The online versions of legislation provided on this website are not official. Enrolled bills are the final version passed by the Ohio General Assembly and presented to the Governor for signature. The official version of acts signed by the Governor are available from the Secretary of State's Office in the Continental Plaza, 180 East Broad St., Columbus.
|
H. B. No. 669 As IntroducedAs Introduced
130th General Assembly | Regular Session | 2013-2014 |
| |
Cosponsors:
Representatives Barborak, Duffey, Rogers, Sheehy
A BILL
To amend sections 150.03, 322.02, 5739.02, 5739.03,
5747.01, and 5751.01 and to enact sections 195.01
to 195.14 and 5709.071 of the Revised Code to
establish the Startup Ohio initiative in which
universities and partnering business may
collaborate in tax-free areas near campuses in
this state to create jobs, attract entrepreneurs,
and spur academic enrichment and to direct the
Director of Budget and Management to transfer $100
million to the Ohio Venture Capital Program Fund.
BE IT ENACTED BY THE GENERAL ASSEMBLY OF THE STATE OF OHIO:
Section 1. That sections 150.03, 322.02, 5739.02, 5739.03,
5747.01, and 5751.01 be amended and sections 195.01, 195.02,
195.03, 195.04, 195.05, 195.06, 195.07, 195.08, 195.09, 195.10,
195.11, 195.12, 195.13, 195.14, and 5709.071 of the Revised Code
be enacted to read as follows:
Sec. 150.03. Within ninety days after April 9, 2003, the
authority shall establish, and subsequently may modify as it
considers necessary, a written investment policy governing the
investment of money from the program fund, which is hereby
created. The program fund shall consist of the proceeds of loans
acquired by a program administrator and money transferred or
appropriated to it by the general assembly. The authority is
subject to Chapter 119. of the Revised Code with respect to the
establishment or modification of the policy. The policy shall meet
all the following requirements:
(A) It is consistent with the purpose of the program stated
in section 150.01 of the Revised Code.
(B) Subject to divisions (C), (D), and (E) of this section,
it permits the investment of money from the program fund in
private, for-profit venture capital funds, including funds of
funds, that invest in enterprises in the seed or early stage of
business development or established business enterprises
developing new methods or technologies, and that demonstrate
potential to generate high levels of successful investment
performance.
(C) It specifies that a program administrator or fund manager
employed by the program administrator shall invest not less than
seventy-five per cent of program fund money under its investment
authority in Ohio-based venture capital funds.
(D) It specifies both of the following:
(1) That not less than an amount equal to fifty per cent of
program fund money invested in any venture capital fund be
invested by the venture capital fund in Ohio-based business
enterprises;
(2) That, commencing with the first program fund commitment
to each venture capital fund, the aggregate amount funded into
Ohio-based business enterprises by all venture capital funds to
which the program fund has committed be not less than the
aggregate amount of all program fund money funded into those
venture capital funds.
(E) It specifies that a program administrator or fund manager
employed by the program administrator shall not invest money from
the program fund in a venture capital fund to the extent that the
total amount of program fund money invested in the venture capital
fund, when combined with any program fund money invested in a
venture capital fund under the same management as that venture
capital fund, exceeds the lesser of the following:
(2)(a) In the case of an Ohio-based venture capital fund,
fifty per cent of the total amount of capital committed to the
fund from all sources, after accounting for capital committed from
the program fund;
(b) In the case of any other venture capital fund, twenty per
cent of the total amount of capital committed to the fund from all
sources, after accounting for capital committed from the program
fund.
(F) It specifies that a program administrator or fund manager
employed by the program administrator shall not commit capital
from the program fund to a venture capital fund until the venture
capital fund receives commitment of at least the same amount from
other investors in the fund.
(G) It specifies the general conditions a private, for-profit
investment fund must meet to be selected as a program
administrator under section 150.05 of the Revised Code, including,
as a significant selection standard, direct experience managing
external or nonproprietary capital in private equity fund of funds
formats.
(H) It specifies the criteria the authority must consider
when making a determination under division (B)(1) of section
150.04 of the Revised Code.
(I) It includes investment standards and general limitations
on allowable investments that the authority considers reasonable
and necessary to achieve the purposes of this chapter as stated in
division (B) of section 150.01 of the Revised Code, minimize the
need for the authority to grant tax credits under section 150.07
of the Revised Code, ensure compliance of the program
administrators with all applicable laws of this state and the
United States, and ensure the safety and soundness of investments
of money from the program fund.
(J) It prohibits the investment of money from the program
fund directly in persons other than venture capital funds, except
for temporary investment in investment grade debt securities or
temporary deposit in interest-bearing accounts or funds pending
permanent investment in venture capital funds.
Sec. 195.01. As used in this chapter:
(A) "University" means a state university as defined in
section 3345.011 of the Revised Code, a community college as
defined in section 3354.01 of the Revised Code, or a private
college or university.
(B) "Private college or university" has the same meaning as
in section 1713.50 of the Revised Code.
(C) "Campus" means land, buildings, or other real property
owned or leased by a university.
(D) "Business" means a sole proprietorship, a corporation for
profit, or a pass-through entity as defined in section 5733.04 of
the Revised Code.
(E) "Partnering business" means a business that is a party to
a partnership contract approved by the startup Ohio board under
section 195.08 of the Revised Code. A business is no longer a
partnering business when the partnership contract expires.
(F) "Partnership contract" means a contract negotiated and
agreed to by a university and a partnering business under section
195.07 of the Revised Code.
(G) "Owner" means a partner of a partnership, a member of a
limited liability company, a majority shareholder of an S
corporation, a person with a majority ownership interest in a
pass-through entity, the sole proprietor of a sole proprietorship,
or any officer, employee, or agent with authority to make
decisions legally binding upon a business.
(H) "Startup space" means vacant land or building space that
satisfies the criteria described under section 195.05 of the
Revised Code.
(I) "New job" means a position filled by one full-time
employee performing a particular set of tasks and duties. The
position must be new to this state and, except as provided in
division (A)(3) of section 195.07 of the Revised Code, the
individual filling the position must not have been transferred
from a related business or any other business located in this
state by means of acquisition, merger, consolidation, or
reorganization of a business.
(J) "Full-time employee" means an individual who is employed
for consideration by a partnering business for at least
thirty-five hours a week, or who renders any other standard of
service generally accepted by custom or specified by contract as
full-time employment.
(K) "Startup Ohio board" or "board" means the board appointed
under section 195.04 of the Revised Code.
(L) "Vacant" means land or building space not occupied by any
person or business or used for some other productive purpose. For
the purposes of this division, "occupied" means actual,
continuous, and exclusive use and possession of land or building
space by a person having lawful right to such use and possession.
(M) "Appointing authority" means the governor, the president
of the senate, or the speaker of the house of representatives.
(N) "Startup zone certificate" means a certificate issued to
a partnering business by the startup Ohio board under section
195.08 of the Revised Code.
(O) "Related businesses" are businesses the majority of the
ownership interests of which are held directly or indirectly by
the same person.
(P) "New employee certificate" means a certificate awarded by
a partnering business to a full-time employee hired to fill a new
job under section 195.09 of the Revised Code.
Sec. 195.02. (A) The startup Ohio initiative is hereby
established to facilitate job creation, attract private economic
investment, encourage entrepreneurial activity, and create
educational enrichment opportunities in this state. The initiative
shall be administered by the startup Ohio board in collaboration
with universities and partnering businesses in this state.
(B) The president or chief executive officer of a university
in this state may seek to create a startup zone by identifying
startup space and writing a strategic plan to attract one or more
businesses to operate in the startup space under a partnership
contract with the university. The strategic plan shall include the
following:
(1) A detailed description of the startup space. The
description shall delineate the boundaries of the space and the
county treasurer's permanent parcel number associated with each
parcel wholly or partially located within the space.
(2) An explanation of the university's rationale in choosing
the startup space. The university shall consider the following in
identifying startup space:
(a) The need for economic development in the startup space
and the surrounding community. The university shall give
preference to underutilized land or buildings, blighted areas, and
other neighborhoods that are ready for development but lacking
resources to improve infrastructure.
(b) The expected effects of developing the startup space on
the economic and social welfare of the surrounding community. The
university shall endeavor to propose startup space in communities
where the positive economic and social impact will be the
greatest. The university shall avoid startup space in communities
where further development would lead to competition with existing
businesses, excessive demand for available public infrastructure,
or poorer conditions for individuals living or working nearby.
(c) The conduciveness of the startup space to fostering
academic enrichment opportunities for students of the university.
For the purposes of this division, close proximity of the startup
space to academic buildings, recreational areas, housing
facilities, and other areas of campus frequented by students; ease
of access to the space by public or university transportation; and
flexibility of the startup space for accommodating commercial and
academic environments contribute positively to the conduciveness
of a startup space to fostering academic enrichment.
(3) The methodology the university intends to use for the
purposes of identifying one or more businesses to operate in the
startup space and entering partnership contracts with such
businesses. The methodology shall describe the following:
(a) The type of business or businesses the university seeks
to operate in the startup space. The university shall seek
businesses that are unique to the community surrounding the
startup space and that cannot reasonably be expected to compete
with or otherwise hamper the success of existing businesses in the
community.
(b) The proposed measures to ensure that partnership
contracts with businesses in the startup space align with or
further the academic mission of the university;
(c) The proposed methods by which the university will consult
with affected counties, municipal corporations, townships,
economic development agencies, citizens, and university governance
in developing and choosing businesses for the startup space. Such
methods may include public hearings, focus groups, meetings, phone
calls, and other forms of communication.
(4) A conflicts of interest policy that, at a minimum,
complies with section 195.14 of the Revised Code;
(5) Any other information or supporting documents deemed
necessary or desirable by the university or the startup Ohio board
to fully explain the strategic plan and the proposed startup
space.
(C) Subject to the limitations prescribed by divisions (B)
and (C) of section 195.03 of the Revised Code, the president or
chief executive officer of a university may submit or amend a
strategic plan for a startup zone under division (B) of this
section at any time. A university may submit a strategic plan for
more than one startup zone or multiple strategic plans for
multiple startup zones simultaneously.
Sec. 195.03. (A) The startup Ohio board shall review and
consider strategic plans submitted by universities under section
195.02 of the Revised Code based on merit and not on the time of
submission. The board may approve a strategic plan only by
affirmative vote of at least two board members. The board shall
consider the following in determining to approve or reject a
strategic plan under this section:
(1) Compliance of the startup space and the strategic plan
with the requirements of this chapter;
(2) Reasonableness of the economic and fiscal assumptions
contained in the strategic plan and any supporting documents;
(3) Likelihood that the proposed startup zone would lead to
the creation of new jobs, attract entrepreneurs, and enrich the
education of the university's students;
(4) Congruence of the strategic plan with the mission and
activities of the university;
(5) Desirability of the startup space according to the
factors described in divisions (B)(2)(a), (b), and (c) of section
195.02 of the Revised Code;
(6) Practicality and desirability of the university's
methodology for identifying and entering partnerships with
businesses to operate in the startup space according to the
factors described in divisions (B)(3)(a), (b), and (c) of section
195.02 of the Revised Code;
(7) Geographic balance of the startup space with other
startup zones in the state;
(8) Variance of urban, rural, and suburban startup zones
throughout the state;
(9) Participation of a diverse range of universities in the
state;
(10) Support or opposition of counties, municipal
corporations, townships, economic development agencies, citizens,
and the governing body of the university.
(B) The aggregate area of all startup zones sponsored by a
single university and located off campus shall not exceed two
hundred thousand square feet.
(C) The aggregate area of all startup zones sponsored by
private colleges and universities shall not exceed three million
square feet.
(D) Acceptance of a strategic plan by the startup Ohio board
immediately designates the startup space described in the plan as
a startup zone. The board shall send written notice of its
approval to the university within fourteen days of accepting the
plan.
(E) If the startup Ohio board rejects the strategic plan, the
board shall send written notice to the university that submitted
the plan within fourteen days of such determination. The notice
shall include the reasons for the board's determination and
suggestions for how the strategic plan could be modified to meet
the board's approval.
Sec. 195.04. (A) There is hereby created the startup Ohio
board consisting of three members with significant expertise and
experience in academic-based economic development projects. The
governor, the president of the senate, and the speaker of the
house of representatives each shall appoint one individual to
serve as a member of the board. The board shall do all of the
following:
(1) Review strategic plans for startup zones submitted by
universities under section 195.02 of the Revised Code and
determine to accept or to reject the plans;
(2) Review and make determinations with respect to
partnership contracts between universities and partnering
businesses under section 195.08 of the Revised Code;
(3) Assist and oversee universities in carrying out strategic
plans accepted by the board;
(4) Monitor the compliance of universities and partnering
businesses with respect to the strategic plan and partnership
contract;
(5) Evaluate the effectiveness of the startup Ohio initiative
in terms of jobs created, private economic investment attracted,
and educational enrichment opportunities provided in an annual
report submitted to the governor, the president of the senate, and
the speaker of the house of representatives.
(B) The governor, the president of the senate, and the
speaker of the house of representatives shall make initial
appointments to the startup Ohio board within ninety days of the
effective date of ...B... of the 130th General Assembly. The
initial appointees shall serve the following terms of office:
(1) The board member appointed by the governor shall serve a
term of four years;
(2) The board member appointed by the president of the senate
shall serve a term of three years;
(3) The board member appointed by the speaker of the house of
representatives shall serve a term of two years.
(C) All board members appointed after the expiration of the
initial appointee's term shall serve terms of four years. The
terms of office for initial appointees to the startup Ohio board
begin on the ninetieth day following the effective date of ...B...
of the 130th General Assembly. Subsequent terms of office begin
the day that the appointee's predecessor's term expires. If an
appointing authority does not appoint a new board member or
reappoint the current board member before the expiration of the
current board member's term, the current board member shall
continue in office until the appointing authority appoints a
successor. A board member may serve an unlimited number of
consecutive terms if the board member is reappointed by an
appointing authority.
(D) Startup Ohio board members serve at the pleasure of their
appointing authority. Board members may be removed from the
position at any time by the member's appointing authority for
malfeasance, misfeasance, or nonfeasance in office. A vacancy in
an unexpired term on the startup Ohio board shall be filled in the
same manner as the initial appointment. A board member appointed
to fill a vacancy on the startup Ohio board shall hold office for
the remainder of the member's predecessor's term. The presence of
two board members constitutes a quorum to conduct the board's
business under this chapter. A vacancy on the board does not
impair the board from carrying out its business if at least two
board members are present.
(E) The startup Ohio board is a public body for the purposes
of section 121.22 of the Revised Code, and it is a public office
for the purposes of section 149.43 of the Revised Code. Board
members shall not be considered to be holding a direct or indirect
interest in a contract or expenditure of money by a university or
a partnering business because of their affiliation with the board.
Board members shall not be paid for their service, but may be
reimbursed by the director of budget and management from the
general revenue fund for reasonable expenses incurred in carrying
out their duties under this section.
Sec. 195.05. (A) Startup space shall be located on land or
in building space that is vacant at the time the university
submits the strategic plan to the startup Ohio board under section
195.02 of the Revised Code. The university shall not relocate or
eliminate academic programs, administrative programs, offices,
housing facilities, dining facilities, athletic facilities, or any
other facility, space, or program that actively serves students,
faculty, or staff in order to create vacant land or building space
for the purposes of this chapter.
(B) Except as provided in division (C) of this section,
startup space shall be located within one mile of the university's
campus. If the startup space is located in a building outside of
the university's campus, its area shall not exceed two hundred
square feet.
(C) A university may apply to the startup Ohio board for
special consideration of land or building space that does not meet
the criteria described in division (B) of this section. The board
may approve such land or building space as startup space if the
board determines that such approval is consistent with the
purposes of the startup Ohio initiative and that the land or
building space otherwise meets the requirements of this section.
Sec. 195.06. (A) After the startup Ohio board designates a
startup zone under section 195.03 of the Revised Code, the
university shall follow the methodology described in its strategic
plan to identify and enter a partnership contract with one or more
businesses to operate within the startup zone. The business shall
meet all of the following criteria:
(1) The mission and activities of the business align with or
further the academic mission of the university;
(2) The business is not a direct or indirect competitor of an
existing business located near the startup zone;
(3) The business has the capacity to meet the performance
benchmarks in the partnership contract;
(4) Except as provided in divisions (C) and (D) of this
section, the business was not operating in this state at the time
of entering the partnership contract or in any of the preceding
five years;
(5) Except as provided in divisions (C) and (D) of this
section, the business is not substantially similar, in terms of
ownership and operation, to a business operating in this state at
the time of entering the partnership contract or in any of the
preceding five years;
(6) The business is in compliance with all worker protection
and environmental laws and regulations;
(7) The business does not owe past due federal, state, or
local taxes;
(8) The business is not engaged in any of the following
commercial activities:
(c) Real estate brokerage or management;
(e) Medical or dental practice;
(g) Finance or financial services;
(i) Administrative support services;
(l) Electricity generation or distribution;
(m) Natural gas generation or distribution;
(B) If, after reasonable efforts, the university determines
it is not practical to identify and enter a partnership contract
with a business using the methodology described in the strategic
plan, the university may seek to amend the methodology by
submitting a proposed amendment to the startup Ohio board. The
board may approve or reject the amendment by a majority vote. The
board shall send notice of its determination with respect to the
amendment to the university within fourteen days of its
determination under this division.
(C) Notwithstanding divisions (A)(4) and (5) of this section,
a university may enter a partnership contract with a returning
business if the contract includes a provision whereby the business
agrees to substantially restore all jobs previously moved by the
business out of this state. For the purposes of this division,
"returning business" means a business that moved jobs out of this
state on or before the effective date of ...B... of the 130th
General Assembly.
(D) Notwithstanding divisions (A)(4) and (5) of this section,
a university may enter a partnership contract with an expanding
business if the contract contains a provision whereby the business
agrees to create new jobs in the startup zone without eliminating
or relocating jobs from elsewhere in the state. For the purposes
of this division, "expanding business" means a business currently
operating in this state that intends to increase its Ohio
operations and create new jobs.
Sec. 195.07. After the university has identified a business
that meets the criteria prescribed by division (A) of section
195.06 of the Revised Code, the university may negotiate the terms
of a partnership contract with the business concerning the
business's operation in the startup zone.
(A) The partnership contract shall include the following
terms for the partnering business:
(1) An agreement to create new jobs in the startup zone
during its first year of operation under the contract and to
retain those jobs for the duration of the contract;
(2) An agreement not to move existing jobs from another area
of the state to the startup zone;
(3) An agreement not to cause individuals to transfer
employment from a related business located in this state to
similar employment with the partnering business in the startup
zone. This agreement does not apply if the partnering business
demonstrates that the related business did not eliminate the
transferring employee's position in this state after the transfer.
(4) Specific performance benchmarks, including:
(a) The number of new jobs the partnering business agrees to
create;
(b) A schedule for when the new jobs will be created;
(c) The job titles and expected salaries associated with the
new jobs.
(5) An agreement to share tax returns, employment
information, and other documents that the university and the
startup Ohio board deem necessary to monitor the partnering
business's compliance with the partnership contract;
(6) An agreement to collaborate with the university in
creating and administering academic enrichment opportunities for
the university's students.
(B) The partnership contract shall specify the date on which
the contract expires. Such date shall be not later than ten years
from the date the contract is submitted to the startup Ohio board
for approval under section 195.08 of the Revised Code.
(C) The partnership contract may include terms additional to
but not in derogation of those described in this section. The
university or partnering business may seek to include any
provisions deemed necessary or desirable to govern the mechanics
of their collaboration in the startup zone for business and
educational purposes.
Sec. 195.08. (A) After the president or chief executive
officer of the university and the owner of the partnering business
have agreed to the terms of the partnership contract, the
university shall submit a copy of the contract to the startup Ohio
board. The board shall review the contract and determine if its
terms are consistent with the strategic plan submitted by the
university under section 195.02 of the Revised Code and the goals
of the startup Ohio initiative. The board may approve or reject
the contract by affirmative vote of at least two board members.
The board shall send notice of its determination on the contract
to the university and the partnering business within fourteen days
of voting.
(B)(1) If the board votes to approve the contract, the notice
shall take the form of a startup zone certificate. The startup
zone certificate shall include the following:
(a) The name, address, and telephone number of the
university;
(b) The name, address, telephone number, and social security
number or federal tax identification number of the partnering
business;
(c) The location of the startup zone and the parcel numbers,
if any, assigned to parcels in the zone or other legal description
of such parcels;
(d) The date the partnership contract takes effect and the
date it expires.
(2) The startup zone certificate shall serve as documentation
that the partnership contract has been approved for the purposes
of the tax incentives described in section 322.02, section
5709.071, division (B)(54) of section 5739.02, division (A)(32) of
section 5747.01, and division (F)(2)(jj) of section 5751.01 of the
Revised Code.
(3) The startup zone certificate expires on the same date the
partnership contract expires or is terminated.
(4) The board shall transmit a copy of the startup zone
certificate to the tax commissioner.
(5) Along with the startup zone certificate, the startup Ohio
board shall give notice to the partnering business of the number
of new employee certificates that the partnering business is
authorized to award. Except as provided in division (D) of this
section, the number of new employee certificates shall equal the
number of new jobs the partnering business agreed to create in the
partnership contract.
(C) If the board rejects the partnership contract, the notice
shall include the reasons for the board's determination and
suggestions for ways in which the contract may be revised to meet
the approval of the board. The university and the partnering
business may amend and resubmit a previously rejected partnership
contract to the board at any time.
(D) The startup Ohio board shall monitor the issuance and use
of new employee certificates under this section and section 195.09
of the Revised Code to ensure that not more than ten thousand
full-time employees use new employee certificates to claim
deductions under division (A)(33) of section 5747.01 of the
Revised Code in any taxable year. To comply with this division,
the board may reduce the number of new employee certificates a
partnering business is authorized to award.
(E) A partnering business shall not assign or transfer a
startup zone certificate issued under this section to any other
person.
Sec. 195.09. (A) A partnering business may award a new
employee certificate to any full-time employee hired to fill a new
job described in the partnership contract. The new employee
certificate shall be in a form prescribed by the startup Ohio
board and shall include the name, address, and social security
number or federal tax identification number of the employee and
the partnering business.
(B) Each time a partnering business awards a new employee
certificate, it shall transmit a copy of the completed new
employee certificate to the startup Ohio board and the tax
commissioner.
(C) If the partnering business or the full-time employee ends
the employment relationship before the expiration of the
partnership contract or if the full-time employee is transferred
outside the startup zone, the partnering business shall revoke the
new employee certificate and transmit notice of such revocation to
the board and the commissioner.
(D) A partnering business shall not revoke a new employee
certificate awarded to any full-time employee for reasons other
than those described in division (C) of this section.
(E) A full-time employee awarded a new employee certificate
under this section may claim an income tax deduction under
division (A)(33) of section 5747.01 of the Revised Code. The
deduction is based on the income earned by the full-time employee
from the partnering business for work performed in the startup
zone. The full-time employee may claim the deduction for taxable
years ending after the date the new employee certificate is
awarded and beginning before the expiration of the partnership
contract.
(F) A partnering business may apply to the startup Ohio board
for authorization to award more new employee certificates than
initially authorized under division (B)(5) of section 195.08 of
the Revised Code. The board, in its discretion and subject to the
limitation prescribed by division (D) of section 195.08 of the
Revised Code, may authorize the partnering business to award
additional new employee certificates under this section.
Sec. 195.10. (A) If a university determines that a
partnering business is not complying with a provision of the
partnership contract, the university shall notify the startup Ohio
board. The board shall conduct a hearing on the alleged
noncompliance and allow opportunities for the university and the
partnering business to present testimony at the hearing. At the
conclusion of the hearing the board, by affirmative vote of at
least two of its members, may do any of the following:
(1) Suspend the partnering business's startup zone
certificate until the partnering business complies with the terms
of the partnership contract;
(2) Terminate the partnership contract;
(3) Terminate the partnership contract and require the
partnering business to refund to the state all or a portion of the
amounts realized by the partnering business through the tax
incentives described in division (A)(32) of section 5747.01 and
division (F)(2)(jj) of section 5751.01 of the Revised Code.
(B) In reaching a determination under division (A) of this
section, the startup Ohio board shall consider the effect of
market conditions on the partnering business's performance under
the partnership contract and whether the partnering business
continues to maintain other operations in this state.
(C) After making a determination under division (A) of this
section, the board shall certify the amount to be refunded to the
tax commissioner. The commissioner shall make an assessment for
that amount against the partnering business under Chapters 5747.
and 5751. of the Revised Code.
(D) Full-time employees awarded new employee certificates by
a partnering business under section 195.09 of the Revised Code
shall not be subject to assessment under this section. If the
partnering business's partnership contract is terminated under
this section, the employee may claim the deduction described in
division (A)(33) of section 5747.01 of the Revised Code only for
income received before the date the contract is terminated.
Sec. 195.11. (A) The startup Ohio board shall file an annual
report to the governor, the president of the senate, and the
speaker of the house of representatives on the effectiveness of
the startup Ohio initiative. The report shall include the
following:
(1) A list of the universities that have submitted strategic
plans under section 195.02 of the Revised Code;
(2) A list of the startup zones approved by the board under
section 195.03 of the Revised Code and the location of each;
(3) A list of the partnering businesses operating in startup
zones and the number of new jobs created by each partnering
business;
(4) The types of industries represented by partnering
businesses operating in startup zones;
(5) A list of the noncompliance issues raised by universities
under section 195.10 of the Revised Code in the preceding year.
(B) The report required under division (A) of this section
shall be completed by the first day of each April occurring at
least six months after the effective date of ...B... of the 130th
General Assembly.
(C) The startup Ohio board may request, and universities and
partnering businesses shall provide, any information or documents
needed by the board to complete the report required by this
section.
Sec. 195.12. No university may contract with a partnering
business to perform services or work that is similar in nature or
in scope to services or work that was performed by employees of
the university at any time during the five years preceding the
date the partnership contract is submitted to the startup Ohio
board under section 195.08 of the Revised Code.
Sec. 195.13. Financial statements and other information
submitted by a university or a partnering business to the startup
Ohio board, and any information taken by the board for the
purposes described in this chapter, are not public records subject
to section 149.43 of the Revised Code. However, the startup Ohio
board may make use of such information for purposes of issuing
public reports or in connection with court proceedings concerning
partnership contracts under this chapter.
Upon the request of the tax commissioner, the startup Ohio
board and the university shall provide the commissioner any
statement or other information submitted by or obtained from a
partnering business. The commissioner shall preserve the
confidentiality of the statement or information.
Sec. 195.14. (A) For the purposes of this section,
"interested individual" means a person who is the president or
chief executive officer of the university or who is an employee,
alumnus, or donor of the university with the ability to influence
or make decisions on a partnership contract, and who has, directly
or indirectly, through business, investment, or family, any of the
following:
(1) An ownership or investment interest in a partnering
business;
(2) A compensation agreement with a partnering business;
(3) A potential ownership or investment interest in, or
compensation arrangement with, any person with which the
university is negotiating a partnership contract. Compensation
includes direct and indirect remuneration as well as material
gifts or favors.
(B) A university participating in the startup Ohio initiative
shall adopt a conflicts of interest policy with respect to its
activities under this chapter. The conflicts of interest policy
shall protect the university's interest when it is considering a
partnership contract that might benefit the private interest of an
interested individual. The conflicts of interest policy shall
include the following:
(1) The procedure for interested individuals to disclose a
financial interest in a partnering business;
(2) The procedure for screening such interested individuals
from negotiations on the partnership contract;
(3) The procedure for reporting conflicts of interest to the
startup Ohio board.
(C) If the university determines that an interested
individual failed to report a financial interest in a partnering
business before the approval of the partnership contract under
section 195.08 of the Revised Code, the university shall report
such failure to the startup Ohio board. The board shall hold a
hearing on the potential conflict of interest and, if the board
determines that the partnership contract is not in the
university's best interest, may terminate the partnership contract
and revoke the partnering business's startup zone certificate.
Sec. 322.02. (A) For the purpose of paying the costs of
enforcing and administering the tax and providing additional
general revenue for the county, any county may levy and collect a
tax to be known as the real property transfer tax on each deed
conveying real property or any interest in real property located
wholly or partially within the boundaries of the county at a rate
not to exceed thirty cents per hundred dollars for each one
hundred dollars or fraction thereof of the value of the real
property or interest in real property located within the
boundaries of the county granted, assigned, transferred, or
otherwise conveyed by the deed. The tax shall be levied pursuant
to a resolution adopted by the board of county commissioners of
the county and, except as provided in division (C) of this section
and division (A) of section 322.07 of the Revised Code, shall be
levied at a uniform rate upon all deeds as defined in division (D)
of section 322.01 of the Revised Code. Prior to the adoption of
any such resolution, the board of county commissioners shall
conduct two public hearings thereon, the second hearing to be not
less than three nor more than ten days after the first. Notice of
the date, time, and place of the hearings shall be given by
publication in a newspaper of general circulation in the county
once a week on the same day of the week for two consecutive weeks
or as provided in section 7.16 of the Revised Code. The second
publication shall be not less than ten nor more than thirty days
prior to the first hearing. The tax shall be levied upon the
grantor named in the deed and shall be paid by the grantor for the
use of the county to the county auditor at the time of the
delivery of the deed as provided in section 319.202 of the Revised
Code and prior to the presentation of the deed to the recorder of
the county for recording.
(B) No resolution levying a real property transfer tax
pursuant to this section or a manufactured home transfer tax
pursuant to section 322.06 of the Revised Code shall be effective
sooner than thirty days following its adoption. Such a resolution
is subject to a referendum as provided in sections 305.31 to
305.41 of the Revised Code, unless the resolution is adopted as an
emergency measure necessary for the immediate preservation of the
public peace, health, or safety, in which case it shall go into
immediate effect. An emergency measure must receive an affirmative
vote of all of the members of the board of commissioners, and
shall state the reasons for the necessity. A resolution may direct
the board of elections to submit the question of levying the tax
to the electors of the county at the next primary or general
election in the county occurring not less than ninety days after
the resolution is certified to the board. No such resolution shall
go into effect unless approved by a majority of those voting upon
it.
(C) No real property transfer tax levied pursuant to this
section shall apply to any deed conveying real property or any
interest in real property located within a startup zone to a
partnering business holding a valid startup zone certificate. The
exemption under this division applies only to conveyances
occurring on or after the date the startup zone certificate takes
effect and before the certificate expires. As used in this
division, "startup zone," "partnering business," and "startup zone
certificate" have the same meanings as in section 195.01 of the
Revised Code.
Sec. 5709.071. Real property constituting or situated on a
parcel designated as a startup zone by the startup Ohio board and
used exclusively for that purpose by a university and one or more
partnering businesses shall be exempt from taxation for the term
of the partnership contract between the university and the
partnering business beginning with the tax year that includes the
effective date of the contract. This exemption does not apply to
any portion of the real property not designated and used
exclusively as a startup zone. The exemption does not apply to any
tax year ending after the expiration of the partnership contract.
For the purposes of this section, "startup zone," "startup Ohio
board," "university," "partnership contract," and "partnering
business" have the same meanings as in section 195.01 of the
Revised Code.
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 three-fourths 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 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 or laws of the United States or the Constitution
of this state;
(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;
building and construction materials for incorporation into a
transportation facility pursuant to a public-private agreement
entered into under sections 5501.70 to 5501.83 of the Revised
Code; 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 JobsOhio in accordance with section 4313.02
of the Revised Code.
(52)(a) Sales to a qualifying corporation.
(b) As used in division (B)(52) of this section:
(i) "Qualifying corporation" means a nonprofit corporation
organized in this state that leases from an eligible county land,
buildings, structures, fixtures, and improvements to the land that
are part of or used in a public recreational facility used by a
major league professional athletic team or a class A to class AAA
minor league affiliate of a major league professional athletic
team for a significant portion of the team's home schedule,
provided the following apply:
(I) The facility is leased from the eligible county pursuant
to a lease that requires substantially all of the revenue from the
operation of the business or activity conducted by the nonprofit
corporation at the facility in excess of operating costs, capital
expenditures, and reserves to be paid to the eligible county at
least once per calendar year.
(II) Upon dissolution and liquidation of the nonprofit
corporation, all of its net assets are distributable to the board
of commissioners of the eligible county from which the corporation
leases the facility.
(ii) "Eligible county" has the same meaning as in section
307.695 of the Revised Code.
(53) Sales to or by a cable service provider, video service
provider, or radio or television broadcast station regulated by
the federal government of cable service or programming, video
service or programming, audio service or programming, or
electronically transferred digital audiovisual or audio work. As
used in division (B)(53) of this section, "cable service" and
"cable service provider" have the same meanings as in section
1332.01 of the Revised Code, and "video service," "video service
provider," and "video programming" have the same meanings as in
section 1332.21 of the Revised Code.
(54) Sales to a partnering business holding a valid startup
zone certificate of tangible personal property or services used or
consumed for business operations in a startup zone. The exemption
under division (B)(54) of this section applies only to sales
occurring on or after the date the consumer's startup zone
certificate takes effect and before the certificate expires. As
used in this division, "startup zone certificate," "partnering
business," and "startup zone" have the same meanings as in section
195.01 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. 5739.03. (A) Except as provided in section 5739.05 or
section 5739.051 of the Revised Code, the tax imposed by or
pursuant to section 5739.02, 5739.021, 5739.023, or 5739.026 of
the Revised Code shall be paid by the consumer to the vendor, and
each vendor shall collect from the consumer, as a trustee for the
state of Ohio, the full and exact amount of the tax payable on
each taxable sale, in the manner and at the times provided as
follows:
(1) If the price is, at or prior to the provision of the
service or the delivery of possession of the thing sold to the
consumer, paid in currency passed from hand to hand by the
consumer or the consumer's agent to the vendor or the vendor's
agent, the vendor or the vendor's agent shall collect the tax with
and at the same time as the price;
(2) If the price is otherwise paid or to be paid, the vendor
or the vendor's agent shall, at or prior to the provision of the
service or the delivery of possession of the thing sold to the
consumer, charge the tax imposed by or pursuant to section
5739.02, 5739.021, 5739.023, or 5739.026 of the Revised Code to
the account of the consumer, which amount shall be collected by
the vendor from the consumer in addition to the price. Such sale
shall be reported on and the amount of the tax applicable thereto
shall be remitted with the return for the period in which the sale
is made, and the amount of the tax shall become a legal charge in
favor of the vendor and against the consumer.
(B)(1)(a) If any sale is claimed to be exempt under division
(E) of section 5739.01 of the Revised Code or under section
5739.02 of the Revised Code, with the exception of divisions
(B)(1) to (11) or (28) of section 5739.02 of the Revised Code, the
consumer must provide to the vendor, and the vendor must obtain
from the consumer, a certificate specifying the reason that the
sale is not legally subject to the tax. The certificate shall be
in such form, and shall be provided either in a hard copy form or
electronic form, as the tax commissioner prescribes. If the sale
is claimed to be exempt under division (B)(54) of section 5739.02
of the Revised Code, a copy of the startup zone certificate, as
defined in section 195.01 of the Revised Code, shall function as
the exemption certificate required under this division.
(b) A vendor that obtains a fully completed exemption
certificate from a consumer is relieved of liability for
collecting and remitting tax on any sale covered by that
certificate. If it is determined the exemption was improperly
claimed, the consumer shall be liable for any tax due on that sale
under section 5739.02, 5739.021, 5739.023, or 5739.026 or Chapter
5741. of the Revised Code. Relief under this division from
liability does not apply to any of the following:
(i) A vendor that fraudulently fails to collect tax;
(ii) A vendor that solicits consumers to participate in the
unlawful claim of an exemption;
(iii) A vendor that accepts an exemption certificate from a
consumer that claims an exemption based on who purchases or who
sells property or a service, when the subject of the transaction
sought to be covered by the exemption certificate is actually
received by the consumer at a location operated by the vendor in
this state, and this state has posted to its web site an exemption
certificate form that clearly and affirmatively indicates that the
claimed exemption is not available in this state;
(iv) A vendor that accepts an exemption certificate from a
consumer who claims a multiple points of use exemption under
division (D) of section 5739.033 of the Revised Code, if the item
purchased is tangible personal property, other than prewritten
computer software.
(2) The vendor shall maintain records, including exemption
certificates, of all sales on which a consumer has claimed an
exemption, and provide them to the tax commissioner on request.
(3) The tax commissioner may establish an identification
system whereby the commissioner issues an identification number to
a consumer that is exempt from payment of the tax. The consumer
must present the number to the vendor, if any sale is claimed to
be exempt as provided in this section.
(4) If no certificate is provided or obtained within ninety
days after the date on which such sale is consummated, it shall be
presumed that the tax applies. Failure to have so provided or
obtained a certificate shall not preclude a vendor, within one
hundred twenty days after the tax commissioner gives written
notice of intent to levy an assessment, from either establishing
that the sale is not subject to the tax, or obtaining, in good
faith, a fully completed exemption certificate.
(5) Certificates need not be obtained nor provided where the
identity of the consumer is such that the transaction is never
subject to the tax imposed or where the item of tangible personal
property sold or the service provided is never subject to the tax
imposed, regardless of use, or when the sale is in interstate
commerce.
(6) If a transaction is claimed to be exempt under division
(B)(13) of section 5739.02 of the Revised Code, the contractor
shall obtain certification of the claimed exemption from the
contractee. This certification shall be in addition to an
exemption certificate provided by the contractor to the vendor. A
contractee that provides a certification under this division shall
be deemed to be the consumer of all items purchased by the
contractor under the claim of exemption, if it is subsequently
determined that the exemption is not properly claimed. The
certification shall be in such form as the tax commissioner
prescribes.
(C) As used in this division, "contractee" means a person who
seeks to enter or enters into a contract or agreement with a
contractor or vendor for the construction of real property or for
the sale and installation onto real property of tangible personal
property.
Any contractor or vendor may request from any contractee a
certification of what portion of the property to be transferred
under such contract or agreement is to be incorporated into the
realty and what portion will retain its status as tangible
personal property after installation is completed. The contractor
or vendor shall request the certification by certified mail
delivered to the contractee, return receipt requested. Upon
receipt of such request and prior to entering into the contract or
agreement, the contractee shall provide to the contractor or
vendor a certification sufficiently detailed to enable the
contractor or vendor to ascertain the resulting classification of
all materials purchased or fabricated by the contractor or vendor
and transferred to the contractee. This requirement applies to a
contractee regardless of whether the contractee holds a direct
payment permit under section 5739.031 of the Revised Code or
provides to the contractor or vendor an exemption certificate as
provided under this section.
For the purposes of the taxes levied by this chapter and
Chapter 5741. of the Revised Code, the contractor or vendor may in
good faith rely on the contractee's certification. Notwithstanding
division (B) of section 5739.01 of the Revised Code, if the tax
commissioner determines that certain property certified by the
contractee as tangible personal property pursuant to this division
is, in fact, real property, the contractee shall be considered to
be the consumer of all materials so incorporated into that real
property and shall be liable for the applicable tax, and the
contractor or vendor shall be excused from any liability on those
materials.
If a contractee fails to provide such certification upon the
request of the contractor or vendor, the contractor or vendor
shall comply with the provisions of this chapter and Chapter 5741.
of the Revised Code without the certification. If the tax
commissioner determines that such compliance has been performed in
good faith and that certain property treated as tangible personal
property by the contractor or vendor is, in fact, real property,
the contractee shall be considered to be the consumer of all
materials so incorporated into that real property and shall be
liable for the applicable tax, and the construction contractor or
vendor shall be excused from any liability on those materials.
This division does not apply to any contract or agreement
where the tax commissioner determines as a fact that a
certification under this division was made solely on the decision
or advice of the contractor or vendor.
(D) Notwithstanding division (B) of section 5739.01 of the
Revised Code, whenever the total rate of tax imposed under this
chapter is increased after the date after a construction contract
is entered into, the contractee shall reimburse the construction
contractor for any additional tax paid on tangible property
consumed or services received pursuant to the contract.
(E) A vendor who files a petition for reassessment contesting
the assessment of tax on sales for which the vendor obtained no
valid exemption certificates and for which the vendor failed to
establish that the sales were properly not subject to the tax
during the one-hundred-twenty-day period allowed under division
(B) of this section, may present to the tax commissioner
additional evidence to prove that the sales were properly subject
to a claim of exception or exemption. The vendor shall file such
evidence within ninety days of the receipt by the vendor of the
notice of assessment, except that, upon application and for
reasonable cause, the period for submitting such evidence shall be
extended thirty days.
The commissioner shall consider such additional evidence in
reaching the final determination on the assessment and petition
for reassessment.
(F) Whenever a vendor refunds the price, minus any separately
stated delivery charge, of an item of tangible personal property
on which the tax imposed under this chapter has been paid, the
vendor shall also refund the amount of tax paid, minus the amount
of tax attributable to the delivery charge.
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 or 5747.65 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) Subject to divisions (A)(20)(a)(iii), (iv), and
(v) of this section, 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) Subject to divisions (A)(20)(a)(iii), (iv), and (v) of
this section, add five-sixths of the amount of qualifying section
179 depreciation expense, including the taxpayer's proportionate
or distributive share of the amount of qualifying section 179
depreciation expense allowed to any pass-through entity in which
the taxpayer has a direct or indirect ownership interest.
(iii) Subject to division (A)(20)(a)(v) of this section, for
taxable years beginning in 2012 or thereafter, if the increase in
income taxes withheld by the taxpayer is equal to or greater than
ten per cent of income taxes withheld by the taxpayer during the
taxpayer's immediately preceding taxable year, "two-thirds" shall
be substituted for "five-sixths" for the purpose of divisions
(A)(20)(a)(i) and (ii) of this section.
(iv) Subject to division (A)(20)(a)(v) of this section, for
taxable years beginning in 2012 or thereafter, a taxpayer is not
required to add an amount under division (A)(20) of this section
if the increase in income taxes withheld by the taxpayer and by
any pass-through entity in which the taxpayer has a direct or
indirect ownership interest is equal to or greater than the sum of
(I) the amount of qualifying section 179 depreciation expense and
(II) the amount of depreciation expense allowed to the taxpayer by
subsection (k) of section 168 of the Internal Revenue Code, and
including the taxpayer's proportionate or distributive shares of
such amounts allowed to any such pass-through entities.
(v) If a taxpayer directly or indirectly incurs a net
operating loss for the taxable year for federal income tax
purposes, to the extent such loss resulted from depreciation
expense allowed by subsection (k) of section 168 of the Internal
Revenue Code and by qualifying section 179 depreciation expense,
"the entire" shall be substituted for "five-sixths of the" for the
purpose of divisions (A)(20)(a)(i) and (ii) of this section.
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)(20)(a)(v) of this
section, net operating loss carryback and carryforward shall not
include 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.
(e) For the purposes of divisions (A)(20) and (21) of this
section:
(i) "Income taxes withheld" means the total amount withheld
and remitted under sections 5747.06 and 5747.07 of the Revised
Code by an employer during the employer's taxable year.
(ii) "Increase in income taxes withheld" means the amount by
which the amount of income taxes withheld by an employer during
the employer's current taxable year exceeds the amount of income
taxes withheld by that employer during the employer's immediately
preceding taxable year.
(iii) "Qualifying section 179 depreciation expense" means the
difference between (I) the amount of depreciation expense directly
or indirectly allowed to a taxpayer under section 179 of the
Internal Revised 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.
(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
of the following:
(i) One-fifth of the amount so added for each of the five
succeeding taxable years if the amount so added was five-sixths of
qualifying section 179 depreciation expense or depreciation
expense allowed by subsection (k) of section 168 of the Internal
Revenue Code;
(ii) One-half of the amount so added for each of the two
succeeding taxable years if the amount so added was two-thirds of
such depreciation expense;
(iii) One-sixth of the amount so added for each of the six
succeeding taxable years if the entire amount of such depreciation
expense was so added.
(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 results in or increases a federal net operating loss
carryback or carryforward. If no such deduction is available for a
taxable year, the taxpayer may carry forward the amount not
deducted in such taxable year to the next taxable year and add
that amount to any deduction otherwise available under division
(A)(21)(a) of this section for that next taxable year. The
carryforward of amounts not so deducted shall continue until the
entire addition required by division (A)(20)(a) of this section
has been deducted.
(d) No refund shall be allowed as a result of adjustments
made by division (A)(21) of this section.
(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 personnel pay
for service in the uniformed services 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 uniformed service, the
deduction allowed under this division shall include only that
portion of such retirement income that is attributable to the
taxpayer's uniformed 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 income derived from a transfer agreement or from the
enterprise transferred under that agreement under section 4313.02
of the Revised Code.
(30) 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.
(31) Deduct one-half of the taxpayer's Ohio small business
investor income, the deduction not to exceed sixty-two thousand
five hundred dollars for each spouse if spouses file separate
returns under section 5747.08 of the Revised Code or one hundred
twenty-five thousand dollars for all other taxpayers. No
pass-through entity may claim a deduction under this division.
For the purposes of this division, "Ohio small business
investor income" means the portion of a taxpayer's adjusted gross
income that is business income reduced by deductions from business
income and apportioned or allocated to this state under sections
5747.21 and 5747.22 of the Revised Code, to the extent not
otherwise deducted or excluded in computing federal or Ohio
adjusted gross income for the taxable year.
(32)(a) Deduct, to the extent not otherwise deducted or
excluded in computing federal or Ohio adjusted gross income for
the taxable year, business income derived from a partnering
business's operation in a startup zone pursuant to a partnership
contract with a university under Chapter 195. of the Revised Code.
Business income may not be deducted under this division for any
taxable year ending before the startup zone certificate takes
effect or beginning after the expiration or termination of the
certificate. Business income derived from a partnering business's
operations outside the startup zone or beyond the scope of the
partnership contract may not be deducted under this division.
For the purpose of computing the business income derived from
a partnering business's operation in a startup zone, business
income apportioned or allocated to this state under sections
5747.21 and 5747.22 of the Revised Code shall be multiplied by
fifty per cent of the sum of the following fractions:
(i) A fraction computed in the same manner as the property
factor computed under division (B)(2)(a) of section 5733.05 of the
Revised Code except the numerator shall be the average value of
real and tangible personal property used in business in the
startup zone and the denominator shall be the average value of
such property used in business in this state, and except there
shall be no exclusions as otherwise provided under that division;
(ii) A fraction computed in the same manner as the payroll
factor computed under division (B)(2)(b) of section 5733.05 of the
Revised Code except the numerator shall be the compensation paid
for services performed solely in the startup zone and the
denominator shall be the compensation paid in this state as
computed under that division, and except there shall be no
exclusion for employees engaged in qualified research.
(b) Any person claiming a deduction under this division shall
retain a copy of the startup zone certificate for four years
following the end of the taxable year for which the deduction is
claimed, and shall make it available for inspection by the tax
commissioner or an agent thereof upon request.
(c) As used in divisions (A)(32) and (33) of this section,
"startup zone," "partnership contract," "partnering business,"
"startup zone certificate," and "university" have the same
meanings as in section 195.01 of the Revised Code.
(33) Deduct, to the extent not otherwise deducted or excluded
in computing federal or Ohio adjusted gross income for the taxable
year, compensation received from a partnering business for
services performed in a startup zone by the holder of a new
employee certificate awarded by such partnering business under
section 195.09 of the Revised Code. This deduction applies only to
compensation received after the individual was awarded the new
employee certificate and before the expiration of the partnership
contract, the termination of the partnership contract under
section 195.10 of the Revised Code, or the revocation of the new
employee certificate under division (C) of section 195.09 of the
Revised Code, whichever comes first. Compensation received for
services performed outside the startup zone shall not be deducted
under this division. The deduction claimed under this division
shall not exceed two hundred fifty thousand dollars for any
taxable year. An individual claiming a deduction under this
division shall retain the new employee certificate for four years
following the end of the taxable year for which the deduction is
claimed, and shall make it available for inspection by the tax
commissioner or an agent thereof upon request.
As used in this section, "new employee certificate" has the
same meaning as in section 195.01 of the Revised Code.
(B) "Business income" means income, including gain or loss,
arising from transactions, activities, and sources in the regular
course of a trade or business and includes income, gain, or loss
from real property, tangible property, and intangible property if
the acquisition, rental, management, and disposition of the
property constitute integral parts of the regular course of a
trade or business operation. "Business income" includes income,
including gain or loss, from a partial or complete liquidation of
a business, including, but not limited to, gain or loss from the
sale or other disposition of goodwill.
(C) "Nonbusiness income" means all income other than business
income and may include, but is not limited to, compensation, rents
and royalties from real or tangible personal property, capital
gains, interest, dividends and distributions, patent or copyright
royalties, or lottery winnings, prizes, and awards.
(D) "Compensation" means any form of remuneration paid to an
employee for personal services.
(E) "Fiduciary" means a guardian, trustee, executor,
administrator, receiver, conservator, or any other person acting
in any fiduciary capacity for any individual, trust, or estate.
(F) "Fiscal year" means an accounting period of twelve months
ending on the last day of any month other than December.
(G) "Individual" means any natural person.
(H) "Internal Revenue Code" means the "Internal Revenue Code
of 1986," 100 Stat. 2085, 26 U.S.C.A. 1, as amended.
(I) "Resident" means any of the following, provided that
division (I)(3) of this section applies only to taxable years of a
trust beginning in 2002 or thereafter:
(1) An individual who is domiciled in this state, subject to
section 5747.24 of the Revised Code;
(2) The estate of a decedent who at the time of death was
domiciled in this state. The domicile tests of section 5747.24 of
the Revised Code are not controlling for purposes of division
(I)(2) of this section.
(3) A trust that, in whole or part, resides in this state. If
only part of a trust resides in this state, the trust is a
resident only with respect to that part.
For the purposes of division (I)(3) of this section:
(a) A trust resides in this state for the trust's current
taxable year to the extent, as described in division (I)(3)(d) of
this section, that the trust consists directly or indirectly, in
whole or in part, of assets, net of any related liabilities, that
were transferred, or caused to be transferred, directly or
indirectly, to the trust by any of the following:
(i) A person, a court, or a governmental entity or
instrumentality on account of the death of a decedent, but only if
the trust is described in division (I)(3)(e)(i) or (ii) of this
section;
(ii) A person who was domiciled in this state for the
purposes of this chapter when the person directly or indirectly
transferred assets to an irrevocable trust, but only if at least
one of the trust's qualifying beneficiaries is domiciled in this
state for the purposes of this chapter during all or some portion
of the trust's current taxable year;
(iii) A person who was domiciled in this state for the
purposes of this chapter when the trust document or instrument or
part of the trust document or instrument became irrevocable, but
only if at least one of the trust's qualifying beneficiaries is a
resident domiciled in this state for the purposes of this chapter
during all or some portion of the trust's current taxable year. If
a trust document or instrument became irrevocable upon the death
of a person who at the time of death was domiciled in this state
for purposes of this chapter, that person is a person described in
division (I)(3)(a)(iii) of this section.
(b) A trust is irrevocable to the extent that the transferor
is not considered to be the owner of the net assets of the trust
under sections 671 to 678 of the Internal Revenue Code.
(c) With respect to a trust other than a charitable lead
trust, "qualifying beneficiary" has the same meaning as "potential
current beneficiary" as defined in section 1361(e)(2) of the
Internal Revenue Code, and with respect to a charitable lead trust
"qualifying beneficiary" is any current, future, or contingent
beneficiary, but with respect to any trust "qualifying
beneficiary" excludes a person or a governmental entity or
instrumentality to any of which a contribution would qualify for
the charitable deduction under section 170 of the Internal Revenue
Code.
(d) For the purposes of division (I)(3)(a) of this section,
the extent to which a trust consists directly or indirectly, in
whole or in part, of assets, net of any related liabilities, that
were transferred directly or indirectly, in whole or part, to the
trust by any of the sources enumerated in that division shall be
ascertained by multiplying the fair market value of the trust's
assets, net of related liabilities, by the qualifying ratio, which
shall be computed as follows:
(i) The first time the trust receives assets, the numerator
of the qualifying ratio is the fair market value of those assets
at that time, net of any related liabilities, from sources
enumerated in division (I)(3)(a) of this section. The denominator
of the qualifying ratio is the fair market value of all the
trust's assets at that time, net of any related liabilities.
(ii) Each subsequent time the trust receives assets, a
revised qualifying ratio shall be computed. The numerator of the
revised qualifying ratio is the sum of (1) the fair market value
of the trust's assets immediately prior to the subsequent
transfer, net of any related liabilities, multiplied by the
qualifying ratio last computed without regard to the subsequent
transfer, and (2) the fair market value of the subsequently
transferred assets at the time transferred, net of any related
liabilities, from sources enumerated in division (I)(3)(a) of this
section. The denominator of the revised qualifying ratio is the
fair market value of all the trust's assets immediately after the
subsequent transfer, net of any related liabilities.
(iii) Whether a transfer to the trust is by or from any of
the sources enumerated in division (I)(3)(a) of this section shall
be ascertained without regard to the domicile of the trust's
beneficiaries.
(e) For the purposes of division (I)(3)(a)(i) of this
section:
(i) A trust is described in division (I)(3)(e)(i) of this
section if the trust is a testamentary trust and the testator of
that testamentary trust was domiciled in this state at the time of
the testator's death for purposes of the taxes levied under
Chapter 5731. of the Revised Code.
(ii) A trust is described in division (I)(3)(e)(ii) of this
section if the transfer is a qualifying transfer described in any
of divisions (I)(3)(f)(i) to (vi) of this section, the trust is an
irrevocable inter vivos trust, and at least one of the trust's
qualifying beneficiaries is domiciled in this state for purposes
of this chapter during all or some portion of the trust's current
taxable year.
(f) For the purposes of division (I)(3)(e)(ii) of this
section, a "qualifying transfer" is a transfer of assets, net of
any related liabilities, directly or indirectly to a trust, if the
transfer is described in any of the following:
(i) The transfer is made to a trust, created by the decedent
before the decedent's death and while the decedent was domiciled
in this state for the purposes of this chapter, and, prior to the
death of the decedent, the trust became irrevocable while the
decedent was domiciled in this state for the purposes of this
chapter.
(ii) The transfer is made to a trust to which the decedent,
prior to the decedent's death, had directly or indirectly
transferred assets, net of any related liabilities, while the
decedent was domiciled in this state for the purposes of this
chapter, and prior to the death of the decedent the trust became
irrevocable while the decedent was domiciled in this state for the
purposes of this chapter.
(iii) The transfer is made on account of a contractual
relationship existing directly or indirectly between the
transferor and either the decedent or the estate of the decedent
at any time prior to the date of the decedent's death, and the
decedent was domiciled in this state at the time of death for
purposes of the taxes levied under Chapter 5731. of the Revised
Code.
(iv) The transfer is made to a trust on account of a
contractual relationship existing directly or indirectly between
the transferor and another person who at the time of the
decedent's death was domiciled in this state for purposes of this
chapter.
(v) The transfer is made to a trust on account of the will of
a testator who was domiciled in this state at the time of the
testator's death for purposes of the taxes levied under Chapter
5731. of the Revised Code.
(vi) The transfer is made to a trust created by or caused to
be created by a court, and the trust was directly or indirectly
created in connection with or as a result of the death of an
individual who, for purposes of the taxes levied under Chapter
5731. of the Revised Code, was domiciled in this state at the time
of the individual's death.
(g) The tax commissioner may adopt rules to ascertain the
part of a trust residing in this state.
(J) "Nonresident" means an individual or estate that is not a
resident. An individual who is a resident for only part of a
taxable year is a nonresident for the remainder of that taxable
year.
(K) "Pass-through entity" has the same meaning as in section
5733.04 of the Revised Code.
(L) "Return" means the notifications and reports required to
be filed pursuant to this chapter for the purpose of reporting the
tax due and includes declarations of estimated tax when so
required.
(M) "Taxable year" means the calendar year or the taxpayer's
fiscal year ending during the calendar year, or fractional part
thereof, upon which the adjusted gross income is calculated
pursuant to this chapter.
(N) "Taxpayer" means any person subject to the tax imposed by
section 5747.02 of the Revised Code or any pass-through entity
that makes the election under division (D) of section 5747.08 of
the Revised Code.
(O) "Dependents" means dependents as defined in the Internal
Revenue Code and as claimed in the taxpayer's federal income tax
return for the taxable year or which the taxpayer would have been
permitted to claim had the taxpayer filed a federal income tax
return.
(P) "Principal county of employment" means, in the case of a
nonresident, the county within the state in which a taxpayer
performs services for an employer or, if those services are
performed in more than one county, the county in which the major
portion of the services are performed.
(Q) As used in sections 5747.50 to 5747.55 of the Revised
Code:
(1) "Subdivision" means any county, municipal corporation,
park district, or township.
(2) "Essential local government purposes" includes all
functions that any subdivision is required by general law to
exercise, including like functions that are exercised under a
charter adopted pursuant to the Ohio Constitution.
(R) "Overpayment" means any amount already paid that exceeds
the figure determined to be the correct amount of the tax.
(S) "Taxable income" or "Ohio taxable income" applies only to
estates and trusts, and means federal taxable income, as defined
and used in the Internal Revenue Code, adjusted as follows:
(1) Add interest or dividends, net of ordinary, necessary,
and reasonable expenses not deducted in computing federal taxable
income, on obligations or securities of any state or of any
political subdivision or authority of any state, other than this
state and its subdivisions and authorities, but only to the extent
that such net amount is not otherwise includible in Ohio taxable
income and is described in either division (S)(1)(a) or (b) of
this section:
(a) The net amount is not attributable to the S portion of an
electing small business trust and has not been distributed to
beneficiaries for the taxable year;
(b) The net amount is attributable to the S portion of an
electing small business trust for the taxable year.
(2) Add interest or dividends, net of ordinary, necessary,
and reasonable expenses not deducted in computing federal taxable
income, on obligations of any authority, commission,
instrumentality, territory, or possession of the United States to
the extent that the interest or dividends are exempt from federal
income taxes but not from state income taxes, but only to the
extent that such net amount is not otherwise includible in Ohio
taxable income and is described in either division (S)(1)(a) or
(b) of this section;
(3) Add the amount of personal exemption allowed to the
estate pursuant to section 642(b) of the Internal Revenue Code;
(4) Deduct interest or dividends, net of related expenses
deducted in computing federal taxable income, on obligations of
the United States and its territories and possessions or of any
authority, commission, or instrumentality of the United States to
the extent that the interest or dividends are exempt from state
taxes under the laws of the United States, but only to the extent
that such amount is included in federal taxable income and is
described in either division (S)(1)(a) or (b) of this section;
(5) Deduct the amount of wages and salaries, if any, not
otherwise allowable as a deduction but that would have been
allowable as a deduction in computing federal taxable income for
the taxable year, had the targeted jobs credit allowed under
sections 38, 51, and 52 of the Internal Revenue Code not been in
effect, but only to the extent such amount relates either to
income included in federal taxable income for the taxable year or
to income of the S portion of an electing small business trust for
the taxable year;
(6) Deduct any interest or interest equivalent, net of
related expenses deducted in computing federal taxable income, on
public obligations and purchase obligations, but only to the
extent that such net amount relates either to income included in
federal taxable income for the taxable year or to income of the S
portion of an electing small business trust for the taxable year;
(7) Add any loss or deduct any gain resulting from sale,
exchange, or other disposition of public obligations to the extent
that such loss has been deducted or such gain has been included in
computing either federal taxable income or income of the S portion
of an electing small business trust for the taxable year;
(8) Except in the case of the final return of an estate, add
any amount deducted by the taxpayer on both its Ohio estate tax
return pursuant to section 5731.14 of the Revised Code, and on its
federal income tax return in determining federal taxable income;
(9)(a) Deduct any amount included in federal taxable income
solely because the amount represents a reimbursement or refund of
expenses that in a previous year the decedent had deducted as an
itemized deduction pursuant to section 63 of the Internal Revenue
Code and applicable treasury regulations. The deduction otherwise
allowed under division (S)(9)(a) of this section shall be reduced
to the extent the reimbursement is attributable to an amount the
taxpayer or decedent deducted under this section in any taxable
year.
(b) Add any amount not otherwise included in Ohio taxable
income for any taxable year to the extent that the amount is
attributable to the recovery during the taxable year of any amount
deducted or excluded in computing federal or Ohio taxable income
in any taxable year, but only to the extent such amount has not
been distributed to beneficiaries for the taxable year.
(10) Deduct any portion of the deduction described in section
1341(a)(2) of the Internal Revenue Code, for repaying previously
reported income received under a claim of right, that meets both
of the following requirements:
(a) It is allowable for repayment of an item that was
included in the taxpayer's taxable income or the decedent's
adjusted gross income for a prior taxable year and did not qualify
for a credit under division (A) or (B) of section 5747.05 of the
Revised Code for that year.
(b) It does not otherwise reduce the taxpayer's taxable
income or the decedent's adjusted gross income for the current or
any other taxable year.
(11) Add any amount claimed as a credit under section
5747.059 or 5747.65 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.
(GG) "Uniformed services" has the same meaning as in 10
U.S.C. 101.
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 5726.01 of
the Revised Code, that paid the tax imposed by section 5726.02 of
the Revised Code based on one or more taxable years that include
the entire tax period under this chapter;
(4) A person directly or indirectly owned by one or more
financial institutions, as defined in section 5726.01 of the
Revised Code, that paid the tax imposed by section 5726.02 of the
Revised Code based on one or more taxable years that include the
entire tax period under this chapter.
For the purposes of division (E)(4) 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.
(5) 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;
(6) 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.
(7) 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.
(8) 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, transfer,
exchange, or other disposition of motor fuel as "motor fuel" is
defined in section 5736.01 of the Revised Code, an amount equal to
the value of the motor fuel, including federal and state motor
fuel excise taxes and receipts from billing or invoicing the tax
imposed under section 5736.02 of the Revised Code to another
person;
(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. If the qualified
distribution center is a refining facility, "supplier" includes
all dealers, brokers, processors, sellers, vendors, cosigners, and
distributors of qualified property.
(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 or, in the case of gold, silver, platinum, or
palladium delivered to a refining facility solely for refining to
a grade and fineness acceptable for delivery to a registered
commodities exchange. "Further shipping" includes storing and
repackaging property into smaller or larger bundles, so long as
the property is not subject to further manufacturing or
processing. "Refining" is limited to extracting impurities from
gold, silver, platinum, or palladium through smelting or some
other process at a refining facility.
(III) "Qualified distribution center" means a warehouse, a
facility similar to a warehouse, or a refining 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. All warehouses or facilities similar to warehouses
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. All refining facilities that are
operated by persons in the same taxpayer group and that are
located in the same or adjacent counties may 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 effective for the remainder of the
qualifying year or until the appeal is finalized, whichever is
earlier. If the operator does not prevail in the appeal, the
operator shall pay the ineligible operator's supplier tax
liability.
(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.
(VIII) "Refining facility" means one or more buildings
located in a county in the Appalachian region of this state as
defined by section 107.21 of the Revised Code and utilized for
refining or smelting gold, silver, platinum, or palladium to a
grade and fineness acceptable for delivery to a registered
commodities exchange.
(IX) "Registered commodities exchange" means a board of
trade, such as New York mercantile exchange, inc. or commodity
exchange, inc., designated as a contract market by the commodity
futures trading commission under the "Commodity Exchange Act," 7
U.S.C. 1 et seq., as amended.
(X) "Ineligible operator's supplier tax liability" means an
amount equal to the tax liability of all suppliers of a
distribution center had the distribution center not been issued a
qualifying certificate for the qualifying year. Ineligible
operator's supplier tax liability shall not include interest or
penalties. The tax commissioner shall determine an ineligible
operator's supplier tax liability based on information that the
commissioner may request from the operator of the distribution
center. An operator shall provide a list of all suppliers of the
distribution center and the corresponding costs of qualified
property for the qualifying year at issue within sixty days of a
request by the commissioner under this division.
(ii)(I) 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 pay the ineligible operator's supplier
tax liability. (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.)
(II) The commissioner may grant a qualifying certificate to a
distribution center that does not qualify as a qualified
distribution center for an entire qualifying period if the
operator of the distribution center demonstrates that the business
operations of the distribution center have changed or will change
such that the distribution center will qualify as a qualified
distribution center within thirty-six months after the date the
operator first applies for a certificate. If, at the end of that
thirty-six-month period, the business operations of the
distribution center have not changed such that the distribution
center qualifies as a qualified distribution center, the operator
of the distribution center shall pay the ineligible operator's
supplier tax liability for each year that the distribution center
received a certificate but did not qualify as a qualified
distribution center. For each year the distribution center
receives a certificate under division (F)(2)(z)(ii)(II) of this
section, the distribution center shall pay all applicable fees
required under division (F)(2)(z) of this section and shall submit
an updated business plan showing the progress the distribution
center made toward qualifying as a qualified distribution center
during the preceding year.
(III) An operator may appeal a determination under division
(F)(2)(z)(ii)(I) or (II) of this section that the ineligible
operator is liable for the operator's supplier tax liability as a
result of not qualifying as a qualified distribution center, as
provided in section 5717.02 of the Revised Code.
(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.
(iv)(I) 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.
(II) The operator of a distribution center that receives a
qualifying certificate under division (F)(2)(z)(ii)(II) of this
section shall make a good faith estimate of the Ohio delivery
percentage that the operator estimates will apply to the
distribution center at the end of the thirty-six-month period
after the operator first applied for a qualifying certificate
under that division. The result of the estimate shall be
multiplied by a factor of one and seventy-five one-hundredths. The
product of that calculation shall be the Ohio delivery percentage
used by suppliers in their reports of taxable gross receipts for
each qualifying year that the distribution center receives a
qualifying certificate under division (F)(2)(z)(ii)(II) of this
section, except that, if the product is less than five per cent,
the Ohio delivery percentage used shall be five per cent and that,
if the product exceeds forty-nine per cent, the Ohio delivery
percentage used shall be forty-nine per cent.
(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. An operator
receiving a qualifying certificate is liable for the ineligible
operator's supplier tax liability for each year the operator
received a certificate but did not qualify as a qualified
distribution center.
(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 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 division (F)(2)(z) 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 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) 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.
(ii) Receipts realized from the sale of agricultural
commodities by an agricultural commodity handler, both as defined
in section 926.01 of the Revised Code, that is licensed by the
director of agriculture to handle agricultural commodities in this
state.
(jj) Receipts realized by a partnering business from
business conducted in a startup zone pursuant to a partnership
contract with a university under Chapter 195. of the Revised Code.
Receipts may be excluded under this division only for tax periods
ending on or before the expiration or termination of the
partnership contract. Receipts realized from business conducted
outside the startup zone or beyond the scope of the partnership
contract shall not be excluded under this division. As used in
this division, "startup zone," "partnering business," "partnership
contract," and "university" have the same meanings as in section
195.01 of the Revised Code.
(kk) 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 150.03, 322.02, 5739.02,
5739.03, 5747.01, and 5751.01 of the Revised Code are hereby
repealed.
Section 3. By June 30, 2015, the Director of Budget and
Management shall transfer $100,000,000 cash from the General
Revenue Fund to the Program Fund created under section 150.03 of
the Revised Code. The transferred amount shall be used in the same
manner as Program Fund revenue received under Chapter 150. of the
Revised Code, for the purposes described in division (B) of
section 150.01 of the Revised Code, and is hereby appropriated by
the General Assembly.
|
|