dependents, to the extent the expenses exceed seven and one-half	105
per cent of the taxpayer's federal adjusted gross income.	106

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

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

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

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

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

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

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

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

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

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

(16) Add any amount claimed as a credit under section	167
5747.059 or 5747.65 of the Revised Code to the extent that such	168
amount satisfies either of the following:	169

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

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

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

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

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

(20)(a)(i) Subject to divisions (A)(20)(a)(iii), (iv), and	206
(v) of this section, add five-sixths of the amount of depreciation	207
expense allowed by subsection (k) of section 168 of the Internal	208
Revenue Code, including the taxpayer's proportionate or	209
distributive share of the amount of depreciation expense allowed	210
by that subsection to a pass-through entity in which the taxpayer	211
has a direct or indirect ownership interest.	212

(ii) Subject to divisions (A)(20)(a)(iii), (iv), and (v) of	213
this section, add five-sixths of the amount of qualifying section	214
179 depreciation expense, including the taxpayer's proportionate	215
or distributive share of the amount of qualifying section 179	216
depreciation expense allowed to any pass-through entity in which	217
the taxpayer has a direct or indirect ownership interest.	218

(iii) Subject to division (A)(20)(a)(v) of this section, for	219
taxable years beginning in 2012 or thereafter, if the increase in	220
income taxes withheld by the taxpayer is equal to or greater than	221
ten per cent of income taxes withheld by the taxpayer during the	222
taxpayer's immediately preceding taxable year, "two-thirds" shall	223
be substituted for "five-sixths" for the purpose of divisions	224
(A)(20)(a)(i) and (ii) of this section.	225

(iv) Subject to division (A)(20)(a)(v) of this section, for	226
taxable years beginning in 2012 or thereafter, a taxpayer is not	227
required to add an amount under division (A)(20) of this section	228
if the increase in income taxes withheld by the taxpayer and by	229
any pass-through entity in which the taxpayer has a direct or	230
indirect ownership interest is equal to or greater than the sum of	231
(I) the amount of qualifying section 179 depreciation expense and	232
(II) the amount of depreciation expense allowed to the taxpayer by	233
subsection (k) of section 168 of the Internal Revenue Code, and	234
including the taxpayer's proportionate or distributive shares of	235
such amounts allowed to any such pass-through entities.	236

(v) If a taxpayer directly or indirectly incurs a net	237
operating loss for the taxable year for federal income tax	238
purposes, to the extent such loss resulted from depreciation	239
expense allowed by subsection (k) of section 168 of the Internal	240
Revenue Code and by qualifying section 179 depreciation expense,	241
"the entire" shall be substituted for "five-sixths of the" for the	242
purpose of divisions (A)(20)(a)(i) and (ii) of this section.	243

The tax commissioner, under procedures established by the	244
commissioner, may waive the add-backs related to a pass-through	245
entity if the taxpayer owns, directly or indirectly, less than	246
five per cent of the pass-through entity.	247

(b) Nothing in division (A)(20) of this section shall be	248
construed to adjust or modify the adjusted basis of any asset.	249

(c) To the extent the add-back required under division	250
(A)(20)(a) of this section is attributable to property generating	251
nonbusiness income or loss allocated under section 5747.20 of the	252
Revised Code, the add-back shall be sitused to the same location	253
as the nonbusiness income or loss generated by the property for	254
the purpose of determining the credit under division (A) of	255
section 5747.05 of the Revised Code. Otherwise, the add-back shall	256
be apportioned, subject to one or more of the four alternative	257
methods of apportionment enumerated in section 5747.21 of the	258
Revised Code.	259

(d) For the purposes of division (A)(20)(a)(v) of this	260
section, net operating loss carryback and carryforward shall not	261
include the allowance of any net operating loss deduction	262
carryback or carryforward to the taxable year to the extent such	263
loss resulted from depreciation allowed by section 168(k) of the	264
Internal Revenue Code and by the qualifying section 179	265
depreciation expense amount.	266

(e) For the purposes of divisions (A)(20) and (21) of this	267
section:	268

(i) "Income taxes withheld" means the total amount withheld	269
and remitted under sections 5747.06 and 5747.07 of the Revised	270
Code by an employer during the employer's taxable year.	271

(ii) "Increase in income taxes withheld" means the amount by	272
which the amount of income taxes withheld by an employer during	273
the employer's current taxable year exceeds the amount of income	274
taxes withheld by that employer during the employer's immediately	275
preceding taxable year.	276

(iii) "Qualifying section 179 depreciation expense" means the	277
difference between (I) the amount of depreciation expense directly	278
or indirectly allowed to a taxpayer under section 179 of the	279
Internal Revised Code, and (II) the amount of depreciation expense	280
directly or indirectly allowed to the taxpayer under section 179	281
of the Internal Revenue Code as that section existed on December	282
31, 2002.	283

(21)(a) If the taxpayer was required to add an amount under	284
division (A)(20)(a) of this section for a taxable year, deduct one	285
of the following:	286

(i) One-fifth of the amount so added for each of the five	287
succeeding taxable years if the amount so added was five-sixths of	288
qualifying section 179 depreciation expense or depreciation	289
expense allowed by subsection (k) of section 168 of the Internal	290
Revenue Code;	291

(ii) One-half of the amount so added for each of the two	292
succeeding taxable years if the amount so added was two-thirds of	293
such depreciation expense;	294

(iii) One-sixth of the amount so added for each of the six	295
succeeding taxable years if the entire amount of such depreciation	296
expense was so added.	297

(b) If the amount deducted under division (A)(21)(a) of this	298
section is attributable to an add-back allocated under division	299
(A)(20)(c) of this section, the amount deducted shall be sitused	300
to the same location. Otherwise, the add-back shall be apportioned	301
using the apportionment factors for the taxable year in which the	302
deduction is taken, subject to one or more of the four alternative	303
methods of apportionment enumerated in section 5747.21 of the	304
Revised Code.	305

(c) No deduction is available under division (A)(21)(a) of	306
this section with regard to any depreciation allowed by section	307
168(k) of the Internal Revenue Code and by the qualifying section	308
179 depreciation expense amount to the extent that such	309
depreciation results in or increases a federal net operating loss	310
carryback or carryforward. If no such deduction is available for a	311
taxable year, the taxpayer may carry forward the amount not	312
deducted in such taxable year to the next taxable year and add	313
that amount to any deduction otherwise available under division	314
(A)(21)(a) of this section for that next taxable year. The	315
carryforward of amounts not so deducted shall continue until the	316
entire addition required by division (A)(20)(a) of this section	317
has been deducted.	318

(d) No refund shall be allowed as a result of adjustments	319
made by division (A)(21) of this section.	320

(22) Deduct, to the extent not otherwise deducted or excluded	321
in computing federal or Ohio adjusted gross income for the taxable	322
year, the amount the taxpayer received during the taxable year as	323
reimbursement for life insurance premiums under section 5919.31 of	324
the Revised Code.	325

(23) Deduct, to the extent not otherwise deducted or excluded	326
in computing federal or Ohio adjusted gross income for the taxable	327
year, the amount the taxpayer received during the taxable year as	328
a death benefit paid by the adjutant general under section 5919.33	329
of the Revised Code.	330

(24) Deduct, to the extent included in federal adjusted gross	331
income and not otherwise allowable as a deduction or exclusion in	332
computing federal or Ohio adjusted gross income for the taxable	333
year, military pay and allowances received by the taxpayer during	334
the taxable year for active duty service in the United States	335
army, air force, navy, marine corps, or coast guard or reserve	336
components thereof or the national guard. The deduction may not be	337
claimed for military pay and allowances received by the taxpayer	338
while the taxpayer is stationed in this state.	339

(25) Deduct, to the extent not otherwise allowable as a	340
deduction or exclusion in computing federal or Ohio adjusted gross	341
income for the taxable year and not otherwise compensated for by	342
any other source, the amount of qualified organ donation expenses	343
incurred by the taxpayer during the taxable year, not to exceed	344
ten thousand dollars. A taxpayer may deduct qualified organ	345
donation expenses only once for all taxable years beginning with	346
taxable years beginning in 2007.	347

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

348

(a) "Human organ" means all or any portion of a human liver,	349
pancreas, kidney, intestine, or lung, and any portion of human	350
bone marrow.	351

(b) "Qualified organ donation expenses" means travel	352
expenses, lodging expenses, and wages and salary forgone by a	353
taxpayer in connection with the taxpayer's donation, while living,	354
of one or more of the taxpayer's human organs to another human	355
being.	356

(26) Deduct, to the extent not otherwise deducted or excluded	357
in computing federal or Ohio adjusted gross income for the taxable	358
year, amounts received by the taxpayer as retired military	359
personnel pay for service in the United States army, navy, air	360
force, coast guard, or marine corps or reserve components thereof,	361
or the national guard, or received by the surviving spouse or	362
former spouse of such a taxpayer under the survivor benefit plan	363
on account of such a taxpayer's death. If the taxpayer receives	364
income on account of retirement paid under the federal civil	365
service retirement system or federal employees retirement system,	366
or under any successor retirement program enacted by the congress	367
of the United States that is established and maintained for	368
retired employees of the United States government, and such	369
retirement income is based, in whole or in part, on credit for the	370
taxpayer's military service, the deduction allowed under this	371
division shall include only that portion of such retirement income	372
that is attributable to the taxpayer's military service, to the	373
extent that portion of such retirement income is otherwise	374
included in federal adjusted gross income and is not otherwise	375
deducted under this section. Any amount deducted under division	376
(A)(26) of this section is not included in a taxpayer's adjusted	377
gross income for the purposes of section 5747.055 of the Revised	378
Code. No amount may be deducted under division (A)(26) of this	379
section on the basis of which a credit was claimed under section	380
5747.055 of the Revised Code.	381

(27) Deduct, to the extent not otherwise deducted or excluded	382
in computing federal or Ohio adjusted gross income for the taxable	383
year, the amount the taxpayer received during the taxable year	384
from the military injury relief fund created in section 5101.98 of	385
the Revised Code.	386

(28) Deduct, to the extent not otherwise deducted or excluded	387
in computing federal or Ohio adjusted gross income for the taxable	388
year, the amount the taxpayer received as a veterans bonus during	389
the taxable year from the Ohio department of veterans services as	390
authorized by Section 2r of Article VIII, Ohio Constitution.	391

(29) Deduct, to the extent not otherwise deducted or excluded	392
in computing federal or Ohio adjusted gross income for the taxable	393
year, any loss from wagering transactions that is allowed as an	394
itemized deduction under section 165 of the Internal Revenue Code	395
and that the taxpayer deducted in computing federal taxable	396
income.	397

(30) Deduct, to the extent not otherwise deducted or excluded	398
in computing federal or Ohio adjusted gross income for the taxable	399
year, any income derived from providing public services under a	400
contract through a project owned by the state, as described in	401
section 126.604 of the Revised Code or derived from a transfer	402
agreement or from the enterprise transferred under that agreement	403
under section 4313.02 of the Revised Code.	404

(31) Deduct, to the extent not otherwise deducted or excluded	405
in computing federal or Ohio adjusted gross income for the taxable	406
year, Ohio college opportunity or federal Pell grant amounts	407
received by the taxpayer or the taxpayer's spouse or dependent	408
pursuant to section 3333.122 of the Revised Code or 20 U.S.C.	409
1070a, et seq., and used to pay room or board furnished by the	410
educational institution for which the grant was awarded at the	411
institution's facilities, including meal plans administered by the	412
institution. For the purposes of this division, receipt of a grant	413
includes the distribution of a grant directly to an educational	414
institution and the crediting of the grant to the enrollee's	415
account with the institution.	416

(32) Deduct, to the extent not otherwise deducted or excluded	417
in computing federal or Ohio adjusted gross income for the taxable	418
year, amounts spent by a law enforcement officer during the	419
taxable year on items used by that individual for official law	420
enforcement activities, not to exceed one thousand dollars.	421

On request of the tax commissioner, the law enforcement	422
officer shall provide a receipt for each item used in calculating	423
the deduction and a letter from the law enforcement officer's	424
employer confirming that the items were used for official law	425
enforcement activities.	426

For purposes of division (A)(30) of this section, "law	427
enforcement officer" means a sheriff, deputy sheriff, constable,	428
municipal police officer, police officer of a township or joint	429
township police district, marshal, deputy marshal, or state	430
highway patrolman, and also means any officer, agent, or employee	431
of the state or any of its agencies, instrumentalities, or	432
political subdivisions, upon whom, by statute, the authority to	433
arrest violators is conferred, when the officer, agent, or	434
employee is acting within the limits of statutory authority.	435

(B) "Business income" means income, including gain or loss,	436
arising from transactions, activities, and sources in the regular	437
course of a trade or business and includes income, gain, or loss	438
from real property, tangible property, and intangible property if	439
the acquisition, rental, management, and disposition of the	440
property constitute integral parts of the regular course of a	441
trade or business operation. "Business income" includes income,	442
including gain or loss, from a partial or complete liquidation of	443
a business, including, but not limited to, gain or loss from the	444
sale or other disposition of goodwill.	445

(C) "Nonbusiness income" means all income other than business	446
income and may include, but is not limited to, compensation, rents	447
and royalties from real or tangible personal property, capital	448
gains, interest, dividends and distributions, patent or copyright	449
royalties, or lottery winnings, prizes, and awards.	450

(D) "Compensation" means any form of remuneration paid to an	451
employee for personal services.	452

(E) "Fiduciary" means a guardian, trustee, executor,	453
administrator, receiver, conservator, or any other person acting	454
in any fiduciary capacity for any individual, trust, or estate.	455

(F) "Fiscal year" means an accounting period of twelve months	456
ending on the last day of any month other than December.	457

(G) "Individual" means any natural person.

458

(H) "Internal Revenue Code" means the "Internal Revenue Code	459
of 1986," 100 Stat. 2085, 26 U.S.C.A. 1, as amended.	460

(I) "Resident" means any of the following, provided that	461
division (I)(3) of this section applies only to taxable years of a	462
trust beginning in 2002 or thereafter:	463

(1) An individual who is domiciled in this state, subject to	464
section 5747.24 of the Revised Code;	465

(2) The estate of a decedent who at the time of death was	466
domiciled in this state. The domicile tests of section 5747.24 of	467
the Revised Code are not controlling for purposes of division	468
(I)(2) of this section.	469

(3) A trust that, in whole or part, resides in this state. If	470
only part of a trust resides in this state, the trust is a	471
resident only with respect to that part.	472

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

473

(a) A trust resides in this state for the trust's current	474
taxable year to the extent, as described in division (I)(3)(d) of	475
this section, that the trust consists directly or indirectly, in	476
whole or in part, of assets, net of any related liabilities, that	477
were transferred, or caused to be transferred, directly or	478
indirectly, to the trust by any of the following:	479

(i) A person, a court, or a governmental entity or	480
instrumentality on account of the death of a decedent, but only if	481
the trust is described in division (I)(3)(e)(i) or (ii) of this	482
section;	483

(ii) A person who was domiciled in this state for the	484
purposes of this chapter when the person directly or indirectly	485
transferred assets to an irrevocable trust, but only if at least	486
one of the trust's qualifying beneficiaries is domiciled in this	487
state for the purposes of this chapter during all or some portion	488
of the trust's current taxable year;	489

(iii) A person who was domiciled in this state for the	490
purposes of this chapter when the trust document or instrument or	491
part of the trust document or instrument became irrevocable, but	492
only if at least one of the trust's qualifying beneficiaries is a	493
resident domiciled in this state for the purposes of this chapter	494
during all or some portion of the trust's current taxable year. If	495
a trust document or instrument became irrevocable upon the death	496
of a person who at the time of death was domiciled in this state	497
for purposes of this chapter, that person is a person described in	498
division (I)(3)(a)(iii) of this section.	499

(b) A trust is irrevocable to the extent that the transferor	500
is not considered to be the owner of the net assets of the trust	501
under sections 671 to 678 of the Internal Revenue Code.	502

(c) With respect to a trust other than a charitable lead	503
trust, "qualifying beneficiary" has the same meaning as "potential	504
current beneficiary" as defined in section 1361(e)(2) of the	505
Internal Revenue Code, and with respect to a charitable lead trust	506
"qualifying beneficiary" is any current, future, or contingent	507
beneficiary, but with respect to any trust "qualifying	508
beneficiary" excludes a person or a governmental entity or	509
instrumentality to any of which a contribution would qualify for	510
the charitable deduction under section 170 of the Internal Revenue	511
Code.	512

(d) For the purposes of division (I)(3)(a) of this section,	513
the extent to which a trust consists directly or indirectly, in	514
whole or in part, of assets, net of any related liabilities, that	515
were transferred directly or indirectly, in whole or part, to the	516
trust by any of the sources enumerated in that division shall be	517
ascertained by multiplying the fair market value of the trust's	518
assets, net of related liabilities, by the qualifying ratio, which	519
shall be computed as follows:	520

(i) The first time the trust receives assets, the numerator	521
of the qualifying ratio is the fair market value of those assets	522
at that time, net of any related liabilities, from sources	523
enumerated in division (I)(3)(a) of this section. The denominator	524
of the qualifying ratio is the fair market value of all the	525
trust's assets at that time, net of any related liabilities.	526

(ii) Each subsequent time the trust receives assets, a	527
revised qualifying ratio shall be computed. The numerator of the	528
revised qualifying ratio is the sum of (1) the fair market value	529
of the trust's assets immediately prior to the subsequent	530
transfer, net of any related liabilities, multiplied by the	531
qualifying ratio last computed without regard to the subsequent	532
transfer, and (2) the fair market value of the subsequently	533
transferred assets at the time transferred, net of any related	534
liabilities, from sources enumerated in division (I)(3)(a) of this	535
section. The denominator of the revised qualifying ratio is the	536
fair market value of all the trust's assets immediately after the	537
subsequent transfer, net of any related liabilities.	538

(iii) Whether a transfer to the trust is by or from any of	539
the sources enumerated in division (I)(3)(a) of this section shall	540
be ascertained without regard to the domicile of the trust's	541
beneficiaries.	542

(e) For the purposes of division (I)(3)(a)(i) of this	543
section:	544

(i) A trust is described in division (I)(3)(e)(i) of this	545
section if the trust is a testamentary trust and the testator of	546
that testamentary trust was domiciled in this state at the time of	547
the testator's death for purposes of the taxes levied under	548
Chapter 5731. of the Revised Code.	549

(ii) A trust is described in division (I)(3)(e)(ii) of this	550
section if the transfer is a qualifying transfer described in any	551
of divisions (I)(3)(f)(i) to (vi) of this section, the trust is an	552
irrevocable inter vivos trust, and at least one of the trust's	553
qualifying beneficiaries is domiciled in this state for purposes	554
of this chapter during all or some portion of the trust's current	555
taxable year.	556

(f) For the purposes of division (I)(3)(e)(ii) of this	557
section, a "qualifying transfer" is a transfer of assets, net of	558
any related liabilities, directly or indirectly to a trust, if the	559
transfer is described in any of the following:	560

(i) The transfer is made to a trust, created by the decedent	561
before the decedent's death and while the decedent was domiciled	562
in this state for the purposes of this chapter, and, prior to the	563
death of the decedent, the trust became irrevocable while the	564
decedent was domiciled in this state for the purposes of this	565
chapter.	566

(ii) The transfer is made to a trust to which the decedent,	567
prior to the decedent's death, had directly or indirectly	568
transferred assets, net of any related liabilities, while the	569
decedent was domiciled in this state for the purposes of this	570
chapter, and prior to the death of the decedent the trust became	571
irrevocable while the decedent was domiciled in this state for the	572
purposes of this chapter.	573

(iii) The transfer is made on account of a contractual	574
relationship existing directly or indirectly between the	575
transferor and either the decedent or the estate of the decedent	576
at any time prior to the date of the decedent's death, and the	577
decedent was domiciled in this state at the time of death for	578
purposes of the taxes levied under Chapter 5731. of the Revised	579
Code.	580

(iv) The transfer is made to a trust on account of a	581
contractual relationship existing directly or indirectly between	582
the transferor and another person who at the time of the	583
decedent's death was domiciled in this state for purposes of this	584
chapter.	585

(v) The transfer is made to a trust on account of the will of	586
a testator who was domiciled in this state at the time of the	587
testator's death for purposes of the taxes levied under Chapter	588
5731. of the Revised Code.	589

(vi) The transfer is made to a trust created by or caused to	590
be created by a court, and the trust was directly or indirectly	591
created in connection with or as a result of the death of an	592
individual who, for purposes of the taxes levied under Chapter	593
5731. of the Revised Code, was domiciled in this state at the time	594
of the individual's death.	595

(g) The tax commissioner may adopt rules to ascertain the	596
part of a trust residing in this state.	597

(J) "Nonresident" means an individual or estate that is not a	598
resident. An individual who is a resident for only part of a	599
taxable year is a nonresident for the remainder of that taxable	600
year.	601

(K) "Pass-through entity" has the same meaning as in section	602
5733.04 of the Revised Code.	603

(L) "Return" means the notifications and reports required to	604
be filed pursuant to this chapter for the purpose of reporting the	605
tax due and includes declarations of estimated tax when so	606
required.	607

(M) "Taxable year" means the calendar year or the taxpayer's	608
fiscal year ending during the calendar year, or fractional part	609
thereof, upon which the adjusted gross income is calculated	610
pursuant to this chapter.	611

(N) "Taxpayer" means any person subject to the tax imposed by	612
section 5747.02 of the Revised Code or any pass-through entity	613
that makes the election under division (D) of section 5747.08 of	614
the Revised Code.	615

(O) "Dependents" means dependents as defined in the Internal	616
Revenue Code and as claimed in the taxpayer's federal income tax	617
return for the taxable year or which the taxpayer would have been	618
permitted to claim had the taxpayer filed a federal income tax	619
return.	620

(P) "Principal county of employment" means, in the case of a	621
nonresident, the county within the state in which a taxpayer	622
performs services for an employer or, if those services are	623
performed in more than one county, the county in which the major	624
portion of the services are performed.	625

(Q) As used in sections 5747.50 to 5747.55 of the Revised	626
Code:	627

(1) "Subdivision" means any county, municipal corporation,	628
park district, or township.	629

(2) "Essential local government purposes" includes all	630
functions that any subdivision is required by general law to	631
exercise, including like functions that are exercised under a	632
charter adopted pursuant to the Ohio Constitution.	633

(R) "Overpayment" means any amount already paid that exceeds	634
the figure determined to be the correct amount of the tax.	635

(S) "Taxable income" or "Ohio taxable income" applies only to	636
estates and trusts, and means federal taxable income, as defined	637
and used in the Internal Revenue Code, adjusted as follows:	638

(1) Add interest or dividends, net of ordinary, necessary,	639
and reasonable expenses not deducted in computing federal taxable	640
income, on obligations or securities of any state or of any	641
political subdivision or authority of any state, other than this	642
state and its subdivisions and authorities, but only to the extent	643
that such net amount is not otherwise includible in Ohio taxable	644
income and is described in either division (S)(1)(a) or (b) of	645
this section:	646

(a) The net amount is not attributable to the S portion of an	647
electing small business trust and has not been distributed to	648
beneficiaries for the taxable year;	649

(b) The net amount is attributable to the S portion of an	650
electing small business trust for the taxable year.	651

(2) Add interest or dividends, net of ordinary, necessary,	652
and reasonable expenses not deducted in computing federal taxable	653
income, on obligations of any authority, commission,	654
instrumentality, territory, or possession of the United States to	655
the extent that the interest or dividends are exempt from federal	656
income taxes but not from state income taxes, but only to the	657
extent that such net amount is not otherwise includible in Ohio	658
taxable income and is described in either division (S)(1)(a) or	659
(b) of this section;	660

(3) Add the amount of personal exemption allowed to the	661
estate pursuant to section 642(b) of the Internal Revenue Code;	662

(4) Deduct interest or dividends, net of related expenses	663
deducted in computing federal taxable income, on obligations of	664
the United States and its territories and possessions or of any	665
authority, commission, or instrumentality of the United States to	666
the extent that the interest or dividends are exempt from state	667
taxes under the laws of the United States, but only to the extent	668
that such amount is included in federal taxable income and is	669
described in either division (S)(1)(a) or (b) of this section;	670

(5) Deduct the amount of wages and salaries, if any, not	671
otherwise allowable as a deduction but that would have been	672
allowable as a deduction in computing federal taxable income for	673
the taxable year, had the targeted jobs credit allowed under	674
sections 38, 51, and 52 of the Internal Revenue Code not been in	675
effect, but only to the extent such amount relates either to	676
income included in federal taxable income for the taxable year or	677
to income of the S portion of an electing small business trust for	678
the taxable year;	679

(6) Deduct any interest or interest equivalent, net of	680
related expenses deducted in computing federal taxable income, on	681
public obligations and purchase obligations, but only to the	682
extent that such net amount relates either to income included in	683
federal taxable income for the taxable year or to income of the S	684
portion of an electing small business trust for the taxable year;	685

(7) Add any loss or deduct any gain resulting from sale,	686
exchange, or other disposition of public obligations to the extent	687
that such loss has been deducted or such gain has been included in	688
computing either federal taxable income or income of the S portion	689
of an electing small business trust for the taxable year;	690

(8) Except in the case of the final return of an estate, add	691
any amount deducted by the taxpayer on both its Ohio estate tax	692
return pursuant to section 5731.14 of the Revised Code, and on its	693
federal income tax return in determining federal taxable income;	694

(9)(a) Deduct any amount included in federal taxable income	695
solely because the amount represents a reimbursement or refund of	696
expenses that in a previous year the decedent had deducted as an	697
itemized deduction pursuant to section 63 of the Internal Revenue	698
Code and applicable treasury regulations. The deduction otherwise	699
allowed under division (S)(9)(a) of this section shall be reduced	700
to the extent the reimbursement is attributable to an amount the	701
taxpayer or decedent deducted under this section in any taxable	702
year.	703

(b) Add any amount not otherwise included in Ohio taxable	704
income for any taxable year to the extent that the amount is	705
attributable to the recovery during the taxable year of any amount	706
deducted or excluded in computing federal or Ohio taxable income	707
in any taxable year, but only to the extent such amount has not	708
been distributed to beneficiaries for the taxable year.	709

(10) Deduct any portion of the deduction described in section	710
1341(a)(2) of the Internal Revenue Code, for repaying previously	711
reported income received under a claim of right, that meets both	712
of the following requirements:	713

(a) It is allowable for repayment of an item that was	714
included in the taxpayer's taxable income or the decedent's	715
adjusted gross income for a prior taxable year and did not qualify	716
for a credit under division (A) or (B) of section 5747.05 of the	717
Revised Code for that year.	718

(b) It does not otherwise reduce the taxpayer's taxable	719
income or the decedent's adjusted gross income for the current or	720
any other taxable year.	721

(11) Add any amount claimed as a credit under section	722
5747.059 or 5747.65 of the Revised Code to the extent that the	723
amount satisfies either of the following:	724

(a) The amount was deducted or excluded from the computation	725
of the taxpayer's federal taxable income as required to be	726
reported for the taxpayer's taxable year under the Internal	727
Revenue Code;	728

(b) The amount resulted in a reduction in the taxpayer's	729
federal taxable income as required to be reported for any of the	730
taxpayer's taxable years under the Internal Revenue Code.	731

(12) Deduct any amount, net of related expenses deducted in	732
computing federal taxable income, that a trust is required to	733
report as farm income on its federal income tax return, but only	734
if the assets of the trust include at least ten acres of land	735
satisfying the definition of "land devoted exclusively to	736
agricultural use" under section 5713.30 of the Revised Code,	737
regardless of whether the land is valued for tax purposes as such	738
land under sections 5713.30 to 5713.38 of the Revised Code. If the	739
trust is a pass-through entity investor, section 5747.231 of the	740
Revised Code applies in ascertaining if the trust is eligible to	741
claim the deduction provided by division (S)(12) of this section	742
in connection with the pass-through entity's farm income.	743

Except for farm income attributable to the S portion of an	744
electing small business trust, the deduction provided by division	745
(S)(12) of this section is allowed only to the extent that the	746
trust has not distributed such farm income. Division (S)(12) of	747
this section applies only to taxable years of a trust beginning in	748
2002 or thereafter.	749

(13) Add the net amount of income described in section 641(c)	750
of the Internal Revenue Code to the extent that amount is not	751
included in federal taxable income.	752

(14) Add or deduct the amount the taxpayer would be required	753
to add or deduct under division (A)(20) or (21) of this section if	754
the taxpayer's Ohio taxable income were computed in the same	755
manner as an individual's Ohio adjusted gross income is computed	756
under this section. In the case of a trust, division (S)(14) of	757
this section applies only to any of the trust's taxable years	758
beginning in 2002 or thereafter.	759

(T) "School district income" and "school district income tax"	760
have the same meanings as in section 5748.01 of the Revised Code.	761

(U) As used in divisions (A)(8), (A)(9), (S)(6), and (S)(7)	762
of this section, "public obligations," "purchase obligations," and	763
"interest or interest equivalent" have the same meanings as in	764
section 5709.76 of the Revised Code.	765

(V) "Limited liability company" means any limited liability	766
company formed under Chapter 1705. of the Revised Code or under	767
the laws of any other state.	768

(W) "Pass-through entity investor" means any person who,	769
during any portion of a taxable year of a pass-through entity, is	770
a partner, member, shareholder, or equity investor in that	771
pass-through entity.	772

(X) "Banking day" has the same meaning as in section 1304.01	773
of the Revised Code.	774

(Y) "Month" means a calendar month.

775

(Z) "Quarter" means the first three months, the second three	776
months, the third three months, or the last three months of the	777
taxpayer's taxable year.	778

(AA)(1) "Eligible institution" means a state university or	779
state institution of higher education as defined in section	780
3345.011 of the Revised Code, or a private, nonprofit college,	781
university, or other post-secondary institution located in this	782
state that possesses a certificate of authorization issued by the	783
Ohio board of regents pursuant to Chapter 1713. of the Revised	784
Code or a certificate of registration issued by the state board of	785
career colleges and schools under Chapter 3332. of the Revised	786
Code.	787

(2) "Qualified tuition and fees" means tuition and fees	788
imposed by an eligible institution as a condition of enrollment or	789
attendance, not exceeding two thousand five hundred dollars in	790
each of the individual's first two years of post-secondary	791
education. If the individual is a part-time student, "qualified	792
tuition and fees" includes tuition and fees paid for the academic	793
equivalent of the first two years of post-secondary education	794
during a maximum of five taxable years, not exceeding a total of	795
five thousand dollars. "Qualified tuition and fees" does not	796
include:	797

(a) Expenses for any course or activity involving sports,	798
games, or hobbies unless the course or activity is part of the	799
individual's degree or diploma program;	800

(b) The cost of books, room and board, student activity fees,	801
athletic fees, insurance expenses, or other expenses unrelated to	802
the individual's academic course of instruction;	803

(c) Tuition, fees, or other expenses paid or reimbursed	804
through an employer, scholarship, grant in aid, or other	805
educational benefit program.	806

(BB)(1) "Modified business income" means the business income	807
included in a trust's Ohio taxable income after such taxable	808
income is first reduced by the qualifying trust amount, if any.	809

(2) "Qualifying trust amount" of a trust means capital gains	810
and losses from the sale, exchange, or other disposition of equity	811
or ownership interests in, or debt obligations of, a qualifying	812
investee to the extent included in the trust's Ohio taxable	813
income, but only if the following requirements are satisfied:	814

(a) The book value of the qualifying investee's physical	815
assets in this state and everywhere, as of the last day of the	816
qualifying investee's fiscal or calendar year ending immediately	817
prior to the date on which the trust recognizes the gain or loss,	818
is available to the trust.	819

(b) The requirements of section 5747.011 of the Revised Code	820
are satisfied for the trust's taxable year in which the trust	821
recognizes the gain or loss.	822

Any gain or loss that is not a qualifying trust amount is	823
modified business income, qualifying investment income, or	824
modified nonbusiness income, as the case may be.	825

(3) "Modified nonbusiness income" means a trust's Ohio	826
taxable income other than modified business income, other than the	827
qualifying trust amount, and other than qualifying investment	828
income, as defined in section 5747.012 of the Revised Code, to the	829
extent such qualifying investment income is not otherwise part of	830
modified business income.	831

(4) "Modified Ohio taxable income" applies only to trusts,	832
and means the sum of the amounts described in divisions (BB)(4)(a)	833
to (c) of this section:	834

(a) The fraction, calculated under section 5747.013, and	835
applying section 5747.231 of the Revised Code, multiplied by the	836
sum of the following amounts:	837

(i) The trust's modified business income;

838

(ii) The trust's qualifying investment income, as defined in	839
section 5747.012 of the Revised Code, but only to the extent the	840
qualifying investment income does not otherwise constitute	841
modified business income and does not otherwise constitute a	842
qualifying trust amount.	843

(b) The qualifying trust amount multiplied by a fraction, the	844
numerator of which is the sum of the book value of the qualifying	845
investee's physical assets in this state on the last day of the	846
qualifying investee's fiscal or calendar year ending immediately	847
prior to the day on which the trust recognizes the qualifying	848
trust amount, and the denominator of which is the sum of the book	849
value of the qualifying investee's total physical assets	850
everywhere on the last day of the qualifying investee's fiscal or	851
calendar year ending immediately prior to the day on which the	852
trust recognizes the qualifying trust amount. If, for a taxable	853
year, the trust recognizes a qualifying trust amount with respect	854
to more than one qualifying investee, the amount described in	855
division (BB)(4)(b) of this section shall equal the sum of the	856
products so computed for each such qualifying investee.	857

(c)(i) With respect to a trust or portion of a trust that is	858
a resident as ascertained in accordance with division (I)(3)(d) of	859
this section, its modified nonbusiness income.	860

(ii) With respect to a trust or portion of a trust that is	861
not a resident as ascertained in accordance with division	862
(I)(3)(d) of this section, the amount of its modified nonbusiness	863
income satisfying the descriptions in divisions (B)(2) to (5) of	864
section 5747.20 of the Revised Code, except as otherwise provided	865
in division (BB)(4)(c)(ii) of this section. With respect to a	866
trust or portion of a trust that is not a resident as ascertained	867
in accordance with division (I)(3)(d) of this section, the trust's	868
portion of modified nonbusiness income recognized from the sale,	869
exchange, or other disposition of a debt interest in or equity	870
interest in a section 5747.212 entity, as defined in section	871
5747.212 of the Revised Code, without regard to division (A) of	872
that section, shall not be allocated to this state in accordance	873
with section 5747.20 of the Revised Code but shall be apportioned	874
to this state in accordance with division (B) of section 5747.212	875
of the Revised Code without regard to division (A) of that	876
section.	877

If the allocation and apportionment of a trust's income under	878
divisions (BB)(4)(a) and (c) of this section do not fairly	879
represent the modified Ohio taxable income of the trust in this	880
state, the alternative methods described in division (C) of	881
section 5747.21 of the Revised Code may be applied in the manner	882
and to the same extent provided in that section.	883

(5)(a) Except as set forth in division (BB)(5)(b) of this	884
section, "qualifying investee" means a person in which a trust has	885
an equity or ownership interest, or a person or unit of government	886
the debt obligations of either of which are owned by a trust. For	887
the purposes of division (BB)(2)(a) of this section and for the	888
purpose of computing the fraction described in division (BB)(4)(b)	889
of this section, all of the following apply:	890

(i) If the qualifying investee is a member of a qualifying	891
controlled group on the last day of the qualifying investee's	892
fiscal or calendar year ending immediately prior to the date on	893
which the trust recognizes the gain or loss, then "qualifying	894
investee" includes all persons in the qualifying controlled group	895
on such last day.	896

(ii) If the qualifying investee, or if the qualifying	897
investee and any members of the qualifying controlled group of	898
which the qualifying investee is a member on the last day of the	899
qualifying investee's fiscal or calendar year ending immediately	900
prior to the date on which the trust recognizes the gain or loss,	901
separately or cumulatively own, directly or indirectly, on the	902
last day of the qualifying investee's fiscal or calendar year	903
ending immediately prior to the date on which the trust recognizes	904
the qualifying trust amount, more than fifty per cent of the	905
equity of a pass-through entity, then the qualifying investee and	906
the other members are deemed to own the proportionate share of the	907
pass-through entity's physical assets which the pass-through	908
entity directly or indirectly owns on the last day of the	909
pass-through entity's calendar or fiscal year ending within or	910
with the last day of the qualifying investee's fiscal or calendar	911
year ending immediately prior to the date on which the trust	912
recognizes the qualifying trust amount.	913

(iii) For the purposes of division (BB)(5)(a)(iii) of this	914
section, "upper level pass-through entity" means a pass-through	915
entity directly or indirectly owning any equity of another	916
pass-through entity, and "lower level pass-through entity" means	917
that other pass-through entity.	918

An upper level pass-through entity, whether or not it is also	919
a qualifying investee, is deemed to own, on the last day of the	920
upper level pass-through entity's calendar or fiscal year, the	921
proportionate share of the lower level pass-through entity's	922
physical assets that the lower level pass-through entity directly	923
or indirectly owns on the last day of the lower level pass-through	924
entity's calendar or fiscal year ending within or with the last	925
day of the upper level pass-through entity's fiscal or calendar	926
year. If the upper level pass-through entity directly and	927
indirectly owns less than fifty per cent of the equity of the	928
lower level pass-through entity on each day of the upper level	929
pass-through entity's calendar or fiscal year in which or with	930
which ends the calendar or fiscal year of the lower level	931
pass-through entity and if, based upon clear and convincing	932
evidence, complete information about the location and cost of the	933
physical assets of the lower pass-through entity is not available	934
to the upper level pass-through entity, then solely for purposes	935
of ascertaining if a gain or loss constitutes a qualifying trust	936
amount, the upper level pass-through entity shall be deemed as	937
owning no equity of the lower level pass-through entity for each	938
day during the upper level pass-through entity's calendar or	939
fiscal year in which or with which ends the lower level	940
pass-through entity's calendar or fiscal year. Nothing in division	941
(BB)(5)(a)(iii) of this section shall be construed to provide for	942
any deduction or exclusion in computing any trust's Ohio taxable	943
income.	944

(b) With respect to a trust that is not a resident for the	945
taxable year and with respect to a part of a trust that is not a	946
resident for the taxable year, "qualifying investee" for that	947
taxable year does not include a C corporation if both of the	948
following apply:	949

(i) During the taxable year the trust or part of the trust	950
recognizes a gain or loss from the sale, exchange, or other	951
disposition of equity or ownership interests in, or debt	952
obligations of, the C corporation.	953

(ii) Such gain or loss constitutes nonbusiness income.

954

(6) "Available" means information is such that a person is	955
able to learn of the information by the due date plus extensions,	956
if any, for filing the return for the taxable year in which the	957
trust recognizes the gain or loss.	958

(CC) "Qualifying controlled group" has the same meaning as in	959
section 5733.04 of the Revised Code.	960

(DD) "Related member" has the same meaning as in section	961
5733.042 of the Revised Code.	962

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

963

(a) "Qualifying person" means any person other than a	964
qualifying corporation.	965

(b) "Qualifying corporation" means any person classified for	966
federal income tax purposes as an association taxable as a	967
corporation, except either of the following:	968

(i) A corporation that has made an election under subchapter	969
S, chapter one, subtitle A, of the Internal Revenue Code for its	970
taxable year ending within, or on the last day of, the investor's	971
taxable year;	972

(ii) A subsidiary that is wholly owned by any corporation	973
that has made an election under subchapter S, chapter one,	974
subtitle A of the Internal Revenue Code for its taxable year	975
ending within, or on the last day of, the investor's taxable year.	976

(2) For the purposes of this chapter, unless expressly stated	977
otherwise, no qualifying person indirectly owns any asset directly	978
or indirectly owned by any qualifying corporation.	979

(FF) For purposes of this chapter and Chapter 5751. of the	980
Revised Code:	981

(1) "Trust" does not include a qualified pre-income tax	982
trust.	983

(2) A "qualified pre-income tax trust" is any pre-income tax	984
trust that makes a qualifying pre-income tax trust election as	985
described in division (FF)(3) of this section.	986

(3) A "qualifying pre-income tax trust election" is an	987
election by a pre-income tax trust to subject to the tax imposed	988
by section 5751.02 of the Revised Code the pre-income tax trust	989
and all pass-through entities of which the trust owns or controls,	990
directly, indirectly, or constructively through related interests,	991
five per cent or more of the ownership or equity interests. The	992
trustee shall notify the tax commissioner in writing of the	993
election on or before April 15, 2006. The election, if timely	994
made, shall be effective on and after January 1, 2006, and shall	995
apply for all tax periods and tax years until revoked by the	996
trustee of the trust.	997

(4) A "pre-income tax trust" is a trust that satisfies all of	998
the following requirements:	999

(a) The document or instrument creating the trust was	1000
executed by the grantor before January 1, 1972;	1001

(b) The trust became irrevocable upon the creation of the	1002
trust; and	1003

(c) The grantor was domiciled in this state at the time the	1004
trust was created.	1005

Section 2.  That existing section 5747.01 of the Revised Code	1006
is hereby repealed.	1007

Section 3.  The amendment by this act of section 5747.01 of	1008
the Revised Code applies to taxable years ending on or after the	1009
effective date of this act.	1010

Section 4.  Section 5747.01 of the Revised Code is presented	1011
in this act as a composite of the section as amended by Am. H.B.	1012
167, Sub. H.B. 365, and Am. Sub. H.B. 510, all of the 129th	1013
General Assembly. The General Assembly, applying the principle	1014
stated in division (B) of section 1.52 of the Revised Code that	1015
amendments are to be harmonized if reasonably capable of	1016
simultaneous operation, finds that the composite is the resulting	1017
version of the section in effect prior to the effective date of	1018
the section as presented in this act.	1019