Create the small defense business linked deposit program

As Passed by the House

136th
General Assembly

Regular
Session
Am. H. B. No. 332

2025-2026

Representatives Mathews, T., Hiner

Cosponsors: Representatives Thomas,
D., Deeter, Williams, Fischer, Abrams, Brennan, Claggett, Click,
Daniels, Dovilla, Ghanbari, Hall, D., Hall, T., Holmes, Hoops, John,
Johnson, Klopfenstein, Lampton, Lear, Manning, Mathews, A., Miller,
J., Miller, K., Oelslager, Peterson, Plummer, Richardson, Robb
Blasdel, Santucci, Schmidt, Sigrist, Synenberg, Thomas, C., White,
A., Workman, Young

To
amend sections 135.61, 135.62, 135.621, 135.623, 1733.04, and 1733.24
and to enact section 135.67 of the Revised Code
to
create the small defense business linked deposit program.

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

Section
1.
That
sections 135.61, 135.62, 135.621, 135.623, 1733.04, and 1733.24 be
amended and section 135.67 of the Revised Code be enacted to read as
follows:

Sec.
135.61.
(A)
For the purposes of this section:

(1)
"Eligible borrower," "eligible credit union," and
"eligible lending institution" have the same meanings as in
section 135.62 of the Revised Code.

(2)
"Eligible participant" and "eligible savings
institution" have the same meanings as in section 135.70 of the
Revised Code.

(B)
The treasurer of state may invest in linked deposits under sections
135.61 to
135.66

135.67

and
135.70 to 135.71 of the Revised Code, provided that at the time any
such linked deposits are placed, purchased, or designated, the
combined amount of investments of public money of the state in linked
deposits of any kind is not more than twelve per cent of the state's
total average investment portfolio, as determined by the treasurer of
state. When deciding whether to invest in any linked deposits, the
treasurer of state shall give priority to the investment, liquidity,
and cash flow needs of the state.

(C)
The treasurer of state may, in accordance with section 111.15 of the
Revised Code, adopt rules necessary for the implementation and
administration of linked deposits authorized by this section,
including, but not limited to, the manner in which an eligible
lending institution or eligible savings institution is designated,
and the manner in which linked deposits are placed, purchased,
designated, held, and collateralized.

(D)
Notwithstanding any contrary provision of the Revised Code, the
treasurer of state may require an eligible credit union that holds
linked deposits authorized under this section to pay interest at a
rate not lower than the product of the interest rate set in the
deposit agreement, as required by sections 135.623 and 135.703 of the
Revised Code, multiplied by the sum of one plus the treasurer of
state's assessment rate. The treasurer of state may, in accordance
with section 119.03 of the Revised Code, adopt rules necessary for
the implementation of this division.

(E)(1)
Records of the treasurer of state, an eligible lending institution,
or an eligible savings institution are not public records within the
meaning of section 149.43 of the Revised Code if any of the following
apply:

(a)
The record is provided by an eligible borrower to an eligible lending
institution, or by an eligible participant to an eligible savings
institution, to obtain a financial service or product from such
institution.

(b)
The record results from a transaction between the eligible borrower
and the eligible lending institution, or the eligible participant and
the eligible savings institution, involving a financial product or
service.

(c)
An eligible lending institution or eligible savings institution
otherwise obtains the record about an eligible borrower or eligible
participant in connection with providing a financial product or
service.

(2)
The records specified in division (E)(1) of this section may include
names, addresses, telephone numbers, social security numbers, income,
credit scores, information obtained through cookies and other
internet collection devices, loan amounts, contributors to a linked
deposit savings account, and amounts contributed to, earned by, or
distributed from a linked deposit savings account.

Sec.
135.62.
As
used in sections 135.62 to
135.66

135.67

of
the Revised Code:

(A)
"Discount interest rate" means an interest rate below the
prevailing interest rate that the treasurer of state determines
eligible lending institutions are willing to pay to hold linked
deposits.

(B)
"Eligible borrower" means a borrower that has met all the
requirements necessary to participate in the adoption linked deposit
program under section 135.63 of the Revised Code, agricultural linked
deposit program under section 135.64 of the Revised Code, small
business linked deposit program under section 135.65 of the Revised
Code,
or

home
improvement linked deposit program under section 135.66 of the
Revised Code
,
or small defense business linked deposit program under section 135.67
of the Revised Code
.

(C)
"Eligible credit union" means, notwithstanding any contrary
provision of sections 135.01 to 135.21 of the Revised Code, a federal
credit union, a foreign credit union licensed pursuant to section
1733.39 of the Revised Code, or a credit union as defined in section
1733.01 of the Revised Code, located in this state.

(D)
"Eligible lending institution" means a financial
institution that is eligible to make loans, agrees to participate in
the applicable linked deposit program, and is one of the following:

(1)
A public depository of state funds, or an eligible credit union
designated under division (A) of section 135.12 of the Revised Code;

(2)
For the agricultural linked deposit program, notwithstanding any
contrary provision of sections 135.01 to 135.21 of the Revised Code,
an institution of the farm credit system organized under the federal
"Farm Credit Act of 1971," 85 Stat. 583, 12 U.S.C. 2001, as
amended.

(E)
"Homestead" means a dwelling owned and occupied in this
state as a single-family primary residence by an individual for the
purpose of qualifying for the home improvement linked deposit
program. "Homestead" includes a house, condo, a unit in a
multiple-unit dwelling, manufactured home or mobile home taxed as
real property pursuant to division (B) of section 4503.06 of the
Revised Code, or any other building with a residential
classification, as allowed by the treasurer of state. "Homestead"
includes so much of the land surrounding the dwelling as is
reasonably necessary for the use of the dwelling as a residence, as
determined by the treasurer of state.

(F)
"Linked deposit" means a certificate of deposit, a share
certificate, other financial institution instrument, or portion of an
existing deposit of interim funds made in accordance with section
135.09 of the Revised Code placed, purchased, or designated by the
treasurer of state with an eligible lending institution; provided the
institution agrees to lend up to the value of such certificate of
deposit, share certificate, or other financial institution
instrument, or designated portion of an existing deposit to eligible
borrowers for applicable linked deposit programs at the rate
established in division (A) of section 135.624 of the Revised Code,
and in accordance with the deposit agreement provided in section
135.623 of the Revised Code.

(G)
"Linked deposit program" means a program authorized under
sections 135.61 to
135.66

135.67

of
the Revised Code and established by the treasurer of state pursuant
to such sections.

(H)
"Loan" means a contractual agreement under which an
eligible lending institution agrees to lend money to an eligible
borrower in the form of an upfront lump sum, a line of credit, or any
other reasonable arrangement approved by the treasurer of state.

(I)
"Manufactured home" has the same meaning as in section
3781.06 of the Revised Code.

(J)
"Mobile home" has the same meaning as in section 4501.01 of
the Revised Code.

(K)
"Other financial institution instrument" means:

(1)
For the agricultural linked deposit program under section 135.64 of
the Revised Code, an investment by the treasurer of state in bonds,
notes, debentures, or other obligations or securities issued by the
federal farm credit bank with regard to an eligible lending
institution;

(2)
For all linked deposit programs other than the agricultural linked
deposit program, a product that otherwise would pay the prevailing
interest rate approved by the treasurer of state, for the purpose of
providing eligible borrowers with the benefits of the applicable
linked deposit program, and in accordance with the deposit agreement
provided in section 135.623 of the Revised Code.

(L)
"Owner" includes a holder of one of the several estates in
fee, a vendee in possession under a purchase agreement or a land
contract, a mortgagor, a life tenant, one or more tenants with a
right of survivorship, tenants in common, a settlor of a revocable or
irrevocable inter vivos trust holding the title to a homestead
occupied by the settlor as of right under the trust, or any other
determination as made by the treasurer of state.

(M)
"Prevailing interest rate" means a current market interest
rate selected by the treasurer of state that eligible lending
institutions are willing to pay to hold deposits of the treasurer of
state.

(N)
"Qualifying adoption expense" means any expense incurred to
legally adopt a child as described in division (C) of section
3107.055 of the Revised Code, including any costs incurred by the
eligible borrower proximately relating to the completion and approval
of the home study under section 3107.031 of the Revised Code, and any
other expense as determined by the treasurer of state.

(O)
"Treasurer of state's assessment rate" means a rate not
exceeding ten per cent that is calculated in a manner determined by
the treasurer of state and that seeks to account for the effect that
varying tax treatment among different types of financial institutions
has on the ability of financial institutions to pay competitive
interest rates to hold deposits.

Sec.
135.621.
(A)
An eligible lending institution that desires to receive a linked
deposit shall accept and review applications for loans from eligible
borrowers for linked deposit programs in which the eligible lending
institution participates. The eligible lending institution shall
apply all usual lending standards to determine the credit worthiness
of each eligible borrower. No loan shall exceed the amount determined
by the treasurer of state.

(B)
An eligible borrower shall certify on its loan application that the
reduced rate loan will be used exclusively for the purposes of the
applicable linked deposit program, as described in section 135.63,
135.64, 135.65,
or

135.66
,
or 135.67

of the Revised Code. Whoever knowingly makes a false statement
concerning such application is guilty of the offense of falsification
under section 2921.13 of the Revised Code.

(C)
The eligible lending institution shall forward to the treasurer of
state a linked deposit loan package, in the form and manner
prescribed by the treasurer of state. The package shall include such
information as required by the treasurer of state, including the
amount of each loan requested by each eligible borrower and all other
information as described in section 135.63, 135.64, 135.65,
or

135.66
,
or 135.67

of the Revised Code for the applicable linked deposit program. The
institution shall certify both of the following:

(1)
That each applicant is an eligible borrower and, for each such
eligible borrower, the present borrowing rate;

(2)
That the eligible lending institution applied all of its usual
lending standards to determine the credit worthiness of each eligible
borrower.

(D)
No fee shall be charged to any party for the preparation, processing,
or reporting of any application to an eligible lending institution or
the treasurer of state for participation in a linked deposit program.

Sec.
135.623.
(A)
An eligible lending institution shall enter into a deposit agreement
with the treasurer of state, which shall include requirements
necessary to carry out the purposes of sections 135.62 to
135.66

135.67

of
the Revised Code.

(B)
The deposit agreement shall specify the maturity period of the linked
deposit considered appropriate by the treasurer of state, which shall
not exceed five years, as well as any other information, terms, or
conditions the treasurer of state may require. Interest shall be paid
by the eligible lending institution at times determined by the
treasurer of state.

Sec.
135.67.
(A)
As used in this section:

(1)
"Armed forces" has the same meaning as in section 5903.01
of the Revised Code.

(2)
"Gross receipts" has the same meaning as in section 5751.01
of the Revised Code.

(B)
The general assembly finds that the defense industry makes
significant contributions to the economic well-being of this state.
However, various economic challenges, such as tightened capital
availability, inflationary pressures, and rising interest rates, can
discourage fledgling businesses, particularly small businesses, from
taking root in this state and engaging with the defense industry.
Accordingly, it is declared to be the public policy of the state to
make reduced rate loans available to defense-oriented businesses,
including subcontractors for those businesses, through the small
defense business linked deposit program.

(C)
An eligible borrower for the small defense business linked deposit
program is any person that has all the following characteristics:

(1)
Is currently headquartered or domiciled in this state, and has been
headquartered or domiciled in this state for at least five years
preceding the person's application for participation in the linked
deposit program;

(2)
Maintains offices or operating facilities in this state that comprise
not less than fifty-one per cent of the total of all offices and
operating facilities maintained by the person;

(3)
Is a party to, or has been a party to, a contract or subcontract with
the armed forces or an agency or instrumentality of the United States
government for the provision of goods or services to the armed
forces;

(4)
Has less than fifty million dollars in gross receipts for the twelve
months preceding application to the linked deposit program;

(5)
Is organized for profit.

(D)
An eligible lending institution for the small defense business linked
deposit program must be able to make commercial loans.

(E)
An eligible borrower shall certify on the loan application that the
reduced rate loan will be used exclusively in this state to create
new jobs, preserve existing jobs and employment opportunities, or
materially contribute to the preservation or growth of the eligible
borrower's business.

Sec.
1733.04.
(A)
In addition to the authority conferred by section 1701.13 of the
Revised Code, but subject to any limitations contained in sections
1733.01 to 1733.45 of the Revised Code, and its articles and
regulations, a credit union may do any of the following:

(1)
Make loans as provided in section 1733.25 of the Revised Code;

(2)
Invest its money as provided in section 1733.30 of the Revised Code;

(3)
If authorized by the code of regulations, rebate to the borrowing
members a portion of the member's interest paid to the credit union;

(4)
If authorized by the regulations, charge a membership or entrance
fee;

(5)
Purchase group savings life insurance and group credit life
insurance;

(6)
Make reasonable contributions to any nonprofit civic, charitable, or
service organizations;

(7)
Act as trustee or custodian, for which reasonable compensation may be
received, under any written trust instrument or custodial agreement
created or organized in the United States and forming part of a
tax-advantaged savings plan that qualifies for specific tax treatment
under sections 223, 401(d), 408, 408A, and 530 of the Internal
Revenue Code, 26 U.S.C. 223, 401(d), 408, 408A, and 530, as amended,
for its members or groups of its members, provided that the funds of
such plans are invested in share accounts or share certificate
accounts of the credit union. These services include, but are not
limited to, acting as a trustee or custodian for member retirement,
education, or health savings accounts.

(8)
Participate in and pledge assets in connection with the linked
deposit programs under sections 135.61 to
135.66

135.67

of
the Revised Code and sections 135.70 to 135.71 of the Revised Code.

(B)
The authority of a credit union shall be subject to the following:

(1)
A credit union may not borrow money in excess of twenty-five per cent
of its shares and undivided earnings, without prior specific
authorization by the superintendent of credit unions.

(2)
A credit union may not pay a commission or other compensation to any
person for securing members or for the sale of its shares, except
that reasonable incentives may be made available directly to members
or potential members to promote thrift.

(C)(1)
A credit union may have service facilities other than its home
office.

(2)
Real estate may be acquired by lease, purchase, or otherwise as
necessary and to the extent required for use of the credit union
presently and in the future operation of its office or headquarters,
and in case of a purchase of real estate, the superintendent must
first be notified in writing prior to the purchase of the real
estate. Nothing herein contained shall be deemed to prohibit a credit
union from taking title to real estate in connection with a default
in the payment of a loan, provided that title to such real estate
shall not be held by the credit union for more than two years without
the prior written approval of the superintendent. A credit union also
may lease space in any real estate it acquires in accordance with
rules adopted by the superintendent.

(D)(1)
As used in division (D) of this section:

(a)
"School" means an elementary or secondary school.

(b)
"Student" means a child enrolled in a school.

(c)
"Student branch" means the designation provided to the
credit union for the in-school services and financial education
offered to students.

(2)
A credit union, upon agreement with a school board, in the case of a
public school, or the governing authority, in the case of a nonpublic
school, and with the permission of the superintendent, may open and
maintain a student branch.

(3)
Notwithstanding any other provision of this section, any student
enrolled in the school maintaining a student branch who is not
otherwise qualified for membership in the credit union maintaining
the student branch is qualified to be a member of that student
branch.

(4)
The student's membership in the student branch expires upon the
student's graduation from secondary school.

(5)
The student branch is for the express use of students and may not be
used by faculty, staff, or lineal ancestors or descendants of
students.

(6)
Faculty, staff, or lineal ancestors or descendants of students are
not eligible for membership in the credit union maintaining the
student branch unless otherwise qualified by this section to be
members.

(7)
The superintendent may adopt rules appropriate to the formation and
operation of student branches.

(E)
A credit union may guarantee the signature of a member in connection
with a transaction involving tangible or intangible property in which
a member has or seeks to acquire an interest.

Sec.
1733.24.
(A)
A credit union is authorized to receive funds for deposit in share
accounts, share draft accounts, and share certificates from its
members, from other credit unions, and from an officer, employee, or
agent of the federal, state, or local governments, or political
subdivisions of the state, in accordance with such terms, rates, and
conditions as may be established by its board of directors, and for
purposes of the linked deposit programs created under sections 135.61
to
135.66

135.67

of
the Revised Code and sections 135.70 to 135.71 of the Revised Code.

(B)
The shares and share accounts of the credit union may be of one or
more classes, as designated by the board of directors, subject to
approval of the superintendent of credit unions based on rules that
shall assure equitable distribution of dividends among classes,
considering costs and advantages of each class to the members of the
credit union, including without limitation special services rendered,
length of ownership, minimum investment, conditions of repurchase,
and other appropriate standards or combinations thereof. In the event
the articles of incorporation of the credit union indicate the
authorized number of shares to be unlimited, the designation of
classification of shares and share accounts of the credit union may
be effected by the board of directors, subject to the approval of the
superintendent, and does not require amendment of the articles of
incorporation. All shares of the credit union shall have a par value
per share as set by the board of directors. Redemptions and
liquidating dividends shall be prorated to each member on the basis
of the price paid the credit union for such share, irrespective of
the class of such shares.

(C)(1)
Each credit union shall have one class of shares designated as
"membership share." The membership shares, or if a credit
union has but one class of shares, then all of the shares of the
credit union, shall have a par value as set by the board of
directors.

(2)
Two or more persons that are eligible for membership that have
jointly subscribed for one or more shares under a joint account each
may be admitted to membership.

(D)
A credit union need not issue certificates for any or all of its
classes of shares but irrespective of whether certificates are
issued, a registry of shares must be kept, including all of the
transactions of the credit union pertaining to such shares.

(E)
A credit union is authorized to maintain share draft accounts in
accordance with rules prescribed by the superintendent. The credit
union may pay dividends on share draft accounts, may pay dividends at
different rates on different types of share draft accounts, and may
permit the owners of such share draft accounts to make withdrawals by
negotiable or transferable instruments or other orders for the
purpose of making transfers to third parties.

(F)
Unless otherwise provided by written agreement of the parties, the
rights, responsibilities, and liabilities attaching to a share draft
withdrawn from, transferred to, or otherwise handled by a credit
union are defined in and governed by Chapters 1303. and 1304. of the
Revised Code, as if the credit union were a bank.

(G)
Unless otherwise provided in the articles or regulations, a member
may designate any person or persons to own or hold shares, or share
accounts with the member in joint tenancy with right of survivorship
and not as tenants in common.

(H)
Shares or share accounts may be issued in the name of a custodian
under the Ohio transfers to minors act, a member in trust for a
beneficiary, a fiduciary or custodian in trust for a member
beneficiary, or a fiduciary or custodian in trust upon the death of a
member. Redemption of such shares or payment of such share accounts
to a member, to the extent of the payment, discharges the liability
of the credit union to the member and the beneficiary, and the credit
union shall be under no obligation to see to the application of the
payment. Unless prior to the death of a member, the member has
notified the credit union in writing in a form approved by the credit
union of a different beneficiary to receive the proceeds of such
shares or share accounts, then the proceeds shall be paid to the
beneficiary or to the beneficiary's parent or legal representative.
Any payment made pursuant to written instructions of the member or
pursuant to the provisions herein contained shall be a valid and
sufficient release and discharge of the credit union in connection
with any such share or share accounts.

(I)(1)
Except as otherwise provided in the articles or regulations, and
subject to the provisions thereof, a minor may purchase shares, share
accounts, or other depository instruments, and except for
qualification as a voting member, the credit union may deal with the
minor with respect to shares, share accounts, or other depository
instruments owned by the minor as if the minor were a person of legal
age.

(2)
If shares, share accounts, or other depository instruments are issued
in the name of a minor, redemption of any part or all of the shares
or withdrawal of funds by payment to the minor of the shares or funds
and any declared dividends or interest releases the credit union from
all obligation to the minor as to the shares reduced or funds
withdrawn.

(J)
The regulations may require advance written notice of a member's
intention to withdraw the member's shares. Such advance notice shall
not exceed sixty days.

(K)
Notwithstanding any provision of law to the contrary, funds deposited
in a share account, share certificate, or in any other manner
pursuant to a program offered by a credit union to promote consumer
savings do not constitute valuable consideration for purposes of a
scheme of chance under Chapter 2915. of the Revised Code.

Section
2.
That
existing sections 135.61, 135.62, 135.621, 135.623, 1733.04, and
1733.24 of the Revised Code are hereby repealed.