(A) As used in this section:

Terms Used In Ohio Code 5733.401

  • Assets: (1) The property comprising the estate of a deceased person, or (2) the property in a trust account.
  • intangible asset: includes , but is not limited to, the corporation's direct interest in each pass-through entity only if at all times during the corporation's taxable year ending prior to the first day of the tax year the corporation's and the corporation's related members' combined direct and indirect interests in the capital or profits of such pass-through entity do not exceed fifty per cent. See Ohio Code 5733.04
  • Intangible property: Property that has no intrinsic value, but is merely the evidence of value such as stock certificates, bonds, and promissory notes.
  • net income: means the taxpayer's taxable income before operating loss deduction and special deductions, as required to be reported for the taxpayer's taxable year under the Internal Revenue Code, subject to the following adjustments:

    (1)(a) Deduct any net operating loss incurred in any taxable years ending in 1971 or thereafter, but exclusive of any net operating loss incurred in taxable years ending prior to January 1, 1971. See Ohio Code 5733.04

  • Pass-through entity: means any entity that is eligible to make and that has made an election under subchapter S of Chapter 1 of Subtitle A of the Internal Revenue Code for its taxable year under that code, or a partnership, limited liability company, or any other person, other than an individual, trust, or estate, if the partnership, limited liability company, or other person is not classified for federal income tax purposes as an association taxed as a corporation. See Ohio Code 5733.04
  • Person: includes an individual, corporation, business trust, estate, trust, partnership, and association. See Ohio Code 1.59
  • Property: means real and personal property. See Ohio Code 1.59
  • Taxable year: means the period prescribed by division (A) of section 5733. See Ohio Code 5733.04

(1) “Investment pass-through entity” means a pass-through entity having for its qualifying taxable year at least ninety per cent of its gross income from transaction fees in connection with the acquisition, ownership, or disposition of intangible property, loan fees, financing fees, consent fees, waiver fees, application fees, net management fees, dividend income, interest income, net capital gains from the sale or exchange of intangible property, or distributive shares of income from pass-through entities; and having for its qualifying taxable year at least ninety per cent of the net book value of its assets represented by intangible assets. Such percentages shall be the quarterly average of those percentages as calculated during the pass-through entity’s taxable year.

(2) “Net management fees” means management fees that a pass-through entity earns or receives from all sources, reduced by management fees that the pass-through entity incurs or pays to any person.

(B) For the purposes of divisions (A) and (C) of this section only, an investment in a pass-through entity shall be deemed to be an investment in an intangible asset, and sections 5733.057 and 5747.231 of the Revised Code do not apply for the purposes of making the determinations required by division (A) of this section or claiming the exclusion provided by division (C) of this section.

(C)(1) Except as otherwise provided in division (C)(2) of this section, for the purposes of division (A) of section 5733.40 of the Revised Code, an investment pass-through entity shall exclude from the calculation of the adjusted qualifying amount the portion of the investment pass-though entity’s net income attributable to transaction fees in connection with the acquisition, ownership, or disposition of intangible property; loan fees; financing fees; consent fees; waiver fees; application fees; net management fees; dividend income; interest income; net capital gains from the sale, exchange, or other disposition of intangible property; and all types and classifications of income attributable to distributive shares of income from other pass-through entities. Nothing in this division shall be construed to provide for an exclusion of any item from adjusted qualifying amount more than once.

(2) Notwithstanding division (C)(1) of this section, the portion of the investment pass-through entity’s net income attributable to net management fees shall not be excluded from the calculation of the adjusted qualifying amount if such net management fees exceed five per cent of the entity’s net income calculated in accordance with generally accepted accounting principles.

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