SB 261

As Introduced
136th General Assembly
   Regular Session  S. B. No. 261
       2025-2026
  Senator Reynolds
  To amend section 5747.01 of the Revised Code to  1
  allow a personal income tax deduction for  2
  certain donations to churches and to name this  3
  act the Tithing Protection Act.  4
 BE IT ENACTED BY THE GENERAL ASSEMBLY OF THE STATE OF OHIO:
     Section 1. That section 5747.01 of the Revised Code be  5
amended to read as follows:  6
     Sec. 5747.01. Except as otherwise expressly provided or  7
clearly appearing from the context, any term used in this  8
chapter that is not otherwise defined in this section has the  9
same meaning as when used in a comparable context in the laws of       10
the United States relating to federal income taxes or if not  11
used in a comparable context in those laws, has the same meaning       12
as in section 5733.40 of the Revised Code. Any reference in this       13
chapter to the Internal Revenue Code includes other laws of the        14
United States relating to federal income taxes.  15
     As used in this chapter:  16
     (A) "Adjusted gross income" or "Ohio adjusted gross  17
income" means federal adjusted gross income, as defined and used       18
in the Internal Revenue Code, adjusted as provided in this  19
section:  20
S. B. No. 261  Page 2
As Introduced
       (1) Add interest or dividends on obligations or securities  21
of any state or of any political subdivision or authority of any  22
state, other than this state and its subdivisions and  23
authorities.  24
       (2) Add interest or dividends on obligations of any  25
authority, commission, instrumentality, territory, or possession  26
of the United States to the extent that the interest or  27
dividends are exempt from federal income taxes but not from  28
state income taxes.  29
       (3) Deduct interest or dividends on obligations of the  30
United States and its territories and possessions or of any  31
authority, commission, or instrumentality of the United States  32
to the extent that the interest or dividends are included in  33
federal adjusted gross income but exempt from state income taxes  34
under the laws of the United States.  35
       (4) Deduct disability and survivor's benefits to the  36
extent included in federal adjusted gross income.  37
       (5) Deduct the following, to the extent not otherwise  38
deducted or excluded in computing federal or Ohio adjusted gross  39
income:  40
       (a) Benefits under Title II of the Social Security Act and  41
tier 1 railroad retirement;  42
       (b) Railroad retirement benefits, other than tier 1  43
railroad retirement benefits, to the extent such amounts are  44
exempt from state taxation under federal law.  45
       (6) Deduct the amount of wages and salaries, if any, not  46
otherwise allowable as a deduction but that would have been  47
allowable as a deduction in computing federal adjusted gross  48
income for the taxable year, had the work opportunity tax credit  49
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As Introduced
allowed and determined under sections 38, 51, and 52 of the  50
Internal Revenue Code not been in effect.  51
        (7) Deduct any interest or interest equivalent on public  52
obligations and purchase obligations to the extent that the  53
interest or interest equivalent is included in federal adjusted  54
gross income.  55
        (8) Add any loss or deduct any gain resulting from the  56
sale, exchange, or other disposition of public obligations to  57
the extent that the loss has been deducted or the gain has been  58
included in computing federal adjusted gross income.  59
        (9) Deduct or add amounts, as provided under section  60
5747.70 of the Revised Code, related to contributions made to or  61
tuition units purchased under a qualified tuition program  62
established pursuant to section 529 of the Internal Revenue  63
Code.  64
        (10)(a) Deduct, to the extent not otherwise allowable as a  65
deduction or exclusion in computing federal or Ohio adjusted  66
gross income for the taxable year, the amount the taxpayer paid  67
during the taxable year for medical care insurance and qualified  68
long-term care insurance for the taxpayer, the taxpayer's  69
spouse, and dependents. No deduction for medical care insurance  70
under division (A)(10)(a) of this section shall be allowed  71
either to any taxpayer who is eligible to participate in any  72
subsidized health plan maintained by any employer of the  73
taxpayer or of the taxpayer's spouse, or to any taxpayer who is  74
entitled to, or on application would be entitled to, benefits  75
under part A of Title XVIII of the "Social Security Act," 49  76
Stat. 620 (1935), 42 U.S.C. 301, as amended. For the purposes of  77
division (A)(10)(a) of this section, "subsidized health plan"  78
means a health plan for which the employer pays any portion of  79
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As Introduced
the plan's cost. The deduction allowed under division (A)(10)(a)  80
of this section shall be the net of any related premium refunds,  81
related premium reimbursements, or related insurance premium  82
dividends received during the taxable year.  83
       (b) Deduct, to the extent not otherwise deducted or  84
excluded in computing federal or Ohio adjusted gross income  85
during the taxable year, the amount the taxpayer paid during the  86
taxable year, not compensated for by any insurance or otherwise,  87
for medical care of the taxpayer, the taxpayer's spouse, and  88
dependents, to the extent the expenses exceed seven and one-half  89
per cent of the taxpayer's federal adjusted gross income.  90
       (c) For purposes of division (A)(10) of this section,  91
"medical care" has the meaning given in section 213 of the  92
Internal Revenue Code, subject to the special rules,  93
limitations, and exclusions set forth therein, and "qualified  94
long-term care" has the same meaning given in section 7702B(c)  95
of the Internal Revenue Code. Solely for purposes of division  96
(A)(10)(a) of this section, "dependent" includes a person who  97
otherwise would be a "qualifying relative" and thus a  98
"dependent" under section 152 of the Internal Revenue Code but  99
for the fact that the person fails to meet the income and  100
support limitations under section 152(d)(1)(B) and (C) of the  101
Internal Revenue Code.  102
       (11)(a) Deduct any amount included in federal adjusted  103
gross income solely because the amount represents a  104
reimbursement or refund of expenses that in any year the  105
taxpayer had deducted as an itemized deduction pursuant to  106
section 63 of the Internal Revenue Code and applicable United  107
States department of the treasury regulations. The deduction  108
otherwise allowed under division (A)(11)(a) of this section  109
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As Introduced
shall be reduced to the extent the reimbursement is attributable  110
to an amount the taxpayer deducted under this section in any  111
taxable year.  112
       (b) Add any amount not otherwise included in Ohio adjusted  113
gross income for any taxable year to the extent that the amount  114
is attributable to the recovery during the taxable year of any  115
amount deducted or excluded in computing federal or Ohio  116
adjusted gross income in any taxable year.  117
       (12) Deduct any portion of the deduction described in  118
section 1341(a)(2) of the Internal Revenue Code, for repaying  119
previously reported income received under a claim of right, that  120
meets both of the following requirements:  121
       (a) It is allowable for repayment of an item that was  122
included in the taxpayer's adjusted gross income for a prior  123
taxable year and did not qualify for a credit under division (A)  124
or (B) of section 5747.05 of the Revised Code for that year;  125
       (b) It does not otherwise reduce the taxpayer's adjusted  126
gross income for the current or any other taxable year.  127
       (13) Deduct an amount equal to the deposits made to, and  128
net investment earnings of, a medical savings account during the  129
taxable year, in accordance with section 3924.66 of the Revised  130
Code. The deduction allowed by division (A)(13) of this section  131
does not apply to medical savings account deposits and earnings  132
otherwise deducted or excluded for the current or any other  133
taxable year from the taxpayer's federal adjusted gross income.  134
       (14)(a) Add an amount equal to the funds withdrawn from a  135
medical savings account during the taxable year, and the net  136
investment earnings on those funds, when the funds withdrawn  137
were used for any purpose other than to reimburse an account  138
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As Introduced
holder for, or to pay, eligible medical expenses, in accordance  139
with section 3924.66 of the Revised Code;  140
       (b) Add the amounts distributed from a medical savings  141
account under division (A)(2) of section 3924.68 of the Revised  142
Code during the taxable year.  143
       (15) Add any amount claimed as a credit under section  144
5747.059 of the Revised Code to the extent that such amount  145
satisfies either of the following:  146
       (a) The amount was deducted or excluded from the  147
computation of the taxpayer's federal adjusted gross income as  148
required to be reported for the taxpayer's taxable year under  149
the Internal Revenue Code;  150
       (b) The amount resulted in a reduction of the taxpayer's  151
federal adjusted gross income as required to be reported for any  152
of the taxpayer's taxable years under the Internal Revenue Code.  153
       (16) Deduct the amount contributed by the taxpayer to an  154
individual development account program established by a county  155
department of job and family services pursuant to sections  156
329.11 to 329.14 of the Revised Code for the purpose of matching  157
funds deposited by program participants. On request of the tax  158
commissioner, the taxpayer shall provide any information that,  159
in the tax commissioner's opinion, is necessary to establish the  160
amount deducted under division (A)(16) of this section.  161
       (17)(a)(i) Subject to divisions (A)(17)(a)(iii), (iv), and  162
(v) of this section, add five-sixths of the amount of  163
depreciation expense allowed by subsection (k) of section 168 of  164
the Internal Revenue Code, including the taxpayer's  165
proportionate or distributive share of the amount of  166
depreciation expense allowed by that subsection to a pass-  167
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As Introduced
through entity in which the taxpayer has a direct or indirect  168
ownership interest.  169
       (ii) Subject to divisions (A)(17)(a)(iii), (iv), and (v)  170
of this section, add five-sixths of the amount of qualifying  171
section 179 depreciation expense, including the taxpayer's  172
proportionate or distributive share of the amount of qualifying  173
section 179 depreciation expense allowed to any pass-through  174
entity in which the taxpayer has a direct or indirect ownership  175
interest.  176
       (iii) Subject to division (A)(17)(a)(v) of this section,  177
for taxable years beginning in 2012 or thereafter, if the  178
increase in income taxes withheld by the taxpayer is equal to or  179
greater than ten per cent of income taxes withheld by the  180
taxpayer during the taxpayer's immediately preceding taxable  181
year, "two-thirds" shall be substituted for "five-sixths" for  182
the purpose of divisions (A)(17)(a)(i) and (ii) of this section.  183
       (iv) Subject to division (A)(17)(a)(v) of this section,  184
for taxable years beginning in 2012 or thereafter, a taxpayer is  185
not required to add an amount under division (A)(17) of this  186
section if the increase in income taxes withheld by the taxpayer  187
and by any pass-through entity in which the taxpayer has a  188
direct or indirect ownership interest is equal to or greater  189
than the sum of (I) the amount of qualifying section 179  190
depreciation expense and (II) the amount of depreciation expense  191
allowed to the taxpayer by subsection (k) of section 168 of the  192
Internal Revenue Code, and including the taxpayer's  193
proportionate or distributive shares of such amounts allowed to  194
any such pass-through entities.  195
       (v) If a taxpayer directly or indirectly incurs a net  196
operating loss for the taxable year for federal income tax  197
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As Introduced
purposes, to the extent such loss resulted from depreciation  198
expense allowed by subsection (k) of section 168 of the Internal  199
Revenue Code and by qualifying section 179 depreciation expense,  200
"the entire" shall be substituted for "five-sixths of the" for  201
the purpose of divisions (A)(17)(a)(i) and (ii) of this section.  202
       The tax commissioner, under procedures established by the  203
commissioner, may waive the add-backs related to a pass-through  204
entity if the taxpayer owns, directly or indirectly, less than  205
five per cent of the pass-through entity.  206
       (b) Nothing in division (A)(17) of this section shall be  207
construed to adjust or modify the adjusted basis of any asset.  208
       (c) To the extent the add-back required under division (A)  209
(17)(a) of this section is attributable to property generating  210
nonbusiness income or loss allocated under section 5747.20 of  211
the Revised Code, the add-back shall be sitused to the same  212
location as the nonbusiness income or loss generated by the  213
property for the purpose of determining the credit under  214
division (A) of section 5747.05 of the Revised Code. Otherwise,  215
the add-back shall be apportioned, subject to one or more of the  216
four alternative methods of apportionment enumerated in section  217
5747.21 of the Revised Code.  218
       (d) For the purposes of division (A)(17)(a)(v) of this  219
section, net operating loss carryback and carryforward shall not  220
include the allowance of any net operating loss deduction  221
carryback or carryforward to the taxable year to the extent such  222
loss resulted from depreciation allowed by section 168(k) of the  223
Internal Revenue Code and by the qualifying section 179  224
depreciation expense amount.  225
       (e) For the purposes of divisions (A)(17) and (18) of this  226
S. B. No. 261  Page 9
As Introduced
section:  227
       (i) "Income taxes withheld" means the total amount  228
withheld and remitted under sections 5747.06 and 5747.07 of the  229
Revised Code by an employer during the employer's taxable year.  230
       (ii) "Increase in income taxes withheld" means the amount  231
by which the amount of income taxes withheld by an employer  232
during the employer's current taxable year exceeds the amount of  233
income taxes withheld by that employer during the employer's  234
immediately preceding taxable year.  235
       (iii) "Qualifying section 179 depreciation expense" means  236
the difference between (I) the amount of depreciation expense  237
directly or indirectly allowed to a taxpayer under section 179  238
of the Internal Revised Code, and (II) the amount of  239
depreciation expense directly or indirectly allowed to the  240
taxpayer under section 179 of the Internal Revenue Code as that  241
section existed on December 31, 2002.  242
       (18)(a) If the taxpayer was required to add an amount  243
under division (A)(17)(a) of this section for a taxable year,  244
deduct one of the following:  245
       (i) One-fifth of the amount so added for each of the five  246
succeeding taxable years if the amount so added was five-sixths  247
of qualifying section 179 depreciation expense or depreciation  248
expense allowed by subsection (k) of section 168 of the Internal  249
Revenue Code;  250
       (ii) One-half of the amount so added for each of the two  251
succeeding taxable years if the amount so added was two-thirds  252
of such depreciation expense;  253
       (iii) One-sixth of the amount so added for each of the six  254
succeeding taxable years if the entire amount of such  255
S. B. No. 261  Page 10
As Introduced
depreciation expense was so added.  256
       (b) If the amount deducted under division (A)(18)(a) of  257
this section is attributable to an add-back allocated under  258
division (A)(17)(c) of this section, the amount deducted shall  259
be sitused to the same location. Otherwise, the deduction shall  260
be apportioned using the apportionment factors for the taxable  261
year in which the deduction is taken, subject to one or more of  262
the four alternative methods of apportionment enumerated in  263
section 5747.21 of the Revised Code.  264
       (c) No deduction is available under division (A)(18)(a) of  265
this section with regard to any depreciation allowed by section  266
168(k) of the Internal Revenue Code and by the qualifying  267
section 179 depreciation expense amount to the extent that such  268
depreciation results in or increases a federal net operating  269
loss carryback or carryforward. If no such deduction is  270
available for a taxable year, the taxpayer may carry forward the  271
amount not deducted in such taxable year to the next taxable  272
year and add that amount to any deduction otherwise available  273
under division (A)(18)(a) of this section for that next taxable  274
year. The carryforward of amounts not so deducted shall continue  275
until the entire addition required by division (A)(17)(a) of  276
this section has been deducted.  277
       (19) Deduct, to the extent not otherwise deducted or  278
excluded in computing federal or Ohio adjusted gross income for  279
the taxable year, the amount the taxpayer received during the  280
taxable year as reimbursement for life insurance premiums under  281
section 5919.31 of the Revised Code.  282
       (20) Deduct, to the extent not otherwise deducted or  283
excluded in computing federal or Ohio adjusted gross income for  284
the taxable year, the amount the taxpayer received during the  285
S. B. No. 261  Page 11
As Introduced
taxable year as a death benefit paid by the adjutant general  286
under section 5919.33 of the Revised Code.  287
       (21) Deduct, to the extent included in federal adjusted  288
gross income and not otherwise allowable as a deduction or  289
exclusion in computing federal or Ohio adjusted gross income for  290
the taxable year, military pay and allowances received by the  291
taxpayer during the taxable year for active duty service in the  292
armed services of the United States, as defined in section  293
5907.01 of the Revised Code, or reserve components thereof or  294
the national guard. The deduction may not be claimed for  295
military pay and allowances received by the taxpayer while the  296
taxpayer is stationed in this state.  297
       (22) Deduct, to the extent not otherwise allowable as a  298
deduction or exclusion in computing federal or Ohio adjusted  299
gross income for the taxable year and not otherwise compensated  300
for by any other source, the amount of qualified organ donation  301
expenses incurred by the taxpayer during the taxable year, not  302
to exceed ten thousand dollars. A taxpayer may deduct qualified  303
organ donation expenses only once for all taxable years  304
beginning with taxable years beginning in 2007.  305
       For the purposes of division (A)(22) of this section:  306
       (a) "Human organ" means all or any portion of a human  307
liver, pancreas, kidney, intestine, or lung, and any portion of  308
human bone marrow.  309
       (b) "Qualified organ donation expenses" means travel  310
expenses, lodging expenses, and wages and salary forgone by a  311
taxpayer in connection with the taxpayer's donation, while  312
living, of one or more of the taxpayer's human organs to another  313
human being.  314
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       (23) Deduct, to the extent not otherwise deducted or  315
excluded in computing federal or Ohio adjusted gross income for  316
the taxable year, amounts received by the taxpayer as retired  317
personnel pay for service in the uniformed services or reserve  318
components thereof, or the national guard, or received by the  319
surviving spouse or former spouse of such a taxpayer under the  320
survivor benefit plan on account of such a taxpayer's death. If  321
the taxpayer receives income on account of retirement paid under  322
the federal civil service retirement system or federal employees  323
retirement system, or under any successor retirement program  324
enacted by the congress of the United States that is established  325
and maintained for retired employees of the United States  326
government, and such retirement income is based, in whole or in  327
part, on credit for the taxpayer's uniformed service, the  328
deduction allowed under this division shall include only that  329
portion of such retirement income that is attributable to the  330
taxpayer's uniformed service, to the extent that portion of such  331
retirement income is otherwise included in federal adjusted  332
gross income and is not otherwise deducted under this section.  333
Any amount deducted under division (A)(23) of this section is  334
not included in a taxpayer's adjusted gross income for the  335
purposes of section 5747.055 of the Revised Code. No amount may  336
be deducted under division (A)(23) of this section on the basis  337
of which a credit was claimed under section 5747.055 of the  338
Revised Code.  339
       (24) Deduct, to the extent not otherwise deducted or  340
excluded in computing federal or Ohio adjusted gross income for  341
the taxable year, the amount the taxpayer received during the  342
taxable year from the military injury relief fund created in  343
section 5902.05 of the Revised Code.  344
       (25) Deduct, to the extent not otherwise deducted or  345
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As Introduced
excluded in computing federal or Ohio adjusted gross income for  346
the taxable year, the amount the taxpayer received as a veterans  347
bonus during the taxable year from the Ohio department of  348
veterans services as authorized by Section 2r of Article VIII,  349
Ohio Constitution.  350
       (26) Deduct, to the extent not otherwise deducted or  351
excluded in computing federal or Ohio adjusted gross income for  352
the taxable year, any income derived from a transfer agreement  353
or from the enterprise transferred under that agreement under  354
section 4313.02 of the Revised Code.  355
       (27) Deduct, to the extent not otherwise deducted or  356
excluded in computing federal or Ohio adjusted gross income for  357
the taxable year, Ohio college opportunity or federal Pell grant  358
amounts received by the taxpayer or the taxpayer's spouse or  359
dependent pursuant to section 3333.122 of the Revised Code or 20  360
U.S.C. 1070a, et seq., and used to pay room or board furnished  361
by the educational institution for which the grant was awarded  362
at the institution's facilities, including meal plans  363
administered by the institution. For the purposes of this  364
division, receipt of a grant includes the distribution of a  365
grant directly to an educational institution and the crediting  366
of the grant to the enrollee's account with the institution.  367
       (28) Deduct from the portion of an individual's federal  368
adjusted gross income that is business income, to the extent not  369
otherwise deducted or excluded in computing federal adjusted  370
gross income for the taxable year, one hundred twenty-five  371
thousand dollars for each spouse if spouses file separate  372
returns under section 5747.08 of the Revised Code or two hundred  373
fifty thousand dollars for all other individuals.  374
       (29) Deduct, as provided under section 5747.78 of the  375
S. B. No. 261  Page 14
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Revised Code, contributions to ABLE savings accounts made in  376
accordance with sections 113.50 to 113.56 of the Revised Code.  377
        (30)(a) Deduct, to the extent not otherwise deducted or  378
excluded in computing federal or Ohio adjusted gross income  379
during the taxable year, all of the following:  380
        (i) Compensation paid to a qualifying employee described  381
in division (A)(14)(a) of section 5703.94 of the Revised Code to  382
the extent such compensation is for disaster work conducted in  383
this state during a disaster response period pursuant to a  384
qualifying solicitation received by the employee's employer;  385
        (ii) Compensation paid to a qualifying employee described  386
in division (A)(14)(b) of section 5703.94 of the Revised Code to  387
the extent such compensation is for disaster work conducted in  388
this state by the employee during the disaster response period  389
on critical infrastructure owned or used by the employee's  390
employer;  391
        (iii) Income received by an out-of-state disaster business  392
for disaster work conducted in this state during a disaster  393
response period, or, if the out-of-state disaster business is a  394
pass-through entity, a taxpayer's distributive share of the  395
pass-through entity's income from the business conducting  396
disaster work in this state during a disaster response period,  397
if, in either case, the disaster work is conducted pursuant to a  398
qualifying solicitation received by the business.  399
        (b) All terms used in division (A)(30) of this section  400
have the same meanings as in section 5703.94 of the Revised  401
Code.  402
        (31) For a taxpayer who is a qualifying Ohio educator,  403
deduct, to the extent not otherwise deducted or excluded in  404
S. B. No. 261  Page 15
As Introduced
computing federal or Ohio adjusted gross income for the taxable  405
year, the lesser of three hundred dollars or the amount of  406
expenses described in subsections (a)(2)(D)(i) and (ii) of  407
section 62 of the Internal Revenue Code paid or incurred by the  408
taxpayer during the taxpayer's taxable year in excess of the  409
amount the taxpayer is authorized to deduct for that taxable  410
year under subsection (a)(2)(D) of that section.  411
       (32) Deduct, to the extent not otherwise deducted or  412
excluded in computing federal or Ohio adjusted gross income for  413
the taxable year, amounts received by the taxpayer as a  414
disability severance payment, computed under 10 U.S.C. 1212,  415
following discharge or release under honorable conditions from  416
the armed forces of the United States, as defined in section  417
5907.01 of the Revised Code.  418
       (33) Deduct, to the extent not otherwise deducted or  419
excluded in computing federal adjusted gross income or Ohio  420
adjusted gross income, amounts not subject to tax due to an  421
agreement entered into under division (A)(2) of section 5747.05  422
of the Revised Code.  423
       (34) Deduct amounts as provided under section 5747.79 of  424
the Revised Code related to the taxpayer's qualifying capital  425
gains and deductible payroll.  426
       To the extent a qualifying capital gain described under  427
division (A)(34) of this section is business income, the  428
taxpayer shall deduct those gains under this division before  429
deducting any such gains under division (A)(28) of this section.  430
       (35)(a) For taxable years beginning in or after 2026,  431
deduct, to the extent not otherwise deducted or excluded in  432
computing federal or Ohio adjusted gross income for the taxable  433
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As Introduced
year:  434
        (i) One hundred per cent of the capital gain received by  435
the taxpayer in the taxable year from a qualifying interest in  436
an Ohio venture capital operating company attributable to the  437
company's investments in Ohio businesses during the period for  438
which the company was an Ohio venture operating company; and  439
        (ii) Fifty per cent of the capital gain received by the  440
taxpayer in the taxable year from a qualifying interest in an  441
Ohio venture capital operating company attributable to the  442
company's investments in all other businesses during the period  443
for which the company was an Ohio venture operating company.  444
        (b) Add amounts previously deducted by the taxpayer under  445
division (A)(35)(a) of this section if the director of  446
development certifies to the tax commissioner that the  447
requirements for the deduction were not met.  448
        (c) All terms used in division (A)(35) of this section  449
have the same meanings as in section 122.851 of the Revised  450
Code.  451
        (d) To the extent a capital gain described in division (A)  452
(35)(a) of this section is business income, the taxpayer shall  453
apply that division before applying division (A)(28) of this  454
section.  455
        (36) Add, to the extent not otherwise included in  456
computing federal or Ohio adjusted gross income for any taxable  457
year, the taxpayer's proportionate share of the amount of the  458
tax levied under section 5747.38 of the Revised Code and paid by  459
an electing pass-through entity for the taxable year.  460
        Notwithstanding any provision of the Revised Code to the  461
contrary, the portion of the addition required by division (A)  462
S. B. No. 261  Page 17
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(36) of this section related to the apportioned business income  463
of the pass-through entity shall be considered business income  464
under division (B) of this section. Such addition is eligible  465
for the deduction in division (A)(28) of this section, subject  466
to the applicable dollar limitations, and the tax rate  467
prescribed by division (A)(4)(a) of section 5747.02 of the  468
Revised Code. The taxpayer shall provide, upon request of the  469
tax commissioner, any documentation necessary to verify the  470
portion of the addition that is business income under this  471
division.  472
       (37) Deduct, to the extent not otherwise deducted or  473
excluded in computing federal or Ohio adjusted gross income for  474
the taxable year, amounts delivered to a qualifying institution  475
pursuant to section 3333.128 of the Revised Code for the benefit  476
of the taxpayer or the taxpayer's spouse or dependent.  477
       (38) Deduct, to the extent not otherwise deducted or  478
excluded in computing federal or Ohio adjusted gross income for  479
the taxable year, amounts received under the Ohio adoption grant  480
program pursuant to section 5180.451 of the Revised Code.  481
       (39) Deduct, to the extent included in federal adjusted  482
gross income, income attributable to amounts provided to a  483
taxpayer for any of the purposes for which an exclusion would  484
have been authorized under section 139 of the Internal Revenue  485
Code if the train derailment near the city of East Palestine on  486
February 3, 2023, had been a qualified disaster pursuant to that  487
section, or to compensate for lost business resulting from that  488
derailment, if such amounts are provided by any of the  489
following:  490
       (a) A federal, state, or local government agency;  491
S. B. No. 261  Page 18
As Introduced
       (b) A railroad company, as that term is defined in section  492
5727.01 of the Revised Code;  493
       (c) Any subsidiary, insurer, or agent of a railroad  494
company or any related person.  495
       Notwithstanding any provision to the contrary, the  496
derailment is not required to meet the definition of a  497
"qualified disaster" pursuant to section 139 of the Internal  498
Revenue Code to qualify for the deduction under this section.  499
       (40) Deduct, to the extent included in federal adjusted  500
gross income, income attributable to loan repayments on behalf  501
of the taxpayer under the rural practice incentive program under  502
section 3333.135 of the Revised Code.  503
       (41) Add any income taxes deducted in computing federal or  504
Ohio adjusted gross income to the extent the income taxes were  505
derived from income subject to a tax levied in another state or  506
the District of Columbia when such tax was enacted for purposes  507
of complying with internal revenue service notice 2020-75.  508
       Notwithstanding any provision of the Revised Code to the  509
contrary, the portion of the addition required by division (A)  510
(41) of this section related to the apportioned business income  511
of the pass-through entity shall be considered business income  512
under division (B) of this section. Such addition is eligible  513
for the deduction in division (A)(28) of this section, subject  514
to the applicable dollar limitations, and the tax rate  515
prescribed by division (A)(4)(a) of section 5747.02 of the  516
Revised Code. The taxpayer shall provide, upon request of the  517
tax commissioner, any documentation necessary to verify the  518
portion of the addition that is business income under this  519
division.  520
S. B. No. 261  Page 19
As Introduced
       (42) Deduct amounts contributed to a homeownership savings  521
account and calculated pursuant to divisions (B) and (C) of  522
section 5747.85 of the Revised Code.  523
       (43) If the taxpayer is the account owner of a  524
homeownership savings account, upon withdrawal or transfer of  525
funds from the account, or closure of the account containing  526
funds that are not used for eligible expenses, add the amount of  527
such funds not used for an eligible expense. The addition  528
required under this division shall not exceed the sum of the  529
amounts deducted by the taxpayer for such account under division  530
(A)(42) of this section in any taxable year and the amount of  531
any funds deposited in the account by a contributor other than  532
the account owner. As used in division (A)(43) of this section,  533
"homeownership savings account," "contributor," "account owner,"  534
and "eligible expenses" have the same meanings as in section  535
5747.85 of the Revised Code.  536
       (44) Deduct, to the extent not otherwise deducted or  537
excluded in computing federal or Ohio adjusted gross income  538
during the taxable year, up to seven hundred fifty dollars of  539
contributions the taxpayer makes to a pregnancy resource center  540
that meets the criteria in division (B) of section 5101.804 of  541
the Revised Code.  542
       (45) If the taxpayer has elected to itemize deductions  543
under section 63 of the Internal Revenue Code for the taxable  544
year, and to the extent not otherwise deducted or excluded in  545
computing federal adjusted gross income for the taxable year,  546
deduct amounts that the taxpayer deducts as a charitable  547
contribution to a church or a convention or association of  548
churches under section 170 of the Internal Revenue Code for the  549
taxable year.  550
S. B. No. 261  Page 20
As Introduced
       (B) "Business income" means income, including gain or  551
loss, arising from transactions, activities, and sources in the  552
regular course of a trade or business and includes income, gain,  553
or loss from real property, tangible property, and intangible  554
property if the acquisition, rental, management, and disposition  555
of the property constitute integral parts of the regular course  556
of a trade or business operation. "Business income" includes  557
income, including gain or loss, from a partial or complete  558
liquidation of a business, including, but not limited to, gain  559
or loss from the sale or other disposition of goodwill or the  560
sale of an equity or ownership interest in a business.  561
       As used in this division, the "sale of an equity or  562
ownership interest in a business" means sales to which either or  563
both of the following apply:  564
       (1) The sale is treated for federal income tax purposes as  565
the sale of assets.  566
       (2) The seller materially participated, as described in 26  567
C.F.R. 1.469-5T, in the activities of the business during the  568
taxable year in which the sale occurs or during any of the five  569
preceding taxable years.  570
       (C) "Nonbusiness income" means all income other than  571
business income and may include, but is not limited to,  572
compensation, rents and royalties from real or tangible personal  573
property, capital gains, interest, dividends and distributions,  574
patent or copyright royalties, or lottery winnings, prizes, and  575
awards.  576
       (D) "Compensation" means any form of remuneration paid to  577
an employee for personal services.  578
       (E) "Fiduciary" means a guardian, trustee, executor,  579
S. B. No. 261  Page 21
As Introduced
administrator, receiver, conservator, or any other person acting  580
in any fiduciary capacity for any individual, trust, or estate.  581
       (F) "Fiscal year" means an accounting period of twelve  582
months ending on the last day of any month other than December.  583
       (G) "Individual" means any natural person.  584
       (H) "Internal Revenue Code" means the "Internal Revenue  585
Code of 1986," 100 Stat. 2085, 26 U.S.C.A. 1, as amended.  586
       (I) "Resident" means any of the following:  587
       (1) An individual who is domiciled in this state, subject  588
to section 5747.24 of the Revised Code;  589
       (2) The estate of a decedent who at the time of death was  590
domiciled in this state. The domicile tests of section 5747.24  591
of the Revised Code are not controlling for purposes of division  592
(I)(2) of this section.  593
       (3) A trust that, in whole or part, resides in this state.  594
If only part of a trust resides in this state, the trust is a  595
resident only with respect to that part.  596
       For the purposes of division (I)(3) of this section:  597
       (a) A trust resides in this state for the trust's current  598
taxable year to the extent, as described in division (I)(3)(d)  599
of this section, that the trust consists directly or indirectly,  600
in whole or in part, of assets, net of any related liabilities,  601
that were transferred, or caused to be transferred, directly or  602
indirectly, to the trust by any of the following:  603
       (i) A person, a court, or a governmental entity or  604
instrumentality on account of the death of a decedent, but only  605
if the trust is described in division (I)(3)(e)(i) or (ii) of  606
S. B. No. 261  Page 22
As Introduced
this section;  607
        (ii) A person who was domiciled in this state for the  608
purposes of this chapter when the person directly or indirectly  609
transferred assets to an irrevocable trust, but only if at least  610
one of the trust's qualifying beneficiaries is domiciled in this  611
state for the purposes of this chapter during all or some  612
portion of the trust's current taxable year;  613
        (iii) A person who was domiciled in this state for the  614
purposes of this chapter when the trust document or instrument  615
or part of the trust document or instrument became irrevocable,  616
but only if at least one of the trust's qualifying beneficiaries  617
is a resident domiciled in this state for the purposes of this  618
chapter during all or some portion of the trust's current  619
taxable year. If a trust document or instrument became  620
irrevocable upon the death of a person who at the time of death  621
was domiciled in this state for purposes of this chapter, that  622
person is a person described in division (I)(3)(a)(iii) of this  623
section.  624
        (b) A trust is irrevocable to the extent that the  625
transferor is not considered to be the owner of the net assets  626
of the trust under sections 671 to 678 of the Internal Revenue  627
Code.  628
        (c) With respect to a trust other than a charitable lead  629
trust, "qualifying beneficiary" has the same meaning as  630
"potential current beneficiary" as defined in section 1361(e)(2)  631
of the Internal Revenue Code, and with respect to a charitable  632
lead trust "qualifying beneficiary" is any current, future, or  633
contingent beneficiary, but with respect to any trust  634
"qualifying beneficiary" excludes a person or a governmental  635
entity or instrumentality to any of which a contribution would  636
S. B. No. 261  Page 23
As Introduced
qualify for the charitable deduction under section 170 of the  637
Internal Revenue Code.  638
       (d) For the purposes of division (I)(3)(a) of this  639
section, the extent to which a trust consists directly or  640
indirectly, in whole or in part, of assets, net of any related  641
liabilities, that were transferred directly or indirectly, in  642
whole or part, to the trust by any of the sources enumerated in  643
that division shall be ascertained by multiplying the fair  644
market value of the trust's assets, net of related liabilities,  645
by the qualifying ratio, which shall be computed as follows:  646
       (i) The first time the trust receives assets, the  647
numerator of the qualifying ratio is the fair market value of  648
those assets at that time, net of any related liabilities, from  649
sources enumerated in division (I)(3)(a) of this section. The  650
denominator of the qualifying ratio is the fair market value of  651
all the trust's assets at that time, net of any related  652
liabilities.  653
       (ii) Each subsequent time the trust receives assets, a  654
revised qualifying ratio shall be computed. The numerator of the  655
revised qualifying ratio is the sum of (1) the fair market value  656
of the trust's assets immediately prior to the subsequent  657
transfer, net of any related liabilities, multiplied by the  658
qualifying ratio last computed without regard to the subsequent  659
transfer, and (2) the fair market value of the subsequently  660
transferred assets at the time transferred, net of any related  661
liabilities, from sources enumerated in division (I)(3)(a) of  662
this section. The denominator of the revised qualifying ratio is  663
the fair market value of all the trust's assets immediately  664
after the subsequent transfer, net of any related liabilities.  665
       (iii) Whether a transfer to the trust is by or from any of  666
S. B. No. 261  Page 24
As Introduced
the sources enumerated in division (I)(3)(a) of this section  667
shall be ascertained without regard to the domicile of the  668
trust's beneficiaries.  669
       (e) For the purposes of division (I)(3)(a)(i) of this  670
section:  671
       (i) A trust is described in division (I)(3)(e)(i) of this  672
section if the trust is a testamentary trust and the testator of  673
that testamentary trust was domiciled in this state at the time  674
of the testator's death for purposes of the taxes levied under  675
Chapter 5731. of the Revised Code.  676
       (ii) A trust is described in division (I)(3)(e)(ii) of  677
this section if the transfer is a qualifying transfer described  678
in any of divisions (I)(3)(f)(i) to (vi) of this section, the  679
trust is an irrevocable inter vivos trust, and at least one of  680
the trust's qualifying beneficiaries is domiciled in this state  681
for purposes of this chapter during all or some portion of the  682
trust's current taxable year.  683
       (f) For the purposes of division (I)(3)(e)(ii) of this  684
section, a "qualifying transfer" is a transfer of assets, net of  685
any related liabilities, directly or indirectly to a trust, if  686
the transfer is described in any of the following:  687
       (i) The transfer is made to a trust, created by the  688
decedent before the decedent's death and while the decedent was  689
domiciled in this state for the purposes of this chapter, and,  690
prior to the death of the decedent, the trust became irrevocable  691
while the decedent was domiciled in this state for the purposes  692
of this chapter.  693
       (ii) The transfer is made to a trust to which the  694
decedent, prior to the decedent's death, had directly or  695
S. B. No. 261  Page 25
As Introduced
indirectly transferred assets, net of any related liabilities,  696
while the decedent was domiciled in this state for the purposes  697
of this chapter, and prior to the death of the decedent the  698
trust became irrevocable while the decedent was domiciled in  699
this state for the purposes of this chapter.  700
        (iii) The transfer is made on account of a contractual  701
relationship existing directly or indirectly between the  702
transferor and either the decedent or the estate of the decedent  703
at any time prior to the date of the decedent's death, and the  704
decedent was domiciled in this state at the time of death for  705
purposes of the taxes levied under Chapter 5731. of the Revised  706
Code.  707
        (iv) The transfer is made to a trust on account of a  708
contractual relationship existing directly or indirectly between  709
the transferor and another person who at the time of the  710
decedent's death was domiciled in this state for purposes of  711
this chapter.  712
        (v) The transfer is made to a trust on account of the will  713
of a testator who was domiciled in this state at the time of the  714
testator's death for purposes of the taxes levied under Chapter  715
5731. of the Revised Code.  716
        (vi) The transfer is made to a trust created by or caused  717
to be created by a court, and the trust was directly or  718
indirectly created in connection with or as a result of the  719
death of an individual who, for purposes of the taxes levied  720
under Chapter 5731. of the Revised Code, was domiciled in this  721
state at the time of the individual's death.  722
        (g) The tax commissioner may adopt rules to ascertain the  723
part of a trust residing in this state.  724
S. B. No. 261  Page 26
As Introduced
       (J) "Nonresident" means an individual or estate that is  725
not a resident. An individual who is a resident for only part of  726
a taxable year is a nonresident for the remainder of that  727
taxable year.  728
       (K) "Pass-through entity" has the same meaning as in  729
section 5733.04 of the Revised Code.  730
       (L) "Return" means the notifications and reports required  731
to be filed pursuant to this chapter for the purpose of  732
reporting the tax due and includes declarations of estimated tax  733
when so required.  734
       (M) "Taxable year" means the calendar year or the  735
taxpayer's fiscal year ending during the calendar year, or  736
fractional part thereof, upon which the adjusted gross income is  737
calculated pursuant to this chapter.  738
       (N) "Taxpayer" means any person subject to the tax imposed  739
by section 5747.02 of the Revised Code or any pass-through  740
entity that makes the election under division (D) of section  741
5747.08 of the Revised Code.  742
       (O) "Dependents" means one of the following:  743
       (1) For taxable years beginning on or after January 1,  744
2018, and before January 1, 2026, dependents as defined in the  745
Internal Revenue Code;  746
       (2) For all other taxable years, dependents as defined in  747
the Internal Revenue Code and as claimed in the taxpayer's  748
federal income tax return for the taxable year or which the  749
taxpayer would have been permitted to claim had the taxpayer  750
filed a federal income tax return.  751
       (P) "Principal county of employment" means, in the case of  752
S. B. No. 261  Page 27
As Introduced
a nonresident, the county within the state in which a taxpayer  753
performs services for an employer or, if those services are  754
performed in more than one county, the county in which the major  755
portion of the services are performed.  756
        (Q) As used in sections 5747.50 to 5747.55 of the Revised  757
Code:  758
        (1) "Subdivision" means any county, municipal corporation,  759
park district, or township.  760
        (2) "Essential local government purposes" includes all  761
functions that any subdivision is required by general law to  762
exercise, including like functions that are exercised under a  763
charter adopted pursuant to the Ohio Constitution.  764
        (R) "Overpayment" means any amount already paid that  765
exceeds the figure determined to be the correct amount of the  766
tax.  767
        (S) "Taxable income" or "Ohio taxable income" applies only  768
to estates and trusts, and means federal taxable income, as  769
defined and used in the Internal Revenue Code, adjusted as  770
follows:  771
        (1) Add interest or dividends, net of ordinary, necessary,  772
and reasonable expenses not deducted in computing federal  773
taxable income, on obligations or securities of any state or of  774
any political subdivision or authority of any state, other than  775
this state and its subdivisions and authorities, but only to the  776
extent that such net amount is not otherwise includible in Ohio  777
taxable income and is described in either division (S)(1)(a) or  778
(b) of this section:  779
        (a) The net amount is not attributable to the S portion of  780
an electing small business trust and has not been distributed to  781
S. B. No. 261  Page 28
As Introduced
beneficiaries for the taxable year;  782
       (b) The net amount is attributable to the S portion of an  783
electing small business trust for the taxable year.  784
       (2) Add interest or dividends, net of ordinary, necessary,  785
and reasonable expenses not deducted in computing federal  786
taxable income, on obligations of any authority, commission,  787
instrumentality, territory, or possession of the United States  788
to the extent that the interest or dividends are exempt from  789
federal income taxes but not from state income taxes, but only  790
to the extent that such net amount is not otherwise includible  791
in Ohio taxable income and is described in either division (S)  792
(1)(a) or (b) of this section;  793
       (3) Add the amount of personal exemption allowed to the  794
estate pursuant to section 642(b) of the Internal Revenue Code;  795
       (4) Deduct interest or dividends, net of related expenses  796
deducted in computing federal taxable income, on obligations of  797
the United States and its territories and possessions or of any  798
authority, commission, or instrumentality of the United States  799
to the extent that the interest or dividends are exempt from  800
state taxes under the laws of the United States, but only to the  801
extent that such amount is included in federal taxable income  802
and is described in either division (S)(1)(a) or (b) of this  803
section;  804
       (5) Deduct the amount of wages and salaries, if any, not  805
otherwise allowable as a deduction but that would have been  806
allowable as a deduction in computing federal taxable income for  807
the taxable year, had the work opportunity tax credit allowed  808
under sections 38, 51, and 52 of the Internal Revenue Code not  809
been in effect, but only to the extent such amount relates  810
S. B. No. 261  Page 29
As Introduced
either to income included in federal taxable income for the  811
taxable year or to income of the S portion of an electing small  812
business trust for the taxable year;  813
        (6) Deduct any interest or interest equivalent, net of  814
related expenses deducted in computing federal taxable income,  815
on public obligations and purchase obligations, but only to the  816
extent that such net amount relates either to income included in  817
federal taxable income for the taxable year or to income of the  818
S portion of an electing small business trust for the taxable  819
year;  820
        (7) Add any loss or deduct any gain resulting from sale,  821
exchange, or other disposition of public obligations to the  822
extent that such loss has been deducted or such gain has been  823
included in computing either federal taxable income or income of  824
the S portion of an electing small business trust for the  825
taxable year;  826
        (8) Except in the case of the final return of an estate,  827
add any amount deducted by the taxpayer on both its Ohio estate  828
tax return pursuant to section 5731.14 of the Revised Code, and  829
on its federal income tax return in determining federal taxable  830
income;  831
        (9)(a) Deduct any amount included in federal taxable  832
income solely because the amount represents a reimbursement or  833
refund of expenses that in a previous year the decedent had  834
deducted as an itemized deduction pursuant to section 63 of the  835
Internal Revenue Code and applicable treasury regulations. The  836
deduction otherwise allowed under division (S)(9)(a) of this  837
section shall be reduced to the extent the reimbursement is  838
attributable to an amount the taxpayer or decedent deducted  839
under this section in any taxable year.  840
S. B. No. 261  Page 30
As Introduced
       (b) Add any amount not otherwise included in Ohio taxable  841
income for any taxable year to the extent that the amount is  842
attributable to the recovery during the taxable year of any  843
amount deducted or excluded in computing federal or Ohio taxable  844
income in any taxable year, but only to the extent such amount  845
has not been distributed to beneficiaries for the taxable year.  846
       (10) Deduct any portion of the deduction described in  847
section 1341(a)(2) of the Internal Revenue Code, for repaying  848
previously reported income received under a claim of right, that  849
meets both of the following requirements:  850
       (a) It is allowable for repayment of an item that was  851
included in the taxpayer's taxable income or the decedent's  852
adjusted gross income for a prior taxable year and did not  853
qualify for a credit under division (A) or (B) of section  854
5747.05 of the Revised Code for that year.  855
       (b) It does not otherwise reduce the taxpayer's taxable  856
income or the decedent's adjusted gross income for the current  857
or any other taxable year.  858
       (11) Add any amount claimed as a credit under section  859
5747.059 of the Revised Code to the extent that the amount  860
satisfies either of the following:  861
       (a) The amount was deducted or excluded from the  862
computation of the taxpayer's federal taxable income as required  863
to be reported for the taxpayer's taxable year under the  864
Internal Revenue Code;  865
       (b) The amount resulted in a reduction in the taxpayer's  866
federal taxable income as required to be reported for any of the  867
taxpayer's taxable years under the Internal Revenue Code.  868
       (12) Deduct any amount, net of related expenses deducted  869
S. B. No. 261  Page 31
As Introduced
in computing federal taxable income, that a trust is required to  870
report as farm income on its federal income tax return, but only  871
if the assets of the trust include at least ten acres of land  872
satisfying the definition of "land devoted exclusively to  873
agricultural use" under section 5713.30 of the Revised Code,  874
regardless of whether the land is valued for tax purposes as  875
such land under sections 5713.30 to 5713.38 of the Revised Code.  876
If the trust is a pass-through entity investor, section 5747.231  877
of the Revised Code applies in ascertaining if the trust is  878
eligible to claim the deduction provided by division (S)(12) of  879
this section in connection with the pass-through entity's farm  880
income.  881
       Except for farm income attributable to the S portion of an  882
electing small business trust, the deduction provided by  883
division (S)(12) of this section is allowed only to the extent  884
that the trust has not distributed such farm income.  885
       (13) Add the net amount of income described in section  886
641(c) of the Internal Revenue Code to the extent that amount is  887
not included in federal taxable income.  888
       (14) Add or deduct the amount the taxpayer would be  889
required to add or deduct under division (A)(17) or (18) of this  890
section if the taxpayer's Ohio taxable income was computed in  891
the same manner as an individual's Ohio adjusted gross income is  892
computed under this section.  893
       (15) Add, to the extent not otherwise included in  894
computing taxable income or Ohio taxable income for any taxable  895
year, the taxpayer's proportionate share of the amount of the  896
tax levied under section 5747.38 of the Revised Code and paid by  897
an electing pass-through entity for the taxable year.  898
S. B. No. 261  Page 32
As Introduced
        (16) Add any income taxes deducted in computing federal  899
taxable income or Ohio taxable income to the extent the income  900
taxes were derived from income subject to a tax levied in  901
another state or the District of Columbia when such tax was  902
enacted for purposes of complying with internal revenue service  903
notice 2020-75.  904
        (T) "School district income" and "school district income  905
tax" have the same meanings as in section 5748.01 of the Revised  906
Code.  907
        (U) As used in divisions (A)(7), (A)(8), (S)(6), and (S)  908
(7) of this section, "public obligations," "purchase  909
obligations," and "interest or interest equivalent" have the  910
same meanings as in section 5709.76 of the Revised Code.  911
        (V) "Limited liability company" means any limited  912
liability company formed under former Chapter 1705. of the  913
Revised Code as that chapter existed prior to February 11, 2022,  914
Chapter 1706. of the Revised Code, or the laws of any other  915
state.  916
        (W) "Pass-through entity investor" means any person who,  917
during any portion of a taxable year of a pass-through entity,  918
is a partner, member, shareholder, or equity investor in that  919
pass-through entity.  920
        (X) "Banking day" has the same meaning as in section  921
1304.01 of the Revised Code.  922
        (Y) "Month" means a calendar month.  923
        (Z) "Quarter" means the first three months, the second  924
three months, the third three months, or the last three months  925
of the taxpayer's taxable year.  926
S. B. No. 261  Page 33
As Introduced
       (AA)(1) "Modified business income" means the business  927
income included in a trust's Ohio taxable income after such  928
taxable income is first reduced by the qualifying trust amount,  929
if any.  930
       (2) "Qualifying trust amount" of a trust means capital  931
gains and losses from the sale, exchange, or other disposition  932
of equity or ownership interests in, or debt obligations of, a  933
qualifying investee to the extent included in the trust's Ohio  934
taxable income, but only if the following requirements are  935
satisfied:  936
       (a) The book value of the qualifying investee's physical  937
assets in this state and everywhere, as of the last day of the  938
qualifying investee's fiscal or calendar year ending immediately  939
prior to the date on which the trust recognizes the gain or  940
loss, is available to the trust.  941
       (b) The requirements of section 5747.011 of the Revised  942
Code are satisfied for the trust's taxable year in which the  943
trust recognizes the gain or loss.  944
       Any gain or loss that is not a qualifying trust amount is  945
modified business income, qualifying investment income, or  946
modified nonbusiness income, as the case may be.  947
       (3) "Modified nonbusiness income" means a trust's Ohio  948
taxable income other than modified business income, other than  949
the qualifying trust amount, and other than qualifying  950
investment income, as defined in section 5747.012 of the Revised  951
Code, to the extent such qualifying investment income is not  952
otherwise part of modified business income.  953
       (4) "Modified Ohio taxable income" applies only to trusts,  954
and means the sum of the amounts described in divisions (AA)(4)  955
S. B. No. 261  Page 34
As Introduced
(a) to (c) of this section:  956
       (a) The fraction, calculated under section 5747.013, and  957
applying section 5747.231 of the Revised Code, multiplied by the  958
sum of the following amounts:  959
       (i) The trust's modified business income;  960
       (ii) The trust's qualifying investment income, as defined  961
in section 5747.012 of the Revised Code, but only to the extent  962
the qualifying investment income does not otherwise constitute  963
modified business income and does not otherwise constitute a  964
qualifying trust amount.  965
       (b) The qualifying trust amount multiplied by a fraction,  966
the numerator of which is the sum of the book value of the  967
qualifying investee's physical assets in this state on the last  968
day of the qualifying investee's fiscal or calendar year ending  969
immediately prior to the day on which the trust recognizes the  970
qualifying trust amount, and the denominator of which is the sum  971
of the book value of the qualifying investee's total physical  972
assets everywhere on the last day of the qualifying investee's  973
fiscal or calendar year ending immediately prior to the day on  974
which the trust recognizes the qualifying trust amount. If, for  975
a taxable year, the trust recognizes a qualifying trust amount  976
with respect to more than one qualifying investee, the amount  977
described in division (AA)(4)(b) of this section shall equal the  978
sum of the products so computed for each such qualifying  979
investee.  980
       (c)(i) With respect to a trust or portion of a trust that  981
is a resident as ascertained in accordance with division (I)(3)  982
(d) of this section, its modified nonbusiness income.  983
       (ii) With respect to a trust or portion of a trust that is  984
S. B. No. 261  Page 35
As Introduced
not a resident as ascertained in accordance with division (I)(3)  985
(d) of this section, the amount of its modified nonbusiness  986
income satisfying the descriptions in divisions (B)(2) to (5) of  987
section 5747.20 of the Revised Code, except as otherwise  988
provided in division (AA)(4)(c)(ii) of this section. With  989
respect to a trust or portion of a trust that is not a resident  990
as ascertained in accordance with division (I)(3)(d) of this  991
section, the trust's portion of modified nonbusiness income  992
recognized from the sale, exchange, or other disposition of a  993
debt interest in or equity interest in a section 5747.212  994
entity, as defined in section 5747.212 of the Revised Code,  995
without regard to division (A) of that section, shall not be  996
allocated to this state in accordance with section 5747.20 of  997
the Revised Code but shall be apportioned to this state in  998
accordance with division (B) of section 5747.212 of the Revised  999
Code without regard to division (A) of that section.  1000
       If the allocation and apportionment of a trust's income  1001
under divisions (AA)(4)(a) and (c) of this section do not fairly  1002
represent the modified Ohio taxable income of the trust in this  1003
state, the alternative methods described in division (C) of  1004
section 5747.21 of the Revised Code may be applied in the manner  1005
and to the same extent provided in that section.  1006
       (5)(a) Except as set forth in division (AA)(5)(b) of this  1007
section, "qualifying investee" means a person in which a trust  1008
has an equity or ownership interest, or a person or unit of  1009
government the debt obligations of either of which are owned by  1010
a trust. For the purposes of division (AA)(2)(a) of this section  1011
and for the purpose of computing the fraction described in  1012
division (AA)(4)(b) of this section, all of the following apply:  1013
       (i) If the qualifying investee is a member of a qualifying  1014
S. B. No. 261  Page 36
As Introduced
controlled group on the last day of the qualifying investee's  1015
fiscal or calendar year ending immediately prior to the date on  1016
which the trust recognizes the gain or loss, then "qualifying  1017
investee" includes all persons in the qualifying controlled  1018
group on such last day.  1019
       (ii) If the qualifying investee, or if the qualifying  1020
investee and any members of the qualifying controlled group of  1021
which the qualifying investee is a member on the last day of the  1022
qualifying investee's fiscal or calendar year ending immediately  1023
prior to the date on which the trust recognizes the gain or  1024
loss, separately or cumulatively own, directly or indirectly, on  1025
the last day of the qualifying investee's fiscal or calendar  1026
year ending immediately prior to the date on which the trust  1027
recognizes the qualifying trust amount, more than fifty per cent  1028
of the equity of a pass-through entity, then the qualifying  1029
investee and the other members are deemed to own the  1030
proportionate share of the pass-through entity's physical assets  1031
which the pass-through entity directly or indirectly owns on the  1032
last day of the pass-through entity's calendar or fiscal year  1033
ending within or with the last day of the qualifying investee's  1034
fiscal or calendar year ending immediately prior to the date on  1035
which the trust recognizes the qualifying trust amount.  1036
       (iii) For the purposes of division (AA)(5)(a)(iii) of this  1037
section, "upper level pass-through entity" means a pass-through  1038
entity directly or indirectly owning any equity of another pass-  1039
through entity, and "lower level pass-through entity" means that  1040
other pass-through entity.  1041
       An upper level pass-through entity, whether or not it is  1042
also a qualifying investee, is deemed to own, on the last day of  1043
the upper level pass-through entity's calendar or fiscal year,  1044
S. B. No. 261  Page 37
As Introduced
the proportionate share of the lower level pass-through entity's  1045
physical assets that the lower level pass-through entity  1046
directly or indirectly owns on the last day of the lower level  1047
pass-through entity's calendar or fiscal year ending within or  1048
with the last day of the upper level pass-through entity's  1049
fiscal or calendar year. If the upper level pass-through entity  1050
directly and indirectly owns less than fifty per cent of the  1051
equity of the lower level pass-through entity on each day of the  1052
upper level pass-through entity's calendar or fiscal year in  1053
which or with which ends the calendar or fiscal year of the  1054
lower level pass-through entity and if, based upon clear and  1055
convincing evidence, complete information about the location and  1056
cost of the physical assets of the lower pass-through entity is  1057
not available to the upper level pass-through entity, then  1058
solely for purposes of ascertaining if a gain or loss  1059
constitutes a qualifying trust amount, the upper level pass-  1060
through entity shall be deemed as owning no equity of the lower  1061
level pass-through entity for each day during the upper level  1062
pass-through entity's calendar or fiscal year in which or with  1063
which ends the lower level pass-through entity's calendar or  1064
fiscal year. Nothing in division (AA)(5)(a)(iii) of this section  1065
shall be construed to provide for any deduction or exclusion in  1066
computing any trust's Ohio taxable income.  1067
       (b) With respect to a trust that is not a resident for the  1068
taxable year and with respect to a part of a trust that is not a  1069
resident for the taxable year, "qualifying investee" for that  1070
taxable year does not include a C corporation if both of the  1071
following apply:  1072
       (i) During the taxable year the trust or part of the trust  1073
recognizes a gain or loss from the sale, exchange, or other  1074
disposition of equity or ownership interests in, or debt  1075
S. B. No. 261  Page 38
As Introduced
obligations of, the C corporation.  1076
        (ii) Such gain or loss constitutes nonbusiness income.  1077
        (6) "Available" means information is such that a person is  1078
able to learn of the information by the due date plus  1079
extensions, if any, for filing the return for the taxable year  1080
in which the trust recognizes the gain or loss.  1081
        (BB) "Qualifying controlled group" has the same meaning as  1082
in section 5733.04 of the Revised Code.  1083
        (CC) "Related member" has the same meaning as in section  1084
5733.042 of the Revised Code.  1085
        (DD)(1) For the purposes of division (DD) of this section:  1086
        (a) "Qualifying person" means any person other than a  1087
qualifying corporation.  1088
        (b) "Qualifying corporation" means any person classified  1089
for federal income tax purposes as an association taxable as a  1090
corporation, except either of the following:  1091
        (i) A corporation that has made an election under  1092
subchapter S, chapter one, subtitle A, of the Internal Revenue  1093
Code for its taxable year ending within, or on the last day of,  1094
the investor's taxable year;  1095
        (ii) A subsidiary that is wholly owned by any corporation  1096
that has made an election under subchapter S, chapter one,  1097
subtitle A of the Internal Revenue Code for its taxable year  1098
ending within, or on the last day of, the investor's taxable  1099
year.  1100
        (2) For the purposes of this chapter, unless expressly  1101
stated otherwise, no qualifying person indirectly owns any asset  1102
S. B. No. 261  Page 39
As Introduced
directly or indirectly owned by any qualifying corporation.  1103
       (EE) For purposes of this chapter and Chapter 5751. of the  1104
Revised Code:  1105
       (1) "Trust" does not include a qualified pre-income tax  1106
trust.  1107
       (2) A "qualified pre-income tax trust" is any pre-income  1108
tax trust that makes a qualifying pre-income tax trust election  1109
as described in division (EE)(3) of this section.  1110
       (3) A "qualifying pre-income tax trust election" is an  1111
election by a pre-income tax trust to subject to the tax imposed  1112
by section 5751.02 of the Revised Code the pre-income tax trust  1113
and all pass-through entities of which the trust owns or  1114
controls, directly, indirectly, or constructively through  1115
related interests, five per cent or more of the ownership or  1116
equity interests. The trustee shall notify the tax commissioner  1117
in writing of the election on or before April 15, 2006. The  1118
election, if timely made, shall be effective on and after  1119
January 1, 2006, and shall apply for all tax periods and tax  1120
years until revoked by the trustee of the trust.  1121
       (4) A "pre-income tax trust" is a trust that satisfies all  1122
of the following requirements:  1123
       (a) The document or instrument creating the trust was  1124
executed by the grantor before January 1, 1972;  1125
       (b) The trust became irrevocable upon the creation of the  1126
trust; and  1127
       (c) The grantor was domiciled in this state at the time  1128
the trust was created.  1129
       (FF) "Uniformed services" means all of the following:  1130
S. B. No. 261  Page 40
As Introduced
       (1) "Armed forces of the United States" as defined in  1131
section 5907.01 of the Revised Code;  1132
       (2) The commissioned corps of the national oceanic and  1133
atmospheric administration;  1134
       (3) The commissioned corps of the public health service.  1135
       (GG) "Taxable business income" means the amount by which  1136
an individual's business income that is included in federal  1137
adjusted gross income exceeds the amount of business income the  1138
individual is authorized to deduct under division (A)(28) of  1139
this section for the taxable year.  1140
       (HH) "Employer" does not include a franchisor with respect  1141
to the franchisor's relationship with a franchisee or an  1142
employee of a franchisee, unless the franchisor agrees to assume  1143
that role in writing or a court of competent jurisdiction  1144
determines that the franchisor exercises a type or degree of  1145
control over the franchisee or the franchisee's employees that  1146
is not customarily exercised by a franchisor for the purpose of  1147
protecting the franchisor's trademark, brand, or both. For  1148
purposes of this division, "franchisor" and "franchisee" have  1149
the same meanings as in 16 C.F.R. 436.1.  1150
       (II) "Modified adjusted gross income" means Ohio adjusted  1151
gross income plus any amount deducted under divisions (A)(28)  1152
and (34) of this section for the taxable year.  1153
       (JJ) "Qualifying Ohio educator" means an individual who,  1154
for a taxable year, qualifies as an eligible educator, as that  1155
term is defined in section 62 of the Internal Revenue Code, and  1156
who holds a certificate, license, or permit described in Chapter  1157
3319. or section 3301.071 of the Revised Code.  1158
       (KK) "Professional employer organization," "professional  1159
S. B. No. 261  Page 41
As Introduced
employer organization agreement," and "professional employer  1160
organization reporting entity" have the same meanings as in  1161
section 4125.01 of the Revised Code.  1162
       (LL) "Alternate employer organization" and "alternate  1163
employer organization agreement" have the same meanings as in  1164
section 4133.01 of the Revised Code.  1165
       (MM) "Casino gaming" has the same meaning as in section  1166
3772.01 of the Revised Code, "lottery sports gaming" has the  1167
same meaning as in section 3770.23 of the Revised Code, "sports  1168
gaming" has the same meaning as in section 3775.01 of the  1169
Revised Code, and "video lottery terminal" has the same meaning  1170
as in section 3770.21 of the Revised Code.  1171
       Section 2. That existing section 5747.01 of the Revised  1172
Code is hereby repealed.  1173
       Section 3. The amendment of section 5747.01 of the Revised  1174
Code by this act applies to taxable years ending on or after the  1175
effective date of this section.  1176
       Section 4. This act shall be known as the Tithing  1177
Protection Act.  1178