As Introduced
136th General Assembly
Regular Session H. B. No. 209
2025-2026
Representative Lorenz
Cosponsors: Representatives Fischer, Johnson, Williams, Brennan, Klopfenstein,
Dean
To amend sections 718.01, 5747.01, and 5748.01 of
the Revised Code to exempt tips from state,
municipal, and school district income taxes.
BE IT ENACTED BY THE GENERAL ASSEMBLY OF THE STATE OF OHIO:
Section 1. That sections 718.01, 5747.01, and 5748.01 of
the Revised Code be amended to read as follows:
Sec. 718.01. Any term used in this chapter that is not
otherwise defined in this chapter has the same meaning as when
used in a comparable context in laws of the United States
relating to federal income taxation or in Title LVII of the
Revised Code, unless a different meaning is clearly required.
Except as provided in section 718.81 of the Revised Code, if a
term used in this chapter that is not otherwise defined in this
chapter is used in a comparable context in both the laws of the
United States relating to federal income tax and in Title LVII
of the Revised Code and the use is not consistent, then the use
of the term in the laws of the United States relating to federal
income tax shall control over the use of the term in Title LVII
of the Revised Code.
Except as otherwise provided in section 718.81 of the
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Revised Code, as used in this chapter:
(A)(1) "Municipal taxable income" means the following:
(a) For a person other than an individual, income
apportioned or sitused to the municipal corporation under
section 718.02 of the Revised Code, as applicable, reduced by
any pre-2017 net operating loss carryforward available to the
person for the municipal corporation.
(b)(i) For an individual who is a resident of a municipal
corporation other than a qualified municipal corporation, income
reduced by exempt income to the extent otherwise included in
income, then reduced as provided in division (A)(2) of this
section, and further reduced by any pre-2017 net operating loss
carryforward available to the individual for the municipal
corporation.
(ii) For an individual who is a resident of a qualified
municipal corporation, Ohio adjusted gross income reduced by
income exempted, and increased by deductions excluded, by the
qualified municipal corporation from the qualified municipal
corporation's tax. If a qualified municipal corporation, on or
before December 31, 2013, exempts income earned by individuals
who are not residents of the qualified municipal corporation and
net profit of persons that are not wholly located within the
qualified municipal corporation, such individual or person shall
have no municipal taxable income for the purposes of the tax
levied by the qualified municipal corporation and may be
exempted by the qualified municipal corporation from the
requirements of section 718.03 of the Revised Code.
(c) For an individual who is a nonresident of a municipal
corporation, income reduced by exempt income to the extent
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otherwise included in income and then, as applicable,
apportioned or sitused to the municipal corporation under
section 718.02 of the Revised Code, then reduced as provided in
division (A)(2) of this section, and further reduced by any pre-
2017 net operating loss carryforward available to the individual
for the municipal corporation.
(2) In computing the municipal taxable income of a
taxpayer who is an individual, the taxpayer may subtract, as
provided in division (A)(1)(b)(i) or (c) of this section, the
amount of the individual's employee business expenses reported
on the individual's form 2106 that the individual deducted for
federal income tax purposes for the taxable year, subject to the
limitation imposed by section 67 of the Internal Revenue Code.
For the municipal corporation in which the taxpayer is a
resident, the taxpayer may deduct all such expenses allowed for
federal income tax purposes. For a municipal corporation in
which the taxpayer is not a resident, the taxpayer may deduct
such expenses only to the extent the expenses are related to the
taxpayer's performance of personal services in that nonresident
municipal corporation.
(B) "Income" means the following:
(1)(a) For residents, all income, salaries, qualifying
wages, commissions, and other compensation from whatever source
earned or received by the resident, including the resident's
distributive share of the net profit of pass-through entities
owned directly or indirectly by the resident and any net profit
of the resident, except as provided in division (D)(5) of this
section.
(b) For the purposes of division (B)(1)(a) of this
section:
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(i) Any net operating loss of the resident incurred in the
taxable year and the resident's distributive share of any net
operating loss generated in the same taxable year and
attributable to the resident's ownership interest in a pass-
through entity shall be allowed as a deduction, for that taxable
year and the following five taxable years, against any other net
profit of the resident or the resident's distributive share of
any net profit attributable to the resident's ownership interest
in a pass-through entity until fully utilized, subject to
division (B)(1)(d) of this section;
(ii) The resident's distributive share of the net profit
of each pass-through entity owned directly or indirectly by the
resident shall be calculated without regard to any net operating
loss that is carried forward by that entity from a prior taxable
year and applied to reduce the entity's net profit for the
current taxable year.
(c) Division (B)(1)(b) of this section does not apply with
respect to any net profit or net operating loss attributable to
an ownership interest in an S corporation unless shareholders'
distributive shares of net profits from S corporations are
subject to tax in the municipal corporation as provided in
division (C)(14)(b) or (c) of this section.
(d) Any amount of a net operating loss used to reduce a
taxpayer's net profit for a taxable year shall reduce the amount
of net operating loss that may be carried forward to any
subsequent year for use by that taxpayer. In no event shall the
cumulative deductions for all taxable years with respect to a
taxpayer's net operating loss exceed the original amount of that
net operating loss available to that taxpayer.
(2) In the case of nonresidents, all income, salaries,
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qualifying wages, commissions, and other compensation from
whatever source earned or received by the nonresident for work
done, services performed or rendered, or activities conducted in
the municipal corporation, including any net profit of the
nonresident, but excluding the nonresident's distributive share
of the net profit or loss of only pass-through entities owned
directly or indirectly by the nonresident.
(3) For taxpayers that are not individuals, net profit of
the taxpayer;
(4) Lottery, sweepstakes, gambling and sports winnings,
winnings from games of chance, and prizes and awards. If the
taxpayer is a professional gambler for federal income tax
purposes, the taxpayer may deduct related wagering losses and
expenses to the extent authorized under the Internal Revenue
Code and claimed against such winnings.
(C) "Exempt income" means all of the following:
(1) The military pay or allowances of members of the armed
forces of the United States or members of their reserve
components, including the national guard of any state;
(2)(a) Except as provided in division (C)(2)(b) of this
section, intangible income;
(b) A municipal corporation that taxed any type of
intangible income on March 29, 1988, pursuant to Section 3 of
S.B. 238 of the 116th general assembly, may continue to tax that
type of income if a majority of the electors of the municipal
corporation voting on the question of whether to permit the
taxation of that type of intangible income after 1988 voted in
favor thereof at an election held on November 8, 1988.
(3) Social security benefits, railroad retirement
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benefits, unemployment compensation, pensions, retirement
benefit payments, payments from annuities, and similar payments
made to an employee or to the beneficiary of an employee under a
retirement program or plan, disability payments received from
private industry or local, state, or federal governments or from
charitable, religious or educational organizations, and the
proceeds of sickness, accident, or liability insurance policies.
As used in division (C)(3) of this section, "unemployment
compensation" does not include supplemental unemployment
compensation described in section 3402(o)(2) of the Internal
Revenue Code.
(4) The income of religious, fraternal, charitable,
scientific, literary, or educational institutions to the extent
such income is derived from tax-exempt real estate, tax-exempt
tangible or intangible property, or tax-exempt activities.
(5) Compensation paid under section 3501.28 or 3501.36 of
the Revised Code to a person serving as a precinct election
official to the extent that such compensation does not exceed
one thousand dollars for the taxable year. Such compensation in
excess of one thousand dollars for the taxable year may be
subject to taxation by a municipal corporation. A municipal
corporation shall not require the payer of such compensation to
withhold any tax from that compensation.
(6) Dues, contributions, and similar payments received by
charitable, religious, educational, or literary organizations or
labor unions, lodges, and similar organizations;
(7) Alimony and child support received;
(8) Compensation for personal injuries or for damages to
property from insurance proceeds or otherwise, excluding
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compensation paid for lost salaries or wages or compensation
from punitive damages;
(9) Income of a public utility when that public utility is
subject to the tax levied under section 5727.24 or 5727.30 of
the Revised Code. Division (C)(9) of this section does not apply
for purposes of Chapter 5745. of the Revised Code.
(10) Gains from involuntary conversions, interest on
federal obligations, items of income subject to a tax levied by
the state and that a municipal corporation is specifically
prohibited by law from taxing, and income of a decedent's estate
during the period of administration except such income from the
operation of a trade or business;
(11) Compensation or allowances excluded from federal
gross income under section 107 of the Internal Revenue Code;
(12) Employee compensation that is not qualifying wages as
defined in division (R) of this section;
(13) Compensation paid to a person employed within the
boundaries of a United States air force base under the
jurisdiction of the United States air force that is used for the
housing of members of the United States air force and is a
center for air force operations, unless the person is subject to
taxation because of residence or domicile. If the compensation
is subject to taxation because of residence or domicile, tax on
such income shall be payable only to the municipal corporation
of residence or domicile.
(14)(a) Except as provided in division (C)(14)(b) or (c)
of this section, an S corporation shareholder's distributive
share of net profits of the S corporation, other than any part
of the distributive share of net profits that represents wages
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as defined in section 3121(a) of the Internal Revenue Code or
net earnings from self-employment as defined in section 1402(a)
of the Internal Revenue Code.
(b) If, pursuant to division (H) of former section 718.01
of the Revised Code as it existed before March 11, 2004, a
majority of the electors of a municipal corporation voted in
favor of the question at an election held on November 4, 2003,
the municipal corporation may continue after 2002 to tax an S
corporation shareholder's distributive share of net profits of
an S corporation.
(c) If, on December 6, 2002, a municipal corporation was
imposing, assessing, and collecting a tax on an S corporation
shareholder's distributive share of net profits of the S
corporation to the extent the distributive share would be
allocated or apportioned to this state under divisions (B)(1)
and (2) of section 5733.05 of the Revised Code if the S
corporation were a corporation subject to taxes imposed under
Chapter 5733. of the Revised Code, the municipal corporation may
continue to impose the tax on such distributive shares to the
extent such shares would be so allocated or apportioned to this
state only until December 31, 2004, unless a majority of the
electors of the municipal corporation voting on the question of
continuing to tax such shares after that date voted in favor of
that question at an election held November 2, 2004. If a
majority of those electors voted in favor of the question, the
municipal corporation may continue after December 31, 2004, to
impose the tax on such distributive shares only to the extent
such shares would be so allocated or apportioned to this state.
(d) A municipal corporation shall be deemed to have
elected to tax S corporation shareholders' distributive shares
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of net profits of the S corporation in the hands of the
shareholders if a majority of the electors of a municipal
corporation voted in favor of a question at an election held
under division (C)(14)(b) or (c) of this section. The municipal
corporation shall specify by resolution or ordinance that the
tax applies to the distributive share of a shareholder of an S
corporation in the hands of the shareholder of the S
corporation.
(15) The income of individuals under eighteen years of
age.
(16)(a) Except as provided in divisions (C)(16)(b), (c),
and (d) of this section, qualifying wages described in division
(B)(1) or (E) of section 718.011 of the Revised Code to the
extent the qualifying wages are not subject to withholding for
the municipal corporation under either of those divisions.
(b) The exemption provided in division (C)(16)(a) of this
section does not apply with respect to the municipal corporation
in which the employee resided at the time the employee earned
the qualifying wages.
(c) The exemption provided in division (C)(16)(a) of this
section does not apply to qualifying wages that an employer
elects to withhold under division (D)(2) of section 718.011 of
the Revised Code.
(d) The exemption provided in division (C)(16)(a) of this
section does not apply to qualifying wages if both of the
following conditions apply:
(i) For qualifying wages described in division (B)(1) of
section 718.011 of the Revised Code, the employee's employer
withholds and remits tax on the qualifying wages to the
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municipal corporation in which the employee's principal place of
work is situated, or, for qualifying wages described in division
(E) of section 718.011 of the Revised Code, the employee's
employer withholds and remits tax on the qualifying wages to the
municipal corporation in which the employer's fixed location is
located;
(ii) The employee receives a refund of the tax described
in division (C)(16)(d)(i) of this section on the basis of the
employee not performing services in that municipal corporation.
(17)(a) Except as provided in division (C)(17)(b) or (c)
of this section, compensation that is not qualifying wages paid
to a nonresident individual for personal services performed in
the municipal corporation on not more than twenty days in a
taxable year.
(b) The exemption provided in division (C)(17)(a) of this
section does not apply under either of the following
circumstances:
(i) The individual's base of operation is located in the
municipal corporation.
(ii) The individual is a professional athlete,
professional entertainer, or public figure, and the compensation
is paid for the performance of services in the individual's
capacity as a professional athlete, professional entertainer, or
public figure. For purposes of division (C)(17)(b)(ii) of this
section, "professional athlete," "professional entertainer," and
"public figure" have the same meanings as in section 718.011 of
the Revised Code.
(c) Compensation to which division (C)(17) of this section
applies shall be treated as earned or received at the
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individual's base of operation. If the individual does not have
a base of operation, the compensation shall be treated as earned
or received where the individual is domiciled.
(d) For purposes of division (C)(17) of this section,
"base of operation" means the location where an individual owns
or rents an office, storefront, or similar facility to which the
individual regularly reports and at which the individual
regularly performs personal services for compensation.
(18) Compensation paid to a person for personal services
performed for a political subdivision on property owned by the
political subdivision, regardless of whether the compensation is
received by an employee of the subdivision or another person
performing services for the subdivision under a contract with
the subdivision, if the property on which services are performed
is annexed to a municipal corporation pursuant to section
709.023 of the Revised Code on or after March 27, 2013, unless
the person is subject to such taxation because of residence. If
the compensation is subject to taxation because of residence,
municipal income tax shall be payable only to the municipal
corporation of residence.
(19) In the case of a tax administered, collected, and
enforced by a municipal corporation pursuant to an agreement
with the board of directors of a joint economic development
district under section 715.72 of the Revised Code, the net
profits of a business, and the income of the employees of that
business, exempted from the tax under division (Q) of that
section.
(20) All of the following:
(a) Income derived from disaster work conducted in this
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state by an out-of-state disaster business during a disaster
response period pursuant to a qualifying solicitation received
by the business;
(b) Income of a qualifying employee described in division
(A)(14)(a) of section 5703.94 of the Revised Code, to the extent
such income is derived from disaster work conducted in this
state by the employee during a disaster response period pursuant
to a qualifying solicitation received by the employee's
employer;
(c) Income of a qualifying employee described in division
(A)(14)(b) of section 5703.94 of the Revised Code, to the extent
such income is derived from disaster work conducted in this
state by the employee during a disaster response period on
critical infrastructure owned or used by the employee's
employer.
(21) Tips.
(22) Income the taxation of which is prohibited by the
constitution or laws of the United States.
Any item of income that is exempt income of a pass-through
entity under division (C) of this section is exempt income of
each owner of the pass-through entity to the extent of that
owner's distributive or proportionate share of that item of the
entity's income.
(D)(1) "Net profit" for a person who is an individual
means the individual's net profit required to be reported on
schedule C, schedule E, or schedule F reduced by any net
operating loss carried forward. For the purposes of division (D)
(1) of this section, the net operating loss carried forward
shall be calculated and deducted in the same manner as provided
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in division (D)(3) of this section.
(2) "Net profit" for a person other than an individual
means adjusted federal taxable income reduced by any net
operating loss incurred by the person in a taxable year
beginning on or after January 1, 2017, subject to the
limitations of division (D)(3) of this section.
(3)(a) The amount of such net operating loss shall be
deducted from net profit to the extent necessary to reduce
municipal taxable income to zero, with any remaining unused
portion of the net operating loss carried forward to not more
than five consecutive taxable years following the taxable year
in which the loss was incurred, but in no case for more years
than necessary for the deduction to be fully utilized.
(b) No person shall use the deduction allowed by division
(D)(3) of this section to offset qualifying wages.
(c)(i) For taxable years beginning in 2018, 2019, 2020,
2021, or 2022, a person may not deduct, for purposes of an
income tax levied by a municipal corporation that levies an
income tax before January 1, 2016, more than fifty per cent of
the amount of the deduction otherwise allowed by division (D)(3)
of this section.
(ii) For taxable years beginning in 2023 or thereafter, a
person may deduct, for purposes of an income tax levied by a
municipal corporation that levies an income tax before January
1, 2016, the full amount allowed by division (D)(3) of this
section without regard to the limitation of division (D)(3)(c)
(i) of this section.
(d) Any pre-2017 net operating loss carryforward deduction
that is available may be utilized before a taxpayer may deduct
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any amount pursuant to division (D)(3) of this section.
(e) Nothing in division (D)(3)(c)(i) of this section
precludes a person from carrying forward, for use with respect
to any return filed for a taxable year beginning after 2018, any
amount of net operating loss that was not fully utilized by
operation of division (D)(3)(c)(i) of this section. To the
extent that an amount of net operating loss that was not fully
utilized in one or more taxable years by operation of division
(D)(3)(c)(i) of this section is carried forward for use with
respect to a return filed for a taxable year beginning in 2019,
2020, 2021, or 2022, the limitation described in division (D)(3)
(c)(i) of this section shall apply to the amount carried
forward.
(4) For the purposes of this chapter, and notwithstanding
division (D)(2) of this section, net profit of a disregarded
entity shall not be taxable as against that disregarded entity,
but shall instead be included in the net profit of the owner of
the disregarded entity.
(5) For the purposes of this chapter, and notwithstanding
any other provision of this chapter, the net profit of a
publicly traded partnership that makes the election described in
division (D)(5) of this section shall be taxed as if the
partnership were a C corporation, and shall not be treated as
the net profit or income of any owner of the partnership.
A publicly traded partnership that is treated as a
partnership for federal income tax purposes and that is subject
to tax on its net profits in one or more municipal corporations
in this state may elect to be treated as a C corporation for
municipal income tax purposes. The publicly traded partnership
shall make the election in every municipal corporation in which
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the partnership is subject to taxation on its net profits. The
election shall be made on the annual tax return filed in each
such municipal corporation. The publicly traded partnership
shall not be required to file the election with any municipal
corporation in which the partnership is not subject to taxation
on its net profits, but division (D)(5) of this section applies
to all municipal corporations in which an individual owner of
the partnership resides.
(E) "Adjusted federal taxable income," for a person
required to file as a C corporation, or for a person that has
elected to be taxed as a C corporation under division (D)(5) of
this section, means a C corporation's federal taxable income
before net operating losses and special deductions as determined
under the Internal Revenue Code, adjusted as follows:
(1) Deduct intangible income to the extent included in
federal taxable income. The deduction shall be allowed
regardless of whether the intangible income relates to assets
used in a trade or business or assets held for the production of
income.
(2) Add an amount equal to five per cent of intangible
income deducted under division (E)(1) of this section, but
excluding that portion of intangible income directly related to
the sale, exchange, or other disposition of property described
in section 1221 of the Internal Revenue Code;
(3) Add any losses allowed as a deduction in the
computation of federal taxable income if the losses directly
relate to the sale, exchange, or other disposition of an asset
described in section 1221 or 1231 of the Internal Revenue Code;
(4)(a) Except as provided in division (E)(4)(b) of this
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section, deduct income and gain included in federal taxable
income to the extent the income and gain directly relate to the
sale, exchange, or other disposition of an asset described in
section 1221 or 1231 of the Internal Revenue Code;
(b) Division (E)(4)(a) of this section does not apply to
the extent the income or gain is income or gain described in
section 1245 or 1250 of the Internal Revenue Code.
(5) Add taxes on or measured by net income allowed as a
deduction in the computation of federal taxable income;
(6) In the case of a real estate investment trust or
regulated investment company, add all amounts with respect to
dividends to, distributions to, or amounts set aside for or
credited to the benefit of investors and allowed as a deduction
in the computation of federal taxable income;
(7) Deduct, to the extent not otherwise deducted or
excluded in computing federal taxable income, any income derived
from a transfer agreement or from the enterprise transferred
under that agreement under section 4313.02 of the Revised Code;
(8) Deduct exempt income to the extent not otherwise
deducted or excluded in computing adjusted federal taxable
income.
(9) Deduct any net profit of a pass-through entity owned
directly or indirectly by the taxpayer and included in the
taxpayer's federal taxable income unless an affiliated group of
corporations includes that net profit in the group's federal
taxable income in accordance with division (E)(3)(b) of section
718.06 of the Revised Code.
(10) Add any loss incurred by a pass-through entity owned
directly or indirectly by the taxpayer and included in the
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taxpayer's federal taxable income unless an affiliated group of
corporations includes that loss in the group's federal taxable
income in accordance with division (E)(3)(b) of section 718.06
of the Revised Code.
If the taxpayer is not a C corporation, is not a
disregarded entity that has made the election described in
division (L)(2) of this section, is not a publicly traded
partnership that has made the election described in division (D)
(5) of this section, and is not an individual, the taxpayer
shall compute adjusted federal taxable income under this section
as if the taxpayer were a C corporation, except guaranteed
payments and other similar amounts paid or accrued to a partner,
former partner, shareholder, former shareholder, member, or
former member shall not be allowed as a deductible expense
unless such payments are a pension or retirement benefit payment
paid to a retired partner, retired shareholder, or retired
member or are in consideration for the use of capital and
treated as payment of interest under section 469 of the Internal
Revenue Code or United States treasury regulations. Amounts paid
or accrued to a qualified self-employed retirement plan with
respect to a partner, former partner, shareholder, former
shareholder, member, or former member of the taxpayer, amounts
paid or accrued to or for health insurance for a partner, former
partner, shareholder, former shareholder, member, or former
member, and amounts paid or accrued to or for life insurance for
a partner, former partner, shareholder, former shareholder,
member, or former member shall not be allowed as a deduction.
Nothing in division (E) of this section shall be construed
as allowing the taxpayer to add or deduct any amount more than
once or shall be construed as allowing any taxpayer to deduct
any amount paid to or accrued for purposes of federal self-
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As Introduced
employment tax.
(F) "Schedule C" means internal revenue service schedule C
(form 1040) filed by a taxpayer pursuant to the Internal Revenue
Code.
(G) "Schedule E" means internal revenue service schedule E
(form 1040) filed by a taxpayer pursuant to the Internal Revenue
Code.
(H) "Schedule F" means internal revenue service schedule F
(form 1040) filed by a taxpayer pursuant to the Internal Revenue
Code.
(I) "Internal Revenue Code" has the same meaning as in
section 5747.01 of the Revised Code.
(J) "Resident" means an individual who is domiciled in the
municipal corporation as determined under section 718.012 of the
Revised Code.
(K) "Nonresident" means an individual that is not a
resident.
(L)(1) "Taxpayer" means a person subject to a tax levied
on income by a municipal corporation in accordance with this
chapter. "Taxpayer" does not include a grantor trust or, except
as provided in division (L)(2)(a) of this section, a disregarded
entity.
(2)(a) A single member limited liability company that is a
disregarded entity for federal tax purposes may be a separate
taxpayer from its single member in all Ohio municipal
corporations in which it either filed as a separate taxpayer or
did not file for its taxable year ending in 2003, if all of the
following conditions are met:
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(i) The limited liability company's single member is also
a limited liability company.
(ii) The limited liability company and its single member
were formed and doing business in one or more Ohio municipal
corporations for at least five years before January 1, 2004.
(iii) Not later than December 31, 2004, the limited
liability company and its single member each made an election to
be treated as a separate taxpayer under division (L) of this
section as this section existed on December 31, 2004.
(iv) The limited liability company was not formed for the
purpose of evading or reducing Ohio municipal corporation income
tax liability of the limited liability company or its single
member.
(v) The Ohio municipal corporation that was the primary
place of business of the sole member of the limited liability
company consented to the election.
(b) For purposes of division (L)(2)(a)(v) of this section,
a municipal corporation was the primary place of business of a
limited liability company if, for the limited liability
company's taxable year ending in 2003, its income tax liability
was greater in that municipal corporation than in any other
municipal corporation in Ohio, and that tax liability to that
municipal corporation for its taxable year ending in 2003 was at
least four hundred thousand dollars.
(M) "Person" includes individuals, firms, companies, joint
stock companies, business trusts, estates, trusts, partnerships,
limited liability partnerships, limited liability companies,
associations, C corporations, S corporations, governmental
entities, and any other entity.
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(N) "Pass-through entity" means a partnership not treated
as an association taxable as a C corporation for federal income
tax purposes, a limited liability company not treated as an
association taxable as a C corporation for federal income tax
purposes, an S corporation, or any other class of entity from
which the income or profits of the entity are given pass-through
treatment for federal income tax purposes. "Pass-through entity"
does not include a trust, estate, grantor of a grantor trust, or
disregarded entity.
(O) "S corporation" means a person that has made an
election under subchapter S of Chapter 1 of Subtitle A of the
Internal Revenue Code for its taxable year.
(P) "Single member limited liability company" means a
limited liability company that has one direct member.
(Q) "Limited liability company" means a 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 another state.
(R) "Qualifying wages" means wages, as defined in section
3121(a) of the Internal Revenue Code, without regard to any wage
limitations, adjusted as follows:
(1) Deduct the following amounts:
(a) Any amount included in wages if the amount constitutes
compensation attributable to a plan or program described in
section 125 of the Internal Revenue Code.
(b) Any amount included in wages if the amount constitutes
payment on account of a disability related to sickness or an
accident paid by a party unrelated to the employer, agent of an
employer, or other payer.
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As Introduced
(c) Any amount attributable to a nonqualified deferred
compensation plan or program described in section 3121(v)(2)(C)
of the Internal Revenue Code if the compensation is included in
wages and the municipal corporation has, by resolution or
ordinance adopted before January 1, 2016, exempted the amount
from withholding and tax.
(d) Any amount included in wages if the amount arises from
the sale, exchange, or other disposition of a stock option, the
exercise of a stock option, or the sale, exchange, or other
disposition of stock purchased under a stock option and the
municipal corporation has, by resolution or ordinance adopted
before January 1, 2016, exempted the amount from withholding and
tax.
(e) Any amount included in wages that is exempt income.
(2) Add the following amounts:
(a) Any amount not included in wages solely because the
employee was employed by the employer before April 1, 1986.
(b) Any amount not included in wages because the amount
arises from the sale, exchange, or other disposition of a stock
option, the exercise of a stock option, or the sale, exchange,
or other disposition of stock purchased under a stock option and
the municipal corporation has not, by resolution or ordinance,
exempted the amount from withholding and tax adopted before
January 1, 2016. Division (R)(2)(b) of this section applies only
to those amounts constituting ordinary income.
(c) Any amount not included in wages if the amount is an
amount described in section 401(k), 403(b), or 457 of the
Internal Revenue Code. Division (R)(2)(c) of this section
applies only to employee contributions and employee deferrals.
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As Introduced
(d) Any amount that is supplemental unemployment
compensation benefits described in section 3402(o)(2) of the
Internal Revenue Code and not included in wages.
(e) Any amount received that is treated as self-employment
income for federal tax purposes in accordance with section
1402(a)(8) of the Internal Revenue Code.
(f) Any amount not included in wages if all of the
following apply:
(i) For the taxable year the amount is employee
compensation that is earned outside of the United States and
that either is included in the taxpayer's gross income for
federal income tax purposes or would have been included in the
taxpayer's gross income for such purposes if the taxpayer did
not elect to exclude the income under section 911 of the
Internal Revenue Code;
(ii) For no preceding taxable year did the amount
constitute wages as defined in section 3121(a) of the Internal
Revenue Code;
(iii) For no succeeding taxable year will the amount
constitute wages; and
(iv) For any taxable year the amount has not otherwise
been added to wages pursuant to either division (R)(2) of this
section or section 718.03 of the Revised Code, as that section
existed before the effective date of H.B. 5 of the 130th general
assembly, March 23, 2015.
(S) "Intangible income" means income of any of the
following types: income yield, interest, capital gains,
dividends, or other income arising from the ownership, sale,
exchange, or other disposition of intangible property including,
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633 H. B. No. 209 Page 23
As Introduced
but not limited to, investments, deposits, money, or credits as
those terms are defined in Chapter 5701. of the Revised Code,
and patents, copyrights, trademarks, tradenames, investments in
real estate investment trusts, investments in regulated
investment companies, and appreciation on deferred compensation.
"Intangible income" does not include prizes, awards, or other
income associated with any lottery winnings, gambling winnings,
or other similar games of chance.
(T) "Taxable year" means the corresponding tax reporting
period as prescribed for the taxpayer under the Internal Revenue
Code.
(U)(1) "Tax administrator" means, subject to division (U)
(2) of this section, the individual charged with direct
responsibility for administration of an income tax levied by a
municipal corporation in accordance with this chapter, and also
includes the following:
(a) A municipal corporation acting as the agent of another
municipal corporation;
(b) A person retained by a municipal corporation to
administer a tax levied by the municipal corporation, but only
if the municipal corporation does not compensate the person in
whole or in part on a contingency basis;
(c) The central collection agency or the regional income
tax agency or their successors in interest, or another entity
organized to perform functions similar to those performed by the
central collection agency and the regional income tax agency.
(2) "Tax administrator" does not include the tax
commissioner.
(3) A private individual or entity serving in any position
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662 H. B. No. 209 Page 24
As Introduced
described in division (U)(1)(b) or (c) of this section shall
have no access to criminal history record information.
(V) "Employer" means a person that is an employer for
federal income tax purposes.
(W) "Employee" means an individual who is an employee for
federal income tax purposes.
(X) "Other payer" means any person, other than an
individual's employer or the employer's agent, that pays an
individual any amount included in the federal gross income of
the individual. "Other payer" includes casino operators and
video lottery terminal sales agents.
(Y) "Calendar quarter" means the three-month period ending
on the last day of March, June, September, or December.
(Z) "Form 2106" means internal revenue service form 2106
filed by a taxpayer pursuant to the Internal Revenue Code.
(AA) "Municipal corporation" includes a joint economic
development district or joint economic development zone that
levies an income tax under section 715.691, 715.70, 715.71, or
715.72 of the Revised Code.
(BB) "Disregarded entity" means a single member limited
liability company, a qualifying subchapter S subsidiary, or
another entity if the company, subsidiary, or entity is a
disregarded entity for federal income tax purposes.
(CC) "Generic form" means an electronic or paper form that
is not prescribed by a particular municipal corporation and that
is designed for reporting taxes withheld by an employer, agent
of an employer, or other payer, estimated municipal income
taxes, or annual municipal income tax liability or for filing a
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690 H. B. No. 209 Page 25
As Introduced
refund claim.
(DD) "Tax return preparer" means any individual described
in section 7701(a)(36) of the Internal Revenue Code and 26
C.F.R. 301.7701-15.
(EE) "Ohio business gateway" means the online computer
network system created under section 125.30 of the Revised Code
or any successor electronic filing and payment system.
(FF) "Local board of tax review" and "board of tax review"
mean the entity created under section 718.11 of the Revised
Code.
(GG) "Net operating loss" means a loss incurred by a
person in the operation of a trade or business. "Net operating
loss" does not include unutilized losses resulting from basis
limitations, at-risk limitations, or passive activity loss
limitations.
(HH) "Casino operator" and "casino facility" have the same
meanings as in section 3772.01 of the Revised Code.
(II) "Video lottery terminal" has the same meaning as in
section 3770.21 of the Revised Code.
(JJ) "Video lottery terminal sales agent" means a lottery
sales agent licensed under Chapter 3770. of the Revised Code to
conduct video lottery terminals on behalf of the state pursuant
to section 3770.21 of the Revised Code.
(KK) "Postal service" means the United States postal
service.
(LL) "Certified mail," "express mail," "United States
mail," "postal service," and similar terms include any delivery
service authorized pursuant to section 5703.056 of the Revised
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718 H. B. No. 209 Page 26
As Introduced
Code.
(MM) "Postmark date," "date of postmark," and similar
terms include the date recorded and marked in the manner
described in division (B)(3) of section 5703.056 of the Revised
Code.
(NN) "Related member" means a person that, with respect to
the taxpayer during all or any portion of the taxable year, is
either a related entity, a component member as defined in
section 1563(b) of the Internal Revenue Code, or a person to or
from whom there is attribution of stock ownership in accordance
with section 1563(e) of the Internal Revenue Code except, for
purposes of determining whether a person is a related member
under this division, "twenty per cent" shall be substituted for
"5 percent" wherever "5 percent" appears in section 1563(e) of
the Internal Revenue Code.
(OO) "Related entity" means any of the following:
(1) An individual stockholder, or a member of the
stockholder's family enumerated in section 318 of the Internal
Revenue Code, if the stockholder and the members of the
stockholder's family own directly, indirectly, beneficially, or
constructively, in the aggregate, at least fifty per cent of the
value of the taxpayer's outstanding stock;
(2) A stockholder, or a stockholder's partnership, estate,
trust, or corporation, if the stockholder and the stockholder's
partnerships, estates, trusts, or corporations own directly,
indirectly, beneficially, or constructively, in the aggregate,
at least fifty per cent of the value of the taxpayer's
outstanding stock;
(3) A corporation, or a party related to the corporation
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747 H. B. No. 209 Page 27
As Introduced
in a manner that would require an attribution of stock from the
corporation to the party or from the party to the corporation
under division (OO)(4) of this section, provided the taxpayer
owns directly, indirectly, beneficially, or constructively, at
least fifty per cent of the value of the corporation's
outstanding stock;
(4) The attribution rules described in section 318 of the
Internal Revenue Code apply for the purpose of determining
whether the ownership requirements in divisions (OO)(1) to (3)
of this section have been met.
(PP)(1) "Assessment" means a written finding by the tax
administrator that a person has underpaid municipal income tax,
or owes penalty and interest, or any combination of tax,
penalty, or interest, to the municipal corporation that
commences the person's time limitation for making an appeal to
the local board of tax review pursuant to section 718.11 of the
Revised Code, and has "ASSESSMENT" written in all capital
letters at the top of such finding.
(2) "Assessment" does not include an informal notice
denying a request for refund issued under division (B)(3) of
section 718.19 of the Revised Code, a billing statement
notifying a taxpayer of current or past-due balances owed to the
municipal corporation, a tax administrator's request for
additional information, a notification to the taxpayer of
mathematical errors, or a tax administrator's other written
correspondence to a person or taxpayer that does not meet the
criteria prescribed by division (PP)(1) of this section.
(QQ) "Taxpayers' rights and responsibilities" means the
rights provided to taxpayers in sections 718.11, 718.12, 718.19,
718.23, 718.36, 718.37, 718.38, 5717.011, and 5717.03 of the
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777 H. B. No. 209 Page 28
As Introduced
Revised Code and the responsibilities of taxpayers to file,
report, withhold, remit, and pay municipal income tax and
otherwise comply with Chapter 718. of the Revised Code and
resolutions, ordinances, and rules adopted by a municipal
corporation for the imposition and administration of a municipal
income tax.
(RR) "Qualified municipal corporation" means a municipal
corporation that, by resolution or ordinance adopted on or
before December 31, 2011, adopted Ohio adjusted gross income, as
defined by section 5747.01 of the Revised Code, as the income
subject to tax for the purposes of imposing a municipal income
tax.
(SS)(1) "Pre-2017 net operating loss carryforward" means
any net operating loss incurred in a taxable year beginning
before January 1, 2017, to the extent such loss was permitted,
by a resolution or ordinance of the municipal corporation that
was adopted by the municipal corporation before January 1, 2016,
to be carried forward and utilized to offset income or net
profit generated in such municipal corporation in future taxable
years.
(2) For the purpose of calculating municipal taxable
income, any pre-2017 net operating loss carryforward may be
carried forward to any taxable year, including taxable years
beginning in 2017 or thereafter, for the number of taxable years
provided in the resolution or ordinance or until fully utilized,
whichever is earlier.
(TT) "Small employer" means any employer that had total
revenue of less than five hundred thousand dollars during the
preceding taxable year. For purposes of this division, "total
revenue" means receipts of any type or kind, including, but not
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807 H. B. No. 209 Page 29
As Introduced
limited to, sales receipts; payments; rents; profits; gains,
dividends, and other investment income; compensation;
commissions; premiums; money; property; grants; contributions;
donations; gifts; program service revenue; patient service
revenue; premiums; fees, including premium fees and service
fees; tuition payments; unrelated business revenue;
reimbursements; any type of payment from a governmental unit,
including grants and other allocations; and any other similar
receipts reported for federal income tax purposes or under
generally accepted accounting principles. "Small employer" does
not include the federal government; any state government,
including any state agency or instrumentality; any political
subdivision; or any entity treated as a government for financial
accounting and reporting purposes.
(UU) "Audit" means the examination of a person or the
inspection of the books, records, memoranda, or accounts of a
person for the purpose of determining liability for a municipal
income tax.
(VV) "Publicly traded partnership" means any partnership,
an interest in which is regularly traded on an established
securities market. A "publicly traded partnership" may have any
number of partners.
(WW) "Tax commissioner" means the tax commissioner
appointed under section 121.03 of the Revised Code.
(XX) "Out-of-state disaster business," "qualifying
solicitation," "qualifying employee," "disaster work," "critical
infrastructure," and "disaster response period" have the same
meanings as in section 5703.94 of the Revised Code.
(YY) "Pension" means a retirement benefit plan, regardless
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836 H. B. No. 209 Page 30
As Introduced
of whether the plan satisfies the qualifications described under
section 401(a) of the Internal Revenue Code, including amounts
that are taxable under the "Federal Insurance Contributions
Act," Chapter 21 of the Internal Revenue Code, excluding
employee contributions and elective deferrals, and regardless of
whether such amounts are paid in the same taxable year in which
the amounts are included in the employee's wages, as defined by
section 3121(a) of the Internal Revenue Code.
(ZZ) "Retirement benefit plan" means an arrangement
whereby an entity provides benefits to individuals either on or
after their termination of service because of retirement or
disability. "Retirement benefit plan" does not include wage
continuation payments, severance payments, or payments made for
accrued personal or vacation time.
Sec. 5747.01. Except as otherwise expressly provided or
clearly appearing from the context, any term used in this
chapter that is not otherwise defined in this section has the
same meaning as when used in a comparable context in the laws of
the United States relating to federal income taxes or if not
used in a comparable context in those laws, has the same meaning
as in section 5733.40 of the Revised Code. Any reference in this
chapter to the Internal Revenue Code includes other laws of the
United States relating to federal income taxes.
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
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865 H. B. No. 209 Page 31
As Introduced
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;
(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
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894 H. B. No. 209 Page 32
As Introduced
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
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)
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924 H. B. No. 209 Page 33
As Introduced
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.
(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
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954 H. B. No. 209 Page 34
As Introduced
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
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
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983 H. B. No. 209 Page 35
As Introduced
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
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
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1012 H. B. No. 209 Page 36
As Introduced
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
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
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1042 H. B. No. 209 Page 37
As Introduced
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
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:
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1071 H. B. No. 209 Page 38
As Introduced
(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
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.
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1100 H. B. No. 209 Page 39
As Introduced
(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.
(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
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1130 H. B. No. 209 Page 40
As Introduced
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:
(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
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1159 H. B. No. 209 Page 41
As Introduced
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
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
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1190 H. B. No. 209 Page 42
As Introduced
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.
(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
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1220 H. B. No. 209 Page 43
As Introduced
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
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
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1249 H. B. No. 209 Page 44
As Introduced
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
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:
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1278 H. B. No. 209 Page 45
As Introduced
(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
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
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1307 H. B. No. 209 Page 46
As Introduced
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
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
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1336 H. B. No. 209 Page 47
As Introduced
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
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
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1365 H. B. No. 209 Page 48
As Introduced
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 tips, to the extent not otherwise deducted or
excluded in computing federal or Ohio adjusted gross income for
the taxable year.
(B) "Business income" means income, including gain or
loss, arising from transactions, activities, and sources in the
regular course of a trade or business and includes income, gain,
or loss from real property, tangible property, and intangible
property if the acquisition, rental, management, and disposition
of the property constitute integral parts of the regular course
of a trade or business operation. "Business income" includes
income, including gain or loss, from a partial or complete
liquidation of a business, including, but not limited to, gain
or loss from the sale or other disposition of goodwill 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
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1394 H. B. No. 209 Page 49
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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.
(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
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1421 H. B. No. 209 Page 50
As Introduced
resident only with respect to that part.
For the purposes of division (I)(3) of this section:
(a) A trust resides in this state for the trust's current
taxable year to the extent, as described in division (I)(3)(d)
of this section, that the trust consists directly or indirectly,
in whole or in part, of assets, net of any related liabilities,
that were transferred, or caused to be transferred, directly or
indirectly, to the trust by any of the following:
(i) A person, a court, or a governmental entity or
instrumentality on account of the death of a decedent, but only
if the trust is described in division (I)(3)(e)(i) or (ii) of
this section;
(ii) A person who was domiciled in this state for the
purposes of this chapter when the person directly or indirectly
transferred assets to an irrevocable trust, but only if at least
one of the trust's qualifying beneficiaries is domiciled in this
state for the purposes of this chapter during all or some
portion of the trust's current taxable year;
(iii) A person who was domiciled in this state for the
purposes of this chapter when the trust document or instrument
or part of the trust document or instrument became irrevocable,
but only if at least one of the trust's qualifying beneficiaries
is a resident domiciled in this state for the purposes of this
chapter during all or some portion of the trust's current
taxable year. If a trust document or instrument became
irrevocable upon the death of a person who at the time of death
was domiciled in this state for purposes of this chapter, that
person is a person described in division (I)(3)(a)(iii) of this
section.
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1450 H. B. No. 209 Page 51
As Introduced
(b) A trust is irrevocable to the extent that the
transferor is not considered to be the owner of the net assets
of the trust under sections 671 to 678 of the Internal Revenue
Code.
(c) With respect to a trust other than a charitable lead
trust, "qualifying beneficiary" has the same meaning as
"potential current beneficiary" as defined in section 1361(e)(2)
of the Internal Revenue Code, and with respect to a charitable
lead trust "qualifying beneficiary" is any current, future, or
contingent beneficiary, but with respect to any trust
"qualifying beneficiary" excludes a person or a governmental
entity or instrumentality to any of which a contribution would
qualify for the charitable deduction under section 170 of the
Internal Revenue Code.
(d) For the purposes of division (I)(3)(a) of this
section, the extent to which a trust consists directly or
indirectly, in whole or in part, of assets, net of any related
liabilities, that were transferred directly or indirectly, in
whole or part, to the trust by any of the sources enumerated in
that division shall be ascertained by multiplying the fair
market value of the trust's assets, net of related liabilities,
by the qualifying ratio, which shall be computed as follows:
(i) The first time the trust receives assets, the
numerator of the qualifying ratio is the fair market value of
those assets at that time, net of any related liabilities, from
sources enumerated in division (I)(3)(a) of this section. The
denominator of the qualifying ratio is the fair market value of
all the trust's assets at that time, net of any related
liabilities.
(ii) Each subsequent time the trust receives assets, a
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1480 H. B. No. 209 Page 52
As Introduced
revised qualifying ratio shall be computed. The numerator of the
revised qualifying ratio is the sum of (1) the fair market value
of the trust's assets immediately prior to the subsequent
transfer, net of any related liabilities, multiplied by the
qualifying ratio last computed without regard to the subsequent
transfer, and (2) the fair market value of the subsequently
transferred assets at the time transferred, net of any related
liabilities, from sources enumerated in division (I)(3)(a) of
this section. The denominator of the revised qualifying ratio is
the fair market value of all the trust's assets immediately
after the subsequent transfer, net of any related liabilities.
(iii) Whether a transfer to the trust is by or from any of
the sources enumerated in division (I)(3)(a) of this section
shall be ascertained without regard to the domicile of the
trust's beneficiaries.
(e) For the purposes of division (I)(3)(a)(i) of this
section:
(i) A trust is described in division (I)(3)(e)(i) of this
section if the trust is a testamentary trust and the testator of
that testamentary trust was domiciled in this state at the time
of the testator's death for purposes of the taxes levied under
Chapter 5731. of the Revised Code.
(ii) A trust is described in division (I)(3)(e)(ii) of
this section if the transfer is a qualifying transfer described
in any of divisions (I)(3)(f)(i) to (vi) of this section, the
trust is an irrevocable inter vivos trust, and at least one of
the trust's qualifying beneficiaries is domiciled in this state
for purposes of this chapter during all or some portion of the
trust's current taxable year.
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1509 H. B. No. 209 Page 53
As Introduced
(f) For the purposes of division (I)(3)(e)(ii) of this
section, a "qualifying transfer" is a transfer of assets, net of
any related liabilities, directly or indirectly to a trust, if
the transfer is described in any of the following:
(i) The transfer is made to a trust, created by the
decedent before the decedent's death and while the decedent was
domiciled in this state for the purposes of this chapter, and,
prior to the death of the decedent, the trust became irrevocable
while the decedent was domiciled in this state for the purposes
of this chapter.
(ii) The transfer is made to a trust to which the
decedent, prior to the decedent's death, had directly or
indirectly transferred assets, net of any related liabilities,
while the decedent was domiciled in this state for the purposes
of this chapter, and prior to the death of the decedent the
trust became irrevocable while the decedent was domiciled in
this state for the purposes of this chapter.
(iii) The transfer is made on account of a contractual
relationship existing directly or indirectly between the
transferor and either the decedent or the estate of the decedent
at any time prior to the date of the decedent's death, and the
decedent was domiciled in this state at the time of death for
purposes of the taxes levied under Chapter 5731. of the Revised
Code.
(iv) The transfer is made to a trust on account of a
contractual relationship existing directly or indirectly between
the transferor and another person who at the time of the
decedent's death was domiciled in this state for purposes of
this chapter.
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1538 H. B. No. 209 Page 54
As Introduced
(v) The transfer is made to a trust on account of the will
of a testator who was domiciled in this state at the time of the
testator's death for purposes of the taxes levied under Chapter
5731. of the Revised Code.
(vi) The transfer is made to a trust created by or caused
to be created by a court, and the trust was directly or
indirectly created in connection with or as a result of the
death of an individual who, for purposes of the taxes levied
under Chapter 5731. of the Revised Code, was domiciled in this
state at the time of the individual's death.
(g) The tax commissioner may adopt rules to ascertain the
part of a trust residing in this state.
(J) "Nonresident" means an individual or estate that is
not a resident. An individual who is a resident for only part of
a taxable year is a nonresident for the remainder of that
taxable year.
(K) "Pass-through entity" has the same meaning as in
section 5733.04 of the Revised Code.
(L) "Return" means the notifications and reports required
to be filed pursuant to this chapter for the purpose of
reporting the tax due and includes declarations of estimated tax
when so required.
(M) "Taxable year" means the calendar year or the
taxpayer's fiscal year ending during the calendar year, or
fractional part thereof, upon which the adjusted gross income is
calculated pursuant to this chapter.
(N) "Taxpayer" means any person subject to the tax imposed
by section 5747.02 of the Revised Code or any pass-through
entity that makes the election under division (D) of section
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1567 H. B. No. 209 Page 55
As Introduced
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,
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
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1595 H. B. No. 209 Page 56
As Introduced
defined and used in the Internal Revenue Code, adjusted as
follows:
(1) Add interest or dividends, net of ordinary, necessary,
and reasonable expenses not deducted in computing federal
taxable income, on obligations or securities of any state or of
any political subdivision or authority of any state, other than
this state and its subdivisions and authorities, but only to the
extent that such net amount is not otherwise includible in Ohio
taxable income and is described in either division (S)(1)(a) or
(b) of this section:
(a) The net amount is not attributable to the S portion of
an electing small business trust and has not been distributed to
beneficiaries for the taxable year;
(b) The net amount is attributable to the S portion of an
electing small business trust for the taxable year.
(2) Add interest or dividends, net of ordinary, necessary,
and reasonable expenses not deducted in computing federal
taxable income, on obligations of any authority, commission,
instrumentality, territory, or possession of the United States
to the extent that the interest or dividends are exempt from
federal income taxes but not from state income taxes, but only
to the extent that such net amount is not otherwise includible
in Ohio taxable income and is described in either division (S)
(1)(a) or (b) of this section;
(3) Add the amount of personal exemption allowed to the
estate pursuant to section 642(b) of the Internal Revenue Code;
(4) Deduct interest or dividends, net of related expenses
deducted in computing federal taxable income, on obligations of
the United States and its territories and possessions or of any
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1624 H. B. No. 209 Page 57
As Introduced
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
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
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1654 H. B. No. 209 Page 58
As Introduced
tax return pursuant to section 5731.14 of the Revised Code, and
on its federal income tax return in determining federal taxable
income;
(9)(a) Deduct any amount included in federal taxable
income solely because the amount represents a reimbursement or
refund of expenses that in a previous year the decedent had
deducted as an itemized deduction pursuant to section 63 of the
Internal Revenue Code and applicable treasury regulations. The
deduction otherwise allowed under division (S)(9)(a) of this
section shall be reduced to the extent the reimbursement is
attributable to an amount the taxpayer or decedent deducted
under this section in any taxable year.
(b) Add any amount not otherwise included in Ohio taxable
income for any taxable year to the extent that the amount is
attributable to the recovery during the taxable year of any
amount deducted or excluded in computing federal or Ohio taxable
income in any taxable year, but only to the extent such amount
has not been distributed to beneficiaries for the taxable year.
(10) Deduct any portion of the deduction described in
section 1341(a)(2) of the Internal Revenue Code, for repaying
previously reported income received under a claim of right, that
meets both of the following requirements:
(a) It is allowable for repayment of an item that was
included in the taxpayer's taxable income or the decedent's
adjusted gross income for a prior taxable year and did not
qualify for a credit under division (A) or (B) of section
5747.05 of the Revised Code for that year.
(b) It does not otherwise reduce the taxpayer's taxable
income or the decedent's adjusted gross income for the current
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1683 H. B. No. 209 Page 59
As Introduced
or any other taxable year.
(11) Add any amount claimed as a credit under section
5747.059 of the Revised Code to the extent that the amount
satisfies either of the following:
(a) The amount was deducted or excluded from the
computation of the taxpayer's federal taxable income as required
to be reported for the taxpayer's taxable year under the
Internal Revenue Code;
(b) The amount resulted in a reduction in the taxpayer's
federal taxable income as required to be reported for any of the
taxpayer's taxable years under the Internal Revenue Code.
(12) Deduct any amount, net of related expenses deducted
in computing federal taxable income, that a trust is required to
report as farm income on its federal income tax return, but only
if the assets of the trust include at least ten acres of land
satisfying the definition of "land devoted exclusively to
agricultural use" under section 5713.30 of the Revised Code,
regardless of whether the land is valued for tax purposes as
such land under sections 5713.30 to 5713.38 of the Revised Code.
If the trust is a pass-through entity investor, section 5747.231
of the Revised Code applies in ascertaining if the trust is
eligible to claim the deduction provided by division (S)(12) of
this section in connection with the pass-through entity's farm
income.
Except for farm income attributable to the S portion of an
electing small business trust, the deduction provided by
division (S)(12) of this section is allowed only to the extent
that the trust has not distributed such farm income.
(13) Add the net amount of income described in section
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1712 H. B. No. 209 Page 60
As Introduced
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
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
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As Introduced
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
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
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1769 H. B. No. 209 Page 62
As Introduced
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
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
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1798 H. B. No. 209 Page 63
As Introduced
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
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
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1828 H. B. No. 209 Page 64
As Introduced
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
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
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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
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
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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.
(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:
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1917 H. B. No. 209 Page 67
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(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
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
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1946 H. B. No. 209 Page 68
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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.
(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
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1973 H. B. No. 209 Page 69
As Introduced
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. 5748.01. As used in this chapter:
(A) "School district income tax" means an income tax
adopted under one of the following:
(1) Former section 5748.03 of the Revised Code as it
existed prior to its repeal by Amended Substitute House Bill No.
291 of the 115th general assembly;
(2) Section 5748.03 of the Revised Code as enacted in
Substitute Senate Bill No. 28 of the 118th general assembly;
(3) Section 5748.08 of the Revised Code as enacted in
Amended Substitute Senate Bill No. 17 of the 122nd general
assembly;
(4) Section 5748.021 of the Revised Code;
(5) Section 5748.081 of the Revised Code;
(6) Section 5748.09 of the Revised Code.
(B) "Individual" means an individual subject to the tax
levied by section 5747.02 of the Revised Code.
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2000 H. B. No. 209 Page 70
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(C) "Estate" means an estate subject to the tax levied by
section 5747.02 of the Revised Code.
(D) "Taxable year" means a taxable year as defined in
division (M) of section 5747.01 of the Revised Code.
(E) "Taxable income" means:
(1) In the case of an individual, one of the following, as
specified in the resolution imposing the tax:
(a) Modified adjusted gross income for the taxable year,
as defined in section 5747.01 of the Revised Code, less the
exemptions provided by section 5747.025 of the Revised Code;
(b) Wages, salaries, tips, and other employee compensation
to the extent included in modified adjusted gross income as
defined in section 5747.01 of the Revised Code, and net earnings
from self-employment, as defined in section 1402(a) of the
Internal Revenue Code, to the extent included in modified
adjusted gross income.
(2) In the case of an estate, taxable income for the
taxable year as defined in division (S) of section 5747.01 of
the Revised Code.
(F) "Resident" of the school district means:
(1) An individual who is a resident of this state as
defined in division (I) of section 5747.01 of the Revised Code
during all or a portion of the taxable year and who, during all
or a portion of such period of state residency, is domiciled in
the school district or lives in and maintains a permanent place
of abode in the school district;
(2) An estate of a decedent who, at the time of death, was
domiciled in the school district.
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2028 H. B. No. 209 Page 71
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(G) "School district income" means:
(1) With respect to an individual, the portion of the
taxable income of an individual that is received by the
individual during the portion of the taxable year that the
individual is a resident of the school district and the school
district income tax is in effect in that school district. An
individual may have school district income with respect to more
than one school district.
(2) With respect to an estate, the taxable income of the
estate for the portion of the taxable year that the school
district income tax is in effect in that school district.
(H) "Taxpayer" means an individual or estate having school
district income upon which a school district income tax is
imposed.
(I) "School district purposes" means any of the purposes
for which a tax may be levied pursuant to division (A) of
section 5705.21 of the Revised Code, including the combined
purposes authorized by section 5705.217 of the Revised Code.
(J) "The county auditor's appraised value" and "effective
rate" have the same meanings as in section 5705.01 of the
Revised Code.
Section 2. That existing sections 718.01, 5747.01, and
5748.01 of the Revised Code are hereby repealed.
Section 3. The amendment by this act of sections 718.01,
5747.01, and 5748.01 of the Revised Code applies to taxable
years ending on or after the effective date of this section.
Section 4. Section 5747.01 of the Revised Code is
presented in this act as a composite of the section as amended
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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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