Ohio Opportunity Zone Tax Credits

Opportunity zones are a federal tax incentive that offers tax-free private equity investment into the communities that need it most, and Ohio is unique on a national level in that it is the only state to offer a complementary 10 percent income tax credit on amounts invested into Ohio opportunity zone property.

Under Ohio law, and in contrast to the federal rules, investments of both pre-tax capital gain and post-tax cash are equally eligible for the award, and as soon as within four months of the investment. According to Ohio state public records, in 2022, 373 investors placed $421 million into Ohio OZ business ventures throughout the Buckeye State, nearly doubling the amount of private OZ investment from the previous year and pushing the total investment amount to over $1 billion since program inception in 2019. This activity is consistent with reports that private investors have placed an estimated $34 billion into opportunity zone business ventures nationwide since 2018.

Here are four things investors need to know about the Ohio OZ tax credit program:

  1. The application window is in January and July of each year for investments made only during the previous six-month period.
  2. The program is capped at $50 million for fiscal year 2024 and awarded on a first-come, first-served basis.
  3. The tax credit certificate must be used within two years of issuance, with unused amounts carried forward for up to five years.
  4. Certificated amounts are freely transferable, meaning all or any portion may be sold for an immediate cash return on the OZ investment.

There are strict procedural rules for investors who intend to qualify for Ohio OZ tax credit eligibility. For example, an applicant’s investment must be made through an Ohio qualified opportunity fund, and the Ohio qualified opportunity fund must hold 100 percent of its assets in Ohio qualified opportunity zone property.

Similarly, there are strict timing rules for investors who intend to qualify for the federal OZ income tax incentives. For example, investments of pre-tax eligible gain must be made into a qualified opportunity fund within 180 days of the date giving rise to the capital gain tax liability (e.g., sale of a capital asset), and a subsequent investment by a qualified opportunity fund into tangible business property must be used to either place the property in service of a trade or business or otherwise to substantially improve the investment property. Investors should consult with their professional advisors on qualification for federal and state OZ income tax incentive eligibility.