Chapter 122:16-1 | Business Tax Credit

Rule 122:16-1-01 | Definitions.

• Effective: July 28, 2016
• Promulgated Under: 119.03

As used in rules 122:16-1-02 to 122:16-1-07 of the Administrative Code:

(A) "Affiliated entities" means any person that (directly or indirectly) owns or controls, is owned or controlled by, or is under common ownership or control with, the taxpayer. For purposes of this definition, the term "own" means to own an equity interest (or the equivalent thereof) of fifty per cent or more.

(B) "Amendment" means any change to the terms and/or conditions of a tax credit agreement following approval from the authority.

(C) "Authority" means the tax credit authority created pursuant to division (M) of section 122.17 of the Revised Code and subject to rules 122:7-1-02 and 122:7-1-03 of the Administrative Code.

(D) "Capital investment project" means a plan of investment as defined in division (A) of section 122.171 of the Revised Code and includes but is not limited to the acquisition, construction, renovation or repair of buildings, machinery, or equipment that has not been used in business in this state by the taxpayer that owns it, or by a taxpayer that is a related member or predecessor of such a taxpayer, other than as inventory, prior to being used in business at the project site.

(E) "Director" means the director of the development services agency of the state of Ohio.

(F) "Effective date" means January first of the first year of the term of the tax credit as approved by the authority.

(G) "Excess income tax revenue" means the total amount to be withheld under section 5747.06 of the Revised Code by the taxpayer throughout the term of the agreement from the compensation of each new employee to be created at the project location.

(H) "Executive director" means the executive director of the tax credit authority.

(I) "Income tax revenue" means the total amount withheld under section 5747.06 of the Revised Code by the taxpayer during the tax year from the compensation of each employee at the project location.

(J) "Maintain operations" means the continuation of operations of the taxpayer as described in the tax credit agreement.

(K) "Metric evaluation date" means the date by which the taxpayer must meet certain commitments included in the tax credit agreement.

(L) "Payroll" means the aggregate taxable income paid to full-time equivalent employees at the project site. Payroll does not include employer contributions to fringe benefits that are provided to employees.

(M) "Person" means, but is not limited to, individuals, combinations of individuals of any form, receivers, assignees, trustees in bankruptcy, firms, companies, joint-stock companies, business trusts, estates, partnerships, limited liability partnerships, limited liability companies, associations, joint ventures, clubs, societies, for-profit corporations, S corporations, qualified subchapter S subsidiaries, qualified subchapter S trusts, trusts, entities that are disregarded for federal tax purposes, and any other entities.

(N) "Post-term reporting period" means the time period a taxpayer must report to the authority and director to verify that the maintenance of operations at the project site. The post-term reporting period begins at the conclusion of the tax credit term and continues for a minimum of three years as set forth in the tax credit agreement corresponding to the taxpayer's obligation to maintain operations at the project site.

(O) "Relocated employees" means the full-time equivalent employees or employment positions employed by the taxpayer or an affiliated entity at a location elsewhere in the State other than the project site that are relocated to the project site, and whose positions are not replaced within the same calendar year, or, if the employees or employment positions are relocated in the final quarter of the calendar year, within that calendar year or the following calendar year.

(P) "Retail" means operations that include point-of-final-purchase transaction at a facility open to the consuming public, wherein one party is obligated to pay the price and the other party is obligated to transfer title to of possession of the item sold,

(Q) "Significant retention" means the project proposes to and actually retains at least forty million dollars of annual payroll at the project site for the term of the tax credit.

(R) "Substantial number of employment positions" means employees whose collective annual gross payroll is at least two hundred thousand dollars. In reaching the "substantial number of employment positions" threshold, the taxpayer must aggregate the payroll from all relocated employees under paragraph (B) of rule 122:16-1-07 of the Administrative Code over the entire term of the tax credit agreement.

(S) "Subtantially maintain" with respect to division (J)(1)(b) of section 122.171 of the Revised Code means at least fifty per cent of the commitments identified in the tax credit agreement.

(T) "Tax year" means the calendar year in and for which the tax imposed by section 5725.18, 5726.02, 5729.03, 5736.02 or 5747.02 or levied under Chapter 5751. of the Revised Code is required to be paid.

(U) "Taxable year" means the annual tax reporting period of the taxpayer prescribed by division (M) of section 5751.01 of the Revised Code with respect to persons subject to the Ohio commericial activities tax, and prescribed by division (M) of section 5747.01 of the Revised Code with respect to persons subject to individual income tax. With respect to insurance companies, taxable year means the calendar year subject to the franchise tax return required pursuant to section 5725.18 of the Revised Code, or subject to the tax required pursuant to section 5729.03 of the Revised Code.

(V) "Taxpayer" means a business entity that has entered into an agreement for tax credit pursuant to division (E) of section 122.171 of the Revised Code.

(W) "Transferred payroll" means the payroll attributed to all relocated employees at the project site, if any.

Supplemental Information

Authorized By: ORC 122.171(K)
Amplifies: ORC 122.171
Five Year Review Date: 7/28/2021
Prior Effective Dates: 12/22/2003

Rule 122:16-1-02 | Fees.

• Effective: July 28, 2016
• Promulgated Under: 119.03

(A) Servicing fees. At the time each taxpayer enters into the tax credit agreement, the taxpayer shall pay to the development services agency a servicing fee, in an amount equal to four hundred dollars times the term of years of the tax credit. A separate servicing fee, each calculated as described in the preceding sentence, shall be assessed for each taxpayer that is party to a tax credit agreement. An amendment that requests the addition of taxpayer(s) following the initial approval of the tax credit shall be subject to the servicing fee for each added taxpayer. Such an amendment is not subject to the amendment fee, as described in paragraph (B) of this rule, unless the amendment requests changes to other terms of the tax credit agreement.

(B) Amendment fees. A taxpayer that has already received project approval from the authority for tax credit assistance shall submit a three hundred dollar fee to the development services agency in connection with a taxpayer's request to amend a previously approved tax credit project, provided that the amendment fee shall not be assessed for ministerial amendments. The determination of the executive director of the authority about the nature of an amendment as ministerial or substantive shall be final.

(C) Late fees. A taxpayer that does not submit a complete annual report or annual certification postmarked by or received prior to March first of the year the report or certification is due shall be assessed a late fee of five hundred dollars for each month the report or certification is not received on the first day of each ensuing calendar month until the taxpayer submits the complete annual report or annual certification under paragraphs (A) and (D) of rule 122:16-1-05 of the Administrative Code. If an annual report or annual certification submitted to the director is not complete, the director, or his or her designee shall notify the taxpayer of the deficiencies in the submission, and the taxpayer shall have 30 days from the date of the notice to provide supplemental information to the director that completes the annual report or annual certification. During the pendency of the thirty day time period to supplement annual report or annual certification information, the taxpayer will be subject to the monthly late fee. Failure by a taxpayer to comply with reporting requirements is a breach of taxpayer's obligations under the tax credit agreement and, after the expiration of any applicable cure period provided for in the tax credit agreement, the authority may exercise its remedies including, without limitation, reduction of the term or percentage of the tax credit or both, or termination of the tax credit.

(D) Termination fees. In the event the authority terminates a tax credit agreement as a result of a taxpayer's failure to submit a complete annual report, the taxpayer shall be required to pay as liquidated damages for the breach of the agreement an amount equal to ten percent of the total amount of tax credit certificates issued to the taxpayer pursuant to the agreement.

(E) Issuance of tax credit certificates. A tax credit certificate shall not be issued to any taxpayer with unpaid fees under this rule.

(F) Use of fees. All fees assessed in connection with the job retention tax credit program shall be utilized to offset the administrative costs of the program.

Supplemental Information

Authorized By: ORC 122.171(K)
Amplifies: ORC 122.171
Five Year Review Date: 7/28/2021
Prior Effective Dates: 2/10/2014

Rule 122:16-1-03 | Eligibility requirements.

• Effective: July 28, 2016
• Promulgated Under: 119.03

(A) Except as otherwise provided in this rule, the authority may grant a tax credit pursuant to section 122.171 of the Revised Code if the authority determines all of the following:

(1) The taxpayer proposing the project is an eligible business as defined in division (A)(2) of section 122.171 of the Revised Code;

(2) The proposed project satisfies the requirements set forth in division (D) of section 122.171 of the Revised Code;

(3) As a result of the project, the taxpayer proposes to do all of the following:

(a) Undertake a capital investment project at the project site;

(b) Retain at least five hundred full-time equivalent employees or an annual Ohio employee payroll of at least thirty-five million dollars at the project site; and

(c) Have an average hourly wage rate of at least one hundred fifty per cent of the federal minimum wage at the time the authority approves the project for all full-time equivalent employees employed at the project site.

(4) The project has received a letter of support from the chief executive, or his or her designee, of the local political subdivision or a regional development agency charged with promoting economic development with jurisdiction over the project site.

(B) To remain eligible for a tax credit, the taxpayer must in accordance with the tax credit agreement accomplish the following:

(1) Complete the capital investment project at the project site;

(2) Retain at least five hundred full-time equivalent employees at the project site in each year of the tax credit agreement; and

(3) Maintain an average hourly wage rate consistent with paragraph (A)(3)(c) of this rule and continue to do so for the entirety of the tax credit term;

(C) All or any portion of a project determined to be retail shall not be eligible for tax credits pursuant to section 122.171 of the Revised Code.

(D) No taxpayer shall receive a retention tax credit under section 122.171 of the Revised Code that counts as retained any employees that have been counted within the twelve months prior to the authority's approval of the retention tax credit as new employees, for which Ohio employee payroll has been included in the calculation of excess payroll, under a tax credit agreement authorized by section 122.17 of the Revised Code.

(E) Each taxpayer shall certify to the authority the amount of existing payroll for individuals employed at the project site as of the date of the job retention tax credit application. Acceptance of tax credit award shall constitute the taxpayer's confirmation that the amount of existing payroll certified to the authority is accurate and will be relied upon by the authority in issuing tax credit certificates. The tax credit shall be calculated on payroll attributed to full-time equivalent employees employed by the taxpayer at the project site, provided that the taxpayer executes and returns the tax credit agreement, within sixty days of delivery of the agreement to the taxpayer. If the taxpayer fails to execute the tax credit agreement within sixty days of delivery, the tax credit authority may take action, including, but not limited to, revising the per cent and term of the tax credit approved or terminating the approval.

(F) The authority may from time to time set additional eligibility requirements for job creation tax credit project applications.

(G) If the authority does not approve a taxpayer's application in which it receives a recommendation under division (C) of section 122.171 of the Revised Code, the Ohio development services agency shall notify the taxpayer of such determination along with any reasons for such determination identified by the authority. The taxpayer may be eligible to reapply, unless otherwise determined by the authority.

Supplemental Information

Authorized By: ORC 122.171(K)
Amplifies: ORC 122.171
Five Year Review Date: 7/28/2021
Prior Effective Dates: 8/27/2010

Rule 122:16-1-04 | Tax credit per cent and term.

• Effective: July 28, 2016
• Promulgated Under: 119.03

(A) The authority shall not grant a tax credit under section 122.171 of the Revised Code in which the estimated value to the taxpayer exceeds seventy-five per cent of the state income tax revenue estimated to be withheld from full-time equivalent employees of the taxpayer located at the project site.

(B) Except as otherwise provided in paragraph (D) of this rule, the authority shall not grant a tax credit that exceeds a term of ten years. The tax credit may be claimed by the taxpayer only for the consecutive taxable years during the term.

(C) The authority shall consider the following factors in determining the tax credit percentage and term to be granted to a taxpayer:

(1) The determinations and recommendations provided under division (C) of section 122.171 of the Revised Code by the director, the director of budget and management, the superintendent of insurance in the case of an insurance company and the tax commissioner;

(2) The average hourly wage rate, excluding benefits, of the full-time equivalent employees at the project site;

(3) The number of full-time equivalent employees to be retained at the project site;

(4) The amount of Ohio employee payroll to be retained at the project site;

(5) The plan of capital investment proposed by the taxpayer at the project site;

(6) The economic condition of the county and region of the state where the project is to be located;

(7) The industry sector of the project proposed for tax credit assistance;

(8) The amount of direct local financial support committed to the project; and

(9) The amount of other financial assistance to be provided by the state in support of the project.

(D) The authority may grant a tax credit term between eleven and fifteen years if the director recommends and the authority finds that there is significant retention associated with the project. The authority shall not grant a tax credit that exceeds a term allowable under division (B) of section 122.171 of the Revised Code.

Supplemental Information

Authorized By: ORC 122.171(K)
Amplifies: ORC 122.171
Five Year Review Date: 7/28/2021
Prior Effective Dates: 12/22/2003

Rule 122:16-1-05 | Reports.

• Effective: July 28, 2016
• Promulgated Under: 119.03

(A) Each taxpayer that is party to a tax credit agreement shall report to the director annually during the term of the tax credit the number of full-time equivalent employees employed by the taxpayer at the project site as a result of the project, the total payroll from operations at the project site, the total Ohio employee payroll from operations at the project site, the income tax revenue from operations at the project site, the average hourly wage of full-time equivalent employees, the amount of any transferred payroll during the tax year and any other information the director deems necessary to perform the director's duties under section 122.171 of the Revised Code. Each taxpayer's report shall be certified as accurate and complete by the original signature of any authorized officer of the taxpayer.

(B) If a taxpayer uses a professional employer organization as defined in section 4125.01 of the Revised Code in conjunction with the project as authorized under section 4125.042 of the Revised Code, the taxpayer is responsible for collecting all appropriate information from the professional employer organization necessary to complete the report to the director identified in paragraph (A) of this rule and failure to do so will be considered a taxpayer's failure to file.

(C) The taxpayer's annual report shall be postmarked prior to or received by the director no later than March first of each year immediately succeeding the calendar year that is the subject of the annual report.

(D) Each taxpayer shall maintain substantial operations at the project site for a time period consistent with division (E)(3) of section 122.171 of the Revised Code. During the post-term reporting period, the taxpayer shall submit an annual certification to the director postmarked prior to or received by the director no later than March first of each year succeeding the calendar year that is the subject of the annual certification. The taxpayer shall submit to the director a certification that includes, but is not limited to, information demonstrating the taxpayer maintains operations at the project site and the total number of full-time equivalent employees at the project site.

(E) Each taxpayer and any professional employer organization utilized in the project shall establish and maintain for at least four years after the conclusion of the post-term reporting period such records of the taxpayer and professional employer organization that substantiate the employment, investment, and operations on which the tax credits are granted and issued. Such records include, but are not limited to, records of personnel, wage records for employees at the project site and conditions of employment. The taxpayer and any professional employer organization shall organize and make available such records for the review and verification by the director or the director's representatives and appropriate state agencies or officials. The taxpayer and any professional employer organization shall permit such officials and their representatives to audit, examine and make excerpts or transcripts from records required to be maintained under this rule at any time during normal business hours upon written notice as often as the director may deem necessary. In the event the director determines a taxpayer has submitted an annual report containing erroneous data or data not supported by the records maintained under this rule, the director may, after providing notice, require the taxpayer to resubmit corrected annual reports for the years in which such reports were filed with the applicable fees described in rule 122:16-1-02 of the Administrative Code. Thereafter, the director shall issues certificates consistent with the amended data and report such amendment to the tax commissioner.

(F) If a taxpayer fails to file any complete annual report during the term of the tax credit, as described in paragraph (A) of this rule, within one hundred eighty days of the March first deadline, the taxpayer may be deemed to have discontinued operations at the project site and shall be subject to the refund provisions of division (J) of section 122.171 of the Revised Code. A complete annual report shall be one that meets the requirements of paragraph (H) of this rule.

(G) If a taxpayer fails to file any complete post-term reporting period annual certification, as described in paragraph (D) of this rule, within one hundred and eighty days of the March first deadline, the taxpayer may be deemed to have discontinued operations at the project site and shall be subject to the refund provisions of division (J) of section 122.171 of the Revised Code. A complete annual certification shall be one that meets the requirements of paragraph (H) of this rule.

(H) For the purposes of this rule, a complete annual report or complete annual certification shall mean an annual report or annual certification that complies with the filing timeframes of paragraphs (C) and (D) of this rule and includes all of the information required by paragraphs (A) and (D) of this rule in a manner prescribed by the director.

Supplemental Information

Authorized By: ORC 122.171(K)
Amplifies: ORC 122.171
Five Year Review Date: 7/28/2021
Prior Effective Dates: 12/22/2003

Rule 122:16-1-06 | Remedies.

• Effective: July 28, 2016
• Promulgated Under: 119.03

(A) In the event a taxpayer fails to retain the number of full-time equivalent employees set forth in the tax credit agreement, or if the authority finds that the taxpayer has failed to comply with any term or condition of the tax credit agreement and such failure continues beyond any applicable cure period, the authority may, after providing written notice, unilaterally and prospectively reduce the percentage and/or term of the tax credit or immediately terminate the tax credit set forth in the tax credit agreement.

(B) In the event a taxpayer or an affiliated entity relocates employment positions in violation of division (E)(7) of section 122.171 of the Revised Code and the taxpayer has previously received tax credit certificates, the authority may, after providing written notice, reduce the tax credit rate to preclude the taxpayer from taking any further credits for the term of the tax credit. In the event a taxpayer or affiliated entity relocates such positions and has not previously received a tax credit certificate, the authority may terminate the tax credit.

(C) The authority shall cause written notice to be given to the affected taxpayer of any proposed action to reduce the percentage or term of the tax credit or to terminate the tax credit agreement. Such notice shall be given at least thirty days prior to the authority meeting at which the action is to be considered, and such notice shall be effective when sent in accordance with the notice requirements of the tax credit agreement.

(D) The authority shall specify in any action reducing the percentage or term of a tax credit or terminating a tax credit agreement the taxable year for which the remedial action shall first be effective.

Supplemental Information

Authorized By: ORC 122.171(K)
Amplifies: ORC 122.171
Five Year Review Date: 7/28/2021
Prior Effective Dates: 8/27/2010

Rule 122:16-1-07 | Relocation of employees.

• Effective: July 28, 2016
• Promulgated Under: 119.03

(A) A taxpayer that relocates a substantial number of employment positions from other operations elsewhere in the state, other than the local jurisdiction of the project site, to the project site shall notify, by certified mail, delivery confirmed courier or acknowledged personal delivery, the legislative authority of the county(s), township(s), or municipal corporation(s) from which the relocated employment positions are to be moved prior to the relocation of such employment positions. The taxpayer shall also concurrently send a copy of the notice to the executive director. The notice shall contain the following information:

(1) The number of full-time equivalent employees and employment positions that will be relocated;

(2) The payroll attributable to the relocated employees;

(3) The business reason for the relocation of employees; and

(4) The location of the project site.

(B) A taxpayer or affiliated entity that relocates any employment position(s) from other operations elsewhere in the state to the project site shall certify the amounts of transferred payroll in the annual report required under paragraph (A) of rule 122:16-1-05 of the Administrative Code that is due in the year immediately following the relocation. The annual report shall include the items listed in paragraph (A) of this rule.

(C) If a taxpayer or affiliated entity relocates a substantial number of employment positions, as defined in paragraph (Q) of rule 122:16-1-01 of the Administrative Code, the transferred payroll attributable to the relocated employment positions shall be excluded from the calculation of the tax credits.

(D) If a taxpayer or affiliated entity relocates fewer than a substantial number of employment positions, as defined in paragraph (Q) of rule 122:16-1-01 of the Administrative Code, then the transferred payroll attributable to the relocated employment positions shall be added to the project's Ohio employee payroll, as defined by division (A)(4) of section 122.171 of the Revised Code, in the year following the tax year in which the relocation occurred. A taxpayer shall derive no tax credit benefit under section 122.171 of the Revised Code from the relocation of employees in the year in which the relocation occurred.

(E) When the executive director believes there has been a violation of paragraph (A) or (B) of this rule, the executive director shall inform the director. If the director agrees that a violation has occurred, the director may recommend to the authority that the taxpayer be subject to a remedial action pursuant to rule 122:16-1-06 of the Administrative Code.

When a violation has occurred the director shall issue amended tax credit certificates, if necessary, to the taxpayer to properly account for the effect of the relocated payroll for each tax year in which the relocated employees were employed at the project location. The director shall forward a copy of each corrected tax certificate to the tax commissioner, or in the case of an insurance company, to the superintendent of insurance.

Supplemental Information

Authorized By: ORC 122.171(K)
Amplifies: ORC 122.171
Five Year Review Date: 7/28/2021
Prior Effective Dates: 8/27/2010