The Ohio Department of Taxation recently released a report outlining 134 tax credits, deductions and exemptions available to Ohio taxpayers. Of note, Ohio’s Job Creation Tax Credit now covers work-from-home employees.
The Tax Expenditure Report for the Governor’s 2020-21 Executive Budget outlines approximately $19.2 Billion of tax credits, exemptions and deductions available to Ohio taxpayers. This client alert serves to provide a list of several Ohio statutory exemptions, credits and/or deductions contained in the report primarily used to benefit businesses, as well as any notable changes to the same exemptions, credits or deductions. The full list can be found in the report.
Sales & Use Tax
Ohio continues to provide sales tax exemptions aimed at attracting and growing business in the state. Of note, Am. Sub. HB 49 extended the time frame that data center operators have to meet the capital investment requirements associated with exemption qualifications from five to six years. Sales tax exemptions in Ohio benefiting business include exemptions from:
- Property used primarily in manufacturing;
- Packaging and packaging equipment;
- Items used in storing, preparing and serving food;
- Building and construction material used in certain structures*;
- Tangible personal property used in research and development;
- Tangible personal property used or consumed in distribution warehouses; and
- Sales of qualified property used in an eligible computer data center*.
Individual Income Tax
Ohio also continues a recent trend in reducing the state’s income tax by reducing the number of income tax brackets from nine to seven, as well as providing the following deductions and credits against income tax:
- Ohio business investor income deduction;
- Historic structure rehabilitation credit*;
- Motion Picture Tax Credit*; and
- Small business investment credit.
Financial Institutions Tax
Am. Sub. HB 49 changed the $10M annual cap to the amount of Ohio new market tax credits* approved each year, rather than the amount of credits claimed each year. While new markets tax credits ultimately support community development projects, the credit itself offsets the Financial Institution Tax as the state tax credit (unlike the federal credit) is only usable by financial institutions and insurance companies in Ohio.
Commercial Activity Tax
Am Sub. HB 49 made a major change to the Job Creation Tax Credit by allowing the counting of home-based employees as part of the credit. As such, employers can now count work from home employees toward the $660,000 minimum commitment of net new annual payroll to the state to qualify for the credit. Other exclusions from and credits against Commercial Activity Tax include:
- Exclusion of first $1M of gross taxable receipts;
- Exclusion of qualified distribution center receipts;
- Exclusion of qualified supply chain receipts;
- Credit for increased R&D activities;
- Job creation tax credit*;
- Job retention tax credit*; and
- R&D loan credit*.
Kilowatt-Hour Tax
While generally reserved for companies that consume a substantial amount of power, certain qualified end users can be exempt from the kilo-watt hour tax. Am. Sub. HB 49 also created an exemption for the distribution of electricity to consumers that use the electricity in a chlor-alkali process to manufacture chlorine and other chemicals.
The Tax Expenditure Report covers 134 credits, exemptions and/or deductions available at the state level; however, it does not cover any additional credits or tax incentives offered and administered at the local level. Additionally, it does not cover any other grants or awards provided through JobsOhio, the state’s privatized economic development organization.
*Any credit, deduction or exemption marked with an asterix (*) will require negotiation and prior approval from the State of Ohio prior to claiming.
For questions related to how to qualify or obtain the same, or any other expenditure listed in the report, contact Stephanie Mercado at smmercado@kjk.com or 216-736-7272, or reach out to any of our Economic Development professionals.
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