The Ohio budget bill, Am. Sub. H.B. 153, provides for a refundable jobs retention tax credit for enterprises that retain employment payroll in the state and make the requisite capital investment in the state. A provision in the bill has generated two questions about the availability of the credit for companies that maintain multiple locations in Ohio, or that are not headquartered in Ohio.
In order to receive the credit, the enterprise must have 500 full-time equivalent employment positions and a total annual payroll of $35 million. However, if the enterprise applies for the credit between July 1, 2011, and January 1, 2014, it is sufficient if the enterprise has $20 million in annual payroll. Finally, the enterprise must have made a capital investment of at least $5 million over the three-year period that includes the year in which the credit is granted.
An additional requirement is that the capital investment must be made “in the political subdivision in which the taxpayer maintains its principal place of business.” This provision seems to call into question the availability of the credit for companies with operations elsewhere.
Based upon prior practice at the Department of Development with respect to the existing jobs creation and retention tax credits, and based upon testimony and discussion surrounding the adoption of this provision, it appears the credit was not intended to be construed so narrowly. It appears that the intent behind the provision was simply that the capital investment had to be made at the location where the job retention was to occur. An enterprise maintaining operations in Cincinnati and Columbus, for example, could not combine capital investment made at the two locations to reach the $5 million threshold; nor could a credit for jobs retained in Columbus be justified by a $5 million investment in the Cincinnati location. Rather, the location where the investment occurs must coincide with the location where the jobs retention occurs.
However, this conclusion is not certain, and formal guidance from the legal staff of the department has not been issued. Enterprises counting on the credit in their financial assessment of any investment in Ohio should confirm with the department the manner in which this provision will be interpreted.
For more information, view Mark Engel's July publication: HB 153 Biennial Budget Bill - Key Economic Development Budget Bill Provisions.
