On July 4, 2023, Governor Mike DeWine signed Ohio House Bill 33, which creates a new Ohio low-income housing tax credit program (the “Ohio Credit”). The Ohio Credit will be codified under Section 175.16 of the Ohio Revised Code. The Executive Director of the Ohio Housing Finance Agency (the “Director”) may reserve the Ohio Credit for a qualified low-income building project that is located in Ohio, qualifies for an allocation of Federal low-income housing tax credits (“Federal Credits”), and is placed in service on or after July 1, 2023. The Ohio Credit cannot be reserved after June 30, 2027.
Aggregate Amount of Ohio Credit
The aggregate amount of Ohio Credits issued in a fiscal year cannot exceed One Hundred Million Dollars ($100,000,000), plus unused amounts from prior years. The combined Ohio Credit and Federal Credit cannot exceed the funding necessary to ensure the financial feasibility of a qualified project.
Reservation Letters and Eligibility Certificates
The Director will send written notice of an Ohio Credit reservation to each project owner. The reservation will state the aggregate Ohio Credit reserved for all years of the credit period (which generally follows the 10 year Federal credit period), except that the annual Ohio Credit amount will equal one-tenth of the reserved Ohio Credit amount. The Director will later issue an eligibility certificate after the project is completed, to permit equity owners to claim the Ohio Credit on Ohio tax returns filed for (i) individual, trust, and estate income tax under § 5747.02; (ii) domestic and foreign insurance premiums tax (including retaliatory tax) under §§ 5729.03, 5725.18, and 5729.06; and (iii) financial institutions tax § 5726.02.
Requirements and Restrictions
- Utilization. The Ohio Credit is not refundable, but if a taxpayer does not have sufficient tax liability to claim the Ohio Credit, it can be carried forward for five (5) years. Unlike most state low-income housing tax credit programs, an equity owner may also assign all or any part of its interest in a qualified project, including its interest in the Ohio Credits, to one or more other equity owners.
- Special Allocations. The Ohio Credit can be specially allocated to the equity owners of a pass-through entity, in any manner agreed to by its equity owners, and the equity owners must acquire their ownership interests prior to claiming the Ohio Credit. However,
- the equity owners are not required to be eligible for an allocation of Federal Credits;
- the equity owners need not qualify as a partner of the pass-through entity for Federal income tax purposes, and
- the allocation is not required to have substantial economic effect under Section 704(b) of the Internal Revenue Code.
- Recapture and Annual Reporting Requirements. The Credit is subject to potential recapture if any portion of the qualified project’s Federal Credits is recaptured or is otherwise disallowed, and the Credit program requires certain annual reporting to state tax authorities by a “designated reporter” to claim the Ohio Credits.
For further guidance on the new Ohio Credit program or the transferability of other state tax credits, contact Thompson Coburn LLP’s Tax Credit partners Garrett Fischer or Janette Lohman.
