The Ohio Biennial Budget and What it Means for Ohio’s Businesses

Kegler Brown Business Tax Alert

The Ohio Biennial Budget (House Bill 153) was recently enacted by the Ohio General Assembly and signed by Governor Kasich. In spite of a projected structural deficit of $8 billion, this budget manages to be balanced without any tax increases or substantial fee increases. However, there are a number of provisions in the legislation that affect Ohio’s tax structure. Contact our team at Kegler Brown if you would like more information on how your business could benefit from these changes.

  • Invest Ohio Tax Credit. This new credit authorizes a non-refundable, small business investment credit against the personal income tax for investing in a small business enterprise with an operating presence in Ohio.
    • Eligible investments must be made on or after July 1, 2011.
    • The investment credit equals 10% of the qualifying investment. Unused credits can be carried forward for up to 7 succeeding tax years.
    • Credits can be claimed for either direct or indirect investments.
    • A tax payer claiming the investment credit must hold the investment for at least 2 years beginning on the day that the qualifying investment is made.
    • Small business enterprise must have at least 50 employees in Ohio or more than 50% of total employees in Ohio.
  • Large computer data center sales and use tax exemption. A sales and use tax exemption may be awarded by the Ohio Tax Credit Authority for equipment used in the operation of a large computer data center business provided that the business makes a capital investment of at least $100 million in the state and maintains an annual payroll for employees involved in the capital investment project of at least $5 million.
  • Broadened Insurance Company Research Credit. Insurance companies may claim a tax credit for research expenses incurred by one of their companies even though that particular company is not subject to the franchise tax.
  • Expanded Job Retention Tax Credits. A new refundable job retention creation tax credit has been created and the existing non-refundable job retention tax credit has been renewed with some modifications.
  • Repealing the estate tax. The estate tax has been repealed for the estates of those who die after January 1, 2013.
  • Commercial Activity Tax Exemption for uranium enrichment facility transactions. Certain receipts from transactions involving uranium within uranium enrichment facilities are exempt from the commercial activity tax.
  • Broadened sales tax exemption for agricultural property and services. The sales and use tax exemption for building materials related to agriculture has been broadened.
  • Exempting the redemption of customer loyalty coupons from sales and use tax. The value of gift cards or gift certificates that are redeemed by a consumer in exchange for a vendor’s goods or services as a part of an awards loyalty or promotional program are exempt from sales and use taxes.
  • Historic building rehabilitation tax credit. The tax credit for rehabilitating a historic building is now permanent. The application for such a credit can be rescinded by the Director of Development when an applicant has failed to obtain financing for the project within 18 months of being initially approved for the credit.
  • Tax exemptions for privatized state services. Entities, other than private prisons, that enter into a contract with the state to perform services that would traditionally be performed by state agencies can claim credits, exemptions and deductions against various taxes.
  • Tax amnesty program. The Tax Commissioner will administer a tax amnesty program for a portion of 2012 for personal income tax, sales and use tax, corporate franchise tax, estate tax, motor vehicle tax, cigarette tax, natural gas company excise tax, and dealers and intangibles tax.
  • Protecting joint vocational school districts in tax incremental financing deals. A township, county or municipality that enters into a tax incremental financing arrangement must hold harmless or require a payment in lieu of taxes agreement to compensate a school district for foregone tax revenue to equally compensate an applicable joint vocational school district.