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H. B. No. 602 As IntroducedAs Introduced
129th General Assembly | Regular Session | 2011-2012 |
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Representatives Lundy, Gerberry
Cosponsors:
Representatives Hagan, R., Ramos, Okey, Yuko, Murray, Letson, Phillips, Milkovich, Fende, O'Brien, Antonio, Foley, Clyde, Fedor
A BILL
To amend sections 718.01, 5739.02, 5747.01, and
5751.01 and to repeal sections 126.60, 126.601,
126.602, 126.603, 126.604, and 126.605 of the
Revised Code to eliminate the authority of the
Director of Budget and Management and the Director
of Transportation in regard to Ohio
Turnpike-related outsourcing contracts and to
require the Ohio Turnpike Commission to hold
public hearings on the issue of outsourcing the
Ohio Turnpike.
BE IT ENACTED BY THE GENERAL ASSEMBLY OF THE STATE OF OHIO:
Section 1. That sections 718.01, 5739.02, 5747.01, and
5751.01 of the Revised Code be amended to read as follows:
Sec. 718.01. (A) As used in this chapter:
(1) "Adjusted federal taxable income" means a C corporation's
federal taxable income before net operating losses and special
deductions as determined under the Internal Revenue Code, adjusted
as follows:
(a) Deduct intangible income to the extent included in
federal taxable income. The deduction shall be allowed regardless
of whether the intangible income relates to assets used in a trade
or business or assets held for the production of income.
(b) Add an amount equal to five per cent of intangible income
deducted under division (A)(1)(a) of this section, but excluding
that portion of intangible income directly related to the sale,
exchange, or other disposition of property described in section
1221 of the Internal Revenue Code;
(c) Add any losses allowed as a deduction in the computation
of federal taxable income if the losses directly relate to the
sale, exchange, or other disposition of an asset described in
section 1221 or 1231 of the Internal Revenue Code;
(d)(i) Except as provided in division (A)(1)(d)(ii) of this
section, deduct income and gain included in federal taxable income
to the extent the income and gain directly relate to the sale,
exchange, or other disposition of an asset described in section
1221 or 1231 of the Internal Revenue Code;
(ii) Division (A)(1)(d)(i) of this section does not apply to
the extent the income or gain is income or gain described in
section 1245 or 1250 of the Internal Revenue Code.
(e) Add taxes on or measured by net income allowed as a
deduction in the computation of federal taxable income;
(f) In the case of a real estate investment trust and
regulated investment company, add all amounts with respect to
dividends to, distributions to, or amounts set aside for or
credited to the benefit of investors and allowed as a deduction in
the computation of federal taxable income;
(g) Deduct, to the extent not otherwise deducted or excluded
in computing federal taxable income, 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.
If the taxpayer is not a C corporation and is not an
individual, the taxpayer shall compute adjusted federal taxable
income as if the taxpayer were a C corporation, except guaranteed
payments and other similar amounts paid or accrued to a partner,
former partner, member, or former member shall not be allowed as a
deductible expense; amounts paid or accrued to a qualified
self-employed retirement plan with respect to an owner or
owner-employee of the taxpayer, amounts paid or accrued to or for
health insurance for an owner or owner-employee, and amounts paid
or accrued to or for life insurance for an owner or owner-employee
shall not be allowed as a deduction.
Nothing in division (A)(1) of this section shall be construed
as allowing the taxpayer to add or deduct any amount more than
once or shall be construed as allowing any taxpayer to deduct any
amount paid to or accrued for purposes of federal self-employment
tax.
Nothing in this chapter shall be construed as limiting or
removing the ability of any municipal corporation to administer,
audit, and enforce the provisions of its municipal income tax.
(2) "Internal Revenue Code" means the Internal Revenue Code
of 1986, 100 Stat. 2085, 26 U.S.C. 1, as amended.
(3) "Schedule C" means internal revenue service schedule C
filed by a taxpayer pursuant to the Internal Revenue Code.
(4) "Form 2106" means internal revenue service form 2106
filed by a taxpayer pursuant to the Internal Revenue Code.
(5) "Intangible income" means income of any of the following
types: income yield, interest, capital gains, dividends, or other
income arising from the ownership, sale, exchange, or other
disposition of intangible property including, but not limited to,
investments, deposits, money, or credits as those terms are
defined in Chapter 5701. of the Revised Code, and patents,
copyrights, trademarks, tradenames, investments in real estate
investment trusts, investments in regulated investment companies,
and appreciation on deferred compensation. "Intangible income"
does not include prizes, awards, or other income associated with
any lottery winnings or other similar games of chance.
(6) "S corporation" means a corporation that has made an
election under subchapter S of Chapter 1 of Subtitle A of the
Internal Revenue Code for its taxable year.
(7) For taxable years beginning on or after January 1, 2004,
"net profit" for a taxpayer other than an individual means
adjusted federal taxable income and "net profit" for a taxpayer
who is an individual means the individual's profit required to be
reported on schedule C, schedule E, or schedule F, other than any
amount allowed as a deduction under division (E)(2) or (3) of this
section or amounts described in division (H) of this section.
(8) "Taxpayer" means a person subject to a tax on income
levied by a municipal corporation. Except as provided in division
(L) of this section, "taxpayer" does not include any person that
is a disregarded entity or a qualifying subchapter S subsidiary
for federal income tax purposes, but "taxpayer" includes any other
person who owns the disregarded entity or qualifying subchapter S
subsidiary.
(9) "Taxable year" means the corresponding tax reporting
period as prescribed for the taxpayer under the Internal Revenue
Code.
(10) "Tax administrator" means the individual charged with
direct responsibility for administration of a tax on income levied
by a municipal corporation and includes:
(a) The central collection agency and the regional income tax
agency and their successors in interest, and other entities
organized to perform functions similar to those performed by the
central collection agency and the regional income tax agency;
(b) A municipal corporation acting as the agent of another
municipal corporation; and
(c) Persons retained by a municipal corporation to administer
a tax levied by the municipal corporation, but only if the
municipal corporation does not compensate the person in whole or
in part on a contingency basis.
(11) "Person" includes individuals, firms, companies,
business trusts, estates, trusts, partnerships, limited liability
companies, associations, corporations, governmental entities, and
any other entity.
(12) "Schedule E" means internal revenue service schedule E
filed by a taxpayer pursuant to the Internal Revenue Code.
(13) "Schedule F" means internal revenue service schedule F
filed by a taxpayer pursuant to the Internal Revenue Code.
(B) No municipal corporation shall tax income at other than a
uniform rate.
(C) No municipal corporation shall levy a tax on income at a
rate in excess of one per cent without having obtained the
approval of the excess by a majority of the electors of the
municipality voting on the question at a general, primary, or
special election. The legislative authority of the municipal
corporation shall file with the board of elections at least ninety
days before the day of the election a copy of the ordinance
together with a resolution specifying the date the election is to
be held and directing the board of elections to conduct the
election. The ballot shall be in the following form: "Shall the
Ordinance providing for a ... per cent levy on income for (Brief
description of the purpose of the proposed levy) be passed?
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FOR THE INCOME TAX |
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AGAINST THE INCOME TAX |
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In the event of an affirmative vote, the proceeds of the levy
may be used only for the specified purpose.
(D)(1) Except as otherwise provided in this section, no
municipal corporation shall exempt from a tax on income
compensation for personal services of individuals over eighteen
years of age or the net profit from a business or profession.
(2)(a) For taxable years beginning on or after January 1,
2004, no municipal corporation shall tax the net profit from a
business or profession using any base other than the taxpayer's
adjusted federal taxable income.
(b) Division (D)(2)(a) of this section does not apply to any
taxpayer required to file a return under section 5745.03 of the
Revised Code or to the net profit from a sole proprietorship.
(E)(1) The legislative authority of a municipal corporation
may, by ordinance or resolution, exempt from withholding and from
a tax on income the following:
(a) Compensation arising from the sale, exchange, or other
disposition of a stock option, the exercise of a stock option, or
the sale, exchange, or other disposition of stock purchased under
a stock option; or
(b) Compensation attributable to a nonqualified deferred
compensation plan or program described in section 3121(v)(2)(C) of
the Internal Revenue Code.
(2) The legislative authority of a municipal corporation may
adopt an ordinance or resolution that allows a taxpayer who is an
individual to deduct, in computing the taxpayer's municipal income
tax liability, an amount equal to the aggregate amount the
taxpayer paid in cash during the taxable year to a health savings
account of the taxpayer, to the extent the taxpayer is entitled to
deduct that amount on internal revenue service form 1040.
(3) The legislative authority of a municipal corporation may
adopt an ordinance or resolution that allows a taxpayer who has a
net profit from a business or profession that is operated as a
sole proprietorship to deduct from that net profit the amount that
the taxpayer paid during the taxable year for medical care
insurance premiums for the taxpayer, the taxpayer's spouse, and
dependents as defined in section 5747.01 of the Revised Code. The
deduction shall be allowed to the same extent the taxpayer is
entitled to deduct the premiums on internal revenue service form
1040. The deduction allowed under this division shall be net of
any related premium refunds, related premium reimbursements, or
related insurance premium dividends received by the taxpayer
during the taxable year.
(F) If an individual's taxable income includes income against
which the taxpayer has taken a deduction for federal income tax
purposes as reportable on the taxpayer's form 2106, and against
which a like deduction has not been allowed by the municipal
corporation, the municipal corporation shall deduct from the
taxpayer's taxable income an amount equal to the deduction shown
on such form allowable against such income, to the extent not
otherwise so allowed as a deduction by the municipal corporation.
(G)(1) In the case of a taxpayer who has a net profit from a
business or profession that is operated as a sole proprietorship,
no municipal corporation may tax or use as the base for
determining the amount of the net profit that shall be considered
as having a taxable situs in the municipal corporation, an amount
other than the net profit required to be reported by the taxpayer
on schedule C or F from such sole proprietorship for the taxable
year.
(2) In the case of a taxpayer who has a net profit from
rental activity required to be reported on schedule E, no
municipal corporation may tax or use as the base for determining
the amount of the net profit that shall be considered as having a
taxable situs in the municipal corporation, an amount other than
the net profit from rental activities required to be reported by
the taxpayer on schedule E for the taxable year.
(H) A municipal corporation shall not tax any of the
following:
(1) The military pay or allowances of members of the armed
forces of the United States and of members of their reserve
components, including the Ohio national guard;
(2) The income of religious, fraternal, charitable,
scientific, literary, or educational institutions to the extent
that such income is derived from tax-exempt real estate,
tax-exempt tangible or intangible property, or tax-exempt
activities;
(3) Except as otherwise provided in division (I) of this
section, intangible income;
(4) Compensation paid under section 3501.28 or 3501.36 of the
Revised Code to a person serving as a precinct election official,
to the extent that such compensation does not exceed one thousand
dollars annually. Such compensation in excess of one thousand
dollars may be subjected to taxation by a municipal corporation. A
municipal corporation shall not require the payer of such
compensation to withhold any tax from that compensation.
(5) Compensation paid to an employee of a transit authority,
regional transit authority, or regional transit commission created
under Chapter 306. of the Revised Code for operating a transit bus
or other motor vehicle for the authority or commission in or
through the municipal corporation, unless the bus or vehicle is
operated on a regularly scheduled route, the operator is subject
to such a tax by reason of residence or domicile in the municipal
corporation, or the headquarters of the authority or commission is
located within the municipal corporation;
(6) The income of a public utility, when that public utility
is subject to the tax levied under section 5727.24 or 5727.30 of
the Revised Code, except a municipal corporation may tax the
following, subject to Chapter 5745. of the Revised Code:
(a) Beginning January 1, 2002, the income of an electric
company or combined company;
(b) Beginning January 1, 2004, the income of a telephone
company.
As used in division (H)(6) of this section, "combined
company," "electric company," and "telephone company" have the
same meanings as in section 5727.01 of the Revised Code.
(7) On and after January 1, 2003, items excluded from federal
gross income pursuant to section 107 of the Internal Revenue Code;
(8) On and after January 1, 2001, compensation paid to a
nonresident individual to the extent prohibited under section
718.011 of the Revised Code;
(9)(a) Except as provided in division (H)(9)(b) and (c) of
this section, an S corporation shareholder's distributive share of
net profits of the S corporation, other than any part of the
distributive share of net profits that represents wages as defined
in section 3121(a) of the Internal Revenue Code or net earnings
from self-employment as defined in section 1402(a) of the Internal
Revenue Code.
(b) If, pursuant to division (H) of former section 718.01 of
the Revised Code as it existed before March 11, 2004, a majority
of the electors of a municipal corporation voted in favor of the
question at an election held on November 4, 2003, the municipal
corporation may continue after 2002 to tax an S corporation
shareholder's distributive share of net profits of an S
corporation.
(c) If, on December 6, 2002, a municipal corporation was
imposing, assessing, and collecting a tax on an S corporation
shareholder's distributive share of net profits of the S
corporation to the extent the distributive share would be
allocated or apportioned to this state under divisions (B)(1) and
(2) of section 5733.05 of the Revised Code if the S corporation
were a corporation subject to taxes imposed under Chapter 5733. of
the Revised Code, the municipal corporation may continue to impose
the tax on such distributive shares to the extent such shares
would be so allocated or apportioned to this state only until
December 31, 2004, unless a majority of the electors of the
municipal corporation voting on the question of continuing to tax
such shares after that date vote in favor of that question at an
election held November 2, 2004. If a majority of those electors
vote in favor of the question, the municipal corporation may
continue after December 31, 2004, to impose the tax on such
distributive shares only to the extent such shares would be so
allocated or apportioned to this state.
(d) For the purposes of division (D) of section 718.14 of the
Revised Code, a municipal corporation shall be deemed to have
elected to tax S corporation shareholders' distributive shares of
net profits of the S corporation in the hands of the shareholders
if a majority of the electors of a municipal corporation vote in
favor of a question at an election held under division (H)(9)(b)
or (c) of this section. The municipal corporation shall specify by
ordinance or rule that the tax applies to the distributive share
of a shareholder of an S corporation in the hands of the
shareholder of the S corporation.
(10) Employee compensation that is not "qualifying wages" as
defined in section 718.03 of the Revised Code;
(11) Beginning August 1, 2007, compensation paid to a person
employed within the boundaries of a United States air force base
under the jurisdiction of the United States air force that is used
for the housing of members of the United States air force and is a
center for air force operations, unless the person is subject to
taxation because of residence or domicile. If the compensation is
subject to taxation because of residence or domicile, municipal
income tax shall be payable only to the municipal corporation of
residence or domicile.
(I) Any municipal corporation that taxes any type of
intangible income on March 29, 1988, pursuant to Section 3 of
Amended Substitute Senate Bill No. 238 of the 116th general
assembly, may continue to tax that type of income after 1988 if a
majority of the electors of the municipal corporation voting on
the question of whether to permit the taxation of that type of
intangible income after 1988 vote in favor thereof at an election
held on November 8, 1988.
(J) Nothing in this section or section 718.02 of the Revised
Code shall authorize the levy of any tax on income that a
municipal corporation is not authorized to levy under existing
laws or shall require a municipal corporation to allow a deduction
from taxable income for losses incurred from a sole proprietorship
or partnership.
(K)(1) Nothing in this chapter prohibits a municipal
corporation from allowing, by resolution or ordinance, a net
operating loss carryforward.
(2) Nothing in this chapter requires a municipal corporation
to allow a net operating loss carryforward.
(L)(1) A single member limited liability company that is a
disregarded entity for federal tax purposes may elect to be a
separate taxpayer from its single member in all Ohio municipal
corporations in which it either filed as a separate taxpayer or
did not file for its taxable year ending in 2003, if all of the
following conditions are met:
(a) The limited liability company's single member is also a
limited liability company;
(b) The limited liability company and its single member were
formed and doing business in one or more Ohio municipal
corporations for at least five years before January 1, 2004;
(c) Not later than December 31, 2004, the limited liability
company and its single member each make an election to be treated
as a separate taxpayer under division (L) of this section;
(d) The limited liability company was not formed for the
purpose of evading or reducing Ohio municipal corporation income
tax liability of the limited liability company or its single
member;
(e) The Ohio municipal corporation that is the primary place
of business of the sole member of the limited liability company
consents to the election.
(2) For purposes of division (L)(1)(e) of this section, a
municipal corporation is the primary place of business of a
limited liability company if, for the limited liability company's
taxable year ending in 2003, its income tax liability is greater
in that municipal corporation than in any other municipal
corporation in Ohio, and that tax liability to that municipal
corporation for its taxable year ending in 2003 is at least four
hundred thousand dollars.
Sec. 5739.02. For the purpose of providing revenue with
which to meet the needs of the state, for the use of the general
revenue fund of the state, for the purpose of securing a thorough
and efficient system of common schools throughout the state, for
the purpose of affording revenues, in addition to those from
general property taxes, permitted under constitutional
limitations, and from other sources, for the support of local
governmental functions, and for the purpose of reimbursing the
state for the expense of administering this chapter, an excise tax
is hereby levied on each retail sale made in this state.
(A)(1) The tax shall be collected as provided in section
5739.025 of the Revised Code. The rate of the tax shall be five
and one-half per cent. The tax applies and is collectible when the
sale is made, regardless of the time when the price is paid or
delivered.
(2) In the case of the lease or rental, with a fixed term of
more than thirty days or an indefinite term with a minimum period
of more than thirty days, of any motor vehicles designed by the
manufacturer to carry a load of not more than one ton, watercraft,
outboard motor, or aircraft, or of any tangible personal property,
other than motor vehicles designed by the manufacturer to carry a
load of more than one ton, to be used by the lessee or renter
primarily for business purposes, the tax shall be collected by the
vendor at the time the lease or rental is consummated and shall be
calculated by the vendor on the basis of the total amount to be
paid by the lessee or renter under the lease agreement. If the
total amount of the consideration for the lease or rental includes
amounts that are not calculated at the time the lease or rental is
executed, the tax shall be calculated and collected by the vendor
at the time such amounts are billed to the lessee or renter. In
the case of an open-end lease or rental, the tax shall be
calculated by the vendor on the basis of the total amount to be
paid during the initial fixed term of the lease or rental, and for
each subsequent renewal period as it comes due. As used in this
division, "motor vehicle" has the same meaning as in section
4501.01 of the Revised Code, and "watercraft" includes an outdrive
unit attached to the watercraft.
A lease with a renewal clause and a termination penalty or
similar provision that applies if the renewal clause is not
exercised is presumed to be a sham transaction. In such a case,
the tax shall be calculated and paid on the basis of the entire
length of the lease period, including any renewal periods, until
the termination penalty or similar provision no longer applies.
The taxpayer shall bear the burden, by a preponderance of the
evidence, that the transaction or series of transactions is not a
sham transaction.
(3) Except as provided in division (A)(2) of this section, in
the case of a sale, the price of which consists in whole or in
part of the lease or rental of tangible personal property, the tax
shall be measured by the installments of that lease or rental.
(4) In the case of a sale of a physical fitness facility
service or recreation and sports club service, the price of which
consists in whole or in part of a membership for the receipt of
the benefit of the service, the tax applicable to the sale shall
be measured by the installments thereof.
(B) The tax does not apply to the following:
(1) Sales to the state or any of its political subdivisions,
or to any other state or its political subdivisions if the laws of
that state exempt from taxation sales made to this state and its
political subdivisions;
(2) Sales of food for human consumption off the premises
where sold;
(3) Sales of food sold to students only in a cafeteria,
dormitory, fraternity, or sorority maintained in a private,
public, or parochial school, college, or university;
(4) Sales of newspapers and of magazine subscriptions and
sales or transfers of magazines distributed as controlled
circulation publications;
(5) The furnishing, preparing, or serving of meals without
charge by an employer to an employee provided the employer records
the meals as part compensation for services performed or work
done;
(6) Sales of motor fuel upon receipt, use, distribution, or
sale of which in this state a tax is imposed by the law of this
state, but this exemption shall not apply to the sale of motor
fuel on which a refund of the tax is allowable under division (A)
of section 5735.14 of the Revised Code; and the tax commissioner
may deduct the amount of tax levied by this section applicable to
the price of motor fuel when granting a refund of motor fuel tax
pursuant to division (A) of section 5735.14 of the Revised Code
and shall cause the amount deducted to be paid into the general
revenue fund of this state;
(7) Sales of natural gas by a natural gas company, of water
by a water-works company, or of steam by a heating company, if in
each case the thing sold is delivered to consumers through pipes
or conduits, and all sales of communications services by a
telegraph company, all terms as defined in section 5727.01 of the
Revised Code, and sales of electricity delivered through wires;
(8) Casual sales by a person, or auctioneer employed directly
by the person to conduct such sales, except as to such sales of
motor vehicles, watercraft or outboard motors required to be
titled under section 1548.06 of the Revised Code, watercraft
documented with the United States coast guard, snowmobiles, and
all-purpose vehicles as defined in section 4519.01 of the Revised
Code;
(9)(a) Sales of services or tangible personal property, other
than motor vehicles, mobile homes, and manufactured homes, by
churches, organizations exempt from taxation under section
501(c)(3) of the Internal Revenue Code of 1986, or nonprofit
organizations operated exclusively for charitable purposes as
defined in division (B)(12) of this section, provided that the
number of days on which such tangible personal property or
services, other than items never subject to the tax, are sold does
not exceed six in any calendar year, except as otherwise provided
in division (B)(9)(b) of this section. If the number of days on
which such sales are made exceeds six in any calendar year, the
church or organization shall be considered to be engaged in
business and all subsequent sales by it shall be subject to the
tax. In counting the number of days, all sales by groups within a
church or within an organization shall be considered to be sales
of that church or organization.
(b) The limitation on the number of days on which tax-exempt
sales may be made by a church or organization under division
(B)(9)(a) of this section does not apply to sales made by student
clubs and other groups of students of a primary or secondary
school, or a parent-teacher association, booster group, or similar
organization that raises money to support or fund curricular or
extracurricular activities of a primary or secondary school.
(c) Divisions (B)(9)(a) and (b) of this section do not apply
to sales by a noncommercial educational radio or television
broadcasting station.
(10) Sales not within the taxing power of this state under
the Constitution of the United States;
(11) Except for transactions that are sales under division
(B)(3)(r) of section 5739.01 of the Revised Code, the
transportation of persons or property, unless the transportation
is by a private investigation and security service;
(12) Sales of tangible personal property or services to
churches, to organizations exempt from taxation under section
501(c)(3) of the Internal Revenue Code of 1986, and to any other
nonprofit organizations operated exclusively for charitable
purposes in this state, no part of the net income of which inures
to the benefit of any private shareholder or individual, and no
substantial part of the activities of which consists of carrying
on propaganda or otherwise attempting to influence legislation;
sales to offices administering one or more homes for the aged or
one or more hospital facilities exempt under section 140.08 of the
Revised Code; and sales to organizations described in division (D)
of section 5709.12 of the Revised Code.
"Charitable purposes" means the relief of poverty; the
improvement of health through the alleviation of illness, disease,
or injury; the operation of an organization exclusively for the
provision of professional, laundry, printing, and purchasing
services to hospitals or charitable institutions; the operation of
a home for the aged, as defined in section 5701.13 of the Revised
Code; the operation of a radio or television broadcasting station
that is licensed by the federal communications commission as a
noncommercial educational radio or television station; the
operation of a nonprofit animal adoption service or a county
humane society; the promotion of education by an institution of
learning that maintains a faculty of qualified instructors,
teaches regular continuous courses of study, and confers a
recognized diploma upon completion of a specific curriculum; the
operation of a parent-teacher association, booster group, or
similar organization primarily engaged in the promotion and
support of the curricular or extracurricular activities of a
primary or secondary school; the operation of a community or area
center in which presentations in music, dramatics, the arts, and
related fields are made in order to foster public interest and
education therein; the production of performances in music,
dramatics, and the arts; or the promotion of education by an
organization engaged in carrying on research in, or the
dissemination of, scientific and technological knowledge and
information primarily for the public.
Nothing in this division shall be deemed to exempt sales to
any organization for use in the operation or carrying on of a
trade or business, or sales to a home for the aged for use in the
operation of independent living facilities as defined in division
(A) of section 5709.12 of the Revised Code.
(13) Building and construction materials and services sold to
construction contractors for incorporation into a structure or
improvement to real property under a construction contract with
this state or a political subdivision of this state, or with the
United States government or any of its agencies; building and
construction materials and services sold to construction
contractors for incorporation into a structure or improvement to
real property that are accepted for ownership by this state or any
of its political subdivisions, or by the United States government
or any of its agencies at the time of completion of the structures
or improvements; building and construction materials sold to
construction contractors for incorporation into a horticulture
structure or livestock structure for a person engaged in the
business of horticulture or producing livestock; building
materials and services sold to a construction contractor for
incorporation into a house of public worship or religious
education, or a building used exclusively for charitable purposes
under a construction contract with an organization whose purpose
is as described in division (B)(12) of this section; building
materials and services sold to a construction contractor for
incorporation into a building under a construction contract with
an organization exempt from taxation under section 501(c)(3) of
the Internal Revenue Code of 1986 when the building is to be used
exclusively for the organization's exempt purposes; building and
construction materials sold for incorporation into the original
construction of a sports facility under section 307.696 of the
Revised Code; building and construction materials and services
sold to a construction contractor for incorporation into real
property outside this state if such materials and services, when
sold to a construction contractor in the state in which the real
property is located for incorporation into real property in that
state, would be exempt from a tax on sales levied by that state;
and, until one calendar year after the construction of a
convention center that qualifies for property tax exemption under
section 5709.084 of the Revised Code is completed, building and
construction materials and services sold to a construction
contractor for incorporation into the real property comprising
that convention center;
(14) Sales of ships or vessels or rail rolling stock used or
to be used principally in interstate or foreign commerce, and
repairs, alterations, fuel, and lubricants for such ships or
vessels or rail rolling stock;
(15) Sales to persons primarily engaged in any of the
activities mentioned in division (B)(42)(a), (g), or (h) of this
section, to persons engaged in making retail sales, or to persons
who purchase for sale from a manufacturer tangible personal
property that was produced by the manufacturer in accordance with
specific designs provided by the purchaser, of packages, including
material, labels, and parts for packages, and of machinery,
equipment, and material for use primarily in packaging tangible
personal property produced for sale, including any machinery,
equipment, and supplies used to make labels or packages, to
prepare packages or products for labeling, or to label packages or
products, by or on the order of the person doing the packaging, or
sold at retail. "Packages" includes bags, baskets, cartons,
crates, boxes, cans, bottles, bindings, wrappings, and other
similar devices and containers, but does not include motor
vehicles or bulk tanks, trailers, or similar devices attached to
motor vehicles. "Packaging" means placing in a package. Division
(B)(15) of this section does not apply to persons engaged in
highway transportation for hire.
(16) Sales of food to persons using supplemental nutrition
assistance program benefits to purchase the food. As used in this
division, "food" has the same meaning as in 7 U.S.C. 2012 and
federal regulations adopted pursuant to the Food and Nutrition Act
of 2008.
(17) Sales to persons engaged in farming, agriculture,
horticulture, or floriculture, of tangible personal property for
use or consumption primarily in the production by farming,
agriculture, horticulture, or floriculture of other tangible
personal property for use or consumption primarily in the
production of tangible personal property for sale by farming,
agriculture, horticulture, or floriculture; or material and parts
for incorporation into any such tangible personal property for use
or consumption in production; and of tangible personal property
for such use or consumption in the conditioning or holding of
products produced by and for such use, consumption, or sale by
persons engaged in farming, agriculture, horticulture, or
floriculture, except where such property is incorporated into real
property;
(18) Sales of drugs for a human being that may be dispensed
only pursuant to a prescription; insulin as recognized in the
official United States pharmacopoeia; urine and blood testing
materials when used by diabetics or persons with hypoglycemia to
test for glucose or acetone; hypodermic syringes and needles when
used by diabetics for insulin injections; epoetin alfa when
purchased for use in the treatment of persons with medical
disease; hospital beds when purchased by hospitals, nursing homes,
or other medical facilities; and medical oxygen and medical
oxygen-dispensing equipment when purchased by hospitals, nursing
homes, or other medical facilities;
(19) Sales of prosthetic devices, durable medical equipment
for home use, or mobility enhancing equipment, when made pursuant
to a prescription and when such devices or equipment are for use
by a human being.
(20) Sales of emergency and fire protection vehicles and
equipment to nonprofit organizations for use solely in providing
fire protection and emergency services, including trauma care and
emergency medical services, for political subdivisions of the
state;
(21) Sales of tangible personal property manufactured in this
state, if sold by the manufacturer in this state to a retailer for
use in the retail business of the retailer outside of this state
and if possession is taken from the manufacturer by the purchaser
within this state for the sole purpose of immediately removing the
same from this state in a vehicle owned by the purchaser;
(22) Sales of services provided by the state or any of its
political subdivisions, agencies, instrumentalities, institutions,
or authorities, or by governmental entities of the state or any of
its political subdivisions, agencies, instrumentalities,
institutions, or authorities;
(23) Sales of motor vehicles to nonresidents of this state
under the circumstances described in division (B) of section
5739.029 of the Revised Code;
(24) Sales to persons engaged in the preparation of eggs for
sale of tangible personal property used or consumed directly in
such preparation, including such tangible personal property used
for cleaning, sanitizing, preserving, grading, sorting, and
classifying by size; packages, including material and parts for
packages, and machinery, equipment, and material for use in
packaging eggs for sale; and handling and transportation equipment
and parts therefor, except motor vehicles licensed to operate on
public highways, used in intraplant or interplant transfers or
shipment of eggs in the process of preparation for sale, when the
plant or plants within or between which such transfers or
shipments occur are operated by the same person. "Packages"
includes containers, cases, baskets, flats, fillers, filler flats,
cartons, closure materials, labels, and labeling materials, and
"packaging" means placing therein.
(25)(a) Sales of water to a consumer for residential use;
(b) Sales of water by a nonprofit corporation engaged
exclusively in the treatment, distribution, and sale of water to
consumers, if such water is delivered to consumers through pipes
or tubing.
(26) Fees charged for inspection or reinspection of motor
vehicles under section 3704.14 of the Revised Code;
(27) Sales to persons licensed to conduct a food service
operation pursuant to section 3717.43 of the Revised Code, of
tangible personal property primarily used directly for the
following:
(a) To prepare food for human consumption for sale;
(b) To preserve food that has been or will be prepared for
human consumption for sale by the food service operator, not
including tangible personal property used to display food for
selection by the consumer;
(c) To clean tangible personal property used to prepare or
serve food for human consumption for sale.
(28) Sales of animals by nonprofit animal adoption services
or county humane societies;
(29) Sales of services to a corporation described in division
(A) of section 5709.72 of the Revised Code, and sales of tangible
personal property that qualifies for exemption from taxation under
section 5709.72 of the Revised Code;
(30) Sales and installation of agricultural land tile, as
defined in division (B)(5)(a) of section 5739.01 of the Revised
Code;
(31) Sales and erection or installation of portable grain
bins, as defined in division (B)(5)(b) of section 5739.01 of the
Revised Code;
(32) The sale, lease, repair, and maintenance of, parts for,
or items attached to or incorporated in, motor vehicles that are
primarily used for transporting tangible personal property
belonging to others by a person engaged in highway transportation
for hire, except for packages and packaging used for the
transportation of tangible personal property;
(33) Sales to the state headquarters of any veterans'
organization in this state that is either incorporated and issued
a charter by the congress of the United States or is recognized by
the United States veterans administration, for use by the
headquarters;
(34) Sales to a telecommunications service vendor, mobile
telecommunications service vendor, or satellite broadcasting
service vendor of tangible personal property and services used
directly and primarily in transmitting, receiving, switching, or
recording any interactive, one- or two-way electromagnetic
communications, including voice, image, data, and information,
through the use of any medium, including, but not limited to,
poles, wires, cables, switching equipment, computers, and record
storage devices and media, and component parts for the tangible
personal property. The exemption provided in this division shall
be in lieu of all other exemptions under division (B)(42)(a) or
(n) of this section to which the vendor may otherwise be entitled,
based upon the use of the thing purchased in providing the
telecommunications, mobile telecommunications, or satellite
broadcasting service.
(35)(a) Sales where the purpose of the consumer is to use or
consume the things transferred in making retail sales and
consisting of newspaper inserts, catalogues, coupons, flyers, gift
certificates, or other advertising material that prices and
describes tangible personal property offered for retail sale.
(b) Sales to direct marketing vendors of preliminary
materials such as photographs, artwork, and typesetting that will
be used in printing advertising material; and of printed matter
that offers free merchandise or chances to win sweepstake prizes
and that is mailed to potential customers with advertising
material described in division (B)(35)(a) of this section;
(c) Sales of equipment such as telephones, computers,
facsimile machines, and similar tangible personal property
primarily used to accept orders for direct marketing retail sales.
(d) Sales of automatic food vending machines that preserve
food with a shelf life of forty-five days or less by refrigeration
and dispense it to the consumer.
For purposes of division (B)(35) of this section, "direct
marketing" means the method of selling where consumers order
tangible personal property by United States mail, delivery
service, or telecommunication and the vendor delivers or ships the
tangible personal property sold to the consumer from a warehouse,
catalogue distribution center, or similar fulfillment facility by
means of the United States mail, delivery service, or common
carrier.
(36) Sales to a person engaged in the business of
horticulture or producing livestock of materials to be
incorporated into a horticulture structure or livestock structure;
(37) Sales of personal computers, computer monitors, computer
keyboards, modems, and other peripheral computer equipment to an
individual who is licensed or certified to teach in an elementary
or a secondary school in this state for use by that individual in
preparation for teaching elementary or secondary school students;
(38) Sales to a professional racing team of any of the
following:
(a) Motor racing vehicles;
(b) Repair services for motor racing vehicles;
(c) Items of property that are attached to or incorporated in
motor racing vehicles, including engines, chassis, and all other
components of the vehicles, and all spare, replacement, and
rebuilt parts or components of the vehicles; except not including
tires, consumable fluids, paint, and accessories consisting of
instrumentation sensors and related items added to the vehicle to
collect and transmit data by means of telemetry and other forms of
communication.
(39) Sales of used manufactured homes and used mobile homes,
as defined in section 5739.0210 of the Revised Code, made on or
after January 1, 2000;
(40) Sales of tangible personal property and services to a
provider of electricity used or consumed directly and primarily in
generating, transmitting, or distributing electricity for use by
others, including property that is or is to be incorporated into
and will become a part of the consumer's production, transmission,
or distribution system and that retains its classification as
tangible personal property after incorporation; fuel or power used
in the production, transmission, or distribution of electricity;
energy conversion equipment as defined in section 5727.01 of the
Revised Code; and tangible personal property and services used in
the repair and maintenance of the production, transmission, or
distribution system, including only those motor vehicles as are
specially designed and equipped for such use. The exemption
provided in this division shall be in lieu of all other exemptions
in division (B)(42)(a) or (n) of this section to which a provider
of electricity may otherwise be entitled based on the use of the
tangible personal property or service purchased in generating,
transmitting, or distributing electricity.
(41) Sales to a person providing services under division
(B)(3)(r) of section 5739.01 of the Revised Code of tangible
personal property and services used directly and primarily in
providing taxable services under that section.
(42) Sales where the purpose of the purchaser is to do any of
the following:
(a) To incorporate the thing transferred as a material or a
part into tangible personal property to be produced for sale by
manufacturing, assembling, processing, or refining; or to use or
consume the thing transferred directly in producing tangible
personal property for sale by mining, including, without
limitation, the extraction from the earth of all substances that
are classed geologically as minerals, production of crude oil and
natural gas, or directly in the rendition of a public utility
service, except that the sales tax levied by this section shall be
collected upon all meals, drinks, and food for human consumption
sold when transporting persons. Persons engaged in rendering
services in the exploration for, and production of, crude oil and
natural gas for others are deemed engaged directly in the
exploration for, and production of, crude oil and natural gas.
This paragraph does not exempt from "retail sale" or "sales at
retail" the sale of tangible personal property that is to be
incorporated into a structure or improvement to real property.
(b) To hold the thing transferred as security for the
performance of an obligation of the vendor;
(c) To resell, hold, use, or consume the thing transferred as
evidence of a contract of insurance;
(d) To use or consume the thing directly in commercial
fishing;
(e) To incorporate the thing transferred as a material or a
part into, or to use or consume the thing transferred directly in
the production of, magazines distributed as controlled circulation
publications;
(f) To use or consume the thing transferred in the production
and preparation in suitable condition for market and sale of
printed, imprinted, overprinted, lithographic, multilithic,
blueprinted, photostatic, or other productions or reproductions of
written or graphic matter;
(g) To use the thing transferred, as described in section
5739.011 of the Revised Code, primarily in a manufacturing
operation to produce tangible personal property for sale;
(h) To use the benefit of a warranty, maintenance or service
contract, or similar agreement, as described in division (B)(7) of
section 5739.01 of the Revised Code, to repair or maintain
tangible personal property, if all of the property that is the
subject of the warranty, contract, or agreement would not be
subject to the tax imposed by this section;
(i) To use the thing transferred as qualified research and
development equipment;
(j) To use or consume the thing transferred primarily in
storing, transporting, mailing, or otherwise handling purchased
sales inventory in a warehouse, distribution center, or similar
facility when the inventory is primarily distributed outside this
state to retail stores of the person who owns or controls the
warehouse, distribution center, or similar facility, to retail
stores of an affiliated group of which that person is a member, or
by means of direct marketing. This division does not apply to
motor vehicles registered for operation on the public highways. As
used in this division, "affiliated group" has the same meaning as
in division (B)(3)(e) of section 5739.01 of the Revised Code and
"direct marketing" has the same meaning as in division (B)(35) of
this section.
(k) To use or consume the thing transferred to fulfill a
contractual obligation incurred by a warrantor pursuant to a
warranty provided as a part of the price of the tangible personal
property sold or by a vendor of a warranty, maintenance or service
contract, or similar agreement the provision of which is defined
as a sale under division (B)(7) of section 5739.01 of the Revised
Code;
(l) To use or consume the thing transferred in the production
of a newspaper for distribution to the public;
(m) To use tangible personal property to perform a service
listed in division (B)(3) of section 5739.01 of the Revised Code,
if the property is or is to be permanently transferred to the
consumer of the service as an integral part of the performance of
the service;
(n) To use or consume the thing transferred primarily in
producing tangible personal property for sale by farming,
agriculture, horticulture, or floriculture. Persons engaged in
rendering farming, agriculture, horticulture, or floriculture
services for others are deemed engaged primarily in farming,
agriculture, horticulture, or floriculture. This paragraph does
not exempt from "retail sale" or "sales at retail" the sale of
tangible personal property that is to be incorporated into a
structure or improvement to real property.
(o) To use or consume the thing transferred in acquiring,
formatting, editing, storing, and disseminating data or
information by electronic publishing.
As used in division (B)(42) of this section, "thing" includes
all transactions included in divisions (B)(3)(a), (b), and (e) of
section 5739.01 of the Revised Code.
(43) Sales conducted through a coin operated device that
activates vacuum equipment or equipment that dispenses water,
whether or not in combination with soap or other cleaning agents
or wax, to the consumer for the consumer's use on the premises in
washing, cleaning, or waxing a motor vehicle, provided no other
personal property or personal service is provided as part of the
transaction.
(44) Sales of replacement and modification parts for engines,
airframes, instruments, and interiors in, and paint for, aircraft
used primarily in a fractional aircraft ownership program, and
sales of services for the repair, modification, and maintenance of
such aircraft, and machinery, equipment, and supplies primarily
used to provide those services.
(45) Sales of telecommunications service that is used
directly and primarily to perform the functions of a call center.
As used in this division, "call center" means any physical
location where telephone calls are placed or received in high
volume for the purpose of making sales, marketing, customer
service, technical support, or other specialized business
activity, and that employs at least fifty individuals that engage
in call center activities on a full-time basis, or sufficient
individuals to fill fifty full-time equivalent positions.
(46) Sales by a telecommunications service vendor of 900
service to a subscriber. This division does not apply to
information services, as defined in division (FF) of section
5739.01 of the Revised Code.
(47) Sales of value-added non-voice data service. This
division does not apply to any similar service that is not
otherwise a telecommunications service.
(48)(a) Sales of machinery, equipment, and software to a
qualified direct selling entity for use in a warehouse or
distribution center primarily for storing, transporting, or
otherwise handling inventory that is held for sale to independent
salespersons who operate as direct sellers and that is held
primarily for distribution outside this state;
(b) As used in division (B)(48)(a) of this section:
(i) "Direct seller" means a person selling consumer products
to individuals for personal or household use and not from a fixed
retail location, including selling such product at in-home product
demonstrations, parties, and other one-on-one selling.
(ii) "Qualified direct selling entity" means an entity
selling to direct sellers at the time the entity enters into a tax
credit agreement with the tax credit authority pursuant to section
122.17 of the Revised Code, provided that the agreement was
entered into on or after January 1, 2007. Neither contingencies
relevant to the granting of, nor later developments with respect
to, the tax credit shall impair the status of the qualified direct
selling entity under division (B)(48) of this section after
execution of the tax credit agreement by the tax credit authority.
(c) Division (B)(48) of this section is limited to machinery,
equipment, and software first stored, used, or consumed in this
state within the period commencing June 24, 2008, and ending on
the date that is five years after that date.
(49) Sales of materials, parts, equipment, or engines used in
the repair or maintenance of aircraft or avionics systems of such
aircraft, and sales of repair, remodeling, replacement, or
maintenance services in this state performed on aircraft or on an
aircraft's avionics, engine, or component materials or parts. As
used in division (B)(49) of this section, "aircraft" means
aircraft of more than six thousand pounds maximum certified
takeoff weight or used exclusively in general aviation.
(50) Sales of full flight simulators that are used for pilot
or flight-crew training, sales of repair or replacement parts or
components, and sales of repair or maintenance services for such
full flight simulators. "Full flight simulator" means a replica of
a specific type, or make, model, and series of aircraft cockpit.
It includes the assemblage of equipment and computer programs
necessary to represent aircraft operations in ground and flight
conditions, a visual system providing an out-of-the-cockpit view,
and a system that provides cues at least equivalent to those of a
three-degree-of-freedom motion system, and has the full range of
capabilities of the systems installed in the device as described
in appendices A and B of part 60 of chapter 1 of title 14 of the
Code of Federal Regulations.
(51) Any transfer or lease of tangible personal property
between the state and a successful proposer in accordance with
sections 126.60 to 126.605 of the Revised Code, provided the
property is part of a project as defined in section 126.60 of the
Revised Code and the state retains ownership of the project or
part thereof that is being transferred or leased, between the
state and JobsOhio in accordance with section 4313.02 of the
Revised Code.
(C) For the purpose of the proper administration of this
chapter, and to prevent the evasion of the tax, it is presumed
that all sales made in this state are subject to the tax until the
contrary is established.
(D) The levy of this tax on retail sales of recreation and
sports club service shall not prevent a municipal corporation from
levying any tax on recreation and sports club dues or on any
income generated by recreation and sports club dues.
(E) The tax collected by the vendor from the consumer under
this chapter is not part of the price, but is a tax collection for
the benefit of the state, and of counties levying an additional
sales tax pursuant to section 5739.021 or 5739.026 of the Revised
Code and of transit authorities levying an additional sales tax
pursuant to section 5739.023 of the Revised Code. Except for the
discount authorized under section 5739.12 of the Revised Code and
the effects of any rounding pursuant to section 5703.055 of the
Revised Code, no person other than the state or such a county or
transit authority shall derive any benefit from the collection or
payment of the tax levied by this section or section 5739.021,
5739.023, or 5739.026 of the Revised Code.
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 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 depreciation expense allowed
by that subsection to a pass-through entity in which the taxpayer
has a direct or indirect ownership interest.
(ii) Add five-sixths of the amount of qualifying section 179
depreciation expense, including a person's proportionate or
distributive share of the amount of qualifying section 179
depreciation expense allowed to 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 the qualifying section 179
depreciation expense amount.
(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.
(31) Deduct, to the extent not otherwise deducted or excluded
in computing federal or Ohio adjusted gross income for the taxable
year, Ohio college opportunity or federal Pell grant amounts
received by the taxpayer or the taxpayer's spouse or dependent
pursuant to section 3333.122 of the Revised Code or 20 U.S.C.
1070a, et seq., and used to pay room or board furnished by the
educational institution for which the grant was awarded at the
institution's facilities, including meal plans administered by the
institution. For the purposes of this division, receipt of a grant
includes the distribution of a grant directly to an educational
institution and the crediting of the grant to the enrollee's
account with the institution.
(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.
Sec. 5751.01. As used in this chapter:
(A) "Person" means, but is not limited to, individuals,
combinations of individuals of any form, receivers, assignees,
trustees in bankruptcy, firms, companies, joint-stock companies,
business trusts, estates, partnerships, limited liability
partnerships, limited liability companies, associations, joint
ventures, clubs, societies, for-profit corporations, S
corporations, qualified subchapter S subsidiaries, qualified
subchapter S trusts, trusts, entities that are disregarded for
federal income tax purposes, and any other entities.
(B) "Consolidated elected taxpayer" means a group of two or
more persons treated as a single taxpayer for purposes of this
chapter as the result of an election made under section 5751.011
of the Revised Code.
(C) "Combined taxpayer" means a group of two or more persons
treated as a single taxpayer for purposes of this chapter under
section 5751.012 of the Revised Code.
(D) "Taxpayer" means any person, or any group of persons in
the case of a consolidated elected taxpayer or combined taxpayer
treated as one taxpayer, required to register or pay tax under
this chapter. "Taxpayer" does not include excluded persons.
(E) "Excluded person" means any of the following:
(1) Any person with not more than one hundred fifty thousand
dollars of taxable gross receipts during the calendar year.
Division (E)(1) of this section does not apply to a person that is
a member of a consolidated elected taxpayer;
(2) A public utility that paid the excise tax imposed by
section 5727.24 or 5727.30 of the Revised Code based on one or
more measurement periods that include the entire tax period under
this chapter, except that a public utility that is a combined
company is a taxpayer with regard to the following gross receipts:
(a) Taxable gross receipts directly attributed to a public
utility activity, but not directly attributed to an activity that
is subject to the excise tax imposed by section 5727.24 or 5727.30
of the Revised Code;
(b) Taxable gross receipts that cannot be directly attributed
to any activity, multiplied by a fraction whose numerator is the
taxable gross receipts described in division (E)(2)(a) of this
section and whose denominator is the total taxable gross receipts
that can be directly attributed to any activity;
(c) Except for any differences resulting from the use of an
accrual basis method of accounting for purposes of determining
gross receipts under this chapter and the use of the cash basis
method of accounting for purposes of determining gross receipts
under section 5727.24 of the Revised Code, the gross receipts
directly attributed to the activity of a natural gas company shall
be determined in a manner consistent with division (D) of section
5727.03 of the Revised Code.
As used in division (E)(2) of this section, "combined
company" and "public utility" have the same meanings as in section
5727.01 of the Revised Code.
(3) A financial institution, as defined in section 5725.01 of
the Revised Code, that paid the corporation franchise tax charged
by division (D) of section 5733.06 of the Revised Code based on
one or more taxable years that include the entire tax period under
this chapter;
(4) A dealer in intangibles, as defined in section 5725.01 of
the Revised Code, that paid the dealer in intangibles tax levied
by division (D) of section 5707.03 of the Revised Code based on
one or more measurement periods that include the entire tax period
under this chapter;
(5) A financial holding company as defined in the "Bank
Holding Company Act," 12 U.S.C. 1841(p);
(6) A bank holding company as defined in the "Bank Holding
Company Act," 12 U.S.C. 1841(a);
(7) A savings and loan holding company as defined in the
"Home Owners Loan Act," 12 U.S.C. 1467a(a)(1)(D) that is engaging
only in activities or investments permissible for a financial
holding company under 12 U.S.C. 1843(k);
(8) A person directly or indirectly owned by one or more
financial institutions, financial holding companies, bank holding
companies, or savings and loan holding companies described in
division (E)(3), (5), (6), or (7) of this section that is engaged
in activities permissible for a financial holding company under 12
U.S.C. 1843(k), except that any such person held pursuant to
merchant banking authority under 12 U.S.C. 1843(k)(4)(H) or 12
U.S.C. 1843(k)(4)(I) is not an excluded person, or a person
directly or indirectly owned by one or more insurance companies
described in division (E)(9) of this section that is authorized to
do the business of insurance in this state.
For the purposes of division (E)(8) of this section, a person
owns another person under the following circumstances:
(a) In the case of corporations issuing capital stock, one
corporation owns another corporation if it owns fifty per cent or
more of the other corporation's capital stock with current voting
rights;
(b) In the case of a limited liability company, one person
owns the company if that person's membership interest, as defined
in section 1705.01 of the Revised Code, is fifty per cent or more
of the combined membership interests of all persons owning such
interests in the company;
(c) In the case of a partnership, trust, or other
unincorporated business organization other than a limited
liability company, one person owns the organization if, under the
articles of organization or other instrument governing the affairs
of the organization, that person has a beneficial interest in the
organization's profits, surpluses, losses, or distributions of
fifty per cent or more of the combined beneficial interests of all
persons having such an interest in the organization;
(d) In the case of multiple ownership, the ownership
interests of more than one person may be aggregated to meet the
fifty per cent ownership tests in this division only when each
such owner is described in division (E)(3), (5), (6), or (7) of
this section and is engaged in activities permissible for a
financial holding company under 12 U.S.C. 1843(k) or is a person
directly or indirectly owned by one or more insurance companies
described in division (E)(9) of this section that is authorized to
do the business of insurance in this state.
(9) A domestic insurance company or foreign insurance
company, as defined in section 5725.01 of the Revised Code, that
paid the insurance company premiums tax imposed by section 5725.18
or Chapter 5729. of the Revised Code, or an unauthorized insurance
company whose gross premiums are subject to tax under section
3905.36 of the Revised Code based on one or more measurement
periods that include the entire tax period under this chapter;
(10) A person that solely facilitates or services one or more
securitizations or similar transactions for any person described
in division (E)(3), (5), (6), (7), (8), or (9) of this section, or
a person that solely facilitates or services one or more
securitizations of phase-in-recovery property pursuant to a final
financing order as those terms are defined in section 4928.23 of
the Revised Code. For purposes of this division, "securitization"
means transferring one or more assets to one or more persons and
then issuing securities backed by the right to receive payment
from the asset or assets so transferred.
(11) Except as otherwise provided in this division, a
pre-income tax trust as defined in division (FF)(4) of section
5747.01 of the Revised Code and any pass-through entity of which
such pre-income tax trust owns or controls, directly, indirectly,
or constructively through related interests, more than five per
cent of the ownership or equity interests. If the pre-income tax
trust has made a qualifying pre-income tax trust election under
division (FF)(3) of section 5747.01 of the Revised Code, then the
trust and the pass-through entities of which it owns or controls,
directly, indirectly, or constructively through related interests,
more than five per cent of the ownership or equity interests,
shall not be excluded persons for purposes of the tax imposed
under section 5751.02 of the Revised Code.
(12) Nonprofit organizations or the state and its agencies,
instrumentalities, or political subdivisions.
(F) Except as otherwise provided in divisions (F)(2), (3),
and (4) of this section, "gross receipts" means the total amount
realized by a person, without deduction for the cost of goods sold
or other expenses incurred, that contributes to the production of
gross income of the person, including the fair market value of any
property and any services received, and any debt transferred or
forgiven as consideration.
(1) The following are examples of gross receipts:
(a) Amounts realized from the sale, exchange, or other
disposition of the taxpayer's property to or with another;
(b) Amounts realized from the taxpayer's performance of
services for another;
(c) Amounts realized from another's use or possession of the
taxpayer's property or capital;
(d) Any combination of the foregoing amounts.
(2) "Gross receipts" excludes the following amounts:
(a) Interest income except interest on credit sales;
(b) Dividends and distributions from corporations, and
distributive or proportionate shares of receipts and income from a
pass-through entity as defined under section 5733.04 of the
Revised Code;
(c) Receipts from the sale, exchange, or other disposition of
an asset described in section 1221 or 1231 of the Internal Revenue
Code, without regard to the length of time the person held the
asset. Notwithstanding section 1221 of the Internal Revenue Code,
receipts from hedging transactions also are excluded to the extent
the transactions are entered into primarily to protect a financial
position, such as managing the risk of exposure to (i) foreign
currency fluctuations that affect assets, liabilities, profits,
losses, equity, or investments in foreign operations; (ii)
interest rate fluctuations; or (iii) commodity price fluctuations.
As used in division (F)(2)(c) of this section, "hedging
transaction" has the same meaning as used in section 1221 of the
Internal Revenue Code and also includes transactions accorded
hedge accounting treatment under statement of financial accounting
standards number 133 of the financial accounting standards board.
For the purposes of division (F)(2)(c) of this section, the actual
transfer of title of real or tangible personal property to another
entity is not a hedging transaction.
(d) Proceeds received attributable to the repayment,
maturity, or redemption of the principal of a loan, bond, mutual
fund, certificate of deposit, or marketable instrument;
(e) The principal amount received under a repurchase
agreement or on account of any transaction properly characterized
as a loan to the person;
(f) Contributions received by a trust, plan, or other
arrangement, any of which is described in section 501(a) of the
Internal Revenue Code, or to which Title 26, Subtitle A, Chapter
1, Subchapter (D) of the Internal Revenue Code applies;
(g) Compensation, whether current or deferred, and whether in
cash or in kind, received or to be received by an employee, former
employee, or the employee's legal successor for services rendered
to or for an employer, including reimbursements received by or for
an individual for medical or education expenses, health insurance
premiums, or employee expenses, or on account of a dependent care
spending account, legal services plan, any cafeteria plan
described in section 125 of the Internal Revenue Code, or any
similar employee reimbursement;
(h) Proceeds received from the issuance of the taxpayer's own
stock, options, warrants, puts, or calls, or from the sale of the
taxpayer's treasury stock;
(i) Proceeds received on the account of payments from
insurance policies, except those proceeds received for the loss of
business revenue;
(j) Gifts or charitable contributions received; membership
dues received by trade, professional, homeowners', or condominium
associations; and payments received for educational courses,
meetings, meals, or similar payments to a trade, professional, or
other similar association; and fundraising receipts received by
any person when any excess receipts are donated or used
exclusively for charitable purposes;
(k) Damages received as the result of litigation in excess of
amounts that, if received without litigation, would be gross
receipts;
(l) Property, money, and other amounts received or acquired
by an agent on behalf of another in excess of the agent's
commission, fee, or other remuneration;
(m) Tax refunds, other tax benefit recoveries, and
reimbursements for the tax imposed under this chapter made by
entities that are part of the same combined taxpayer or
consolidated elected taxpayer group, and reimbursements made by
entities that are not members of a combined taxpayer or
consolidated elected taxpayer group that are required to be made
for economic parity among multiple owners of an entity whose tax
obligation under this chapter is required to be reported and paid
entirely by one owner, pursuant to the requirements of sections
5751.011 and 5751.012 of the Revised Code;
(o) Contributions to capital;
(p) Sales or use taxes collected as a vendor or an
out-of-state seller on behalf of the taxing jurisdiction from a
consumer or other taxes the taxpayer is required by law to collect
directly from a purchaser and remit to a local, state, or federal
tax authority;
(q) In the case of receipts from the sale of cigarettes or
tobacco products by a wholesale dealer, retail dealer,
distributor, manufacturer, or seller, all as defined in section
5743.01 of the Revised Code, an amount equal to the federal and
state excise taxes paid by any person on or for such cigarettes or
tobacco products under subtitle E of the Internal Revenue Code or
Chapter 5743. of the Revised Code;
(r) In the case of receipts from the sale of motor fuel by a
licensed motor fuel dealer, licensed retail dealer, or licensed
permissive motor fuel dealer, all as defined in section 5735.01 of
the Revised Code, an amount equal to federal and state excise
taxes paid by any person on such motor fuel under section 4081 of
the Internal Revenue Code or Chapter 5735. of the Revised Code;
(s) In the case of receipts from the sale of beer or
intoxicating liquor, as defined in section 4301.01 of the Revised
Code, by a person holding a permit issued under Chapter 4301. or
4303. of the Revised Code, an amount equal to federal and state
excise taxes paid by any person on or for such beer or
intoxicating liquor under subtitle E of the Internal Revenue Code
or Chapter 4301. or 4305. of the Revised Code;
(t) Receipts realized by a new motor vehicle dealer or used
motor vehicle dealer, as defined in section 4517.01 of the Revised
Code, from the sale or other transfer of a motor vehicle, as
defined in that section, to another motor vehicle dealer for the
purpose of resale by the transferee motor vehicle dealer, but only
if the sale or other transfer was based upon the transferee's need
to meet a specific customer's preference for a motor vehicle;
(u) Receipts from a financial institution described in
division (E)(3) of this section for services provided to the
financial institution in connection with the issuance, processing,
servicing, and management of loans or credit accounts, if such
financial institution and the recipient of such receipts have at
least fifty per cent of their ownership interests owned or
controlled, directly or constructively through related interests,
by common owners;
(v) Receipts realized from administering anti-neoplastic
drugs and other cancer chemotherapy, biologicals, therapeutic
agents, and supportive drugs in a physician's office to patients
with cancer;
(w) Funds received or used by a mortgage broker that is not a
dealer in intangibles, other than fees or other consideration,
pursuant to a table-funding mortgage loan or warehouse-lending
mortgage loan. Terms used in division (F)(2)(w) of this section
have the same meanings as in section 1322.01 of the Revised Code,
except "mortgage broker" means a person assisting a buyer in
obtaining a mortgage loan for a fee or other consideration paid by
the buyer or a lender, or a person engaged in table-funding or
warehouse-lending mortgage loans that are first lien mortgage
loans.
(x) Property, money, and other amounts received by a
professional employer organization, as defined in section 4125.01
of the Revised Code, from a client employer, as defined in that
section, in excess of the administrative fee charged by the
professional employer organization to the client employer;
(y) In the case of amounts retained as commissions by a
permit holder under Chapter 3769. of the Revised Code, an amount
equal to the amounts specified under that chapter that must be
paid to or collected by the tax commissioner as a tax and the
amounts specified under that chapter to be used as purse money;
(z) Qualifying distribution center receipts.
(i) For purposes of division (F)(2)(z) of this section:
(I) "Qualifying distribution center receipts" means receipts
of a supplier from qualified property that is delivered to a
qualified distribution center, multiplied by a quantity that
equals one minus the Ohio delivery percentage.
(II) "Qualified property" means tangible personal property
delivered to a qualified distribution center that is shipped to
that qualified distribution center solely for further shipping by
the qualified distribution center to another location in this
state or elsewhere. "Further shipping" includes storing and
repackaging such property into smaller or larger bundles, so long
as such property is not subject to further manufacturing or
processing.
(III) "Qualified distribution center" means a warehouse or
other similar facility in this state that, for the qualifying
year, is operated by a person that is not part of a combined
taxpayer group and that has a qualifying certificate. However, all
warehouses or other similar facilities that are operated by
persons in the same taxpayer group and that are located within one
mile of each other shall be treated as one qualified distribution
center.
(IV) "Qualifying year" means the calendar year to which the
qualifying certificate applies.
(V) "Qualifying period" means the period of the first day of
July of the second year preceding the qualifying year through the
thirtieth day of June of the year preceding the qualifying year.
(VI) "Qualifying certificate" means the certificate issued by
the tax commissioner after the operator of a distribution center
files an annual application with the commissioner. The application
and annual fee shall be filed and paid for each qualified
distribution center on or before the first day of September before
the qualifying year or within forty-five days after the
distribution center opens, whichever is later.
The applicant must substantiate to the commissioner's
satisfaction that, for the qualifying period, all persons
operating the distribution center have more than fifty per cent of
the cost of the qualified property shipped to a location such that
it would be sitused outside this state under the provisions of
division (E) of section 5751.033 of the Revised Code. The
applicant must also substantiate that the distribution center
cumulatively had costs from its suppliers equal to or exceeding
five hundred million dollars during the qualifying period. (For
purposes of division (F)(2)(z)(i)(VI) of this section, "supplier"
excludes any person that is part of the consolidated elected
taxpayer group, if applicable, of the operator of the qualified
distribution center.) The commissioner may require the applicant
to have an independent certified public accountant certify that
the calculation of the minimum thresholds required for a qualified
distribution center by the operator of a distribution center has
been made in accordance with generally accepted accounting
principles. The commissioner shall issue or deny the issuance of a
certificate within sixty days after the receipt of the
application. A denial is subject to appeal under section 5717.02
of the Revised Code. If the operator files a timely appeal under
section 5717.02 of the Revised Code, the operator shall be granted
a qualifying certificate, provided that the operator is liable for
any tax, interest, or penalty upon amounts claimed as qualifying
distribution center receipts, other than those receipts exempt
under division (C)(1) of section 5751.011 of the Revised Code,
that would have otherwise not been owed by its suppliers if the
qualifying certificate was valid.
(VII) "Ohio delivery percentage" means the proportion of the
total property delivered to a destination inside Ohio from the
qualified distribution center during the qualifying period
compared with total deliveries from such distribution center
everywhere during the qualifying period.
(ii) If the distribution center is new and was not open for
the entire qualifying period, the operator of the distribution
center may request that the commissioner grant a qualifying
certificate. If the certificate is granted and it is later
determined that more than fifty per cent of the qualified property
during that year was not shipped to a location such that it would
be sitused outside of this state under the provisions of division
(E) of section 5751.033 of the Revised Code or if it is later
determined that the person that operates the distribution center
had average monthly costs from its suppliers of less than forty
million dollars during that year, then the operator of the
distribution center shall be liable for any tax, interest, or
penalty upon amounts claimed as qualifying distribution center
receipts, other than those receipts exempt under division (C)(1)
of section 5751.011 of the Revised Code, that would have not
otherwise been owed by its suppliers during the qualifying year if
the qualifying certificate was valid. (For purposes of division
(F)(2)(z)(ii) of this section, "supplier" excludes any person that
is part of the consolidated elected taxpayer group, if applicable,
of the operator of the qualified distribution center.)
(iii) When filing an application for a qualifying certificate
under division (F)(2)(z)(i)(VI) of this section, the operator of a
qualified distribution center also shall provide documentation, as
the commissioner requires, for the commissioner to ascertain the
Ohio delivery percentage. The commissioner, upon issuing the
qualifying certificate, also shall certify the Ohio delivery
percentage. The operator of the qualified distribution center may
appeal the commissioner's certification of the Ohio delivery
percentage in the same manner as an appeal is taken from the
denial of a qualifying certificate under division (F)(2)(z)(i)(VI)
of this section.
Within thirty days after all appeals have been exhausted, the
operator of the qualified distribution center shall notify the
affected suppliers of qualified property that such suppliers are
required to file, within sixty days after receiving notice from
the operator of the qualified distribution center, amended reports
for the impacted calendar quarter or quarters or calendar year,
whichever the case may be. Any additional tax liability or tax
overpayment shall be subject to interest but shall not be subject
to the imposition of any penalty so long as the amended returns
are timely filed. The supplier of tangible personal property
delivered to the qualified distribution center shall include in
its report of taxable gross receipts the receipts from the total
sales of property delivered to the qualified distribution center
for the calendar quarter or calendar year, whichever the case may
be, multiplied by the Ohio delivery percentage for the qualifying
year. Nothing in division (F)(2)(z)(iii) of this section shall be
construed as imposing liability on the operator of a qualified
distribution center for the tax imposed by this chapter arising
from any change to the Ohio delivery percentage.
(iv) In the case where the distribution center is new and not
open for the entire qualifying period, the operator shall make a
good faith estimate of an Ohio delivery percentage for use by
suppliers in their reports of taxable gross receipts for the
remainder of the qualifying period. The operator of the facility
shall disclose to the suppliers that such Ohio delivery percentage
is an estimate and is subject to recalculation. By the due date of
the next application for a qualifying certificate, the operator
shall determine the actual Ohio delivery percentage for the
estimated qualifying period and proceed as provided in division
(F)(2)(z)(iii) of this section with respect to the calculation and
recalculation of the Ohio delivery percentage. The supplier is
required to file, within sixty days after receiving notice from
the operator of the qualified distribution center, amended reports
for the impacted calendar quarter or quarters or calendar year,
whichever the case may be. Any additional tax liability or tax
overpayment shall be subject to interest but shall not be subject
to the imposition of any penalty so long as the amended returns
are timely filed.
(v) Qualifying certificates and Ohio delivery percentages
issued by the commissioner shall be open to public inspection and
shall be timely published by the commissioner. A supplier relying
in good faith on a certificate issued under this division shall
not be subject to tax on the qualifying distribution center
receipts under division (F)(2)(z) of this section. A person
receiving a qualifying certificate is responsible for paying the
tax, interest, and penalty upon amounts claimed as qualifying
distribution center receipts that would not otherwise have been
owed by the supplier if the qualifying certificate were available
when it is later determined that the qualifying certificate should
not have been issued because the statutory requirements were in
fact not met.
(vi) The annual fee for a qualifying certificate shall be one
hundred thousand dollars for each qualified distribution center.
If a qualifying certificate is not issued, the annual fee is
subject to refund after the exhaustion of all appeals provided for
in division (F)(2)(z)(i)(VI) of this section. The fee imposed
under this division may be assessed in the same manner as the tax
imposed under this chapter. The first one hundred thousand dollars
of the annual application fees collected each calendar year shall
be credited to the revenue enhancement fund. The remainder of the
annual application fees collected shall be distributed in the same
manner required under section 5751.20 of the Revised Code.
(vii) The tax commissioner may require that adequate security
be posted by the operator of the distribution center on appeal
when the commissioner disagrees that the applicant has met the
minimum thresholds for a qualified distribution center as set
forth in divisions (F)(2)(z)(i)(VI) and (F)(2)(z)(ii) of this
section.
(aa) Receipts of an employer from payroll deductions relating
to the reimbursement of the employer for advancing moneys to an
unrelated third party on an employee's behalf;
(bb) Cash discounts allowed and taken;
(cc) Returns and allowances;
(dd) Bad debts from receipts on the basis of which the tax
imposed by this chapter was paid in a prior quarterly tax payment
period. For the purpose of this division, "bad debts" means any
debts that have become worthless or uncollectible between the
preceding and current quarterly tax payment periods, have been
uncollected for at least six months, and that may be claimed as a
deduction under section 166 of the Internal Revenue Code and the
regulations adopted under that section, or that could be claimed
as such if the taxpayer kept its accounts on the accrual basis.
"Bad debts" does not include repossessed property, uncollectible
amounts on property that remains in the possession of the taxpayer
until the full purchase price is paid, or expenses in attempting
to collect any account receivable or for any portion of the debt
recovered;
(ee) Any amount realized from the sale of an account
receivable to the extent the receipts from the underlying
transaction giving rise to the account receivable were included in
the gross receipts of the taxpayer;
(ff) Any receipts directly attributed to providing public
services pursuant to sections 126.60 to 126.605 of the Revised
Code, or any receipts directly attributed to a transfer agreement
or to the enterprise transferred under that agreement under
section 4313.02 of the Revised Code.
(gg)(i) As used in this division:
(I) "Qualified uranium receipts" means receipts from the
sale, exchange, lease, loan, production, processing, or other
disposition of uranium within a uranium enrichment zone certified
by the tax commissioner under division (F)(2)(gg)(ii) of this
section. "Qualified uranium receipts" does not include any
receipts with a situs in this state outside a uranium enrichment
zone certified by the tax commissioner under division
(F)(2)(gg)(ii) of this section.
(II) "Uranium enrichment zone" means all real property that
is part of a uranium enrichment facility licensed by the United
States nuclear regulatory commission and that was or is owned or
controlled by the United States department of energy or its
successor.
(ii) Any person that owns, leases, or operates real or
tangible personal property constituting or located within a
uranium enrichment zone may apply to the tax commissioner to have
the uranium enrichment zone certified for the purpose of excluding
qualified uranium receipts under division (F)(2)(gg) of this
section. The application shall include such information that the
tax commissioner prescribes. Within sixty days after receiving the
application, the tax commissioner shall certify the zone for that
purpose if the commissioner determines that the property qualifies
as a uranium enrichment zone as defined in division (F)(2)(gg) of
this section, or, if the tax commissioner determines that the
property does not qualify, the commissioner shall deny the
application or request additional information from the applicant.
If the tax commissioner denies an application, the commissioner
shall state the reasons for the denial. The applicant may appeal
the denial of an application to the board of tax appeals pursuant
to section 5717.02 of the Revised Code. If the applicant files a
timely appeal, the tax commissioner shall conditionally certify
the applicant's property. The conditional certification shall
expire when all of the applicant's appeals are exhausted. Until
final resolution of the appeal, the applicant shall retain the
applicant's records in accordance with section 5751.12 of the
Revised Code, notwithstanding any time limit on the preservation
of records under that section.
(hh) Amounts realized by licensed motor fuel dealers or
licensed permissive motor fuel dealers from the exchange of
petroleum products, including motor fuel, between such dealers,
provided that delivery of the petroleum products occurs at a
refinery, terminal, pipeline, or marine vessel and that the
exchanging dealers agree neither dealer shall require monetary
compensation from the other for the value of the exchanged
petroleum products other than such compensation for differences in
product location or grade. Division (F)(2)(hh) of this section
does not apply to amounts realized as a result of differences in
location or grade of exchanged petroleum products or from
handling, lubricity, dye, or other additive injections fees,
pipeline security fees, or similar fees. As used in this division,
"motor fuel," "licensed motor fuel dealer," "licensed permissive
motor fuel dealer," and "terminal" have the same meanings as in
section 5735.01 of the Revised Code.
(ii) In the case of amounts collected by a licensed casino
operator from casino gaming, amounts in excess of the casino
operator's gross casino revenue. In this division, "casino
operator" and "casino gaming" have the meanings defined in section
3772.01 of the Revised Code, and "gross casino revenue" has the
meaning defined in section 5753.01 of the Revised Code.
(jj) Any receipts for which the tax imposed by this chapter
is prohibited by the constitution or laws of the United States or
the constitution of this state.
(3) In the case of a taxpayer when acting as a real estate
broker, "gross receipts" includes only the portion of any fee for
the service of a real estate broker, or service of a real estate
salesperson associated with that broker, that is retained by the
broker and not paid to an associated real estate salesperson or
another real estate broker. For the purposes of this division,
"real estate broker" and "real estate salesperson" have the same
meanings as in section 4735.01 of the Revised Code.
(4) A taxpayer's method of accounting for gross receipts for
a tax period shall be the same as the taxpayer's method of
accounting for federal income tax purposes for the taxpayer's
federal taxable year that includes the tax period. If a taxpayer's
method of accounting for federal income tax purposes changes, its
method of accounting for gross receipts under this chapter shall
be changed accordingly.
(G) "Taxable gross receipts" means gross receipts sitused to
this state under section 5751.033 of the Revised Code.
(H) A person has "substantial nexus with this state" if any
of the following applies. The person:
(1) Owns or uses a part or all of its capital in this state;
(2) Holds a certificate of compliance with the laws of this
state authorizing the person to do business in this state;
(3) Has bright-line presence in this state;
(4) Otherwise has nexus with this state to an extent that the
person can be required to remit the tax imposed under this chapter
under the Constitution of the United States.
(I) A person has "bright-line presence" in this state for a
reporting period and for the remaining portion of the calendar
year if any of the following applies. The person:
(1) Has at any time during the calendar year property in this
state with an aggregate value of at least fifty thousand dollars.
For the purpose of division (I)(1) of this section, owned property
is valued at original cost and rented property is valued at eight
times the net annual rental charge.
(2) Has during the calendar year payroll in this state of at
least fifty thousand dollars. Payroll in this state includes all
of the following:
(a) Any amount subject to withholding by the person under
section 5747.06 of the Revised Code;
(b) Any other amount the person pays as compensation to an
individual under the supervision or control of the person for work
done in this state; and
(c) Any amount the person pays for services performed in this
state on its behalf by another.
(3) Has during the calendar year taxable gross receipts of at
least five hundred thousand dollars.
(4) Has at any time during the calendar year within this
state at least twenty-five per cent of the person's total
property, total payroll, or total gross receipts.
(5) Is domiciled in this state as an individual or for
corporate, commercial, or other business purposes.
(J) "Tangible personal property" has the same meaning as in
section 5739.01 of the Revised Code.
(K) "Internal Revenue Code" means the Internal Revenue Code
of 1986, 100 Stat. 2085, 26 U.S.C. 1, as amended. Any term used in
this chapter that is not otherwise defined has the same meaning as
when used in a comparable context in the laws of the United States
relating to federal income taxes unless a different meaning is
clearly required. Any reference in this chapter to the Internal
Revenue Code includes other laws of the United States relating to
federal income taxes.
(L) "Calendar quarter" means a three-month period ending on
the thirty-first day of March, the thirtieth day of June, the
thirtieth day of September, or the thirty-first day of December.
(M) "Tax period" means the calendar quarter or calendar year
on the basis of which a taxpayer is required to pay the tax
imposed under this chapter.
(N) "Calendar year taxpayer" means a taxpayer for which the
tax period is a calendar year.
(O) "Calendar quarter taxpayer" means a taxpayer for which
the tax period is a calendar quarter.
(P) "Agent" means a person authorized by another person to
act on its behalf to undertake a transaction for the other,
including any of the following:
(1) A person receiving a fee to sell financial instruments;
(2) A person retaining only a commission from a transaction
with the other proceeds from the transaction being remitted to
another person;
(3) A person issuing licenses and permits under section
1533.13 of the Revised Code;
(4) A lottery sales agent holding a valid license issued
under section 3770.05 of the Revised Code;
(5) A person acting as an agent of the division of liquor
control under section 4301.17 of the Revised Code.
(Q) "Received" includes amounts accrued under the accrual
method of accounting.
(R) "Reporting person" means a person in a consolidated
elected taxpayer or combined taxpayer group that is designated by
that group to legally bind the group for all filings and tax
liabilities and to receive all legal notices with respect to
matters under this chapter, or, for the purposes of section
5751.04 of the Revised Code, a separate taxpayer that is not a
member of such a group.
Section 2. That existing sections 718.01, 5739.02, 5747.01,
and 5751.01 and sections 126.60, 126.601, 126.602, 126.603,
126.604, and 126.605 of the Revised Code are hereby repealed.
Section 3. It is the intent of the General Assembly in
enacting this act to eliminate all authority granted to the
Director of Budget and Management and the Director of
Transportation in Am. Sub. H.B. 153 of the 129th General Assembly
pertaining to a purchase and sale agreement, lease, service
agreement, franchise agreement, concession agreement, or other
written agreement with respect to the operation or maintenance of
the Ohio Turnpike, and to restore to the Ohio Turnpike Commission
the full exercise of all powers granted to the Commission in the
Revised Code.
The Director of Budget and Management shall terminate any
contract entered into or other action taken under sections 126.60
to 126.605 of the Revised Code prior to their repeal by this act
promptly and in a manner determined to be least costly to the
state and its citizens.
Section 4. The Ohio Turnpike Commission shall hold not less
than four public hearings on the issue of outsourcing the
maintenance and operation of the Ohio Turnpike. The hearings shall
be held in geographically diverse locations in this state that are
within the immediate vicinity of the Ohio Turnpike. The Commission
shall inform the public of each hearing by causing an appropriate
notice to be published on the Commission's internet web site and
in a newspaper of general circulation in the county in which the
hearing is to be held. Notice shall be published not less than one
week prior to the date of the hearing. Additionally, the
Commission shall send notice to the Governor and the presiding
officers and minority leaders of the Senate and House of
Representatives of the public hearing schedule and locations.
The Commission shall hold the first hearing within thirty
days of the effective date of this act and shall conclude the last
hearing not more than ninety days after the effective date of this
act. At each hearing, the Commission shall afford any person that
may be affected by the potential outsourcing of the maintenance
and operation of the Ohio Turnpike the opportunity to comment on
such a course of action and the opportunity to present material to
the Commission in support of the person's position. Upon the
conclusion of the last hearing, the Commission shall compile any
materials submitted to it during the hearings and prepare a report
that summarizes the comments of persons who appeared at the
hearings. The Commission shall present the report to the Governor
and the presiding officers and minority leaders of the Senate and
House of Representatives not later than thirty days after the date
of the last hearing.
Section 5. The General Assembly, applying the principle
stated in division (B) of section 1.52 of the Revised Code that
amendments are to be harmonized if reasonably capable of
simultaneous operation, finds that the following sections,
presented in this act as composites of the sections as amended by
the acts indicated, are the resulting versions of the sections in
effect prior to the effective date of the sections as presented in
this act:
Section 5739.02 of the Revised Code as amended by both Am.
Sub. H.B. 487 and Am. Sub. H.B. 508 of the 129th General Assembly.
Section 5747.01 of the Revised Code as amended by both Am.
Sub. H.B. 153 and Am. H.B. 167 of the 129th General Assembly.
Section 5751.01 of the Revised Code as amended by both Am.
Sub. H.B. 508 and Am. Sub. S.B. 315 of the 129th General Assembly.
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