Ohio Renews 10% Income Tax Credit for Opportunity Zone Investments

On June 30, 2021, Ohio Governor Mike DeWine signed into law a state budget that renews funding for the Ohio OZ income tax credit for an additional two-year term. Here is what OZ investors need to know:

  • Successful applicants receive a certificate for a non-refundable income tax credit equal to 10% of the amount invested into Ohio opportunity zone property.
  • Investments of eligible gains and ordinary after-tax cash qualify for the credit.
  • The Ohio OZ tax credit is capped at $2 million per taxpayer, and up to $50 million for all taxpayers, during the 2021-2022 biennium period.
  • The tax credit certificate may be used for up to 5 years, or transferred in whole on a one-time basis, meaning they can be sold for an immediate cash return on investment.
  • The application period is in January of each year and the tax credits are awarded on a first-come, first-served basis.

According to state public records, in 2020 Ohio taxpayers saved approximately $120 million in income tax by investing into 73 opportunity zone projects throughout the Buckeye State. These investors received an immediate 10% state income tax credit and will be eligible to exit these investments tax-free after a minimum ten-year holding period. Ohio’s OZ tax credit complements the federal OZ laws by providing a dollar-for-dollar credit against state income tax for calendar year investments made into Ohio opportunity zones.

However, there are strict procedural rules that investors must follow under Ohio law. For example, an Ohio qualified opportunity fund must hold 100% of its assets in Ohio qualified opportunity zone property and deploy investor capital in the same calendar year that it received investor funds. Investors should consult their professional advisors for advice on the structuring and timing of funds transfers to ensure eligibility.

Kegler Brown Hill + Ritter advises taxpayer-investors, fund managers, developers, and entrepreneurs on tax-advantaged qualified opportunity zone transactions, including the purchase and sale of Ohio OZ tax credit certificates. For questions on the Ohio OZ tax credit or other opportunity zones-related matters, please contact Andrew P. Doup at (614) 462-5488 or [email protected].