Youngstown Daily Legal News

Expansion of program designed to boost investment in distressed areas sought

TIFFANY L. PARKS
Special to the Legal News
Published: June 24, 2015

Sens. Bill Beagle and Charleta Tavares have introduced a bipartisan proposal into the Ohio General Assembly that would modify the state’s new markets tax credit program.

“Ohio’s new markets tax credit program serves to incentivize private capital investment in businesses located in economically distressed areas,” said Beagle, R-Tipp City.

Similar to the federal new markets tax credit program, the state awards U.S. Treasury-regulated certified development entities or CDEs tax credit investment authority which must be invested in a qualified business within one year of receiving the authority.

The tax credit equals 39 percent of the investment, and is redeemed gradually over a seven-year period.

The proposed legislation, Senate Bill 41, would expand the class of low-income community businesses eligible to receive credit-eligible investments for purposes of the new markets tax credit to include businesses that derive 15 percent or more of revenue from real estate sales or rentals.

The measure also would adjust the percentage of the credit that may be claimed by a credit recipient for each year of the credit schedule and would eliminate the requirement that a taxpayer receive a federal new markets tax credit in order to qualify for the state version.

In addition, SB 41 would allow an investment that did not qualify for the Ohio new markets tax credit at the time the investment was made to qualify for the credit if the investment meets all of the program’s requirements as amended by the act.

“The legislation is aimed at improving the existing state new markets business investment program, to be structured like successful new markets business investment programs in other states,” Beagle said.

In pushing for the bill’s passage before the Senate Ways and Means Committee, Beagle said the program has $10 million in tax credit allocation available to CDEs each year, who then sell the credit to investors and use that money for high-impact projects.

“In turn, businesses in the low-income community receive this flexible loan or equity for their projects which create new job opportunities and services in the community,” he said, adding that SB 41 would synch the state and federal new markets tax credit redemption schedules.

Tavares, D-Bexley, said enacting the measure would remove administrative barriers that limit the program’s effectiveness and implement best practices from successful new markets programs in 10 other states.

Of those best practices, SB 41 would introduce a market-driven release of investment authority.

“All investment authority under the program will be available at the onset of the program and released based on market-driven demand,” Tavares said. “Ohio currently limits the amount of investment authority available each round of investment authority.”

With regard to allowing businesses that derive 15 percent or more of revenue from real estate sales or rentals, Tavares said the restriction has had unintended consequences of disqualifying projects with potential for job creation.

The federal program has no such restriction.

“An improved state new markets program will also attract more federal new markets investment. Ohio currently ranks 16th amongst all states in per capita federal new markets investments,” Tavares said, noting that through 2010, Ohio saw $88 per capita invested in the state under the federal program.

“During the same period, Missouri, which has a population that is half of Ohio’s, attracted investment of $150 per capita.”

Tavares said restructuring the state’s program will allow Ohio to experience the economic boost that has been realized in other areas of the country.

She said an economic impact study on Missouri’s program found that $1.53 was generated for every dollar in investment. In addition, $38.7 million in new state and local revenue was generated.

In Florida, Tavares said 5,300 jobs were created, retained or supported as a result of its program.

The Florida venture also attracted $236 million in additional private funding.

“Further, the federal program has created or retained 300,000 jobs in economically distressed areas,” she said.

If enacted, Tavares said SB 41 has the potential to enable significant economic impact and job creation for the areas of the state that are struggling.

“The resounding success of the federal program has encouraged 10 states, beginning in 2007, to enact their own programs to drive even more capital into economically distressed communities and attract additional private capital investment to their states,” she said.

“Ohio is one of the 10 states, but we have yet to fully tap the potential of the program because of the unique problems in how our program is structured. This legislation will address those issues and make Ohio’s program one of the most competitive and strongest in the country.”

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