On April 28, 2016, the Ohio 2020 Tax Policy Study Commission (the “Commission”) held a public hearing on the future of the Ohio historic preservation tax credit (the “OH HTC”). As you may recall, the Ohio biennial budget bill for 2016-2017, Amended Substitute House Bill No. 64, which was signed into law by Ohio Governor John Kasich on June 30, 2015, created the Commission, which was tasked with reviewing and making recommendations on, a number of Ohio tax issues. One specific tax issue assigned to the Commission was how to make the OH HTC more efficient and effective, including whether to convert the OH HTC to a refundable tax credit or grant program. The deadline for the Commission to publish its findings and recommendations on the OH HTC and submit its report to the General Assembly is October 31, 2016. This April 28, 2016 hearing indicates the Commission is taking steps to move forward with its task of reviewing the OH HTC.
By way of brief background, the OH HTC program1 currently allows for a state of Ohio tax credit equal to 25 percent of certain qualifying expenditures incurred by an eligible taxpayer to rehabilitate a “historic building.” Such tax credit can be applied against certain Ohio taxes, namely the personal income tax, financial institutions tax, insurance company franchise tax and, for a limited time only, the commercial activity tax. In order for eligible taxpayers to generate OH HTCs on a rehabilitation project, they must first apply to the Ohio Development Services Agency for an award of OH HTCs. Each year there are two application rounds and two corresponding OH HTC award announcements. No more than $60 million of OH HTCs can be awarded in any one year. Further, each project is generally limited to an OH HTC award of $5 million. However, once each biennium, a “catalytic” project may be awarded up to $25 million in OH HTCs.
At the Commission’s April 28, 2016 hearing, various industry leaders appeared to testify on the OH HTC, including representatives from Heritage Ohio, Downtown Cleveland Alliance and the American Institute of Architects (AIA) of Ohio. All praised the efficiency and effectiveness of the current OH HTC program, with one even mentioning its use by other states as a model. The Commission asked most witnesses their opinions as to what could be done to improve the OH HTC program. The only change consistently suggested was to expand the OH HTC program by removing the annual $60 million cap altogether. Such removal, witnesses suggested, would increase the opportunity for economic development and make it possible for an even greater number of deserving rehabilitation projects to be completed in Ohio.
We will continue to monitor the Commission’s efforts as it reviews the OH HTC program and makes recommendations for the program going forward.