H.B. 153, Ohio’s budget bill for the 2012-2013 fiscal biennium, contains a number of statutory revisions that impact economic development. The bill creates new tax exemptions, credits and grant programs as well as extends some existing tax exemptions or credits, and enacts a number of new tax breaks. At the same time, the bill contains no tax rate increases. This bulletin will summarize the many substantive changes made by the bill that may impact economic development efforts in Ohio.
Grants & Credits
Section 122.171 - Expansion of the Refundable Job Retention Tax Credit Program. Expands the refundable job retention tax credit program to include companies that employ at least 500 full-time equivalent employees and companies that have an annual payroll of at least $35 million.
Section 122.171 – Expansion of a Non-Refundable Jobs Retention Tax Credit. Expands the non-refundable jobs retention tax credit program to permit the Ohio Tax Credit Authority, between July 1, 2011, and December 31, 2013, to issue tax credits to businesses that (i) retain at least 500 full-time equivalent employees and an annual payroll of at least $20 million, or (ii) maintain an annual payroll of $30 million; (iii) that invest at least $5 million at a project site in the same jurisdiction where its principal place of business is located during a period of three consecutive calendar years, including the calendar year that includes a day of the taxpayer's taxable year or tax period with respect to which the credit is granted, and (iv) that meet other existing requirements. The aggregate amount of tax credits that may be issued between July 1, 2011 and June 30, 2013 cannot exceed $25 million.
Section 122.175 – Creation of a Data Center Sales and Use Tax Exemption. Creates a new sales tax exemption for equipment used in the operation of a computer data center business. The business must make a capital investment of at least $100 million in Ohio, during a period of three consecutive calendar years, and must maintain annual payroll for employees involved in the investment project of at least $5 million for the entire term of the credit. Application must be made to the tax credit authority, which may authorize a partial or full exemption (100%) for the project.
Section 122.76 – Removal of the Minimum Financial Institution Percentage from the Minority Business Loan Program. Revises R.C. 122.76, which allows the director of development, with controlling board approval, to lend funds for the purpose of procuring or improving real or personal property to minority business enterprises, community improvement corporations, Ohio development corporations, minority contractors business assistance organizations and minority business supplier development councils that predominantly benefit minority business enterprises (or are located in a census tract that has a population that is sixty per cent or more minority), to remove the requirement of bank or governmental financing of at least 30% of the total project cost.
Sections 122.86 and 5747.81 – Creation of the InvestOhio Program. Creates a non-refundable personal income tax credit program for persons investing in a small business enterprise with an operating presence in Ohio. A “small business enterprise” is one having assets of less than $50 million, or annual sales less than $10 million. Eligible investments must be made on or after July 1, 2011, must be used to acquire a direct or indirect equity interest in the enterprise, and must be held for at least 2 years if made before July 1, 2013, and 5 years if made after that date. The maximum an individual may invest in any fiscal biennium is $10 million, and the credit is 10% of the amount invested. During any fiscal biennium, small business investment certificates cannot be issued by the Department of Development that would cause the credits claimed for any biennium to exceed $100,000,000. Any unused credit may be carried forward seven taxable years.
Section 149.311 – Extension of the Ohio Historic Preservation Tax Credit Program. The tax credit for the rehabilitation of an historic building, set to expire July 1, 2011, was made permanent. There is an aggregate limit of $25 million for such credits during each fiscal biennium. Also, R.C. 5725.34 and 5729.17 were amended so that foreign and domestic insurance companies are added to the taxpayers eligible for the credit. The department of development may charge reasonable fees to administer the law and permits the director to rescind an application where the applicant has failed to obtain the necessary funding within 18 months of being approved for the credit. Recipients are required to repay amounts received if the project is not completed. Various other procedural changes are also made. The revisions to the Ohio Historic Preservation Tax Credit program have an immediate effective date.
Sections 5709.40, 5709.41, 5709.73, 5709.78, 5709.82, 5709.83 – Requirement for Compensation Payments to Joint Vocational School District for Tax Increment Financing Arrangement at Same Rate and Term as City, Local or Exempted Village School District. Any municipality, county or township that implements a tax increment financing (TIF) program and enters into an agreement with the affected city, local, or exempted village school district to compensate that district for all or a portion of the tax revenue that such school district would have received, but for the TIF, must also compensate the affected joint vocational school district at the same rate and term. The affected joint vocational school district is also required to receive notice of the proposed TIF program in the same manner as the city, local, or exempted village school district.
Sections 5709.62, 5709.63, 5709.632 – Extension of the Enterprise Zone Program. The enterprise zone (EZ) program, which was set to expire on October 15, 2011, was extended to October 15, 2012.
Section 5733.351 – Amends Definition of “Eligible Entities” for Purposes of the “Qualified Research Expenses Tax Credit Program” to Include Insurance Companies. The corporation franchise tax credit for research expenses incurred by one or more members of an affiliated group was revised to permit the inclusion of an insurance company in the group, even though insurance companies are not subject to the franchise tax. Uncodified bill section 757.93 states the change is a clarification of existing law.
Section 122.121 – Delays the Effective Date of the Sports Incentive Grant Program until July 1, 2013. The Sports Incentive Grant Program allows a municipality or county to apply for a grant from the Ohio Department of Development of up $500,000 to utilize in the preparation for and presentation of specified sporting events and related activities, provided that the event is anticipated to generate in excess of $250,000 in incremental sales tax revenue. The grant program has a yearly fiscal cap of $1,000,000. The commencement of the program, which was scheduled to begin July 1, 2011, was delayed until July 1, 2013.
Section 122.861 – Creates a Diesel Emissions Reduction Grant and Revolving Loan Program. For purposes of reducing emissions from diesel engines, R.C. 122.861 authorizes Ohio’s director of environmental protection to make grants and loans for projects relating to certified engine configurations and verified technologies in a manner consistent with the requirements of Section 793 of the Energy Policy Act of 2005, Pub. L. No. 109-58, 119 Stat. 841, et seq., and any regulations issued pursuant to that section. The bill transfers authority to administer the program from the Department of Development to the state Director of Environmental Protection.
Section 166.02 – Removes Prevailing Wage Requirements for Guarantees and Loans in R.C. 166.06 and 166.07. The bill removes the requirement that projects utilizing financial assistance from programs created from R.C. 166.06 and 166.07 must pay laborers and mechanics employed on the project the prevailing rate of wages under Chapter 4115.
Section 1728.07 – Exempts a Community Urban Redevelopment Corporation (CURC) from the Prevailing Wage Requirement. Community Urban Redevelopment Corporations are exempted from paying laborers and mechanics employed on the CURC projects the prevailing rate of wages under Chapter 4115.
Section 4115.04 – Exempts Public Improvements Undertaken by a Port Authority from Paying Prevailing Wages. Port Authorities are exempt from the prevailing wage requirements of R.C. 4115.03 to 4115.16 for public improvements undertaken by, or under contract for, a port authority as defined in section 4582.01 or 4582.21 of the Revised Code.
Section 4582.12 – Exempts a Port Authority Project from Paying Prevailing Wages. Port Authorities are exempt from the prevailing wage requirements when the port authority elects to construct a port authority facility.
Section 5727.75 – Extends the Date for Filing a Property Tax Exemption by a Qualified Energy Project until December 31, 2013. The exemption for qualified alternative energy projects in R.C. 5727.75 was extended for two years. Application for exemption must be made by December 31, 2013; construction on the facility must begin before January 1, 2014, and the facility must be in operation by January 1, 2015.
Section 5751.01 – Exempts Uranium Enrichment from the Commercial Activity Tax. An exclusion from “gross receipts” was added to the Commercial Activity Tax for receipts from transactions involving uranium in a designated uranium enrichment zone in Ohio. The owner or operator of the facility must apply for a certificate in order to claim the exclusion. If the application is denied, the denial may be appealed to the board of tax appeals, in which case the applicant must maintain certain tax records until the appeal is resolved.
Section 5731.02 – Repeal of the Estate Tax. The Estate Tax was repealed for the estate of individuals dying on or after January 1, 2013.
The Ohio Historic Preservation Tax Credit provision is effective immediately. The remaining provisions become effective 90 days after the bill was signed by the Governor on June 30.