Ohio taxpayers and pass-through entities can now receive a nonrefundable credit for investments in certain small business enterprises operating in the State of Ohio. Qualifying investments include the acquisition of an equity interest in a small business after July 1, 2011, and cannot include funds from a grant or loan from a governmental source.
In order to claim the credit, approval of an application must be obtained from the Ohio Director of Development. The Department will issue a small business investment certificate that should be attached to the investor’s Ohio income tax return.
The small business enterprise is defined as:
• Having less than $50 million in sales or less than $10 million in assets and
• Having at least 50 full- time equivalent Ohio employees and
• Within six months of the qualifying investment, incurs costs for Ohio-based tangible, intangible or real property or compensation to new Ohio employees, an additional amount at least equal to the original investment.
Credits become available after 2 years if the qualifying investment is made after July 1, 2011, and before July 1, 2013. If the qualifying investment is made after June 30, 2013, credits become available after 5 years.
The credit is equal to 10% of certain qualifying investments in a small business enterprise. Investors can claim up to $1 million ($2 million for married filing joint taxpayers) through this new credit every two years. Unused portions of the credit can be carried forward 7 years.
Clearly, this provision has been driven by Mark Kvamme, Governor Kasich’s Director of Development, who hopes to make Ohio more taxpayer and investment friendly. The administration expects that the plan could create 30,000 jobs by attracting $1 billion in investments.