[MaxGhenis]

Summary

Illinois and Ohio each let a filer take a repayment of income held under a claim of right off federal AGI. Illinois allows its subtraction when the federal return claims section 1341 relief, and Ohio allows its deduction for any repayment section 1341 covers. PolicyEngine had neither rule, so a repayment changed nothing in either state. This PR adds both.

• claim_of_right_relief_claimed (federal, tax unit): the return has a repayment over $3,000, and either federal tax uses the section 1341(a)(5) credit or the return itemizes and deducts the repayment under (a)(4). Only Illinois reads it.
• il_claim_of_right_subtraction (tax unit): the repayment when the return claims relief. It joins gov.states.il.tax.income.base.subtractions (Schedule M line 15).
• oh_claim_of_right_deduction (person): each filer's repayment when the return's total exceeds the section 1341 threshold, less the part (A)(12) excludes. It joins gov.states.oh.tax.income.deductions.deductions (Schedule of Adjustments line 29 in 2025).
• oh_claim_of_right_repayment_not_deductible (person input): the part (A)(12) excludes: income Ohio AGI left out when received, income that qualified then for the Ohio resident or nonresident credit (R.C. 5747.05(A) or (B)), and amounts that reduce Ohio AGI on another line.

The law

Illinois. 35 ILCS 5/203(a)(2)(P) subtracts "the deduction used to compute the federal income tax credit" under section 1341, or "any itemized deduction taken from adjusted gross income" for the same restoration. 86 Ill. Adm. Code 100.2465(b) sets the credit branch's amount at "the amount of the repayment that would otherwise have been deductible in that taxable year". The Schedule M instructions for line 15 repeat the statute in 2017 (PDF p. 2), 2021 (p. 3) and 2025 (p. 3).

Ohio. R.C. 5747.01(A)(12) deducts the section 1341(a)(2) deduction to the extent it "is allowable for repayment of an item that was included in the taxpayer's adjusted gross income for a prior taxable year". The item also must not have qualified that year for a credit under R.C. 5747.05(A) or (B), and the deduction must not otherwise reduce AGI.

The IT 1040 booklets add a condition the statute lacks: the federal return must claim the repayment as a Schedule A deduction or a credit. Every booklet from 2021 (line 23, PDF p. 17) through 2025 (line 29, PDF p. 23) carries it.

Design notes

• Illinois follows the federal return, and Ohio follows its statute. Illinois's statute turns on what the federal return claims, so its subtraction reads claim_of_right_relief_claimed. Ohio's statute asks only that the deduction be allowable, and we follow the statute over the booklets' added condition. Ohio's deduction therefore applies whichever federal method governs and whether or not the federal return itemizes. The two texts part ways when a return's federal methods tie and it takes the standard deduction: a $10,000 repayment with no earlier-year federal decrease gives $10,000 under the statute and nothing under the booklets.
• An eligible return claims relief by taking the credit or itemizing the deduction. claim_of_right_relief_claimed holds when the credit branch's tax, rounded to the cent, falls below the deduction branch's, or when the deduction branch itemizes. Where the methods tie, (a)(4) governs, and a return taking the standard deduction deducts nothing, so Illinois subtracts nothing ("any itemized deduction taken").
• Ohio keeps the section 1341 threshold. Nonbusiness repayments totaling $3,000 or less on a return fall outside section 1341, so they stay miscellaneous itemized deductions (section 67(b)(9)), which section 67(h), formerly 67(g), disallows from 2018. Ohio deducts only an allowable amount, so those repayments get nothing.
• Illinois subtracts the whole repayment under either method. Under the credit method the Illinois subtraction equals the repayment that "would otherwise have been deductible" (100.2465(b)), and under the deduction method it equals the itemized deduction taken. Both equal the head's and spouse's repayment. From 2026 the federal section 68 limit reduces total itemized deductions and has no rule allocating the reduction to one deduction, so the model reads "the itemized deduction taken" as the whole Schedule A amount.
• Ohio works per person, like every other item in Ohio's deduction list. A dependent's repayment belongs on the dependent's own return.
• State income tax doesn't feed the federal choice. Illinois reads federal itemization, and federal SALT reads state_withheld_income_tax in place of computed state tax.
• Repayments move out of the catch-all inputs. il_other_subtractions and oh_other_subtractions now document that they exclude these repayments. A user who entered a repayment in either should move it to claim_of_right_repayment, or it counts twice.

Indiana, Massachusetts and West Virginia (#10196), New Jersey (#10198), Hawaii (#10200) and Arkansas (#10203) use the same federal input in their own PRs.

Not modeled:

• Repayments deducted in arriving at AGI, such as repaid business income. claim_of_right_repayment excludes them.
• The law of each year before 2021. The Illinois subtraction and Ohio deduction lists start in 2021, and the model extends each list's first entry back to 2015 (policyengine_us/system.py), so the relief also applies in 2015–2020. We haven't checked those years against each year's law. Before 2018 a repayment of $3,000 or less counted as a federal miscellaneous itemized deduction, which the model doesn't carry.

Household examples (2025, single, age 40)

Household	No repayment	Repays $10,000
Illinois: wages $40,000, earlier-year federal decrease $2,200	Federal $2,671.50; IL $1,838.93	Federal $471.50 (credit); IL $1,343.93 ($495 less: 4.95% of $10,000)
Illinois: wages $100,000, charity $20,000, decrease $400	Federal $11,456.04; IL $4,808.92	Federal $9,256.04 (deduction, itemizing); IL $4,313.92
Illinois: wages $40,000, decrease $0	Federal $2,671.50; IL $1,838.93	Federal $2,671.50 (deduction, standard deduction); IL $1,838.93
Ohio: wages $40,000, decrease $2,200	Federal $2,671.50; OH $659.63	Federal $471.50; OH $364.63 ($295 less: 2.75% of $10,000, plus Ohio's $20 exemption credit)
Ohio: wages $40,000, decrease $0	Federal $2,671.50; OH $659.63	Federal $2,671.50; OH $364.63

Tests

Each YAML case takes its expected values from the cited form:

• gov/irs/credits/claim_of_right/claim_of_right_relief_claimed.yaml, 5 cases: the credit; the deduction while itemizing; the deduction with the standard deduction; no qualifying repayment; a method flag without one.
• gov/states/il/tax/income/subtractions/il_claim_of_right_subtraction.yaml, 8 cases, including the $3,000 boundary, a joint return with a dependent, and two integration cases with the method derived (base income, taxable income and tax at 4.95%).
• gov/states/oh/tax/income/deductions/oh_claim_of_right_deduction.yaml, 11 cases. They cover both federal methods, itemizing and with the standard deduction, income Ohio excluded or credited, and a federal credit that doesn't override those exclusions. They also cover a joint return with a dependent, another state, an integration case to Ohio taxable income, and repayments of $3,000 and $3,001. One couple's spouse falls below the joint filing credit's $500 test ($3,500 of wages, $3,100 repaid).

tests/unit/test_il_oh_claim_of_right_properties.py (the Rest job's remaining group) needs Python because the federal method and the itemizing choice come from the branch computations, and each check compares separate simulations.

Invariants (over a 216-return grid: state × repayment × earlier-year decrease × wages × charity)

1. Each federal method. Fix the credit method, or the deduction method on a return that itemizes. Illinois income tax then equals a simulation with no repayment and the eligible repayment entered through il_other_subtractions. Ohio taxable income then equals a simulation with no repayment and wages lower by it (where wages cover it). With the deduction method fixed on a return taking the standard deduction, Illinois income tax equals the no-repayment simulation, and Ohio taxable income still equals the lower-wage one.
2. The model's own choice. Every eligible Illinois return with a positive earlier-year decrease matches that reference, every eligible Ohio return matches it whatever the decrease, and every ineligible return matches the no-repayment simulation.
3. Never raises; monotone (single filers). Neither state's income tax exceeds its no-repayment value for the grid's single filers, some repayment lowers it, and it never rises as the repayment grows (also across $3,000). On a joint Ohio return it can rise, because amounts deducted on the Schedule of Adjustments don't count toward the joint filing credit's $500 test. The deduction can take a spouse below that test (YAML case 8; 2025 instructions, line 12, PDF p. 29).

Restoring the federal-claim condition in Ohio fails 2 YAML cases and 2 property tests, and dropping Ohio's threshold fails 1 YAML case and 2 property tests.

test_claim_of_right_section_1341_properties.py now holds an explicit, sourced map of the states whose own relief applies under the federal credit method (Arkansas, Hawaii, Illinois, Indiana, Massachusetts, New Jersey, Ohio, West Virginia) and the variable that carries each. Each listed state whose variable exists must lower the household's tax by more than $1, and every other state stays unchanged, apart from the three that deduct federal tax. #10196, #10198, #10200 and #10203 carry the identical file, so they merge in any order.

Cost

The property file adds about 6 s to the remaining group, measured locally, and its process peaks at 1.41 GB including the model import, which the group's process already holds. It builds six simulations of 216 single-person returns and frees them at teardown.

Microsimulation impact

We estimate no change in 2025. No record in the default dataset carries claim_of_right_repayment, and each new amount needs a repayment, so no record changes in il_base_income, oh_agi, state_income_tax, income_tax or household_net_income.

Axiom

axiom: TheAxiomFoundation/rulespec-us#1798 queued

rulespec-us has no us-il/statutes/35/5/203 module and no us-oh/statutes/5747/01 module. The corpus holds (P) at us-il/statute/35/5/203-current/block-1 and (A)(12) at us-oh/statute/5747.01.

impact: none in 2025; no record in the default dataset carries claim_of_right_repayment

🤖 Generated with Claude Code

[MaxGhenis]

Merging at 6f9c95eb6e as an admin squash with --match-head-commit, past the required-review gate.

• Checks: gh pr checks passes all 36 checks at this head, including pull request run 42582286920 (36 of 36 jobs). GitHub reports the PR MERGEABLE, and no change request stands.
• An independent review at 856ff8c67c, after the merges of Model the claim of right repayment deduction and credit (26 U.S.C. 1341) and North Carolina's rules that depend on it #10038 and main, asked for one documentation fix: Ohio's catch-all input had to name this deduction, or a user could enter a repayment twice.
• An independent delta review approved 6f9c95eb6e. The commits after 856ff8c67c change the changelog, one YAML case name, one test docstring and documentation strings, and no formula or expected value moved.
• On a tree that composes all five claim-of-right PRs on main at fc521b4f6c, the source-conflict guard (103 of 103) and the shared section 1341 property file (58 of 58) pass. So do the relief flag (5 of 5), Illinois (8 of 8) and Ohio (11 of 11) cases and the Illinois and Ohio property file (3 of 3).
• The review ran each mutation the description lists, and each household figure in the description matches a simulation to the cent.