Tax Credits + Economic Incentives

Tax Credits + Economic Incentives

We help clients identify and procure the local, state, and federal economic incentives that will most effectively advance their business goals.

We also appreciate how important state-funded incentives can be to your process and recognize the advantages that come with many often-overlooked local community incentives.

Our representation of both private clients and local economic development entities puts our firm in a unique position to think creatively about both perspectives. Our clients in economic and community development roles benefit from our years of experience in identifying economic development drivers and catering to private party needs. Our private clients benefit from our understanding of the economic incentive process and its limitations—an understanding that has grown from years spent representing economic development interests.

Our Services

  • Economic incentive identification and negotiation: working with local and state agencies and economic development entities to identify and negotiate incentive packages for new and growing businesses and new Ohio investments
  • Site selection strategies: identifying the best geographic location and community for new facilities, paying particular attention to local community incentives in addition to state-funded incentives
  • Tax structuring: identifying optimal structures to execute business strategies in the most cost-effective way
  • Grant application, negotiation and compliance: representing companies applying for and implementing both privately and publicly sourced grant funds

Our Clients

  • Startups and growth-stage companies: identifying public and private funding sources to maximize growth potential; representing startups throughout the lifecycle stages, from idea to incubator to pre-seed funding and beyond
  • Companies looking to locate new operations in Ohio
  • Expanding Ohio companies: identifying grants, tax incentives and other public financing options to help mature Ohio companies grow

Experience

Heartland Bank Closes Construction Loan for Mixed-Use Development in Bexley

Kegler Brown Hill + Ritter and Heartland Bank logos

Exchange of Real Property Between U.S. Army and Private Industrial Park

Creation of Dual-Rail Industrial Park

Creation of Unique Rail and Truck Intermodal Facility

Publications + Presentations

publication

Ohio’s Revised LLC Act - What You Need to Know

Article

What developers should know about loans and rental assistance from USDA

Columbus Business First
publication

Latest PPP Guidance Provides More Pieces to the PPP Puzzle

After more than a month without additional guidance from the Treasury or the SBA, new guidance was released on August 4th in the form of Frequently Asked Questions on Loan Forgiveness. Many borrowers have completed their covered periods and spent most or all of their PPP funds at this point. Accordingly, this guidance will be most helpful to those who have elected to use a 24-week covered period or have yet to apply for a PPP loan. If you have spent all of your PPP funds already, take solace in the fact that the SBA has clarified that borrowers may rely on the guidance available at the time of their application. With that out of the way, I have outlined some of the new pieces to the PPP puzzle below.Timing Timeline for Applying for ForgivenessBorrowers must apply for forgiveness within 10 months of the completion of their covered period. PaymentsBorrowers do not need to begin making payments on amounts not forgiven until the forgiveness amount is remitted to the lender by the SBA. Interest accrues on amounts owed during the time between the disbursement of the funds and the SBA’s remittance of the forgiveness amount on any amount that is not forgiven. After the lender receives notice from the SBA of the forgiveness amount, the lender is responsible for notifying the borrower of the forgiveness amount and the date on which the first payment is due. After that, the amount not forgiven must be repaid by the maturity date of the loan. Note that the maturity of the loan is 5 years if the loan was issued after June 5, 2020. For loans issued prior to June 5, the maturity date is 2 years, unless a different arrangement is reached between the lender and the borrower.Payroll Costs Cash v. Accrual BasisAccrual basis is reaffirmed for payroll costs incurred prior to the covered period, but paid during the covered period, and payroll costs incurred during the covered period, but paid by the next payroll date after the covered period. Cash Compensation and CalculationAll forms of cash compensation are includable as payroll costs (subject to the $100k annualized limit). This includes: tips, commissions, bonuses, and hazard pay. In calculating cash compensation to employees, it was not previously clear whether this would include the gross or net amount. The newest guidance clarifies that the gross amount before deductions for taxes, employee benefits payments, and similar payments should be used for calculating cash compensation. Group Health BenefitsAlthough not previously clear, the guidance clarified that forgiveness is not provided for group health payments accelerated from periods outside of a borrower’s covered period. However, those group health benefits payments by borrowers on behalf of employees that were incurred or paid during the covered period are still eligible for forgiveness. Retirement ContributionsAs with group health benefits, forgiveness is not provided for employer contributions for retirement benefits accelerated from periods outside of a borrower’s covered period. However, employer contributions for retirement benefits on behalf of employees that were incurred or paid during the covered period are still eligible for forgiveness. Owner CompensationThe guidance has provided detailed guidance on amounts paid to owners that are eligible for forgiveness for owners of C. Corps, S. Corps, Self-Employed Individuals, General Partners, and LLC Owners. Non-Payroll Costs Alternative Covered PeriodFor payroll costs, borrowers may elect an alternative covered period, beginning on their first payroll date after receiving their funds. However, this is not permitted for non-payroll costs. For non-payroll costs, the covered period is limited to the period beginning on the date of the disbursement of the PPP loan. Cash vs. Accrual BasisAccrual basis is reaffirmed for non-payroll costs incurred prior to the covered period, but paid during the covered period, and non-payroll costs incurred during the covered period, but paid during the next regular billing date after the covered period. Prepayments of Non-Payroll CostsPrepayment of all non-payroll costs (except for mortgage payments) is not prohibited. Unsecured DebtsInterest payments on unsecured debts are not eligible for forgiveness. Forgiveness is limited to interest payments on business mortgages on real or personal property (like auto loans). Renewal of Leases and Refinancing of MortgagesPayments on leases renewed during the covered period or mortgages that were refinanced during the covered period are eligible for forgiveness, so long as the obligation under the original agreement existed prior to February 15, 2020. Prepayments on lease obligations are not expressly prohibited. Transportation CostsPrior to the latest guidance, there was much confusion as to what constituted “transportation costs” as a permitted non-payroll cost. The guidance clarified that “transportation costs” refers to transportation utility fees assessed by state and local governments. Forgiveness Reductions Comparison Period for Seasonal EmployersSeasonal employers are to use the same 12-week period used for calculation of their loan amount as the period used for calculation of any reduction in the amount of loan forgiveness. Employees Making More Than $100kBorrowers are to include those employees who made more than $100,000 in 2019 on their forgiveness applications. Reductions to CompensationFinally, the guidance clarified that only decreases to an employee’s salary or wages are to be counted against a borrower for purposes of reductions to its forgiveness amount, as opposed to all reductions to that employee’s compensation.

publication

Strategies to Maximize Your PPP Loan Funds + Forgiveness

Smart Summary PPP forgiveness is valuable, but there are certain conditions that businesses should take care to avoid.Businesses should be documenting their payments meticulously and planning re-hires strategically to fully realize loan forgiveness.Employers may need to get creative with payroll in order to incentivize employees currently receiving unemployment while meeting their quotas for forgiveness.When the CARES Act passed on March 27, 2020, the Paycheck Protection Program (“PPP”) provided an opportunity for small business owners to receive an injection of cash while their businesses are subject to government-ordered shut downs. Those businesses fortunate enough to receive funds now face a myriad of issues as they spend their PPP funds while also trying to plan for forgiveness to the greatest extent possible. The most pressing issue is one of time. The funds must be spent within 8 weeks of the loan’s funding, yet many businesses are still closed to the public or working with limited revenue potential. To that end, this article provides some FAQs and examples to show how forgiveness works so small business owners can plan accordingly.Forgiveness Like anything else, forgiveness under the PPP comes with conditions. What is the limit on forgiveness? The full principal amount of the loan, plus accrued interest. What expenses can be forgiven? It depends on the total amount spent over the covered period. We’ve prepared a worksheet that helps you understand and calculate all of this, which can be downloaded for free here. Are there restrictions on forgiveness? Yes. 75% of the amount forgiven must be attributable to payroll costs. How can my forgiveness be reduced? There are two ways your total forgiveness amount can be reduced: a reduction in number of employees or a reduction to employees’ salary or wages. Refer to our worksheet for help on your specific situation. If there is a reason my forgiveness amount may be reduced, are there any second chances? Yes. The PPP provides a grace period. If, from February 15 to April 26, 2020, you had: (i) a reduction in the number of FTEs as compared to February 15, 2020; and/or (ii) a reduction in the salary or wages of one or more employees as compared to February 15, 2020, but you eliminated the reduction in FTEs and/or salary or wages by June 30, 2020, then the amount of loan forgiveness will be determined without regard to any reductions.Employment Concerns Once you have your PPP money and a plan in place for forgiveness, it’s time to spend. But many employers are finding it hard to allocate 75% of their spending to payroll when employees have been laid off and are happy collecting employment. With the CARES Act’s additional $600 benefit, employers may need to get creative to compete with the expanded benefits. Options include a one-time “recall” bonus, temporary raises, partial unemployment, or any combination of the three. The best strategy will depend on your recall needs and PPP spend plan. ExamplesTo better understand your options, here are three common scenarios to consider.Company A – No LayoffsOn February 15, 2020, Company A had 10 FTEs. From February 15 – June 30, 2019, Company A had an average of 10 FTEs. Over the 8-week period after receiving loan funds, Company A had an average of 10 FTEs. Result: Company A will have its loan amount entirely forgiven with respect to covered expenditures, provided that at least 75% of the forgiveness amount is attributable to payroll costs. Company B – 60% Layoff with Full FTE Re-Hires Before June 30On February 15, 2020, Company B had 10 FTEs.From February 15 – June 30, 2019, Company B had an average of 10 FTEs. Company B operated on a skeleton crew of 4 FTEs over the 8-week period after the disbursement of the loan funds. Company B hired 6 additional FTEs on June 15, 2020, as their business ramped back up. Normally, Company B’s forgiveness amount would be reduced by 60%, but because Company B eliminated the discrepancy in FTEs before June 30, 2020, the reduction amount is calculated without regard to such reduction. Note in this example that it is unlikely Company B will have spent all of their available funds because they operated on a skeleton crew during the 8-week payment period. Thus, there would likely be some funding remaining which can be repaid or retained as a loan. Result: Company B will have its loan amount entirely forgiven with respect to covered expenditures, provided that at least 75% of the forgiveness amount is attributable to payroll costs. Company C – 100% Layoff with Re-Hires and Bonus IncentivesOn February 15, 2020, Company C had 10 FTEsFrom February 15 – June 30, 2019, Company C had an average of 10 FTEs. Company C was forced to completely shut down operations. To make matters more difficult, most of Company C’s employees make less than $50,000 per year, such that its full-time employees were making more on unemployment than if they returned to work. In order to incentivize employees who would otherwise qualify for continued unemployment, Company C decides to implement temporary raises. It did not bring back any of them until week 6 of the 8-week period, at which point, Company C re-hired all 10 FTEs and gave them temporary raises in an amount equal to the entire loan amount, dispersed evenly among them. Result: Although Company C’s average FTE over the 8-week period was equal to 2.5 FTE, Company C’s loan amount will be entirely forgiven with respect to covered expenditures. This is because Company C eliminated the discrepancy in FTEs before June 30, 2020. Further, all payroll costs, including the incentives, were paid during the 8-week period. What You Should Do Now Document Everything. When you apply for forgiveness, you will need to provide documentation of payroll records over the covered period. Such documentation may include Form 941, state quarterly wage unemployment insurance tax reporting forms, or equivalent payroll processor records that best correspond to the covered period. You must also submit evidence of business rent, business mortgage interest payments on real or personal property, or business utility payments during the covered period if you used loan proceeds for those purposes. Accordingly, you will want to document all expenses with these important categories in mind. Project and Plan. As with Companies A, B, and C above, each borrower will be in a unique situation. You should project your FTEs over the 8-week period against both your designated historical comparison period and February 15, 2020. You will also want to plan how and when funds will be expended with forgiveness in mind. Know the categories of expenses for which forgiveness is permitted and that the expenditures must occur over the 8-week period after you have received the funds. Watch for Reduction Traps and Don’t Forget About Grace. If your projected average of FTEs over the 8-week period is less than your historical comparison period, then you should look for creative ways to receive 100% forgiveness. As long as you can eliminate any discrepancies prior to June 30, 2020, then you may be able to take advantage of the grace period to receive full forgiveness. Work with Your Advisors. Given how quickly everything has developed with the PPP, it is important to take the time to plan for how you will comply with forgiveness requirements. The earlier you bring in your financial and legal advisors, the greater chance you have of making the most of your PPP funds.Danielle Crane is an employment lawyer with Kegler Brown, advising clients on human capital strategies to help navigate the COVID-19 pandemic and prepare for re-opening. She can be reached directly at dcrane@keglerbrown.com or (614) 462-5444.Brendan Feheley is a director and chair of Kegler Brown’s Labor + Employment practice where he is working with business owners and their HR leaders to navigate the COVID-19 pandemic. He can be reached directly at bfeheley@keglerbrown.com or (614) 462-5482.

E-mployment Alert
publication

Are Ohio’s Commercial Landlords and Lenders Now Required to Give a 90-day Reprieve?

Smart Summary Governor DeWine issued an executive order requesting landlords to suspend commercial rent payments for at least 90 days. The Order also urges lenders to offer a similar reprieve to their landlord borrowers. The Order is not legally binding, though more forceful language could potentially be forthcoming. Since the COVID-19 crisis began, we’ve been fielding calls and e-mails from clients on both sides of the commercial landlord-tenant relationship.  Tenants negatively affected by the crisis want some sort of relief from their landlords in terms of a rent abatement or forbearance, and landlords are receiving a crippling volume of these requests from their tenants. Typically, there is no legal ground to require a landlord to grant an abatement or deferral request, but from a practical standpoint, it still may make sense for them to work with commercial tenants if the alternative is for those tenants to permanently close their doors. At the same time, it’s also important to recognize that landlords may be caught between a rock and hard place. Most are still required to make mortgage payments and pay taxes, common area maintenance costs and other expenses, without receiving rent from their commercial tenants. Each side may also put the responsibility on the other to attempt to obtain relief from federal sources, including the SBA’s Economic Injury Disaster Loan program and the Paycheck Protection Program provision of the recently passed CARES Act. To date, however, there hasn’t been an across-the-board standard or a one-size-fits-all approach for negotiations between commercial landlords and tenants dealing with the effects of COVID-19.Governor DeWine Opines with an Executive Order In an attempt to provide some relief for both sides, Governor Mike DeWine issued Executive Order 2020-08D on April 1, urging Ohio landlords to suspend rent payments and evictions for at least 90 days for small-business tenants experiencing “financial hardship due to the COVID-19 pandemic.” Accordingly, to assist those landlords who would then be at risk of defaulting on their own mortgages, the Order also requests that lenders agree to a minimum 90-day forbearance and refrain from enforcing default penalties or initiating foreclosures during that period. The Order specifies, however, that the governor is not requesting a rent abatement under the leases, nor forgiveness of mortgage payments, just a delay in collections instead.Interpretation: Request or Requirement? While the language may not be entirely clear, our interpretation of this Order is that it is a request, not a requirement , and that landlords and lenders alike are not currently legally obligated to comply. However, we think it’s unlikely that a court in Ohio is going to take up a foreclosure action at this time. Given the rapidly evolving pace of change right now, it’s certainly possible for Governor DeWine to sign a more forceful Order before this situation is over. Regardless, this Order may provide a new baseline for negotiations between landlords and tenants as they navigate through the COVID-19 crisis. Michael Schottenstein is an associate attorney in Kegler Brown’s Real Estate + Finance practice. He represents both commercial landlords and tenants in the drafting and negotiation of leases, amendments and works with clients in the context of their more general business operations. Michael can be reached at mschottenstein@keglerbrown.com or (614) 462-5451.