Article written by:
Christy Macioce, CPA
Opportunity Zones were created through the Tax Cuts and Jobs Act (TCJA) to spur long-term investment in distressed communities. At the federal level, taxpayers are able to invest capital gains in a Qualified Opportunity Fund creating substantial tax benefits.
In response to the federal incentive, Ohio enacted an Opportunity Zone credit for taxpayers in 2019. To qualify for the Ohio Opportunity Zone credit, the investment must be made with opportunity funds that include one hundred percent of assets within Ohio-based Opportunity Zones. The credit equates to 10% of an eligible opportunity fund investment and has a cap of one million dollars per taxpayer. These rules are in place for the current fiscal biennium covering the 2020 and 2021 Ohio Opportunity Tax Credits.
The Ohio opportunity fund credit is nonrefundable, meaning the only use is offsetting Ohio income tax liability. Any unused portion of the credit can carry forward to the following five tax years. Taxpayers who may not be able to utilize Ohio Opportunity Zone credit can sell the credit and often times see a benefit of 70-85% of the credits’ value in return.
Taxpayers must submit an online application with the state of Ohio to apply for the credit. The current round has $23.4 million in credits available with applications processed on a first-come, first-served basis until the credits issued reach the total allocation amount. The 2021 credit application round opens on January 8 and runs through January 31, 2021.
The current round of tax credit allocation is expected to be highly competitive. Eligible investors should gather all information and complete the application in advance to be ready for submission when the application process opens. If you have questions about the credit or need assistance with your application, contact a GBQ advisor.