As part of the Federal Tax Cut and Jobs Act of 2017, the State of Ohio worked with the U.S. Treasury Department to establish Ohio Opportunity Zones (OZs) in over 300 economically distressed census tracts in 73 of its counties. These Ohio OZs were selected based on submissions by local government officials and nonprofit economic development organizations throughout the state of Ohio.
In 2019, the Ohio Amended Substitute House Bill No. 166, established the Ohio Opportunity Zone Tax Credit, which offers tax incentives for eligible investments in qualified projects located in designated Ohio Opportunity Zones. Long-term investments in designated opportunity zones provide tax benefits for investors to maximize unrealized capital gains on property they’ve invested in.
Historically, the Ohio Opportunity Zone Tax Credit was available once per fiscal year. However, changes made in Senate Bill 225 by the 134th General Assembly added a second application round per fiscal year.
Under Senate Bill 225 provisions, the first round, in July, is for Ohio Qualified Opportunity Fund (QOF) investments occurring Jan. 1 – June 30, 2023. The second round, in January, is for QOF investments occurring July 1 – Dec. 31, 2023.
Ohio allows a 10% investment tax credit for taxpayers who invest in a Qualified Opportunity Zone Fund that invests in Ohio Opportunity Zone Property. In the past, taxpayers were eligible for the credit only if the OZ Fund’s investment in the OZ Property occurred in the same calendar year as the taxpayer’s investment in the OZ Fund. This rule has changed. Investments in the OZ Fund and in the OZ Property can now straddle calendar years. So, for example, if the taxpayer invests in the OZ Fund in January 2023, and the OZ Fund invests in OZ Property in January 2024, the taxpayer is still eligible for the credit.
Eligible applicants include entities that invested in an Ohio QOF which, in turn, invested that capital in a Qualified Opportunity Zone property in Ohio. For the July 2023 application round, investments made by QOFs into qualified opportunity zone properties between Jan. 1 and June 30 will be eligible for tax credit consideration.
The application submittal period opens July 10, 2023, at 10 a.m. EST. The application submittal period will close August 1, 2023, at 5 p.m. EST.
Additional information on program eligibility and the application process can be found on the Ohio Opportunity Zones Tax Credit web page.
Please reach out to our CSH tax experts with any questions you might have around Opportunity Zone investments or the Ohio Opportunity Zone Tax Credit Program.