Ohio Amended Substitute House Bill 64 ("HB 64") was signed into law June 30, 2015. The bill will cause significant changes to the Ohio Job Creation Tax Credit ("JCTC") and the Ohio Job Retention Tax Credit ("JRTC"). The bill becomes effective September 29, 2015.
HB 64 will significantly change JCTC and JRTC calculations for agreements approved by the Ohio Tax Credit Authority (“TCA”) before and after January 1, 2014. Calculations in agreements approved post-December 31, 2013, will now be focused on annual Ohio employee payroll rather than Ohio income taxes withheld. Impacted taxpayers are able to amend agreements to reflect the new payroll based computation method. The tax credit percentage awarded will be revised to account for the change from income tax withholding to employee payroll. Calculations in JCTC agreements approved pre-January 1, 2014, will be adjusted per a withholding factor discussed below. There will be changes to the annual report filed with Ohio Development Services Agency for the 2015 reporting period.
Additional Impacts of HB 64
- Protection of the Value of Credit Agreements Pre-June 29, 2013: Effective January 1, 2016, the TCA will annually compute a withholding adjustment for JCTC and JRTC agreements approved by the TCA on or before December 31, 2013. This withholding adjustment factor effectively restores taxpayers’ expectations relative to credit agreements approved by the TCA prior to the income tax rate decreases enacted since June 29, 2013, and any future income tax rate increases or decreases. However, the TCA will only make this adjustment for taxpayers that meet all of the commitments set forth in the agreement for the current year in terms of job growth, payroll and capital investment.
- Increased Clawback Provisions for JCTC and JRTC: Converting to the new payroll computation method triggers clawback provisions included in HB 64 requiring taxpayers to repay claimed tax credits if the number of new employees or new payroll is not maintained throughout the term of the agreement.
- JRTC Becomes Non-refundable: The TCA could refund JRTCs in limited circumstances under the old law. The TCA will no longer be able to approve refunds for JRTCs under HB 64.
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