Start Applying for InvestOhio Tax Credit Program on Dec. 5

First Come, First Served
The InvestOhio program provides a non-refundable tax credit that can be used against Ohio’s personal income tax for investors in qualifying Ohio small businesses.

InvestOhio is part of the most recent budget bill enacted last summer. The program, administered by the Ohio Department of Development in collaboration with the Ohio Department of Taxation, is expected to generate at least $1 billion in new private investment in Ohio small businesses by 2013.

Both the investor and the small business must be registered on the Ohio Business Gateway prior to applying for the credit. Once properly registered, investors and small businesses may begin applying for the credit on Dec. 5. The State of Ohio has allocated $100 million for this credit over the next two years (ending June 30, 2013); credits will be awarded on a first come, first served basis. Interested investors and small businesses should begin the process as soon as possible.

The InvestOhio credit is available to any person, trust, or estate subject to Ohio personal income tax that makes a cash investment in a qualifying small business entity (SBE). To be an eligible SBE, the business must have:

  • Less than $50 million in assets or less than $10 million in annual sales
  • At least 50 full-time equivalent employees subject to Ohio withholding tax. An SBE with less than 50 full-time equivalent employees may still qualify for the credit so long as more than half of all their full-time equivalent employees are subject to Ohio withholding tax.

The credit amount is 10 percent of an investor’s qualifying investments in qualifying SBEs and is limited to $1 million per investor ($2 million for married investors filing jointly). To claim the credit, the SBE must use the investment to purchase tangible personal property, motor vehicles, intangible personal property, or real property located or used within Ohio. The SBE may also use the investment for payroll costs associated with retained or new employees. These purchases must be made within six months of the investment; other conditions and limitations apply to certain expenditures. All qualifying purchases must be identified upon application and purchased before the credit may be claimed.

For investments made prior to June 30, 2013, the investor must retain their investment in the SBE for two years. Property purchased by the SBE must also be held for a period of two years. The credit may be claimed in the year in which the investor’s holding period will expire. For example, investments made in 2011 may be claimed on the investor’s 2013 Ohio personal income tax return. Investments made in 2012 may be claimed on the investor’s 2014 Ohio personal income tax return. Any unused credit may be carried forward for up to seven years.

If the Ohio Department of Development finds that an investor or SBE did not fully comply with the requirements for claiming the credit, the investor must reapply and will have to restart the entire process. With limited funds allocated for the credit, it is important for all investors and SBEs to consult with a trusted advisor to ensure compliance. Potential issues affecting investors and SBEs include:

  • Qualification as an investor
  • Qualification of an entity as an SBE
  • Qualification of proposed purchases
  • Potential investments in multiple SBEs
  • Potential limitations of credit by the Department of Development

BMF’s experienced state and local tax staff can assist interested investors analyze, apply, and take full advantage of the InvestOhio credit program. Interested parties should contact our tax team as soon as possible as the application process opens Dec. 5.

For more information, please contact:

Robert M. Burak, CPA
Partner in Charge, Tax Department
330.255.2419
Email

Jonathan O'Donnell, JD
Manager, SALT Practice Leader
330.255.2479
Email