InvestOhio, a program developed to promote small business investments in Ohio, was renewed for July 1, 2015, through June 30, 2017, biennium. InvestOhio provides a non-refundable personal income tax credit to people who invest in an eligible small business.

What Is an Eligible Ohio Small Business?
An eligible small business is defined as having either total assets of $50 million or less or total sales of $10 million or less.  More than 50% of your employees must be located in Ohio, or you must have more than 50 full-time equivalent employees in Ohio.

What is an Eligible Investment?
In order to receive the credit, cash must be invested in an eligible small business that acquires, increases or maintains an equity interest.  A shareholder or partner can invest in their company either with their own cash or cash loaned to them from a creditor.

Alternatively, a distribution from your company, followed by a reinvestment of cash into equity may also qualify.  Loans of any kind from a shareholder or partner to the company will not qualify.  Investments to acquire an existing business, whether by an asset or stock purchase, will not qualify, but acquisitions of the new qualifying property will qualify.

 What Are The Investment Requirements?
Once the funds are contributed, they must be spent within six months in order to qualify for the credit.  The funds must be spent on tangible personal property (such as equipment or furniture and fixtures), motor vehicles, certain real property, and intangibles, or compensation for new or re-trained employees.  All of these investments must be held for five years in order to qualify for the credit.

How Much Is The Tax Credit?
The tax credit is equal to ten percent of the investment made. For example, a $1 million investment equates to a $100,000 tax credit, eligible to be taken on your Ohio income tax return after the end of the five-year holding period.  The maximum amount of credit available to any one taxpayer is $1 million ($2 million if you are married).

The credit is non-refundable, meaning you must have Ohio income tax in order to use the credit.  As C-corporations do not currently pay Ohio income tax, they are not eligible for this credit.  Entities that are eligible for the credit are pass-through entities (such as S-corporations and partnerships), trusts and estates, and individuals.

An application with the State of Ohio through the Ohio Business Gateway must be filed to claim the credit.  The credit is first-come, first serve, until the credit limit is reached.

If you believe you are eligible for this credit, or if you would like more details, please contact your tax advisor or visit https://development.ohio.gov/bs/bs_investohio.htm.