New program provides significant tax credits for qualified business investments
The state of Ohio announced this week that registration for the InvestOhio tax credit program will begin Monday, November 14 at 8 a.m. Only $100 million in credits will be awarded for the period of July 1, 2011 – June 30, 2013 and they will be awarded based on a first-come, first-served basis. Registering as early as possible is highly recommended. Registration is required by both the company receiving the investment and also the investor. The Ohio Business Gateway will handle registration.The InvestOhio credit is a 10 percent credit for eligible investors making qualified investments of capital into eligible small business enterprises.
Eligible small business enterprises
Eligible small business enterprises must have less than $50 million in assets or $10 million or less in annual sales. The business must have either 50 full time equivalent employees in Ohio or have at least half its employees in Ohio. Investments into any business which meets the above criteria may qualify. The recipient of the investment does not receive the credit and does not need to be subject to Ohio income tax. This means the investments may be made into C-Corporations as well as enterprises subject to Ohio income tax.
The credit is available to individuals, estates, and trusts that are subject to Ohio income tax. Pass-through entities, such as S-Corps and Partnerships, that are not taxed at the entity level, but have pass-through income which is subject to Ohio income tax at the personal level do qualify for the program. C-Corporations, which are not subject to Ohio income tax, do not qualify as eligible investors. In addition to these requirements, the investor must maintain ownership for two years from the date of the investment of capital into the business.
Qualified investments include:
- purchases of tangible personal property used in business
- motor vehicles used in business
- real property used in business
- intangible property used in business
- compensation of new employees
The business enterprise must retain all of the property that it acquired from the investment of the money for two years.The Ohio Department of Development has provided tutorials for both the process of obtaining the credits as well as the registration process. In addition to the tutorials, there is also a list of frequently asked questions that can be helpful in understanding how the credits apply to different scenarios. We encourage you to visit the Ohio Department of Development website to look at these resources.
The opportunities provided by this credit are substantial. Many small businesses and investors which intend to invest in personal property, real property, vehicles, capital equipment, or new employees before June 30, 2013 will qualify. Businesses seeking outside investment could use the credit to help provide a more attractive opportunity for potential investors. All owners of small businesses and pass-through entities should be aware of the many opportunities provided.
Please call your Cassady Schiller advisor as soon as possible to learn more about what this credit can do for you.