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H. B. No. 365 As IntroducedAs Introduced
129th General Assembly | Regular Session | 2011-2012 |
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Representatives Beck, Dovilla
Cosponsors:
Representatives Stebelton, Blessing, Terhar, Hollington
A BILL
To amend section 5747.01 of the Revised Code to allow
taxpayers who claim an enhanced federal income tax
depreciation deduction to reduce the amount of the
deduction the taxpayer must add-back for Ohio
income tax purposes if the taxpayer increases
payroll in the year the enhanced federal deduction
is taken.
BE IT ENACTED BY THE GENERAL ASSEMBLY OF THE STATE OF OHIO:
Section 1. That section 5747.01 of the Revised Code be
amended to read as follows:
Sec. 5747.01. Except as otherwise expressly provided or
clearly appearing from the context, any term used in this chapter
that is not otherwise defined in this section has the same meaning
as when used in a comparable context in the laws of the United
States relating to federal income taxes or if not used in a
comparable context in those laws, has the same meaning as in
section 5733.40 of the Revised Code. Any reference in this chapter
to the Internal Revenue Code includes other laws of the United
States relating to federal income taxes.
(A) "Adjusted gross income" or "Ohio adjusted gross income"
means federal adjusted gross income, as defined and used in the
Internal Revenue Code, adjusted as provided in this section:
(1) Add interest or dividends on obligations or securities of
any state or of any political subdivision or authority of any
state, other than this state and its subdivisions and authorities.
(2) Add interest or dividends on obligations of any
authority, commission, instrumentality, territory, or possession
of the United States to the extent that the interest or dividends
are exempt from federal income taxes but not from state income
taxes.
(3) Deduct interest or dividends on obligations of the United
States and its territories and possessions or of any authority,
commission, or instrumentality of the United States to the extent
that the interest or dividends are included in federal adjusted
gross income but exempt from state income taxes under the laws of
the United States.
(4) Deduct disability and survivor's benefits to the extent
included in federal adjusted gross income.
(5) Deduct benefits under Title II of the Social Security Act
and tier 1 railroad retirement benefits to the extent included in
federal adjusted gross income under section 86 of the Internal
Revenue Code.
(6) In the case of a taxpayer who is a beneficiary of a trust
that makes an accumulation distribution as defined in section 665
of the Internal Revenue Code, add, for the beneficiary's taxable
years beginning before 2002, the portion, if any, of such
distribution that does not exceed the undistributed net income of
the trust for the three taxable years preceding the taxable year
in which the distribution is made to the extent that the portion
was not included in the trust's taxable income for any of the
trust's taxable years beginning in 2002 or thereafter.
"Undistributed net income of a trust" means the taxable income of
the trust increased by (a)(i) the additions to adjusted gross
income required under division (A) of this section and (ii) the
personal exemptions allowed to the trust pursuant to section
642(b) of the Internal Revenue Code, and decreased by (b)(i) the
deductions to adjusted gross income required under division (A) of
this section, (ii) the amount of federal income taxes attributable
to such income, and (iii) the amount of taxable income that has
been included in the adjusted gross income of a beneficiary by
reason of a prior accumulation distribution. Any undistributed net
income included in the adjusted gross income of a beneficiary
shall reduce the undistributed net income of the trust commencing
with the earliest years of the accumulation period.
(7) Deduct the amount of wages and salaries, if any, not
otherwise allowable as a deduction but that would have been
allowable as a deduction in computing federal adjusted gross
income for the taxable year, had the targeted jobs credit allowed
and determined under sections 38, 51, and 52 of the Internal
Revenue Code not been in effect.
(8) Deduct any interest or interest equivalent on public
obligations and purchase obligations to the extent that the
interest or interest equivalent is included in federal adjusted
gross income.
(9) Add any loss or deduct any gain resulting from the sale,
exchange, or other disposition of public obligations to the extent
that the loss has been deducted or the gain has been included in
computing federal adjusted gross income.
(10) Deduct or add amounts, as provided under section 5747.70
of the Revised Code, related to contributions to variable college
savings program accounts made or tuition units purchased pursuant
to Chapter 3334. of the Revised Code.
(11)(a) Deduct, to the extent not otherwise allowable as a
deduction or exclusion in computing federal or Ohio adjusted gross
income for the taxable year, the amount the taxpayer paid during
the taxable year for medical care insurance and qualified
long-term care insurance for the taxpayer, the taxpayer's spouse,
and dependents. No deduction for medical care insurance under
division (A)(11) of this section shall be allowed either to any
taxpayer who is eligible to participate in any subsidized health
plan maintained by any employer of the taxpayer or of the
taxpayer's spouse, or to any taxpayer who is entitled to, or on
application would be entitled to, benefits under part A of Title
XVIII of the "Social Security Act," 49 Stat. 620 (1935), 42 U.S.C.
301, as amended. For the purposes of division (A)(11)(a) of this
section, "subsidized health plan" means a health plan for which
the employer pays any portion of the plan's cost. The deduction
allowed under division (A)(11)(a) of this section shall be the net
of any related premium refunds, related premium reimbursements, or
related insurance premium dividends received during the taxable
year.
(b) Deduct, to the extent not otherwise deducted or excluded
in computing federal or Ohio adjusted gross income during the
taxable year, the amount the taxpayer paid during the taxable
year, not compensated for by any insurance or otherwise, for
medical care of the taxpayer, the taxpayer's spouse, and
dependents, to the extent the expenses exceed seven and one-half
per cent of the taxpayer's federal adjusted gross income.
(c) Deduct, to the extent not otherwise deducted or excluded
in computing federal or Ohio adjusted gross income, any amount
included in federal adjusted gross income under section 105 or not
excluded under section 106 of the Internal Revenue Code solely
because it relates to an accident and health plan for a person who
otherwise would be a "qualifying relative" and thus a "dependent"
under section 152 of the Internal Revenue Code but for the fact
that the person fails to meet the income and support limitations
under section 152(d)(1)(B) and (C) of the Internal Revenue Code.
(d) For purposes of division (A)(11) of this section,
"medical care" has the meaning given in section 213 of the
Internal Revenue Code, subject to the special rules, limitations,
and exclusions set forth therein, and "qualified long-term care"
has the same meaning given in section 7702B(c) of the Internal
Revenue Code. Solely for purposes of divisions (A)(11)(a) and (c)
of this section, "dependent" includes a person who otherwise would
be a "qualifying relative" and thus a "dependent" under section
152 of the Internal Revenue Code but for the fact that the person
fails to meet the income and support limitations under section
152(d)(1)(B) and (C) of the Internal Revenue Code.
(12)(a) Deduct any amount included in federal adjusted gross
income solely because the amount represents a reimbursement or
refund of expenses that in any year the taxpayer had deducted as
an itemized deduction pursuant to section 63 of the Internal
Revenue Code and applicable United States department of the
treasury regulations. The deduction otherwise allowed under
division (A)(12)(a) of this section shall be reduced to the extent
the reimbursement is attributable to an amount the taxpayer
deducted under this section in any taxable year.
(b) Add any amount not otherwise included in Ohio adjusted
gross income for any taxable year to the extent that the amount is
attributable to the recovery during the taxable year of any amount
deducted or excluded in computing federal or Ohio adjusted gross
income in any taxable year.
(13) Deduct any portion of the deduction described in section
1341(a)(2) of the Internal Revenue Code, for repaying previously
reported income received under a claim of right, that meets both
of the following requirements:
(a) It is allowable for repayment of an item that was
included in the taxpayer's adjusted gross income for a prior
taxable year and did not qualify for a credit under division (A)
or (B) of section 5747.05 of the Revised Code for that year;
(b) It does not otherwise reduce the taxpayer's adjusted
gross income for the current or any other taxable year.
(14) Deduct an amount equal to the deposits made to, and net
investment earnings of, a medical savings account during the
taxable year, in accordance with section 3924.66 of the Revised
Code. The deduction allowed by division (A)(14) of this section
does not apply to medical savings account deposits and earnings
otherwise deducted or excluded for the current or any other
taxable year from the taxpayer's federal adjusted gross income.
(15)(a) Add an amount equal to the funds withdrawn from a
medical savings account during the taxable year, and the net
investment earnings on those funds, when the funds withdrawn were
used for any purpose other than to reimburse an account holder
for, or to pay, eligible medical expenses, in accordance with
section 3924.66 of the Revised Code;
(b) Add the amounts distributed from a medical savings
account under division (A)(2) of section 3924.68 of the Revised
Code during the taxable year.
(16) Add any amount claimed as a credit under section
5747.059 of the Revised Code to the extent that such amount
satisfies either of the following:
(a) The amount was deducted or excluded from the computation
of the taxpayer's federal adjusted gross income as required to be
reported for the taxpayer's taxable year under the Internal
Revenue Code;
(b) The amount resulted in a reduction of the taxpayer's
federal adjusted gross income as required to be reported for any
of the taxpayer's taxable years under the Internal Revenue Code.
(17) Deduct the amount contributed by the taxpayer to an
individual development account program established by a county
department of job and family services pursuant to sections 329.11
to 329.14 of the Revised Code for the purpose of matching funds
deposited by program participants. On request of the tax
commissioner, the taxpayer shall provide any information that, in
the tax commissioner's opinion, is necessary to establish the
amount deducted under division (A)(17) of this section.
(18) Beginning in taxable year 2001 but not for any taxable
year beginning after December 31, 2005, if the taxpayer is married
and files a joint return and the combined federal adjusted gross
income of the taxpayer and the taxpayer's spouse for the taxable
year does not exceed one hundred thousand dollars, or if the
taxpayer is single and has a federal adjusted gross income for the
taxable year not exceeding fifty thousand dollars, deduct amounts
paid during the taxable year for qualified tuition and fees paid
to an eligible institution for the taxpayer, the taxpayer's
spouse, or any dependent of the taxpayer, who is a resident of
this state and is enrolled in or attending a program that
culminates in a degree or diploma at an eligible institution. The
deduction may be claimed only to the extent that qualified tuition
and fees are not otherwise deducted or excluded for any taxable
year from federal or Ohio adjusted gross income. The deduction may
not be claimed for educational expenses for which the taxpayer
claims a credit under section 5747.27 of the Revised Code.
(19) Add any reimbursement received during the taxable year
of any amount the taxpayer deducted under division (A)(18) of this
section in any previous taxable year to the extent the amount is
not otherwise included in Ohio adjusted gross income.
(20)(a)(i) Add five-sixths of the amount of adjusted section
168 depreciation expense allowed by subsection (k) of section 168
of the Internal Revenue Code, including the taxpayer's
proportionate or distributive share of the amount of adjusted
section 168 depreciation expense allowed by that subsection to
calculated under this division for a pass-through entity in which
the taxpayer has a direct or indirect ownership interest.
(ii) Add five-sixths of the amount of adjusted qualifying
section 179 depreciation expense, including a person's taxpayer's
proportionate or distributive share of the amount of adjusted
qualifying section 179 depreciation expense allowed to calculated
under this division for any pass-through entity in which the
person has a direct or indirect ownership. For the purposes of
this division, "qualifying section 179 depreciation expense" means
the difference between (I) the amount of depreciation expense
directly or indirectly allowed to the taxpayer under section 179
of the Internal Revenue Code, and (II) the amount of depreciation
expense directly or indirectly allowed to the taxpayer under
section 179 of the Internal Revenue Code as that section existed
on December 31, 2002.
The tax commissioner, under procedures established by the
commissioner, may waive the add-backs related to a pass-through
entity if the taxpayer owns, directly or indirectly, less than
five per cent of the pass-through entity.
(b) Nothing in division (A)(20) of this section shall be
construed to adjust or modify the adjusted basis of any asset.
(c) To the extent the add-back required under division
(A)(20)(a) of this section is attributable to property generating
nonbusiness income or loss allocated under section 5747.20 of the
Revised Code, the add-back shall be sitused to the same location
as the nonbusiness income or loss generated by the property for
the purpose of determining the credit under division (A) of
section 5747.05 of the Revised Code. Otherwise, the add-back shall
be apportioned, subject to one or more of the four alternative
methods of apportionment enumerated in section 5747.21 of the
Revised Code.
(d) For the purposes of division (A) of this section, net
operating loss carryback and carryforward shall not include
five-sixths of the allowance of any net operating loss deduction
carryback or carryforward to the taxable year to the extent such
loss resulted from depreciation allowed by section 168(k) of the
Internal Revenue Code and by is attributable to the adjusted
section 168 depreciation expense amount or the adjusted qualifying
section 179 depreciation expense amount.
(e) For the purposes of division (A)(20) of this section:
(i) "Income taxes withheld" means the total amount withheld
under section 5747.06 of the Revised Code by an employer during a
taxable year.
(ii) "Increase in income taxes withheld" means the amount by
which the amount of income taxes withheld by an employer during
the taxable year exceeds the amount of income taxes withheld by
that employer during the immediately preceding taxable year.
(iii) "Qualifying section 179 depreciation expense" means the
difference between (I) the amount of depreciation expense allowed
to a person under section 179 of the Internal Revised Code, and
(II) the amount of depreciation expense allowed to the person
under section 179 of the Internal Revenue Code as that section
existed on December 31, 2002.
(iv) "Adjusted qualifying section 179 depreciation expense"
means the amount, if any, by which qualifying section 179
depreciation expense allowed to a person for the taxable year
exceeds the increase in income taxes withheld by that person.
(v) "Adjusted section 168 depreciation expense" means the
amount, if any, by which depreciation expense allowed to a person
by subsection (k) of section 168 of the Internal Revenue Code
exceeds the increase in income taxes withheld by that person.
(21)(a) If the taxpayer was required to add an amount under
division (A)(20)(a) of this section for a taxable year, deduct
one-fifth of the amount so added for each of the five succeeding
taxable years.
(b) If the amount deducted under division (A)(21)(a) of this
section is attributable to an add-back allocated under division
(A)(20)(c) of this section, the amount deducted shall be sitused
to the same location. Otherwise, the add-back shall be apportioned
using the apportionment factors for the taxable year in which the
deduction is taken, subject to one or more of the four alternative
methods of apportionment enumerated in section 5747.21 of the
Revised Code.
(c) No deduction is available under division (A)(21)(a) of
this section with regard to any depreciation allowed by section
168(k) of the Internal Revenue Code and by the qualifying section
179 depreciation expense amount to the extent that such
depreciation resulted in or increased a federal net operating loss
carryback or carryforward to a taxable year to which division
(A)(20)(d) of this section does not apply.
(22) Deduct, to the extent not otherwise deducted or excluded
in computing federal or Ohio adjusted gross income for the taxable
year, the amount the taxpayer received during the taxable year as
reimbursement for life insurance premiums under section 5919.31 of
the Revised Code.
(23) Deduct, to the extent not otherwise deducted or excluded
in computing federal or Ohio adjusted gross income for the taxable
year, the amount the taxpayer received during the taxable year as
a death benefit paid by the adjutant general under section 5919.33
of the Revised Code.
(24) Deduct, to the extent included in federal adjusted gross
income and not otherwise allowable as a deduction or exclusion in
computing federal or Ohio adjusted gross income for the taxable
year, military pay and allowances received by the taxpayer during
the taxable year for active duty service in the United States
army, air force, navy, marine corps, or coast guard or reserve
components thereof or the national guard. The deduction may not be
claimed for military pay and allowances received by the taxpayer
while the taxpayer is stationed in this state.
(25) Deduct, to the extent not otherwise allowable as a
deduction or exclusion in computing federal or Ohio adjusted gross
income for the taxable year and not otherwise compensated for by
any other source, the amount of qualified organ donation expenses
incurred by the taxpayer during the taxable year, not to exceed
ten thousand dollars. A taxpayer may deduct qualified organ
donation expenses only once for all taxable years beginning with
taxable years beginning in 2007.
For the purposes of division (A)(25) of this section:
(a) "Human organ" means all or any portion of a human liver,
pancreas, kidney, intestine, or lung, and any portion of human
bone marrow.
(b) "Qualified organ donation expenses" means travel
expenses, lodging expenses, and wages and salary forgone by a
taxpayer in connection with the taxpayer's donation, while living,
of one or more of the taxpayer's human organs to another human
being.
(26) Deduct, to the extent not otherwise deducted or excluded
in computing federal or Ohio adjusted gross income for the taxable
year, amounts received by the taxpayer as retired military
personnel pay for service in the United States army, navy, air
force, coast guard, or marine corps or reserve components thereof,
or the national guard, or received by the surviving spouse or
former spouse of such a taxpayer under the survivor benefit plan
on account of such a taxpayer's death. If the taxpayer receives
income on account of retirement paid under the federal civil
service retirement system or federal employees retirement system,
or under any successor retirement program enacted by the congress
of the United States that is established and maintained for
retired employees of the United States government, and such
retirement income is based, in whole or in part, on credit for the
taxpayer's military service, the deduction allowed under this
division shall include only that portion of such retirement income
that is attributable to the taxpayer's military service, to the
extent that portion of such retirement income is otherwise
included in federal adjusted gross income and is not otherwise
deducted under this section. Any amount deducted under division
(A)(26) of this section is not included in a taxpayer's adjusted
gross income for the purposes of section 5747.055 of the Revised
Code. No amount may be deducted under division (A)(26) of this
section on the basis of which a credit was claimed under section
5747.055 of the Revised Code.
(27) Deduct, to the extent not otherwise deducted or excluded
in computing federal or Ohio adjusted gross income for the taxable
year, the amount the taxpayer received during the taxable year
from the military injury relief fund created in section 5101.98 of
the Revised Code.
(28) Deduct, to the extent not otherwise deducted or excluded
in computing federal or Ohio adjusted gross income for the taxable
year, the amount the taxpayer received as a veterans bonus during
the taxable year from the Ohio department of veterans services as
authorized by Section 2r of Article VIII, Ohio Constitution.
(29) Deduct, to the extent not otherwise deducted or excluded
in computing federal or Ohio adjusted gross income for the taxable
year, any loss from wagering transactions that is allowed as an
itemized deduction under section 165 of the Internal Revenue Code
and that the taxpayer deducted in computing federal taxable
income.
(30) Deduct, to the extent not otherwise deducted or excluded
in computing federal or Ohio adjusted gross income for the taxable
year, any income derived from providing public services under a
contract through a project owned by the state, as described in
section 126.604 of the Revised Code or derived from a transfer
agreement or from the enterprise transferred under that agreement
under section 4313.02 of the Revised Code.
(B) "Business income" means income, including gain or loss,
arising from transactions, activities, and sources in the regular
course of a trade or business and includes income, gain, or loss
from real property, tangible property, and intangible property if
the acquisition, rental, management, and disposition of the
property constitute integral parts of the regular course of a
trade or business operation. "Business income" includes income,
including gain or loss, from a partial or complete liquidation of
a business, including, but not limited to, gain or loss from the
sale or other disposition of goodwill.
(C) "Nonbusiness income" means all income other than business
income and may include, but is not limited to, compensation, rents
and royalties from real or tangible personal property, capital
gains, interest, dividends and distributions, patent or copyright
royalties, or lottery winnings, prizes, and awards.
(D) "Compensation" means any form of remuneration paid to an
employee for personal services.
(E) "Fiduciary" means a guardian, trustee, executor,
administrator, receiver, conservator, or any other person acting
in any fiduciary capacity for any individual, trust, or estate.
(F) "Fiscal year" means an accounting period of twelve months
ending on the last day of any month other than December.
(G) "Individual" means any natural person.
(H) "Internal Revenue Code" means the "Internal Revenue Code
of 1986," 100 Stat. 2085, 26 U.S.C.A. 1, as amended.
(I) "Resident" means any of the following, provided that
division (I)(3) of this section applies only to taxable years of a
trust beginning in 2002 or thereafter:
(1) An individual who is domiciled in this state, subject to
section 5747.24 of the Revised Code;
(2) The estate of a decedent who at the time of death was
domiciled in this state. The domicile tests of section 5747.24 of
the Revised Code are not controlling for purposes of division
(I)(2) of this section.
(3) A trust that, in whole or part, resides in this state. If
only part of a trust resides in this state, the trust is a
resident only with respect to that part.
For the purposes of division (I)(3) of this section:
(a) A trust resides in this state for the trust's current
taxable year to the extent, as described in division (I)(3)(d) of
this section, that the trust consists directly or indirectly, in
whole or in part, of assets, net of any related liabilities, that
were transferred, or caused to be transferred, directly or
indirectly, to the trust by any of the following:
(i) A person, a court, or a governmental entity or
instrumentality on account of the death of a decedent, but only if
the trust is described in division (I)(3)(e)(i) or (ii) of this
section;
(ii) A person who was domiciled in this state for the
purposes of this chapter when the person directly or indirectly
transferred assets to an irrevocable trust, but only if at least
one of the trust's qualifying beneficiaries is domiciled in this
state for the purposes of this chapter during all or some portion
of the trust's current taxable year;
(iii) A person who was domiciled in this state for the
purposes of this chapter when the trust document or instrument or
part of the trust document or instrument became irrevocable, but
only if at least one of the trust's qualifying beneficiaries is a
resident domiciled in this state for the purposes of this chapter
during all or some portion of the trust's current taxable year. If
a trust document or instrument became irrevocable upon the death
of a person who at the time of death was domiciled in this state
for purposes of this chapter, that person is a person described in
division (I)(3)(a)(iii) of this section.
(b) A trust is irrevocable to the extent that the transferor
is not considered to be the owner of the net assets of the trust
under sections 671 to 678 of the Internal Revenue Code.
(c) With respect to a trust other than a charitable lead
trust, "qualifying beneficiary" has the same meaning as "potential
current beneficiary" as defined in section 1361(e)(2) of the
Internal Revenue Code, and with respect to a charitable lead trust
"qualifying beneficiary" is any current, future, or contingent
beneficiary, but with respect to any trust "qualifying
beneficiary" excludes a person or a governmental entity or
instrumentality to any of which a contribution would qualify for
the charitable deduction under section 170 of the Internal Revenue
Code.
(d) For the purposes of division (I)(3)(a) of this section,
the extent to which a trust consists directly or indirectly, in
whole or in part, of assets, net of any related liabilities, that
were transferred directly or indirectly, in whole or part, to the
trust by any of the sources enumerated in that division shall be
ascertained by multiplying the fair market value of the trust's
assets, net of related liabilities, by the qualifying ratio, which
shall be computed as follows:
(i) The first time the trust receives assets, the numerator
of the qualifying ratio is the fair market value of those assets
at that time, net of any related liabilities, from sources
enumerated in division (I)(3)(a) of this section. The denominator
of the qualifying ratio is the fair market value of all the
trust's assets at that time, net of any related liabilities.
(ii) Each subsequent time the trust receives assets, a
revised qualifying ratio shall be computed. The numerator of the
revised qualifying ratio is the sum of (1) the fair market value
of the trust's assets immediately prior to the subsequent
transfer, net of any related liabilities, multiplied by the
qualifying ratio last computed without regard to the subsequent
transfer, and (2) the fair market value of the subsequently
transferred assets at the time transferred, net of any related
liabilities, from sources enumerated in division (I)(3)(a) of this
section. The denominator of the revised qualifying ratio is the
fair market value of all the trust's assets immediately after the
subsequent transfer, net of any related liabilities.
(iii) Whether a transfer to the trust is by or from any of
the sources enumerated in division (I)(3)(a) of this section shall
be ascertained without regard to the domicile of the trust's
beneficiaries.
(e) For the purposes of division (I)(3)(a)(i) of this
section:
(i) A trust is described in division (I)(3)(e)(i) of this
section if the trust is a testamentary trust and the testator of
that testamentary trust was domiciled in this state at the time of
the testator's death for purposes of the taxes levied under
Chapter 5731. of the Revised Code.
(ii) A trust is described in division (I)(3)(e)(ii) of this
section if the transfer is a qualifying transfer described in any
of divisions (I)(3)(f)(i) to (vi) of this section, the trust is an
irrevocable inter vivos trust, and at least one of the trust's
qualifying beneficiaries is domiciled in this state for purposes
of this chapter during all or some portion of the trust's current
taxable year.
(f) For the purposes of division (I)(3)(e)(ii) of this
section, a "qualifying transfer" is a transfer of assets, net of
any related liabilities, directly or indirectly to a trust, if the
transfer is described in any of the following:
(i) The transfer is made to a trust, created by the decedent
before the decedent's death and while the decedent was domiciled
in this state for the purposes of this chapter, and, prior to the
death of the decedent, the trust became irrevocable while the
decedent was domiciled in this state for the purposes of this
chapter.
(ii) The transfer is made to a trust to which the decedent,
prior to the decedent's death, had directly or indirectly
transferred assets, net of any related liabilities, while the
decedent was domiciled in this state for the purposes of this
chapter, and prior to the death of the decedent the trust became
irrevocable while the decedent was domiciled in this state for the
purposes of this chapter.
(iii) The transfer is made on account of a contractual
relationship existing directly or indirectly between the
transferor and either the decedent or the estate of the decedent
at any time prior to the date of the decedent's death, and the
decedent was domiciled in this state at the time of death for
purposes of the taxes levied under Chapter 5731. of the Revised
Code.
(iv) The transfer is made to a trust on account of a
contractual relationship existing directly or indirectly between
the transferor and another person who at the time of the
decedent's death was domiciled in this state for purposes of this
chapter.
(v) The transfer is made to a trust on account of the will of
a testator who was domiciled in this state at the time of the
testator's death for purposes of the taxes levied under Chapter
5731. of the Revised Code.
(vi) The transfer is made to a trust created by or caused to
be created by a court, and the trust was directly or indirectly
created in connection with or as a result of the death of an
individual who, for purposes of the taxes levied under Chapter
5731. of the Revised Code, was domiciled in this state at the time
of the individual's death.
(g) The tax commissioner may adopt rules to ascertain the
part of a trust residing in this state.
(J) "Nonresident" means an individual or estate that is not a
resident. An individual who is a resident for only part of a
taxable year is a nonresident for the remainder of that taxable
year.
(K) "Pass-through entity" has the same meaning as in section
5733.04 of the Revised Code.
(L) "Return" means the notifications and reports required to
be filed pursuant to this chapter for the purpose of reporting the
tax due and includes declarations of estimated tax when so
required.
(M) "Taxable year" means the calendar year or the taxpayer's
fiscal year ending during the calendar year, or fractional part
thereof, upon which the adjusted gross income is calculated
pursuant to this chapter.
(N) "Taxpayer" means any person subject to the tax imposed by
section 5747.02 of the Revised Code or any pass-through entity
that makes the election under division (D) of section 5747.08 of
the Revised Code.
(O) "Dependents" means dependents as defined in the Internal
Revenue Code and as claimed in the taxpayer's federal income tax
return for the taxable year or which the taxpayer would have been
permitted to claim had the taxpayer filed a federal income tax
return.
(P) "Principal county of employment" means, in the case of a
nonresident, the county within the state in which a taxpayer
performs services for an employer or, if those services are
performed in more than one county, the county in which the major
portion of the services are performed.
(Q) As used in sections 5747.50 to 5747.55 of the Revised
Code:
(1) "Subdivision" means any county, municipal corporation,
park district, or township.
(2) "Essential local government purposes" includes all
functions that any subdivision is required by general law to
exercise, including like functions that are exercised under a
charter adopted pursuant to the Ohio Constitution.
(R) "Overpayment" means any amount already paid that exceeds
the figure determined to be the correct amount of the tax.
(S) "Taxable income" or "Ohio taxable income" applies only to
estates and trusts, and means federal taxable income, as defined
and used in the Internal Revenue Code, adjusted as follows:
(1) Add interest or dividends, net of ordinary, necessary,
and reasonable expenses not deducted in computing federal taxable
income, on obligations or securities of any state or of any
political subdivision or authority of any state, other than this
state and its subdivisions and authorities, but only to the extent
that such net amount is not otherwise includible in Ohio taxable
income and is described in either division (S)(1)(a) or (b) of
this section:
(a) The net amount is not attributable to the S portion of an
electing small business trust and has not been distributed to
beneficiaries for the taxable year;
(b) The net amount is attributable to the S portion of an
electing small business trust for the taxable year.
(2) Add interest or dividends, net of ordinary, necessary,
and reasonable expenses not deducted in computing federal taxable
income, on obligations of any authority, commission,
instrumentality, territory, or possession of the United States to
the extent that the interest or dividends are exempt from federal
income taxes but not from state income taxes, but only to the
extent that such net amount is not otherwise includible in Ohio
taxable income and is described in either division (S)(1)(a) or
(b) of this section;
(3) Add the amount of personal exemption allowed to the
estate pursuant to section 642(b) of the Internal Revenue Code;
(4) Deduct interest or dividends, net of related expenses
deducted in computing federal taxable income, on obligations of
the United States and its territories and possessions or of any
authority, commission, or instrumentality of the United States to
the extent that the interest or dividends are exempt from state
taxes under the laws of the United States, but only to the extent
that such amount is included in federal taxable income and is
described in either division (S)(1)(a) or (b) of this section;
(5) Deduct the amount of wages and salaries, if any, not
otherwise allowable as a deduction but that would have been
allowable as a deduction in computing federal taxable income for
the taxable year, had the targeted jobs credit allowed under
sections 38, 51, and 52 of the Internal Revenue Code not been in
effect, but only to the extent such amount relates either to
income included in federal taxable income for the taxable year or
to income of the S portion of an electing small business trust for
the taxable year;
(6) Deduct any interest or interest equivalent, net of
related expenses deducted in computing federal taxable income, on
public obligations and purchase obligations, but only to the
extent that such net amount relates either to income included in
federal taxable income for the taxable year or to income of the S
portion of an electing small business trust for the taxable year;
(7) Add any loss or deduct any gain resulting from sale,
exchange, or other disposition of public obligations to the extent
that such loss has been deducted or such gain has been included in
computing either federal taxable income or income of the S portion
of an electing small business trust for the taxable year;
(8) Except in the case of the final return of an estate, add
any amount deducted by the taxpayer on both its Ohio estate tax
return pursuant to section 5731.14 of the Revised Code, and on its
federal income tax return in determining federal taxable income;
(9)(a) Deduct any amount included in federal taxable income
solely because the amount represents a reimbursement or refund of
expenses that in a previous year the decedent had deducted as an
itemized deduction pursuant to section 63 of the Internal Revenue
Code and applicable treasury regulations. The deduction otherwise
allowed under division (S)(9)(a) of this section shall be reduced
to the extent the reimbursement is attributable to an amount the
taxpayer or decedent deducted under this section in any taxable
year.
(b) Add any amount not otherwise included in Ohio taxable
income for any taxable year to the extent that the amount is
attributable to the recovery during the taxable year of any amount
deducted or excluded in computing federal or Ohio taxable income
in any taxable year, but only to the extent such amount has not
been distributed to beneficiaries for the taxable year.
(10) Deduct any portion of the deduction described in section
1341(a)(2) of the Internal Revenue Code, for repaying previously
reported income received under a claim of right, that meets both
of the following requirements:
(a) It is allowable for repayment of an item that was
included in the taxpayer's taxable income or the decedent's
adjusted gross income for a prior taxable year and did not qualify
for a credit under division (A) or (B) of section 5747.05 of the
Revised Code for that year.
(b) It does not otherwise reduce the taxpayer's taxable
income or the decedent's adjusted gross income for the current or
any other taxable year.
(11) Add any amount claimed as a credit under section
5747.059 of the Revised Code to the extent that the amount
satisfies either of the following:
(a) The amount was deducted or excluded from the computation
of the taxpayer's federal taxable income as required to be
reported for the taxpayer's taxable year under the Internal
Revenue Code;
(b) The amount resulted in a reduction in the taxpayer's
federal taxable income as required to be reported for any of the
taxpayer's taxable years under the Internal Revenue Code.
(12) Deduct any amount, net of related expenses deducted in
computing federal taxable income, that a trust is required to
report as farm income on its federal income tax return, but only
if the assets of the trust include at least ten acres of land
satisfying the definition of "land devoted exclusively to
agricultural use" under section 5713.30 of the Revised Code,
regardless of whether the land is valued for tax purposes as such
land under sections 5713.30 to 5713.38 of the Revised Code. If the
trust is a pass-through entity investor, section 5747.231 of the
Revised Code applies in ascertaining if the trust is eligible to
claim the deduction provided by division (S)(12) of this section
in connection with the pass-through entity's farm income.
Except for farm income attributable to the S portion of an
electing small business trust, the deduction provided by division
(S)(12) of this section is allowed only to the extent that the
trust has not distributed such farm income. Division (S)(12) of
this section applies only to taxable years of a trust beginning in
2002 or thereafter.
(13) Add the net amount of income described in section 641(c)
of the Internal Revenue Code to the extent that amount is not
included in federal taxable income.
(14) Add or deduct the amount the taxpayer would be required
to add or deduct under division (A)(20) or (21) of this section if
the taxpayer's Ohio taxable income were computed in the same
manner as an individual's Ohio adjusted gross income is computed
under this section. In the case of a trust, division (S)(14) of
this section applies only to any of the trust's taxable years
beginning in 2002 or thereafter.
(T) "School district income" and "school district income tax"
have the same meanings as in section 5748.01 of the Revised Code.
(U) As used in divisions (A)(8), (A)(9), (S)(6), and (S)(7)
of this section, "public obligations," "purchase obligations," and
"interest or interest equivalent" have the same meanings as in
section 5709.76 of the Revised Code.
(V) "Limited liability company" means any limited liability
company formed under Chapter 1705. of the Revised Code or under
the laws of any other state.
(W) "Pass-through entity investor" means any person who,
during any portion of a taxable year of a pass-through entity, is
a partner, member, shareholder, or equity investor in that
pass-through entity.
(X) "Banking day" has the same meaning as in section 1304.01
of the Revised Code.
(Y) "Month" means a calendar month.
(Z) "Quarter" means the first three months, the second three
months, the third three months, or the last three months of the
taxpayer's taxable year.
(AA)(1) "Eligible institution" means a state university or
state institution of higher education as defined in section
3345.011 of the Revised Code, or a private, nonprofit college,
university, or other post-secondary institution located in this
state that possesses a certificate of authorization issued by the
Ohio board of regents pursuant to Chapter 1713. of the Revised
Code or a certificate of registration issued by the state board of
career colleges and schools under Chapter 3332. of the Revised
Code.
(2) "Qualified tuition and fees" means tuition and fees
imposed by an eligible institution as a condition of enrollment or
attendance, not exceeding two thousand five hundred dollars in
each of the individual's first two years of post-secondary
education. If the individual is a part-time student, "qualified
tuition and fees" includes tuition and fees paid for the academic
equivalent of the first two years of post-secondary education
during a maximum of five taxable years, not exceeding a total of
five thousand dollars. "Qualified tuition and fees" does not
include:
(a) Expenses for any course or activity involving sports,
games, or hobbies unless the course or activity is part of the
individual's degree or diploma program;
(b) The cost of books, room and board, student activity fees,
athletic fees, insurance expenses, or other expenses unrelated to
the individual's academic course of instruction;
(c) Tuition, fees, or other expenses paid or reimbursed
through an employer, scholarship, grant in aid, or other
educational benefit program.
(BB)(1) "Modified business income" means the business income
included in a trust's Ohio taxable income after such taxable
income is first reduced by the qualifying trust amount, if any.
(2) "Qualifying trust amount" of a trust means capital gains
and losses from the sale, exchange, or other disposition of equity
or ownership interests in, or debt obligations of, a qualifying
investee to the extent included in the trust's Ohio taxable
income, but only if the following requirements are satisfied:
(a) The book value of the qualifying investee's physical
assets in this state and everywhere, as of the last day of the
qualifying investee's fiscal or calendar year ending immediately
prior to the date on which the trust recognizes the gain or loss,
is available to the trust.
(b) The requirements of section 5747.011 of the Revised Code
are satisfied for the trust's taxable year in which the trust
recognizes the gain or loss.
Any gain or loss that is not a qualifying trust amount is
modified business income, qualifying investment income, or
modified nonbusiness income, as the case may be.
(3) "Modified nonbusiness income" means a trust's Ohio
taxable income other than modified business income, other than the
qualifying trust amount, and other than qualifying investment
income, as defined in section 5747.012 of the Revised Code, to the
extent such qualifying investment income is not otherwise part of
modified business income.
(4) "Modified Ohio taxable income" applies only to trusts,
and means the sum of the amounts described in divisions (BB)(4)(a)
to (c) of this section:
(a) The fraction, calculated under section 5747.013, and
applying section 5747.231 of the Revised Code, multiplied by the
sum of the following amounts:
(i) The trust's modified business income;
(ii) The trust's qualifying investment income, as defined in
section 5747.012 of the Revised Code, but only to the extent the
qualifying investment income does not otherwise constitute
modified business income and does not otherwise constitute a
qualifying trust amount.
(b) The qualifying trust amount multiplied by a fraction, the
numerator of which is the sum of the book value of the qualifying
investee's physical assets in this state on the last day of the
qualifying investee's fiscal or calendar year ending immediately
prior to the day on which the trust recognizes the qualifying
trust amount, and the denominator of which is the sum of the book
value of the qualifying investee's total physical assets
everywhere on the last day of the qualifying investee's fiscal or
calendar year ending immediately prior to the day on which the
trust recognizes the qualifying trust amount. If, for a taxable
year, the trust recognizes a qualifying trust amount with respect
to more than one qualifying investee, the amount described in
division (BB)(4)(b) of this section shall equal the sum of the
products so computed for each such qualifying investee.
(c)(i) With respect to a trust or portion of a trust that is
a resident as ascertained in accordance with division (I)(3)(d) of
this section, its modified nonbusiness income.
(ii) With respect to a trust or portion of a trust that is
not a resident as ascertained in accordance with division
(I)(3)(d) of this section, the amount of its modified nonbusiness
income satisfying the descriptions in divisions (B)(2) to (5) of
section 5747.20 of the Revised Code, except as otherwise provided
in division (BB)(4)(c)(ii) of this section. With respect to a
trust or portion of a trust that is not a resident as ascertained
in accordance with division (I)(3)(d) of this section, the trust's
portion of modified nonbusiness income recognized from the sale,
exchange, or other disposition of a debt interest in or equity
interest in a section 5747.212 entity, as defined in section
5747.212 of the Revised Code, without regard to division (A) of
that section, shall not be allocated to this state in accordance
with section 5747.20 of the Revised Code but shall be apportioned
to this state in accordance with division (B) of section 5747.212
of the Revised Code without regard to division (A) of that
section.
If the allocation and apportionment of a trust's income under
divisions (BB)(4)(a) and (c) of this section do not fairly
represent the modified Ohio taxable income of the trust in this
state, the alternative methods described in division (C) of
section 5747.21 of the Revised Code may be applied in the manner
and to the same extent provided in that section.
(5)(a) Except as set forth in division (BB)(5)(b) of this
section, "qualifying investee" means a person in which a trust has
an equity or ownership interest, or a person or unit of government
the debt obligations of either of which are owned by a trust. For
the purposes of division (BB)(2)(a) of this section and for the
purpose of computing the fraction described in division (BB)(4)(b)
of this section, all of the following apply:
(i) If the qualifying investee is a member of a qualifying
controlled group on the last day of the qualifying investee's
fiscal or calendar year ending immediately prior to the date on
which the trust recognizes the gain or loss, then "qualifying
investee" includes all persons in the qualifying controlled group
on such last day.
(ii) If the qualifying investee, or if the qualifying
investee and any members of the qualifying controlled group of
which the qualifying investee is a member on the last day of the
qualifying investee's fiscal or calendar year ending immediately
prior to the date on which the trust recognizes the gain or loss,
separately or cumulatively own, directly or indirectly, on the
last day of the qualifying investee's fiscal or calendar year
ending immediately prior to the date on which the trust recognizes
the qualifying trust amount, more than fifty per cent of the
equity of a pass-through entity, then the qualifying investee and
the other members are deemed to own the proportionate share of the
pass-through entity's physical assets which the pass-through
entity directly or indirectly owns on the last day of the
pass-through entity's calendar or fiscal year ending within or
with the last day of the qualifying investee's fiscal or calendar
year ending immediately prior to the date on which the trust
recognizes the qualifying trust amount.
(iii) For the purposes of division (BB)(5)(a)(iii) of this
section, "upper level pass-through entity" means a pass-through
entity directly or indirectly owning any equity of another
pass-through entity, and "lower level pass-through entity" means
that other pass-through entity.
An upper level pass-through entity, whether or not it is also
a qualifying investee, is deemed to own, on the last day of the
upper level pass-through entity's calendar or fiscal year, the
proportionate share of the lower level pass-through entity's
physical assets that the lower level pass-through entity directly
or indirectly owns on the last day of the lower level pass-through
entity's calendar or fiscal year ending within or with the last
day of the upper level pass-through entity's fiscal or calendar
year. If the upper level pass-through entity directly and
indirectly owns less than fifty per cent of the equity of the
lower level pass-through entity on each day of the upper level
pass-through entity's calendar or fiscal year in which or with
which ends the calendar or fiscal year of the lower level
pass-through entity and if, based upon clear and convincing
evidence, complete information about the location and cost of the
physical assets of the lower pass-through entity is not available
to the upper level pass-through entity, then solely for purposes
of ascertaining if a gain or loss constitutes a qualifying trust
amount, the upper level pass-through entity shall be deemed as
owning no equity of the lower level pass-through entity for each
day during the upper level pass-through entity's calendar or
fiscal year in which or with which ends the lower level
pass-through entity's calendar or fiscal year. Nothing in division
(BB)(5)(a)(iii) of this section shall be construed to provide for
any deduction or exclusion in computing any trust's Ohio taxable
income.
(b) With respect to a trust that is not a resident for the
taxable year and with respect to a part of a trust that is not a
resident for the taxable year, "qualifying investee" for that
taxable year does not include a C corporation if both of the
following apply:
(i) During the taxable year the trust or part of the trust
recognizes a gain or loss from the sale, exchange, or other
disposition of equity or ownership interests in, or debt
obligations of, the C corporation.
(ii) Such gain or loss constitutes nonbusiness income.
(6) "Available" means information is such that a person is
able to learn of the information by the due date plus extensions,
if any, for filing the return for the taxable year in which the
trust recognizes the gain or loss.
(CC) "Qualifying controlled group" has the same meaning as in
section 5733.04 of the Revised Code.
(DD) "Related member" has the same meaning as in section
5733.042 of the Revised Code.
(EE)(1) For the purposes of division (EE) of this section:
(a) "Qualifying person" means any person other than a
qualifying corporation.
(b) "Qualifying corporation" means any person classified for
federal income tax purposes as an association taxable as a
corporation, except either of the following:
(i) A corporation that has made an election under subchapter
S, chapter one, subtitle A, of the Internal Revenue Code for its
taxable year ending within, or on the last day of, the investor's
taxable year;
(ii) A subsidiary that is wholly owned by any corporation
that has made an election under subchapter S, chapter one,
subtitle A of the Internal Revenue Code for its taxable year
ending within, or on the last day of, the investor's taxable year.
(2) For the purposes of this chapter, unless expressly stated
otherwise, no qualifying person indirectly owns any asset directly
or indirectly owned by any qualifying corporation.
(FF) For purposes of this chapter and Chapter 5751. of the
Revised Code:
(1) "Trust" does not include a qualified pre-income tax
trust.
(2) A "qualified pre-income tax trust" is any pre-income tax
trust that makes a qualifying pre-income tax trust election as
described in division (FF)(3) of this section.
(3) A "qualifying pre-income tax trust election" is an
election by a pre-income tax trust to subject to the tax imposed
by section 5751.02 of the Revised Code the pre-income tax trust
and all pass-through entities of which the trust owns or controls,
directly, indirectly, or constructively through related interests,
five per cent or more of the ownership or equity interests. The
trustee shall notify the tax commissioner in writing of the
election on or before April 15, 2006. The election, if timely
made, shall be effective on and after January 1, 2006, and shall
apply for all tax periods and tax years until revoked by the
trustee of the trust.
(4) A "pre-income tax trust" is a trust that satisfies all of
the following requirements:
(a) The document or instrument creating the trust was
executed by the grantor before January 1, 1972;
(b) The trust became irrevocable upon the creation of the
trust; and
(c) The grantor was domiciled in this state at the time the
trust was created.
Section 2. That existing section 5747.01 of the Revised Code
is hereby repealed.
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