OHIO LEGISLATIVE SERVICE COMMISSION
Office of Research Legislative Budget
www.lsc.ohio.gov and Drafting Office
S.B. 225 Final Analysis
134th General Assembly
Click here for S.B. 225’s Fiscal Note
Primary Sponsor: Sen. Schuring
Effective date: September 13, 2022
Effective Date:
Joe McDaniels, Attorney
SUMMARY
Historic building rehabilitation tax credit
 Increases, from $60 million to $120 million, the amount of historic building
rehabilitation tax credits that may be awarded by the Director of Development in each
of FY 2023 and FY 2024.
 Allows several credit enhancements for rehabilitation projects approved by the Director
before July 1, 2024.
 Permits owners of projects approved after June 30, 2020, and before the act’s effective
date, September 13, 2022, to reapply for an enhanced credit so long as construction on
the project has not yet commenced.
 Provides that a state historic rehabilitation tax credit certificate is “effective” on the
date that all historic buildings rehabilitated by the project are “placed in service,”
according to the meaning prescribed by federal income tax law.
 Requires the Director to consider the potential for increased attendance and gross
revenue in determining whether to approve a project rehabilitating a historic theater.
Ohio opportunity zone investment tax credit
 Expands eligibility to receive an Ohio opportunity zone investment tax credit to
investors in Ohio opportunity zones that are not subject to the personal income tax.
 Transitions the overall cap on the amount of Ohio opportunity zone investment tax
credits from a biennial to an annual limit, and requires that compliance be determined
based on the amount of credits awarded by the Director rather than the amount of
credits claimed by recipients or transferees.
 Increases the cap for the FY 2022-2023 biennium from $50 million to $75 million, and
sets caps of $50 million for FY 2024, and $25 million for FY 2025 and thereafter.
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 Requires the Director to conduct two annual application periods, each covering
qualifying investments made during the preceding six months.
 Expands the circumstances under which a tax credit may be transferred.
Tax increment financing and downtown redevelopment districts
 Allows for retrospective application of two provisions adopted in H.B. 110 of the 134th
General Assembly related to tax increment financing districts (TIFs) and downtown
redevelopment districts (DRDs).
Canton Hartford-Houtz Poor Fund
 Relieves the city of Canton of the requirement to appoint a board of trustees to take
charge of property bequeathed to the city by an 1879 act of the General Assembly.
 Authorizes the city of Canton to distribute all moneys and proceeds bequeathed to the
city under the 1879 act to the Canton Ex-Newsboys Association or any other charitable
organization.
DETAILED ANALYSIS
Historic building rehabilitation tax credit
The act increases the amount of historic building rehabilitation tax credits that may be
awarded in FY 2023 and FY 2024, and authorizes several tax credit enhancements for
rehabilitation projects approved before July 1, 2024. It also permits the owner of a project
approved after June 30, 2020, and before the act’s effective date, September 13, 2022, to
reapply for an enhanced tax credit so long as construction on the project has not yet
commenced. Finally, the act specifies the “effective date” of a tax credit certificate and requires
consideration of revenue and attendance in evaluating a credit application involving the
rehabilitation of a historic theater.
Background
Continuing law authorizes a historic building rehabilitation tax credit equal to a
percentage, generally 25%, of the qualified expenditures incurred by the owner or, in some
cases, lessee of a building of historical significance to rehabilitate the building in accordance
with certain preservation criteria. Credits are awarded through a competitive application
process administered by the Director of Development in consultation with the State Historic
Preservation Officer. Credit recipients are issued a rehabilitation tax credit certificate, which
may be used to claim a credit against the income tax, financial institutions tax, or insurance
premiums taxes.
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Overall credit cap
Continuing law generally limits the amount of rehabilitation tax credit certificates that
may be awarded by the Director to $60 million per fiscal year, plus any unallocated credits from
previous fiscal years. The act temporarily increases the cap to $120 million (plus unallocated
credits) for each of FY 2023 and FY 2024. The cap reverts to $60 million in FY 2025.1
Enhancements
The act provides for three temporary credit enhancements.
First, if the project is located in a county, township, or municipal corporation that has a
population of less than 300,000, according to the 2020 census, the act increases the credit
amount to 35% of qualified rehabilitation expenditures. Projects that are not located in such a
county, township, or municipal corporation (i.e., most of Columbus, Cleveland, and Cincinnati)
receive the standard 25% credit amount.2
Second, the act increases from $5 million to $10 million the maximum annual credit that
may be claimed for a single project.3
Third, the act allows a full refund of any credit amount that exceeds the tax otherwise
due, up to the $10 million annual limitation described above. Generally, under continuing law, if
any portion of the credit is refunded, the aggregate amount applied against the tax and
refunded to the taxpayer is limited to $3 million, and any additional balance may be carried
forward as a credit for up to five years.4
The enhancements apply automatically to projects approved by the Director on or after
the act’s effective date, September 13, 2022, and before July 1, 2024.5 The owner of a project
approved after June 30, 2020, and before the act’s effective date may reapply for an enhanced
tax credit, so long as construction of the project has not yet commenced. Under the act,
construction commences when physical work on the project begins. Neither preliminary
activities such as planning, designing, securing financing, exploring, researching, or developing
plans and specifications, nor building stabilization, environmental abatement, or work
necessary to qualify a building for the National Register of Historic Places, constitute
commencement of construction.
The form of the application, manner of submission, and criteria and procedures used by
the Director in reviewing, evaluating, and approving enhanced credit applications for both new
and previously approved projects are the same that apply to standard historic rehabilitation tax
1 R.C. 149.311(D)(2).
2 R.C. 149.311(I)(1).
3 R.C. 149.311(I)(2).
4 R.C. 149.311(I)(3); R.C. 5725.151, 5725.34, 5726.52, 5729.17, 5733.47, and 5747.76, not in the act.
5 R.C. 149.311(I).
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credit applications under continuing law. If approved, the enhanced tax credit replaces the
standard credit. No project may receive both a standard credit and an enhanced credit. 6
Certificate effective date
The act provides that a state historic rehabilitation tax credit certificate is “effective” on
the date that all historic buildings rehabilitated by the project are “placed in service,” as that
term is used in the context of the federal historic building rehabilitation tax credit – though
federal law neither defines nor elaborates on what that term means. The effect of applying
federal terminology to the Ohio credit is unclear. It could be construed to modify the date that
the Director is permitted to issue a tax credit certificate. Continuing law prohibits the Director
from issuing a certificate until the project or phase of the project is “complete,” but does not
elaborate further.
The act might alternatively be construed to modify when the credit may be claimed.
Continuing law provides that the credit must be claimed for the year specified in the tax credit
certificate but provides no further instructions to the Director as to when that must be. It could
be the year in which the project is completed, the year in which the tax credit certificate is
issued, or some other year determined by the Director.
The act could also be interpreted to nullify authority to issue or claim a credit for
completing part of a multi-phase rehabilitation project. Multi-phase projects with a
rehabilitation period not exceeding five years qualify for a credit upon completion of each
project phase. The buildings included in such a project are often not fully placed in service until
all phases are complete. Though the act retains language authorizing issuance of certificates in
phases, it is possible that making the certificates effective after all buildings are placed in
service prohibits the Director from issuing a certificate, or the project’s owner from claiming a
tax credit, until all project phases are completed.7
Historic theaters
The act requires the Director, when determining whether to award a tax credit to a
project that rehabilitates a historic theater, to consider the potential of the project to generate
increased attendance and gross revenue for the theater. The considerations apply only if the
building was used by a theater before the rehabilitation and is intended for use as a theater
afterwards. The act requires all tax credit applications to indicate whether the project includes
a historic theater.
Under continuing law, general criteria for reviewing, evaluating, and approving
applications are prescribed by rule of the Director. Before approving an application, the
Director must conduct a cost-benefit analysis and confirm that the project will result in a net
revenue gain in state and local taxes once the historic building is used. The Director must also
6 Section 3.
7 R.C. 149.311(K) and 5701.11.
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consider the economic impact of the project, the regional distributive balance of the credits
throughout the state, and the mix of high and low cost projects approved for tax credits.8
Ohio opportunity zone investment tax credit
The act makes several modifications to an income tax credit for investments benefitting
Ohio opportunity zones. First, it expands eligibility to receive a credit allocation, i.e., a tax credit
certificate, to an investor in an Ohio opportunity zone that is not subject to the personal
income tax. Second, it transitions the overall cap on the amount of tax credit certificates that
may be awarded by the Director of Development from a biennial limit to an annual limit,
beginning in FY 2024, and specifies that compliance with the cap is determined by the total
credits issued by the Director rather than the total credits claimed by recipients. Third, it
increases that overall cap for the FY 2022-FY 2023 biennium and for FY 2024. Fourth, it requires
the Director to conduct two, rather than one, annual application periods for the tax credit, each
covering investments made in the preceding six months. Finally, it expands the circumstances in
which a tax credit may be transferred to another person.
Background
Federal law allows states to designate economically distressed areas that meet certain
criteria as “opportunity zones.”9 Certain investments made to benefit the zone are eligible for
preferential federal tax treatment. Specifically, when a taxpayer reinvests capital gains (i.e.,
income from the sale of stock or other asset) in an “opportunity zone fund” – an investment
fund that holds at least 90% of its assets in property, stock, or ownership interests that benefit
opportunity zones – the tax on those capital gains is deferred until the investment is sold or
exchanged from the fund. Additional federal benefits are available if the investment is held in
the fund for at least five years.10
Because Ohio law uses federal adjusted gross income as a starting point for Ohio income
tax liability, the federal deferral and reduction in capital gain taxes also defers or reduces a
taxpayer’s Ohio income tax. These federal and Ohio tax benefits are available regardless of
where the zone is located.
Ohio income tax credit
Continuing law, changed in part by the act, adds to these incentives by allowing an Ohio
income tax credit for investments that entirely benefit Ohio-designated zones. To qualify for
the credit, a taxpayer must invest in an opportunity zone fund that in turn holds 100% of its
invested assets in opportunity zones in Ohio (referred to in law as an “Ohio qualified
opportunity fund”) and that fund must invest that money in projects located in an Ohio
opportunity zone. The investor may then apply to the Director of Development for a tax credit
8 R.C. 149.311(B) and (D)(8).
9 26 United States Code (U.S.C.) 1400Z-1.
10 26 U.S.C. 1400Z-2.
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certificate. The nonrefundable credit equals 10% of the fund’s investment in such projects. It
may be claimed in the year in which the fund invests the applicant’s investment in such
projects, or in the following year. Unused credit amounts may be carried forward for up to five
years.
Award to nontaxpayers
The act allows the Director to award a credit to a person that is not subject to Ohio
income tax and is, therefore, unable to claim the credit.11 Continuing law, changed in part by
the act, allows credit recipients to sell or transfer the credit to another person.
Overall credit limit
Prior law prohibited the Director from issuing tax credit certificates in a total amount
that would cause the Ohio opportunity zone investment credits claimed in any fiscal biennium
to exceed $50 million. The act transitions the cap from a biennial limit to an annual limit,
beginning in FY 2024. In addition, it requires that, for the FY 2022-FY 2023 biennium and each
fiscal year thereafter, compliance with the cap be determined based on the amount of credits
issued by the Director rather than the amount of credits claimed by recipients. The act
increases the credit cap from $50 million to $75 million for the FY 2022-FY 2023 biennium, then
sets a cap of $50 million for FY 2024, and $25 million for FY 2025 and thereafter.
Continuing law, unchanged by the act, limits the amount of tax credit that may be
allocated to any particular credit recipient to $2 million per fiscal biennium.12
Application periods
The act requires the Director to conduct two annual application periods for the credit,
each covering qualifying investments by Ohio qualified opportunity funds during the six
preceding months. Prior law provided for one application period, from January 1 to February 1,
for all such investments during the preceding year. The act shortens that application period to
January 10 to February 1, and adds a second application period from July 10 to August 1. It also
specifies that, if the start or end date of an application period falls on a weekend or legal
holiday, the application period instead starts or ends on the next business day.13
Credit transfer
Continuing law, changed in part by the act, allows the holder of an unclaimed tax credit
certificate to transfer the full credit amount to another taxpayer. To effectuate the transfer, the
original certificate holder must send written notice to the Tax Commissioner stating the
certificate number and identifying the transferee. Under prior law, the credit could not be
transferred more than once.
11 R.C. 122.84.
12 R.C. 122.84(C)(2).
13 R.C. 122.84(A)(5), (A)(6), (B), and (C)(1).
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The act modifies the transferability of tax credit certificates as follows: