To amend sections 5733.98 and 5747.98 and to enact sections 5733.421 and 5747.391 of the Revised Code to create a tax credit for wages paid by employers to employees who have been convicted of felonies.

Section 1. That sections 5733.98 and 5747.98 be amended and sections 5733.421 and 5747.391 of the Revised Code be enacted to read as follows:

Sec. 5733.421.  (A) As used in this section:

(1) "Qualified reforming felon" means an individual who:

(a) Has been convicted of a felony under any statute of the United States or any state;

(b) Was hired by a taxpayer within one year of the conviction or, if sentenced to a term of incarceration, was hired within one year of being released from incarceration; and

(c) Is a member of a family that, in the six months immediately preceding the date of hiring, had an income that, on an annual basis, would be seventy per cent or less of the most recent lower living standard calculated by the federal bureau of labor statistics.

(2) "Family" means an individual, an individual's spouse, and children.

(3) "Wages" has the same meaning as in section 3306 of the Internal Revenue Code.

(B)(1) Beginning in tax year 2006, a nonrefundable credit is allowed against the tax imposed by section 5733.06 of the Revised Code for the wages paid by a taxpayer to a qualified reforming felon who works at least one hundred twenty hours for the taxpayer during the taxpayer's taxable year. The amount of the credit shall be calculated as follows:

(a) For each qualified reforming felon who works at least four hundred hours during the taxable year, the credit equals forty per cent of the wages paid to the qualified reforming felon, but shall not exceed two thousand four hundred dollars per qualified reforming felon.

(b) For each qualified reforming felon who works less than four hundred hours but at least one hundred twenty hours during the taxable year, the credit equals twenty-five per cent of the wages paid to the qualified reforming felon, but shall not exceed one thousand five hundred dollars per qualified reforming felon.

The credit shall be claimed in the order required under section 5733.98 of the Revised Code. The credit, to the extent it exceeds the taxpayer's tax liability for the tax year after allowance for any other credits that precede the credit under that section in that order, may be carried forward for the next five succeeding tax years, but the amount of any excess credit allowed in any such year shall be deducted from the balance carried forward to the succeeding year.

(2) A taxpayer who received federally funded payments for on-the-job training of a qualified reforming felon may not claim the credit allowed under this section for any portion of the wages paid to that qualified reforming felon.

(3) A taxpayer may not claim the credit allowed under this section for any portion of the wages paid to a qualified reforming felon for services that were the same as, or substantially similar to, services that, but for a strike or lockout, would have been performed by another employee.

(4) If a qualified reforming felon's employment is terminated during the taxable year and the qualified reforming felon was employed by the taxpayer for less than twelve months, the taxpayer may not claim the full amount of the credit allowed under this section unless the qualified reforming felon voluntarily terminated employment; was unable to continue employment due to a disability or death; or was terminated for cause. If a qualified reforming felon's employment is terminated for any other reason, the amount of the credit to which the taxpayer is entitled under this section is reduced by a percentage equal to the percentage of the taxable year that the qualified reforming felon was not employed by the taxpayer.

(C)(1) The tax commissioner may require a taxpayer to furnish such information as is necessary to support a claim for a credit under this section, and no credit shall be allowed unless the information is provided.

(2) All files, statements, returns, reports, papers, or documents of any kind relating to qualified reforming felons or their families are not public records under section 149.43 of the Revised Code.

Sec. 5733.98.  (A) To provide a uniform procedure for calculating the amount of tax imposed by section 5733.06 of the Revised Code that is due under this chapter, a taxpayer shall claim any credits to which it is entitled in the following order, except as otherwise provided in section 5733.058 of the Revised Code:

(1) The credit for taxes paid by a qualifying pass-through entity allowed under section 5733.0611 of the Revised Code;

(2) The credit allowed for financial institutions under section 5733.45 of the Revised Code;

(3) The credit for qualifying affiliated groups under section 5733.068 of the Revised Code;

(4) The subsidiary corporation credit under section 5733.067 of the Revised Code;

(5) The savings and loan assessment credit under section 5733.063 of the Revised Code;

(6) The credit for recycling and litter prevention donations under section 5733.064 of the Revised Code;

(7) The credit for employers that enter into agreements with child day-care centers under section 5733.36 of the Revised Code;

(8) The credit for employers that reimburse employee child care expenses under section 5733.38 of the Revised Code;

(9) The credit for maintaining railroad active grade crossing warning devices under section 5733.43 of the Revised Code;

(10) The credit for purchases of lights and reflectors under section 5733.44 of the Revised Code;

(11) The job retention credit under division (B) of section 5733.0610 of the Revised Code;

(12) The credit for losses on loans made under the Ohio venture capital program under sections 150.01 to 150.10 of the Revised Code if the taxpayer elected a nonrefundable credit under section 150.07 of the Revised Code;

(13) The credit for purchases of new manufacturing machinery and equipment under section 5733.31 or section 5733.311 of the Revised Code;

(14) The second credit for purchases of new manufacturing machinery and equipment under section 5733.33 of the Revised Code;

(15) The job training credit under section 5733.42 of the Revised Code;

(16) The credit for qualified research expenses under section 5733.351 of the Revised Code;

(17) The enterprise zone credit under section 5709.66 of the Revised Code;

(18) The credit for the eligible costs associated with a voluntary action under section 5733.34 of the Revised Code;

(19) The credit for employers that establish on-site child day-care centers under section 5733.37 of the Revised Code;

(20) The credit for employers that employ qualified reforming felons under section 5733.421 of the Revised Code;

(21) The ethanol plant investment credit under section 5733.46 of the Revised Code;

(21)(22) The credit for purchases of qualifying grape production property under section 5733.32 of the Revised Code;

(22)(23) The export sales credit under section 5733.069 of the Revised Code;

(23)(24) The credit for research and development and technology transfer investors under section 5733.35 of the Revised Code;

(24)(25) The enterprise zone credits under section 5709.65 of the Revised Code;

(25)(26) The credit for using Ohio coal under section 5733.39 of the Revised Code;

(26)(27) The research and development credit under section 5733.352 of the Revised Code;

(27)(28) The credit for small telephone companies under section 5733.57 of the Revised Code;

(28)(29) The credit for eligible nonrecurring 9-1-1 charges under section 5733.55 of the Revised Code;

(29)(30) The credit for providing programs to aid the communicatively impaired under section 5733.56 of the Revised Code;

(30)(31) The refundable jobs creation credit under division (A) of section 5733.0610 of the Revised Code;

(31)(32) The refundable credit for tax withheld under division (B)(2) of section 5747.062 of the Revised Code;

(32)(33) The credit for losses on loans made to the Ohio venture capital program under sections 150.01 to 150.10 of the Revised Code if the taxpayer elected a refundable credit under section 150.07 of the Revised Code.

(B) For any credit except the credits enumerated in divisions (A)(30), (31), and (32), and (33) of this section, the amount of the credit for a tax year shall not exceed the tax due after allowing for any other credit that precedes it in the order required under this section. Any excess amount of a particular credit may be carried forward if authorized under the section creating that credit.

Sec. 5747.391.  (A) As used in this section:

(1) "Pass-through entity" has the same meaning as in section 5733.04 of the Revised Code and includes a sole proprietorship.

(2) "Qualified reforming felon" means an individual who:

(a) Has been convicted of a felony under any statute of the United States or any state;

(b) Was hired by a pass-through entity within one year of the conviction or, if sentenced to a term of incarceration, was hired within one year of being released from incarceration; and

(c) Is a member of a family that, in the six months immediately preceding the date of hiring, had an income that, on an annual basis, would be seventy per cent or less of the most recent lower living standard calculated by the federal bureau of labor statistics.

(3) "Family" means an individual, an individual's spouse, and children.

(4) "Wages" has the same meaning as in section 3306 of the Internal Revenue Code.

(B)(1) For taxable years beginning in 2005 or thereafter, a nonrefundable credit is allowed against the tax imposed by section 5747.02 of the Revised Code for the wages paid by a pass-through entity to a qualified reforming felon who works at least one hundred twenty hours for the pass-through entity during the taxable year. The amount of the credit shall be calculated as follows:

(a) For each qualified reforming felon who works at least four hundred hours during the taxable year, the credit equals forty per cent of the wages paid to the qualified reforming felon, but shall not exceed two thousand four hundred dollars per qualified reforming felon.

(b) For each qualified reforming felon who works less than four hundred hours but at least one hundred twenty hours during the taxable year, the credit equals twenty-five per cent of the wages paid to the qualified reforming felon, but shall not exceed one thousand five hundred dollars per qualified reforming felon.

The amount of a taxpayer's credit is the taxpayer's proportionate share of the credit distributed by the pass-through entity. The credit shall be claimed in the order required under section 5747.98 of the Revised Code. The credit, to the extent it exceeds the taxpayer's tax liability for the taxable year after allowance for any other credits that precede the credit under that section in that order, may be carried forward for the next five succeeding taxable years, but the amount of any excess credit allowed in any such year shall be deducted from the balance carried forward to the succeeding year.

(2) A taxpayer may not claim the credit allowed under this section for any portion of the wages paid to a qualified reforming felon for whom the pass-through entity received federally funded payments for on-the-job training.

(3) A taxpayer may not claim the credit allowed under this section for any portion of the wages paid to a qualified reforming felon for services that were the same as, or substantially similar to, services that, but for a strike or lockout, would have been performed by another employee.

(4) If a qualified reforming felon's employment is terminated during the taxable year and the qualified reforming felon was employed by the pass-through entity for less than twelve months, a taxpayer may not claim the full amount of the credit allowed under this section unless the qualified reforming felon voluntarily terminated employment; was unable to continue employment due to a disability or death; or was terminated for cause. If a qualified reforming felon's employment is terminated for any other reason, the amount of the credit to which the taxpayer is entitled under this section is reduced by a percentage equal to the percentage of the taxable year that the qualified reforming felon was not employed by the pass-through entity.

(C)(1) The tax commissioner may require a taxpayer to furnish such information as is necessary to support a claim for a credit under this section, and no credit shall be allowed unless the information is provided.

(2) All files, statements, returns, reports, papers, or documents of any kind relating to qualified reforming felons or their families are not public records under section 149.43 of the Revised Code.

Sec. 5747.98.  (A) To provide a uniform procedure for calculating the amount of tax due under section 5747.02 of the Revised Code, a taxpayer shall claim any credits to which the taxpayer is entitled in the following order:

(1) The retirement income credit under division (B) of section 5747.055 of the Revised Code;

(2) The senior citizen credit under division (C) of section 5747.05 of the Revised Code;

(3) The lump sum distribution credit under division (D) of section 5747.05 of the Revised Code;

(4) The dependent care credit under section 5747.054 of the Revised Code;

(5) The lump sum retirement income credit under division (C) of section 5747.055 of the Revised Code;

(6) The lump sum retirement income credit under division (D) of section 5747.055 of the Revised Code;

(7) The lump sum retirement income credit under division (E) of section 5747.055 of the Revised Code;

(8) The credit for displaced workers who pay for job training under section 5747.27 of the Revised Code;

(9) The campaign contribution credit under section 5747.29 of the Revised Code;

(10) The twenty-dollar personal exemption credit under section 5747.022 of the Revised Code;

(11) The joint filing credit under division (G) of section 5747.05 of the Revised Code;

(12) The nonresident credit under division (A) of section 5747.05 of the Revised Code;

(13) The credit for a resident's out-of-state income under division (B) of section 5747.05 of the Revised Code;

(14) The credit for employers that enter into agreements with child day-care centers under section 5747.34 of the Revised Code;

(15) The credit for employers that reimburse employee child care expenses under section 5747.36 of the Revised Code;

(16) The credit for adoption of a minor child under section 5747.37 of the Revised Code;

(17) The credit for purchases of lights and reflectors under section 5747.38 of the Revised Code;

(18) The job retention credit under division (B) of section 5747.058 of the Revised Code;

(19) The credit for losses on loans made under the Ohio venture capital program under sections 150.01 to 150.10 of the Revised Code if the taxpayer elected a nonrefundable credit under section 150.07 of the Revised Code;

(20) The credit for purchases of new manufacturing machinery and equipment under section 5747.26 or section 5747.261 of the Revised Code;

(21) The second credit for purchases of new manufacturing machinery and equipment and the credit for using Ohio coal under section 5747.31 of the Revised Code;

(22) The job training credit under section 5747.39 of the Revised Code;

(23) The enterprise zone credit under section 5709.66 of the Revised Code;

(24) The credit for the eligible costs associated with a voluntary action under section 5747.32 of the Revised Code;

(25) The credit for employers that establish on-site child day-care centers under section 5747.35 of the Revised Code;

(26) The credit for employers that employ qualified reforming felons under section 5747.391 of the Revised Code;

(27) The ethanol plant investment credit under section 5747.75 of the Revised Code;

(27)(28) The credit for purchases of qualifying grape production property under section 5747.28 of the Revised Code;

(28)(29) The export sales credit under section 5747.057 of the Revised Code;

(29)(30) The credit for research and development and technology transfer investors under section 5747.33 of the Revised Code;

(30)(31) The enterprise zone credits under section 5709.65 of the Revised Code;

(31)(32) The research and development credit under section 5747.331 of the Revised Code;

(32)(33) The refundable jobs creation credit under division (A) of section 5747.058 of the Revised Code;

(33)(34) The refundable credit for taxes paid by a qualifying entity granted under section 5747.059 of the Revised Code;

(34)(35) The refundable credits for taxes paid by a qualifying pass-through entity granted under division (J) of section 5747.08 of the Revised Code;

(35)(36) The refundable credit for tax withheld under division (B)(1) of section 5747.062 of the Revised Code;

(36)(37) The credit for losses on loans made to the Ohio venture capital program under sections 150.01 to 150.10 of the Revised Code if the taxpayer elected a refundable credit under section 150.07 of the Revised Code.

(B) For any credit, except the credits enumerated in divisions (A)(32)(33) to (36)(37) of this section and the credit granted under division (I) of section 5747.08 of the Revised Code, the amount of the credit for a taxable year shall not exceed the tax due after allowing for any other credit that precedes it in the order required under this section. Any excess amount of a particular credit may be carried forward if authorized under the section creating that credit. Nothing in this chapter shall be construed to allow a taxpayer to claim, directly or indirectly, a credit more than once for a taxable year.

Section 2. That existing sections 5733.98 and 5747.98 of the Revised Code are hereby repealed.