Announcements

InvestOhio Tax Credit Bulletin

"InvestOhio has been established to promote investment in small business, and consequently drive job creation in the state." .............Ohio Department of Development

What is the benefit to me?

The InvestOhio program gives investors a 10% non-refundable tax credit against Ohio income tax on qualified investments.

Credit Limits: Individuals may receive a credit of up to $1 million for a $10 million investment; married taxpayers filing jointly up to a $2 million credit for a $20 million investment during the July 1, 2011 – June 30, 2013 biennial period. The credit is non-refundable and non-transferable and has a seven year carry forward.

What is a qualified investment?

  • Cash investment by an individual, trust or estate made after July 1, 2011 to purchase capital stock or equity interest in an eligible small business.
    • Note: This can be an existing owner purchasing additional capital or equity interest.
  • The investment must be held by the investor for at least two years if investment is made prior to June 30, 2013, and at least five years if made after June 30, 2013. The credit is not claimed until the end of the holding period.

What is an eligible small business? The following four requirements must be met:

  • May be a corporation, individual or pass-through entity, and the investor must be subject to Ohio state income tax.
    • Note: A C Corporation can make an investment but will not qualify because it is not subject to Ohio state income tax but an S Corporation or Partnership can make a qualifying investment and pass the credit through to its individual owners. Even though C Corporations are disqualified, individuals can make qualifying investments in C Corporations.
  • Must have at least 50 full time equivalent employees in Ohio, or have at least half of its employees in Ohio.
    • Note: If a business has 3 employees, 2 of which are in Ohio, it qualifies as an eligible business because over half of its employees are in Ohio.
  • Must have total assets not exceeding $50 million, or total sales not exceeding $10 million, and
  • Within six months of receiving the investment, the business must spend at least the amount of the investment on:
    • Equipment, tangible personal property or real property in Ohio,
    • Intangible assets – patents, copyrights, trademarks, licenses – used in Ohio,
    • Motor vehicles purchased and registered in Ohio used for business purposes, or
    • Compensation for new or retained employees in Ohio, excluding owners, managers or officers.

Asset Holding Period requirement:

  • Assets purchased under the investment must be held by the company for the investment holding period.

What is the process involved?

  • The business must apply and be certified as a eligible small business.
  • The individual or business making the investment in the business must apply for its investment to be qualified. The amount of credits issued in the July 1, 2011 – June 30, 2013 biennial period will be limited to $100 million. The credits are issued on a first come, first serve basis.
  • The application forms will not be available until September 30, 2011.
  • In addition regulations involving related company rules, buying out existing owners, and other tax situations have not been released by the Ohio Department of Taxation.

What do I do now?

If you have a situation where you think you might qualify or if you have any questions please contact us. We will try to help you get certified so you are eligible to claim your credit against Ohio income tax.

This bulletin was prepared using the information currently released by the Ohio Department of Taxation, the Ohio Department of Development and House Bill 153. Since the regulations involving this tax credit have not yet been released, we must emphasize that this bulletin is still preliminary in nature.

Thank you for the opportunity to serve you.

Sincerely,

Arend, Laukhuf & Stoller, Inc.

 

Please contact us and we will be happy to meet with you.

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