New Tax Credit
Are you ready to take advantage of the new InvestOhio tax credit? The registration period is now open and registration must be completed before you can apply for the credit. The application date is expected to be the first full week in December and now is the time to ensure that you are ready to apply.
What is InvestOhio?
InvestOhio is a tool for helping Ohio small businesses gain the capital they need to succeed and create jobs. Through the program, individuals who invest up to $10 million in eligible small businesses may receive up to a 10 percent non-refundable personal income tax credit if the investment is held for two years. The credit is issued on a first-come, first-serve basis.
What is an Eligible Investment?
- Eligible investor must infuse new equity (cash) into an eligible Ohio Small Business to acquire an ownership interest. Investments made between 7/1/2011 and June 30, 2013 can qualify.
- Small Business is required to reinvest the infusion of cash into 1 of 5 categories of allowable expenses within 6 months.
- Investor must maintain interest for 2 years and small business must retain property purchased for 2 years before the credit can be claimed for investments made before 6/30/2013.
What is an eligible Ohio Small Business?
Eligible companies must have less than $50 million in assets OR less than $10 million in annual sales. In addition, they must have at least 50 full-time equivalent employees in Ohio OR at least 50% of its total employees in Ohio. The employees must be having Ohio tax withheld.
Who is an Eligible Investor?
Eligible investors include individuals, estates, trusts and pass-through entities that file and pay Ohio income tax.
What is an Eligible Expense?
- Tangible personal property (used in business and located in Ohio)
- Motor vehicles (purchased, registered and primarily use for business in Ohio
- Real property (located and used in business in Ohio)
- Intellectual property (patents, copyrights, trademarks)
- Compensation for newly-hired or retained employees (excluding increased compensation for owners, officers or managers) for whom the enterprise is required to withhold Ohio income tax.
What is the Process to Take Advantage of the Credit?
Step 1 – Ensure that both the eligible small business and the investor(s) each have Ohio Business Gateway (OBG) Accounts. You can register for an OBG account here.
Step 2 – Both the eligible small business and each eligible investor must register for the Invest Ohio credit through OBG and receive their respective Invest Ohio id number (registration began November 14, 2011). Registration must be done prior to applying for the credit.
Step 3 -Parties must agree upon the amount of the investment and date that the will be made.
Step 4 – Either the eligible small business or the investor(s) must apply for the credit on the OBG (application process starts first week of December). When the application is complete, the applicant will be issued a transaction ID number that determines the priority of the application. The steps in the application process have not yet been defined by Ohio. However, there are three items that will be required:
- The date of the investment
- The amount of the investment
- The transaction ID number received at the time of registration
Step 5 – The investor(s) must make the investment as noted in the application and inform the department within 30 days that the investment was made.
Step 6 – The company must reinvest the money received in qualified expenditures within 6 months of the investment date. The company must notify that department that the investment has been spent.
Step 7 – The investor must hold the investment for 2 years and the company must hold the qualified purchases for 2 years and provide proof to the department. (or 5 years if applicable)
Step 8 – The investor may claim the credit on his/her personal income tax return
**Timing of the application is CRITICAL. The credits are awarded on a first-come, first-serve basis**
Not sure if you qualify or need help registering for InvestOhio?
Please contact Amy Gibson or Jenna Staton, two of the professionals in Skoda Minotti's Tax Planning & Preparation Group at (440) 449-6800.