Client Alerts Economic Development / 07.19.2019

New Tax Credits & Incentives Included in 2019-2020 Ohio Budget

By Stephanie Mercado

economic developmentFollowing a 17-day delay, Governor Mike DeWine signed Ohio’s $69B biennium budget on Wednesday.  The budget includes tax cuts, as well as an increased focus on education, public health and water quality programs. KJK will be providing a more in-depth analysis regarding specific items contained in the budget; however, below is an overview of important elements related to tax credits, incentives and taxation, as well as other notable aspects of the budget:

Taxation, Credits & Incentives

  • Ohioans will receive a 4% across-the-board state income tax reduction. The bottom two brackets will also be eliminated to allow those earning less than $21,750 to pay no state income taxes.
  • Ohio retains the heavily debated $40M motion-picture tax credit; however, the credit will also now focus on post-production, promotional costs and live theatre, in addition to requiring businesses applying for the credit to be registered in Ohio.
  • Ohio also retains the $250,000 small business income tax deduction, despite efforts by the House to decrease the deduction to $100,000. The deduction, however, now excludes attorneys and lobbyists.
  • Certain investments in Opportunity Zones in Ohio are now eligible for a 10% credit against Ohio income tax, in addition to existing federal tax benefits. Credits are awarded through an application process through the Ohio Development Services Agency, and only $50M in credits will be awarded per fiscal biennium. The maximum credit to any applicant is $1M per fiscal biennium. As such, only 50 projects could receive the credit state-wide. Applications are due between Jan. 1 and Feb. 1 of the year following the investment, and awards will be made on a first come, first served basis. As such, it is anticipated that there will be a significant number of statewide submissions made on Jan. 1 for investments made prior to Dec. 31, 2019 through Qualified Opportunity Funds.
  • The budget also expands the eligibility requirements for the seldom used Ohio Job Retention Tax Credit by expanding eligibility based on new capital investment, as compared to payroll or employment levels.
  • Local communities can extend existing tax increment financing (TIF) agreements up to an additional 30 years.
  • The budget now also expands a sales and use tax exemption for cleaning equipment and supplies used in food processing or production. Historically, the exemption only applied to dairy processors, but now expands to any production for human consumption.

Local & Municipal Impact

  • The budget creates a new $172M H2Ohio fund to support the protection of Lake Erie, rivers and other waterways, in addition to other community-focused water projects.
  • Additionally, it increases the Local Government Fund by 1.68%.

Healthcare & Education

  • The budget provides $675M for wraparound services for at-risk students to be used for wellness such as mental health treatment, after-school programs and tutoring.
  • The age to buy tobacco is raised from 18 to 21.

Other Items & Pending Legislation

  • In addition to the state budget, legislation also passed supporting a $645M budget for the Bureau of Workers’ Compensation.
  • Senate Bill 39 would allow insurance companies a tax credit of as much as 10% of a qualified project’s development costs against their tax on insurance premiums for investments in ‘transformational mixed-use developments,” or TMUDs. We will continue to track this bill that could be critical to helping urban mixed-use projects move forward.

If you have any questions or would like more information, please reach out to Stephanie Mercado at 216.736.7272 or smmercado@kjk.com, or contact any of our Economic Development professionals.

 

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