Exempt tips from state, municipal, school district income taxes

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 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 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:

(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, 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 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 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 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 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 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 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 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 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 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 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 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 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-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:

(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.

(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.

(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.

(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, 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 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 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 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 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 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 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 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 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 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) 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 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 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 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 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:

(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.

(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 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 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 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 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 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:

(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 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 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 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 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 resident only with
respect to that part.

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

(O)
"Dependents" means 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
defined and used in the Internal Revenue Code, adjusted as follows:

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

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

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

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

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

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

(5)
Deduct the amount of wages and salaries, if any, not otherwise
allowable as a deduction but that would have been allowable as a
deduction in computing federal taxable income for the taxable year,
had the 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 tax return pursuant
to section 5731.14 of the Revised Code, and on its federal income tax
return in determining federal taxable income;

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

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

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

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

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

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

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

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

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

Except
for farm income attributable to the S portion of an electing small
business trust, the deduction provided by division (S)(12) of this
section is allowed only to the extent that the trust has not
distributed such farm income.

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

(14)
Deduct the amount the taxpayer would be required to deduct under
division (A)(18) of this section if the taxpayer's Ohio taxable
income
were

was

computed
in the same manner as an individual's Ohio adjusted gross income is
computed under this section.

(15)
Add, to the extent not otherwise included in computing taxable income
or Ohio taxable income for any taxable year, the taxpayer's
proportionate share of the amount of the tax levied under section
5747.38 of the Revised Code and paid by an electing pass-through
entity for the taxable year.

(16)
Add any income taxes deducted in computing federal taxable income or
Ohio taxable income to the extent the income taxes were derived from
income subject to a tax levied in another state or the District of
Columbia when such tax was enacted for purposes of complying with
internal revenue service notice 2020-75.

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

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

(V)
"Limited liability company" means any limited liability
company formed under former Chapter 1705. of the Revised Code as that
chapter existed prior to February 11, 2022, Chapter 1706. of the
Revised Code, or the laws of any other state.

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

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

(Y)
"Month" means a calendar month.

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

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

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

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

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

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

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

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

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

(i)
The trust's modified business income;

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

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

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

(ii)
With respect to a trust or portion of a trust that is not a resident
as ascertained in accordance with division (I)(3)(d) of this section,
the amount of its modified nonbusiness income satisfying the
descriptions in divisions (B)(2) to (5) of section 5747.20 of the
Revised Code, except as otherwise provided in division (AA)(4)(c)(ii)
of this section. With respect to a trust or portion of a trust that
is not a resident as ascertained in accordance with division
(I)(3)(d) of this section, the trust's portion of modified
nonbusiness income recognized from the sale, exchange, or other
disposition of a debt interest in or equity interest in a section
5747.212 entity, as defined in section 5747.212 of the Revised Code,
without regard to division (A) of that section, shall not be
allocated to this state in accordance with section 5747.20 of the
Revised Code but shall be apportioned to this state in accordance
with division (B) of section 5747.212 of the Revised Code without
regard to division (A) of that section.

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

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

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

(ii)
If the qualifying investee, or if the qualifying investee and any
members of the qualifying controlled group of which the qualifying
investee is a member on the last day of the qualifying investee's
fiscal or calendar year ending immediately prior to the date on which
the trust recognizes the gain or loss, separately or cumulatively
own, directly or indirectly, on the last day of the qualifying
investee's fiscal or calendar year ending immediately prior to the
date on which the trust recognizes the qualifying trust amount, more
than fifty per cent of the equity of a pass-through entity, then the
qualifying investee and the other members are deemed to own the
proportionate share of the pass-through entity's physical assets
which the pass-through entity directly or indirectly owns on the last
day of the pass-through entity's calendar or fiscal year ending
within or with the last day of the qualifying investee's fiscal or
calendar year ending immediately prior to the date on which the trust
recognizes the qualifying trust amount.

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

An
upper level pass-through entity, whether or not it is also a
qualifying investee, is deemed to own, on the last day of the upper
level pass-through entity's calendar or fiscal year, the
proportionate share of the lower level pass-through entity's physical
assets that the lower level pass-through entity directly or
indirectly owns on the last day of the lower level pass-through
entity's calendar or fiscal year ending within or with the last day
of the upper level pass-through entity's fiscal or calendar year. If
the upper level pass-through entity directly and indirectly owns less
than fifty per cent of the equity of the lower level pass-through
entity on each day of the upper level pass-through entity's calendar
or fiscal year in which or with which ends the calendar or fiscal
year of the lower level pass-through entity and if, based upon clear
and convincing evidence, complete information about the location and
cost of the physical assets of the lower pass-through entity is not
available to the upper level pass-through entity, then solely for
purposes of ascertaining if a gain or loss constitutes a qualifying
trust amount, the upper level pass-through entity shall be deemed as
owning no equity of the lower level pass-through entity for each day
during the upper level pass-through entity's calendar or fiscal year
in which or with which ends the lower level pass-through entity's
calendar or fiscal year. Nothing in division (AA)(5)(a)(iii) of this
section shall be construed to provide for any deduction or exclusion
in computing any trust's Ohio taxable income.

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

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

(ii)
Such gain or loss constitutes nonbusiness income.

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

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

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

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

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

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

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

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

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

(EE)
For purposes of this chapter and Chapter 5751. of the Revised Code:

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

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

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

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

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

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

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

(FF)
"Uniformed services" means all of the following:

(1)
"Armed forces of the United States" as defined in section
5907.01 of the Revised Code;

(2)
The commissioned corps of the national oceanic and atmospheric
administration;

(3)
The commissioned corps of the public health service.

(GG)
"Taxable business income" means the amount by which an
individual's business income that is included in federal adjusted
gross income exceeds the amount of business income the individual is
authorized to deduct under division (A)(28) of this section for the
taxable year.

(HH)
"Employer" does not include a franchisor with respect to
the franchisor's relationship with a franchisee or an employee of a
franchisee, unless the franchisor agrees to assume that role in
writing or a court of competent jurisdiction determines that the
franchisor exercises a type or degree of control over the franchisee
or the franchisee's employees that is not customarily exercised by a
franchisor for the purpose of protecting the franchisor's trademark,
brand, or both. For purposes of this division, "franchisor"
and "franchisee" have the same meanings as in 16 C.F.R.
436.1.

(II)
"Modified adjusted gross income" means Ohio adjusted gross
income plus any amount deducted under divisions (A)(28) and (34) of
this section for the taxable year.

(JJ)
"Qualifying Ohio educator" means an individual who, for a
taxable year, qualifies as an eligible educator, as that term is
defined in section 62 of the Internal Revenue Code, and who holds a
certificate, license, or permit described in Chapter 3319. or section
3301.071 of the Revised Code.

Sec.
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.

(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.

(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 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.