Ohio Opportunity Zone Tax Credit Could Attract Investments to Underserved Communities

As a part of Governor DeWine’s Investing in Ohio’s Future budget, the Governor proposed the creation of the Ohio Opportunity Zone Investment Credit. The newly created Opportunity Zone Investment Credit and the Ohio Qualified Opportunity Fund are modeled after the Federal Tax Cuts and Jobs Act of 2017.

The federal tax reform legislation established the opportunity zone program and the US Treasury based upon recommendations of state Governors certified 8700 opportunity zones nationally in generally low wealth census tracts in each state. Investment in these areas allows a tax payer to access tax benefits when capital gains are invested in qualifying projects. The program is meant to spur investment and job creation in economically-disadvantaged parts of the country as well as Ohio. Ohio has 320 federally designated opportunity zone sites in urban and rural communities all across the state of Ohio. Taxpayers who invest their capital gains for ten years will not pay any capital gains taxes on that investment and have the opportunity to defer a smaller percentage they would have to pay in their original capital gain event. It is estimated by the Economic Innovation Group that $6.1 Trillion in capital gains are available in the United States that could benefit from this program.

House Bill 166 sponsored by Representative Scott Oelslager, the Chairman of the House Finance Committee formally introduced Governor DeWine’s budget with detailed language. Included in the bill is the newly created Opportunity Zone Investment Credit and the Ohio Qualified Opportunity Fund.

The proposed Ohio opportunity zone investment credit is a non-refundable credit that allows a “tax payer”; as defined by ORC 5747.01 to invest capital gains in a qualified opportunity fund. The credit shall equal 10 percent of the tax payers investment in a qualified opportunity fund in the taxable year of the investment. The tax credit per section 5747.82 is allowed against a taxpayer’s aggregate tax liability under section 5747.02.

Established in the proposed language there are a couple of caps applied to the issuance of the Opportunity Zone Investment Credit.
The Development Services Agency Director cannot issue more than $50 million in credits over the biennium. This serves as a cap on how many credits can be issued.
The Development Services Agency Director cannot issue credits to a single applicant that would exceed $1 million over the biennium.
A credit cannot be issued for a project that also has been issued a small business investment certificate or InvestOhio issued under ORC section 122.86.

More detailed language can be found in the link below, beginning in lines 2596-2658, as well as Lines 43307-43320