As Introduced
135th General Assembly
Regular Session S. B. No. 278
2023-2024
Senators Schuring, Huffman, S.
A BILL
To amend sections 718.01, 718.81, 928.01, 928.99, 1
3780.03, 3780.10, 3780.11, 3780.16, 3780.29, 2
3780.36, 3780.99, 3796.01, 3796.03, 3796.05, 3
3796.08, 3796.09, 3796.18, 3796.19, 3796.20, 4
3796.21, 4731.30, and 5747.01 and to enact 5
sections 928.10, 928.11, and 928.12 of the 6
Revised Code to modify the regulation and 7
taxation of medical marijuana, adult use 8
cannabis, and hemp. 9
BE IT ENACTED BY THE GENERAL ASSEMBLY OF THE STATE OF OHIO:
Section 1. That sections 718.01, 718.81, 928.01, 928.99, 10
3780.03, 3780.10, 3780.11, 3780.16, 3780.29, 3780.36, 3780.99, 11
3796.01, 3796.03, 3796.05, 3796.08, 3796.09, 3796.18, 3796.19, 12
3796.20, 3796.21, 4731.30, and 5747.01 be amended and sections 13
928.10, 928.11, and 928.12 of the Revised Code be enacted to 14
read as follows: 15
Sec. 718.01. Any term used in this chapter that is not 16
otherwise defined in this chapter has the same meaning as when 17
used in a comparable context in laws of the United States 18
relating to federal income taxation or in Title LVII of the 19
S. B. No. 278 Page 2
As Introduced
Revised Code, unless a different meaning is clearly required. 20
Except as provided in section 718.81 of the Revised Code, if a 21
term used in this chapter that is not otherwise defined in this 22
chapter is used in a comparable context in both the laws of the 23
United States relating to federal income tax and in Title LVII 24
of the Revised Code and the use is not consistent, then the use 25
of the term in the laws of the United States relating to federal 26
income tax shall control over the use of the term in Title LVII 27
of the Revised Code. 28
Except as otherwise provided in section 718.81 of the 29
Revised Code, as used in this chapter: 30
(A)(1) "Municipal taxable income" means the following: 31
(a) For a person other than an individual, income 32
apportioned or sitused to the municipal corporation under 33
section 718.02 of the Revised Code, as applicable, reduced by 34
any pre-2017 net operating loss carryforward available to the 35
person for the municipal corporation. 36
(b)(i) For an individual who is a resident of a municipal 37
corporation other than a qualified municipal corporation, income 38
reduced by exempt income to the extent otherwise included in 39
income, then reduced as provided in division (A)(2) of this 40
section, and further reduced by any pre-2017 net operating loss 41
carryforward available to the individual for the municipal 42
corporation. 43
(ii) For an individual who is a resident of a qualified 44
municipal corporation, Ohio adjusted gross income reduced by 45
income exempted, and increased by deductions excluded, by the 46
qualified municipal corporation from the qualified municipal 47
corporation's tax. If a qualified municipal corporation, on or 48
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As Introduced
before December 31, 2013, exempts income earned by individuals 49
who are not residents of the qualified municipal corporation and 50
net profit of persons that are not wholly located within the 51
qualified municipal corporation, such individual or person shall 52
have no municipal taxable income for the purposes of the tax 53
levied by the qualified municipal corporation and may be 54
exempted by the qualified municipal corporation from the 55
requirements of section 718.03 of the Revised Code. 56
(c) For an individual who is a nonresident of a municipal 57
corporation, income reduced by exempt income to the extent 58
otherwise included in income and then, as applicable, 59
apportioned or sitused to the municipal corporation under 60
section 718.02 of the Revised Code, then reduced as provided in 61
division (A)(2) of this section, and further reduced by any pre- 62
2017 net operating loss carryforward available to the individual 63
for the municipal corporation. 64
(2) In computing the municipal taxable income of a 65
taxpayer who is an individual, the taxpayer may subtract, as 66
provided in division (A)(1)(b)(i) or (c) of this section, the 67
amount of the individual's employee business expenses reported 68
on the individual's form 2106 that the individual deducted for 69
federal income tax purposes for the taxable year, subject to the 70
limitation imposed by section 67 of the Internal Revenue Code. 71
For the municipal corporation in which the taxpayer is a 72
resident, the taxpayer may deduct all such expenses allowed for 73
federal income tax purposes. For a municipal corporation in 74
which the taxpayer is not a resident, the taxpayer may deduct 75
such expenses only to the extent the expenses are related to the 76
taxpayer's performance of personal services in that nonresident 77
municipal corporation. 78
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As Introduced
(B) "Income" means the following: 79
(1)(a) For residents, all income, salaries, qualifying 80
wages, commissions, and other compensation from whatever source 81
earned or received by the resident, including the resident's 82
distributive share of the net profit of pass-through entities 83
owned directly or indirectly by the resident and any net profit 84
of the resident, except as provided in division (D)(5) of this 85
section. 86
(b) For the purposes of division (B)(1)(a) of this 87
section: 88
(i) Any net operating loss of the resident incurred in the 89
taxable year and the resident's distributive share of any net 90
operating loss generated in the same taxable year and 91
attributable to the resident's ownership interest in a pass- 92
through entity shall be allowed as a deduction, for that taxable 93
year and the following five taxable years, against any other net 94
profit of the resident or the resident's distributive share of 95
any net profit attributable to the resident's ownership interest 96
in a pass-through entity until fully utilized, subject to 97
division (B)(1)(d) of this section; 98
(ii) The resident's distributive share of the net profit 99
of each pass-through entity owned directly or indirectly by the 100
resident shall be calculated without regard to any net operating 101
loss that is carried forward by that entity from a prior taxable 102
year and applied to reduce the entity's net profit for the 103
current taxable year. 104
(c) Division (B)(1)(b) of this section does not apply with 105
respect to any net profit or net operating loss attributable to 106
an ownership interest in an S corporation unless shareholders' 107
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As Introduced
distributive shares of net profits from S corporations are 108
subject to tax in the municipal corporation as provided in 109
division (C)(14)(b) or (c) of this section. 110
(d) Any amount of a net operating loss used to reduce a 111
taxpayer's net profit for a taxable year shall reduce the amount 112
of net operating loss that may be carried forward to any 113
subsequent year for use by that taxpayer. In no event shall the 114
cumulative deductions for all taxable years with respect to a 115
taxpayer's net operating loss exceed the original amount of that 116
net operating loss available to that taxpayer. 117
(2) In the case of nonresidents, all income, salaries, 118
qualifying wages, commissions, and other compensation from 119
whatever source earned or received by the nonresident for work 120
done, services performed or rendered, or activities conducted in 121
the municipal corporation, including any net profit of the 122
nonresident, but excluding the nonresident's distributive share 123
of the net profit or loss of only pass-through entities owned 124
directly or indirectly by the nonresident. 125
(3) For taxpayers that are not individuals, net profit of 126
the taxpayer; 127
(4) Lottery, sweepstakes, gambling and sports winnings, 128
winnings from games of chance, and prizes and awards. If the 129
taxpayer is a professional gambler for federal income tax 130
purposes, the taxpayer may deduct related wagering losses and 131
expenses to the extent authorized under the Internal Revenue 132
Code and claimed against such winnings. 133
(C) "Exempt income" means all of the following: 134
(1) The military pay or allowances of members of the armed 135
forces of the United States or members of their reserve 136
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components, including the national guard of any state; 137
(2)(a) Except as provided in division (C)(2)(b) of this 138
section, intangible income; 139
(b) A municipal corporation that taxed any type of 140
intangible income on March 29, 1988, pursuant to Section 3 of 141
S.B. 238 of the 116th general assembly, may continue to tax that 142
type of income if a majority of the electors of the municipal 143
corporation voting on the question of whether to permit the 144
taxation of that type of intangible income after 1988 voted in 145
favor thereof at an election held on November 8, 1988. 146
(3) Social security benefits, railroad retirement 147
benefits, unemployment compensation, pensions, retirement 148
benefit payments, payments from annuities, and similar payments 149
made to an employee or to the beneficiary of an employee under a 150
retirement program or plan, disability payments received from 151
private industry or local, state, or federal governments or from 152
charitable, religious or educational organizations, and the 153
proceeds of sickness, accident, or liability insurance policies. 154
As used in division (C)(3) of this section, "unemployment 155
compensation" does not include supplemental unemployment 156
compensation described in section 3402(o)(2) of the Internal 157
Revenue Code. 158
(4) The income of religious, fraternal, charitable, 159
scientific, literary, or educational institutions to the extent 160
such income is derived from tax-exempt real estate, tax-exempt 161
tangible or intangible property, or tax-exempt activities. 162
(5) Compensation paid under section 3501.28 or 3501.36 of 163
the Revised Code to a person serving as a precinct election 164
official to the extent that such compensation does not exceed 165
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As Introduced
one thousand dollars for the taxable year. Such compensation in 166
excess of one thousand dollars for the taxable year may be 167
subject to taxation by a municipal corporation. A municipal 168
corporation shall not require the payer of such compensation to 169
withhold any tax from that compensation. 170
(6) Dues, contributions, and similar payments received by 171
charitable, religious, educational, or literary organizations or 172
labor unions, lodges, and similar organizations; 173
(7) Alimony and child support received; 174
(8) Compensation for personal injuries or for damages to 175
property from insurance proceeds or otherwise, excluding 176
compensation paid for lost salaries or wages or compensation 177
from punitive damages; 178
(9) Income of a public utility when that public utility is 179
subject to the tax levied under section 5727.24 or 5727.30 of 180
the Revised Code. Division (C)(9) of this section does not apply 181
for purposes of Chapter 5745. of the Revised Code. 182
(10) Gains from involuntary conversions, interest on 183
federal obligations, items of income subject to a tax levied by 184
the state and that a municipal corporation is specifically 185
prohibited by law from taxing, and income of a decedent's estate 186
during the period of administration except such income from the 187
operation of a trade or business; 188
(11) Compensation or allowances excluded from federal 189
gross income under section 107 of the Internal Revenue Code; 190
(12) Employee compensation that is not qualifying wages as 191
defined in division (R) of this section; 192
(13) Compensation paid to a person employed within the 193
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As Introduced
boundaries of a United States air force base under the 194
jurisdiction of the United States air force that is used for the 195
housing of members of the United States air force and is a 196
center for air force operations, unless the person is subject to 197
taxation because of residence or domicile. If the compensation 198
is subject to taxation because of residence or domicile, tax on 199
such income shall be payable only to the municipal corporation 200
of residence or domicile. 201
(14)(a) Except as provided in division (C)(14)(b) or (c) 202
of this section, an S corporation shareholder's distributive 203
share of net profits of the S corporation, other than any part 204
of the distributive share of net profits that represents wages 205
as defined in section 3121(a) of the Internal Revenue Code or 206
net earnings from self-employment as defined in section 1402(a) 207
of the Internal Revenue Code. 208
(b) If, pursuant to division (H) of former section 718.01 209
of the Revised Code as it existed before March 11, 2004, a 210
majority of the electors of a municipal corporation voted in 211
favor of the question at an election held on November 4, 2003, 212
the municipal corporation may continue after 2002 to tax an S 213
corporation shareholder's distributive share of net profits of 214
an S corporation. 215
(c) If, on December 6, 2002, a municipal corporation was 216
imposing, assessing, and collecting a tax on an S corporation 217
shareholder's distributive share of net profits of the S 218
corporation to the extent the distributive share would be 219
allocated or apportioned to this state under divisions (B)(1) 220
and (2) of section 5733.05 of the Revised Code if the S 221
corporation were a corporation subject to taxes impose