December 09, 2011
InvestOhio Tax Credit Initiative Begins
The Ohio Department of Development recently launched its InvestOhio program in order to provide an incentive for individuals to invest money into eligible small businesses. The Department of Development expects these investments to boost Ohio’s overall economy by creating more jobs. The Director of Development is authorized to award up to $100 million in tax credits and will award these credits to eligible investors based on a first come, first served basis. Therefore, it is important to be proactive in registering and applying for the credit to maximize chances of receiving of the credit.
InvestOhio offers a 10 percent personal income tax credit for equity investments of up to $10 million in eligible small businesses. This is a non-refundable credit against income tax only, and it can be carried forward for 7 years. The credit is available to the investor, not the small business enterprise. Upon making the investment, the investor’s equity interest must be held for two years before the tax credit may be claimed. Eligible businesses must be based in Ohio and must have less than $50 million in assets or $10 million in annual sales. In order to be considered “based in Ohio”, a business must have at least 50 employees in Ohio or, if the business has fewer than 50 total employees, at least 50 percent of its total employment must be based in Ohio. Individuals, estates, and trusts are eligible investors for this credit. However, pass-through entities are also eligible investors if they are owned either directly or indirectly by an individual, estate, or trust.
The small business must use this investment for one or more of the following expenditures:
- Tangible personal property, other than motor vehicles operated on public roads and highways, used in business and physically located in Ohio
- Motor vehicles operated on public roads and highways if they are purchased and registered in Ohio, are used primarily for business purposes, and are necessary for the operation of the business
- Real property located in Ohio that is used in the business
- Intangible personal property, including patents, copyrights, trademarks, service marks, or licenses used in business primarily in Ohio
- Compensation for new employees of the business for whom the company is required to withhold income tax not including increased compensation for owners, officers, or managers. Compensation for new employees includes compensation for newly hired or retained employees.
For any of the property mentioned above, it must be used in Ohio from the time of acquisition until the end of the investor’s holding period. The expenditures must be made within 7 months of the investment and evidence must be provided to the Director of Development within 30 days of completing the expenditures or within 7 months of the investment, whichever occurs first.
Both the investor and the small business must register for InvestOhio through the Ohio Business Gateway. Registration began on November 14, 2011. After registering, the two parties must decide who is responsible for applying to the InvestOhio program and that party will then apply at the Ohio Business Gateway. This application process will begin the first week of December 2011 and, as previously mentioned, the credits will be awarded on a first come, first served basis. The qualifying investment must be made on or around the date described in the application, regardless of whether the application has been approved yet. Evidence of this investment must be provided to the Director within 30 days. Approved applicants will be notified by email of their eligibility and the small business will then have 7 months to make the qualifying expenditures and submit evidence to the director by the previously mentioned deadline. Upon completion of the two year holding period, evidence of continued ownership must be provided and the investor will then be allowed to claim the tax credit.
Please contact your Marcum SALT representative for further information on the InvestOhio program.