Add Illinois's and Ohio's claim of right repayment subtractions (35 ILCS 5/203(a)(2)(P), R.C. 5747.01(A)(12))

[MaxGhenis]

Summary

Illinois and Ohio each let a filer take a repayment of income held under a claim of right off federal AGI when the federal return claims section 1341 relief for it: Illinois by statute, Ohio by its department's instructions (its statute says only "allowable"; Max rules on which to follow, d1464). PolicyEngine had neither rule, so in both states a repayment changed nothing. This PR adds them.

Stacked on #10038 (branch federal-claim-of-right-1341), which models 26 U.S.C. 1341. Review the commits after dc10cc58ce except the merges of #10038's heads 2d36a76bca (its merge of main), 32b0c13a6a (Montana's miscellaneous itemized list takes the claim of right deduction from 2024, so Montana's tax now changes under the federal deduction method; under the credit method that deduction is zero) 6f34ccde23 (its second merge of main), d1c695b2f7 (itemizing branches inherit the claim of right method under core 3.33) and 17cad4b53b (changelog and docstring), which bring in no change of this PR's. Head c60ee46243.

• claim_of_right_relief_claimed (federal, tax unit): the return has a repayment over $3,000 and either federal tax is computed under section 1341(a)(5) (the credit) or the return itemizes and deducts the repayment under (a)(4).
• il_claim_of_right_subtraction (tax unit): the repayment when relief is claimed. It joins gov.states.il.tax.income.base.subtractions (Schedule M line 15).
• oh_claim_of_right_deduction (person): each filer's repayment when relief is claimed, less the part (A)(12) does not allow. 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): that part: income not included in Ohio AGI 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

35 ILCS 5/203(a)(2)(P):

(P) An amount equal to the amount of the deduction used to compute the federal income tax credit for restoration of substantial amounts held under claim of right for the taxable year pursuant to Section 1341 of the Internal Revenue Code or of any itemized deduction taken from adjusted gross income in the computation of taxable income for restoration of substantial amounts held under claim of right for the taxable year;

86 Ill. Adm. Code 100.2465(b) says the credit branch subtracts "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):

(12) Deduct any portion of the deduction described in section 1341(a)(2) of the Internal Revenue Code, for repaying previously reported income received under a claim of right, that meets both of the following requirements:
(a) It is allowable for repayment of an item that was included in the taxpayer's adjusted gross income for a prior taxable year and did not qualify for a credit under division (A) or (B) of section 5747.05 of the Revised Code for that year;
(b) It does not otherwise reduce the taxpayer's adjusted gross income for the current or any other taxable year.

The 2025 IT 1040 instructions, line 29 (PDF p. 23) list four conditions, the last being: "In the current tax year, you claimed either (i) an itemized deduction on your federal Schedule A for the amount repaid OR (ii) a tax credit on your federal 1040 based upon the amount repaid." The same division was (A)(13) in the October 2016 version.

Design notes

• One federal test for both states. Illinois's statute turns on what the federal return claims. Ohio's statute requires only that the deduction be "allowable"; the condition that the federal return claimed the credit or the Schedule A deduction comes from the department's IT 1040 instructions, in every edition from 2021 (line 23, PDF p. 17) to 2025 (line 29, PDF p. 23). This PR follows the instructions; the two differ only for an eligible return whose two methods tie, to the cent, while it takes the standard deduction, and Max rules on which to follow (decision d1464). So claim_of_right_relief_claimed computes it once from Model the claim of right repayment deduction and credit (26 U.S.C. 1341) and North Carolina's rules that depend on it #10038's outputs: claim_of_right_section_1341_eligible & (claim_of_right_credit_applies | (tax_unit_itemizes & claim_of_right_deduction > 0)). It requires eligibility, as claim_of_right_credit does, so a method flag entered on a return without a qualifying repayment claims nothing (the property tests found this; see Tests).
• The deduction method without itemizing claims nothing. When the deduction method wins, the deduction lowered tax, which only an itemized deduction does; so an eligible return claims relief whenever the credit branch's tax, rounded to the cent, is below the deduction branch's, or the deduction branch itemizes. A rounded tie with the standard deduction claims nothing: a decrease of zero, for example, where the methods tie, (a)(4) governs, and a return taking the standard deduction deducts nothing. Illinois then gives nothing, as its statute says ("any itemized deduction taken"); Ohio gives nothing under its instructions ("you claimed ... an itemized deduction"), the reading d1464 asks Max to confirm.
• Amount. Under the credit method the Illinois subtraction is "the amount of the repayment that would otherwise have been deductible" (100.2465(b)); under the deduction method it is 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; the model reads "the itemized deduction taken" as the whole Schedule A amount. That is a reading, which Max can confirm with d1464.
• Ohio is per person, like every other item in Ohio's deduction list. A dependent's repayment belongs on the dependent's own return.
• No cycle. Both formulas read federal itemization. Federal SALT reads state_withheld_income_tax, not computed state tax, so state income tax does not feed back into the federal choice.
• il_schedule_m_subtractions (an existing catch-all input) now documents that it excludes line 15.

Not modeled:

• Repayments of $3,000 or less of the nonbusiness income claim_of_right_repayment covers. From 2018 they are a disallowed miscellaneous itemized deduction (26 U.S.C. 67(g), redesignated 67(h) by P.L. 119-21), so they claim no federal relief and neither state allows them. Repayments deducted in arriving at AGI (business income, for example) are outside the input. Before 2018 they were a federal miscellaneous itemized deduction; Model the claim of right repayment deduction and credit (26 U.S.C. 1341) and North Carolina's rules that depend on it #10038 leaves that deduction unmodeled, and the Illinois subtraction and Ohio deduction lists start in 2021.

Household on main, #10038 and this branch (2025, single, age 40)

Script: ~/reviews/us-hub/claim-of-right-states/scripts/households.py; outputs evidence/households_*.json. main is 95eefa51e5; #10038 is dc10cc58ce; this branch 9dbf3b4015 (the later commit changes only documentation and references).

Household	main	#10038	This branch
Illinois: wages $40,000, repays $10,000, earlier-year federal decrease $2,200	Federal $2,671.50; IL $1,838.93	Federal $471.50 (credit); IL $1,838.93	Federal $471.50; IL $1,343.93 ($495 less: 4.95% of $10,000)
Illinois: wages $100,000, charity $20,000, repays $10,000, decrease $400	Federal $11,456.04; IL $4,808.92	Federal $9,256.04 (deduction, itemizing); IL $4,808.92	IL $4,313.92
Ohio: wages $40,000, repays $10,000, decrease $2,200	Federal $2,671.50; OH $659.63	Federal $471.50; OH $659.63	OH $364.63 ($295 less: 2.75% of $10,000, plus Ohio's $20 exemption credit, which applies once modified AGI less exemptions is under $30,000)

Tests

YAML, each expected value computed by hand from the cited form:

• gov/irs/credits/claim_of_right/claim_of_right_relief_claimed.yaml, 5 cases: credit; deduction while itemizing; 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, 8 cases, including the excluded-income input, a joint return with a dependent, an integration case to Ohio taxable income, and a couple whose 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). Why Python: the federal method and the itemizing choice come from #10038's branch computations, and each check compares separate simulations, which YAML cannot. Every reference is built without the new variables, so no check restates a formula.

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

1. Each federal method. With the credit method fixed, or the deduction method fixed on a return that itemizes, Illinois income tax equals a simulation with no repayment and the eligible repayment entered through the existing il_schedule_m_subtractions input, and Ohio taxable income 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, both equal a simulation with no repayment.
2. The model's own choice. Every eligible return with a positive earlier-year decrease matches that reference; every ineligible return matches the no-repayment simulation.
3. Never raises; monotone (single filers). Neither state's income tax is ever above 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: amounts deducted on the Schedule of Adjustments are not qualifying income for the joint filing credit, so the deduction can take a spouse below its $500 test (YAML case 8; 2025 instructions, line 12, PDF p. 29).

Mutation check: five single-line mutants (the helper ignoring itemizing, the helper ignoring eligibility, Illinois ignoring the federal claim, Ohio only under the credit, Ohio's deduction left out of its list) each fail the suite. The first version of the test caught a real gap: the helper did not check eligibility, so a method flag entered on a $2,000 repayment got the Illinois subtraction.

The cross-state test from #10038, test_claim_of_right_section_1341_properties.py, asserted that under the federal credit method no state's tax changes. It now has an explicit, sourced map of the states whose own relief applies under the credit method (Arkansas, Hawaii, Illinois, Indiana, Massachusetts, New Jersey, Ohio, West Virginia) and the variable that carries each. Each listed state whose variable is in the model must lower the household's tax by more than $1; every other state, North Carolina and Montana included, must be unchanged. #10196, #10198 and #10200 carry the identical commit, so they merge in any order.

Local runs at 9dbf3b4015 (macOS; the later commit changes only documentation and references): the three YAML files pass (5, 8 and 8 cases; 21 in one process at 3.06 GB peak); the property file passes 3 tests in 8.1 s at 1.42 GB peak (32.3 s wall with import); the cross-state per-state test passes. Details: evidence/tests.md.

Cost

The new property file adds about 6 s to the remaining group, measured locally (not CI); 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. For scale, the remaining group on main had 2,151 tests, 24:05 wall clock and 12.8 GB peak (run 37926760594, as reported in #10028).

Microsimulation

2025, default dataset (populace_us_2024 at populace-us-2024-spm-20260909), run 2026-10-13 under the shared heavy-run lock: #10038's head dc10cc58ce against this branch at 198ac62974 (later commits only merge #10038's later heads and change tests or documentation). Driver and outputs: ~/reviews/us-hub/claim-of-right-states/impact/ (multi.sh; compare.il-oh.2025.json).

• claim_of_right_repayment is $0 on every record (weighted sum $0), so claim_of_right_relief_claimed, il_claim_of_right_subtraction and oh_claim_of_right_deduction are $0 everywhere.
• No record changes in income_tax, state_income_tax, household_net_income, claim_of_right_credit_applies or il_base_income, oh_agi.

The change takes effect only for households that enter a repayment; the dataset has none.

Axiom

axiom: 35 ILCS 5/203(a)(2)(P) and Ohio R.C. 5747.01(A)(12) — not yet queued. The rulespec-us pe-parity issue is drafted and held; filing waits for Max's go (decision d1459), or the US hub may file it under d1142.

• rulespec-us main has no us-il/statutes/35/5/203 module and no us-oh/statutes/5747/01 module.
• Corpus: us-il/statute/35/5/203-current/block-1 holds (P); us-oh/statute/5747.01 holds (A)(12) but sits in a September lock newer than the pinned release us-rulespec-2026-08-08-obbb-alien-snap.

Review

Independent review r1 (Opus 5.5, as the GPT-6.1 Sol lanes were held; ~/reviews/us-hub/claim-of-right-states/reviews/out-10195.md, REQUEST CHANGES) and the response (reviews/response-10195.md): the Ohio input now covers all of (A)(12)'s exclusions; Ohio's federal-claim condition is attributed to the instructions and queued for Max (d1464); the cross-state test uses an explicit map; the property test no longer restates formulas; the Ohio drop is explained; the 2026 section 68 reading is stated.

Review r2 (reviews/out-10195-r2.md, REQUEST CHANGES on wording only, no numerical defect): the summary now attributes Ohio's condition to its instructions; the cent-rounding tie, the scope of small repayments and the Illinois 2026 reading are stated; the joint filing credit case is documented and tested.

Reviews r2 and r3 ran on GPT-6.1 Sol. Review r3 (reviews/out-10195-r3.md, APPROVE) left four wording nits, now fixed. A delta review of the changes since (r4, Opus 5.5, reviews/out-delta-r4.md) approves this head.

Follow-ups

• Other states' own claim of right rules are in sibling PRs: Indiana, Massachusetts and West Virginia (Add Indiana's, Massachusetts's and West Virginia's claim of right repayment deductions #10196), New Jersey (Offset New Jersey claim of right repayments within their income category (N.J.S.A. 54A:5-2) #10198), Hawaii (Model Hawaii's claim of right deduction and credit (section 1341 as operative in Hawaii from 2022) #10200). Arkansas (Add Arkansas's claim of right deduction (Ark. Code § 26-51-457) #10203). Pennsylvania has no relief (Board of Finance and Revenue, Keller & Avolio, Docket 1630061, 2017: "Pennsylvania tax law does not contain a provision similar to Section 1341"), so it needs no change; Kentucky waits on decision d1465.

🤖 Generated with Claude Code

[MaxGhenis]

Hand-off to the US + core hub (Illinois and Ohio; state claim of right lane, session local_d0c92ac9).

• Head: 9b500d304e. MERGEABLE. The PR's own changes are unchanged since the approving review; later commits only merge Model the claim of right repayment deduction and credit (26 U.S.C. 1341) and North Carolina's rules that depend on it #10038's heads 2d36a76bca (its merge of main) and 32b0c13a6a (Montana list).
• Review: delta review r4 (Opus 5.5) APPROVE; r3 (GPT-6.1 Sol) APPROVE (~/reviews/us-hub/claim-of-right-states/reviews/out-delta-r4.md, out-10195-r3.md).
• Passed locally at the current or reviewed head: the PR's YAML files, its property tests where it has them, and the cross-state test test_claim_of_right_section_1341_properties.py (33 tests, including 2026); details in ~/reviews/us-hub/claim-of-right-states/evidence/tests.md.
• Microsimulation: done (2025 default dataset); no record changes, and every new variable is $0 because claim_of_right_repayment is $0 on every record (~/reviews/us-hub/claim-of-right-states/impact/compare.*.2025.json).
• Pending: CI on this head.
• Depends on: Model the claim of right repayment deduction and credit (26 U.S.C. 1341) and North Carolina's rules that depend on it #10038 (federal section 1341), which must merge first; this branch carries its commits. After Model the claim of right repayment deduction and credit (26 U.S.C. 1341) and North Carolina's rules that depend on it #10038 squash-merges, merge upstream/main into this branch before landing.
• Hold for Max's ruling d1464 (Ohio: the IT 1040 instructions' federal-claim condition, as implemented, or the statute's "allowable"; also the Illinois 2026 section 68 reading). Merge only after d1464 is ruled; a ruling for the statute changes one condition in oh_claim_of_right_deduction.
• Axiom: the rulespec-us pe-parity draft is held for Max's go (d1459), with the hub's d1142 standing go as the alternative.
• Follow-ups owed: none from this PR. Kentucky is decision d1465; Pennsylvania needs no change.

[MaxGhenis]

Hand-off update (2026-10-14): new head 4eca535761, MERGEABLE. It merges #10038's 6f34ccde23 (its second merge of main). The PR's own changes are unchanged since the approving review. Local runs at this head: YAML 21, property 3, all passing. Everything else in the hand-off comment above still holds; the hub-file line is re-appended with this head.

[MaxGhenis]

Hand-off update (2026-10-14, supersedes the earlier one today): head c60ee46243 merges #10038's final head 17cad4b53b (handed to the hub). Local runs at the d1c695b2f7 merge, under policyengine-core 3.33.3 (the version CI resolves): YAML 21, property 3, all passing; 17cad4b53b adds no code. The PR's own changes are unchanged since the approving review. The hub-file line is re-appended with this head.