Bill Text: OH SB203 | 2013-2014 | 130th General Assembly | Introduced

---

Bill Title: To authorize an income tax credit for individuals that earn a nonprofit management degree or certain professional designations and to allow a sales tax exemption for out-of-state nonprofit corporations that relocate jobs to Ohio.

Spectrum: Bipartisan Bill

Status: (Introduced - Dead) 2013-10-08 - To Ways & Means [SB203 Detail]

Download: Ohio-2013-SB203-Introduced.html

---

As Introduced

130th General Assembly Regular Session 2013-2014

S. B. No. 203

Senators Schaffer, Tavares 

---

A BILL

To amend sections 5739.02, 5747.01, and 5747.98 and

1

to enact sections 5739.40 and 5747.78 of the

2

Revised Code to authorize an income tax credit for

3

individuals that earn a nonprofit management

4

degree or certain professional designations and to

5

allow a sales tax exemption for out-of-state

6

nonprofit corporations that relocate jobs to Ohio.

7

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

Section 1. That sections 5739.02, 5747.01, and 5747.98 be	8
amended and sections 5739.40 and 5747.78 of the Revised Code be	9
enacted to read as follows:	10

Sec. 5739.02.  For the purpose of providing revenue with	11
which to meet the needs of the state, for the use of the general	12
revenue fund of the state, for the purpose of securing a thorough	13
and efficient system of common schools throughout the state, for	14
the purpose of affording revenues, in addition to those from	15
general property taxes, permitted under constitutional	16
limitations, and from other sources, for the support of local	17
governmental functions, and for the purpose of reimbursing the	18
state for the expense of administering this chapter, an excise tax	19
is hereby levied on each retail sale made in this state.	20

(A)(1) The tax shall be collected as provided in section	21
5739.025 of the Revised Code. The rate of the tax shall be five	22
and one-half per cent. The tax applies and is collectible when the	23
sale is made, regardless of the time when the price is paid or	24
delivered.	25

(2) In the case of the lease or rental, with a fixed term of	26
more than thirty days or an indefinite term with a minimum period	27
of more than thirty days, of any motor vehicles designed by the	28
manufacturer to carry a load of not more than one ton, watercraft,	29
outboard motor, or aircraft, or of any tangible personal property,	30
other than motor vehicles designed by the manufacturer to carry a	31
load of more than one ton, to be used by the lessee or renter	32
primarily for business purposes, the tax shall be collected by the	33
vendor at the time the lease or rental is consummated and shall be	34
calculated by the vendor on the basis of the total amount to be	35
paid by the lessee or renter under the lease agreement. If the	36
total amount of the consideration for the lease or rental includes	37
amounts that are not calculated at the time the lease or rental is	38
executed, the tax shall be calculated and collected by the vendor	39
at the time such amounts are billed to the lessee or renter. In	40
the case of an open-end lease or rental, the tax shall be	41
calculated by the vendor on the basis of the total amount to be	42
paid during the initial fixed term of the lease or rental, and for	43
each subsequent renewal period as it comes due. As used in this	44
division, "motor vehicle" has the same meaning as in section	45
4501.01 of the Revised Code, and "watercraft" includes an outdrive	46
unit attached to the watercraft.	47

A lease with a renewal clause and a termination penalty or	48
similar provision that applies if the renewal clause is not	49
exercised is presumed to be a sham transaction. In such a case,	50
the tax shall be calculated and paid on the basis of the entire	51
length of the lease period, including any renewal periods, until	52
the termination penalty or similar provision no longer applies.	53
The taxpayer shall bear the burden, by a preponderance of the	54
evidence, that the transaction or series of transactions is not a	55
sham transaction.	56

(3) Except as provided in division (A)(2) of this section, in	57
the case of a sale, the price of which consists in whole or in	58
part of the lease or rental of tangible personal property, the tax	59
shall be measured by the installments of that lease or rental.	60

(4) In the case of a sale of a physical fitness facility	61
service or recreation and sports club service, the price of which	62
consists in whole or in part of a membership for the receipt of	63
the benefit of the service, the tax applicable to the sale shall	64
be measured by the installments thereof.	65

(B) The tax does not apply to the following:

66

(1) Sales to the state or any of its political subdivisions,	67
or to any other state or its political subdivisions if the laws of	68
that state exempt from taxation sales made to this state and its	69
political subdivisions;	70

(2) Sales of food for human consumption off the premises	71
where sold;	72

(3) Sales of food sold to students only in a cafeteria,	73
dormitory, fraternity, or sorority maintained in a private,	74
public, or parochial school, college, or university;	75

(4) Sales of newspapers and of magazine subscriptions and	76
sales or transfers of magazines distributed as controlled	77
circulation publications;	78

(5) The furnishing, preparing, or serving of meals without	79
charge by an employer to an employee provided the employer records	80
the meals as part compensation for services performed or work	81
done;	82

(6) Sales of motor fuel upon receipt, use, distribution, or	83
sale of which in this state a tax is imposed by the law of this	84
state, but this exemption shall not apply to the sale of motor	85
fuel on which a refund of the tax is allowable under division (A)	86
of section 5735.14 of the Revised Code; and the tax commissioner	87
may deduct the amount of tax levied by this section applicable to	88
the price of motor fuel when granting a refund of motor fuel tax	89
pursuant to division (A) of section 5735.14 of the Revised Code	90
and shall cause the amount deducted to be paid into the general	91
revenue fund of this state;	92

(7) Sales of natural gas by a natural gas company, of water	93
by a water-works company, or of steam by a heating company, if in	94
each case the thing sold is delivered to consumers through pipes	95
or conduits, and all sales of communications services by a	96
telegraph company, all terms as defined in section 5727.01 of the	97
Revised Code, and sales of electricity delivered through wires;	98

(8) Casual sales by a person, or auctioneer employed directly	99
by the person to conduct such sales, except as to such sales of	100
motor vehicles, watercraft or outboard motors required to be	101
titled under section 1548.06 of the Revised Code, watercraft	102
documented with the United States coast guard, snowmobiles, and	103
all-purpose vehicles as defined in section 4519.01 of the Revised	104
Code;	105

(9)(a) Sales of services or tangible personal property, other	106
than motor vehicles, mobile homes, and manufactured homes, by	107
churches, organizations exempt from taxation under section	108
501(c)(3) of the Internal Revenue Code of 1986, or nonprofit	109
organizations operated exclusively for charitable purposes as	110
defined in division (B)(12) of this section, provided that the	111
number of days on which such tangible personal property or	112
services, other than items never subject to the tax, are sold does	113
not exceed six in any calendar year, except as otherwise provided	114
in division (B)(9)(b) of this section. If the number of days on	115
which such sales are made exceeds six in any calendar year, the	116
church or organization shall be considered to be engaged in	117
business and all subsequent sales by it shall be subject to the	118
tax. In counting the number of days, all sales by groups within a	119
church or within an organization shall be considered to be sales	120
of that church or organization.	121

(b) The limitation on the number of days on which tax-exempt	122
sales may be made by a church or organization under division	123
(B)(9)(a) of this section does not apply to sales made by student	124
clubs and other groups of students of a primary or secondary	125
school, or a parent-teacher association, booster group, or similar	126
organization that raises money to support or fund curricular or	127
extracurricular activities of a primary or secondary school.	128

(c) Divisions (B)(9)(a) and (b) of this section do not apply	129
to sales by a noncommercial educational radio or television	130
broadcasting station.	131

(10) Sales not within the taxing power of this state under	132
the Constitution of the United States;	133

(11) Except for transactions that are sales under division	134
(B)(3)(r) of section 5739.01 of the Revised Code, the	135
transportation of persons or property, unless the transportation	136
is by a private investigation and security service;	137

(12) Sales of tangible personal property or services to	138
churches, to organizations exempt from taxation under section	139
501(c)(3) of the Internal Revenue Code of 1986, and to any other	140
nonprofit organizations operated exclusively for charitable	141
purposes in this state, no part of the net income of which inures	142
to the benefit of any private shareholder or individual, and no	143
substantial part of the activities of which consists of carrying	144
on propaganda or otherwise attempting to influence legislation;	145
sales to offices administering one or more homes for the aged or	146
one or more hospital facilities exempt under section 140.08 of the	147
Revised Code; and sales to organizations described in division (D)	148
of section 5709.12 of the Revised Code.	149

"Charitable purposes" means the relief of poverty; the	150
improvement of health through the alleviation of illness, disease,	151
or injury; the operation of an organization exclusively for the	152
provision of professional, laundry, printing, and purchasing	153
services to hospitals or charitable institutions; the operation of	154
a home for the aged, as defined in section 5701.13 of the Revised	155
Code; the operation of a radio or television broadcasting station	156
that is licensed by the federal communications commission as a	157
noncommercial educational radio or television station; the	158
operation of a nonprofit animal adoption service or a county	159
humane society; the promotion of education by an institution of	160
learning that maintains a faculty of qualified instructors,	161
teaches regular continuous courses of study, and confers a	162
recognized diploma upon completion of a specific curriculum; the	163
operation of a parent-teacher association, booster group, or	164
similar organization primarily engaged in the promotion and	165
support of the curricular or extracurricular activities of a	166
primary or secondary school; the operation of a community or area	167
center in which presentations in music, dramatics, the arts, and	168
related fields are made in order to foster public interest and	169
education therein; the production of performances in music,	170
dramatics, and the arts; or the promotion of education by an	171
organization engaged in carrying on research in, or the	172
dissemination of, scientific and technological knowledge and	173
information primarily for the public.	174

Nothing in this division shall be deemed to exempt sales to	175
any organization for use in the operation or carrying on of a	176
trade or business, or sales to a home for the aged for use in the	177
operation of independent living facilities as defined in division	178
(A) of section 5709.12 of the Revised Code.	179

(13) Building and construction materials and services sold to	180
construction contractors for incorporation into a structure or	181
improvement to real property under a construction contract with	182
this state or a political subdivision of this state, or with the	183
United States government or any of its agencies; building and	184
construction materials and services sold to construction	185
contractors for incorporation into a structure or improvement to	186
real property that are accepted for ownership by this state or any	187
of its political subdivisions, or by the United States government	188
or any of its agencies at the time of completion of the structures	189
or improvements; building and construction materials sold to	190
construction contractors for incorporation into a horticulture	191
structure or livestock structure for a person engaged in the	192
business of horticulture or producing livestock; building	193
materials and services sold to a construction contractor for	194
incorporation into a house of public worship or religious	195
education, or a building used exclusively for charitable purposes	196
under a construction contract with an organization whose purpose	197
is as described in division (B)(12) of this section; building	198
materials and services sold to a construction contractor for	199
incorporation into a building under a construction contract with	200
an organization exempt from taxation under section 501(c)(3) of	201
the Internal Revenue Code of 1986 when the building is to be used	202
exclusively for the organization's exempt purposes; building and	203
construction materials sold for incorporation into the original	204
construction of a sports facility under section 307.696 of the	205
Revised Code; building and construction materials and services	206
sold to a construction contractor for incorporation into real	207
property outside this state if such materials and services, when	208
sold to a construction contractor in the state in which the real	209
property is located for incorporation into real property in that	210
state, would be exempt from a tax on sales levied by that state;	211
and, until one calendar year after the construction of a	212
convention center that qualifies for property tax exemption under	213
section 5709.084 of the Revised Code is completed, building and	214
construction materials and services sold to a construction	215
contractor for incorporation into the real property comprising	216
that convention center;	217

(14) Sales of ships or vessels or rail rolling stock used or	218
to be used principally in interstate or foreign commerce, and	219
repairs, alterations, fuel, and lubricants for such ships or	220
vessels or rail rolling stock;	221

(15) Sales to persons primarily engaged in any of the	222
activities mentioned in division (B)(42)(a), (g), or (h) of this	223
section, to persons engaged in making retail sales, or to persons	224
who purchase for sale from a manufacturer tangible personal	225
property that was produced by the manufacturer in accordance with	226
specific designs provided by the purchaser, of packages, including	227
material, labels, and parts for packages, and of machinery,	228
equipment, and material for use primarily in packaging tangible	229
personal property produced for sale, including any machinery,	230
equipment, and supplies used to make labels or packages, to	231
prepare packages or products for labeling, or to label packages or	232
products, by or on the order of the person doing the packaging, or	233
sold at retail. "Packages" includes bags, baskets, cartons,	234
crates, boxes, cans, bottles, bindings, wrappings, and other	235
similar devices and containers, but does not include motor	236
vehicles or bulk tanks, trailers, or similar devices attached to	237
motor vehicles. "Packaging" means placing in a package. Division	238
(B)(15) of this section does not apply to persons engaged in	239
highway transportation for hire.	240

(16) Sales of food to persons using supplemental nutrition	241
assistance program benefits to purchase the food. As used in this	242
division, "food" has the same meaning as in 7 U.S.C. 2012 and	243
federal regulations adopted pursuant to the Food and Nutrition Act	244
of 2008.	245

(17) Sales to persons engaged in farming, agriculture,	246
horticulture, or floriculture, of tangible personal property for	247
use or consumption primarily in the production by farming,	248
agriculture, horticulture, or floriculture of other tangible	249
personal property for use or consumption primarily in the	250
production of tangible personal property for sale by farming,	251
agriculture, horticulture, or floriculture; or material and parts	252
for incorporation into any such tangible personal property for use	253
or consumption in production; and of tangible personal property	254
for such use or consumption in the conditioning or holding of	255
products produced by and for such use, consumption, or sale by	256
persons engaged in farming, agriculture, horticulture, or	257
floriculture, except where such property is incorporated into real	258
property;	259

(18) Sales of drugs for a human being that may be dispensed	260
only pursuant to a prescription; insulin as recognized in the	261
official United States pharmacopoeia; urine and blood testing	262
materials when used by diabetics or persons with hypoglycemia to	263
test for glucose or acetone; hypodermic syringes and needles when	264
used by diabetics for insulin injections; epoetin alfa when	265
purchased for use in the treatment of persons with medical	266
disease; hospital beds when purchased by hospitals, nursing homes,	267
or other medical facilities; and medical oxygen and medical	268
oxygen-dispensing equipment when purchased by hospitals, nursing	269
homes, or other medical facilities;	270

(19) Sales of prosthetic devices, durable medical equipment	271
for home use, or mobility enhancing equipment, when made pursuant	272
to a prescription and when such devices or equipment are for use	273
by a human being.	274

(20) Sales of emergency and fire protection vehicles and	275
equipment to nonprofit organizations for use solely in providing	276
fire protection and emergency services, including trauma care and	277
emergency medical services, for political subdivisions of the	278
state;	279

(21) Sales of tangible personal property manufactured in this	280
state, if sold by the manufacturer in this state to a retailer for	281
use in the retail business of the retailer outside of this state	282
and if possession is taken from the manufacturer by the purchaser	283
within this state for the sole purpose of immediately removing the	284
same from this state in a vehicle owned by the purchaser;	285

(22) Sales of services provided by the state or any of its	286
political subdivisions, agencies, instrumentalities, institutions,	287
or authorities, or by governmental entities of the state or any of	288
its political subdivisions, agencies, instrumentalities,	289
institutions, or authorities;	290

(23) Sales of motor vehicles to nonresidents of this state	291
under the circumstances described in division (B) of section	292
5739.029 of the Revised Code;	293

(24) Sales to persons engaged in the preparation of eggs for	294
sale of tangible personal property used or consumed directly in	295
such preparation, including such tangible personal property used	296
for cleaning, sanitizing, preserving, grading, sorting, and	297
classifying by size; packages, including material and parts for	298
packages, and machinery, equipment, and material for use in	299
packaging eggs for sale; and handling and transportation equipment	300
and parts therefor, except motor vehicles licensed to operate on	301
public highways, used in intraplant or interplant transfers or	302
shipment of eggs in the process of preparation for sale, when the	303
plant or plants within or between which such transfers or	304
shipments occur are operated by the same person. "Packages"	305
includes containers, cases, baskets, flats, fillers, filler flats,	306
cartons, closure materials, labels, and labeling materials, and	307
"packaging" means placing therein.	308

(25)(a) Sales of water to a consumer for residential use;

309

(b) Sales of water by a nonprofit corporation engaged	310
exclusively in the treatment, distribution, and sale of water to	311
consumers, if such water is delivered to consumers through pipes	312
or tubing.	313

(26) Fees charged for inspection or reinspection of motor	314
vehicles under section 3704.14 of the Revised Code;	315

(27) Sales to persons licensed to conduct a food service	316
operation pursuant to section 3717.43 of the Revised Code, of	317
tangible personal property primarily used directly for the	318
following:	319

(a) To prepare food for human consumption for sale;

320

(b) To preserve food that has been or will be prepared for	321
human consumption for sale by the food service operator, not	322
including tangible personal property used to display food for	323
selection by the consumer;	324

(c) To clean tangible personal property used to prepare or	325
serve food for human consumption for sale.	326

(28) Sales of animals by nonprofit animal adoption services	327
or county humane societies;	328

(29) Sales of services to a corporation described in division	329
(A) of section 5709.72 of the Revised Code, and sales of tangible	330
personal property that qualifies for exemption from taxation under	331
section 5709.72 of the Revised Code;	332

(30) Sales and installation of agricultural land tile, as	333
defined in division (B)(5)(a) of section 5739.01 of the Revised	334
Code;	335

(31) Sales and erection or installation of portable grain	336
bins, as defined in division (B)(5)(b) of section 5739.01 of the	337
Revised Code;	338

(32) The sale, lease, repair, and maintenance of, parts for,	339
or items attached to or incorporated in, motor vehicles that are	340
primarily used for transporting tangible personal property	341
belonging to others by a person engaged in highway transportation	342
for hire, except for packages and packaging used for the	343
transportation of tangible personal property;	344

(33) Sales to the state headquarters of any veterans'	345
organization in this state that is either incorporated and issued	346
a charter by the congress of the United States or is recognized by	347
the United States veterans administration, for use by the	348
headquarters;	349

(34) Sales to a telecommunications service vendor, mobile	350
telecommunications service vendor, or satellite broadcasting	351
service vendor of tangible personal property and services used	352
directly and primarily in transmitting, receiving, switching, or	353
recording any interactive, one- or two-way electromagnetic	354
communications, including voice, image, data, and information,	355
through the use of any medium, including, but not limited to,	356
poles, wires, cables, switching equipment, computers, and record	357
storage devices and media, and component parts for the tangible	358
personal property. The exemption provided in this division shall	359
be in lieu of all other exemptions under division (B)(42)(a) or	360
(n) of this section to which the vendor may otherwise be entitled,	361
based upon the use of the thing purchased in providing the	362
telecommunications, mobile telecommunications, or satellite	363
broadcasting service.	364

(35)(a) Sales where the purpose of the consumer is to use or	365
consume the things transferred in making retail sales and	366
consisting of newspaper inserts, catalogues, coupons, flyers, gift	367
certificates, or other advertising material that prices and	368
describes tangible personal property offered for retail sale.	369

(b) Sales to direct marketing vendors of preliminary	370
materials such as photographs, artwork, and typesetting that will	371
be used in printing advertising material; and of printed matter	372
that offers free merchandise or chances to win sweepstake prizes	373
and that is mailed to potential customers with advertising	374
material described in division (B)(35)(a) of this section;	375

(c) Sales of equipment such as telephones, computers,	376
facsimile machines, and similar tangible personal property	377
primarily used to accept orders for direct marketing retail sales.	378

(d) Sales of automatic food vending machines that preserve	379
food with a shelf life of forty-five days or less by refrigeration	380
and dispense it to the consumer.	381

For purposes of division (B)(35) of this section, "direct	382
marketing" means the method of selling where consumers order	383
tangible personal property by United States mail, delivery	384
service, or telecommunication and the vendor delivers or ships the	385
tangible personal property sold to the consumer from a warehouse,	386
catalogue distribution center, or similar fulfillment facility by	387
means of the United States mail, delivery service, or common	388
carrier.	389

(36) Sales to a person engaged in the business of	390
horticulture or producing livestock of materials to be	391
incorporated into a horticulture structure or livestock structure;	392

(37) Sales of personal computers, computer monitors, computer	393
keyboards, modems, and other peripheral computer equipment to an	394
individual who is licensed or certified to teach in an elementary	395
or a secondary school in this state for use by that individual in	396
preparation for teaching elementary or secondary school students;	397

(38) Sales to a professional racing team of any of the	398
following:	399

(a) Motor racing vehicles;

400

(b) Repair services for motor racing vehicles;

401

(c) Items of property that are attached to or incorporated in	402
motor racing vehicles, including engines, chassis, and all other	403
components of the vehicles, and all spare, replacement, and	404
rebuilt parts or components of the vehicles; except not including	405
tires, consumable fluids, paint, and accessories consisting of	406
instrumentation sensors and related items added to the vehicle to	407
collect and transmit data by means of telemetry and other forms of	408
communication.	409

(39) Sales of used manufactured homes and used mobile homes,	410
as defined in section 5739.0210 of the Revised Code, made on or	411
after January 1, 2000;	412

(40) Sales of tangible personal property and services to a	413
provider of electricity used or consumed directly and primarily in	414
generating, transmitting, or distributing electricity for use by	415
others, including property that is or is to be incorporated into	416
and will become a part of the consumer's production, transmission,	417
or distribution system and that retains its classification as	418
tangible personal property after incorporation; fuel or power used	419
in the production, transmission, or distribution of electricity;	420
energy conversion equipment as defined in section 5727.01 of the	421
Revised Code; and tangible personal property and services used in	422
the repair and maintenance of the production, transmission, or	423
distribution system, including only those motor vehicles as are	424
specially designed and equipped for such use. The exemption	425
provided in this division shall be in lieu of all other exemptions	426
in division (B)(42)(a) or (n) of this section to which a provider	427
of electricity may otherwise be entitled based on the use of the	428
tangible personal property or service purchased in generating,	429
transmitting, or distributing electricity.	430

(41) Sales to a person providing services under division	431
(B)(3)(r) of section 5739.01 of the Revised Code of tangible	432
personal property and services used directly and primarily in	433
providing taxable services under that section.	434

(42) Sales where the purpose of the purchaser is to do any of	435
the following:	436

(a) To incorporate the thing transferred as a material or a	437
part into tangible personal property to be produced for sale by	438
manufacturing, assembling, processing, or refining; or to use or	439
consume the thing transferred directly in producing tangible	440
personal property for sale by mining, including, without	441
limitation, the extraction from the earth of all substances that	442
are classed geologically as minerals, production of crude oil and	443
natural gas, or directly in the rendition of a public utility	444
service, except that the sales tax levied by this section shall be	445
collected upon all meals, drinks, and food for human consumption	446
sold when transporting persons. Persons engaged in rendering	447
services in the exploration for, and production of, crude oil and	448
natural gas for others are deemed engaged directly in the	449
exploration for, and production of, crude oil and natural gas.	450
This paragraph does not exempt from "retail sale" or "sales at	451
retail" the sale of tangible personal property that is to be	452
incorporated into a structure or improvement to real property.	453

(b) To hold the thing transferred as security for the	454
performance of an obligation of the vendor;	455

(c) To resell, hold, use, or consume the thing transferred as	456
evidence of a contract of insurance;	457

(d) To use or consume the thing directly in commercial	458
fishing;	459

(e) To incorporate the thing transferred as a material or a	460
part into, or to use or consume the thing transferred directly in	461
the production of, magazines distributed as controlled circulation	462
publications;	463

(f) To use or consume the thing transferred in the production	464
and preparation in suitable condition for market and sale of	465
printed, imprinted, overprinted, lithographic, multilithic,	466
blueprinted, photostatic, or other productions or reproductions of	467
written or graphic matter;	468

(g) To use the thing transferred, as described in section	469
5739.011 of the Revised Code, primarily in a manufacturing	470
operation to produce tangible personal property for sale;	471

(h) To use the benefit of a warranty, maintenance or service	472
contract, or similar agreement, as described in division (B)(7) of	473
section 5739.01 of the Revised Code, to repair or maintain	474
tangible personal property, if all of the property that is the	475
subject of the warranty, contract, or agreement would not be	476
subject to the tax imposed by this section;	477

(i) To use the thing transferred as qualified research and	478
development equipment;	479

(j) To use or consume the thing transferred primarily in	480
storing, transporting, mailing, or otherwise handling purchased	481
sales inventory in a warehouse, distribution center, or similar	482
facility when the inventory is primarily distributed outside this	483
state to retail stores of the person who owns or controls the	484
warehouse, distribution center, or similar facility, to retail	485
stores of an affiliated group of which that person is a member, or	486
by means of direct marketing. This division does not apply to	487
motor vehicles registered for operation on the public highways. As	488
used in this division, "affiliated group" has the same meaning as	489
in division (B)(3)(e) of section 5739.01 of the Revised Code and	490
"direct marketing" has the same meaning as in division (B)(35) of	491
this section.	492

(k) To use or consume the thing transferred to fulfill a	493
contractual obligation incurred by a warrantor pursuant to a	494
warranty provided as a part of the price of the tangible personal	495
property sold or by a vendor of a warranty, maintenance or service	496
contract, or similar agreement the provision of which is defined	497
as a sale under division (B)(7) of section 5739.01 of the Revised	498
Code;	499

(l) To use or consume the thing transferred in the production	500
of a newspaper for distribution to the public;	501

(m) To use tangible personal property to perform a service	502
listed in division (B)(3) of section 5739.01 of the Revised Code,	503
if the property is or is to be permanently transferred to the	504
consumer of the service as an integral part of the performance of	505
the service;	506

(n) To use or consume the thing transferred primarily in	507
producing tangible personal property for sale by farming,	508
agriculture, horticulture, or floriculture. Persons engaged in	509
rendering farming, agriculture, horticulture, or floriculture	510
services for others are deemed engaged primarily in farming,	511
agriculture, horticulture, or floriculture. This paragraph does	512
not exempt from "retail sale" or "sales at retail" the sale of	513
tangible personal property that is to be incorporated into a	514
structure or improvement to real property.	515

(o) To use or consume the thing transferred in acquiring,	516
formatting, editing, storing, and disseminating data or	517
information by electronic publishing.	518

As used in division (B)(42) of this section, "thing" includes	519
all transactions included in divisions (B)(3)(a), (b), and (e) of	520
section 5739.01 of the Revised Code.	521

(43) Sales conducted through a coin operated device that	522
activates vacuum equipment or equipment that dispenses water,	523
whether or not in combination with soap or other cleaning agents	524
or wax, to the consumer for the consumer's use on the premises in	525
washing, cleaning, or waxing a motor vehicle, provided no other	526
personal property or personal service is provided as part of the	527
transaction.	528

(44) Sales of replacement and modification parts for engines,	529
airframes, instruments, and interiors in, and paint for, aircraft	530
used primarily in a fractional aircraft ownership program, and	531
sales of services for the repair, modification, and maintenance of	532
such aircraft, and machinery, equipment, and supplies primarily	533
used to provide those services.	534

(45) Sales of telecommunications service that is used	535
directly and primarily to perform the functions of a call center.	536
As used in this division, "call center" means any physical	537
location where telephone calls are placed or received in high	538
volume for the purpose of making sales, marketing, customer	539
service, technical support, or other specialized business	540
activity, and that employs at least fifty individuals that engage	541
in call center activities on a full-time basis, or sufficient	542
individuals to fill fifty full-time equivalent positions.	543

(46) Sales by a telecommunications service vendor of 900	544
service to a subscriber. This division does not apply to	545
information services, as defined in division (FF) of section	546
5739.01 of the Revised Code.	547

(47) Sales of value-added non-voice data service. This	548
division does not apply to any similar service that is not	549
otherwise a telecommunications service.	550

(48)(a) Sales of machinery, equipment, and software to a	551
qualified direct selling entity for use in a warehouse or	552
distribution center primarily for storing, transporting, or	553
otherwise handling inventory that is held for sale to independent	554
salespersons who operate as direct sellers and that is held	555
primarily for distribution outside this state;	556

(b) As used in division (B)(48)(a) of this section:

557

(i) "Direct seller" means a person selling consumer products	558
to individuals for personal or household use and not from a fixed	559
retail location, including selling such product at in-home product	560
demonstrations, parties, and other one-on-one selling.	561

(ii) "Qualified direct selling entity" means an entity	562
selling to direct sellers at the time the entity enters into a tax	563
credit agreement with the tax credit authority pursuant to section	564
122.17 of the Revised Code, provided that the agreement was	565
entered into on or after January 1, 2007. Neither contingencies	566
relevant to the granting of, nor later developments with respect	567
to, the tax credit shall impair the status of the qualified direct	568
selling entity under division (B)(48) of this section after	569
execution of the tax credit agreement by the tax credit authority.	570

(c) Division (B)(48) of this section is limited to machinery,	571
equipment, and software first stored, used, or consumed in this	572
state within the period commencing June 24, 2008, and ending on	573
the date that is five years after that date.	574

(49) Sales of materials, parts, equipment, or engines used in	575
the repair or maintenance of aircraft or avionics systems of such	576
aircraft, and sales of repair, remodeling, replacement, or	577
maintenance services in this state performed on aircraft or on an	578
aircraft's avionics, engine, or component materials or parts. As	579
used in division (B)(49) of this section, "aircraft" means	580
aircraft of more than six thousand pounds maximum certified	581
takeoff weight or used exclusively in general aviation.	582

(50) Sales of full flight simulators that are used for pilot	583
or flight-crew training, sales of repair or replacement parts or	584
components, and sales of repair or maintenance services for such	585
full flight simulators. "Full flight simulator" means a replica of	586
a specific type, or make, model, and series of aircraft cockpit.	587
It includes the assemblage of equipment and computer programs	588
necessary to represent aircraft operations in ground and flight	589
conditions, a visual system providing an out-of-the-cockpit view,	590
and a system that provides cues at least equivalent to those of a	591
three-degree-of-freedom motion system, and has the full range of	592
capabilities of the systems installed in the device as described	593
in appendices A and B of part 60 of chapter 1 of title 14 of the	594
Code of Federal Regulations.	595

(51) Any transfer or lease of tangible personal property	596
between the state and a successful proposer in accordance with	597
sections 126.60 to 126.605 of the Revised Code, provided the	598
property is part of a project as defined in section 126.60 of the	599
Revised Code and the state retains ownership of the project or	600
part thereof that is being transferred or leased, between the	601
state and JobsOhio in accordance with section 4313.02 of the	602
Revised Code.	603

(52) Sales of tangible personal property or services to a	604
nonprofit corporation that holds a job relocation exemption	605
certificate issued under section 5739.40 of the Revised Code.	606

(C) For the purpose of the proper administration of this	607
chapter, and to prevent the evasion of the tax, it is presumed	608
that all sales made in this state are subject to the tax until the	609
contrary is established.	610

(D) The levy of this tax on retail sales of recreation and	611
sports club service shall not prevent a municipal corporation from	612
levying any tax on recreation and sports club dues or on any	613
income generated by recreation and sports club dues.	614

(E) The tax collected by the vendor from the consumer under	615
this chapter is not part of the price, but is a tax collection for	616
the benefit of the state, and of counties levying an additional	617
sales tax pursuant to section 5739.021 or 5739.026 of the Revised	618
Code and of transit authorities levying an additional sales tax	619
pursuant to section 5739.023 of the Revised Code. Except for the	620
discount authorized under section 5739.12 of the Revised Code and	621
the effects of any rounding pursuant to section 5703.055 of the	622
Revised Code, no person other than the state or such a county or	623
transit authority shall derive any benefit from the collection or	624
payment of the tax levied by this section or section 5739.021,	625
5739.023, or 5739.026 of the Revised Code.	626

Sec. 5739.40. (A) As used in this section:

627

(1) "Nonprofit corporation" has the same meaning as in	628
section 1702.01 of the Revised Code.	629

(2) "Qualifying nonprofit corporation" means a nonprofit	630
corporation that relocates at least fifty full-time employment	631
positions from one or more other states to this state within one	632
year after the nonprofit corporation first establishes a physical	633
presence in this state.	634

(B) A qualifying nonprofit corporation may apply to the tax	635
commissioner for a job relocation exemption certificate. The	636
application shall be in the form prescribed by the commissioner.	637
Within thirty days of the receipt of an application, the tax	638
commissioner shall issue a job relocation exemption certificate to	639
the nonprofit corporation if the nonprofit corporation meets the	640
criteria described in division (A)(2) of this section. Except as	641
provided in division (C) of this section, the certificate shall be	642
valid for three years from the date the tax commissioner issues	643
the certificate. The certificate shall otherwise comply with the	644
requirements for exemption certificates prescribed under section	645
5739.03 of the Revised Code.	646

(C) If a qualifying nonprofit corporation that receives a job	647
relocation exemption certificate fails to maintain at least fifty	648
full-time employment positions in this state during the three-year	649
period for which the certificate is issued, the tax commissioner	650
shall immediately revoke the certificate. The commissioner may	651
require a qualifying nonprofit corporation that receives a job	652
relocation exemption certificate to periodically report to the	653
commissioner the number of full-time employees that the qualifying	654
nonprofit corporation employs in the state, along with any other	655
information the commissioner considers necessary to administer	656
this section.	657

Sec. 5747.01.  Except as otherwise expressly provided or	658
clearly appearing from the context, any term used in this chapter	659
that is not otherwise defined in this section has the same meaning	660
as when used in a comparable context in the laws of the United	661
States relating to federal income taxes or if not used in a	662
comparable context in those laws, has the same meaning as in	663
section 5733.40 of the Revised Code. Any reference in this chapter	664
to the Internal Revenue Code includes other laws of the United	665
States relating to federal income taxes.	666

As used in this chapter:

667

(A) "Adjusted gross income" or "Ohio adjusted gross income"	668
means federal adjusted gross income, as defined and used in the	669
Internal Revenue Code, adjusted as provided in this section:	670

(1) Add interest or dividends on obligations or securities of	671
any state or of any political subdivision or authority of any	672
state, other than this state and its subdivisions and authorities.	673

(2) Add interest or dividends on obligations of any	674
authority, commission, instrumentality, territory, or possession	675
of the United States to the extent that the interest or dividends	676
are exempt from federal income taxes but not from state income	677
taxes.	678

(3) Deduct interest or dividends on obligations of the United	679
States and its territories and possessions or of any authority,	680
commission, or instrumentality of the United States to the extent	681
that the interest or dividends are included in federal adjusted	682
gross income but exempt from state income taxes under the laws of	683
the United States.	684

(4) Deduct disability and survivor's benefits to the extent	685
included in federal adjusted gross income.	686

(5) Deduct benefits under Title II of the Social Security Act	687
and tier 1 railroad retirement benefits to the extent included in	688
federal adjusted gross income under section 86 of the Internal	689
Revenue Code.	690

(6) In the case of a taxpayer who is a beneficiary of a trust	691
that makes an accumulation distribution as defined in section 665	692
of the Internal Revenue Code, add, for the beneficiary's taxable	693
years beginning before 2002, the portion, if any, of such	694
distribution that does not exceed the undistributed net income of	695
the trust for the three taxable years preceding the taxable year	696
in which the distribution is made to the extent that the portion	697
was not included in the trust's taxable income for any of the	698
trust's taxable years beginning in 2002 or thereafter.	699
"Undistributed net income of a trust" means the taxable income of	700
the trust increased by (a)(i) the additions to adjusted gross	701
income required under division (A) of this section and (ii) the	702
personal exemptions allowed to the trust pursuant to section	703
642(b) of the Internal Revenue Code, and decreased by (b)(i) the	704
deductions to adjusted gross income required under division (A) of	705
this section, (ii) the amount of federal income taxes attributable	706
to such income, and (iii) the amount of taxable income that has	707
been included in the adjusted gross income of a beneficiary by	708
reason of a prior accumulation distribution. Any undistributed net	709
income included in the adjusted gross income of a beneficiary	710
shall reduce the undistributed net income of the trust commencing	711
with the earliest years of the accumulation period.	712

(7) Deduct the amount of wages and salaries, if any, not	713
otherwise allowable as a deduction but that would have been	714
allowable as a deduction in computing federal adjusted gross	715
income for the taxable year, had the targeted jobs credit allowed	716
and determined under sections 38, 51, and 52 of the Internal	717
Revenue Code not been in effect.	718

(8) Deduct any interest or interest equivalent on public	719
obligations and purchase obligations to the extent that the	720
interest or interest equivalent is included in federal adjusted	721
gross income.	722

(9) Add any loss or deduct any gain resulting from the sale,	723
exchange, or other disposition of public obligations to the extent	724
that the loss has been deducted or the gain has been included in	725
computing federal adjusted gross income.	726

(10) Deduct or add amounts, as provided under section 5747.70	727
of the Revised Code, related to contributions to variable college	728
savings program accounts made or tuition units purchased pursuant	729
to Chapter 3334. of the Revised Code.	730

(11)(a) Deduct, to the extent not otherwise allowable as a	731
deduction or exclusion in computing federal or Ohio adjusted gross	732
income for the taxable year, the amount the taxpayer paid during	733
the taxable year for medical care insurance and qualified	734
long-term care insurance for the taxpayer, the taxpayer's spouse,	735
and dependents. No deduction for medical care insurance under	736
division (A)(11) of this section shall be allowed either to any	737
taxpayer who is eligible to participate in any subsidized health	738
plan maintained by any employer of the taxpayer or of the	739
taxpayer's spouse, or to any taxpayer who is entitled to, or on	740
application would be entitled to, benefits under part A of Title	741
XVIII of the "Social Security Act," 49 Stat. 620 (1935), 42 U.S.C.	742
301, as amended. For the purposes of division (A)(11)(a) of this	743
section, "subsidized health plan" means a health plan for which	744
the employer pays any portion of the plan's cost. The deduction	745
allowed under division (A)(11)(a) of this section shall be the net	746
of any related premium refunds, related premium reimbursements, or	747
related insurance premium dividends received during the taxable	748
year.	749

(b) Deduct, to the extent not otherwise deducted or excluded	750
in computing federal or Ohio adjusted gross income during the	751
taxable year, the amount the taxpayer paid during the taxable	752
year, not compensated for by any insurance or otherwise, for	753
medical care of the taxpayer, the taxpayer's spouse, and	754
dependents, to the extent the expenses exceed seven and one-half	755
per cent of the taxpayer's federal adjusted gross income.	756

(c) Deduct, to the extent not otherwise deducted or excluded	757
in computing federal or Ohio adjusted gross income, any amount	758
included in federal adjusted gross income under section 105 or not	759
excluded under section 106 of the Internal Revenue Code solely	760
because it relates to an accident and health plan for a person who	761
otherwise would be a "qualifying relative" and thus a "dependent"	762
under section 152 of the Internal Revenue Code but for the fact	763
that the person fails to meet the income and support limitations	764
under section 152(d)(1)(B) and (C) of the Internal Revenue Code.	765

(d) For purposes of division (A)(11) of this section,	766
"medical care" has the meaning given in section 213 of the	767
Internal Revenue Code, subject to the special rules, limitations,	768
and exclusions set forth therein, and "qualified long-term care"	769
has the same meaning given in section 7702B(c) of the Internal	770
Revenue Code. Solely for purposes of divisions (A)(11)(a) and (c)	771
of this section, "dependent" includes a person who otherwise would	772
be a "qualifying relative" and thus a "dependent" under section	773
152 of the Internal Revenue Code but for the fact that the person	774
fails to meet the income and support limitations under section	775
152(d)(1)(B) and (C) of the Internal Revenue Code.	776

(12)(a) Deduct any amount included in federal adjusted gross	777
income solely because the amount represents a reimbursement or	778
refund of expenses that in any year the taxpayer had deducted as	779
an itemized deduction pursuant to section 63 of the Internal	780
Revenue Code and applicable United States department of the	781
treasury regulations. The deduction otherwise allowed under	782
division (A)(12)(a) of this section shall be reduced to the extent	783
the reimbursement is attributable to an amount the taxpayer	784
deducted under this section in any taxable year.	785

(b) Add any amount not otherwise included in Ohio adjusted	786
gross income for any taxable year to the extent that the amount is	787
attributable to the recovery during the taxable year of any amount	788
deducted or excluded in computing federal or Ohio adjusted gross	789
income in any taxable year.	790

(13) Deduct any portion of the deduction described in section	791
1341(a)(2) of the Internal Revenue Code, for repaying previously	792
reported income received under a claim of right, that meets both	793
of the following requirements:	794

(a) It is allowable for repayment of an item that was	795
included in the taxpayer's adjusted gross income for a prior	796
taxable year and did not qualify for a credit under division (A)	797
or (B) of section 5747.05 of the Revised Code for that year;	798

(b) It does not otherwise reduce the taxpayer's adjusted	799
gross income for the current or any other taxable year.	800

(14) Deduct an amount equal to the deposits made to, and net	801
investment earnings of, a medical savings account during the	802
taxable year, in accordance with section 3924.66 of the Revised	803
Code. The deduction allowed by division (A)(14) of this section	804
does not apply to medical savings account deposits and earnings	805
otherwise deducted or excluded for the current or any other	806
taxable year from the taxpayer's federal adjusted gross income.	807

(15)(a) Add an amount equal to the funds withdrawn from a	808
medical savings account during the taxable year, and the net	809
investment earnings on those funds, when the funds withdrawn were	810
used for any purpose other than to reimburse an account holder	811
for, or to pay, eligible medical expenses, in accordance with	812
section 3924.66 of the Revised Code;	813

(b) Add the amounts distributed from a medical savings	814
account under division (A)(2) of section 3924.68 of the Revised	815
Code during the taxable year.	816

(16) Add any amount claimed as a credit under section	817
5747.059 or 5747.65 of the Revised Code to the extent that such	818
amount satisfies either of the following:	819

(a) The amount was deducted or excluded from the computation	820
of the taxpayer's federal adjusted gross income as required to be	821
reported for the taxpayer's taxable year under the Internal	822
Revenue Code;	823

(b) The amount resulted in a reduction of the taxpayer's	824
federal adjusted gross income as required to be reported for any	825
of the taxpayer's taxable years under the Internal Revenue Code.	826

(17) Deduct the amount contributed by the taxpayer to an	827
individual development account program established by a county	828
department of job and family services pursuant to sections 329.11	829
to 329.14 of the Revised Code for the purpose of matching funds	830
deposited by program participants. On request of the tax	831
commissioner, the taxpayer shall provide any information that, in	832
the tax commissioner's opinion, is necessary to establish the	833
amount deducted under division (A)(17) of this section.	834

(18) Beginning in taxable year 2001 but not for any taxable	835
year beginning after December 31, 2005, if the taxpayer is married	836
and files a joint return and the combined federal adjusted gross	837
income of the taxpayer and the taxpayer's spouse for the taxable	838
year does not exceed one hundred thousand dollars, or if the	839
taxpayer is single and has a federal adjusted gross income for the	840
taxable year not exceeding fifty thousand dollars, deduct amounts	841
paid during the taxable year for qualified tuition and fees paid	842
to an eligible institution for the taxpayer, the taxpayer's	843
spouse, or any dependent of the taxpayer, who is a resident of	844
this state and is enrolled in or attending a program that	845
culminates in a degree or diploma at an eligible institution. The	846
deduction may be claimed only to the extent that qualified tuition	847
and fees are not otherwise deducted or excluded for any taxable	848
year from federal or Ohio adjusted gross income. The deduction may	849
not be claimed for educational expenses for which the taxpayer	850
claims a credit under section 5747.27 or 5747.78 of the Revised	851
Code.	852

(19) Add any reimbursement received during the taxable year	853
of any amount the taxpayer deducted under division (A)(18) of this	854
section in any previous taxable year to the extent the amount is	855
not otherwise included in Ohio adjusted gross income.	856

(20)(a)(i) Subject to divisions (A)(20)(a)(iii), (iv), and	857
(v) of this section, add five-sixths of the amount of depreciation	858
expense allowed by subsection (k) of section 168 of the Internal	859
Revenue Code, including the taxpayer's proportionate or	860
distributive share of the amount of depreciation expense allowed	861
by that subsection to a pass-through entity in which the taxpayer	862
has a direct or indirect ownership interest.	863

(ii) Subject to divisions (A)(20)(a)(iii), (iv), and (v) of	864
this section, add five-sixths of the amount of qualifying section	865
179 depreciation expense, including the taxpayer's proportionate	866
or distributive share of the amount of qualifying section 179	867
depreciation expense allowed to any pass-through entity in which	868
the taxpayer has a direct or indirect ownership interest.	869

(iii) Subject to division (A)(20)(a)(v) of this section, for	870
taxable years beginning in 2012 or thereafter, if the increase in	871
income taxes withheld by the taxpayer is equal to or greater than	872
ten per cent of income taxes withheld by the taxpayer during the	873
taxpayer's immediately preceding taxable year, "two-thirds" shall	874
be substituted for "five-sixths" for the purpose of divisions	875
(A)(20)(a)(i) and (ii) of this section.	876

(iv) Subject to division (A)(20)(a)(v) of this section, for	877
taxable years beginning in 2012 or thereafter, a taxpayer is not	878
required to add an amount under division (A)(20) of this section	879
if the increase in income taxes withheld by the taxpayer and by	880
any pass-through entity in which the taxpayer has a direct or	881
indirect ownership interest is equal to or greater than the sum of	882
(I) the amount of qualifying section 179 depreciation expense and	883
(II) the amount of depreciation expense allowed to the taxpayer by	884
subsection (k) of section 168 of the Internal Revenue Code, and	885
including the taxpayer's proportionate or distributive shares of	886
such amounts allowed to any such pass-through entities.	887

(v) If a taxpayer directly or indirectly incurs a net	888
operating loss for the taxable year for federal income tax	889
purposes, to the extent such loss resulted from depreciation	890
expense allowed by subsection (k) of section 168 of the Internal	891
Revenue Code and by qualifying section 179 depreciation expense,	892
"the entire" shall be substituted for "five-sixths of the" for the	893
purpose of divisions (A)(20)(a)(i) and (ii) of this section.	894

The tax commissioner, under procedures established by the	895
commissioner, may waive the add-backs related to a pass-through	896
entity if the taxpayer owns, directly or indirectly, less than	897
five per cent of the pass-through entity.	898

(b) Nothing in division (A)(20) of this section shall be	899
construed to adjust or modify the adjusted basis of any asset.	900

(c) To the extent the add-back required under division	901
(A)(20)(a) of this section is attributable to property generating	902
nonbusiness income or loss allocated under section 5747.20 of the	903
Revised Code, the add-back shall be sitused to the same location	904
as the nonbusiness income or loss generated by the property for	905
the purpose of determining the credit under division (A) of	906
section 5747.05 of the Revised Code. Otherwise, the add-back shall	907
be apportioned, subject to one or more of the four alternative	908
methods of apportionment enumerated in section 5747.21 of the	909
Revised Code.	910

(d) For the purposes of division (A)(20)(a)(v) of this	911
section, net operating loss carryback and carryforward shall not	912
include the allowance of any net operating loss deduction	913
carryback or carryforward to the taxable year to the extent such	914
loss resulted from depreciation allowed by section 168(k) of the	915
Internal Revenue Code and by the qualifying section 179	916
depreciation expense amount.	917

(e) For the purposes of divisions (A)(20) and (21) of this	918
section:	919

(i) "Income taxes withheld" means the total amount withheld	920
and remitted under sections 5747.06 and 5747.07 of the Revised	921
Code by an employer during the employer's taxable year.	922

(ii) "Increase in income taxes withheld" means the amount by	923
which the amount of income taxes withheld by an employer during	924
the employer's current taxable year exceeds the amount of income	925
taxes withheld by that employer during the employer's immediately	926
preceding taxable year.	927

(iii) "Qualifying section 179 depreciation expense" means the	928
difference between (I) the amount of depreciation expense directly	929
or indirectly allowed to a taxpayer under section 179 of the	930
Internal Revised Code, and (II) the amount of depreciation expense	931
directly or indirectly allowed to the taxpayer under section 179	932
of the Internal Revenue Code as that section existed on December	933
31, 2002.	934

(21)(a) If the taxpayer was required to add an amount under	935
division (A)(20)(a) of this section for a taxable year, deduct one	936
of the following:	937

(i) One-fifth of the amount so added for each of the five	938
succeeding taxable years if the amount so added was five-sixths of	939
qualifying section 179 depreciation expense or depreciation	940
expense allowed by subsection (k) of section 168 of the Internal	941
Revenue Code;	942

(ii) One-half of the amount so added for each of the two	943
succeeding taxable years if the amount so added was two-thirds of	944
such depreciation expense;	945

(iii) One-sixth of the amount so added for each of the six	946
succeeding taxable years if the entire amount of such depreciation	947
expense was so added.	948

(b) If the amount deducted under division (A)(21)(a) of this	949
section is attributable to an add-back allocated under division	950
(A)(20)(c) of this section, the amount deducted shall be sitused	951
to the same location. Otherwise, the add-back shall be apportioned	952
using the apportionment factors for the taxable year in which the	953
deduction is taken, subject to one or more of the four alternative	954
methods of apportionment enumerated in section 5747.21 of the	955
Revised Code.	956

(c) No deduction is available under division (A)(21)(a) of	957
this section with regard to any depreciation allowed by section	958
168(k) of the Internal Revenue Code and by the qualifying section	959
179 depreciation expense amount to the extent that such	960
depreciation results in or increases a federal net operating loss	961
carryback or carryforward. If no such deduction is available for a	962
taxable year, the taxpayer may carry forward the amount not	963
deducted in such taxable year to the next taxable year and add	964
that amount to any deduction otherwise available under division	965
(A)(21)(a) of this section for that next taxable year. The	966
carryforward of amounts not so deducted shall continue until the	967
entire addition required by division (A)(20)(a) of this section	968
has been deducted.	969

(d) No refund shall be allowed as a result of adjustments	970
made by division (A)(21) of this section.	971

(22) Deduct, to the extent not otherwise deducted or excluded	972
in computing federal or Ohio adjusted gross income for the taxable	973
year, the amount the taxpayer received during the taxable year as	974
reimbursement for life insurance premiums under section 5919.31 of	975
the Revised Code.	976

(23) Deduct, to the extent not otherwise deducted or excluded	977
in computing federal or Ohio adjusted gross income for the taxable	978
year, the amount the taxpayer received during the taxable year as	979
a death benefit paid by the adjutant general under section 5919.33	980
of the Revised Code.	981

(24) Deduct, to the extent included in federal adjusted gross	982
income and not otherwise allowable as a deduction or exclusion in	983
computing federal or Ohio adjusted gross income for the taxable	984
year, military pay and allowances received by the taxpayer during	985
the taxable year for active duty service in the United States	986
army, air force, navy, marine corps, or coast guard or reserve	987
components thereof or the national guard. The deduction may not be	988
claimed for military pay and allowances received by the taxpayer	989
while the taxpayer is stationed in this state.	990

(25) Deduct, to the extent not otherwise allowable as a	991
deduction or exclusion in computing federal or Ohio adjusted gross	992
income for the taxable year and not otherwise compensated for by	993
any other source, the amount of qualified organ donation expenses	994
incurred by the taxpayer during the taxable year, not to exceed	995
ten thousand dollars. A taxpayer may deduct qualified organ	996
donation expenses only once for all taxable years beginning with	997
taxable years beginning in 2007.	998

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

999

(a) "Human organ" means all or any portion of a human liver,	1000
pancreas, kidney, intestine, or lung, and any portion of human	1001
bone marrow.	1002

(b) "Qualified organ donation expenses" means travel	1003
expenses, lodging expenses, and wages and salary forgone by a	1004
taxpayer in connection with the taxpayer's donation, while living,	1005
of one or more of the taxpayer's human organs to another human	1006
being.	1007

(26) Deduct, to the extent not otherwise deducted or excluded	1008
in computing federal or Ohio adjusted gross income for the taxable	1009
year, amounts received by the taxpayer as retired military	1010
personnel pay for service in the United States army, navy, air	1011
force, coast guard, or marine corps or reserve components thereof,	1012
or the national guard, or received by the surviving spouse or	1013
former spouse of such a taxpayer under the survivor benefit plan	1014
on account of such a taxpayer's death. If the taxpayer receives	1015
income on account of retirement paid under the federal civil	1016
service retirement system or federal employees retirement system,	1017
or under any successor retirement program enacted by the congress	1018
of the United States that is established and maintained for	1019
retired employees of the United States government, and such	1020
retirement income is based, in whole or in part, on credit for the	1021
taxpayer's military service, the deduction allowed under this	1022
division shall include only that portion of such retirement income	1023
that is attributable to the taxpayer's military service, to the	1024
extent that portion of such retirement income is otherwise	1025
included in federal adjusted gross income and is not otherwise	1026
deducted under this section. Any amount deducted under division	1027
(A)(26) of this section is not included in a taxpayer's adjusted	1028
gross income for the purposes of section 5747.055 of the Revised	1029
Code. No amount may be deducted under division (A)(26) of this	1030
section on the basis of which a credit was claimed under section	1031
5747.055 of the Revised Code.	1032

(27) Deduct, to the extent not otherwise deducted or excluded	1033
in computing federal or Ohio adjusted gross income for the taxable	1034
year, the amount the taxpayer received during the taxable year	1035
from the military injury relief fund created in section 5101.98 of	1036
the Revised Code.	1037

(28) Deduct, to the extent not otherwise deducted or excluded	1038
in computing federal or Ohio adjusted gross income for the taxable	1039
year, the amount the taxpayer received as a veterans bonus during	1040
the taxable year from the Ohio department of veterans services as	1041
authorized by Section 2r of Article VIII, Ohio Constitution.	1042

(29) Deduct, to the extent not otherwise deducted or excluded	1043
in computing federal or Ohio adjusted gross income for the taxable	1044
year, any loss from wagering transactions that is allowed as an	1045
itemized deduction under section 165 of the Internal Revenue Code	1046
and that the taxpayer deducted in computing federal taxable	1047
income.	1048

(30) Deduct, to the extent not otherwise deducted or excluded	1049
in computing federal or Ohio adjusted gross income for the taxable	1050
year, any income derived from providing public services under a	1051
contract through a project owned by the state, as described in	1052
section 126.604 of the Revised Code or derived from a transfer	1053
agreement or from the enterprise transferred under that agreement	1054
under section 4313.02 of the Revised Code.	1055

(31) Deduct, to the extent not otherwise deducted or excluded	1056
in computing federal or Ohio adjusted gross income for the taxable	1057
year, Ohio college opportunity or federal Pell grant amounts	1058
received by the taxpayer or the taxpayer's spouse or dependent	1059
pursuant to section 3333.122 of the Revised Code or 20 U.S.C.	1060
1070a, et seq., and used to pay room or board furnished by the	1061
educational institution for which the grant was awarded at the	1062
institution's facilities, including meal plans administered by the	1063
institution. For the purposes of this division, receipt of a grant	1064
includes the distribution of a grant directly to an educational	1065
institution and the crediting of the grant to the enrollee's	1066
account with the institution.	1067

(B) "Business income" means income, including gain or loss,	1068
arising from transactions, activities, and sources in the regular	1069
course of a trade or business and includes income, gain, or loss	1070
from real property, tangible property, and intangible property if	1071
the acquisition, rental, management, and disposition of the	1072
property constitute integral parts of the regular course of a	1073
trade or business operation. "Business income" includes income,	1074
including gain or loss, from a partial or complete liquidation of	1075
a business, including, but not limited to, gain or loss from the	1076
sale or other disposition of goodwill.	1077

(C) "Nonbusiness income" means all income other than business	1078
income and may include, but is not limited to, compensation, rents	1079
and royalties from real or tangible personal property, capital	1080
gains, interest, dividends and distributions, patent or copyright	1081
royalties, or lottery winnings, prizes, and awards.	1082

(D) "Compensation" means any form of remuneration paid to an	1083
employee for personal services.	1084

(E) "Fiduciary" means a guardian, trustee, executor,	1085
administrator, receiver, conservator, or any other person acting	1086
in any fiduciary capacity for any individual, trust, or estate.	1087

(F) "Fiscal year" means an accounting period of twelve months	1088
ending on the last day of any month other than December.	1089

(G) "Individual" means any natural person.

1090

(H) "Internal Revenue Code" means the "Internal Revenue Code	1091
of 1986," 100 Stat. 2085, 26 U.S.C.A. 1, as amended.	1092

(I) "Resident" means any of the following, provided that	1093
division (I)(3) of this section applies only to taxable years of a	1094
trust beginning in 2002 or thereafter:	1095

(1) An individual who is domiciled in this state, subject to	1096
section 5747.24 of the Revised Code;	1097

(2) The estate of a decedent who at the time of death was	1098
domiciled in this state. The domicile tests of section 5747.24 of	1099
the Revised Code are not controlling for purposes of division	1100
(I)(2) of this section.	1101

(3) A trust that, in whole or part, resides in this state. If	1102
only part of a trust resides in this state, the trust is a	1103
resident only with respect to that part.	1104

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

1105

(a) A trust resides in this state for the trust's current	1106
taxable year to the extent, as described in division (I)(3)(d) of	1107
this section, that the trust consists directly or indirectly, in	1108
whole or in part, of assets, net of any related liabilities, that	1109
were transferred, or caused to be transferred, directly or	1110
indirectly, to the trust by any of the following:	1111

(i) A person, a court, or a governmental entity or	1112
instrumentality on account of the death of a decedent, but only if	1113
the trust is described in division (I)(3)(e)(i) or (ii) of this	1114
section;	1115

(ii) A person who was domiciled in this state for the	1116
purposes of this chapter when the person directly or indirectly	1117
transferred assets to an irrevocable trust, but only if at least	1118
one of the trust's qualifying beneficiaries is domiciled in this	1119
state for the purposes of this chapter during all or some portion	1120
of the trust's current taxable year;	1121

(iii) A person who was domiciled in this state for the	1122
purposes of this chapter when the trust document or instrument or	1123
part of the trust document or instrument became irrevocable, but	1124
only if at least one of the trust's qualifying beneficiaries is a	1125
resident domiciled in this state for the purposes of this chapter	1126
during all or some portion of the trust's current taxable year. If	1127
a trust document or instrument became irrevocable upon the death	1128
of a person who at the time of death was domiciled in this state	1129
for purposes of this chapter, that person is a person described in	1130
division (I)(3)(a)(iii) of this section.	1131

(b) A trust is irrevocable to the extent that the transferor	1132
is not considered to be the owner of the net assets of the trust	1133
under sections 671 to 678 of the Internal Revenue Code.	1134

(c) With respect to a trust other than a charitable lead	1135
trust, "qualifying beneficiary" has the same meaning as "potential	1136
current beneficiary" as defined in section 1361(e)(2) of the	1137
Internal Revenue Code, and with respect to a charitable lead trust	1138
"qualifying beneficiary" is any current, future, or contingent	1139
beneficiary, but with respect to any trust "qualifying	1140
beneficiary" excludes a person or a governmental entity or	1141
instrumentality to any of which a contribution would qualify for	1142
the charitable deduction under section 170 of the Internal Revenue	1143
Code.	1144

(d) For the purposes of division (I)(3)(a) of this section,	1145
the extent to which a trust consists directly or indirectly, in	1146
whole or in part, of assets, net of any related liabilities, that	1147
were transferred directly or indirectly, in whole or part, to the	1148
trust by any of the sources enumerated in that division shall be	1149
ascertained by multiplying the fair market value of the trust's	1150
assets, net of related liabilities, by the qualifying ratio, which	1151
shall be computed as follows:	1152

(i) The first time the trust receives assets, the numerator	1153
of the qualifying ratio is the fair market value of those assets	1154
at that time, net of any related liabilities, from sources	1155
enumerated in division (I)(3)(a) of this section. The denominator	1156
of the qualifying ratio is the fair market value of all the	1157
trust's assets at that time, net of any related liabilities.	1158

(ii) Each subsequent time the trust receives assets, a	1159
revised qualifying ratio shall be computed. The numerator of the	1160
revised qualifying ratio is the sum of (1) the fair market value	1161
of the trust's assets immediately prior to the subsequent	1162
transfer, net of any related liabilities, multiplied by the	1163
qualifying ratio last computed without regard to the subsequent	1164
transfer, and (2) the fair market value of the subsequently	1165
transferred assets at the time transferred, net of any related	1166
liabilities, from sources enumerated in division (I)(3)(a) of this	1167
section. The denominator of the revised qualifying ratio is the	1168
fair market value of all the trust's assets immediately after the	1169
subsequent transfer, net of any related liabilities.	1170

(iii) Whether a transfer to the trust is by or from any of	1171
the sources enumerated in division (I)(3)(a) of this section shall	1172
be ascertained without regard to the domicile of the trust's	1173
beneficiaries.	1174

(e) For the purposes of division (I)(3)(a)(i) of this	1175
section:	1176

(i) A trust is described in division (I)(3)(e)(i) of this	1177
section if the trust is a testamentary trust and the testator of	1178
that testamentary trust was domiciled in this state at the time of	1179
the testator's death for purposes of the taxes levied under	1180
Chapter 5731. of the Revised Code.	1181

(ii) A trust is described in division (I)(3)(e)(ii) of this	1182
section if the transfer is a qualifying transfer described in any	1183
of divisions (I)(3)(f)(i) to (vi) of this section, the trust is an	1184
irrevocable inter vivos trust, and at least one of the trust's	1185
qualifying beneficiaries is domiciled in this state for purposes	1186
of this chapter during all or some portion of the trust's current	1187
taxable year.	1188

(f) For the purposes of division (I)(3)(e)(ii) of this	1189
section, a "qualifying transfer" is a transfer of assets, net of	1190
any related liabilities, directly or indirectly to a trust, if the	1191
transfer is described in any of the following:	1192

(i) The transfer is made to a trust, created by the decedent	1193
before the decedent's death and while the decedent was domiciled	1194
in this state for the purposes of this chapter, and, prior to the	1195
death of the decedent, the trust became irrevocable while the	1196
decedent was domiciled in this state for the purposes of this	1197
chapter.	1198

(ii) The transfer is made to a trust to which the decedent,	1199
prior to the decedent's death, had directly or indirectly	1200
transferred assets, net of any related liabilities, while the	1201
decedent was domiciled in this state for the purposes of this	1202
chapter, and prior to the death of the decedent the trust became	1203
irrevocable while the decedent was domiciled in this state for the	1204
purposes of this chapter.	1205

(iii) The transfer is made on account of a contractual	1206
relationship existing directly or indirectly between the	1207
transferor and either the decedent or the estate of the decedent	1208
at any time prior to the date of the decedent's death, and the	1209
decedent was domiciled in this state at the time of death for	1210
purposes of the taxes levied under Chapter 5731. of the Revised	1211
Code.	1212

(iv) The transfer is made to a trust on account of a	1213
contractual relationship existing directly or indirectly between	1214
the transferor and another person who at the time of the	1215
decedent's death was domiciled in this state for purposes of this	1216
chapter.	1217

(v) The transfer is made to a trust on account of the will of	1218
a testator who was domiciled in this state at the time of the	1219
testator's death for purposes of the taxes levied under Chapter	1220
5731. of the Revised Code.	1221

(vi) The transfer is made to a trust created by or caused to	1222
be created by a court, and the trust was directly or indirectly	1223
created in connection with or as a result of the death of an	1224
individual who, for purposes of the taxes levied under Chapter	1225
5731. of the Revised Code, was domiciled in this state at the time	1226
of the individual's death.	1227

(g) The tax commissioner may adopt rules to ascertain the	1228
part of a trust residing in this state.	1229

(J) "Nonresident" means an individual or estate that is not a	1230
resident. An individual who is a resident for only part of a	1231
taxable year is a nonresident for the remainder of that taxable	1232
year.	1233

(K) "Pass-through entity" has the same meaning as in section	1234
5733.04 of the Revised Code.	1235

(L) "Return" means the notifications and reports required to	1236
be filed pursuant to this chapter for the purpose of reporting the	1237
tax due and includes declarations of estimated tax when so	1238
required.	1239

(M) "Taxable year" means the calendar year or the taxpayer's	1240
fiscal year ending during the calendar year, or fractional part	1241
thereof, upon which the adjusted gross income is calculated	1242
pursuant to this chapter.	1243

(N) "Taxpayer" means any person subject to the tax imposed by	1244
section 5747.02 of the Revised Code or any pass-through entity	1245
that makes the election under division (D) of section 5747.08 of	1246
the Revised Code.	1247

(O) "Dependents" means dependents as defined in the Internal	1248
Revenue Code and as claimed in the taxpayer's federal income tax	1249
return for the taxable year or which the taxpayer would have been	1250
permitted to claim had the taxpayer filed a federal income tax	1251
return.	1252

(P) "Principal county of employment" means, in the case of a	1253
nonresident, the county within the state in which a taxpayer	1254
performs services for an employer or, if those services are	1255
performed in more than one county, the county in which the major	1256
portion of the services are performed.	1257

(Q) As used in sections 5747.50 to 5747.55 of the Revised	1258
Code:	1259

(1) "Subdivision" means any county, municipal corporation,	1260
park district, or township.	1261

(2) "Essential local government purposes" includes all	1262
functions that any subdivision is required by general law to	1263
exercise, including like functions that are exercised under a	1264
charter adopted pursuant to the Ohio Constitution.	1265

(R) "Overpayment" means any amount already paid that exceeds	1266
the figure determined to be the correct amount of the tax.	1267

(S) "Taxable income" or "Ohio taxable income" applies only to	1268
estates and trusts, and means federal taxable income, as defined	1269
and used in the Internal Revenue Code, adjusted as follows:	1270

(1) Add interest or dividends, net of ordinary, necessary,	1271
and reasonable expenses not deducted in computing federal taxable	1272
income, on obligations or securities of any state or of any	1273
political subdivision or authority of any state, other than this	1274
state and its subdivisions and authorities, but only to the extent	1275
that such net amount is not otherwise includible in Ohio taxable	1276
income and is described in either division (S)(1)(a) or (b) of	1277
this section:	1278

(a) The net amount is not attributable to the S portion of an	1279
electing small business trust and has not been distributed to	1280
beneficiaries for the taxable year;	1281

(b) The net amount is attributable to the S portion of an	1282
electing small business trust for the taxable year.	1283

(2) Add interest or dividends, net of ordinary, necessary,	1284
and reasonable expenses not deducted in computing federal taxable	1285
income, on obligations of any authority, commission,	1286
instrumentality, territory, or possession of the United States to	1287
the extent that the interest or dividends are exempt from federal	1288
income taxes but not from state income taxes, but only to the	1289
extent that such net amount is not otherwise includible in Ohio	1290
taxable income and is described in either division (S)(1)(a) or	1291
(b) of this section;	1292

(3) Add the amount of personal exemption allowed to the	1293
estate pursuant to section 642(b) of the Internal Revenue Code;	1294

(4) Deduct interest or dividends, net of related expenses	1295
deducted in computing federal taxable income, on obligations of	1296
the United States and its territories and possessions or of any	1297
authority, commission, or instrumentality of the United States to	1298
the extent that the interest or dividends are exempt from state	1299
taxes under the laws of the United States, but only to the extent	1300
that such amount is included in federal taxable income and is	1301
described in either division (S)(1)(a) or (b) of this section;	1302

(5) Deduct the amount of wages and salaries, if any, not	1303
otherwise allowable as a deduction but that would have been	1304
allowable as a deduction in computing federal taxable income for	1305
the taxable year, had the targeted jobs credit allowed under	1306
sections 38, 51, and 52 of the Internal Revenue Code not been in	1307
effect, but only to the extent such amount relates either to	1308
income included in federal taxable income for the taxable year or	1309
to income of the S portion of an electing small business trust for	1310
the taxable year;	1311

(6) Deduct any interest or interest equivalent, net of	1312
related expenses deducted in computing federal taxable income, on	1313
public obligations and purchase obligations, but only to the	1314
extent that such net amount relates either to income included in	1315
federal taxable income for the taxable year or to income of the S	1316
portion of an electing small business trust for the taxable year;	1317

(7) Add any loss or deduct any gain resulting from sale,	1318
exchange, or other disposition of public obligations to the extent	1319
that such loss has been deducted or such gain has been included in	1320
computing either federal taxable income or income of the S portion	1321
of an electing small business trust for the taxable year;	1322

(8) Except in the case of the final return of an estate, add	1323
any amount deducted by the taxpayer on both its Ohio estate tax	1324
return pursuant to section 5731.14 of the Revised Code, and on its	1325
federal income tax return in determining federal taxable income;	1326

(9)(a) Deduct any amount included in federal taxable income	1327
solely because the amount represents a reimbursement or refund of	1328
expenses that in a previous year the decedent had deducted as an	1329
itemized deduction pursuant to section 63 of the Internal Revenue	1330
Code and applicable treasury regulations. The deduction otherwise	1331
allowed under division (S)(9)(a) of this section shall be reduced	1332
to the extent the reimbursement is attributable to an amount the	1333
taxpayer or decedent deducted under this section in any taxable	1334
year.	1335

(b) Add any amount not otherwise included in Ohio taxable	1336
income for any taxable year to the extent that the amount is	1337
attributable to the recovery during the taxable year of any amount	1338
deducted or excluded in computing federal or Ohio taxable income	1339
in any taxable year, but only to the extent such amount has not	1340
been distributed to beneficiaries for the taxable year.	1341

(10) Deduct any portion of the deduction described in section	1342
1341(a)(2) of the Internal Revenue Code, for repaying previously	1343
reported income received under a claim of right, that meets both	1344
of the following requirements:	1345

(a) It is allowable for repayment of an item that was	1346
included in the taxpayer's taxable income or the decedent's	1347
adjusted gross income for a prior taxable year and did not qualify	1348
for a credit under division (A) or (B) of section 5747.05 of the	1349
Revised Code for that year.	1350

(b) It does not otherwise reduce the taxpayer's taxable	1351
income or the decedent's adjusted gross income for the current or	1352
any other taxable year.	1353

(11) Add any amount claimed as a credit under section	1354
5747.059 or 5747.65 of the Revised Code to the extent that the	1355
amount satisfies either of the following:	1356

(a) The amount was deducted or excluded from the computation	1357
of the taxpayer's federal taxable income as required to be	1358
reported for the taxpayer's taxable year under the Internal	1359
Revenue Code;	1360

(b) The amount resulted in a reduction in the taxpayer's	1361
federal taxable income as required to be reported for any of the	1362
taxpayer's taxable years under the Internal Revenue Code.	1363

(12) Deduct any amount, net of related expenses deducted in	1364
computing federal taxable income, that a trust is required to	1365
report as farm income on its federal income tax return, but only	1366
if the assets of the trust include at least ten acres of land	1367
satisfying the definition of "land devoted exclusively to	1368
agricultural use" under section 5713.30 of the Revised Code,	1369
regardless of whether the land is valued for tax purposes as such	1370
land under sections 5713.30 to 5713.38 of the Revised Code. If the	1371
trust is a pass-through entity investor, section 5747.231 of the	1372
Revised Code applies in ascertaining if the trust is eligible to	1373
claim the deduction provided by division (S)(12) of this section	1374
in connection with the pass-through entity's farm income.	1375

Except for farm income attributable to the S portion of an	1376
electing small business trust, the deduction provided by division	1377
(S)(12) of this section is allowed only to the extent that the	1378
trust has not distributed such farm income. Division (S)(12) of	1379
this section applies only to taxable years of a trust beginning in	1380
2002 or thereafter.	1381

(13) Add the net amount of income described in section 641(c)	1382
of the Internal Revenue Code to the extent that amount is not	1383
included in federal taxable income.	1384

(14) Add or deduct the amount the taxpayer would be required	1385
to add or deduct under division (A)(20) or (21) of this section if	1386
the taxpayer's Ohio taxable income were computed in the same	1387
manner as an individual's Ohio adjusted gross income is computed	1388
under this section. In the case of a trust, division (S)(14) of	1389
this section applies only to any of the trust's taxable years	1390
beginning in 2002 or thereafter.	1391

(T) "School district income" and "school district income tax"	1392
have the same meanings as in section 5748.01 of the Revised Code.	1393

(U) As used in divisions (A)(8), (A)(9), (S)(6), and (S)(7)	1394
of this section, "public obligations," "purchase obligations," and	1395
"interest or interest equivalent" have the same meanings as in	1396
section 5709.76 of the Revised Code.	1397

(V) "Limited liability company" means any limited liability	1398
company formed under Chapter 1705. of the Revised Code or under	1399
the laws of any other state.	1400

(W) "Pass-through entity investor" means any person who,	1401
during any portion of a taxable year of a pass-through entity, is	1402
a partner, member, shareholder, or equity investor in that	1403
pass-through entity.	1404

(X) "Banking day" has the same meaning as in section 1304.01	1405
of the Revised Code.	1406

(Y) "Month" means a calendar month.

1407

(Z) "Quarter" means the first three months, the second three	1408
months, the third three months, or the last three months of the	1409
taxpayer's taxable year.	1410

(AA)(1) "Eligible institution" means a state university or	1411
state institution of higher education as defined in section	1412
3345.011 of the Revised Code, or a private, nonprofit college,	1413
university, or other post-secondary institution located in this	1414
state that possesses a certificate of authorization issued by the	1415
Ohio board of regents pursuant to Chapter 1713. of the Revised	1416
Code or a certificate of registration issued by the state board of	1417
career colleges and schools under Chapter 3332. of the Revised	1418
Code.	1419

(2) "Qualified tuition and fees" means tuition and fees	1420
imposed by an eligible institution as a condition of enrollment or	1421
attendance, not exceeding two thousand five hundred dollars in	1422
each of the individual's first two years of post-secondary	1423
education. If the individual is a part-time student, "qualified	1424
tuition and fees" includes tuition and fees paid for the academic	1425
equivalent of the first two years of post-secondary education	1426
during a maximum of five taxable years, not exceeding a total of	1427
five thousand dollars. "Qualified tuition and fees" does not	1428
include:	1429

(a) Expenses for any course or activity involving sports,	1430
games, or hobbies unless the course or activity is part of the	1431
individual's degree or diploma program;	1432

(b) The cost of books, room and board, student activity fees,	1433
athletic fees, insurance expenses, or other expenses unrelated to	1434
the individual's academic course of instruction;	1435

(c) Tuition, fees, or other expenses paid or reimbursed	1436
through an employer, scholarship, grant in aid, or other	1437
educational benefit program.	1438

(BB)(1) "Modified business income" means the business income	1439
included in a trust's Ohio taxable income after such taxable	1440
income is first reduced by the qualifying trust amount, if any.	1441

(2) "Qualifying trust amount" of a trust means capital gains	1442
and losses from the sale, exchange, or other disposition of equity	1443
or ownership interests in, or debt obligations of, a qualifying	1444
investee to the extent included in the trust's Ohio taxable	1445
income, but only if the following requirements are satisfied:	1446

(a) The book value of the qualifying investee's physical	1447
assets in this state and everywhere, as of the last day of the	1448
qualifying investee's fiscal or calendar year ending immediately	1449
prior to the date on which the trust recognizes the gain or loss,	1450
is available to the trust.	1451

(b) The requirements of section 5747.011 of the Revised Code	1452
are satisfied for the trust's taxable year in which the trust	1453
recognizes the gain or loss.	1454

Any gain or loss that is not a qualifying trust amount is	1455
modified business income, qualifying investment income, or	1456
modified nonbusiness income, as the case may be.	1457

(3) "Modified nonbusiness income" means a trust's Ohio	1458
taxable income other than modified business income, other than the	1459
qualifying trust amount, and other than qualifying investment	1460
income, as defined in section 5747.012 of the Revised Code, to the	1461
extent such qualifying investment income is not otherwise part of	1462
modified business income.	1463

(4) "Modified Ohio taxable income" applies only to trusts,	1464
and means the sum of the amounts described in divisions (BB)(4)(a)	1465
to (c) of this section:	1466

(a) The fraction, calculated under section 5747.013, and	1467
applying section 5747.231 of the Revised Code, multiplied by the	1468
sum of the following amounts:	1469

(i) The trust's modified business income;

1470

(ii) The trust's qualifying investment income, as defined in	1471
section 5747.012 of the Revised Code, but only to the extent the	1472
qualifying investment income does not otherwise constitute	1473
modified business income and does not otherwise constitute a	1474
qualifying trust amount.	1475

(b) The qualifying trust amount multiplied by a fraction, the	1476
numerator of which is the sum of the book value of the qualifying	1477
investee's physical assets in this state on the last day of the	1478
qualifying investee's fiscal or calendar year ending immediately	1479
prior to the day on which the trust recognizes the qualifying	1480
trust amount, and the denominator of which is the sum of the book	1481
value of the qualifying investee's total physical assets	1482
everywhere on the last day of the qualifying investee's fiscal or	1483
calendar year ending immediately prior to the day on which the	1484
trust recognizes the qualifying trust amount. If, for a taxable	1485
year, the trust recognizes a qualifying trust amount with respect	1486
to more than one qualifying investee, the amount described in	1487
division (BB)(4)(b) of this section shall equal the sum of the	1488
products so computed for each such qualifying investee.	1489

(c)(i) With respect to a trust or portion of a trust that is	1490
a resident as ascertained in accordance with division (I)(3)(d) of	1491
this section, its modified nonbusiness income.	1492

(ii) With respect to a trust or portion of a trust that is	1493
not a resident as ascertained in accordance with division	1494
(I)(3)(d) of this section, the amount of its modified nonbusiness	1495
income satisfying the descriptions in divisions (B)(2) to (5) of	1496
section 5747.20 of the Revised Code, except as otherwise provided	1497
in division (BB)(4)(c)(ii) of this section. With respect to a	1498
trust or portion of a trust that is not a resident as ascertained	1499
in accordance with division (I)(3)(d) of this section, the trust's	1500
portion of modified nonbusiness income recognized from the sale,	1501
exchange, or other disposition of a debt interest in or equity	1502
interest in a section 5747.212 entity, as defined in section	1503
5747.212 of the Revised Code, without regard to division (A) of	1504
that section, shall not be allocated to this state in accordance	1505
with section 5747.20 of the Revised Code but shall be apportioned	1506
to this state in accordance with division (B) of section 5747.212	1507
of the Revised Code without regard to division (A) of that	1508
section.	1509

If the allocation and apportionment of a trust's income under	1510
divisions (BB)(4)(a) and (c) of this section do not fairly	1511
represent the modified Ohio taxable income of the trust in this	1512
state, the alternative methods described in division (C) of	1513
section 5747.21 of the Revised Code may be applied in the manner	1514
and to the same extent provided in that section.	1515

(5)(a) Except as set forth in division (BB)(5)(b) of this	1516
section, "qualifying investee" means a person in which a trust has	1517
an equity or ownership interest, or a person or unit of government	1518
the debt obligations of either of which are owned by a trust. For	1519
the purposes of division (BB)(2)(a) of this section and for the	1520
purpose of computing the fraction described in division (BB)(4)(b)	1521
of this section, all of the following apply:	1522

(i) If the qualifying investee is a member of a qualifying	1523
controlled group on the last day of the qualifying investee's	1524
fiscal or calendar year ending immediately prior to the date on	1525
which the trust recognizes the gain or loss, then "qualifying	1526
investee" includes all persons in the qualifying controlled group	1527
on such last day.	1528

(ii) If the qualifying investee, or if the qualifying	1529
investee and any members of the qualifying controlled group of	1530
which the qualifying investee is a member on the last day of the	1531
qualifying investee's fiscal or calendar year ending immediately	1532
prior to the date on which the trust recognizes the gain or loss,	1533
separately or cumulatively own, directly or indirectly, on the	1534
last day of the qualifying investee's fiscal or calendar year	1535
ending immediately prior to the date on which the trust recognizes	1536
the qualifying trust amount, more than fifty per cent of the	1537
equity of a pass-through entity, then the qualifying investee and	1538
the other members are deemed to own the proportionate share of the	1539
pass-through entity's physical assets which the pass-through	1540
entity directly or indirectly owns on the last day of the	1541
pass-through entity's calendar or fiscal year ending within or	1542
with the last day of the qualifying investee's fiscal or calendar	1543
year ending immediately prior to the date on which the trust	1544
recognizes the qualifying trust amount.	1545

(iii) For the purposes of division (BB)(5)(a)(iii) of this	1546
section, "upper level pass-through entity" means a pass-through	1547
entity directly or indirectly owning any equity of another	1548
pass-through entity, and "lower level pass-through entity" means	1549
that other pass-through entity.	1550

An upper level pass-through entity, whether or not it is also	1551
a qualifying investee, is deemed to own, on the last day of the	1552
upper level pass-through entity's calendar or fiscal year, the	1553
proportionate share of the lower level pass-through entity's	1554
physical assets that the lower level pass-through entity directly	1555
or indirectly owns on the last day of the lower level pass-through	1556
entity's calendar or fiscal year ending within or with the last	1557
day of the upper level pass-through entity's fiscal or calendar	1558
year. If the upper level pass-through entity directly and	1559
indirectly owns less than fifty per cent of the equity of the	1560
lower level pass-through entity on each day of the upper level	1561
pass-through entity's calendar or fiscal year in which or with	1562
which ends the calendar or fiscal year of the lower level	1563
pass-through entity and if, based upon clear and convincing	1564
evidence, complete information about the location and cost of the	1565
physical assets of the lower pass-through entity is not available	1566
to the upper level pass-through entity, then solely for purposes	1567
of ascertaining if a gain or loss constitutes a qualifying trust	1568
amount, the upper level pass-through entity shall be deemed as	1569
owning no equity of the lower level pass-through entity for each	1570
day during the upper level pass-through entity's calendar or	1571
fiscal year in which or with which ends the lower level	1572
pass-through entity's calendar or fiscal year. Nothing in division	1573
(BB)(5)(a)(iii) of this section shall be construed to provide for	1574
any deduction or exclusion in computing any trust's Ohio taxable	1575
income.	1576

(b) With respect to a trust that is not a resident for the	1577
taxable year and with respect to a part of a trust that is not a	1578
resident for the taxable year, "qualifying investee" for that	1579
taxable year does not include a C corporation if both of the	1580
following apply:	1581

(i) During the taxable year the trust or part of the trust	1582
recognizes a gain or loss from the sale, exchange, or other	1583
disposition of equity or ownership interests in, or debt	1584
obligations of, the C corporation.	1585

(ii) Such gain or loss constitutes nonbusiness income.

1586

(6) "Available" means information is such that a person is	1587
able to learn of the information by the due date plus extensions,	1588
if any, for filing the return for the taxable year in which the	1589
trust recognizes the gain or loss.	1590

(CC) "Qualifying controlled group" has the same meaning as in	1591
section 5733.04 of the Revised Code.	1592

(DD) "Related member" has the same meaning as in section	1593
5733.042 of the Revised Code.	1594

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

1595

(a) "Qualifying person" means any person other than a	1596
qualifying corporation.	1597

(b) "Qualifying corporation" means any person classified for	1598
federal income tax purposes as an association taxable as a	1599
corporation, except either of the following:	1600

(i) A corporation that has made an election under subchapter	1601
S, chapter one, subtitle A, of the Internal Revenue Code for its	1602
taxable year ending within, or on the last day of, the investor's	1603
taxable year;	1604

(ii) A subsidiary that is wholly owned by any corporation	1605
that has made an election under subchapter S, chapter one,	1606
subtitle A of the Internal Revenue Code for its taxable year	1607
ending within, or on the last day of, the investor's taxable year.	1608

(2) For the purposes of this chapter, unless expressly stated	1609
otherwise, no qualifying person indirectly owns any asset directly	1610
or indirectly owned by any qualifying corporation.	1611

(FF) For purposes of this chapter and Chapter 5751. of the	1612
Revised Code:	1613

(1) "Trust" does not include a qualified pre-income tax	1614
trust.	1615

(2) A "qualified pre-income tax trust" is any pre-income tax	1616
trust that makes a qualifying pre-income tax trust election as	1617
described in division (FF)(3) of this section.	1618

(3) A "qualifying pre-income tax trust election" is an	1619
election by a pre-income tax trust to subject to the tax imposed	1620
by section 5751.02 of the Revised Code the pre-income tax trust	1621
and all pass-through entities of which the trust owns or controls,	1622
directly, indirectly, or constructively through related interests,	1623
five per cent or more of the ownership or equity interests. The	1624
trustee shall notify the tax commissioner in writing of the	1625
election on or before April 15, 2006. The election, if timely	1626
made, shall be effective on and after January 1, 2006, and shall	1627
apply for all tax periods and tax years until revoked by the	1628
trustee of the trust.	1629

(4) A "pre-income tax trust" is a trust that satisfies all of	1630
the following requirements:	1631

(a) The document or instrument creating the trust was	1632
executed by the grantor before January 1, 1972;	1633

(b) The trust became irrevocable upon the creation of the	1634
trust; and	1635

(c) The grantor was domiciled in this state at the time the	1636
trust was created.	1637

Sec. 5747.78.  (A) There is hereby allowed a nonrefundable	1638
credit against the tax imposed under section 5747.02 of the	1639
Revised Code for a taxpayer who pays tuition and fees during a	1640
taxable year to an eligible institution, at which the taxpayer,	1641
the taxpayer's spouse, or a dependent of the taxpayer is enrolled	1642
in or attending a program that culminates in a degree in nonprofit	1643
management. The amount of the credit equals the lesser of one	1644
thousand five hundred dollars or the amount of tuition and fees	1645
paid to the eligible institution during the taxable year.	1646

(B) There is hereby allowed a nonrefundable credit against	1647
the tax imposed under section 5747.02 of the Revised Code for a	1648
taxpayer who incurs expenses during the taxable year to complete	1649
the institute of organization management program sponsored by the	1650
United States chamber of commerce, to complete the lobbying	1651
certificate program sponsored by the American league of lobbyists,	1652
to receive an accreditation in public relations, or to become	1653
certified as a certified fund raising executive, certified sports	1654
event executive, certified destination marketing executive, or	1655
certified meeting planner. The amount of the credit equals the	1656
lesser of five hundred dollars or fifty per cent of the expenses	1657
incurred, provided that, if the taxpayer receives reimbursement	1658
for the taxpayer's expenses from any source, the amount of the	1659
credit equals the lesser of five hundred dollars or fifty per cent	1660
of the expenses incurred after subtracting the amount reimbursed	1661
to the taxpayer.	1662

(C) A taxpayer shall claim a credit allowed under division	1663
(A) or (B) of this section in the order required under section	1664
5747.98 of the Revised Code. The taxpayer may carry forward a	1665
credit to the extent that the credit exceeds the amount of tax due	1666
after allowing for any other credits that precede the credit in	1667
the order prescribed by section 5747.98 of the Revised Code.	1668

Sec. 5747.98.  (A) To provide a uniform procedure for	1669
calculating the amount of tax due under section 5747.02 of the	1670
Revised Code, a taxpayer shall claim any credits to which the	1671
taxpayer is entitled in the following order:	1672

(1) The retirement income credit under division (B) of	1673
section 5747.055 of the Revised Code;	1674

(2) The senior citizen credit under division (C) of section	1675
5747.05 of the Revised Code;	1676

(3) The lump sum distribution credit under division (D) of	1677
section 5747.05 of the Revised Code;	1678

(4) The dependent care credit under section 5747.054 of the	1679
Revised Code;	1680

(5) The lump sum retirement income credit under division (C)	1681
of section 5747.055 of the Revised Code;	1682

(6) The lump sum retirement income credit under division (D)	1683
of section 5747.055 of the Revised Code;	1684

(7) The lump sum retirement income credit under division (E)	1685
of section 5747.055 of the Revised Code;	1686

(8) The low-income credit under section 5747.056 of the	1687
Revised Code;	1688

(9) The credit for displaced workers who pay for job training	1689
under section 5747.27 of the Revised Code;	1690

(10) The campaign contribution credit under section 5747.29	1691
of the Revised Code;	1692

(11) The twenty-dollar personal exemption credit under	1693
section 5747.022 of the Revised Code;	1694

(12) The joint filing credit under division (G) of section	1695
5747.05 of the Revised Code;	1696

(13) The nonresident credit under division (A) of section	1697
5747.05 of the Revised Code;	1698

(14) The credit for a resident's out-of-state income under	1699
division (B) of section 5747.05 of the Revised Code;	1700

(15) The credit for employers that enter into agreements with	1701
child day-care centers under section 5747.34 of the Revised Code;	1702

(16) The credit for employers that reimburse employee child	1703
care expenses under section 5747.36 of the Revised Code;	1704

(17) The credit for adoption of a minor child under section	1705
5747.37 of the Revised Code;	1706

(18) The credit for purchases of lights and reflectors under	1707
section 5747.38 of the Revised Code;	1708

(19) The nonrefundable job retention credit under division	1709
(B) of section 5747.058 of the Revised Code;	1710

(20) The credit for selling alternative fuel under section	1711
5747.77 of the Revised Code;	1712

(21) The second credit for purchases of new manufacturing	1713
machinery and equipment and the credit for using Ohio coal under	1714
section 5747.31 of the Revised Code;	1715

(22) The job training credit under section 5747.39 of the	1716
Revised Code;	1717

(23) The enterprise zone credit under section 5709.66 of the	1718
Revised Code;	1719

(24) The credit for the eligible costs associated with a	1720
voluntary action under section 5747.32 of the Revised Code;	1721

(25) The credit for employers that establish on-site child	1722
day-care centers under section 5747.35 of the Revised Code;	1723

(26) The ethanol plant investment credit under section	1724
5747.75 of the Revised Code;	1725

(27) The credit for purchases of qualifying grape production	1726
property under section 5747.28 of the Revised Code;	1727

(28) The small business investment credit under section	1728
5747.81 of the Revised Code;	1729

(29) The credit for research and development and technology	1730
transfer investors under section 5747.33 of the Revised Code;	1731

(30) The enterprise zone credits under section 5709.65 of the	1732
Revised Code;	1733

(31) The research and development credit under section	1734
5747.331 of the Revised Code;	1735

(32) The credit for rehabilitating a historic building under	1736
section 5747.76 of the Revised Code;	1737

(33) The credit for tuition and fees paid to earn a degree in	1738
nonprofit management under division (A) of section 5747.78 of the	1739
Revised Code;	1740

(34) The credit for expenses incurred to complete a	1741
professional certification program or obtain a professional	1742
designation under division (B) of section 5747.78 of the Revised	1743
Code;	1744

(35) The refundable credit for rehabilitating a historic	1745
building under section 5747.76 of the Revised Code;	1746

(34)(36) The refundable jobs creation credit or job retention	1747
credit under division (A) of section 5747.058 of the Revised Code;	1748

(35)(37) The refundable credit for taxes paid by a qualifying	1749
entity granted under section 5747.059 of the Revised Code;	1750

(36)(38) The refundable credits for taxes paid by a	1751
qualifying pass-through entity granted under division (J) of	1752
section 5747.08 of the Revised Code;	1753

(37)(39) The refundable credit under section 5747.80 of the	1754
Revised Code for losses on loans made to the Ohio venture capital	1755
program under sections 150.01 to 150.10 of the Revised Code;	1756

(38)(40) The refundable motion picture production credit	1757
under section 5747.66 of the Revised Code.	1758

(39)(41) The refundable credit for financial institution	1759
taxes paid by a pass-through entity granted under section 5747.65	1760
of the Revised Code.	1761

(B) For any credit, except the refundable credits enumerated	1762
in this section and the credit granted under division (I) of	1763
section 5747.08 of the Revised Code, the amount of the credit for	1764
a taxable year shall not exceed the tax due after allowing for any	1765
other credit that precedes it in the order required under this	1766
section. Any excess amount of a particular credit may be carried	1767
forward if authorized under the section creating that credit.	1768
Nothing in this chapter shall be construed to allow a taxpayer to	1769
claim, directly or indirectly, a credit more than once for a	1770
taxable year.	1771

Section 2. That existing sections 5739.02, 5747.01, and	1772
5747.98 of the Revised Code are hereby repealed.	1773

Section 3. The General Assembly, applying the principle	1774
stated in division (B) of section 1.52 of the Revised Code that	1775
amendments are to be harmonized if reasonably capable of	1776
simultaneous operation, finds that the following sections,	1777
presented in this act as composites of the sections as amended by	1778
the acts indicated, are the resulting versions of the sections in	1779
effect prior to the effective date of the sections as presented in	1780
this act:	1781

Section 5739.02 of the Revised Code as amended by both Am.	1782
Sub. H.B. 487 and Am. Sub. H.B. 508 of the 129th General Assembly.	1783

Section 5747.01 of the Revised Code as amended by Am. H.B.	1784
167, Sub. H.B. 365, and Am. Sub. H.B. 510, all of the 129th	1785
General Assembly.	1786

Section 5747.98 of the Revised Code as amended by both Am.	1787
Sub. H.B. 386 and Am. Sub. H.B. 510 of the 129th General Assembly.	1788