New “transformational mixed use development” state tax credits

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Taxpayers can now access a new, nonrefundable insurance premium tax credit for capital contributions to certain “transformational mixed use developments” (TMUDs). Amended Substitute Senate Bill 39, a piece of legislation finished during the recent lame duck session and signed into law by Ohio Governor DeWine on December 29, 2020, allows property owners or insurance companies to apply to the Ohio Tax Credit Authority for certification and preliminary approval of tax credits against taxes imposed on insurance companies under R.C. Section 5725.18 or R.C. Section 5729.03. The Tax Credit Authority is limited to awarding $100 million per year (with individual projects capped at $40 million each). Rural areas received a set-aside under the legislation of $20 million per year in available tax credits. Once awarded, the tax credits may be sold or transferred to raise capital for certified projects.

To be eligible, projects must meet four requirements. First, a project must have a “transformational economic impact” on the development site and the surrounding area. Second, the project must have more than one intended use, with some combination of retail, office, residential, recreation, structured parking and/or other similar uses into one development. Third, upon completion, the increase in tax collections must exceed ten percent of the development costs. Fourth, a project is only eligible if it would not be completed but for receiving the tax credit.

Notably, eligibility criteria shift depending on whether the project is in a rural area (defined under the legislation as beyond ten miles of a major city, which in turn the program defines as a city with population greater than 100,000). That is, if within ten miles of a major city, the project’s estimated development costs must exceed $50 million and include at least one new or previously vacant 15-story or taller building (or otherwise the project involves floor areas of at least 350,000 square feet), with $4 million or more in annual payroll. Rural projects, on the other hand, must include at least one new or previously vacant two-story or taller building (or otherwise involves floor areas of at least 75,000 square feet). There is no minimum investment requirement for rural projects.

See our January 7, 2021 blog post for more on Senate Bill 39.

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DISCLAIMER: Because of the generality of this update, the information provided herein may not be applicable in all situations and should not be acted upon without specific legal advice based on particular situations.

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