Proposed Ohio Opportunity Zone Tax Credit

Ohio General Assembly House Bill 727 (“HB 727”), introduced on August 29th, seeks to capitalize on the newly created “Opportunity Zone” program by adding a state tax incentive component. The U.S. Congress created the O-Zone program in 2017, and it is now codified at §14002-1 of the Internal Revenue Code. HB 727, if passed, would create a nonrefundable state income tax credit of up to 10%, against the aggregate tax liability of a taxpayer that invests $250,000 or more during the taxable year in an Ohio qualified opportunity fund. (This credit would be established through the creation of new Ohio revised code section 5747.74.) An opportunity fund, in order to qualify under HB 727, would need to hold 100% of its assets in a qualified opportunity zone property designated in the state of Ohio. This is a notable departure from the definition for qualified opportunity fund found in the Internal Revenue Code in that 100% of assets must be in qualified opportunity zone property in a designated Ohio geographic location, whereas the Federal definition requires that 90% of the opportunity fund must be held, but in any geographic location. While this bill is in its infancy with changes sure to come, it is nonetheless an important indicator that the state of Ohio is going to take an interest in fostering and incentivizing opportunity zone development. It remains to be seen if local governments will likewise adjust their incentive policies in response to a program that is sure to alter the development landscape in the near future.  

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