Columbus is quickly becoming a force to be reckoned with when it comes to population growth. According to the United States Census Bureau, Columbus just surpassed Indianapolis as the 14th largest city in the U.S. and is officially the second-largest city in the Midwest. Since the 2010 census, Columbus (city limits only) has grown 9.3 percent, from 787,033 residents to 860,090 in 2016. Moreover, between 2011 and 2016, private employment in Ohio increased by 450,000 jobs, far outperforming the regional average of 261,000 jobs .
So, what is Ohio doing right? How has Ohio become competitive in a site selection search? And, how can your development project benefit from working with JobsOhio?
Ohio’s business-friendly tax climate continues to stimulate business growth. Among the many Ohio advantages, the Job Creation Tax Credit (JCTC) has been seen in almost every new development project. As seen in our examples, the JCTC is a tool which is utilized by JobsOhio to attract competitive private business projects which are deemed as beneficial to the state and local economies.
The companies that are planning out their hiring goals with the right consultant, are finding significant dollars associated with the JCTC awards received. However, it is vital to know the JCTC is a discretionary, refundable tax credit that may be awarded in competitive situations to companies that are considering expanding or relocating in Ohio.
What is the Job Creation Tax Credit
The JCTC is awarded by JobsOhio and approved by the Ohio Tax Credit Authority. It provides a refundable tax credit that is calculated as a percentage of the expected increased tax withholdings generated from the new jobs associated with competitive projects. The tax credit is measured as a percentage of the state income tax withholdings (or percentage of new payroll) for all new employees hired under the program and is applied toward the company’s commercial activity tax liability.
Should the amount of the credit exceed the company’s commercial activity tax liability for any given year, the difference is refunded. Some Ohio cities, including Columbus and Cincinnati, also offer JCTCs as non-refundable credits which are provided as a percentage of city income tax withholdings for eligible new employees. These credits are generally applied toward municipal tax liability.
Who Can Qualify for the JCTC?
Businesses must apply for the credit before committing to the project and must be approved through the Ohio Tax Credit Authority before hiring begins. In practice, the JCTC essentially turn new jobs created tax savings or even cash refunds for a company. To be eligible for the tax credit a company must have a project that will result in net new jobs that were not previously performed by employees of the applicant.
The JCTC requires projects under consideration to create at least 10 new jobs (within three years) with a minimum annual payroll of $660,000 that pay at least 150 percent of the federal minimum wage. The project must generally be economically sound and benefit the people of Ohio by increasing opportunities for employment and strengthening the state economy, and receiving the tax credit should factor in the applicant’s decision to go forward with the project.
What is the Value of the JCTC?
Since the JCTC is based on the state withholding tax collected from net new employees, the number of net new positions and the wages of new employees will affect potential value. JobsOhio has discretionary authority to provide a calculated percentage of the expected increase in tax withholdings of net new jobs. There is a wide range in value that can be provided depending on the competitive nature and the attractiveness of the project. JobsOhio may consider many factors in making a JCTC offer including investment, economic impact, industry, location, competition and more. JCTC Tax Credits could provide anywhere between $3,000 and $15,000 per job.
Can JCTC credits help your company?
While Ohio’s Job Creation Tax Credits can be extremely valuable, obtaining an offer from JobsOhio and maximizing value can be a challenge for many businesses. From identifying opportunity, to managing interactions with JobsOhio economic development liaisons, to meeting compliance requirements, the JCTC can be challenging to navigate.
Having an experienced site selection and economic incentive advisor is a great first step. Rapidly growing companies, especially multi-state companies, need to have a strategic location and incentive plan. If your company is investing and adding jobs, incentives like the JCTC could bring you hundreds of thousands of dollars or even more in benefit.
If you have questions please give us a call.