To amend sections 5747.021, 5747.03, 5747.112, 5748.03, 5748.06, and 5748.08 and to enact sections 5748.11, 5748.12, 5748.13, 5748.14, 5748.15, and 5748.16 of the Revised Code to authorize school districts to enter into agreements with the Department of Taxation or other entities for the collection and administration of school district income taxes.

Section 1. That sections 5747.021, 5747.03, 5747.112, 5748.03, 5748.06, and 5748.08 be amended and sections 5748.11, 5748.12, 5748.13, 5748.14, 5748.15, and 5748.16 of the Revised Code be enacted to read as follows:

Sec. 5747.021.  In addition to the tax levied under section 5747.02 of the Revised Code, the tax commissioner shall charge the tax imposed on the school district income of an individual or estate by a school district under Chapter 5748. of the Revised Code with which the department of taxation has entered into an agreement under section 5748.11 of the Revised Code to collect and administer school district income taxes. The commissioner shall charge such tax by multiplying the rate certified to be charged under such chapter Chapter 5748. of the Revised Code by the taxpayer's school district income with respect to that district.

Sec. 5747.03.  (A) All money collected under this chapter arising from the taxes imposed by section 5747.02 or 5747.41 of the Revised Code shall be credited to the general revenue fund, except that the treasurer of state shall:

(1) Credit an amount equal to four and two-tenths per cent of those taxes collected under this chapter to the local government fund, which is hereby created in the state treasury, for distribution in accordance with section 5747.50 of the Revised Code;

(2) Credit an amount equal to five and seven-tenths per cent of those taxes collected under this chapter to the library and local government support fund, which is hereby created in the state treasury, for distribution in accordance with section 5747.47 of the Revised Code;

(3) At the beginning of each calendar quarter, credit to the Ohio political party fund, pursuant to section 3517.16 of the Revised Code, an amount equal to the total dollar value realized from the taxpayer exercise of the income tax checkoff option on tax forms processed during the preceding calendar quarter;

(4) Credit an amount equal to six-tenths of one per cent of those taxes collected under this chapter to the local government revenue assistance fund for distribution in accordance with section 5747.61 of the Revised Code.

(B)(1) Following the crediting of moneys pursuant to division (A) of this section, the remainder deposited in the general revenue fund shall be distributed pursuant to division (F) of section 321.24 and section 323.156 of the Revised Code; to make subsidy payments to institutions of higher education from appropriations to the Ohio board of regents; to support expenditures for programs and services for the mentally ill, mentally retarded, developmentally disabled, and elderly; for primary and secondary education; for medical assistance; and for any other purposes authorized by law, subject to the limitation that at least fifty per cent of the income tax collected by the state from the tax imposed by section 5747.02 of the Revised Code shall be returned pursuant to Section 9 of Article XII, Ohio Constitution.

(2) To ensure that such constitutional requirement is satisfied the tax commissioner shall, on or before the thirtieth day of June of each year, from the best information available to the tax commissioner, determine and certify for each county to the director of budget and management the amount of taxes collected under this chapter from the tax imposed under section 5747.02 of the Revised Code during the preceding calendar year that are required to be returned to the county by Section 9 of Article XII, Ohio Constitution. The director shall provide for payment from the general revenue fund to the county in the amount, if any, that the sum of the amount so certified for that county exceeds the sum of the following:

(a) The sum of the payments from the general revenue fund for the preceding calendar year to the credit of the county's undivided income tax fund pursuant to division (F) of section 321.24 and section 323.156 of the Revised Code;

(b) The sum of the amounts from the general revenue fund distributed in the county during the preceding calendar year for subsidy payments to institutions of higher education from appropriations to the Ohio board of regents; for programs and services for mentally ill, mentally retarded, developmentally disabled, and elderly persons; for primary and secondary education; and for medical assistance.

(c) The amount distributed to the county during the preceding calendar year from the local government fund;

(d) The amount distributed to the county during the preceding calendar year from the library and local government support fund;

(e) The amount distributed to the county during the preceding calendar year from the local government revenue assistance fund.

Payments under this division shall be credited to the county's undivided income tax fund, except that, notwithstanding section 5705.14 of the Revised Code, such payments may be transferred by the board of county commissioners to the county general fund by resolution adopted with the affirmative vote of two-thirds of the members thereof.

(C) All payments received in each month from taxes imposed under Chapter 5748. of the Revised Code and any penalties or interest thereon, insofar as they are collected by the department of taxation, shall be paid into the school district income tax fund, which is hereby created in the state treasury, except that an amount equal to the following portion of such payments shall be paid into the general school district income tax administrative fund, which is hereby created in the state treasury:

(1) One and three-quarters of one per cent of those received in fiscal year 1996;

(2) One and one-half per cent of those received in fiscal year 1997 and thereafter.

Money in the school district income tax administrative fund shall be used by the tax commissioner to defray costs incurred in administering the school district's income tax, including the cost of providing employers with information regarding the rate of tax imposed by any school district. Any moneys remaining in the fund after such use shall be deposited in the school district income tax fund. The department of taxation is not entitled to any compensation with respect to school district income taxes collected by an entity other than the department and no administrative fee shall be charged by the department in connection with those taxes.

All interest earned on moneys in the school district income tax fund shall be credited to the fund.

(D)(1)(a) Within thirty days of the end of each calendar quarter ending on the last day of March, June, September, and December, the director of budget and management shall make a payment from the school district income tax fund to each school district for which school district income tax revenue was received collected by the department of taxation during that quarter. The amount of the payment shall equal the balance in the school district's account at the end of that quarter.

(b) After a school district for which the department of taxation collects school district income tax ceases to levy an income tax, the director of budget and management shall adjust the payments under division (D)(1)(a) of this section to retain sufficient money in the school district's account to pay refunds. For the calendar quarters ending on the last day of March and December of the calendar year following the last calendar year the tax is levied, the director shall make the payments in the amount required under division (D)(1)(a) of this section. For the calendar quarter ending on the last day of June of the calendar year following the last calendar year the tax is levied, the director shall make a payment equal to nine-tenths of the balance in the account at the end of that quarter. For the calendar quarter ending on the last day of September of the calendar year following the last calendar year the tax is levied, the director shall make no payment. For the second and succeeding calendar years following the last calendar year the tax is levied, the director shall make one payment each year, within thirty days of the last day of June, in an amount equal to the balance in the district's account on the last day of June.

(2) Moneys paid to a school district under this division shall be deposited in its school district income tax fund. All interest earned on moneys in the school district income tax fund shall be apportioned by the tax commissioner pro rata among the school districts for which the department of taxation collects school district income tax in the proportions and at the times the districts are entitled to receive payments under this division.

Sec. 5747.112.  For payment of any refund of school district income taxes illegally, erroneously, or excessively paid, the treasurer of state shall place one thousand dollars collected in a separate fund in the state treasury for each school district for which the department of taxation collects school district income tax. As required by the depletion of each fund, the treasurer of state shall place to the credit thereof an amount sufficient to make the total of the school district's fund at the time of such credit amount to one thousand dollars.

Sec. 5748.03. (A) The form of the ballot on a question submitted to the electors under section 5748.02 of the Revised Code shall be as follows:

"Shall an annual income tax of ....... (state the proposed rate of tax) on the school district income of individuals and of estates be imposed by ....... (state the name of the school district), for ....... (state the number of years the tax would be levied, or that it would be levied for a continuing period of time), beginning ....... (state the date the tax would first take effect), for the purpose of ...... (state the purpose of the tax)?

(B)(1) If the question submitted to electors proposes a school district income tax only on the taxable income of individuals as defined in division (E)(1)(b) of section 5748.01 of the Revised Code, the form of the ballot shall be modified by stating that the tax is to be levied on the "earned income of individuals residing in the school district" in lieu of the "school district income of individuals and of estates."

(2) If the question submitted to electors proposes to renew an expiring income tax, the ballot shall be modified by adding the following language immediately after the name of the school district that would impose the tax: "to renew an income tax expiring at the end of ........ (state the last year the existing income tax may be levied)."

(3) If the question includes a proposal under division (B)(2) of section 5748.02 of the Revised Code to reduce the rate of one or more school district property taxes, the ballot shall state that the purpose of the school district income tax is for current expenses, and the form of the ballot shall be modified by adding the following language immediately after the statement of the purpose of the proposed income tax: ", and shall the rate of an existing tax on property, currently levied for the purpose of current expenses at the rate of ....... mills, be REDUCED to ....... mills until any such time as the income tax is repealed." In lieu of "for the tax" and "against the tax," the phrases "for the issue" and "against the issue," respectively, shall be used. If a board of education proposes a reduction in the rates of more than one tax, the ballot language shall be modified accordingly to express the rates at which those taxes currently are levied and the rates to which the taxes will be reduced.

(C) The board of elections shall certify the results of the election to the board of education and to the tax commissioner. If a majority of the electors voting on the question vote in favor of it, the income tax, the applicable provisions of Chapter 5747. of the Revised Code, and the reduction in the rate or rates of existing property taxes, if the question included such a reduction, shall take effect on the date specified in the resolution. If the question approved by the voters includes a reduction in the rate of a school district property tax, the board of education shall not levy the tax at a rate greater than the rate to which the tax is reduced, unless the school district income tax is repealed in an election under section 5748.04 of the Revised Code.

(D) If the rate at which a property tax is levied and collected is reduced pursuant to a question approved under this section, the tax commissioner shall compute the percentage required to be computed for that tax under division (D) of section 319.301 of the Revised Code each year the rate is reduced as if the tax had been levied in the preceding year at the rate at which it has been reduced. If the rate of a property tax increases due to the repeal of the school district income tax pursuant to section 5748.04 of the Revised Code, the tax commissioner, for the first year for which the rate increases, shall compute the percentage as if the tax in the preceding year had been levied at the rate at which the tax was authorized to be levied prior to any rate reduction.

Sec. 5748.06.  For a taxpayer sixty-five years of age or older during the taxable year, a credit shall be permitted against the tax otherwise due under this chapter for such year equal to fifty dollars for each return required to be filed under section 5747.08 of the Revised Code for taxes levied under this chapter. The credit allowed under this section shall not exceed the tax otherwise due.

Sec. 5748.08.  (A) The board of education of a city, local, or exempted village school district, at any time by a vote of two-thirds of all its members, may declare by resolution that it may be necessary for the school district to do all of the following:

(1) Raise a specified amount of money for school district purposes by levying an annual tax on school district income;

(2) Issue general obligation bonds for permanent improvements, stating in the resolution the necessity and purpose of the bond issue and the amount, approximate date, estimated rate of interest, and maximum number of years over which the principal of the bonds may be paid;

(3) Levy a tax outside the ten-mill limitation to pay debt charges on the bonds and any anticipatory securities;

(4) Submit the question of the school district income tax and bond issue to the electors of the district at a special election.

The resolution shall specify whether the income that is to be subject to the tax is taxable income of individuals and estates as defined in divisions (E)(1)(a) and (2) of section 5748.01 of the Revised Code or taxable income of individuals as defined in division (E)(1)(b) of that section.

On adoption of the resolution, the board shall certify a copy of it to the tax commissioner and the county auditor no later than ninety days prior to the date of the special election at which the board intends to propose the income tax and bond issue. Not later than ten days of receipt of the resolution, the tax commissioner, in the same manner as required by division (A) of section 5748.02 of the Revised Code, shall estimate the rates designated in divisions (A)(1) and (2) of that section and certify them to the board. Not later than ten days of receipt of the resolution, the county auditor shall estimate and certify to the board the average annual property tax rate required throughout the stated maturity of the bonds to pay debt charges on the bonds, in the same manner as under division (C) of section 133.18 of the Revised Code.

(B) On receipt of the tax commissioner's and county auditor's certifications prepared under division (A) of this section, the board of education of the city, local, or exempted village school district, by a vote of two-thirds of all its members, may adopt a resolution proposing for a specified number of years or for a continuing period of time the levy of an annual tax for school district purposes on school district income and declaring that the amount of taxes that can be raised within the ten-mill limitation will be insufficient to provide an adequate amount for the present and future requirements of the school district; that it is necessary to issue general obligation bonds of the school district for specified permanent improvements and to levy an additional tax in excess of the ten-mill limitation to pay the debt charges on the bonds and any anticipatory securities; and that the question of the bonds and taxes shall be submitted to the electors of the school district at a special election, which shall not be earlier than seventy-five days after certification of the resolution to the board of elections, and the date of which shall be consistent with section 3501.01 of the Revised Code. The resolution shall specify all of the following:

(1) The purpose for which the school district income tax is to be imposed and the rate of the tax, which shall be the rate set forth in the tax commissioner's certification rounded to the nearest one-fourth of one per cent;

(2) Whether the income that is to be subject to the tax is taxable income of individuals and estates as defined in divisions (E)(1)(a) and (2) of section 5748.01 of the Revised Code or taxable income of individuals as defined in division (E)(1)(b) of that section. The specification shall be the same as the specification in the resolution adopted and certified under division (A) of this section.

(3) The number of years the tax will be levied, or that it will be levied for a continuing period of time;

(4) The date on which the tax shall take effect, which shall be the first day of January of any year following the year in which the question is submitted;

(5) The county auditor's estimate of the average annual property tax rate required throughout the stated maturity of the bonds to pay debt charges on the bonds.

(C) A resolution adopted under division (B) of this section shall go into immediate effect upon its passage, and no publication of the resolution shall be necessary other than that provided for in the notice of election. Immediately after its adoption and at least seventy-five days prior to the election at which the question will appear on the ballot, the board of education shall certify a copy of the resolution, along with copies of the auditor's estimate and its resolution under division (A) of this section, to the board of elections of the proper county. The board of education shall make the arrangements for the submission of the question to the electors of the school district, and the election shall be conducted, canvassed, and certified in the same manner as regular elections in the district for the election of county officers.

The resolution shall be put before the electors as one ballot question, with a majority vote indicating approval of the school district income tax, the bond issue, and the levy to pay debt charges on the bonds and any anticipatory securities. The board of elections shall publish the notice of the election in one or more newspapers of general circulation in the school district once a week for two consecutive weeks prior to the election and, if the board of elections operates and maintains a web site, also shall post notice of the election on its web site for thirty days prior to the election. The notice of election shall state all of the following:

(1) The questions to be submitted to the electors;

(2) The rate of the school district income tax;

(3) The principal amount of the proposed bond issue;

(4) The permanent improvements for which the bonds are to be issued;

(5) The maximum number of years over which the principal of the bonds may be paid;

(6) The estimated additional average annual property tax rate to pay the debt charges on the bonds, as certified by the county auditor;

(7) The time and place of the special election.

(D) The form of the ballot on a question submitted to the electors under this section shall be as follows:

"Shall the ........ school district be authorized to do both of the following:

(1) Impose an annual income tax of ...... (state the proposed rate of tax) on the school district income of individuals and of estates, for ........ (state the number of years the tax would be levied, or that it would be levied for a continuing period of time), beginning ........ (state the date the tax would first take effect), for the purpose of ........ (state the purpose of the tax)?

(2) Issue bonds for the purpose of ....... in the principal amount of $......, to be repaid annually over a maximum period of ....... years, and levy a property tax outside the ten-mill limitation estimated by the county auditor to average over the bond repayment period ....... mills for each one dollar of tax valuation, which amounts to ....... (rate expressed in cents or dollars and cents, such as "36 cents" or "$1.41") for each $100 of tax valuation, to pay the annual debt charges on the bonds, and to pay debt charges on any notes issued in anticipation of those bonds?

(E) If the question submitted to electors proposes a school district income tax only on the taxable income of individuals as defined in division (E)(1)(b) of section 5748.01 of the Revised Code, the form of the ballot shall be modified by stating that the tax is to be levied on the "earned income of individuals residing in the school district" in lieu of the "school district income of individuals and of estates."

(F) The board of elections promptly shall certify the results of the election to the tax commissioner and the county auditor of the county in which the school district is located. If a majority of the electors voting on the question vote in favor of it, the income tax and the applicable provisions of Chapter 5747. of the Revised Code shall take effect on the date specified in the resolution, and the board of education may proceed with issuance of the bonds and with the levy and collection of the property taxes to pay debt charges on the bonds, at the additional rate or any lesser rate in excess of the ten-mill limitation. Any securities issued by the board of education under this section are Chapter 133. securities, as that term is defined in section 133.01 of the Revised Code.

(G) After approval of a question under this section, the board of education may anticipate a fraction of the proceeds of the school district income tax in accordance with section 5748.05 of the Revised Code. Any anticipation notes under this division shall be issued as provided in section 133.24 of the Revised Code, shall have principal payments during each year after the year of their issuance over a period not to exceed five years, and may have a principal payment in the year of their issuance.

(H) The question of repeal of a school district income tax levied for more than five years may be initiated and submitted in accordance with section 5748.04 of the Revised Code.

(I) No board of education shall submit a question under this section to the electors of the school district more than twice in any calendar year. If a board submits the question twice in any calendar year, one of the elections on the question shall be held on the date of the general election.

Sec. 5748.11.  (A) On or before July 1, 2008, the board of education of a school district that levies a school district income tax shall, by adopting a resolution approved by a majority of the members of the board, enter into a written agreement with one of the following entities for the entity to collect and otherwise administer the district's school district income tax for taxable years beginning in 2008 and for any subsequent taxable years specified in the agreement:

(1) The department of taxation;

(2) A municipal corporation that satisfies both of the following conditions:

(a) The municipal corporation levies an income tax; and

(b) At least fifty-one per cent of the municipal corporation's territorial boundaries overlap with the territorial boundaries of the school district.

(3) The central collection agency or the regional income tax agency or their successors in interest, or other similar entities organized to perform functions similar to those performed by the central collection agency and the regional income tax agency.

(B) The agreement entered into by a board under division (A) of this section shall specify that the entity designated therein to collect and administer a school district's income tax shall collect and administer those taxes for taxable years beginning in 2008. The agreement also shall specify any additional taxable years for which the entity will collect and administer those taxes or, if the entity will perform those functions on an ongoing basis, specify that the agreement is for an ongoing period. Subsequent agreements entered into by a board under this section shall specify the taxable years for which the entity will perform collection and other administrative functions or, if the entity will perform those functions for an ongoing period, specify that the agreement is for an ongoing period. Every agreement entered into under this section shall specify the amount of fees to be charged by the entity contracted with to administer the school district income tax. If the agreement is between a board and the department of taxation, the agreement shall specify that the amount of fees charged shall be those authorized to be charged by the department under division (C) of section 5747.03 of the Revised Code at the time the agreement is entered into. An agreement between a board and an entity other than the department of taxation may specify any amount of fees agreed to by the parties to the agreement, provided that the amount agreed to may not exceed the amount authorized to be charged by the department of taxation under division (C) of section 5747.03 of the Revised Code at the time the contract is entered into. Every agreement shall specify all other material terms and conditions of the agreement in addition to those described in this division.

An agreement may be amended pursuant to terms and procedures mutually agreed to by the board and the entity with which the board contracts.

(C) Either party to an agreement entered into under this section may terminate the agreement, provided that the party terminating the agreement provides the other party with ninety days notice of the party's intention to terminate. To terminate the agreement, a board of education shall, by majority vote of the members of the board, adopt a resolution to that effect. A termination initiated by a board of education shall take effect on the ninetieth day after the date on which a copy of the board's resolution is delivered to the entity with which the board contracted. A termination initiated by the entity a board has contracted with to collect and administer the district's school district income tax shall take effect on the ninetieth day after the date on which the board is notified of the termination.

(D) If an agreement entered into under this section is terminated by either party or if it expires under its own terms, and the school district that entered into the agreement continues, after the agreement's termination or expiration, to levy a school district income tax, the board shall adopt a resolution for the purpose of entering into a new agreement with an entity described in division (A) of this section for administration of its school district income tax.

(E) If the board of education of a school district fails to adopt a resolution on or before July 1, 2008, as required under division (A) of this section, or if the board first levies a school district income tax after that date, the department of taxation shall administer that school district's income tax until such time as the board adopts a resolution for the purpose of entering into an agreement with an entity other than the department. If a board subsequently enters into an agreement with an entity other than the department, the agreement shall specify the taxable year or years for which the entity will administer the school district's income tax, shall specify that the agreement takes effect on July 1 of the taxable year or years for which the entity will administer such tax, and shall contain all of the applicable terms and conditions specified in division (B) of this section.

(F) A board of education shall certify a copy of every resolution adopted, and every agreement executed, under this section to the tax commissioner immediately upon its adoption or execution, whichever the case may be.

Sec. 5748.12.  A board of education that enters into an agreement with an entity other than the department of taxation for the collection and administration of its school district income tax shall create a school district income tax collection fund to receive deposits of school district income taxes. The entity with which the board contracts for the collection of school district income taxes shall deposit the school district income taxes it collects for that district, less fees allowed to the entity under the agreement, in the school district's school district income tax collection fund within twenty-four hours after their collection. Only the treasurer of the school district that creates a school district income tax collection fund may withdraw moneys from the fund.

Sec. 5748.13.  Any information acquired by a municipal corporation as a result of returns received or investigations, hearings, or verifications conducted pursuant to an agreement entered into under section 5748.11 of the Revised Code for the collection and administration of a school district income tax is confidential, and no person shall disclose such information except in accordance with a proper judicial order or in connection with the performance of that person's official duties. This section does not prohibit a municipal corporation that levies an income tax under Chapter 718. of the Revised Code from comparing school district income tax records and returns with records and returns compiled with respect to its municipal income tax for the purpose of ensuring that income is being properly reported with respect to both taxes and that municipal and school district income tax liabilities are being paid in full.

Sec. 5748.14. (A) An entity other than the department of taxation that administers a school district income tax may impose the following penalties:

(1) If a taxpayer fails to pay any amount of tax required to be paid under this chapter, except estimated tax, on or before the date prescribed for payment, a penalty not exceeding the maximum penalty allowed under division (A)(2) of section 5747.15 of the Revised Code may be imposed.

(2) If a taxpayer or employer files what purports to be a return that does not contain information upon which the substantial correctness of the return may be judged or contains information that on its face indicates that the return is substantially incorrect and the filing of the return in that manner is due to a position that is frivolous or a desire that is apparent from the return to delay or impede the administration of the school district income tax, a penalty may be imposed not exceeding the maximum penalty allowed under division (A)(5) of section 5747.15 of the Revised Code.

(3) If any person makes a false or fraudulent claim for a refund of school district income tax, a penalty may be imposed not exceeding the greater of one thousand dollars or one hundred per cent of the claim.

(B) Any penalty imposed under this section shall be in addition to all other penalties imposed under this section. All or part of any penalty imposed under this section may be abated if the taxpayer shows that the failure to comply was due to reasonable cause and not willful neglect.

Sec. 5748.15.  A claim for unpaid school district income taxes administered by an entity other than the department of taxation and any penalties and interest on those unpaid taxes shall be filed in the municipal court of the municipal corporation in which the administrative offices of the school district levying the tax are principally located. If such municipal corporation is not the site of a municipal court, the claim shall be filed in the court of common pleas of the county in which the offices of the school district are principally located. Such courts shall have exclusive, original jurisdiction over actions to collect unpaid school district income taxes administered by an entity other than the department of taxation.

This section does not apply to any unpaid school district income tax, penalty, or interest administered by the department of taxation. Unpaid school district income taxes, penalties, and interest administered by the department of taxation shall be collected in accordance with procedures established under Chapter 5747. of the Revised Code, section 131.02 of the Revised Code, and other applicable provisions of the Revised Code.

Sec. 5748.16. If a school district enters into an agreement under section 5748.11 of the Revised Code with an entity other than the department of taxation for the collection and administration of its school district income tax, that entity shall administer and collect that tax as if the entity were the tax commissioner acting under Chapter 5747. of the Revised Code, except that:

(A) Administrative fees charged by the entity shall be those specified in the agreement between the entity and the school district;

(B) Taxes collected by the entity shall be deposited in the school district income tax collection fund created under section 5748.12 of the Revised Code;

(C) The entity shall have no authority to issue an assessment under section 5747.13 or 5747.14 of the Revised Code; and

(D) Unpaid taxes, penalties, and interest shall be collected by filing a claim for the unpaid amounts as prescribed in section 5748.15 of the Revised Code.

Section 2. That existing sections 5747.021, 5747.03, 5747.112, 5748.03, 5748.06, and 5748.08 of the Revised Code are hereby repealed.