As Reported by the Senate Insurance, Commerce and Labor Committee

127th General Assembly Regular Session 2007-2008

Sub. S. B. No. 115

Senator Stivers 

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A BILL

To amend sections 1739.05, 1751.14, 3923.24, and

1

5747.01 and to enact section 3923.84 of the

2

Revised Code to require health insurers to

3

provide coverage for dependent children until the

4

age of thirty if the child meets specified

5

conditions and allows those children to be claimed

6

for purposes of the current Ohio income tax

7

deductions for self-paid and employer-sponsored

8

health insurance coverage.

9

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

Section 1. That sections 1739.05, 1751.14, 3923.24, and	10
5747.01 be amended and section 3923.84 of the Revised Code be	11
enacted to read as follows:	12

Sec. 1739.05.  (A) A multiple employer welfare arrangement	13
that is created pursuant to sections 1739.01 to 1739.22 of the	14
Revised Code and that operates a group self-insurance program may	15
be established only if any of the following applies:	16

(1) The arrangement has and maintains a minimum enrollment of	17
three hundred employees of two or more employers.	18

(2) The arrangement has and maintains a minimum enrollment of	19
three hundred self-employed individuals.	20

(3) The arrangement has and maintains a minimum enrollment of	21
three hundred employees or self-employed individuals in any	22
combination of divisions (A)(1) and (2) of this section.	23

(B) A multiple employer welfare arrangement that is created	24
pursuant to sections 1739.01 to 1739.22 of the Revised Code and	25
that operates a group self-insurance program shall comply with all	26
laws applicable to self-funded programs in this state, including	27
sections 3901.04, 3901.041, 3901.19 to 3901.26, 3901.38, 3901.381	28
to 3901.3814, 3901.40, 3901.45, 3901.46, 3902.01 to 3902.14,	29
3923.282, 3923.30, 3923.301, 3923.38, 3923.581, 3923.63, 3923.84,	30
3924.031, 3924.032, and 3924.27 of the Revised Code.	31

(C) A multiple employer welfare arrangement created pursuant	32
to sections 1739.01 to 1739.22 of the Revised Code shall solicit	33
enrollments only through agents or solicitors licensed pursuant to	34
Chapter 3905. of the Revised Code to sell or solicit sickness and	35
accident insurance.	36

(D) A multiple employer welfare arrangement created pursuant	37
to sections 1739.01 to 1739.22 of the Revised Code shall provide	38
benefits only to individuals who are members, employees of	39
members, or the dependents of members or employees, or are	40
eligible for continuation of coverage under section 1751.53 or	41
3923.38 of the Revised Code or under Title X of the "Consolidated	42
Omnibus Budget Reconciliation Act of 1985," 100 Stat. 227, 29	43
U.S.C.A. 1161, as amended.	44

Sec. 1751.14.  (A) AnyNotwithstanding section 3901.71 of the	45
Revised Code, any policy, contract, or agreement for health care	46
services authorized by this chapter that is issued, delivered, or	47
renewed in this state and that provides that coverage of an	48
unmarried dependent child will terminate upon attainment of the	49
limiting age for dependent children specified in the policy,	50
contract, or agreement, shall also provide in substance thatboth	51
of the following:	52

(1) That the limiting age shall not be less than thirty years	53
of age if all of the following are true:	54

(a) The child is a resident of Ohio or a full-time student at	55
an accredited public or private institution of higher education.	56

(b) Neither the child nor any spouse of the child is employed	57
by an employer that offers any health benefit plan under which the	58
child is eligible for coverage.	59

(c) The child is not eligible for coverage under the medicaid	60
program established under Chapter 5111. of the Revised Code or the	61
medicare program established under Title XVIII of the "Social	62
Security Act," 42 U.S.C. 1395.	63

(2) That attainment of the limiting age shall not operate to	64
terminate the coverage of the child if the child is and continues	65
to be both of the following:	66

(1)(a) Incapable of self-sustaining employment by reason of	67
mental retardation or physical handicap;	68

(2)(b) Primarily dependent upon the subscriber for support	69
and maintenance.	70

(B) Proof of incapacity and dependence for purposes of	71
division (A) of this section shall be furnished to the health	72
insuring corporation within thirty-one days of the child's	73
attainment of the limiting age. Upon request, but not more	74
frequently than annually, the health insuring corporation may	75
require proof satisfactory to it of the continuance of such	76
incapacity and dependency.	77

(C) Nothing in this section shall require a health insuring	78
corporation to cover a dependent child's spouse or children as	79
dependents on the policy, contract, or agreement of the parent or	80
legal guardian of the dependent.	81

(D) This section does not apply to any health insuring	82
corporation policy, contract, or agreement offering only	83
supplemental health care services or specialty health care	84
services.	85

(E) A health insuring corporation that offers	86
employer-sponsored policies, contracts, or agreements shall	87
separately identify any additional premium costs for coverage of	88
dependent children who are not described in division (A)(2) of	89
this section and are either nineteen years of age or older or	90
full-time students and twenty-five years of age or older. Nothing	91
in this section shall be construed to require an employer to offer	92
coverage to the dependents of any employee.	93

(F) As used in this section, "health benefit plan" has the	94
same meaning as in section 3924.01 of the Revised Code and also	95
includes both of the following:	96

(1) A public employee benefit plan;

97

(2) A health benefit plan as regulated under the "Employee	98
Retirement Income Security Act of 1974" 29 U.S.C. 1001, et seq.	99

Sec. 3923.24. Every(A) Notwithstanding section 3901.71 of	100
the Revised Code every certificate furnished by an insurer in	101
connection with, or pursuant to any provision of, any group	102
sickness and accident insurance policy delivered, issued for	103
delivery, renewed, or used in this state on or after January 1,	104
1972, and every policy of sickness and accident insurance	105
delivered, issued for delivery, renewed, or used in this state on	106
or after January 1, 1972, which provides that coverage of an	107
unmarried dependent child of a parent or legal guardian will	108
terminate upon attainment of the limiting age for dependent	109
children specified in the contract shall also provide in substance	110
thatboth of the following:	111

(1) That the limiting age shall not be less than thirty years	112
of age if all of the following are true:	113

(a) The child is a resident of Ohio or a full-time student at	114
an accredited public or private institution of higher education.	115

(b) Neither the child nor any spouse of the child is employed	116
by an employer that offers any health benefit plan under which the	117
child is eligible for coverage.	118

(c) The child is not eligible for coverage under the medicaid	119
program established under Chapter 5111. of the Revised Code or the	120
medicare program established under Title XVIII of the "Social	121
Security Act," 42 U.S.C. 1395.	122

(2) That attainment of such limiting age shall not operate to	123
terminate the coverage of such child if the child is and continues	124
to be both of the following:	125

(A)(a) Incapable of self-sustaining employment by reason of	126
mental retardation or physical handicap;	127

(B)(b) Primarily dependent upon the policyholder or	128
certificate holder for support and maintenance.	129

(B) Proof of such incapacity and dependence shall be	130
furnished by the policyholder or by the certificate holder to the	131
insurer within thirty-one days of the child's attainment of the	132
limiting age. Upon request, but not more frequently than annually	133
after the two-year period following the child's attainment of the	134
limiting age, the insurer may require proof satisfactory to it of	135
the continuance of such incapacity and dependency.	136

(C) Nothing in this section shall require an insurer to cover	137
a dependent child who is mentally retarded or physically	138
handicapped if the contract is underwritten on evidence of	139
insurability based on health factors set forth in the application,	140
or if such dependent child does not satisfy the conditions of the	141
contract as to any requirement for evidence of insurability or	142
other provision of the contract, satisfaction of which is required	143
for coverage thereunder to take effect. In any such case, the	144
terms of the contract shall apply with regard to the coverage or	145
exclusion of the dependent from such coverage. Nothing in this	146
section shall apply to accidental death or dismemberment benefits	147
provided by any such policy of sickness and accident insurance.	148

(D) Nothing in this section shall require an insurer to cover	149
a dependent child's spouse or children as dependents on the policy	150
of the parent or legal guardian of the dependent.	151

(E) This section does not apply to any policies or	152
certificates covering only accident, credit, dental, disability	153
income, long-term care, hospital indemnity, medicare supplement,	154
specified disease, or vision care; coverage under a	155
one-time-limited-duration policy of not longer than six months;	156
coverage issued as a supplement to liability insurance; insurance	157
arising out of a workers' compensation or similar law; automobile	158
medical-payment insurance; or insurance under which benefits are	159
payable with or without regard to fault and which is statutorily	160
required to be contained in any liability insurance policy or	161
equivalent self-insurance.	162

(F) A sickness and accident insurer that offers	163
employer-sponsored group policies shall separately identify any	164
additional premium costs for coverage of dependent children who	165
are not described in division (A)(2) of this section and are	166
either nineteen years of age or older or full-time students and	167
twenty-five years of age or older. Nothing in this section shall	168
be construed to require an employer to offer coverage to the	169
dependents of any employee.	170

(G) As used in this section, "health benefit plan" has the	171
same meaning as in section 3924.01 of the Revised Code and also	172
includes both of the following:	173

(1) A public employee benefit plan;

174

(2) A health benefit plan as regulated under the "Employee	175
Retirement Income Security Act of 1974" 29 U.S.C. 1001, et seq.	176

Sec. 3923.84. (A) Notwithstanding section 3901.71 of the	177
Revised Code, any public employee benefit plan that provides that	178
coverage of an unmarried dependent child will terminate upon	179
attainment of the limiting age for dependent children specified in	180
the plan shall also provide in substance both of the following:	181

(1) That the limiting age shall not be less than thirty years	182
of age if all of the following are true:	183

(a) The child is a resident of Ohio or a full-time student at	184
an accredited public or private institution of higher education.	185

(b) Neither the child nor any spouse of the child is employed	186
by an employer that offers any health benefit plan under which the	187
child is eligible for coverage.	188

(c) The child is not eligible for coverage under the medicaid	189
program established under Chapter 5111. of the Revised Code or the	190
medicare program established under Title XVIII of the "Social	191
Security Act," 42 U.S.C. 1395.	192

(2) That attainment of the limiting age shall not operate to	193
terminate the coverage of the child if the child is and continues	194
to be both of the following:	195

(a) Incapable of self-sustaining employment by reason of	196
mental retardation or physical handicap;	197

(b) Primarily dependent upon the plan member for support and	198
maintenance.	199

(B) Proof of incapacity and dependence for purposes of	200
division (A) of this section shall be furnished to the public	201
employee benefit plan within thirty-one days of the child's	202
attainment of the limiting age. Upon request, but not more	203
frequently than annually, the public employee benefit plan may	204
require proof satisfactory to it of the continuance of such	205
incapacity and dependency.	206

(C) Nothing in this section shall require a public employee	207
benefit plan to cover a dependent child's spouse or children as	208
dependents on the public employee benefit plan of the parent or	209
legal guardian of the dependent.	210

(D) This section does not apply to any public employee	211
benefit plan covering only accident, credit, dental, disability	212
income, long-term care, hospital indemnity, medicare supplement,	213
specified disease, or vision care; coverage under a	214
one-time-limited-duration policy of not longer than six months;	215
coverage issued as a supplement to liability insurance; insurance	216
arising out of a workers' compensation or similar law; automobile	217
medical-payment insurance; or insurance under which benefits are	218
payable with or without regard to fault and which is statutorily	219
required to be contained in any liability insurance policy or	220
equivalent self-insurance.	221

(E) A public employee benefit plan shall separately identify	222
any additional premium costs for coverage of dependent children	223
who are not described in division (A)(2) of this section and are	224
either nineteen years of age or older or full-time students and	225
twenty-five years of age or older. Nothing in this section shall	226
be construed to require an employer to offer coverage to the	227
dependents of any employee.	228

(F) As used in this section, "health benefit plan" has the	229
same meaning as in section 3924.01 of the Revised Code and also	230
includes both of the following:	231

(1) A public employee benefit plan;

232

(2) A health benefit plan as regulated under the "Employee	233
Retirement Income Security Act of 1974" 29 U.S.C. 1001, et seq.	234

Sec. 5747.01.  Except as otherwise expressly provided or	235
clearly appearing from the context, any term used in this chapter	236
that is not otherwise defined in this section has the same meaning	237
as when used in a comparable context in the laws of the United	238
States relating to federal income taxes or if not used in a	239
comparable context in those laws, has the same meaning as in	240
section 5733.40 of the Revised Code. Any reference in this chapter	241
to the Internal Revenue Code includes other laws of the United	242
States relating to federal income taxes.	243

As used in this chapter:

244

(A) "Adjusted gross income" or "Ohio adjusted gross income"	245
means federal adjusted gross income, as defined and used in the	246
Internal Revenue Code, adjusted as provided in this section:	247

(1) Add interest or dividends on obligations or securities of	248
any state or of any political subdivision or authority of any	249
state, other than this state and its subdivisions and authorities.	250

(2) Add interest or dividends on obligations of any	251
authority, commission, instrumentality, territory, or possession	252
of the United States to the extent that the interest or dividends	253
are exempt from federal income taxes but not from state income	254
taxes.	255

(3) Deduct interest or dividends on obligations of the United	256
States and its territories and possessions or of any authority,	257
commission, or instrumentality of the United States to the extent	258
that the interest or dividends are included in federal adjusted	259
gross income but exempt from state income taxes under the laws of	260
the United States.	261

(4) Deduct disability and survivor's benefits to the extent	262
included in federal adjusted gross income.	263

(5) Deduct benefits under Title II of the Social Security Act	264
and tier 1 railroad retirement benefits to the extent included in	265
federal adjusted gross income under section 86 of the Internal	266
Revenue Code.	267

(6) In the case of a taxpayer who is a beneficiary of a trust	268
that makes an accumulation distribution as defined in section 665	269
of the Internal Revenue Code, add, for the beneficiary's taxable	270
years beginning before 2002, the portion, if any, of such	271
distribution that does not exceed the undistributed net income of	272
the trust for the three taxable years preceding the taxable year	273
in which the distribution is made to the extent that the portion	274
was not included in the trust's taxable income for any of the	275
trust's taxable years beginning in 2002 or thereafter.	276
"Undistributed net income of a trust" means the taxable income of	277
the trust increased by (a)(i) the additions to adjusted gross	278
income required under division (A) of this section and (ii) the	279
personal exemptions allowed to the trust pursuant to section	280
642(b) of the Internal Revenue Code, and decreased by (b)(i) the	281
deductions to adjusted gross income required under division (A) of	282
this section, (ii) the amount of federal income taxes attributable	283
to such income, and (iii) the amount of taxable income that has	284
been included in the adjusted gross income of a beneficiary by	285
reason of a prior accumulation distribution. Any undistributed net	286
income included in the adjusted gross income of a beneficiary	287
shall reduce the undistributed net income of the trust commencing	288
with the earliest years of the accumulation period.	289

(7) Deduct the amount of wages and salaries, if any, not	290
otherwise allowable as a deduction but that would have been	291
allowable as a deduction in computing federal adjusted gross	292
income for the taxable year, had the targeted jobs credit allowed	293
and determined under sections 38, 51, and 52 of the Internal	294
Revenue Code not been in effect.	295

(8) Deduct any interest or interest equivalent on public	296
obligations and purchase obligations to the extent that the	297
interest or interest equivalent is included in federal adjusted	298
gross income.	299

(9) Add any loss or deduct any gain resulting from the sale,	300
exchange, or other disposition of public obligations to the extent	301
that the loss has been deducted or the gain has been included in	302
computing federal adjusted gross income.	303

(10) Deduct or add amounts, as provided under section	304
5747.70 of the Revised Code, related to contributions to variable	305
college savings program accounts made or tuition units purchased	306
pursuant to Chapter 3334. of the Revised Code.	307

(11)(a) Deduct, to the extent not otherwise allowable as a	308
deduction or exclusion in computing federal or Ohio adjusted gross	309
income for the taxable year, the amount the taxpayer paid during	310
the taxable year for medical care insurance and qualified	311
long-term care insurance for the taxpayer, the taxpayer's spouse,	312
and dependents. No deduction for medical care insurance under	313
division (A)(11) of this section shall be allowed either to any	314
taxpayer who is eligible to participate in any subsidized health	315
plan maintained by any employer of the taxpayer or of the	316
taxpayer's spouse, or to any taxpayer who is entitled to, or on	317
application would be entitled to, benefits under part A of Title	318
XVIII of the "Social Security Act," 49 Stat. 620 (1935), 42 U.S.C.	319
301, as amended. For the purposes of division (A)(11)(a) of this	320
section, "subsidized health plan" means a health plan for which	321
the employer pays any portion of the plan's cost. The	322

(i) The deduction allowed under division (A)(11)(a) of this	323
section shall be the net of any related premium refunds, related	324
premium reimbursements, or related insurance premium dividends	325
received during the taxable year.	326

(ii) For purposes of division (A)(11)(a) of this section,	327
"dependent" has the same meaning as in division (O) of this	328
section except that it also includes a child who meets all of	329
the following conditions:	330

(I) As of the close of the calendar year in which the	331
taxpayer's taxable year begins, the child has attained twenty-four	332
years of age but has not attained thirty years of age.	333

(II) The child is a resident of Ohio or a full-time student	334
at an accredited public or private institution of higher	335
education.	336

(III) Neither the child nor any spouse of the child is	337
employed by an employer that offers any health benefit plan under	338
which the child is eligible for coverage.	339

(IV) The child is not eligible for coverage under the	340
medicaid program established under Chapter 5111. of the Revised	341
Code or the medicare program established under Title XVIII of the	342
"Social Security Act," 42 U.S.C. 1395.	343

(b) Deduct, to the extent not otherwise deducted or excluded	344
in computing federal or Ohio adjusted gross income during the	345
taxable year, the amount the taxpayer paid during the taxable	346
year, not compensated for by any insurance or otherwise, for	347
medical care of the taxpayer, the taxpayer's spouse, and	348
dependents, to the extent the expenses exceed seven and one-half	349
per cent of the taxpayer's federal adjusted gross income.	350

(c) For purposes of division (A)(11) of this section,	351
"medical care" has the meaning given in section 213 of the	352
Internal Revenue Code, subject to the special rules, limitations,	353
and exclusions set forth therein, and "qualified long-term care"	354
has the same meaning given in section 7702B(c) of the Internal	355
Revenue Code.	356

(12)(a) Deduct any amount included in federal adjusted gross	357
income solely because the amount represents a reimbursement or	358
refund of expenses that in any year the taxpayer had deducted as	359
an itemized deduction pursuant to section 63 of the Internal	360
Revenue Code and applicable United States department of the	361
treasury regulations. The deduction otherwise allowed under	362
division (A)(12)(a) of this section shall be reduced to the extent	363
the reimbursement is attributable to an amount the taxpayer	364
deducted under this section in any taxable year.	365

(b) Add any amount not otherwise included in Ohio adjusted	366
gross income for any taxable year to the extent that the amount is	367
attributable to the recovery during the taxable year of any amount	368
deducted or excluded in computing federal or Ohio adjusted gross	369
income in any taxable year.	370

(13) Deduct any portion of the deduction described in section	371
1341(a)(2) of the Internal Revenue Code, for repaying previously	372
reported income received under a claim of right, that meets both	373
of the following requirements:	374

(a) It is allowable for repayment of an item that was	375
included in the taxpayer's adjusted gross income for a prior	376
taxable year and did not qualify for a credit under division (A)	377
or (B) of section 5747.05 of the Revised Code for that year;	378

(b) It does not otherwise reduce the taxpayer's adjusted	379
gross income for the current or any other taxable year.	380

(14) Deduct an amount equal to the deposits made to, and net	381
investment earnings of, a medical savings account during the	382
taxable year, in accordance with section 3924.66 of the Revised	383
Code. The deduction allowed by division (A)(14) of this section	384
does not apply to medical savings account deposits and earnings	385
otherwise deducted or excluded for the current or any other	386
taxable year from the taxpayer's federal adjusted gross income.	387

(15)(a) Add an amount equal to the funds withdrawn from a	388
medical savings account during the taxable year, and the net	389
investment earnings on those funds, when the funds withdrawn were	390
used for any purpose other than to reimburse an account holder	391
for, or to pay, eligible medical expenses, in accordance with	392
section 3924.66 of the Revised Code;	393

(b) Add the amounts distributed from a medical savings	394
account under division (A)(2) of section 3924.68 of the Revised	395
Code during the taxable year.	396

(16) Add any amount claimed as a credit under section	397
5747.059 of the Revised Code to the extent that such amount	398
satisfies either of the following:	399

(a) The amount was deducted or excluded from the computation	400
of the taxpayer's federal adjusted gross income as required to be	401
reported for the taxpayer's taxable year under the Internal	402
Revenue Code;	403

(b) The amount resulted in a reduction of the taxpayer's	404
federal adjusted gross income as required to be reported for any	405
of the taxpayer's taxable years under the Internal Revenue Code.	406

(17) Deduct the amount contributed by the taxpayer to an	407
individual development account program established by a county	408
department of job and family services pursuant to sections 329.11	409
to 329.14 of the Revised Code for the purpose of matching funds	410
deposited by program participants. On request of the tax	411
commissioner, the taxpayer shall provide any information that, in	412
the tax commissioner's opinion, is necessary to establish the	413
amount deducted under division (A)(17) of this section.	414

(18) Beginning in taxable year 2001 but not for any taxable	415
year beginning after December 31, 2005, if the taxpayer is married	416
and files a joint return and the combined federal adjusted gross	417
income of the taxpayer and the taxpayer's spouse for the taxable	418
year does not exceed one hundred thousand dollars, or if the	419
taxpayer is single and has a federal adjusted gross income for the	420
taxable year not exceeding fifty thousand dollars, deduct amounts	421
paid during the taxable year for qualified tuition and fees paid	422
to an eligible institution for the taxpayer, the taxpayer's	423
spouse, or any dependent of the taxpayer, who is a resident of	424
this state and is enrolled in or attending a program that	425
culminates in a degree or diploma at an eligible institution. The	426
deduction may be claimed only to the extent that qualified tuition	427
and fees are not otherwise deducted or excluded for any taxable	428
year from federal or Ohio adjusted gross income. The deduction may	429
not be claimed for educational expenses for which the taxpayer	430
claims a credit under section 5747.27 of the Revised Code.	431

(19) Add any reimbursement received during the taxable year	432
of any amount the taxpayer deducted under division (A)(18) of this	433
section in any previous taxable year to the extent the amount is	434
not otherwise included in Ohio adjusted gross income.	435

(20)(a)(i) Add five-sixths of the amount of depreciation	436
expense allowed by subsection (k) of section 168 of the Internal	437
Revenue Code, including the taxpayer's proportionate or	438
distributive share of the amount of depreciation expense allowed	439
by that subsection to a pass-through entity in which the taxpayer	440
has a direct or indirect ownership interest.	441

(ii) Add five-sixths of the amount of qualifying section 179	442
depreciation expense, including a person's proportionate or	443
distributive share of the amount of qualifying section 179	444
depreciation expense allowed to any pass-through entity in which	445
the person has a direct or indirect ownership. For the purposes of	446
this division, "qualifying section 179 depreciation expense" means	447
the difference between (I) the amount of depreciation expense	448
directly or indirectly allowed to the taxpayer under section 179	449
of the Internal Revenue Code, and (II) the amount of depreciation	450
expense directly or indirectly allowed to the taxpayer under	451
section 179 of the Internal Revenue Code as that section existed	452
on December 31, 2002.	453

The tax commissioner, under procedures established by the	454
commissioner, may waive the add-backs related to a pass-through	455
entity if the taxpayer owns, directly or indirectly, less than	456
five per cent of the pass-through entity.	457

(b) Nothing in division (A)(20) of this section shall be	458
construed to adjust or modify the adjusted basis of any asset.	459

(c) To the extent the add-back required under division	460
(A)(20)(a) of this section is attributable to property generating	461
nonbusiness income or loss allocated under section 5747.20 of the	462
Revised Code, the add-back shall be sitused to the same location	463
as the nonbusiness income or loss generated by the property for	464
the purpose of determining the credit under division (A) of	465
section 5747.05 of the Revised Code. Otherwise, the add-back shall	466
be apportioned, subject to one or more of the four alternative	467
methods of apportionment enumerated in section 5747.21 of the	468
Revised Code.	469

(d) For the purposes of division (A) of this section, net	470
operating loss carryback and carryforward shall not include	471
five-sixths of the allowance of any net operating loss deduction	472
carryback or carryforward to the taxable year to the extent such	473
loss resulted from depreciation allowed by section 168(k) of the	474
Internal Revenue Code and by the qualifying section 179	475
depreciation expense amount.	476

(21)(a) If the taxpayer was required to add an amount under	477
division (A)(20)(a) of this section for a taxable year, deduct	478
one-fifth of the amount so added for each of the five succeeding	479
taxable years.	480

(b) If the amount deducted under division (A)(21)(a) of this	481
section is attributable to an add-back allocated under division	482
(A)(20)(c) of this section, the amount deducted shall be sitused	483
to the same location. Otherwise, the add-back shall be apportioned	484
using the apportionment factors for the taxable year in which the	485
deduction is taken, subject to one or more of the four alternative	486
methods of apportionment enumerated in section 5747.21 of the	487
Revised Code.	488

(c) No deduction is available under division (A)(21)(a) of	489
this section with regard to any depreciation allowed by section	490
168(k) of the Internal Revenue Code and by the qualifying section	491
179 depreciation expense amount to the extent that such	492
depreciation resulted in or increased a federal net operating loss	493
carryback or carryforward to a taxable year to which division	494
(A)(20)(d) of this section does not apply.	495

(22) Deduct, to the extent not otherwise deducted or excluded	496
in computing federal or Ohio adjusted gross income for the taxable	497
year, the amount the taxpayer received during the taxable year as	498
reimbursement for life insurance premiums under section 5919.31 of	499
the Revised Code.	500

(23) Deduct, to the extent not otherwise deducted or excluded	501
in computing federal or Ohio adjusted gross income for the taxable	502
year, the amount the taxpayer received during the taxable year as	503
a death benefit paid by the adjutant general under section 5919.33	504
of the Revised Code.	505

(24) Deduct, to the extent included in federal adjusted gross	506
income and not otherwise allowable as a deduction or exclusion in	507
computing federal or Ohio adjusted gross income for the taxable	508
year, military pay and allowances received by the taxpayer during	509
the taxable year for active duty service in the United States	510
army, air force, navy, marine corps, or coast guard or reserve	511
components thereof or the national guard. The deduction may not be	512
claimed for military pay and allowances received by the taxpayer	513
while the taxpayer is stationed in this state.	514

(25) Deduct, to the extent not otherwise allowable as a	515
deduction or exclusion in computing federal or Ohio adjusted gross	516
income for the taxable year and not otherwise compensated for by	517
any other source, the amount of qualified organ donation expenses	518
incurred by the taxpayer during the taxable year, not to exceed	519
ten thousand dollars. A taxpayer may deduct qualified organ	520
donation expenses only once for all taxable years beginning with	521
taxable years beginning in 2007.	522

For the purposes of division (A)(25) of this section:

523

(a) "Human organ" means all or any portion of a human liver,	524
pancreas, kidney, intestine, or lung, and any portion of human	525
bone marrow.	526

(b) "Qualified organ donation expenses" means travel	527
expenses, lodging expenses, and wages and salary forgone by a	528
taxpayer in connection with the taxpayer's donation, while living,	529
of one or more of the taxpayer's human organs to another human	530
being.	531

(26) Deduct, to the extent not otherwise deducted or excluded	532
in computing federal or Ohio adjusted gross income for the taxable	533
year, amounts received by the taxpayer as retired military	534
personnel pay for service in the United States army, navy, air	535
force, coast guard, or marine corps or reserve components thereof,	536
or the national guard. If the taxpayer receives income on account	537
of retirement paid under the federal civil service retirement	538
system or federal employees retirement system, or under any	539
successor retirement program enacted by the congress of the United	540
States that is established and maintained for retired employees of	541
the United States government, and such retirement income is based,	542
in whole or in part, on credit for the taxpayer's military	543
service, the deduction allowed under this division shall include	544
only that portion of such retirement income that is attributable	545
to the taxpayer's military service, to the extent that portion of	546
such retirement income is otherwise included in federal adjusted	547
gross income and is not otherwise deducted under this section. Any	548
amount deducted under division (A)(26) of this section is not	549
included in the taxpayer's adjusted gross income for the purposes	550
of section 5747.055 of the Revised Code. No amount may be	551
deducted under division (A)(26) of this section on the basis of	552
which a credit was claimed under section 5747.055 of the Revised	553
Code.	554

(27) Deduct, to the extent not otherwise deducted or excluded	555
in computing federal or Ohio adjusted gross income for the taxable	556
year, income that would have been excluded from federal adjusted	557
gross income under sections 105 and 106 of the Internal Revenue	558
Code but for the fact that the taxpayer's child met the	559
conditions set forth in divisions (A)(11)(a)(ii)(I) to (IV) of	560
this section.	561

(B) "Business income" means income, including gain or loss,	562
arising from transactions, activities, and sources in the regular	563
course of a trade or business and includes income, gain, or loss	564
from real property, tangible property, and intangible property if	565
the acquisition, rental, management, and disposition of the	566
property constitute integral parts of the regular course of a	567
trade or business operation. "Business income" includes income,	568
including gain or loss, from a partial or complete liquidation of	569
a business, including, but not limited to, gain or loss from the	570
sale or other disposition of goodwill.	571

(C) "Nonbusiness income" means all income other than business	572
income and may include, but is not limited to, compensation, rents	573
and royalties from real or tangible personal property, capital	574
gains, interest, dividends and distributions, patent or copyright	575
royalties, or lottery winnings, prizes, and awards.	576

(D) "Compensation" means any form of remuneration paid to an	577
employee for personal services.	578

(E) "Fiduciary" means a guardian, trustee, executor,	579
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 months	582
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 Code	585
of 1986," 100 Stat. 2085, 26 U.S.C.A. 1, as amended.	586

(I) "Resident" means any of the following, provided that	587
division (I)(3) of this section applies only to taxable years of a	588
trust beginning in 2002 or thereafter:	589

(1) An individual who is domiciled in this state, subject to	590
section 5747.24 of the Revised Code;	591

(2) The estate of a decedent who at the time of death was	592
domiciled in this state. The domicile tests of section 5747.24 of	593
the Revised Code are not controlling for purposes of division	594
(I)(2) of this section.	595

(3) A trust that, in whole or part, resides in this state. If	596
only part of a trust resides in this state, the trust is a	597
resident only with respect to that part.	598

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

599

(a) A trust resides in this state for the trust's current	600
taxable year to the extent, as described in division (I)(3)(d) of	601
this section, that the trust consists directly or indirectly, in	602
whole or in part, of assets, net of any related liabilities, that	603
were transferred, or caused to be transferred, directly or	604
indirectly, to the trust by any of the following:	605

(i) A person, a court, or a governmental entity or	606
instrumentality on account of the death of a decedent, but only if	607
the trust is described in division (I)(3)(e)(i) or (ii) of this	608
section;	609

(ii) A person who was domiciled in this state for the	610
purposes of this chapter when the person directly or indirectly	611
transferred assets to an irrevocable trust, but only if at least	612
one of the trust's qualifying beneficiaries is domiciled in this	613
state for the purposes of this chapter during all or some portion	614
of the trust's current taxable year;	615

(iii) A person who was domiciled in this state for the	616
purposes of this chapter when the trust document or instrument or	617
part of the trust document or instrument became irrevocable, but	618
only if at least one of the trust's qualifying beneficiaries is a	619
resident domiciled in this state for the purposes of this chapter	620
during all or some portion of the trust's current taxable year. If	621
a trust document or instrument became irrevocable upon the death	622
of a person who at the time of death was domiciled in this state	623
for purposes of this chapter, that person is a person described in	624
division (I)(3)(a)(iii) of this section.	625

(b) A trust is irrevocable to the extent that the transferor	626
is not considered to be the owner of the net assets of the trust	627
under sections 671 to 678 of the Internal Revenue Code.	628

(c) With respect to a trust other than a charitable lead	629
trust, "qualifying beneficiary" has the same meaning as "potential	630
current beneficiary" as defined in section 1361(e)(2) of the	631
Internal Revenue Code, and with respect to a charitable lead trust	632
"qualifying beneficiary" is any current, future, or contingent	633
beneficiary, but with respect to any trust "qualifying	634
beneficiary" excludes a person or a governmental entity or	635
instrumentality to any of which a contribution would qualify for	636
the charitable deduction under section 170 of the Internal Revenue	637
Code.	638

(d) For the purposes of division (I)(3)(a) of this section,	639
the extent to which a trust consists directly or indirectly, in	640
whole or in part, of assets, net of any related liabilities, that	641
were transferred directly or indirectly, in whole or part, to the	642
trust by any of the sources enumerated in that division shall be	643
ascertained by multiplying the fair market value of the trust's	644
assets, net of related liabilities, by the qualifying ratio, which	645
shall be computed as follows:	646

(i) The first time the trust receives assets, the numerator	647
of the qualifying ratio is the fair market value of those assets	648
at that time, net of any related liabilities, from sources	649
enumerated in division (I)(3)(a) of this section. The denominator	650
of the qualifying ratio is the fair market value of all the	651
trust's assets at that time, net of any related liabilities.	652

(ii) Each subsequent time the trust receives assets, a	653
revised qualifying ratio shall be computed. The numerator of the	654
revised qualifying ratio is the sum of (1) the fair market value	655
of the trust's assets immediately prior to the subsequent	656
transfer, net of any related liabilities, multiplied by the	657
qualifying ratio last computed without regard to the subsequent	658
transfer, and (2) the fair market value of the subsequently	659
transferred assets at the time transferred, net of any related	660
liabilities, from sources enumerated in division (I)(3)(a) of this	661
section. The denominator of the revised qualifying ratio is the	662
fair market value of all the trust's assets immediately after the	663
subsequent transfer, net of any related liabilities.	664

(iii) Whether a transfer to the trust is by or from any of	665
the sources enumerated in division (I)(3)(a) of this section shall	666
be ascertained without regard to the domicile of the trust's	667
beneficiaries.	668

(e) For the purposes of division (I)(3)(a)(i) of this	669
section:	670

(i) A trust is described in division (I)(3)(e)(i) of this	671
section if the trust is a testamentary trust and the testator of	672
that testamentary trust was domiciled in this state at the time of	673
the testator's death for purposes of the taxes levied under	674
Chapter 5731. of the Revised Code.	675

(ii) A trust is described in division (I)(3)(e)(ii) of this	676
section if the transfer is a qualifying transfer described in any	677
of divisions (I)(3)(f)(i) to (vi) of this section, the trust is an	678
irrevocable inter vivos trust, and at least one of the trust's	679
qualifying beneficiaries is domiciled in this state for purposes	680
of this chapter during all or some portion of the trust's current	681
taxable year.	682

(f) For the purposes of division (I)(3)(e)(ii) of this	683
section, a "qualifying transfer" is a transfer of assets, net of	684
any related liabilities, directly or indirectly to a trust, if the	685
transfer is described in any of the following:	686

(i) The transfer is made to a trust, created by the decedent	687
before the decedent's death and while the decedent was domiciled	688
in this state for the purposes of this chapter, and, prior to the	689
death of the decedent, the trust became irrevocable while the	690
decedent was domiciled in this state for the purposes of this	691
chapter.	692

(ii) The transfer is made to a trust to which the decedent,	693
prior to the decedent's death, had directly or indirectly	694
transferred assets, net of any related liabilities, while the	695
decedent was domiciled in this state for the purposes of this	696
chapter, and prior to the death of the decedent the trust became	697
irrevocable while the decedent was domiciled in this state for the	698
purposes of this chapter.	699

(iii) The transfer is made on account of a contractual	700
relationship existing directly or indirectly between the	701
transferor and either the decedent or the estate of the decedent	702
at any time prior to the date of the decedent's death, and the	703
decedent was domiciled in this state at the time of death for	704
purposes of the taxes levied under Chapter 5731. of the Revised	705
Code.	706

(iv) The transfer is made to a trust on account of a	707
contractual relationship existing directly or indirectly between	708
the transferor and another person who at the time of the	709
decedent's death was domiciled in this state for purposes of this	710
chapter.	711

(v) The transfer is made to a trust on account of the will of	712
a testator.	713

(vi) The transfer is made to a trust created by or caused to	714
be created by a court, and the trust was directly or indirectly	715
created in connection with or as a result of the death of an	716
individual who, for purposes of the taxes levied under Chapter	717
5731. of the Revised Code, was domiciled in this state at the time	718
of the individual's death.	719

(g) The tax commissioner may adopt rules to ascertain the	720
part of a trust residing in this state.	721

(J) "Nonresident" means an individual or estate that is not a	722
resident. An individual who is a resident for only part of a	723
taxable year is a nonresident for the remainder of that taxable	724
year.	725

(K) "Pass-through entity" has the same meaning as in section	726
5733.04 of the Revised Code.	727

(L) "Return" means the notifications and reports required to	728
be filed pursuant to this chapter for the purpose of reporting the	729
tax due and includes declarations of estimated tax when so	730
required.	731

(M) "Taxable year" means the calendar year or the taxpayer's	732
fiscal year ending during the calendar year, or fractional part	733
thereof, upon which the adjusted gross income is calculated	734
pursuant to this chapter.	735

(N) "Taxpayer" means any person subject to the tax imposed by	736
section 5747.02 of the Revised Code or any pass-through entity	737
that makes the election under division (D) of section 5747.08 of	738
the Revised Code.	739

(O) "Dependents" means dependents as defined in the Internal	740
Revenue Code and as claimed in the taxpayer's federal income tax	741
return for the taxable year or which the taxpayer would have been	742
permitted to claim had the taxpayer filed a federal income tax	743
return.	744

(P) "Principal county of employment" means, in the case of a	745
nonresident, the county within the state in which a taxpayer	746
performs services for an employer or, if those services are	747
performed in more than one county, the county in which the major	748
portion of the services are performed.	749

(Q) As used in sections 5747.50 to 5747.55 of the Revised	750
Code:	751

(1) "Subdivision" means any county, municipal corporation,	752
park district, or township.	753

(2) "Essential local government purposes" includes all	754
functions that any subdivision is required by general law to	755
exercise, including like functions that are exercised under a	756
charter adopted pursuant to the Ohio Constitution.	757

(R) "Overpayment" means any amount already paid that exceeds	758
the figure determined to be the correct amount of the tax.	759

(S) "Taxable income" or "Ohio taxable income" applies only to	760
estates and trusts, and means federal taxable income, as defined	761
and used in the Internal Revenue Code, adjusted as follows:	762

(1) Add interest or dividends, net of ordinary, necessary,	763
and reasonable expenses not deducted in computing federal taxable	764
income, on obligations or securities of any state or of any	765
political subdivision or authority of any state, other than this	766
state and its subdivisions and authorities, but only to the extent	767
that such net amount is not otherwise includible in Ohio taxable	768
income and is described in either division (S)(1)(a) or (b) of	769
this section:	770

(a) The net amount is not attributable to the S portion of an	771
electing small business trust and has not been distributed to	772
beneficiaries for the taxable year;	773

(b) The net amount is attributable to the S portion of an	774
electing small business trust for the taxable year.	775

(2) Add interest or dividends, net of ordinary, necessary,	776
and reasonable expenses not deducted in computing federal taxable	777
income, on obligations of any authority, commission,	778
instrumentality, territory, or possession of the United States to	779
the extent that the interest or dividends are exempt from federal	780
income taxes but not from state income taxes, but only to the	781
extent that such net amount is not otherwise includible in Ohio	782
taxable income and is described in either division (S)(1)(a) or	783
(b) of this section;	784

(3) Add the amount of personal exemption allowed to the	785
estate pursuant to section 642(b) of the Internal Revenue Code;	786

(4) Deduct interest or dividends, net of related expenses	787
deducted in computing federal taxable income, on obligations of	788
the United States and its territories and possessions or of any	789
authority, commission, or instrumentality of the United States to	790
the extent that the interest or dividends are exempt from state	791
taxes under the laws of the United States, but only to the extent	792
that such amount is included in federal taxable income and is	793
described in either division (S)(1)(a) or (b) of this section;	794

(5) Deduct the amount of wages and salaries, if any, not	795
otherwise allowable as a deduction but that would have been	796
allowable as a deduction in computing federal taxable income for	797
the taxable year, had the targeted jobs credit allowed under	798
sections 38, 51, and 52 of the Internal Revenue Code not been in	799
effect, but only to the extent such amount relates either to	800
income included in federal taxable income for the taxable year or	801
to income of the S portion of an electing small business trust for	802
the taxable year;	803

(6) Deduct any interest or interest equivalent, net of	804
related expenses deducted in computing federal taxable income, on	805
public obligations and purchase obligations, but only to the	806
extent that such net amount relates either to income included in	807
federal taxable income for the taxable year or to income of the S	808
portion of an electing small business trust for the taxable year;	809

(7) Add any loss or deduct any gain resulting from sale,	810
exchange, or other disposition of public obligations to the extent	811
that such loss has been deducted or such gain has been included in	812
computing either federal taxable income or income of the S portion	813
of an electing small business trust for the taxable year;	814

(8) Except in the case of the final return of an estate, add	815
any amount deducted by the taxpayer on both its Ohio estate tax	816
return pursuant to section 5731.14 of the Revised Code, and on its	817
federal income tax return in determining federal taxable income;	818

(9)(a) Deduct any amount included in federal taxable income	819
solely because the amount represents a reimbursement or refund of	820
expenses that in a previous year the decedent had deducted as an	821
itemized deduction pursuant to section 63 of the Internal Revenue	822
Code and applicable treasury regulations. The deduction otherwise	823
allowed under division (S)(9)(a) of this section shall be reduced	824
to the extent the reimbursement is attributable to an amount the	825
taxpayer or decedent deducted under this section in any taxable	826
year.	827

(b) Add any amount not otherwise included in Ohio taxable	828
income for any taxable year to the extent that the amount is	829
attributable to the recovery during the taxable year of any amount	830
deducted or excluded in computing federal or Ohio taxable income	831
in any taxable year, but only to the extent such amount has not	832
been distributed to beneficiaries for the taxable year.	833

(10) Deduct any portion of the deduction described in section	834
1341(a)(2) of the Internal Revenue Code, for repaying previously	835
reported income received under a claim of right, that meets both	836
of the following requirements:	837

(a) It is allowable for repayment of an item that was	838
included in the taxpayer's taxable income or the decedent's	839
adjusted gross income for a prior taxable year and did not qualify	840
for a credit under division (A) or (B) of section 5747.05 of the	841
Revised Code for that year.	842

(b) It does not otherwise reduce the taxpayer's taxable	843
income or the decedent's adjusted gross income for the current or	844
any other taxable year.	845

(11) Add any amount claimed as a credit under section	846
5747.059 of the Revised Code to the extent that the amount	847
satisfies either of the following:	848

(a) The amount was deducted or excluded from the computation	849
of the taxpayer's federal taxable income as required to be	850
reported for the taxpayer's taxable year under the Internal	851
Revenue Code;	852

(b) The amount resulted in a reduction in the taxpayer's	853
federal taxable income as required to be reported for any of the	854
taxpayer's taxable years under the Internal Revenue Code.	855

(12) Deduct any amount, net of related expenses deducted in	856
computing federal taxable income, that a trust is required to	857
report as farm income on its federal income tax return, but only	858
if the assets of the trust include at least ten acres of land	859
satisfying the definition of "land devoted exclusively to	860
agricultural use" under section 5713.30 of the Revised Code,	861
regardless of whether the land is valued for tax purposes as such	862
land under sections 5713.30 to 5713.38 of the Revised Code. If the	863
trust is a pass-through entity investor, section 5747.231 of the	864
Revised Code applies in ascertaining if the trust is eligible to	865
claim the deduction provided by division (S)(12) of this section	866
in connection with the pass-through entity's farm income.	867

Except for farm income attributable to the S portion of an	868
electing small business trust, the deduction provided by division	869
(S)(12) of this section is allowed only to the extent that the	870
trust has not distributed such farm income. Division (S)(12) of	871
this section applies only to taxable years of a trust beginning in	872
2002 or thereafter.	873

(13) Add the net amount of income described in section 641(c)	874
of the Internal Revenue Code to the extent that amount is not	875
included in federal taxable income.	876

(14) Add or deduct the amount the taxpayer would be required	877
to add or deduct under division (A)(20) or (21) of this section if	878
the taxpayer's Ohio taxable income were computed in the same	879
manner as an individual's Ohio adjusted gross income is computed	880
under this section. In the case of a trust, division (S)(14) of	881
this section applies only to any of the trust's taxable years	882
beginning in 2002 or thereafter.	883

(T) "School district income" and "school district income tax"	884
have the same meanings as in section 5748.01 of the Revised Code.	885

(U) As used in divisions (A)(8), (A)(9), (S)(6), and (S)(7)	886
of this section, "public obligations," "purchase obligations," and	887
"interest or interest equivalent" have the same meanings as in	888
section 5709.76 of the Revised Code.	889

(V) "Limited liability company" means any limited liability	890
company formed under Chapter 1705. of the Revised Code or under	891
the laws of any other state.	892

(W) "Pass-through entity investor" means any person who,	893
during any portion of a taxable year of a pass-through entity, is	894
a partner, member, shareholder, or equity investor in that	895
pass-through entity.	896

(X) "Banking day" has the same meaning as in section 1304.01	897
of the Revised Code.	898

(Y) "Month" means a calendar month.

899

(Z) "Quarter" means the first three months, the second three	900
months, the third three months, or the last three months of the	901
taxpayer's taxable year.	902

(AA)(1) "Eligible institution" means a state university or	903
state institution of higher education as defined in section	904
3345.011 of the Revised Code, or a private, nonprofit college,	905
university, or other post-secondary institution located in this	906
state that possesses a certificate of authorization issued by the	907
Ohio board of regents pursuant to Chapter 1713. of the Revised	908
Code or a certificate of registration issued by the state board of	909
career colleges and schools under Chapter 3332. of the Revised	910
Code.	911

(2) "Qualified tuition and fees" means tuition and fees	912
imposed by an eligible institution as a condition of enrollment or	913
attendance, not exceeding two thousand five hundred dollars in	914
each of the individual's first two years of post-secondary	915
education. If the individual is a part-time student, "qualified	916
tuition and fees" includes tuition and fees paid for the academic	917
equivalent of the first two years of post-secondary education	918
during a maximum of five taxable years, not exceeding a total of	919
five thousand dollars. "Qualified tuition and fees" does not	920
include:	921

(a) Expenses for any course or activity involving sports,	922
games, or hobbies unless the course or activity is part of the	923
individual's degree or diploma program;	924

(b) The cost of books, room and board, student activity fees,	925
athletic fees, insurance expenses, or other expenses unrelated to	926
the individual's academic course of instruction;	927

(c) Tuition, fees, or other expenses paid or reimbursed	928
through an employer, scholarship, grant in aid, or other	929
educational benefit program.	930

(BB)(1) "Modified business income" means the business income	931
included in a trust's Ohio taxable income after such taxable	932
income is first reduced by the qualifying trust amount, if any.	933

(2) "Qualifying trust amount" of a trust means capital gains	934
and losses from the sale, exchange, or other disposition of equity	935
or ownership interests in, or debt obligations of, a qualifying	936
investee to the extent included in the trust's Ohio taxable	937
income, but only if the following requirements are satisfied:	938

(a) The book value of the qualifying investee's physical	939
assets in this state and everywhere, as of the last day of the	940
qualifying investee's fiscal or calendar year ending immediately	941
prior to the date on which the trust recognizes the gain or loss,	942
is available to the trust.	943

(b) The requirements of section 5747.011 of the Revised Code	944
are satisfied for the trust's taxable year in which the trust	945
recognizes the gain or loss.	946

Any gain or loss that is not a qualifying trust amount is	947
modified business income, qualifying investment income, or	948
modified nonbusiness income, as the case may be.	949

(3) "Modified nonbusiness income" means a trust's Ohio	950
taxable income other than modified business income, other than the	951
qualifying trust amount, and other than qualifying investment	952
income, as defined in section 5747.012 of the Revised Code, to the	953
extent such qualifying investment income is not otherwise part of	954
modified business income.	955

(4) "Modified Ohio taxable income" applies only to trusts,	956
and means the sum of the amounts described in divisions (BB)(4)(a)	957
to (c) of this section:	958

(a) The fraction, calculated under section 5747.013, and	959
applying section 5747.231 of the Revised Code, multiplied by the	960
sum of the following amounts:	961

(i) The trust's modified business income;

962

(ii) The trust's qualifying investment income, as defined in	963
section 5747.012 of the Revised Code, but only to the extent the	964
qualifying investment income does not otherwise constitute	965
modified business income and does not otherwise constitute a	966
qualifying trust amount.	967

(b) The qualifying trust amount multiplied by a fraction, the	968
numerator of which is the sum of the book value of the qualifying	969
investee's physical assets in this state on the last day of the	970
qualifying investee's fiscal or calendar year ending immediately	971
prior to the day on which the trust recognizes the qualifying	972
trust amount, and the denominator of which is the sum of the book	973
value of the qualifying investee's total physical assets	974
everywhere on the last day of the qualifying investee's fiscal or	975
calendar year ending immediately prior to the day on which the	976
trust recognizes the qualifying trust amount. If, for a taxable	977
year, the trust recognizes a qualifying trust amount with respect	978
to more than one qualifying investee, the amount described in	979
division (BB)(4)(b) of this section shall equal the sum of the	980
products so computed for each such qualifying investee.	981

(c)(i) With respect to a trust or portion of a trust that is	982
a resident as ascertained in accordance with division (I)(3)(d) of	983
this section, its modified nonbusiness income.	984

(ii) With respect to a trust or portion of a trust that is	985
not a resident as ascertained in accordance with division	986
(I)(3)(d) of this section, the amount of its modified nonbusiness	987
income satisfying the descriptions in divisions (B)(2) to (5) of	988
section 5747.20 of the Revised Code, except as otherwise provided	989
in division (BB)(4)(c)(ii) of this section. With respect to a	990
trust or portion of a trust that is not a resident as ascertained	991
in accordance with division (I)(3)(d) of this section, the trust's	992
portion of modified nonbusiness income recognized from the sale,	993
exchange, or other disposition of a debt interest in or equity	994
interest in a section 5747.212 entity, as defined in section	995
5747.212 of the Revised Code, without regard to division (A) of	996
that section, shall not be allocated to this state in accordance	997
with section 5747.20 of the Revised Code but shall be apportioned	998
to this state in accordance with division (B) of section 5747.212	999
of the Revised Code without regard to division (A) of that	1000
section.	1001

If the allocation and apportionment of a trust's income under	1002
divisions (BB)(4)(a) and (c) of this section do not fairly	1003
represent the modified Ohio taxable income of the trust in this	1004
state, the alternative methods described in division (C) of	1005
section 5747.21 of the Revised Code may be applied in the manner	1006
and to the same extent provided in that section.	1007

(5)(a) Except as set forth in division (BB)(5)(b) of this	1008
section, "qualifying investee" means a person in which a trust has	1009
an equity or ownership interest, or a person or unit of government	1010
the debt obligations of either of which are owned by a trust. For	1011
the purposes of division (BB)(2)(a) of this section and for the	1012
purpose of computing the fraction described in division (BB)(4)(b)	1013
of this section, all of the following apply:	1014

(i) If the qualifying investee is a member of a qualifying	1015
controlled group on the last day of the qualifying investee's	1016
fiscal or calendar year ending immediately prior to the date on	1017
which the trust recognizes the gain or loss, then "qualifying	1018
investee" includes all persons in the qualifying controlled group	1019
on such last day.	1020

(ii) If the qualifying investee, or if the qualifying	1021
investee and any members of the qualifying controlled group of	1022
which the qualifying investee is a member on the last day of the	1023
qualifying investee's fiscal or calendar year ending immediately	1024
prior to the date on which the trust recognizes the gain or loss,	1025
separately or cumulatively own, directly or indirectly, on the	1026
last day of the qualifying investee's fiscal or calendar year	1027
ending immediately prior to the date on which the trust recognizes	1028
the qualifying trust amount, more than fifty per cent of the	1029
equity of a pass-through entity, then the qualifying investee and	1030
the other members are deemed to own the proportionate share of the	1031
pass-through entity's physical assets which the pass-through	1032
entity directly or indirectly owns on the last day of the	1033
pass-through entity's calendar or fiscal year ending within or	1034
with the last day of the qualifying investee's fiscal or calendar	1035
year ending immediately prior to the date on which the trust	1036
recognizes the qualifying trust amount.	1037

(iii) For the purposes of division (BB)(5)(a)(iii) of this	1038
section, "upper level pass-through entity" means a pass-through	1039
entity directly or indirectly owning any equity of another	1040
pass-through entity, and "lower level pass-through entity" means	1041
that other pass-through entity.	1042

An upper level pass-through entity, whether or not it is also	1043
a qualifying investee, is deemed to own, on the last day of the	1044
upper level pass-through entity's calendar or fiscal year, the	1045
proportionate share of the lower level pass-through entity's	1046
physical assets that the lower level pass-through entity directly	1047
or indirectly owns on the last day of the lower level pass-through	1048
entity's calendar or fiscal year ending within or with the last	1049
day of the upper level pass-through entity's fiscal or calendar	1050
year. If the upper level pass-through entity directly and	1051
indirectly owns less than fifty per cent of the equity of the	1052
lower level pass-through entity on each day of the upper level	1053
pass-through entity's calendar or fiscal year in which or with	1054
which ends the calendar or fiscal year of the lower level	1055
pass-through entity and if, based upon clear and convincing	1056
evidence, complete information about the location and cost of the	1057
physical assets of the lower pass-through entity is not available	1058
to the upper level pass-through entity, then solely for purposes	1059
of ascertaining if a gain or loss constitutes a qualifying trust	1060
amount, the upper level pass-through entity shall be deemed as	1061
owning no equity of the lower level pass-through entity for each	1062
day during the upper level pass-through entity's calendar or	1063
fiscal year in which or with which ends the lower level	1064
pass-through entity's calendar or fiscal year. Nothing in division	1065
(BB)(5)(a)(iii) of this section shall be construed to provide for	1066
any deduction or exclusion in computing any trust's Ohio taxable	1067
income.	1068

(b) With respect to a trust that is not a resident for the	1069
taxable year and with respect to a part of a trust that is not a	1070
resident for the taxable year, "qualifying investee" for that	1071
taxable year does not include a C corporation if both of the	1072
following apply:	1073

(i) During the taxable year the trust or part of the trust	1074
recognizes a gain or loss from the sale, exchange, or other	1075
disposition of equity or ownership interests in, or debt	1076
obligations of, the C corporation.	1077

(ii) Such gain or loss constitutes nonbusiness income.

1078

(6) "Available" means information is such that a person is	1079
able to learn of the information by the due date plus extensions,	1080
if any, for filing the return for the taxable year in which the	1081
trust recognizes the gain or loss.	1082

(CC) "Qualifying controlled group" has the same meaning as in	1083
section 5733.04 of the Revised Code.	1084

(DD) "Related member" has the same meaning as in section	1085
5733.042 of the Revised Code.	1086

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

1087

(a) "Qualifying person" means any person other than a	1088
qualifying corporation.	1089

(b) "Qualifying corporation" means any person classified for	1090
federal income tax purposes as an association taxable as a	1091
corporation, except either of the following:	1092

(i) A corporation that has made an election under subchapter	1093
S, chapter one, subtitle A, of the Internal Revenue Code for its	1094
taxable year ending within, or on the last day of, the investor's	1095
taxable year;	1096

(ii) A subsidiary that is wholly owned by any corporation	1097
that has made an election under subchapter S, chapter one,	1098
subtitle A of the Internal Revenue Code for its taxable year	1099
ending within, or on the last day of, the investor's taxable year.	1100

(2) For the purposes of this chapter, unless expressly stated	1101
otherwise, no qualifying person indirectly owns any asset directly	1102
or indirectly owned by any qualifying corporation.	1103

(FF) 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 tax	1108
trust that makes a qualifying pre-income tax trust election as	1109
described in division (FF)(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 controls,	1114
directly, indirectly, or constructively through related interests,	1115
five per cent or more of the ownership or equity interests. The	1116
trustee shall notify the tax commissioner in writing of the	1117
election on or before April 15, 2006. The election, if timely	1118
made, shall be effective on and after January 1, 2006, and shall	1119
apply for all tax periods and tax years until revoked by the	1120
trustee of the trust.	1121

(4) A "pre-income tax trust" is a trust that satisfies all of	1122
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 the	1128
trust was created.	1129

Section 2. That existing sections 1739.05, 1751.14, 3923.24,	1130
and 5747.01 of the Revised Code are hereby repealed.	1131

Section 3. Section 1751.14 of the Revised Code, as amended by	1132
this act, shall apply only to policies, contracts, and agreements	1133
that are delivered, issued for delivery, or renewed in this state	1134
six months after the effective date of this act; section 3923.24	1135
of the Revised Code, as amended by this act, shall apply only to	1136
policies of sickness and accident insurance and plans of health	1137
coverage that are established or modified in this state six months	1138
after the effective date of this act; and section 3923.84, as	1139
enacted by this act, shall apply only to public employee health	1140
plans established or modified in this state six months after the	1141
effective date of this act.	1142