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OEDA - Schoeny Smith (10/14/2009)
 

OEDA - Schoeny Smith (10/14/2009)

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Steve Schoeny and Chad Smith talk about changes to Ohio's tax credit programs at the 2009 OEDA Conference.

Steve Schoeny and Chad Smith talk about changes to Ohio's tax credit programs at the 2009 OEDA Conference.

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  • Fixed Asset Investments This amount should be consistent with what the company indicates in the FAA as opposed to the Commitment Letter. The Tax Incentives Office derives the amount from the fixed asset portion in the investment breakdown in the FAA. Additionally Furniture & Fixtures and Inventory do not count toward the Fixed Asset Investment. Affiliates / Subsidiaries Will any additional company’s have involvement in the project? This includes company’s making the investment and taking part in the hiring of employees. Maintained Employees Does the company have any sites with employees within the county or a 15-mile radius of the project site? If so, these employees need to be counted as maintained. Facility Ownership Is it leased or owned? If leased, does the term or renewal options cover the tax credit term?? It is also important to check that any property tax abatements from the local jurisdiction benefit the company and not the lessor. Double Check Wage & Job Numbers Because the both value of the tax credit, and the rate/term given are highly driven by employee wages, it is important to make sure the wages and job numbers are consistent across the board. What the company indicates in the FAA should be consistent with negotiated numbers.
  • Project Timing Make sure if the company has indicated construction or occupancy dates prior to the Tax Credit Authority meeting, they have a the new Go Forward letter sent to them. If hire dates prior to the Tax Credit Authority date are indicated, make sure the company is aware those employees will not be counted as new hires. Service Projects Make sure on service projects the % of sales outside of Ohio are at least 51% or are part of a value-added component that has sales outside of Ohio of at least 51%. JCTC Start Date Communicate to the company that this is the year the company may begin claiming the credit on new hires (on a calendar year basis only). The company may choose to start the credit whenever it pleases. In most cases, the decision is between claiming the credit right away at the beginning of the hiring cycle (thus less employees) or capturing the most employees in the first credit year (thus waiting until most or all employees are hired). Relocation Projects It is important to notify the Department as soon as possible if employees are relocating in Ohio for the project so the Tax Incentives Office can prepare the proper notice. Employees relocating within Ohio to the project site will not be counted as new. Confirm Only 1 Project Site The program is site specific, therefore, double-check with the company to make sure the project is being conducted at just one site.

OEDA - Schoeny Smith (10/14/2009) OEDA - Schoeny Smith (10/14/2009) Presentation Transcript

  • Ohio Department of Development’s Incentive Update Steve Schoeny Chad Smith Strategic Business Investment Division Ohio Department of Development Wednesday, October 14, 2009
  • Today’s Agenda
    • I. State Tax Incentive Programs:
    • Changes in Job Creation Tax Credit Program (JCTC)
    • Changes in Job Retention Tax Credit Program (JRTC)
    • Computation of new JCTC
    • II. Job Ready Site (JRS) Program update
    • III. Ohio Film Tax Credit
    • IV. Other
  • Changes in Job Creation Tax Credit
    • Job Creation Tax Credit – Current
    • Refundable tax credit based on withholding for Net, New, Full-time Employees
      • New Employees defined as 35 hours per week or more
      • Focus on full-time employees leads to cumbersome reporting
    • Job Creation Tax Credit – New
    • Refundable tax credit based on growth in full-time equivalent employees (FTEs) and payroll
      • Permitting credit for FTEs recognizes that leading edge companies offer flexible work environments
      • Payroll is a strong proxy for the delivery of wealth into Ohioans.
    • Impact: Two page annual reports
  • Changes in Job Creation Tax Credit
    • Job Retention Tax Credit – Current
    • Non-Refundable Tax Credit based on retained full-time employees with more than 6 months tenure at the facility
    • Minimum thresholds
      • $100 million in capital investment if wages average over $29 per hour
      • $200 million in capital investment if wages average less than $29 per hour
      • 1,000 retained jobs
    • Job Retention Tax Credit – New
    • Payroll and FTE based like the JCTC
    • Lower thresholds
      • $50 million in capital investment for manufacturing
      • $20 million in capital investment for non-manufacturing
      • 500 retained employees
    • Program cap of $13 million in new annual credits per year
  • Computation of Credit
  • Key Definitions
    • “ Income Tax Revenue (ITR)”
        • Total amount withheld from each employee employed at the project.
    • “ Baseline Income Tax Revenue (BITR)”
        • “ Income Tax Revenue” twelve months preceding Tax Credit Authority approval
        • Multiplied by 1 plus the annual pay increase factor
    • “ Excess Income Tax Revenue (EITR)”
        • “ Income Tax Revenue” minus “Baseline Income Tax Revenue”
  • Additional Definitions
    • “ Pay Increase Factor (PIF)”
      • Annual percentage adjustment of “Baseline Income Tax Revenue” determined by the Tax Credit Authority
    • “ Payroll”
      • Wages paid to employees at the project location not including benefits
    • “ Consumer Price Index”
      • The seasonally adjusted compound annual rate statistic released by the Dept. of Labor, Bureau of Statistics
  • Who qualifies?
    • Companies that proposing to create at least 10 full-time employees at 175% of the federal minimum wage generating at least $660,000 in payroll over the first three years of initial operations qualify for the program.
    • The payroll amount of $660,000 is the equivalent of 175% of the federal minimum wage for 25 full-time equivalent employees. This payroll figure will increase yearly as federal minimum wage increases.
  • Scenario 1: 3-year Company
  • Assumptions
    • Company had 90 FTE’s at the project site at the time of approval ($2.8m in payroll).
    • The company proposes to create 60 new FTE’s ($1.87m in payroll).
    • The wage for both current FTE’s, and new proposed FTE’s is $15.00 per hour.
    • Company experienced large “ramp-up” growth over the previous three years (38%).
    • BITR used annually adjusted by using 2x the 12-month ending Consumer Price Index of All Urban Consumers (1.4) plus “1” as the PIF, or 1.028%.
    • Company meets payroll commitments by its third year and exceeds those commitments through the remainder of the term.
  • Scenario 1: 3-year Company
  • Scenario 2: Single-contract Dependent
  • Assumptions
    • Company had 100 FTE’s at the project site at the time of approval ($2.9m in payroll).
    • The company proposes to create 225 new FTE’s ($6.5m in payroll).
    • The wage for both current FTE’s and new proposed FTE’s is $14.00 per hour.
    • Company experienced payroll growth over the previous three years of 7.5%.
    • BITR used annually adjusted by using 2x the 12-month ending Consumer Price Index of All Urban Consumers (1.4) plus “1” as the PIF, or 1.028%.
    • Company lost its contract, and starting laying off employees at a rapid pace, dipping below is baseline employment in year 4. Secured a new contract in year 5.
  • Scenario 2: Single-contract Dependent
  • Scenario 3: 2-year Company, Steady Growth
  • Assumptions
    • Company had 120 FTE’s at the project site at the time of approval ($5.4m in payroll).
    • The company proposes to create 35 new FTE’s ($1.6m in payroll).
    • The wage for both current FTE’s and new proposed FTE’s is $22.00 per hour.
    • Company experienced rapid payroll growth during 2-year start-up period (50%).
    • BITR used annually adjusted by using 2x the 12-month ending Consumer Price Index of All Urban Consumers (1.4) plus “1” as the PIF, or 1.028%.
    • Company reached commitments in year three, then maintained a steady growth pace.
  • Scenario 3: 2-year Company, Steady Growth
  • Ohio Job Ready Sites Program (JRS)
  • JRS Overview
    • Program created to fill gaps in Ohio’s inventory of readily available sites
    • Site Categories
      • Manufacturing or Mega Manufacturing
      • Technical Center/Research Laboratory
      • “ Smart” Office
      • Existing Industrial Building
    • Sites are held to rigorous site development standards
    • Sites are certified by Development and a third-party site selector upon completion
  • JRS Timeline – Funding Round 3
    • Fall 2009
      • Program Guidelines
      • Pre-application
        • Provides preliminary feedback on projects
        • Participation not required
    • Winter 2010
      • Competitive application
    • Fall 2010
      • Award announcements
  • JRS Funding Round 3
    • Combined FY 2010 & FY 2011
      • $20 million available in competitive funds
    • Industrial Site Improvement Fund Program rolled into JRS
    • High-Intensity Category
      • Grants capped at $3.5 million
      • Typically moderate to significant infrastructure improvements
      • Certification required
    • Low-Intensity Category
      • Grants capped at $750,000
      • Typically minimal or phased infrastructure improvements
      • Certification preferred but not required
  • Ohio Film Tax Credit
  • Film Tax Credit
    • The program provides a refundable, non-transferable tax credit to be taken against a business’ corporate franchise tax or an individual’s Ohio personal income tax obligations. The credit is based on eligible production expenditures (EPE’s)
    • EPE’s must be made in Ohio to qualify for credit. Production expenditures do not, however, have to be made exclusively in Ohio.
    • Must have a minimum of $300,000 EPE in order to apply
    • EPE’s are credited as follows:
      • Ohio resident cast and crew wages will be credited at 35%
      • All other EPE’s will be credited at 25%.
      • **For the purposes of this credit, an Ohio resident is an individual who maintains a domicile located in the State of Ohio for at least six months in any calendar year.
  • Other Tax Credit/Incentive Issues
    • Technology Investment Tax Credit
      • $15 million in additional capacity
    • State New Markets Tax Credit
      • $10 million to support investment similar to the federal program
    • Sporting Events Tax Credit
      • Super Bowl; NCAA Bowl Championship Series and Final Four games; the Olympics; all-star major-league basketball, baseball, and hockey games; World Cup Soccer games; and the National Senior Games
      • Does not start until FY2012
      • No funding source
  • Questions? Steve Schoeny Director Strategic Business Investment Division (p) 614-728-9499 (f) 614-644-1789 Chad Smith Manager Office of Grants & Tax Incentives Strategic Business Investment Division (p) 614-387-1498 (f) 614-644-1789