Ohio historic preservation and economic development projects may soon receive a large temporary boost from the Ohio General Assembly. Recently passed by the Ohio Senate and now under consideration in the Ohio House, Ohio Senate Bill 225 would double both the Ohio Historic Preservation Tax Credit (OHPTC) and Opportunity Zone (OZ) Tax Credit caps.
OHPTC Awards Temporarily Doubled
For state fiscal years 2022 and 2023, the bill would permit the Ohio Director of Development to change the amount of OHPTCs awarded from $60 million to $120 million. If the bill is signed into law in time, the Ohio Department of Development’s Round 29, beginning Fall 2022, would be the first group of applications to benefit.
Often used in conjunction with the federal historic tax credit, the OHPTC is a sought-after tool that makes challenging redevelopments of eligible historic buildings feasible. The program is highly competitive and impactful. Currently, the OHPTC program provides a state tax credit of up to 25% of qualified rehabilitation expenditures incurred during a rehabilitation project, up to $5 million. OHPTC credits can be applied to income tax, financial institutions tax or insurance premiums taxes.
OHPTC Temporary Enhancements
Ohio Senate Bill 225 would also provide several enhancements to the 25% credit:
- The credit is boosted from 25% to 35% for projects in communities with populations smaller than 71,000 as determined by the 2020 census.
- The bill would increase the maximum annual credit able to be claimed for a single project from $5 million to $10 million.
- The bill would increase the full refund cap of any credit amount from $3 million (with the balance carrying forward up to 5 years) to $10 million.
As would be provided by the bill, these enhancements apply automatically to projects approved on or after the bill’s 90-day effective date and before July 1, 2023. As long as construction has not yet commenced, the owner of a project approved after June 30, 2020 and before the bill’s 90-day effective date may reapply for an enhanced tax credit.
Ohio has approved OHPTC credits for over 766 buildings in 77 Ohio communities, leveraging more than $7.3 billion in private development and federal tax credits.
Ohio OZ Tax Credit Changes
S.B. 225 expands tax credit certificate eligibility to investors in an Ohio Opportunity Zone that are not subject to the Ohio personal income tax. The bill increases OZ Tax Credit award limits from $50 million to $100 million for state fiscal years 2022 and 2023. The bill provides that there would be two shorter credit application periods each fiscal year covering investments made in the prior six months. The first application window would run from January 10 to February 1, while the second would extend from July 10 to August 1. Several changes aimed at improving the transferability of all or portions of Ohio OZ tax credits are also proposed in the bill.
The Ohio OZ Tax Credit Program provides an incentive for taxpayer investors to place capital in projects located in economically distressed areas known as “Ohio Opportunity Zones.” Ohio’s program requires that taxpayer investors place cash in an Ohio Qualified Opportunity Fund (“Ohio QOF”), which in turn must invest that money in an Ohio Qualified Opportunity Zone property. Once the money is invested in the Qualified Opportunity Zone property (QOZ Property), the taxpayer investor is then eligible for a non-refundable tax credit equal to 10% of the amount of its funds invested by the Ohio QOF in the QOZ Property. The Ohio Department of Development reviews OZ Tax Credit applications in the order that they are received until all eligible applications are funded or until the allocated tax credits are fully utilized, whichever comes first.