InvestOhio is a new tool to provide much needed capital into Ohio's small businesses, helping them create jobs. The nearly 900,000 small businesses in Ohio are one of the backbones of the state's economy. InvestOhio encourages investors to actively support these small businesses, sparking growth and improving Ohio's competitive position. The program, administered by the Ohio Development Services Agency in collaboration with the Ohio Department of Taxation, generated nearly $700 million dollars of investment in the state in the previous biennium and is expected to continue to generate investment to the state moving forward.
How it Works
InvestOhio provides a non-refundable personal income tax credit to investors that provide new equity (cash) into Ohio small businesses to acquire an ownership interest in the company. The small business is required to reinvest that infusion of cash into one of five categories of allowable expenses within six months of its receipt. The investor must retain his or her ownership interest for a five year holding period before the tax credit may be claimed. The small business must similarly retain the property that it purchased from the cash infusion for the entire five year holding period.
The Director of the Ohio Development Services Agency (Director) is authorized to award up to $100 million in tax credits during the current State of Ohio fiscal biennium, which ends on June 30, 2015.
In order to be awarded a small business investment certificate (an InvestOhio tax credit) there are several steps to follow. While more detailed information can be found below in our tutorials and FAQ, the process requires the following steps:
- Both the investor and the small business must register for InvestOhio through the Ohio Business Gateway. At the end of registration, each registrant will receive an InvestOhio User ID. It is a unique number that prevents parties from having to share sensitive information with proposed business partners. This number will be required to complete Step 3, below.
- The parties on a given transaction will decide who is responsible for applying to the InvestOhio program. Regardless of whether it is the investor or the small business, the party that applies must obtain the InvestOhio User ID of the other party on the transaction. They must also reach an agreement with that party about when the investment will take place and the amount of the investment.
- The party that is responsible for applying will do so at the Ohio Business Gateway, starting November 1, 2013. The application will seek only the information described in Step 2, above. The timing of when an eligible investor or small business applies is critical, as credits are awarded on a first come, first served basis. Additionally, an application must be filed in the same state biennium as the investment (currently July 1, 2013-June 30, 2015). Once a party has completed an application, he or she will be given an InvestOhio Transaction ID number. This number will determine the priority for that transaction. Once the Director has accepted enough transactions to fulfill all of the available tax credits, the Director will inform applicants of where their transactions sits in the line of unfulfilled transactions so that they can estimate how close their transaction is to potentially being awarded a tax credit.
- Regardless of whether a transaction has the necessary priority to be awarded an InvestOhio tax credit at the time of application, the investor must make the investment on or around the date described in the application. Some transactions that were initially eligible may be disqualified for failure to follow the program rules. If a disqualification takes place, the Director will simply move on to the next InvestOhio Transaction ID that was not awarded a tax credit, so it is critical that those transactions that were not immediately eligible for a tax credit still complete the investment.
- Those transactions that have the necessary priority at the time of application will be notified by email of their eligibility. The investor must make the investment on or around the date described in the application and provide evidence of the investment to the Director within 30 days.
- The small business must then make allowed expenditures and provide evidence to the Director within 30 days of completing the expenditures or within seven months of the investment, whichever occurs first.
- Both the investor and the small business must retain ownership interest (investor) and property (small business) for the duration of the holding period (five years). Both parties must provide evidence of continued ownership to the Director upon the completion of the holding period.
- If the parties to the transaction have met the above steps, the investor may claim the tax credit.
For questions on InvestOhio, please refer to the InvestOhio FAQ, as this document will be regularly updated. For additional questions regarding the InvestOhio process, contact the Ohio Development Services Agency's Business Response Line at (800) 848-1300, or email email@example.com.