The Ohio Opportunity Zone Tax Credit Program provides an incentive for taxpayers to invest in projects in the 320 federally certified Ohio Opportunity Zones. Federal Opportunity Zones offer three tax incentives to investors: a temporary tax deferral for capital gains reinvested in an Opportunity Fund– the deferred gain is recognized on the earlier of the date on which the opportunity zone investment is sold or December 31, 2026; a step-up in basis for capital gains reinvested in an Opportunity Fund– the basis of the original investment is increased by 10% if the investment in the qualified opportunity zone fund is held by the taxpayer for at least 5 years, and by an additional 5% if held for at least 7 years, excluding up to 15% of the original gain from taxation; and a permanent exclusion from taxable income of capital gains from the sale or exchange of an investment in a qualified opportunity zone fund, if the investment is held for at least 10 years.
Pursuant to federal law, Opportunity Zones operate with a taxpayer investing in an Ohio Qualified Opportunity Fund (“Ohio QOF”), which in turn must invest that money in a Qualified Opportunity Zone property in Ohio. Once the money is invested in the Qualified Opportunity Zone property (“QOZ Property”), the taxpayer is eligible for a non-refundable tax credit equal to 10% of the amount of its funds invested by the Ohio QOF in the QOZ Property. The Taxpayer may invest in multiple Ohio QOFs and may receive tax credits totaling up to $1 million dollars during the 2020-2021 biennium period.
The Ohio Opportunity Zone Tax Credit is applied to the individual income tax, as outlined in the Ohio Revised Code Section 5747.02. The tax credit may be claimed for the Taxpayer’s qualifying taxable year or the next consecutive taxable year. For the 2020-2021 biennium, a total of $50 million in tax credit allocation in available. To determine the eligibility of a taxpayer to take the Ohio Opportunity Zone Tax Credit, the taxpayer must: be subject to the income tax levied under ORC Section 5747.02; make an investment in an Ohio QOF; and Ohio QOF invests all or a part the Taxpayer’s fund contribution in a QOZ Property in Ohio. The Ohio QOF eligibility requirements require the fund be a designated as a “Qualified Opportunity Fund” as defined by the Federal government in 26 U.S.C. 1400Z-2 and hold 100% of its invested assets in a QOZ Property situation in an Ohio Opportunity Zone.
The Ohio Opportunity Zone Tax Credit offers several benefits that include: increased investment in economically distressed Ohio Opportunity Zones; increased business and housing development in Ohio Opportunity Zones; and taxpayers reduce their individual income tax liability. Applications are open for the Ohio Opportunity Zone Tax Credit from January 2, 2020 to January 31, 2020 for investments made by an Ohio QOF in QOZ Property in Ohio in calendar year 2019. The Ohio Development Services Agency will review electronically filed applications in the order they are received, issuing the tax credit certificate allocation until all eligible applications are funded OR the $50 million in tax credits is fully utilized – whichever comes first. So time is of the essence.
Contact Dave Robinson at [email protected] if you need assistance related to the Ohio Opportunity Zone Tax Credit or with other Opportunity Zone questions.