In an effort to expand the use of the underutilized Ohio’s Job Retention Tax Credit (“JRTC”), Governor DeWine signed into law, in 2019, major changes to the definition of “Eligible Business.” The non-refundable tax credit is granted at the discretion of the Ohio Tax Credit Authority to eligible Ohio businesses who invest in capital investment projects.
Prior to the change, very few businesses met the eligibility requirements for the JRTC. They were required to meet both an employment or payroll threshold and a capital investment threshold.
With the changes enacted, more businesses, mainly manufacturing businesses, will be able to meet the definition of “Eligible Business.” If a business is a manufacturer, it no longer is required to meet the employment threshold. The payments made for a capital investment project at the site over a three-year period must equal or exceed the lesser of (a) $50 million, or (b) 5% of the net book value of all tangible property used at the site as of the last day of the three-year period in which the capital investment payments are made.
If the business is engaged in corporate administrative functions, it must satisfy two requirements. It must (a) be located in a foreign trade zone, employ at least 500 full-time equivalent employees, or have an annual payroll of at least $35 million; and (b) make or cause to be made payments of $25 million in the aggregate for the capital investment project at the site during a three-year period.
The credit is calculated based on the excess payroll for the year over the base year payroll amount multiplied by the percentage specified in the agreement with the Authority.
If you have questions about Ohio’s Job Retention Tax Credit, please contact your HBK Advisor.