Program Goal
To attract additional federal tax credits, encourage private investment funding to Ohio businesses, and spark revitalization in Ohio’s communities.
Program Summary
The Ohio New Markets Tax Credit (Ohio New Markets) program is designed to leverage the highly successful and innovative Federal New Markets Tax Credit (Federal New Markets) program by offering state tax credits to attract additional federal tax credits and private investments in Ohio businesses. This program will help finance business or real estate investments in low income communities by providing investors with state tax credits in exchange for delivering below market rate investment options to Ohio businesses. While Ohio has already attracted over $1.1 billion dollars in Federal New Markets Tax Credits, this program will give Ohio a significant competitive advantage nationally because very few states have a companion program to leverage and attract Federal New Markets investments.
The Federal New Markets program was enacted in 2000 to enhance investments in businesses and real estate projects in low-income communities throughout the country. To date, the Federal New Markets program has awarded $21 billion dollars in tax credits. It provides a tax credit against Federal income taxes for investors that make investments into organizations, called Community Development Entities (CDEs), whose primary mission is serving and providing capital to low income communities. Each year, the US Treasury Department’s Community Development Financial Institutions Fund
(CDFI) will award federal tax credits to selected CDEs who demonstrate the ability to offer below market financing for low income communities. The federal program has been extremely successful on the federal level and was named one of the top 50 in the “Innovations in American Government Awards” in March 2009.
The Ohio New Markets program will leverage the federal program by offering state tax credits for CDEs that have been allocated federal tax credits. CDEs will then be required to invest the federal and state credits into Ohio businesses and projects to expand the number of investments in the state and to attract additional private investors for CDEs working within Ohio. As private credit markets have struggled, financial mechanisms like New Markets Tax Credits have become increasingly important for businesses that need access to capital.
The Ohio Department of Development will also serve as a resource for Ohio businesses and projects looking for investors.
Eligible Areas
Low-income communities (LIC) are census tracks that have a poverty rate of 20% or more, or the median income is below 80% of the greater than (a) statewide median income or (b) metropolitan median income.
Eligible Applicants
Community Development Entities (CDEs) which have been allocated federal New Markets Tax Credits serving Ohio. The Ohio New Markets Tax Credits are provided to investors which invest in the funds established by a CDE for projects in Ohio.
Tax Credit Awards
The tax credits are structured to be used for investments over the course of seven years. The total tax credit value will be 39% with the yearly percentage of tax credits being:
- 0% for each of the first 2 years;
- 7% for the third year;
- 8% for the next four years
Funding Limits
The amount of tax credit claimed shall not exceed the amount of the taxpayer’s state tax liability for the tax year for which the tax credit is claimed. The maximum state tax credit impact in any fiscal year shall not exceed $10 million. There is no limit per CDE, however the maximum amount of state tax credits for one project shall not exceed $1 million.
Interested Parties List
For organizations or individuals interested in this program, the Urban Development Division will maintain an interested parties list and distribute information about this program.
Program Implementation
The legislation which created the Ohio New Markets program becomes effective on October 16, 2009. The program is currently under review so that it may be implemented effectively and efficiently. Please check back again soon for more details on implementation.