Federal Tax Credits
Job Creation Tax Credit (JCTC): The Job Creation Tax Credit is a refundable tax credit to companies creating at least 25 new full-time jobs (within 3 years) in Ohio. The credit may also be available for certain high-wage industries creating 10 or more new full-time jobs within 3 years. The refundable tax credit is measured as a percentage of the state income tax withholdings for all new employees hired under the program, and is applied toward the company’s commercial activities tax (CAT) liability. Should the amount of the credit exceed the company’s CAT liability for any given year, the difference is refunded. Approved projects generally range between a 25 and 55 percent credit for a period of 5 to 7 years. The business must apply for the credit before committing to the project.
Job Retention Tax Credit (JRTC): The Job Retention Tax Credit is a non-refundable tax credit to companies retaining at least 1,000 full-time jobs in Ohio. Companies must also commit to new fixed asset investment of either $100 million, if the average wages of the retained jobs exceeds 400 percent of the federal minimum wage (equal to $20.60 per hour), or $200 million, if the average wages of the retained jobs does not exceed 400 percent of the federal minimum wage. The credit is measured as a percentage of the state income tax withholdings for all employees retained under the program. Approved projects generally range up to 75 percent for 10 years. The business must apply for the credit before committing to the project
Research and Development Investment Tax Credit: The R&D Investment Tax Credit is a non-refundable Ohio corporate franchise (income) tax credit for all investment in qualified research expenses incurred in Ohio by eligible “C” corporations. Qualified research expenses are based on Section 41 definitions in the U.S. Internal Revenue Code and include expenses for both in-house and contract research expenses.
The amount of the credit is based on 7 percent of the amount of all qualified investment in a specific year. For companies with a presence in Ohio, the eligible investment in R&D expenses is based on all investment exceeding the company’s three-year annual average investment in the county. The credit can be carried forward for up to seven years.
Local Property Tax Exemptions: Local communities in Ohio are authorized to collect local property taxes on real property (land and buildings) and tangible personal property (machinery and equipment, furniture and fixtures, and inventory). Through the Ohio Enterprise Zone and Community Reinvestment Area programs, local communities can elect to abate a portion of property taxes owed by a company. Typical abatements under the Ohio Enterprise Zone are 50 to 75 percent of taxes exempted for 10 to 15 years, on real or tangible personal property. Under the Community Reinvestment Area program, real property taxes can be abated up 100 percent for 15 years.
Sales and Inventory Tax Exemptions: State and local sales taxes are exempted on certain types of purchases, including machinery and equipment used in the manufacturing process; material handling equipment used in the warehousing of inventory that is primarily (51 percent or greater) distributed to retail operations associated with the warehouse operator; and equipment used for research and development purposes. Additionally, inventory, which is taxed at the local level as tangible personal property, can be exempt from tax if located in an established Foreign Trade Zone. Inventory is also exempt from taxation if qualified for the Warehouse Inventory Tax Exemption, whereby inventory that is received from outside Ohio, held “for storage only” (i.e. no value is added to the inventory while stored in Ohio), and distributed outside Ohio, is completely exempt from local tangible personal property tax.
The Work Opportunity Tax Credit Programs (WOTC): The Work Opportunity Tax Credit Program is a federal tax credit which provides Ohio employers with a tax credit against their federal tax liability for hiring individuals from nine target groups of disadvantaged job seekers. Tax credits range from $1,200 to $2,400 for all WOTC target groups. Employers may receive a maximum credit of up to $9,000 per eligible employee for the Long Term IV-A target group. The WOTC Tax Credits are administered by the Ohio Department of Job & Family Services.
Empowerment Zone (EZ) and Enterprise Community (EC) Tax Credit Programs: The Empowerment Zone Tax Credit gives employers an incentive to retain or hire individuals who both live and work in an EZ. Businesses can claim credit, even retroactively, for as much as $3000 per qualified EZ employee each year. This tax credit is attractive to businesses that are looking to reduce tax liability or that are considering expanding or relocating to an EZ.
The Enterprise Community Credit is available to qualified companies that locate within regions that have been previously designated for renewal. The program includes a state income tax credit for each net new job created based on average wage, training credits, and the refund of sales and used taxes on the purchase of materials used in the construction of new facility or expansion of existing facilities. The result of this type of program is the increased investment by the business community to make both capital investments in the EZ and to provide jobs for the local residents.
New Market Tax Credit: Using the popular and effective Federal New Markets Tax Credit as a model, the budget creates an Ohio New Markets Tax Credit. The credit will encourage investments in securities issued by community development entities that, in turn, will make investments in qualified low-income community businesses. This new initiative will help spark revitalization efforts in our urban areas. Named as one of the Top 50 in the "Innovations in American Government Awards" in March 2009, new markets tax credits have successfully incentivized significant additional private sector investment into distressed areas throughout the country. Ohio will join a handful of states in complementing and supporting the credit with its own state version, which will give Ohio a significant competitive advantage in attracting these investments nationally.
The Ohio New Markets Tax Credit provides a nonrefundable tax credit with a four-year carry-forward against the insurance premium and financial institution franchise tax and the foreign insurance company tax, for insurance companies and financial institutions that purchase and hold securities issued by low-income community organizations to finance investments in qualified active low-income community businesses in Ohio. Up to $1 million in credits will be available per business, with a total of $10 million in credits available per year beginning January 1, 2010.