As Introduced
136th General Assembly
Regular Session H. B. No. 140
2025-2026
Representatives McNally, Lett
Cosponsors: Representatives Piccolantonio, Upchurch, Brennan, Brewer, Grim,
Brownlee, Jarrells, Sims, Lawson-Rowe, Abdullahi, Hall, D., Synenberg, Baker,
Cockley, Somani, White, E., Miller, J., Isaacsohn, Mohamed, Thomas, C.,
Robinson, Rader, Russo
A B I L L
To amend sections 5747.01, 5747.08, and 5747.98 and
to enact section 5747.36 of the Revised Code to
authorize the refundable thriving families tax
credit for certain income taxpayers with
dependents who are minor children.
BE IT ENACTED BY THE GENERAL ASSEMBLY OF THE STATE OF OHIO:
Section 1. That sections 5747.01, 5747.08, and 5747.98 be
amended and section 5747.36 of the Revised Code be enacted to
read as follows:
Sec. 5747.01. Except as otherwise expressly provided or
clearly appearing from the context, any term used in this
chapter that is not otherwise defined in this section has the
same meaning as when used in a comparable context in the laws of
the United States relating to federal income taxes or if not
used in a comparable context in those laws, has the same meaning
as in section 5733.40 of the Revised Code. Any reference in this
chapter to the Internal Revenue Code includes other laws of the
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United States relating to federal income taxes.
As used in this chapter:
(A) "Adjusted gross income" or "Ohio adjusted gross
income" means federal adjusted gross income, as defined and used
in the Internal Revenue Code, adjusted as provided in this
section:
(1) Add interest or dividends on obligations or securities
of any state or of any political subdivision or authority of any
state, other than this state and its subdivisions and
authorities.
(2) Add interest or dividends on obligations of any
authority, commission, instrumentality, territory, or possession
of the United States to the extent that the interest or
dividends are exempt from federal income taxes but not from
state income taxes.
(3) Deduct interest or dividends on obligations of the
United States and its territories and possessions or of any
authority, commission, or instrumentality of the United States
to the extent that the interest or dividends are included in
federal adjusted gross income but exempt from state income taxes
under the laws of the United States.
(4) Deduct disability and survivor's benefits to the
extent included in federal adjusted gross income.
(5) Deduct the following, to the extent not otherwise
deducted or excluded in computing federal or Ohio adjusted gross
income:
(a) Benefits under Title II of the Social Security Act and
tier 1 railroad retirement;
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(b) Railroad retirement benefits, other than tier 1
railroad retirement benefits, to the extent such amounts are
exempt from state taxation under federal law.
(6) Deduct the amount of wages and salaries, if any, not
otherwise allowable as a deduction but that would have been
allowable as a deduction in computing federal adjusted gross
income for the taxable year, had the work opportunity tax credit
allowed and determined under sections 38, 51, and 52 of the
Internal Revenue Code not been in effect.
(7) Deduct any interest or interest equivalent on public
obligations and purchase obligations to the extent that the
interest or interest equivalent is included in federal adjusted
gross income.
(8) Add any loss or deduct any gain resulting from the
sale, exchange, or other disposition of public obligations to
the extent that the loss has been deducted or the gain has been
included in computing federal adjusted gross income.
(9) Deduct or add amounts, as provided under section
5747.70 of the Revised Code, related to contributions made to or
tuition units purchased under a qualified tuition program
established pursuant to section 529 of the Internal Revenue
Code.
(10)(a) Deduct, to the extent not otherwise allowable as a
deduction or exclusion in computing federal or Ohio adjusted
gross income for the taxable year, the amount the taxpayer paid
during the taxable year for medical care insurance and qualified
long-term care insurance for the taxpayer, the taxpayer's
spouse, and dependents. No deduction for medical care insurance
under division (A)(10)(a) of this section shall be allowed
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either to any taxpayer who is eligible to participate in any
subsidized health plan maintained by any employer of the
taxpayer or of the taxpayer's spouse, or to any taxpayer who is
entitled to, or on application would be entitled to, benefits
under part A of Title XVIII of the "Social Security Act," 49
Stat. 620 (1935), 42 U.S.C. 301, as amended. For the purposes of
division (A)(10)(a) of this section, "subsidized health plan"
means a health plan for which the employer pays any portion of
the plan's cost. The deduction allowed under division (A)(10)(a)
of this section shall be the net of any related premium refunds,
related premium reimbursements, or related insurance premium
dividends received during the taxable year.
(b) Deduct, to the extent not otherwise deducted or
excluded in computing federal or Ohio adjusted gross income
during the taxable year, the amount the taxpayer paid during the
taxable year, not compensated for by any insurance or otherwise,
for medical care of the taxpayer, the taxpayer's spouse, and
dependents, to the extent the expenses exceed seven and one-half
per cent of the taxpayer's federal adjusted gross income.
(c) For purposes of division (A)(10) of this section,
"medical care" has the meaning given in section 213 of the
Internal Revenue Code, subject to the special rules,
limitations, and exclusions set forth therein, and "qualified
long-term care" has the same meaning given in section 7702B(c)
of the Internal Revenue Code. Solely for purposes of division
(A)(10)(a) of this section, "dependent" includes a person who
otherwise would be a "qualifying relative" and thus a
"dependent" under section 152 of the Internal Revenue Code but
for the fact that the person fails to meet the income and
support limitations under section 152(d)(1)(B) and (C) of the
Internal Revenue Code.
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(11)(a) Deduct any amount included in federal adjusted
gross income solely because the amount represents a
reimbursement or refund of expenses that in any year the
taxpayer had deducted as an itemized deduction pursuant to
section 63 of the Internal Revenue Code and applicable United
States department of the treasury regulations. The deduction
otherwise allowed under division (A)(11)(a) of this section
shall be reduced to the extent the reimbursement is attributable
to an amount the taxpayer deducted under this section in any
taxable year.
(b) Add any amount not otherwise included in Ohio adjusted
gross income for any taxable year to the extent that the amount
is attributable to the recovery during the taxable year of any
amount deducted or excluded in computing federal or Ohio
adjusted gross income in any taxable year.
(12) Deduct any portion of the deduction described in
section 1341(a)(2) of the Internal Revenue Code, for repaying
previously reported income received under a claim of right, that
meets both of the following requirements:
(a) It is allowable for repayment of an item that was
included in the taxpayer's adjusted gross income for a prior
taxable year and did not qualify for a credit under division (A)
or (B) of section 5747.05 of the Revised Code for that year;
(b) It does not otherwise reduce the taxpayer's adjusted
gross income for the current or any other taxable year.
(13) Deduct an amount equal to the deposits made to, and
net investment earnings of, a medical savings account during the
taxable year, in accordance with section 3924.66 of the Revised
Code. The deduction allowed by division (A)(13) of this section
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does not apply to medical savings account deposits and earnings
otherwise deducted or excluded for the current or any other
taxable year from the taxpayer's federal adjusted gross income.
(14)(a) Add an amount equal to the funds withdrawn from a
medical savings account during the taxable year, and the net
investment earnings on those funds, when the funds withdrawn
were used for any purpose other than to reimburse an account
holder for, or to pay, eligible medical expenses, in accordance
with section 3924.66 of the Revised Code;
(b) Add the amounts distributed from a medical savings
account under division (A)(2) of section 3924.68 of the Revised
Code during the taxable year.
(15) Add any amount claimed as a credit under section
5747.059 of the Revised Code to the extent that such amount
satisfies either of the following:
(a) The amount was deducted or excluded from the
computation of the taxpayer's federal adjusted gross income as
required to be reported for the taxpayer's taxable year under
the Internal Revenue Code;
(b) The amount resulted in a reduction of the taxpayer's
federal adjusted gross income as required to be reported for any
of the taxpayer's taxable years under the Internal Revenue Code.
(16) Deduct the amount contributed by the taxpayer to an
individual development account program established by a county
department of job and family services pursuant to sections
329.11 to 329.14 of the Revised Code for the purpose of matching
funds deposited by program participants. On request of the tax
commissioner, the taxpayer shall provide any information that,
in the tax commissioner's opinion, is necessary to establish the
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amount deducted under division (A)(16) of this section.
(17)(a)(i) Subject to divisions (A)(17)(a)(iii), (iv), and
(v) of this section, add five-sixths of the amount of
depreciation expense allowed by subsection (k) of section 168 of
the Internal Revenue Code, including the taxpayer's
proportionate or distributive share of the amount of
depreciation expense allowed by that subsection to a pass-
through entity in which the taxpayer has a direct or indirect
ownership interest.
(ii) Subject to divisions (A)(17)(a)(iii), (iv), and (v)
of this section, add five-sixths of the amount of qualifying
section 179 depreciation expense, including the taxpayer's
proportionate or distributive share of the amount of qualifying
section 179 depreciation expense allowed to any pass-through
entity in which the taxpayer has a direct or indirect ownership
interest.
(iii) Subject to division (A)(17)(a)(v) of this section,
for taxable years beginning in 2012 or thereafter, if the
increase in income taxes withheld by the taxpayer is equal to or
greater than ten per cent of income taxes withheld by the
taxpayer during the taxpayer's immediately preceding taxable
year, "two-thirds" shall be substituted for "five-sixths" for
the purpose of divisions (A)(17)(a)(i) and (ii) of this section.
(iv) Subject to division (A)(17)(a)(v) of this section,
for taxable years beginning in 2012 or thereafter, a taxpayer is
not required to add an amount under division (A)(17) of this
section if the increase in income taxes withheld by the taxpayer
and by any pass-through entity in which the taxpayer has a
direct or indirect ownership interest is equal to or greater
than the sum of (I) the amount of qualifying section 179
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depreciation expense and (II) the amount of depreciation expense
allowed to the taxpayer by subsection (k) of section 168 of the
Internal Revenue Code, and including the taxpayer's
proportionate or distributive shares of such amounts allowed to
any such pass-through entities.
(v) If a taxpayer directly or indirectly incurs a net
operating loss for the taxable year for federal income tax
purposes, to the extent such loss resulted from depreciation
expense allowed by subsection (k) of section 168 of the Internal
Revenue Code and by qualifying section 179 depreciation expense,
"the entire" shall be substituted for "five-sixths of the" for
the purpose of divisions (A)(17)(a)(i) and (ii) of this section.
The tax commissioner, under procedures established by the
commissioner, may waive the add-backs related to a pass-through
entity if the taxpayer owns, directly or indirectly, less than
five per cent of the pass-through entity.
(b) Nothing in division (A)(17) of this section shall be
construed to adjust or modify the adjusted basis of any asset.
(c) To the extent the add-back required under division (A)
(17)(a) of this section is attributable to property generating
nonbusiness income or loss allocated under section 5747.20 of
the Revised Code, the add-back shall be sitused to the same
location as the nonbusiness income or loss generated by the
property for the purpose of determining the credit under
division (A) of section 5747.05 of the Revised Code. Otherwise,
the add-back shall be apportioned, subject to one or more of the
four alternative methods of apportionment enumerated in section
5747.21 of the Revised Code.
(d) For the purposes of division (A)(17)(a)(v) of this
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section, net operating loss carryback and carryforward shall not
include the allowance of any net operating loss deduction
carryback or carryforward to the taxable year to the extent such
loss resulted from depreciation allowed by section 168(k) of the
Internal Revenue Code and by the qualifying section 179
depreciation expense amount.
(e) For the purposes of divisions (A)(17) and (18) of this
section:
(i) "Income taxes withheld" means the total amount
withheld and remitted under sections 5747.06 and 5747.07 of the
Revised Code by an employer during the employer's taxable year.
(ii) "Increase in income taxes withheld" means the amount
by which the amount of income taxes withheld by an employer
during the employer's current taxable year exceeds the amount of
income taxes withheld by that employer during the employer's
immediately preceding taxable year.
(iii) "Qualifying section 179 depreciation expense" means
the difference between (I) the amount of depreciation expense
directly or indirectly allowed to a taxpayer under section 179
of the Internal Revised Code, and (II) the amount of
depreciation expense directly or indirectly allowed to the
taxpayer under section 179 of the Internal Revenue Code as that
section existed on December 31, 2002.
(18)(a) If the taxpayer was required to add an amount
under division (A)(17)(a) of this section for a taxable year,
deduct one of the following:
(i) One-fifth of the amount so added for each of the five
succeeding taxable years if the amount so added was five-sixths
of qualifying section 179 depreciation expense or depreciation
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expense allowed by subsection (k) of section 168 of the Internal
Revenue Code;
(ii) One-half of the amount so added for each of the two
succeeding taxable years if the amount so added was two-thirds
of such depreciation expense;
(iii) One-sixth of the amount so added for each of the six
succeeding taxable years if the entire amount of such
depreciation expense was so added.
(b) If the amount deducted under division (A)(18)(a) of
this section is attributable to an add-back allocated under
division (A)(17)(c) of this section, the amount deducted shall
be sitused to the same location. Otherwise, the add-back shall
be apportioned using the apportionment factors for the taxable
year in which the deduction is taken, subject to one or more of
the four alternative methods of apportionment enumerated in
section 5747.21 of the Revised Code.
(c) No deduction is available under division (A)(18)(a) of
this section with regard to any depreciation allowed by section
168(k) of the Internal Revenue Code and by the qualifying
section 179 depreciation expense amount to the extent that such
depreciation results in or increases a federal net operating
loss carryback or carryforward. If no such deduction is
available for a taxable year, the taxpayer may carry forward the
amount not deducted in such taxable year to the next taxable
year and add that amount to any deduction otherwise available
under division (A)(18)(a) of this section for that next taxable
year. The carryforward of amounts not so deducted shall continue
until the entire addition required by division (A)(17)(a) of
this section has been deducted.
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(19) Deduct, to the extent not otherwise deducted or
excluded in computing federal or Ohio adjusted gross income for
the taxable year, the amount the taxpayer received during the
taxable year as reimbursement for life insurance premiums under
section 5919.31 of the Revised Code.
(20) Deduct, to the extent not otherwise deducted or
excluded in computing federal or Ohio adjusted gross income for
the taxable year, the amount the taxpayer received during the
taxable year as a death benefit paid by the adjutant general
under section 5919.33 of the Revised Code.
(21) Deduct, to the extent included in federal adjusted
gross income and not otherwise allowable as a deduction or
exclusion in computing federal or Ohio adjusted gross income for
the taxable year, military pay and allowances received by the
taxpayer during the taxable year for active duty service in the
United States army, air force, navy, marine corps, or coast
guard or reserve components thereof or the national guard. The
deduction may not be claimed for military pay and allowances
received by the taxpayer while the taxpayer is stationed in this
state.
(22) Deduct, to the extent not otherwise allowable as a
deduction or exclusion in computing federal or Ohio adjusted
gross income for the taxable year and not otherwise compensated
for by any other source, the amount of qualified organ donation
expenses incurred by the taxpayer during the taxable year, not
to exceed ten thousand dollars. A taxpayer may deduct qualified
organ donation expenses only once for all taxable years
beginning with taxable years beginning in 2007.
For the purposes of division (A)(22) of this section:
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(a) "Human organ" means all or any portion of a human
liver, pancreas, kidney, intestine, or lung, and any portion of
human bone marrow.
(b) "Qualified organ donation expenses" means travel
expenses, lodging expenses, and wages and salary forgone by a
taxpayer in connection with the taxpayer's donation, while
living, of one or more of the taxpayer's human organs to another
human being.
(23) Deduct, to the extent not otherwise deducted or
excluded in computing federal or Ohio adjusted gross income for
the taxable year, amounts received by the taxpayer as retired
personnel pay for service in the uniformed services or reserve
components thereof, or the national guard, or received by the
surviving spouse or former spouse of such a taxpayer under the
survivor benefit plan on account of such a taxpayer's death. If
the taxpayer receives income on account of retirement paid under
the federal civil service retirement system or federal employees
retirement system, or under any successor retirement program
enacted by the congress of the United States that is established
and maintained for retired employees of the United States
government, and such retirement income is based, in whole or in
part, on credit for the taxpayer's uniformed service, the
deduction allowed under this division shall include only that
portion of such retirement income that is attributable to the
taxpayer's uniformed service, to the extent that portion of such
retirement income is otherwise included in federal adjusted
gross income and is not otherwise deducted under this section.
Any amount deducted under division (A)(23) of this section is
not included in a taxpayer's adjusted gross income for the
purposes of section 5747.055 of the Revised Code. No amount may
be deducted under division (A)(23) of this section on the basis
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of which a credit was claimed under section 5747.055 of the
Revised Code.
(24) Deduct, to the extent not otherwise deducted or
excluded in computing federal or Ohio adjusted gross income for
the taxable year, the amount the taxpayer received during the
taxable year from the military injury relief fund created in
section 5902.05 of the Revised Code.
(25) Deduct, to the extent not otherwise deducted or
excluded in computing federal or Ohio adjusted gross income for
the taxable year, the amount the taxpayer received as a veterans
bonus during the taxable year from the Ohio department of
veterans services as authorized by Section 2r of Article VIII,
Ohio Constitution.
(26) Deduct, to the extent not otherwise deducted or
excluded in computing federal or Ohio adjusted gross income for
the taxable year, any income derived from a transfer agreement
or from the enterprise transferred under that agreement under
section 4313.02 of the Revised Code.
(27) Deduct, to the extent not otherwise deducted or
excluded in computing federal or Ohio adjusted gross income for
the taxable year, Ohio college opportunity or federal Pell grant
amounts received by the taxpayer or the taxpayer's spouse or
dependent pursuant to section 3333.122 of the Revised Code or 20
U.S.C. 1070a, et seq., and used to pay room or board furnished
by the educational institution for which the grant was awarded
at the institution's facilities, including meal plans
administered by the institution. For the purposes of this
division, receipt of a grant includes the distribution of a
grant directly to an educational institution and the crediting
of the grant to the enrollee's account with the institution.
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(28) Deduct from the portion of an individual's federal
adjusted gross income that is business income, to the extent not
otherwise deducted or excluded in computing federal adjusted
gross income for the taxable year, one hundred twenty-five
thousand dollars for each spouse if spouses file separate
returns under section 5747.08 of the Revised Code or two hundred
fifty thousand dollars for all other individuals.
(29) Deduct, as provided under section 5747.78 of the
Revised Code, contributions to ABLE savings accounts made in
accordance with sections 113.50 to 113.56 of the Revised Code.
(30)(a) Deduct, to the extent not otherwise deducted or
excluded in computing federal or Ohio adjusted gross income
during the taxable year, all of the following:
(i) Compensation paid to a qualifying employee described
in division (A)(14)(a) of section 5703.94 of the Revised Code to
the extent such compensation is for disaster work conducted in
this state during a disaster response period pursuant to a
qualifying solicitation received by the employee's employer;
(ii) Compensation paid to a qualifying employee described
in division (A)(14)(b) of section 5703.94 of the Revised Code to
the extent such compensation is for disaster work conducted in
this state by the employee during the disaster response period
on critical infrastructure owned or used by the employee's
employer;
(iii) Income received by an out-of-state disaster business
for disaster work conducted in this state during a disaster
response period, or, if the out-of-state disaster business is a
pass-through entity, a taxpayer's distributive share of the
pass-through entity's income from the business conducting
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disaster work in this state during a disaster response period,
if, in either case, the disaster work is conducted pursuant to a
qualifying solicitation received by the business.
(b) All terms used in division (A)(30) of this section
have the same meanings as in section 5703.94 of the Revised
Code.
(31) For a taxpayer who is a qualifying Ohio educator,
deduct, to the extent not otherwise deducted or excluded in
computing federal or Ohio adjusted gross income for the taxable
year, the lesser of two hundred fifty dollars or the amount of
expenses described in subsections (a)(2)(D)(i) and (ii) of
section 62 of the Internal Revenue Code paid or incurred by the
taxpayer during the taxpayer's taxable year in excess of the
amount the taxpayer is authorized to deduct for that taxable
year under subsection (a)(2)(D) of that section.
(32) Deduct, to the extent not otherwise deducted or
excluded in computing federal or Ohio adjusted gross income for
the taxable year, amounts received by the taxpayer as a
disability severance payment, computed under 10 U.S.C. 1212,
following discharge or release under honorable conditions from
the armed forces of the United States, as defined in section
5907.01 of the Revised Code.
(33) Deduct, to the extent not otherwise deducted or
excluded in computing federal adjusted gross income or Ohio
adjusted gross income, amounts not subject to tax due to an
agreement entered into under division (A)(2) of section 5747.05
of the Revised Code.
(34) Deduct amounts as provided under section 5747.79 of
the Revised Code related to the taxpayer's qualifying capital
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gains and deductible payroll.
To the extent a qualifying capital gain described under
division (A)(34) of this section is business income, the
taxpayer shall deduct those gains under this division before
deducting any such gains under division (A)(28) of this section.
(35)(a) For taxable years beginning in or after 2026,
deduct, to the extent not otherwise deducted or excluded in
computing federal or Ohio adjusted gross income for the taxable
year:
(i) One hundred per cent of the capital gain received by
the taxpayer in the taxable year from a qualifying interest in
an Ohio venture capital operating company attributable to the
company's investments in Ohio businesses during the period for
which the company was an Ohio venture operating company; and
(ii) Fifty per cent of the capital gain received by the
taxpayer in the taxable year from a qualifying interest in an
Ohio venture capital operating company attributable to the
company's investments in all other businesses during the period
for which the company was an Ohio venture operating company.
(b) Add amounts previously deducted by the taxpayer under
division (A)(35)(a) of this section if the director of
development certifies to the tax commissioner that the
requirements for the deduction were not met.
(c) All terms used in division (A)(35) of this section
have the same meanings as in section 122.851 of the Revised
Code.
(d) To the extent a capital gain described in division (A)
(35)(a) of this section is business income, the taxpayer shall
apply that division before applying division (A)(28) of this
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section.
(36) Add, to the extent not otherwise included in
computing federal or Ohio adjusted gross income for any taxable
year, the taxpayer's proportionate share of the amount of the
tax levied under section 5747.38 of the Revised Code and paid by
an electing pass-through entity for the taxable year.
Notwithstanding any provision of the Revised Code to the
contrary, the portion of the addition required by division (A)
(36) of this section related to the apportioned business income
of the pass-through entity shall be considered business income
under division (B) of this section. Such addition is eligible
for the deduction in division (A)(28) of this section, subject
to the applicable dollar limitations, and the tax rate
prescribed by division (A)(4)(a) of section 5747.02 of the
Revised Code. The taxpayer shall provide, upon request of the
tax commissioner, any documentation necessary to verify the
portion of the addition that is business income under this
division.
(37) Deduct, to the extent not otherwise deducted or
excluded in computing federal or Ohio adjusted gross income for
the taxable year, amounts delivered to a qualifying institution
pursuant to section 3333.128 of the Revised Code for the benefit
of the taxpayer or the taxpayer's spouse or dependent.
(38) Deduct, to the extent not otherwise deducted or
excluded in computing federal or Ohio adjusted gross income for
the taxable year, amounts received under the Ohio adoption grant
program pursuant to section 5101.191 of the Revised Code.
(39) Deduct, to the extent included in federal adjusted
gross income, income attributable to amounts provided to a
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As Introduced
taxpayer for any of the purposes for which an exclusion would
have been authorized under section 139 of the Internal Revenue
Code if the train derailment near the city of East Palestine on
February 3, 2023, had been a qualified disaster pursuant to that
section, or to compensate for lost business resulting from that
derailment, if such amounts are provided by any of the
following:
(a) A federal, state, or local government agency;
(b) A railroad company, as that term is defined in section
5727.01 of the Revised Code;
(c) Any subsidiary, insurer, or agent of a railroad
company or any related person.
Notwithstanding any provision to the contrary, the
derailment is not required to meet the definition of a
"qualified disaster" pursuant to section 139 of the Internal
Revenue Code to qualify for the deduction under this section.
(40) Deduct, to the extent included in federal adjusted
gross income, income attributable to loan repayments on behalf
of the taxpayer under the rural practice incentive program under
section 3333.135 of the Revised Code.
(41) Add any income taxes deducted in computing federal or
Ohio adjusted gross income to the extent the income taxes were
derived from income subject to a tax levied in another state or
the District of Columbia when such tax was enacted for purposes
of complying with internal revenue service notice 2020-75.
Notwithstanding any provision of the Revised Code to the
contrary, the portion of the addition required by division (A)
(41) of this section related to the apportioned business income
of the pass-through entity shall be considered business income
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As Introduced
under division (B) of this section. Such addition is eligible
for the deduction in division (A)(28) of this section, subject
to the applicable dollar limitations, and the tax rate
prescribed by division (A)(4)(a) of section 5747.02 of the
Revised Code. The taxpayer shall provide, upon request of the
tax commissioner, any documentation necessary to verify the
portion of the addition that is business income under this
division.
(42) Deduct amounts contributed to a homeownership savings
account and calculated pursuant to divisions (B) and (C) of
section 5747.85 of the Revised Code.
(43) If the taxpayer is the account owner, add the amount
of funds withdrawn from a homeownership savings account not used
for eligible expenses, regardless of who deposited those funds.
As used in division (A)(43) of this section, "homeownership
savings account," "account owner," and "eligible expenses" have
the same meanings as in section 5747.85 of the Revised Code.
(44) Deduct, to the extent not otherwise deducted or
excluded in computing federal adjusted gross income or Ohio
adjusted gross income, refund amounts received from the thriving
families tax credit authorized under section 5747.36 of the
Revised Code.
(B) "Business income" means income, including gain or
loss, arising from transactions, activities, and sources in the
regular course of a trade or business and includes income, gain,
or loss from real property, tangible property, and intangible
property if the acquisition, rental, management, and disposition
of the property constitute integral parts of the regular course
of a trade or business operation. "Business income" includes
income, including gain or loss, from a partial or complete
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As Introduced
liquidation of a business, including, but not limited to, gain
or loss from the sale or other disposition of goodwill or the
sale of an equity or ownership interest in a business.
As used in this division, the "sale of an equity or
ownership interest in a business" means sales to which either or
both of the following apply:
(1) The sale is treated for federal income tax purposes as
the sale of assets.
(2) The seller materially participated, as described in 26
C.F.R. 1.469-5T, in the activities of the business during the
taxable year in which the sale occurs or during any of the five
preceding taxable years.
(C) "Nonbusiness income" means all income other than
business income and may include, but is not limited to,
compensation, rents and royalties from real or tangible personal
property, capital gains, interest, dividends and distributions,
patent or copyright royalties, or lottery winnings, prizes, and
awards.
(D) "Compensation" means any form of remuneration paid to
an employee for personal services.
(E) "Fiduciary" means a guardian, trustee, executor,
administrator, receiver, conservator, or any other person acting
in any fiduciary capacity for any individual, trust, or estate.
(F) "Fiscal year" means an accounting period of twelve
months ending on the last day of any month other than December.
(G) "Individual" means any natural person.
(H) "Internal Revenue Code" means the "Internal Revenue
Code of 1986," 100 Stat. 2085, 26 U.S.C.A. 1, as amended.
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(I) "Resident" means any of the following:
(1) An individual who is domiciled in this state, subject
to section 5747.24 of the Revised Code;
(2) The estate of a decedent who at the time of death was
domiciled in this state. The domicile tests of section 5747.24
of the Revised Code are not controlling for purposes of division
(I)(2) of this section.
(3) A trust that, in whole or part, resides in this state.
If only part of a trust resides in this state, the trust is a
resident only with respect to that part.
For the purposes of division (I)(3) of this section:
(a) A trust resides in this state for the trust's current
taxable year to the extent, as described in division (I)(3)(d)
of this section, that the trust consists directly or indirectly,
in whole or in part, of assets, net of any related liabilities,
that were transferred, or caused to be transferred, directly or
indirectly, to the trust by any of the following:
(i) A person, a court, or a governmental entity or
instrumentality on account of the death of a decedent, but only
if the trust is described in division (I)(3)(e)(i) or (ii) of
this section;
(ii) A person who was domiciled in this state for the
purposes of this chapter when the person directly or indirectly
transferred assets to an irrevocable trust, but only if at least
one of the trust's qualifying beneficiaries is domiciled in this
state for the purposes of this chapter during all or some
portion of the trust's current taxable year;
(iii) A person who was domiciled in this state for the
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purposes of this chapter when the trust document or instrument
or part of the trust document or instrument became irrevocable,
but only if at least one of the trust's qualifying beneficiaries
is a resident domiciled in this state for the purposes of this
chapter during all or some portion of the trust's current
taxable year. If a trust document or instrument became
irrevocable upon the death of a person who at the time of death
was domiciled in this state for purposes of this chapter, that
person is a person described in division (I)(3)(a)(iii) of this
section.
(b) A trust is irrevocable to the extent that the
transferor is not considered to be the owner of the net assets
of the trust under sections 671 to 678 of the Internal Revenue
Code.
(c) With respect to a trust other than a charitable lead
trust, "qualifying beneficiary" has the same meaning as
"potential current beneficiary" as defined in section 1361(e)(2)
of the Internal Revenue Code, and with respect to a charitable
lead trust "qualifying beneficiary" is any current, future, or
contingent beneficiary, but with respect to any trust
"qualifying beneficiary" excludes a person or a governmental
entity or instrumentality to any of which a contribution would
qualify for the charitable deduction under section 170 of the
Internal Revenue Code.
(d) For the purposes of division (I)(3)(a) of this
section, the extent to which a trust consists directly or
indirectly, in whole or in part, of assets, net of any related
liabilities, that were transferred directly or indirectly, in
whole or part, to the trust by any of the sources enumerated in
that division shall be ascertained by multiplying the fair
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As Introduced
market value of the trust's assets, net of related liabilities,
by the qualifying ratio, which shall be computed as follows:
(i) The first time the trust receives assets, the
numerator of the qualifying ratio is the fair market value of
those assets at that time, net of any related liabilities, from
sources enumerated in division (I)(3)(a) of this section. The
denominator of the qualifying ratio is the fair market value of
all the trust's assets at that time, net of any related
liabilities.
(ii) Each subsequent time the trust receives assets, a
revised qualifying ratio shall be computed. The numerator of the
revised qualifying ratio is the sum of (1) the fair market value
of the trust's assets immediately prior to the subsequent
transfer, net of any related liabilities, multiplied by the
qualifying ratio last computed without regard to the subsequent
transfer, and (2) the fair market value of the subsequently
transferred assets at the time transferred, net of any related
liabilities, from sources enumerated in division (I)(3)(a) of
this section. The denominator of the revised qualifying ratio is
the fair market value of all the trust's assets immediately
after the subsequent transfer, net of any related liabilities.
(iii) Whether a transfer to the trust is by or from any of
the sources enumerated in division (I)(3)(a) of this section
shall be ascertained without regard to the domicile of the
trust's beneficiaries.
(e) For the purposes of division (I)(3)(a)(i) of this
section:
(i) A trust is described in division (I)(3)(e)(i) of this
section if the trust is a testamentary trust and the testator of
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As Introduced
that testamentary trust was domiciled in this state at the time
of the testator's death for purposes of the taxes levied under
Chapter 5731. of the Revised Code.
(ii) A trust is described in division (I)(3)(e)(ii) of
this section if the transfer is a qualifying transfer described
in any of divisions (I)(3)(f)(i) to (vi) of this section, the
trust is an irrevocable inter vivos trust, and at least one of
the trust's qualifying beneficiaries is domiciled in this state
for purposes of this chapter during all or some portion of the
trust's current taxable year.
(f) For the purposes of division (I)(3)(e)(ii) of this
section, a "qualifying transfer" is a transfer of assets, net of
any related liabilities, directly or indirectly to a trust, if
the transfer is described in any of the following:
(i) The transfer is made to a trust, created by the
decedent before the decedent's death and while the decedent was
domiciled in this state for the purposes of this chapter, and,
prior to the death of the decedent, the trust became irrevocable
while the decedent was domiciled in this state for the purposes
of this chapter.
(ii) The transfer is made to a trust to which the
decedent, prior to the decedent's death, had directly or
indirectly transferred assets, net of any related liabilities,
while the decedent was domiciled in this state for the purposes
of this chapter, and prior to the death of the decedent the
trust became irrevocable while the decedent was domiciled in
this state for the purposes of this chapter.
(iii) The transfer is made on account of a contractual
relationship existing directly or indirectly between the
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688 H. B. No. 140 Page 25
As Introduced
transferor and either the decedent or the estate of the decedent
at any time prior to the date of the decedent's death, and the
decedent was domiciled in this state at the time of death for
purposes of the taxes levied under Chapter 5731. of the Revised
Code.
(iv) The transfer is made to a trust on account of a
contractual relationship existing directly or indirectly between
the transferor and another person who at the time of the
decedent's death was domiciled in this state for purposes of
this chapter.
(v) The transfer is made to a trust on account of the will
of a testator who was domiciled in this state at the time of the
testator's death for purposes of the taxes levied under Chapter
5731. of the Revised Code.
(vi) The transfer is made to a trust created by or caused
to be created by a court, and the trust was directly or
indirectly created in connection with or as a result of the
death of an individual who, for purposes of the taxes levied
under Chapter 5731. of the Revised Code, was domiciled in this
state at the time of the individual's death.
(g) The tax commissioner may adopt rules to ascertain the
part of a trust residing in this state.
(J) "Nonresident" means an individual or estate that is
not a resident. An individual who is a resident for only part of
a taxable year is a nonresident for the remainder of that
taxable year.
(K) "Pass-through entity" has the same meaning as in
section 5733.04 of the Revised Code.
(L) "Return" means the notifications and reports required
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717 H. B. No. 140 Page 26
As Introduced
to be filed pursuant to this chapter for the purpose of
reporting the tax due and includes declarations of estimated tax
when so required.
(M) "Taxable year" means the calendar year or the
taxpayer's fiscal year ending during the calendar year, or
fractional part thereof, upon which the adjusted gross income is
calculated pursuant to this chapter.
(N) "Taxpayer" means any person subject to the tax imposed
by section 5747.02 of the Revised Code or any pass-through
entity that makes the election under division (D) of section
5747.08 of the Revised Code.
(O) "Dependents" means one of the following:
(1) For taxable years beginning on or after January 1,
2018, and before January 1, 2026, dependents as defined in the
Internal Revenue Code;
(2) For all other taxable years, dependents as defined in
the Internal Revenue Code and as claimed in the taxpayer's
federal income tax return for the taxable year or which the
taxpayer would have been permitted to claim had the taxpayer
filed a federal income tax return.
(P) "Principal county of employment" means, in the case of
a nonresident, the county within the state in which a taxpayer
performs services for an employer or, if those services are
performed in more than one county, the county in which the major
portion of the services are performed.
(Q) As used in sections 5747.50 to 5747.55 of the Revised
Code:
(1) "Subdivision" means any county, municipal corporation,
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745 H. B. No. 140 Page 27
As Introduced
park district, or township.
(2) "Essential local government purposes" includes all
functions that any subdivision is required by general law to
exercise, including like functions that are exercised under a
charter adopted pursuant to the Ohio Constitution.
(R) "Overpayment" means any amount already paid that
exceeds the figure determined to be the correct amount of the
tax.
(S) "Taxable income" or "Ohio taxable income" applies only
to estates and trusts, and means federal taxable income, as
defined and used in the Internal Revenue Code, adjusted as
follows:
(1) Add interest or dividends, net of ordinary, necessary,
and reasonable expenses not deducted in computing federal
taxable income, on obligations or securities of any state or of
any political subdivision or authority of any state, other than
this state and its subdivisions and authorities, but only to the
extent that such net amount is not otherwise includible in Ohio
taxable income and is described in either division (S)(1)(a) or
(b) of this section:
(a) The net amount is not attributable to the S portion of
an electing small business trust and has not been distributed to
beneficiaries for the taxable year;
(b) The net amount is attributable to the S portion of an
electing small business trust for the taxable year.
(2) Add interest or dividends, net of ordinary, necessary,
and reasonable expenses not deducted in computing federal
taxable income, on obligations of any authority, commission,
instrumentality, territory, or possession of the United States
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As Introduced
to the extent that the interest or dividends are exempt from
federal income taxes but not from state income taxes, but only
to the extent that such net amount is not otherwise includible
in Ohio taxable income and is described in either division (S)
(1)(a) or (b) of this section;
(3) Add the amount of personal exemption allowed to the
estate pursuant to section 642(b) of the Internal Revenue Code;
(4) Deduct interest or dividends, net of related expenses
deducted in computing federal taxable income, on obligations of
the United States and its territories and possessions or of any
authority, commission, or instrumentality of the United States
to the extent that the interest or dividends are exempt from
state taxes under the laws of the United States, but only to the
extent that such amount is included in federal taxable income
and is described in either division (S)(1)(a) or (b) of this
section;
(5) Deduct the amount of wages and salaries, if any, not
otherwise allowable as a deduction but that would have been
allowable as a deduction in computing federal taxable income for
the taxable year, had the work opportunity tax credit allowed
under sections 38, 51, and 52 of the Internal Revenue Code not
been in effect, but only to the extent such amount relates
either to income included in federal taxable income for the
taxable year or to income of the S portion of an electing small
business trust for the taxable year;
(6) Deduct any interest or interest equivalent, net of
related expenses deducted in computing federal taxable income,
on public obligations and purchase obligations, but only to the
extent that such net amount relates either to income included in
federal taxable income for the taxable year or to income of the
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804 H. B. No. 140 Page 29
As Introduced
S portion of an electing small business trust for the taxable
year;
(7) Add any loss or deduct any gain resulting from sale,
exchange, or other disposition of public obligations to the
extent that such loss has been deducted or such gain has been
included in computing either federal taxable income or income of
the S portion of an electing small business trust for the
taxable year;
(8) Except in the case of the final return of an estate,
add any amount deducted by the taxpayer on both its Ohio estate
tax return pursuant to section 5731.14 of the Revised Code, and
on its federal income tax return in determining federal taxable
income;
(9)(a) Deduct any amount included in federal taxable
income solely because the amount represents a reimbursement or
refund of expenses that in a previous year the decedent had
deducted as an itemized deduction pursuant to section 63 of the
Internal Revenue Code and applicable treasury regulations. The
deduction otherwise allowed under division (S)(9)(a) of this
section shall be reduced to the extent the reimbursement is
attributable to an amount the taxpayer or decedent deducted
under this section in any taxable year.
(b) Add any amount not otherwise included in Ohio taxable
income for any taxable year to the extent that the amount is
attributable to the recovery during the taxable year of any
amount deducted or excluded in computing federal or Ohio taxable
income in any taxable year, but only to the extent such amount
has not been distributed to beneficiaries for the taxable year.
(10) Deduct any portion of the deduction described in
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833 H. B. No. 140 Page 30
As Introduced
section 1341(a)(2) of the Internal Revenue Code, for repaying
previously reported income received under a claim of right, that
meets both of the following requirements:
(a) It is allowable for repayment of an item that was
included in the taxpayer's taxable income or the decedent's
adjusted gross income for a prior taxable year and did not
qualify for a credit under division (A) or (B) of section
5747.05 of the Revised Code for that year.
(b) It does not otherwise reduce the taxpayer's taxable
income or the decedent's adjusted gross income for the current
or any other taxable year.
(11) Add any amount claimed as a credit under section
5747.059 of the Revised Code to the extent that the amount
satisfies either of the following:
(a) The amount was deducted or excluded from the
computation of the taxpayer's federal taxable income as required
to be reported for the taxpayer's taxable year under the
Internal Revenue Code;
(b) The amount resulted in a reduction in the taxpayer's
federal taxable income as required to be reported for any of the
taxpayer's taxable years under the Internal Revenue Code.
(12) Deduct any amount, net of related expenses deducted
in computing federal taxable income, that a trust is required to
report as farm income on its federal income tax return, but only
if the assets of the trust include at least ten acres of land
satisfying the definition of "land devoted exclusively to
agricultural use" under section 5713.30 of the Revised Code,
regardless of whether the land is valued for tax purposes as
such land under sections 5713.30 to 5713.38 of the Revised Code.
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862 H. B. No. 140 Page 31
As Introduced
If the trust is a pass-through entity investor, section 5747.231
of the Revised Code applies in ascertaining if the trust is
eligible to claim the deduction provided by division (S)(12) of
this section in connection with the pass-through entity's farm
income.
Except for farm income attributable to the S portion of an
electing small business trust, the deduction provided by
division (S)(12) of this section is allowed only to the extent
that the trust has not distributed such farm income.
(13) Add the net amount of income described in section
641(c) of the Internal Revenue Code to the extent that amount is
not included in federal taxable income.
(14) Deduct the amount the taxpayer would be required to
deduct under division (A)(18) of this section if the taxpayer's
Ohio taxable income were was computed in the same manner as an
individual's Ohio adjusted gross income is computed under this
section.
(15) Add, to the extent not otherwise included in
computing taxable income or Ohio taxable income for any taxable
year, the taxpayer's proportionate share of the amount of the
tax levied under section 5747.38 of the Revised Code and paid by
an electing pass-through entity for the taxable year.
(16) Add any income taxes deducted in computing federal
taxable income or Ohio taxable income to the extent the income
taxes were derived from income subject to a tax levied in
another state or the District of Columbia when such tax was
enacted for purposes of complying with internal revenue service
notice 2020-75.
(T) "School district income" and "school district income
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As Introduced
tax" have the same meanings as in section 5748.01 of the Revised
Code.
(U) As used in divisions (A)(7), (A)(8), (S)(6), and (S)
(7) of this section, "public obligations," "purchase
obligations," and "interest or interest equivalent" have the
same meanings as in section 5709.76 of the Revised Code.
(V) "Limited liability company" means any limited
liability company formed under former Chapter 1705. of the
Revised Code as that chapter existed prior to February 11, 2022,
Chapter 1706. of the Revised Code, or the laws of any other
state.
(W) "Pass-through entity investor" means any person who,
during any portion of a taxable year of a pass-through entity,
is a partner, member, shareholder, or equity investor in that
pass-through entity.
(X) "Banking day" has the same meaning as in section
1304.01 of the Revised Code.
(Y) "Month" means a calendar month.
(Z) "Quarter" means the first three months, the second
three months, the third three months, or the last three months
of the taxpayer's taxable year.
(AA)(1) "Modified business income" means the business
income included in a trust's Ohio taxable income after such
taxable income is first reduced by the qualifying trust amount,
if any.
(2) "Qualifying trust amount" of a trust means capital
gains and losses from the sale, exchange, or other disposition
of equity or ownership interests in, or debt obligations of, a
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919 H. B. No. 140 Page 33
As Introduced
qualifying investee to the extent included in the trust's Ohio
taxable income, but only if the following requirements are
satisfied:
(a) The book value of the qualifying investee's physical
assets in this state and everywhere, as of the last day of the
qualifying investee's fiscal or calendar year ending immediately
prior to the date on which the trust recognizes the gain or
loss, is available to the trust.
(b) The requirements of section 5747.011 of the Revised
Code are satisfied for the trust's taxable year in which the
trust recognizes the gain or loss.
Any gain or loss that is not a qualifying trust amount is
modified business income, qualifying investment income, or
modified nonbusiness income, as the case may be.
(3) "Modified nonbusiness income" means a trust's Ohio
taxable income other than modified business income, other than
the qualifying trust amount, and other than qualifying
investment income, as defined in section 5747.012 of the Revised
Code, to the extent such qualifying investment income is not
otherwise part of modified business income.
(4) "Modified Ohio taxable income" applies only to trusts,
and means the sum of the amounts described in divisions (AA)(4)
(a) to (c) of this section:
(a) The fraction, calculated under section 5747.013, and
applying section 5747.231 of the Revised Code, multiplied by the
sum of the following amounts:
(i) The trust's modified business income;
(ii) The trust's qualifying investment income, as defined
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947 H. B. No. 140 Page 34
As Introduced
in section 5747.012 of the Revised Code, but only to the extent
the qualifying investment income does not otherwise constitute
modified business income and does not otherwise constitute a
qualifying trust amount.
(b) The qualifying trust amount multiplied by a fraction,
the numerator of which is the sum of the book value of the
qualifying investee's physical assets in this state on the last
day of the qualifying investee's fiscal or calendar year ending
immediately prior to the day on which the trust recognizes the
qualifying trust amount, and the denominator of which is the sum
of the book value of the qualifying investee's total physical
assets everywhere on the last day of the qualifying investee's
fiscal or calendar year ending immediately prior to the day on
which the trust recognizes the qualifying trust amount. If, for
a taxable year, the trust recognizes a qualifying trust amount
with respect to more than one qualifying investee, the amount
described in division (AA)(4)(b) of this section shall equal the
sum of the products so computed for each such qualifying
investee.
(c)(i) With respect to a trust or portion of a trust that
is a resident as ascertained in accordance with division (I)(3)
(d) of this section, its modified nonbusiness income.
(ii) With respect to a trust or portion of a trust that is
not a resident as ascertained in accordance with division (I)(3)
(d) of this section, the amount of its modified nonbusiness
income satisfying the descriptions in divisions (B)(2) to (5) of
section 5747.20 of the Revised Code, except as otherwise
provided in division (AA)(4)(c)(ii) of this section. With
respect to a trust or portion of a trust that is not a resident
as ascertained in accordance with division (I)(3)(d) of this
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977 H. B. No. 140 Page 35
As Introduced
section, the trust's portion of modified nonbusiness income
recognized from the sale, exchange, or other disposition of a
debt interest in or equity interest in a section 5747.212
entity, as defined in section 5747.212 of the Revised Code,
without regard to division (A) of that section, shall not be
allocated to this state in accordance with section 5747.20 of
the Revised Code but shall be apportioned to this state in
accordance with division (B) of section 5747.212 of the Revised
Code without regard to division (A) of that section.
If the allocation and apportionment of a trust's income
under divisions (AA)(4)(a) and (c) of this section do not fairly
represent the modified Ohio taxable income of the trust in this
state, the alternative methods described in division (C) of
section 5747.21 of the Revised Code may be applied in the manner
and to the same extent provided in that section.
(5)(a) Except as set forth in division (AA)(5)(b) of this
section, "qualifying investee" means a person in which a trust
has an equity or ownership interest, or a person or unit of
government the debt obligations of either of which are owned by
a trust. For the purposes of division (AA)(2)(a) of this section
and for the purpose of computing the fraction described in
division (AA)(4)(b) of this section, all of the following apply:
(i) If the qualifying investee is a member of a qualifying
controlled group on the last day of the qualifying investee's
fiscal or calendar year ending immediately prior to the date on
which the trust recognizes the gain or loss, then "qualifying
investee" includes all persons in the qualifying controlled
group on such last day.
(ii) If the qualifying investee, or if the qualifying
investee and any members of the qualifying controlled group of
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1007 H. B. No. 140 Page 36
As Introduced
which the qualifying investee is a member on the last day of the
qualifying investee's fiscal or calendar year ending immediately
prior to the date on which the trust recognizes the gain or
loss, separately or cumulatively own, directly or indirectly, on
the last day of the qualifying investee's fiscal or calendar
year ending immediately prior to the date on which the trust
recognizes the qualifying trust amount, more than fifty per cent
of the equity of a pass-through entity, then the qualifying
investee and the other members are deemed to own the
proportionate share of the pass-through entity's physical assets
which the pass-through entity directly or indirectly owns on the
last day of the pass-through entity's calendar or fiscal year
ending within or with the last day of the qualifying investee's
fiscal or calendar year ending immediately prior to the date on
which the trust recognizes the qualifying trust amount.
(iii) For the purposes of division (AA)(5)(a)(iii) of this
section, "upper level pass-through entity" means a pass-through
entity directly or indirectly owning any equity of another pass-
through entity, and "lower level pass-through entity" means that
other pass-through entity.
An upper level pass-through entity, whether or not it is
also a qualifying investee, is deemed to own, on the last day of
the upper level pass-through entity's calendar or fiscal year,
the proportionate share of the lower level pass-through entity's
physical assets that the lower level pass-through entity
directly or indirectly owns on the last day of the lower level
pass-through entity's calendar or fiscal year ending within or
with the last day of the upper level pass-through entity's
fiscal or calendar year. If the upper level pass-through entity
directly and indirectly owns less than fifty per cent of the
equity of the lower level pass-through entity on each day of the
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1038 H. B. No. 140 Page 37
As Introduced
upper level pass-through entity's calendar or fiscal year in
which or with which ends the calendar or fiscal year of the
lower level pass-through entity and if, based upon clear and
convincing evidence, complete information about the location and
cost of the physical assets of the lower pass-through entity is
not available to the upper level pass-through entity, then
solely for purposes of ascertaining if a gain or loss
constitutes a qualifying trust amount, the upper level pass-
through entity shall be deemed as owning no equity of the lower
level pass-through entity for each day during the upper level
pass-through entity's calendar or fiscal year in which or with
which ends the lower level pass-through entity's calendar or
fiscal year. Nothing in division (AA)(5)(a)(iii) of this section
shall be construed to provide for any deduction or exclusion in
computing any trust's Ohio taxable income.
(b) With respect to a trust that is not a resident for the
taxable year and with respect to a part of a trust that is not a
resident for the taxable year, "qualifying investee" for that
taxable year does not include a C corporation if both of the
following apply:
(i) During the taxable year the trust or part of the trust
recognizes a gain or loss from the sale, exchange, or other
disposition of equity or ownership interests in, or debt
obligations of, the C corporation.
(ii) Such gain or loss constitutes nonbusiness income.
(6) "Available" means information is such that a person is
able to learn of the information by the due date plus
extensions, if any, for filing the return for the taxable year
in which the trust recognizes the gain or loss.
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1067 H. B. No. 140 Page 38
As Introduced
(BB) "Qualifying controlled group" has the same meaning as
in section 5733.04 of the Revised Code.
(CC) "Related member" has the same meaning as in section
5733.042 of the Revised Code.
(DD)(1) For the purposes of division (DD) of this section:
(a) "Qualifying person" means any person other than a
qualifying corporation.
(b) "Qualifying corporation" means any person classified
for federal income tax purposes as an association taxable as a
corporation, except either of the following:
(i) A corporation that has made an election under
subchapter S, chapter one, subtitle A, of the Internal Revenue
Code for its taxable year ending within, or on the last day of,
the investor's taxable year;
(ii) A subsidiary that is wholly owned by any corporation
that has made an election under subchapter S, chapter one,
subtitle A of the Internal Revenue Code for its taxable year
ending within, or on the last day of, the investor's taxable
year.
(2) For the purposes of this chapter, unless expressly
stated otherwise, no qualifying person indirectly owns any asset
directly or indirectly owned by any qualifying corporation.
(EE) For purposes of this chapter and Chapter 5751. of the
Revised Code:
(1) "Trust" does not include a qualified pre-income tax
trust.
(2) A "qualified pre-income tax trust" is any pre-income
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1094 H. B. No. 140 Page 39
As Introduced
tax trust that makes a qualifying pre-income tax trust election
as described in division (EE)(3) of this section.
(3) A "qualifying pre-income tax trust election" is an
election by a pre-income tax trust to subject to the tax imposed
by section 5751.02 of the Revised Code the pre-income tax trust
and all pass-through entities of which the trust owns or
controls, directly, indirectly, or constructively through
related interests, five per cent or more of the ownership or
equity interests. The trustee shall notify the tax commissioner
in writing of the election on or before April 15, 2006. The
election, if timely made, shall be effective on and after
January 1, 2006, and shall apply for all tax periods and tax
years until revoked by the trustee of the trust.
(4) A "pre-income tax trust" is a trust that satisfies all
of the following requirements:
(a) The document or instrument creating the trust was
executed by the grantor before January 1, 1972;
(b) The trust became irrevocable upon the creation of the
trust; and
(c) The grantor was domiciled in this state at the time
the trust was created.
(FF) "Uniformed services" means all of the following:
(1) "Armed forces of the United States" as defined in
section 5907.01 of the Revised Code;
(2) The commissioned corps of the national oceanic and
atmospheric administration;
(3) The commissioned corps of the public health service.
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1121 H. B. No. 140 Page 40
As Introduced
(GG) "Taxable business income" means the amount by which
an individual's business income that is included in federal
adjusted gross income exceeds the amount of business income the
individual is authorized to deduct under division (A)(28) of
this section for the taxable year.
(HH) "Employer" does not include a franchisor with respect
to the franchisor's relationship with a franchisee or an
employee of a franchisee, unless the franchisor agrees to assume
that role in writing or a court of competent jurisdiction
determines that the franchisor exercises a type or degree of
control over the franchisee or the franchisee's employees that
is not customarily exercised by a franchisor for the purpose of
protecting the franchisor's trademark, brand, or both. For
purposes of this division, "franchisor" and "franchisee" have
the same meanings as in 16 C.F.R. 436.1.
(II) "Modified adjusted gross income" means Ohio adjusted
gross income plus any amount deducted under divisions (A)(28)
and (34) of this section for the taxable year.
(JJ) "Qualifying Ohio educator" means an individual who,
for a taxable year, qualifies as an eligible educator, as that
term is defined in section 62 of the Internal Revenue Code, and
who holds a certificate, license, or permit described in Chapter
3319. or section 3301.071 of the Revised Code.
Sec. 5747.08. An annual return with respect to the tax
imposed by section 5747.02 of the Revised Code and each tax
imposed under Chapter 5748. of the Revised Code shall be made by
every taxpayer for any taxable year for which the taxpayer is
liable for the tax imposed by that section or under that
chapter, unless the total credits allowed under division (E) of
section 5747.05 and divisions (F) and (G) of section 5747.055 of
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1151 H. B. No. 140 Page 41
As Introduced
the Revised Code for the year are equal to or exceed the tax
imposed by section 5747.02 of the Revised Code, in which case no
return shall be required unless the taxpayer is liable for a tax
imposed pursuant to Chapter 5748. of the Revised Code.
(A) If an individual is deceased, any return or notice
required of that individual under this chapter shall be made and
filed by that decedent's executor, administrator, or other
person charged with the property of that decedent.
(B) If an individual is unable to make a return or notice
required by this chapter, the return or notice required of that
individual shall be made and filed by the individual's duly
authorized agent, guardian, conservator, fiduciary, or other
person charged with the care of the person or property of that
individual.
(C) Returns or notices required of an estate or a trust
shall be made and filed by the fiduciary of the estate or trust.
(D)(1)(a) Except as otherwise provided in division (D)(1)
(b) of this section, any pass-through entity may file a single
return on behalf of one or more of the entity's investors other
than an investor that is a person subject to the tax imposed
under section 5733.06 of the Revised Code. The single return
shall set forth the name, address, and social security number or
other identifying number of each of those pass-through entity
investors and shall indicate the distributive share of each of
those pass-through entity investor's income taxable in this
state in accordance with sections 5747.20 to 5747.231 of the
Revised Code. Such pass-through entity investors for whom the
pass-through entity elects to file a single return are not
entitled to the exemption or credit provided for by sections
5747.02 and 5747.022 of the Revised Code; shall calculate the
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1181 H. B. No. 140 Page 42
As Introduced
tax before business credits at the highest rate of tax set forth
in section 5747.02 of the Revised Code for the taxable year for
which the return is filed; and are entitled to only their
distributive share of the business credits as defined in
division (D)(2) of this section. A single check drawn by the
pass-through entity shall accompany the return in full payment
of the tax due, as shown on the single return, for such
investors, other than investors who are persons subject to the
tax imposed under section 5733.06 of the Revised Code.
(b)(i) A pass-through entity shall not include in such a
single return any investor that is a trust to the extent that
any direct or indirect current, future, or contingent
beneficiary of the trust is a person subject to the tax imposed
under section 5733.06 of the Revised Code.
(ii) A pass-through entity shall not include in such a
single return any investor that is itself a pass-through entity
to the extent that any direct or indirect investor in the second
pass-through entity is a person subject to the tax imposed under
section 5733.06 of the Revised Code.
(c) Except as provided by division (L) of this section,
nothing in division (D) of this section precludes the tax
commissioner from requiring such investors to file the return
and make the payment of taxes and related interest, penalty, and
interest penalty required by this section or section 5747.02,
5747.09, or 5747.15 of the Revised Code. Nothing in division (D)
of this section precludes such an investor from filing the
annual return under this section, utilizing the refundable
credit equal to the investor's proportionate share of the tax
paid by the pass-through entity on behalf of the investor under
division (I) of this section, and making the payment of taxes
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1211 H. B. No. 140 Page 43
As Introduced
imposed under section 5747.02 of the Revised Code. Nothing in
division (D) of this section shall be construed to provide to
such an investor or pass-through entity any additional deduction
or credit, other than the credit provided by division (I) of
this section, solely on account of the entity's filing a return
in accordance with this section. Such a pass-through entity also
shall make the filing and payment of estimated taxes on behalf
of the pass-through entity investors other than an investor that
is a person subject to the tax imposed under section 5733.06 of
the Revised Code.
(2) For the purposes of this section, "business credits"
means the credits listed in section 5747.98 of the Revised Code
excluding the following credits:
(a) The retirement income credit under division (B) of
section 5747.055 of the Revised Code;
(b) The senior citizen credit under division (F) of
section 5747.055 of the Revised Code;
(c) The lump sum distribution credit under division (G) of
section 5747.055 of the Revised Code;
(d) The dependent care credit under section 5747.054 of
the Revised Code;
(e) The lump sum retirement income credit under division
(C) of section 5747.055 of the Revised Code;
(f) The lump sum retirement income credit under division
(D) of section 5747.055 of the Revised Code;
(g) The lump sum retirement income credit under division
(E) of section 5747.055 of the Revised Code;
(h) The credit for displaced workers who pay for job
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1239 H. B. No. 140 Page 44
As Introduced
training under section 5747.27 of the Revised Code;
(i) The twenty-dollar personal exemption credit under
section 5747.022 of the Revised Code;
(j) The joint filing credit under division (E) of section
5747.05 of the Revised Code;
(k) The nonresident credit under division (A) of section
5747.05 of the Revised Code;
(l) The credit for a resident's out-of-state income under
division (B) of section 5747.05 of the Revised Code;
(m) The earned income tax credit under section 5747.71 of
the Revised Code;
(n) The lead abatement credit under section 5747.26 of the
Revised Code;
(o) The credit for education expenses under section
5747.72 of the Revised Code;
(p) The credit for tuition paid to a nonchartered
nonpublic school under section 5747.75 of the Revised Code ;
(q) The thriving families tax credit under section 5747.36
of the Revised Code.
(3) The election provided for under division (D) of this
section applies only to the taxable year for which the election
is made by the pass-through entity. Unless the tax commissioner
provides otherwise, this election, once made, is binding and
irrevocable for the taxable year for which the election is made.
Nothing in this division shall be construed to provide for any
deduction or credit that would not be allowable if a nonresident
pass-through entity investor were to file an annual return.
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1266 H. B. No. 140 Page 45
As Introduced
(4) If a pass-through entity makes the election provided
for under division (D) of this section, the pass-through entity
shall be liable for any additional taxes, interest, interest
penalty, or penalties imposed by this chapter if the tax
commissioner finds that the single return does not reflect the
correct tax due by the pass-through entity investors covered by
that return. Nothing in this division shall be construed to
limit or alter the liability, if any, imposed on pass-through
entity investors for unpaid or underpaid taxes, interest,
interest penalty, or penalties as a result of the pass-through
entity's making the election provided for under division (D) of
this section. For the purposes of division (D) of this section,
"correct tax due" means the tax that would have been paid by the
pass-through entity had the single return been filed in a manner
reflecting the commissioner's findings. Nothing in division (D)
of this section shall be construed to make or hold a pass-
through entity liable for tax attributable to a pass-through
entity investor's income from a source other than the pass-
through entity electing to file the single return.
(E) If a husband and wife file a joint federal income tax
return for a taxable year, they shall file a joint return under
this section for that taxable year, and their liabilities are
joint and several, but, if the federal income tax liability of
either spouse is determined on a separate federal income tax
return, they shall file separate returns under this section.
If either spouse is not required to file a federal income
tax return and either or both are required to file a return
pursuant to this chapter, they may elect to file separate or
joint returns, and, pursuant to that election, their liabilities
are separate or joint and several. If a husband and wife file
separate returns pursuant to this chapter, each must claim the
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1297 H. B. No. 140 Page 46
As Introduced
taxpayer's own exemption, but not both, as authorized under
section 5747.02 of the Revised Code on the taxpayer's own
return.
(F) Each return or notice required to be filed under this
section shall contain the signature of the taxpayer or the
taxpayer's duly authorized agent and of the person who prepared
the return for the taxpayer, and shall include the taxpayer's
social security number. Each return shall be verified by a
declaration under the penalties of perjury. The tax commissioner
shall prescribe the form that the signature and declaration
shall take.
(G) Each return or notice required to be filed under this
section shall be made and filed as required by section 5747.04
of the Revised Code, on or before the fifteenth day of April of
each year, on forms that the tax commissioner shall prescribe,
together with remittance made payable to the treasurer of state
in the combined amount of the state and all school district
income taxes shown to be due on the form.
Upon good cause shown, the commissioner may extend the
period for filing any notice or return required to be filed
under this section and may adopt rules relating to extensions.
If the extension results in an extension of time for the payment
of any state or school district income tax liability with
respect to which the return is filed, the taxpayer shall pay at
the time the tax liability is paid an amount of interest
computed at the rate per annum prescribed by section 5703.47 of
the Revised Code on that liability from the time that payment is
due without extension to the time of actual payment. Except as
provided in section 5747.132 of the Revised Code, in addition to
all other interest charges and penalties, all taxes imposed
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1327 H. B. No. 140 Page 47
As Introduced
under this chapter or Chapter 5748. of the Revised Code and
remaining unpaid after they become due, except combined amounts
due of one dollar or less, bear interest at the rate per annum
prescribed by section 5703.47 of the Revised Code until paid or
until the day an assessment is issued under section 5747.13 of
the Revised Code, whichever occurs first.
If the commissioner considers it necessary in order to
ensure the payment of the tax imposed by section 5747.02 of the
Revised Code or any tax imposed under Chapter 5748. of the
Revised Code, the commissioner may require returns and payments
to be made otherwise than as provided in this section.
To the extent that any provision in this division
conflicts with any provision in section 5747.026 of the Revised
Code, the provision in that section prevails.
(H) The amounts withheld pursuant to section 5747.06,
5747.062, 5747.063, 5747.064, 5747.065, or 5747.071 of the
Revised Code shall be allowed to the ultimate recipient of the
income as credits against payment of the appropriate taxes
imposed on the ultimate recipient by section 5747.02 and under
Chapter 5748. of the Revised Code. As used in this division,
"ultimate recipient" means the person who is required to report
income from which amounts are withheld pursuant to section
5747.06, 5747.062, 5747.063, 5747.064, 5747.065, or 5747.071 of
the Revised Code on the annual return required to be filed under
this section.
(I) If a pass-through entity elects to file a single
return under division (D) of this section and if any investor is
required to file the annual return and make the payment of taxes
required by this chapter on account of the investor's other
income that is not included in a single return filed by a pass-
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1357 H. B. No. 140 Page 48
As Introduced
through entity or any other investor elects to file the annual
return, the investor is entitled to a refundable credit equal to
the investor's proportionate share of the tax paid by the pass-
through entity on behalf of the investor. The investor shall
claim the credit for the investor's taxable year in which or
with which ends the taxable year of the pass-through entity.
Nothing in this chapter shall be construed to allow any credit
provided in this chapter to be claimed more than once. For the
purpose of computing any interest, penalty, or interest penalty,
the investor shall be deemed to have paid the refundable credit
provided by this division on the day that the pass-through
entity paid the estimated tax or the tax giving rise to the
credit.
(J) The tax commissioner shall ensure that each return
required to be filed under this section includes a box that the
taxpayer may check to authorize a paid tax preparer who prepared
the return to communicate with the department of taxation about
matters pertaining to the return. The return or instructions
accompanying the return shall indicate that by checking the box
the taxpayer authorizes the department of taxation to contact
the preparer concerning questions that arise during the
processing of the return and authorizes the preparer only to
provide the department with information that is missing from the
return, to contact the department for information about the
processing of the return or the status of the taxpayer's refund
or payments, and to respond to notices about mathematical
errors, offsets, or return preparation that the taxpayer has
received from the department and has shown to the preparer.
(K) The tax commissioner shall permit individual taxpayers
to instruct the department of taxation to cause any refund of
overpaid taxes to be deposited directly into a checking account,
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1388 H. B. No. 140 Page 49
As Introduced
savings account, or an individual retirement account or
individual retirement annuity, or preexisting college savings
plan or program account offered by the Ohio tuition trust
authority under Chapter 3334. of the Revised Code, as designated
by the taxpayer, when the taxpayer files the annual return
required by this section electronically.
(L) If, for the taxable year, a nonresident or trust that
is the owner of an electing pass-through entity, as defined in
section 5747.38 of the Revised Code, does not have Ohio adjusted
gross income or, in the case of a trust, modified Ohio taxable
income other than from one or more electing pass-through
entities, the nonresident or trust shall not be required to file
an annual return under this section. Nothing in this division
precludes such an owner from filing the annual return under this
section, utilizing the refundable credit under section 5747.39
of the Revised Code equal to the owner's proportionate share of
the tax levied under section 5747.38 of the Revised Code and
paid by the electing pass-through entity, and making the payment
of taxes imposed under section 5747.02 of the Revised Code.
(M) The tax commissioner may adopt rules to administer
this section.
Sec. 5747.36. (A) As used in this section:
(1) "Qualifying child" means an individual who is a
dependent of the taxpayer and who is less than eighteen years of
age on the last day of the taxpayer's taxable year.
(2) "Household" means any dwelling unit, including a unit
in a multiple unit dwelling, a manufactured home, or a mobile
home.
(3) "Household income" means the sum of the federal
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1417 H. B. No. 140 Page 50
As Introduced
adjusted gross income of a taxpayer and all other occupants of
the taxpayer's household other than qualifying children or any
other individuals eligible to be claimed as a dependent for
federal income tax purposes for the taxable year.
(B)(1) There is hereby granted a refundable credit, to be
known as the thriving families tax credit, against the aggregate
tax liability, under section 5747.02 of the Revised Code, of a
taxpayer who is an individual with one or more qualifying
children and who has a household income for the taxable year
that does not exceed eighty-five thousand dollars. Except as
provided in division (B)(2) of this section, the amount of the
credit shall equal one thousand dollars for each of the
taxpayer's qualifying children who is less than six years of age
on the last day of the taxpayer's taxable year or five hundred
dollars for each other qualifying child.
(2) The credit amounts described in division (B)(1) of
this section shall be reduced by one-twentieth of that amount
for each one thousand dollars of a taxpayer's annual household
income in excess of sixty-five thousand dollars.
(3) The tax commissioner may request that a taxpayer
claiming a credit under this section furnish information as is
necessary to support the claim for the credit under this
section, and no credit shall be allowed unless the requested
information is provided.
(C) The taxpayer shall claim the credit in the order
required under section 5747.98 of the Revised Code. If the
credit allowed for any taxable year exceeds the aggregate amount
of tax otherwise due under section 5747.02 of the Revised Code,
after allowing for any other credits preceding the credit in
that order, the excess shall be refunded to the taxpayer in
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1447 H. B. No. 140 Page 51
As Introduced
twelve equal payments to be paid on or before the last day of
each calendar month beginning after the filing date.
Sec. 5747.98. (A) To provide a uniform procedure for
calculating a taxpayer's aggregate tax liability under section
5747.02 of the Revised Code, a taxpayer shall claim any credits
to which the taxpayer is entitled in the following order:
Either the retirement income credit under division (B) of
section 5747.055 of the Revised Code or the lump sum retirement
income credits under divisions (C), (D), and (E) of that
section;
Either the senior citizen credit under division (F) of
section 5747.055 of the Revised Code or the lump sum
distribution credit under division (G) of that section;
The dependent care credit under section 5747.054 of the
Revised Code;
The credit for displaced workers who pay for job training
under section 5747.27 of the Revised Code;
The campaign contribution credit under section 5747.29 of
the Revised Code;
The twenty-dollar personal exemption credit under section
5747.022 of the Revised Code;
The joint filing credit under division (G)(E) of section
5747.05 of the Revised Code;
The earned income credit under section 5747.71 of the
Revised Code;
The nonrefundable credit for education expenses under
section 5747.72 of the Revised Code;
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1474 H. B. No. 140 Page 52
As Introduced
The nonrefundable credit for donations to scholarship
granting organizations under section 5747.73 of the Revised
Code;
The nonrefundable credit for tuition paid to a
nonchartered nonpublic school under section 5747.75 of the
Revised Code;
The nonrefundable vocational job credit under section
5747.057 of the Revised Code;
The nonrefundable job retention credit under division (B)
of section 5747.058 of the Revised Code;
The enterprise zone credit under section 5709.66 of the
Revised Code;
The credit for beginning farmers who participate in a
financial management program under division (B) of section
5747.77 of the Revised Code;
The credit for commercial vehicle operator training
expenses under section 5747.82 of the Revised Code;
The nonrefundable welcome home Ohio (WHO) program credit
under section 122.633 of the Revised Code;
The credit for selling or renting agricultural assets to
beginning farmers under division (A) of section 5747.77 of the
Revised Code;
The credit for purchases of qualifying grape production
property under section 5747.28 of the Revised Code;
The small business investment credit under section 5747.81
of the Revised Code;
The nonrefundable lead abatement credit under section
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1501 H. B. No. 140 Page 53
As Introduced
5747.26 of the Revised Code;
The opportunity zone investment credit under section
5747.86 of the Revised Code;
The enterprise zone credits under section 5709.65 of the
Revised Code;
The research and development credit under section 5747.331
of the Revised Code;
The credit for rehabilitating a historic building under
section 5747.76 of the Revised Code;
The nonrefundable Ohio low-income housing tax credit under
section 5747.83 of the Revised Code;
The nonrefundable affordable single-family home credit
under section 5747.84 of the Revised Code;
The nonresident credit under division (A) of section
5747.05 of the Revised Code;
The credit for a resident's out-of-state income under
division (B) of section 5747.05 of the Revised Code;
The refundable motion picture and broadway theatrical
production credit under section 5747.66 of the Revised Code;
The refundable credit for film and theater capital
improvement projects under section 5747.67 of the Revised Code;
The refundable jobs creation credit or job retention
credit under division (A) of section 5747.058 of the Revised
Code;
The refundable credit for taxes paid by a qualifying
entity granted under section 5747.059 of the Revised Code;
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1527 H. B. No. 140 Page 54
As Introduced
The refundable credits for taxes paid by a qualifying
pass-through entity granted under division (I) of section
5747.08 of the Revised Code;
The refundable credit under section 5747.80 of the Revised
Code for losses on loans made to the Ohio venture capital
program under sections 150.01 to 150.10 of the Revised Code;
The refundable credit for rehabilitating a historic
building under section 5747.76 of the Revised Code;
The refundable credit under section 5747.39 of the Revised
Code for taxes levied under section 5747.38 of the Revised Code
paid by an electing pass-through entity ;
The refundable thriving families tax credit under section
5747.36 of the Revised Code .
(B) For any credit, except the refundable credits
enumerated in this section and the credit granted under division
(H) of section 5747.08 of the Revised Code, the amount of the
credit for a taxable year shall not exceed the taxpayer's
aggregate amount of tax due under section 5747.02 of the Revised
Code, after allowing for any other credit that precedes it in
the order required under this section. Any excess amount of a
particular credit may be carried forward if authorized under the
section creating that credit. Nothing in this chapter shall be
construed to allow a taxpayer to claim, directly or indirectly,
a credit more than once for a taxable year.
Section 2. That existing sections 5747.01, 5747.08, and
5747.98 of the Revised Code are hereby repealed.
Section 3. The amendment or enactment by this act of
sections 5747.01 and 5747.36 of the Revised Code applies to
taxable years ending on or after the effective date of this
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1556 H. B. No. 140 Page 55
As Introduced
section.
Section 4. Section 5747.01 of the Revised Code is
presented in this act as a composite of the section as amended
by both H.B. 101 and S.B. 154 of the 135th General Assembly. The
General Assembly, applying the principle stated in division (B)
of section 1.52 of the Revised Code that amendments are to be
harmonized if reasonably capable of simultaneous operation,
finds that the composite is the resulting version of the section
in effect prior to the effective date of the section as
presented in this act.
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