InvestOhio: New Ohio Tax Credit
InvestOhio provides a non-refundable personal income tax credit to investors that invest new equity (cash) into certain approved Ohio small business entities to acquire an ownership interest in the company.
Eligibility Requirements
The investor should confirm that the entity will be classified as a “small business enterprise” for purposes of InvestOhio. To qualify, the small business:
- Must have less than $50 million in assets or less than $10 million in annual sales
- Must have at least 50 full-time equivalent employees in Ohio OR more than half of total employees are employed in Ohio
Eligible investments must be made on or after July 1, 2011.
The small business is required to reinvest that infusion of cash into one of five categories of allowable expenses within six months of its receipt:
- Tangible personal property used in business
- Motor vehicles used in business
- Real property used in business
- Intangible property used in business
- Compensation of new employees
The investor must retain his or her ownership interest for a two year holding period if the investment is made prior to July 1, 2013. The small business must similarly retain the property that it purchased from the cash infusion for the entire two year holding period. A five year holding period applies if the investment is made on or after July 1, 2013.
How to Apply
In order to be awarded a small business investment certificate (an InvestOhio tax credit) there are several steps to follow. Detailed information can be found on the Ohio Department of Development’s website, including tutorials and frequently asked questions (FAQ). Some highlights to consider are:
- Both the investor and the small business must have an account established on Ohio Business Gateway.
- Both the investor and the small business must register for InvestOhio through the Ohio Business Gateway. At the end of registration, each registrant will receive an InvestOhio User ID. This number will be required to complete the application process.
- The parties on a given transaction will decide who is responsible for applying to the InvestOhio program. Regardless of whether it is the investor or the small business, the party that applies must
obtain the InvestOhio User ID of the other party on the transaction. They must also reach an agreement with that party about when the investment will take place and the amount of the
investment. - The party that is responsible for applying will do so on Ohio Business Gateway, starting the first week of December. The timing of when an eligible investor or small business applies is critical, as credits are awarded on a first come, first served basis. Once a party has completed an application, he or she will be given an InvestOhio Transaction ID number. This number will determine the priority for that transaction.
- Regardless of whether a transaction has the necessary priority to be awarded an InvestOhio tax credit at the time of application, the investor must make the investment on or around the date described in the application. Some transactions that were initially eligible may be disqualified for failure to follow the program rules.
There are additional reporting requirements and qualifications that must be satisfied during the process to ensure the InvestOhio tax credit will be awarded. We can discuss those details with you throughout the process.
Ohio Income Tax Credit Available
If approved, the income tax credit equals 10% of the qualifying amount of the taxpayer’s investment. The tax credit is available against income tax and is nonrefundable. Any unused amount may be carried forward for seven years.
Some of the details of this program are still being developed and not available at this time; however, if you have any questions about the InvestOhio program and registration or application process, please contact your Plante Moran tax advisor.
