The state of Ohio created the Ohio Megaproject Program to prepare for large scale corporate site location projects in the state of Ohio operating budget in 2021. The timing was perfect. The Ohio Megaproject Program creates the basis for much of the $2 B in economic development incentives that were used to recruit the $20B Intel facility planned for Central Ohio.
Ohio House Bill 687, state of Ohio Capital Budget, was passed by the Ohio General Assembly, and the legislation contained planned funding for Ohio’s economic development incentives that include: direct assistance to Intel in the Ohio Department of Development’s capital budget allotment such as $600 M for an “Ohio Onshoring Incentive,” $300 M for a water reclamation plant, $101 M for local water and sewer infrastructure improvements, and $95 M for road upgrades.
Besides funding, the Ohio General Assembly with the support of Governor Mike DeWine also made recent amendments to the Ohio Megaproject Program to ensure its application to the Intel project in Ohio House Bill 687. Before a business may qualify for any of the enhanced Megaproject incentives, it must either operate a “megaproject” or sell tangible private property to one. A Megaproject is a development project that satisfies all the following conditions:
- Wages. The operator must compensate the project’s employees at 300% of the federal minimum wage or more. With a federal minimum wage currently set at $7.25 per hour for non-exempt employees, this Megaproject income threshold would equal $21.75 per hour and is calculated exclusive of employee benefits, which must be met at the time the project is approved for an Ohio Jobs Creation Tax Credit (JCTC).
- Capital Investment and Payroll. The operator must either make at least $1 B in fixed-asset investments in the project or create at the project at least $75 M in annual Ohio employee payroll, i.e., payroll subject to Ohio income tax. If the project qualifies based on Ohio employee payroll, the operator must maintain at least $75 M in annual payroll at the project site throughout the term of the JCTC.
- Sites and Workforce. The project requires “unique sites, extremely robust utility service, and a technically skilled workforce.”
Ohio House Bill 687 made several additional changes to the Ohio Megaproject Program, including:
- Establishes specialized criteria by which an Ohio semiconductor wafer manufacturing facility may qualify as a megaproject and, accordingly, its operators and suppliers may qualify for the enhanced tax incentives authorized by the bill and by continuing law.
- Generally, retains current wage and investment or payroll requirements for megaprojects, and applies those requirements to semiconductor wafer manufacturing projects that qualify for incentives under the bill’s specialized criteria.
- Allows the Tax Credit Authority (TCA) to designate more than one business as an operator of the same megaproject.
- Allows suppliers of a semiconductor wafer manufacturing megaproject to qualify for Megaproject tax incentives, other than the extended job creation tax credit (JCTC) and community reinvestment area (CRA) property tax exemption, without meeting the payroll and investment thresholds required for megaprojects suppliers.
- Expands an existing sales and use tax exemption for qualified research and development equipment to include sales of any tangible private property used to perform research and development at a semiconductor wafer manufacturing megaproject site.
- Allows a sales and use tax exemption for building and construction materials incorporated into a manufacturing or research and development facility at a semiconductor wafer manufacturing megaproject site.
- Allows a sales and use tax exemption for certain other tangible private property and equipment used in a manufacturing process at a semiconductor wafer manufacturing megaproject site.
- Modifies an existing commercial activity tax (CAT) exclusion for tangible private property sold by a megaproject supplier to a Megaproject operator for use at a megaproject site and is subject to a valid JCTC agreement.
- Allows a new CAT exclusion for gross receipts from the sale of new capital equipment used at the site of a semiconductor wafer manufacturing megaproject, provided the cost of the equipment exceeds $100 M.
- Requires the Director of Development to issue a certificate of compliance for each year that a megaproject operator or supplier continues to qualify as such, for purposes of the megaproject tax incentives.
- Allows the TCA to impose recoupment payments on the operator of a non-compliant semiconductor wafer manufacturing megaproject, based on the amount of sales and use tax and CAT incentives granted in connection with the project.
- Requires megaproject operators to annually submit an economic impact report to the Director of Development detailing their purchasing, construction, and employment activity.
Ohio House Bill 687 also establishes specialized criteria by which an Ohio semiconductor wafer manufacturing facility may qualify as a megaproject and, accordingly, its operators and suppliers may qualify for the enhanced incentives authorized by the bill and by continuing law. Specifically, it expands the definition of “Megaproject” to include a project operated by a business that meets all of the following requirements: headquartered in the United States; spends at least 50% of its research and development budget in the United States for the year preceding the JCTC agreement; builds and operates a semiconductor manufacturing facility in Ohio, or intends to do so by a date specified in the JCTC agreement, i.e., the “metric evaluation date.” The bill’s alternative criteria for a semiconductor wafer manufacturing facility work in place of the general unique site, robust utility service, and technically skilled workforce criteria that apply to other projects.
All megaprojects, including semiconductor wafer manufacturing factories, must comply with the wage and investment or payroll thresholds prescribed by continuing law, but Ohio House Bill 687 also changes the way these thresholds are enforced. Current law states that the operator of the megaproject must meet the required thresholds, whereas the bill states that the operator must agree to meet the required thresholds as part of the operator’s JCTC agreement. It appears that, under current law, as soon as an operator fails to meet an applicable threshold–for example, by paying the project’s employees less than 300% of the federal minimum wage, the project no longer qualifies as a megaproject. Conversely, under the bill, a non-compliant project remains a megaproject, but the project’s operators and suppliers do not receive certificates of compliance for purposes of the associated tax incentives, and the Director of Development must notify the Ohio Tax Commissioner that the project failed to meet one or more of the applicable thresholds.
Ohio House Bill 687 also requires a megaproject operator to annually submit an economic impact report to the Director of Development, on or before July 1, beginning with the year specified in the JCTC agreement. The report must be certified as true and correct by an officer of the megaproject operator. It must include the following information: the total amount of purchases made by the megaproject operator for the megaproject from megaproject suppliers; the total amount of such purchases made from suppliers other than megaproject suppliers; a summary of the construction activity at the megaproject site; the total amount of the megaproject operator’s research and development expenditures at the site of the megaproject for that year; the number of employees working at the megaproject site and their counties of residence; and a summary of the supply chain activity in support of the megaproject, including a list of the 25 suppliers with a physical presence in Ohio from which the megaproject operator made the most purchases in that year. The bill specifies that economic activity reports are public records.
Ohio’s Megaproject Program positions the Buckeye State to compete globally for the next large-scale, transformational global corporate site location project through a more transparent and predictable process. Montrose Group has negotiated over $1 B in corporate site location projects and is well-positioned to help companies or communities utilize the new Ohio Megaproject Program. Do not hesitate to contact Dave Robinson at [email protected] if you any questions regarding the Ohio Megaproject Program or other corporate site location or economic development programs.
