The global hunt for the next Amazon HQ2 or FoxConn deal almost always requires an extraordinary economic development incentive deal—a deal that generally has to go to a state government’s legislator to change state law to permit that deal to happen. These “megaprojects” are as big a job producer as can be found in a corporate site location process. To be better positioned for the next Megaproject, the Ohio General Assembly included a new Megaproject economic development incentive program in the recently enacted state operating budget.
Before a business may qualify for any of enhanced Megaproject incentives, it must either operate a “megaproject” or sell tangible personal property to one. A Megaproject is a development project that satisfies all of 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 is currently $7.25 per hour for nonexempt employees this income threshold would equal $21.75 per hour and this wage threshold is calculated exclusive of employee benefits and 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 billion in fixed-asset investments in the project or create at the project at least $75 million in annual Ohio employee payroll, i.e., payroll subject to Ohio income tax. If the project qualifies on the basis of Ohio employee payroll, the operator must maintain at least $75 million in annual payroll at the project throughout the term of the JCTC.
- Sites and Workforce. The project requires “unique sites, extremely robust utility service, and a technically skilled workforce.”
In addition to the megaproject’s operator, certain suppliers of a megaproject are eligible for the bill’s incentives. Specifically, any business that sells tangible personal property may qualify for the incentives if it satisfies both of the following requirements: the business makes at least $100 million in fixed-asset investments in Ohio; and the business creates at least $10 million in annual Ohio employee payroll and maintains that level of payroll throughout the term of the JCTC.
The Ohio operating budget bill authorizes several special tax incentives for operators and certain suppliers of a “megaproject,” i.e., a large-scale development that meets certain investment or payroll thresholds. Specifically, the bill increases the maximum number of years, from 15 to 30, over which the operator or supplier may receive a JCTC, authorizes a megaproject supplier’s JCTC to be wholly or partially allocated to the megaproject’s operator, authorizes a megaproject supplier, in calculating its commercial activity tax, to exclude its gross receipts from sales to a megaproject operator, and authorizes local governments to grant a 30-year Community Reinvestment Area or Enterprise Zone property tax exemption to a megaproject or property owned by a megaproject supplier.
It worth noting the three major Ohio economic development programs enhanced by the Ohio Megaproject Program.
Jobs Creation Tax Credit. The JCTC is a refundable and performance-based tax credit calculated as a percent of created payroll and applied toward the company’s commercial activity tax liability. Should the amount of the credit exceed the company’s commercial activity tax liability for any given year, the difference is refunded. Companies creating at least 10 jobs (within three years) with a minimum annual payroll of $660,000 and that pay at least 150 percent of the federal minimum wage are eligible for the credit; however, they must apply for the credit before committing to a project. The Ohio Tax Credit Authority must approve applicants before hiring begins. The JCTC is Ohio’s major economic development tax credit program which is a competitively awarded, refundable tax credit against nearly any taxes a company pays to the state of Ohio.
Enterprise Zones. Counties and municipal corporations may designate areas within the county or municipal corporation as “enterprise zones.” After the EZ designation is approved by the Director of Development Services, the county or municipal corporation may then enter into enterprise zone agreements with businesses for the purpose of fostering economic development in the zone. Under an enterprise zone agreement, the business agrees to establish or expand within the enterprise zone or to relocate its operations to the zone in exchange for tax exemptions for the development’s increased property value and other incentives. In general, a school board of the district in which an EZ is located is required to approve any exemption in excess of 75% of the property’s increased value or an exemption for a period of years in excess of ten.
Community Reinvestment Area. Ohio’s CRA law authorizes counties and municipal corporations to designate certain areas as “community reinvestment areas” to encourage new construction or the remodeling of existing structures. Similar to an EZ, after a CRA is approved by the Director of the Ohio Department of Development, the county or municipal corporation may enter into an agreement with a business exempting the increased value of new construction or remodeling of a commercial or industrial structure in the CRA in exchange for the creation or retention of jobs at the structure. Unlike an EZ, residential construction and remodeling may also qualify for a CRA exemption, but no agreement is required for residential exemptions. Before commercial or industrial property may receive a CRA exemption, the exemption must be approved by the school board of the district in which the property is located, unless the exemption is for less than 50% of the property’s increased value. Under current law, EZ and CRA exemptions are generally limited to no more than a 15-year term. 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.
