COLUMBUS — Smokers aren't the only ones who will pay more taxes under the state's new budget plan.

        While most of the attention has focused on the new cigarette tax increase, Ohioans with trust funds will also pay more taxes.

        Trust fund beneficiaries already pay taxes on income they receive from their trusts. But the new plan also will require taxes to be paid on income generated that remains in the trust and isn't distributed.

        About 67,000 trust funds in Ohio are affected by the new tax, which is expected to generate $104 million.

        “Most other states that have an income tax also tax trusts; but here in Ohio we've had an income tax on individuals, estates and on corporations but not on trusts,” said Steve Nechemias, a tax attorney with the Cincinnati law firm Taft, Stettinius and Hollister.

        “If you look at it that way, certainly this is not something novel, revolutionary or even unusual.”

        Gary Gudmundson, communications director for the Ohio Department of Taxation, said the new law, for example, would require trusts that earn $50,000 in income that isn't distributed to pay an extra $1,859 in taxes each year.

        There are 7,600 trusts earning between $50,000 and $500,000 annually. Most trust funds — more than half of those affected by the new law — generate less than $7,500 per year and would typically owe $100 or less.

        Mr. Gudmundson said the new law simply taxes trustees the same way it would tax individuals.

        “If a trust makes $50,000 in income, then the trustee files an income tax return on behalf of the trust,” he said.

        Unlike individuals, though, trustees have one big tax advantage. The new tax provision is to expire Dec. 31, 2004.

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