No, income isn't being "backed out," per se.
States compute nonresident income tax different ways. In Ohio, your tax is calculated based on your total income, and then you receive a credit against the tax, based on your non-Ohio income.
According to How do I calculate my nonresident credit? on the Ohio Department of Taxation's Income - Ohio Residency and Residency Credits page:
A nonresident taxpayer is allowed a “nonresident” credit for all income not earned or received in Ohio. The credit is calculated on the Ohio Schedule of Credits using the taxpayer’s non-Ohio portion of their Ohio adjusted gross income. Taxpayers must use form IT NRC to calculate the non-Ohio portion of their Ohio adjusted gross income.
See Form IT NRC and Ohio Schedule of Credits in the Instructions for IT 1040 and SSD 100 for more information.
@llabah
