Bill Text: OH HB655 | 2013-2014 | 130th General Assembly | Introduced

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Bill Title: To reduce the job retention and capital investment requirements of the Job Retention Tax Credit for businesses in targeted areas or industries, to require that a Job Creation or Retention Tax Credit awarded to such a business equal 100% of its new or retained income tax withholding, and to modify the credits' annual report requirement to provide that employers must submit reports only if required by the Director of Development Services.

Spectrum: Slight Partisan Bill (Republican 3-1)

Status: (Introduced - Dead) 2014-11-10 - To Ways and Means [HB655 Detail]

Download: Ohio-2013-HB655-Introduced.html

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As Introduced

130th General Assembly Regular Session 2013-2014

H. B. No. 655

Representatives Beck, Adams, J. 

Cosponsors: Representatives Milkovich, Retherford 

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A BILL

To amend sections 122.17 and 122.171 of the Revised

1

Code to reduce the job retention and capital

2

investment requirements of the Job Retention Tax

3

Credit for businesses in targeted areas or

4

industries, to require that a Job Creation or

5

Retention Tax Credit awarded to such a business

6

equal 100% of its new or retained income tax

7

withholding, and to modify the credits' annual

8

report requirement to provide that employers must

9

submit reports only if required by the Director of

10

Development Services.

11

BE IT ENACTED BY THE GENERAL ASSEMBLY OF THE STATE OF OHIO:

Section 1. That sections 122.17 and 122.171 of the Revised	12
Code be amended to read as follows:	13

Sec. 122.17.  (A) As used in this section:

14

(1) "Income tax revenue" means the total amount withheld	15
under section 5747.06 of the Revised Code by the taxpayer during	16
the taxable year, or during the calendar year that includes the	17
tax period, from the compensation of each employee or each	18
home-based employee employed in the project to the extent the	19
employee's withholdings are not used to determine the credit under	20
section 122.171 of the Revised Code. "Income tax revenue" excludes	21
amounts withheld before the day the taxpayer becomes eligible for	22
the credit.	23

(2) "Baseline income tax revenue" means income tax revenue	24
except that the applicable withholding period is the twelve months	25
immediately preceding the date the tax credit authority approves	26
the taxpayer's application or the date the tax credit authority	27
receives the recommendation described in division (C)(2)(a) of	28
this section, whichever occurs first, multiplied by the sum of one	29
plus an annual pay increase factor to be determined by the tax	30
credit authority.	31

(3) "Excess income tax revenue" means income tax revenue	32
minus baseline income tax revenue.	33

(4) "Home-based employee" means an employee whose services	34
are performed primarily from the employee's residence in this	35
state exclusively for the benefit of the project and whose rate of	36
pay is at least one hundred thirty-one per cent of the federal	37
minimum wage under 29 U.S.C. 206.	38

(5) "Distressed area" has the same meaning as in section	39
122.16 of the Revised Code.	40

(6) "Targeted industry" means the information technology,	41
manufacturing, automobile, or aerospace industry.	42

(B) The tax credit authority may make grants under this	43
section to foster job creation in this state. Such a grant shall	44
take the form of a refundable credit allowed against the tax	45
imposed by section 5725.18, 5726.02, 5729.03, 5733.06, 5736.02, or	46
5747.02 or levied under Chapter 5751. of the Revised Code. The	47
credit shall be claimed for the taxable years or tax periods	48
specified in the taxpayer's agreement with the tax credit	49
authority under division (D) of this section. With respect to	50
taxes imposed under section 5726.02, 5733.06, or 5747.02 or	51
Chapter 5751. of the Revised Code, the credit shall be claimed in	52
the order required under section 5726.98, 5733.98, 5747.98, or	53
5751.98 of the Revised Code. The amount of the credit available	54
for a taxable year or for a calendar year that includes a tax	55
period equals the excess income tax revenue for that year	56
multiplied by the percentage specified in the agreement with the	57
tax credit authority. If the project site is located in a	58
distressed area, or if the taxpayer is engaged at the project site	59
primarily in a targeted industry, the percentage shall equal one	60
hundred per cent. Any credit granted under this section against	61
the tax imposed by section 5733.06 or 5747.02 of the Revised Code,	62
to the extent not fully utilized against such tax for taxable	63
years ending prior to 2008, shall automatically be converted	64
without any action taken by the tax credit authority to a credit	65
against the tax levied under Chapter 5751. of the Revised Code for	66
tax periods beginning on or after July 1, 2008, provided that the	67
person to whom the credit was granted is subject to such tax. The	68
converted credit shall apply to those calendar years in which the	69
remaining taxable years specified in the agreement end.	70

(C)(1) A taxpayer or potential taxpayer who proposes a	71
project to create new jobs in this state may apply to the tax	72
credit authority to enter into an agreement for a tax credit under	73
this section.	74

An application shall not propose to include both home-based	75
employees and employees who are not home-based employees in the	76
computation of income tax revenue for the purposes of the same tax	77
credit agreement. If a taxpayer or potential taxpayer employs both	78
home-based employees and employees who are not home-based	79
employees in a project, the taxpayer shall submit separate	80
applications for separate tax credit agreements for the project,	81
one of which shall include home-based employees in the computation	82
of income tax revenue and one of which shall include all other	83
employees in the computation of income tax revenue.	84

The director of development services shall prescribe the form	85
of the application. After receipt of an application, the authority	86
may enter into an agreement with the taxpayer for a credit under	87
this section if it determines all of the following:	88

(a) The taxpayer's project will increase payroll and income	89
tax revenue;	90

(b) The taxpayer's project is economically sound and will	91
yield a net positive benefit to the people of this state by	92
increasing opportunities for employment and strengthening the	93
economy of this state;	94

(c) Receiving the tax credit is a major factor in the	95
taxpayer's decision to go forward with the project.	96

(2)(a) A taxpayer that chooses to begin the project prior to	97
receiving the determination of the authority may, upon submitting	98
the taxpayer's application to the authority, request that the	99
chief investment officer of the nonprofit corporation formed under	100
section 187.01 of the Revised Code and the director review the	101
taxpayer's application and recommend to the authority that the	102
taxpayer's application be considered. As soon as possible after	103
receiving such a request, the chief investment officer and the	104
director shall review the taxpayer's application and, if they	105
determine that the application warrants consideration by the	106
authority, make that recommendation to the authority not later	107
than six months after the application is received by the	108
authority.	109

(b) The authority shall consider any taxpayer's application	110
for which it receives a recommendation under division (C)(2)(a) of	111
this section. If the authority determines that the taxpayer does	112
not meet all of the criteria set forth in division (C)(1) of this	113
section, the authority and the development services agency shall	114
proceed in accordance with rules adopted by the director pursuant	115
to division (I) of this section.	116

(D) An agreement under this section shall include all of the	117
following:	118

(1) A detailed description of the project that is the subject	119
of the agreement;	120

(2)(a) The term of the tax credit, which, except as provided	121
in division (D)(2)(b) of this section, shall not exceed fifteen	122
years, and the first taxable year, or first calendar year that	123
includes a tax period, for which the credit may be claimed;	124

(b) If the tax credit is computed on the basis of home-based	125
employees, the term of the credit shall expire on or before the	126
last day of the taxable or calendar year ending before the	127
beginning of the seventh year after September 6, 2012, the	128
effective date of H.B. 327 of the 129th general assembly.	129

(3) A requirement that the taxpayer shall maintain operations	130
at the project location for at least the greater of seven years or	131
the term of the credit plus three years;	132

(4) The percentage, as determined by the tax credit	133
authority, of excess income tax revenue that will be allowed as	134
the amount of the credit for each taxable year or for each	135
calendar year that includes a tax period;	136

(5) The pay increase factor to be applied to the taxpayer's	137
baseline income tax revenue;	138

(6) A requirement that the taxpayer annually shall report to	139
the director of development services employment, tax withholding,	140
investment, the provision of health care benefits and tuition	141
reimbursement if required in the agreement, and other information	142
the director needs to perform the director's duties under this	143
section;	144

(7) A requirement that the director of development services	145
annually review the information reported under division (D)(6) of	146
this section and verify compliance with the agreement; if the	147
taxpayer is in compliance, a requirement that the director issue a	148
certificate to the taxpayer stating that the information has been	149
verifiedwhether the taxpayer is in compliance with the agreement	150
and identifying the amount of the credit that may be claimed for	151
the taxable or calendar year;	152

(8)(7) A provision providing that the taxpayer may not	153
relocate a substantial number of employment positions from	154
elsewhere in this state to the project location unless the	155
director of development services determines that the legislative	156
authority of the county, township, or municipal corporation from	157
which the employment positions would be relocated has been	158
notified by the taxpayer of the relocation.	159

For purposes of this section, the movement of an employment	160
position from one political subdivision to another political	161
subdivision shall be considered a relocation of an employment	162
position unless the employment position in the first political	163
subdivision is replaced.	164

(9)(8) If the tax credit is computed on the basis of	165
home-based employees, that the tax credit may not be claimed by	166
the taxpayer until the taxable year or tax period in which the	167
taxpayer employs at least two hundred employees more than the	168
number of employees the taxpayer employed on June 30, 2011.	169

(E) If a taxpayer fails to meet or comply with any condition	170
or requirement set forth in a tax credit agreement, the tax credit	171
authority may amend the agreement to reduce the percentage or term	172
of the tax credit. The reduction of the percentage or term may	173
take effect in the current taxable or calendar year.	174

(F) Projects that consist solely of point-of-final-purchase	175
retail facilities are not eligible for a tax credit under this	176
section. If a project consists of both point-of-final-purchase	177
retail facilities and nonretail facilities, only the portion of	178
the project consisting of the nonretail facilities is eligible for	179
a tax credit and only the excess income tax revenue from the	180
nonretail facilities shall be considered when computing the amount	181
of the tax credit. If a warehouse facility is part of a	182
point-of-final-purchase retail facility and supplies only that	183
facility, the warehouse facility is not eligible for a tax credit.	184
Catalog distribution centers are not considered	185
point-of-final-purchase retail facilities for the purposes of this	186
division, and are eligible for tax credits under this section.	187

(G) Financial statements and other information submitted to	188
the development services agency or the tax credit authority by an	189
applicant or recipient of a tax credit under this section, and any	190
information taken for any purpose from such statements or	191
information, are not public records subject to section 149.43 of	192
the Revised Code. However, the chairperson of the authority may	193
make use of the statements and other information for purposes of	194
issuing public reports or in connection with court proceedings	195
concerning tax credit agreements under this section. Upon the	196
request of the tax commissioner or, if the applicant or recipient	197
is an insurance company, upon the request of the superintendent of	198
insurance, the chairperson of the authority shall provide to the	199
commissioner or superintendent any statement or information	200
submitted by an applicant or recipient of a tax credit in	201
connection with the credit. The commissioner or superintendent	202
shall preserve the confidentiality of the statement or	203
information.	204

(H) A taxpayer claiming a credit under this section shall	205
submit to the tax commissioner or, if the taxpayer is an insurance	206
company, to the superintendent of insurance, a copy of the	207
director of development services' certificate of verification	208
under division (D)(7)(6) of this section with the taxpayer's tax	209
report or return for the taxable year or for the calendar year	210
that includes the tax period. Failure to submit a copy of the	211
certificate with the report or return does not invalidate a claim	212
for a credit if the taxpayer submits a copy of the certificate to	213
the commissioner or superintendent within sixty days after the	214
commissioner or superintendent requests it.	215

(I) The director of development services, after consultation	216
with the tax commissioner and the superintendent of insurance and	217
in accordance with Chapter 119. of the Revised Code, shall adopt	218
rules necessary to implement this section, including rules that	219
establish a procedure to be followed by the tax credit authority	220
and the development services agency in the event the authority	221
considers a taxpayer's application for which it receives a	222
recommendation under division (C)(2)(a) of this section but does	223
not approve it. The rules may provide for recipients of tax	224
credits under this section to be charged fees to cover	225
administrative costs of the tax credit program. The fees collected	226
shall be credited to the business assistance fund created in	227
section 122.174 of the Revised Code. At the time the director	228
gives public notice under division (A) of section 119.03 of the	229
Revised Code of the adoption of the rules, the director shall	230
submit copies of the proposed rules to the chairpersons of the	231
standing committees on economic development in the senate and the	232
house of representatives.	233

(J) For the purposes of this section, a taxpayer may include	234
a partnership, a corporation that has made an election under	235
subchapter S of chapter one of subtitle A of the Internal Revenue	236
Code, or any other business entity through which income flows as a	237
distributive share to its owners. A partnership, S-corporation, or	238
other such business entity may elect to pass the credit received	239
under this section through to the persons to whom the income or	240
profit of the partnership, S-corporation, or other entity is	241
distributed. The election shall be made on the annual report	242
required under division (D)(6) of this section.The taxpayer shall	243
make the election by annually submitting a notice to the director	244
of development services. The notice may be included in an annual	245
report submitted under division (R) of this section. The election	246
applies to and is irrevocable for the credit for which the report	247
notice is submitted. If the election is made, the credit shall be	248
apportioned among those persons in the same proportions as those	249
in which the income or profit is distributed.	250

(K) If the director of development services determines that a	251
taxpayer who has received a credit under this section is not	252
complying with the requirement under division (D)(3) of this	253
section, the director shall notify the tax credit authority of the	254
noncompliance. After receiving such a notice, and after giving the	255
taxpayer an opportunity to explain the noncompliance, the tax	256
credit authority may require the taxpayer to refund to this state	257
a portion of the credit in accordance with the following:	258

(1) If the taxpayer maintained operations at the project	259
location for a period less than or equal to the term of the	260
credit, an amount not exceeding one hundred per cent of the sum of	261
any credits allowed and received under this section;	262

(2) If the taxpayer maintained operations at the project	263
location for a period longer than the term of the credit, but less	264
than the greater of seven years or the term of the credit plus	265
three years, an amount not exceeding seventy-five per cent of the	266
sum of any credits allowed and received under this section.	267

In determining the portion of the tax credit to be refunded	268
to this state, the tax credit authority shall consider the effect	269
of market conditions on the taxpayer's project and whether the	270
taxpayer continues to maintain other operations in this state.	271
After making the determination, the authority shall certify the	272
amount to be refunded to the tax commissioner or superintendent of	273
insurance, as appropriate. If the amount is certified to the	274
commissioner, the commissioner shall make an assessment for that	275
amount against the taxpayer under Chapter 5726., 5733., 5736.,	276
5747., or 5751. of the Revised Code. If the amount is certified to	277
the superintendent, the superintendent shall make an assessment	278
for that amount against the taxpayer under Chapter 5725. or 5729.	279
of the Revised Code. The time limitations on assessments under	280
those chapters do not apply to an assessment under this division,	281
but the commissioner or superintendent, as appropriate, shall make	282
the assessment within one year after the date the authority	283
certifies to the commissioner or superintendent the amount to be	284
refunded.	285

(L) On or before the first day of August each year, the	286
director of development services shall submit a report to the	287
governor, the president of the senate, and the speaker of the	288
house of representatives on the tax credit program under this	289
section. The report shall include information on the number of	290
agreements that were entered into under this section during the	291
preceding calendar year, a description of the project that is the	292
subject of each such agreement, and an update on the status of	293
projects under agreements entered into before the preceding	294
calendar year.	295

(M) There is hereby created the tax credit authority, which	296
consists of the director of development services and four other	297
members appointed as follows: the governor, the president of the	298
senate, and the speaker of the house of representatives each shall	299
appoint one member who shall be a specialist in economic	300
development; the governor also shall appoint a member who is a	301
specialist in taxation. Of the initial appointees, the members	302
appointed by the governor shall serve a term of two years; the	303
members appointed by the president of the senate and the speaker	304
of the house of representatives shall serve a term of four years.	305
Thereafter, terms of office shall be for four years. Initial	306
appointments to the authority shall be made within thirty days	307
after January 13, 1993. Each member shall serve on the authority	308
until the end of the term for which the member was appointed.	309
Vacancies shall be filled in the same manner provided for original	310
appointments. Any member appointed to fill a vacancy occurring	311
prior to the expiration of the term for which the member's	312
predecessor was appointed shall hold office for the remainder of	313
that term. Members may be reappointed to the authority. Members of	314
the authority shall receive their necessary and actual expenses	315
while engaged in the business of the authority. The director of	316
development services shall serve as chairperson of the authority,	317
and the members annually shall elect a vice-chairperson from among	318
themselves. Three members of the authority constitute a quorum to	319
transact and vote on the business of the authority. The majority	320
vote of the membership of the authority is necessary to approve	321
any such business, including the election of the vice-chairperson.	322

The director of development services may appoint a	323
professional employee of the development services agency to serve	324
as the director's substitute at a meeting of the authority. The	325
director shall make the appointment in writing. In the absence of	326
the director from a meeting of the authority, the appointed	327
substitute shall serve as chairperson. In the absence of both the	328
director and the director's substitute from a meeting, the	329
vice-chairperson shall serve as chairperson.	330

(N) For purposes of the credits granted by this section	331
against the taxes imposed under sections 5725.18 and 5729.03 of	332
the Revised Code, "taxable year" means the period covered by the	333
taxpayer's annual statement to the superintendent of insurance.	334

(O) On or before the first day of March of each of the five	335
calendar years beginning with 2014, each taxpayer subject to an	336
agreement with the tax credit authority under this section on the	337
basis of home-based employees shall report the number of	338
home-based employees and other employees employed by the taxpayer	339
in this state to the development services agency.	340

(P) On or before the first day of January of 2019, the	341
director of development services shall submit a report to the	342
governor, the president of the senate, and the speaker of the	343
house of representatives on the effect of agreements entered into	344
under this section in which the taxpayer included home-based	345
employees in the computation of income tax revenue. The report	346
shall include information on the number of such agreements that	347
were entered into in the preceding six years, a description of the	348
projects that were the subjects of such agreements, and an	349
analysis of nationwide home-based employment trends, including the	350
number of home-based jobs created from July 1, 2011, through June	351
30, 2017, and a description of any home-based employment tax	352
incentives provided by other states during that time.	353

(Q) The director of development services may require any	354
agreement entered into under this section for a tax credit	355
computed on the basis of home-based employees to contain a	356
provision that the taxpayer makes available health care benefits	357
and tuition reimbursement to all employees.	358

(R) The director of development services may require a	359
taxpayer subject to an agreement entered into under this section	360
to report annually to the director employment, tax withholding,	361
investment, the provision of health care benefits and tuition	362
reimbursement if required in the agreement, and other information	363
the director needs to perform the director's duties under this	364
section.	365

Sec. 122.171. (A) As used in this section:

366

(1) "Capital investment project" means a plan of investment	367
at a project site for the acquisition, construction, renovation,	368
or repair of buildings, machinery, or equipment, or for	369
capitalized costs of basic research and new product development	370
determined in accordance with generally accepted accounting	371
principles, but does not include any of the following:	372

(a) Payments made for the acquisition of personal property	373
through operating leases;	374

(b) Project costs paid before January 1, 2002;

375

(c) Payments made to a related member as defined in section	376
5733.042 of the Revised Code or to a consolidated elected taxpayer	377
or a combined taxpayer as defined in section 5751.01 of the	378
Revised Code.	379

(2) "Eligible business" means a taxpayer and its related	380
members with Ohio operations satisfying all of the following:	381

(a) The(i) If the project site is located in a distressed	382
area or if the taxpayer is engaged at the project site primarily	383
in a targeted industry, the taxpayer employs at least one hundred	384
full-time equivalent employees or has an annual payroll of at	385
least seven million dollars at the time the tax credit authority	386
grants the tax credit under this section;	387

(ii) If the project is not located in a distressed area and	388
the taxpayer is not engaged at the project site primarily in a	389
targeted industry, the taxpayer employs at least five hundred	390
full-time equivalent employees or has an annual payroll of at	391
least thirty-five million dollars at the time the tax credit	392
authority grants the tax credit under this section;.	393

(b) The taxpayer makes or causes to be made payments for the	394
capital investment project of one of the following:	395

(i) If the taxpayer is engaged at the project site primarily	396
as a manufacturerproject site is located in a distressed area or	397
if the taxpayer is engaged at the project site primarily in a	398
targeted industry, at least fiftytwelve million five hundred	399
thousand dollars in the aggregate at the project site during a	400
period of three consecutive calendar years, including the calendar	401
year that includes a day of the taxpayer's taxable year or tax	402
period with respect to which the credit is granted;	403

(ii) If the taxpayer is engaged at the project siteproject	404
site is not located in a distressed area, and if the taxpayer is	405
not engaged at the project site primarily in a targeted industry	406
but is engaged primarily in significant corporate administrative	407
functions, as defined by the director of development services by	408
rule, at least twenty million dollars in the aggregate at the	409
project site during a period of three consecutive calendar years	410
including the calendar year that includes a day of the taxpayer's	411
taxable year or tax period with respect to which the credit is	412
granted;	413

(iii) If the taxpayer is applying to enter into an agreement	414
for a tax credit authorized under division (B)(3) of this section,	415
at least five million dollars in the aggregate at the project site	416
during a period of three consecutive calendar years, including the	417
calendar year that includes a day of the taxpayer's taxable year	418
or tax period with respect to which the credit is granted.	419

(c) The taxpayer had a capital investment project reviewed	420
and approved by the tax credit authority as provided in divisions	421
(C), (D), and (E) of this section.	422

(3) "Full-time equivalent employees" means the quotient	423
obtained by dividing the total number of hours for which employees	424
were compensated for employment in the project by two thousand	425
eighty. "Full-time equivalent employees" shall exclude hours that	426
are counted for a credit under section 122.17 of the Revised Code.	427

(4) "Income tax revenue" means the total amount withheld	428
under section 5747.06 of the Revised Code by the taxpayer during	429
the taxable year, or during the calendar year that includes the	430
tax period, from the compensation of all employees employed in the	431
project whose hours of compensation are included in calculating	432
the number of full-time equivalent employees.	433

(5) "Manufacturer" has the same meaning as in section	434
5739.011 of the Revised Code.	435

(6) "Project site" means an integrated complex of facilities	436
in this state, as specified by the tax credit authority under this	437
section, within a fifteen-mile radius where a taxpayer is	438
primarily operating as an eligible business.	439

(7) "Related member" has the same meaning as in section	440
5733.042 of the Revised Code as that section existed on the	441
effective date of its amendment by Am. Sub. H.B. 215 of the 122nd	442
general assembly, September 29, 1997.	443

(8) "Taxable year" includes, in the case of a domestic or	444
foreign insurance company, the calendar year ending on the	445
thirty-first day of December preceding the day the superintendent	446
of insurance is required to certify to the treasurer of state	447
under section 5725.20 or 5729.05 of the Revised Code the amount of	448
taxes due from insurance companies.	449

(9) "Distressed area" has the same meaning as in section	450
122.16 of the Revised Code.	451

(10) "Targeted industry" means the information technology,	452
manufacturing, automobile, or aerospace industry.	453

(B) The tax credit authority created under section 122.17 of	454
the Revised Code may grant tax credits under this section for the	455
purpose of fostering job retention in this state. Upon application	456
by an eligible business and upon consideration of the	457
recommendation of the director of budget and management, tax	458
commissioner, the superintendent of insurance in the case of an	459
insurance company, and director of development services under	460
division (C) of this section, the tax credit authority may grant	461
the following credits against the tax imposed by section 5725.18,	462
5726.02, 5729.03, 5733.06, 5736.02, 5747.02, or 5751.02 of the	463
Revised Code:	464

(1) A nonrefundable credit to an eligible business;

465

(2) A refundable credit to an eligible business meeting the	466
following conditions, provided that the director of budget and	467
management, tax commissioner, superintendent of insurance in the	468
case of an insurance company, and director of development services	469
have recommended the granting of the credit to the tax credit	470
authority before July 1, 2011:	471

(a) The business retains at least one thousand full-time	472
equivalent employees at the project site.	473

(b) The business makes or causes to be made payments for a	474
capital investment project of at least twenty-five million dollars	475
in the aggregate at the project site during a period of three	476
consecutive calendar years, including the calendar year that	477
includes a day of the business' taxable year or tax period with	478
respect to which the credit is granted.	479

(c) In 2010, the business received a written offer of	480
financial incentives from another state of the United States that	481
the director determines to be sufficient inducement for the	482
business to relocate the business' operations from this state to	483
that state.	484

(3) A refundable credit to an eligible business with a total	485
annual payroll of at least twenty million dollars, provided that	486
the tax credit authority grants the tax credit on or after July 1,	487
2011, and before January 1, 2014.	488

The credits authorized in divisions (B)(1), (2), and (3) of	489
this section may be granted for a period up to fifteen taxable	490
years or, in the case of the tax levied by section 5736.02 or	491
5751.02 of the Revised Code, for a period of up to fifteen	492
calendar years. The credit amount for a taxable year or a calendar	493
year that includes the tax period for which a credit may be	494
claimed equals the income tax revenue for that year multiplied by	495
the percentage specified in the agreement with the tax credit	496
authority. The percentage may not exceed seventy-five per cent,	497
except that, if the project site is located in a distressed area	498
or if the taxpayer is engaged at the project site primarily in a	499
targeted industry, the percentage shall equal one hundred per	500
cent. The credit shall be claimed in the order required under	501
section 5725.98, 5726.98, 5729.98, 5733.98, 5747.98, or 5751.98 of	502
the Revised Code. In determining the percentage and term of the	503
credit, the tax credit authority shall consider both the number of	504
full-time equivalent employees and the value of the capital	505
investment project. The credit amount may not be based on the	506
income tax revenue for a calendar year before the calendar year in	507
which the tax credit authority specifies the tax credit is to	508
begin, and the credit shall be claimed only for the taxable years	509
or tax periods specified in the eligible business' agreement with	510
the tax credit authority. In no event shall the credit be claimed	511
for a taxable year or tax period terminating before the date	512
specified in the agreement. Any credit granted under this section	513
against the tax imposed by section 5733.06 or 5747.02 of the	514
Revised Code, to the extent not fully utilized against such tax	515
for taxable years ending prior to 2008, shall automatically be	516
converted without any action taken by the tax credit authority to	517
a credit against the tax levied under Chapter 5751. of the Revised	518
Code for tax periods beginning on or after July 1, 2008, provided	519
that the person to whom the credit was granted is subject to such	520
tax. The converted credit shall apply to those calendar years in	521
which the remaining taxable years specified in the agreement end.	522

If a nonrefundable credit allowed under division (B)(1) of	523
this section for a taxable year or tax period exceeds the	524
taxpayer's tax liability for that year or period, the excess may	525
be carried forward for the three succeeding taxable or calendar	526
years, but the amount of any excess credit allowed in any taxable	527
year or tax period shall be deducted from the balance carried	528
forward to the succeeding year or period.	529

(C) A taxpayer that proposes a capital investment project to	530
retain jobs in this state may apply to the tax credit authority to	531
enter into an agreement for a tax credit under this section. The	532
director of development services shall prescribe the form of the	533
application. After receipt of an application, the authority shall	534
forward copies of the application to the director of budget and	535
management, the tax commissioner, the superintendent of insurance	536
in the case of an insurance company, and the director of	537
development services, each of whom shall review the application to	538
determine the economic impact the proposed project would have on	539
the state and the affected political subdivisions and shall submit	540
a summary of their determinations and recommendations to the	541
authority.	542

(D) Upon review and consideration of the determinations and	543
recommendations described in division (C) of this section, the tax	544
credit authority may enter into an agreement with the taxpayer for	545
a credit under this section if the authority determines all of the	546
following:	547

(1) The taxpayer's capital investment project will result in	548
the retention of employment in this state and will yield a net	549
positive benefit to the state.	550

(2) The taxpayer is economically sound and has the ability to	551
complete the proposed capital investment project.	552

(3) The taxpayer intends to and has the ability to maintain	553
operations at the project site for at least the greater of (a) the	554
term of the credit plus three years, or (b) seven years.	555

(4) Receiving the credit is a major factor in the taxpayer's	556
decision to begin, continue with, or complete the project.	557

(5) If the taxpayer is applying to enter into an agreement	558
for a tax credit authorized under division (B)(3) of this section,	559
the taxpayer's capital investment project will be located in the	560
political subdivision in which the taxpayer maintains its	561
principal place of business or maintains a unit or division with	562
at least four thousand two hundred employees at the project site.	563

(E) An agreement under this section shall include all of the	564
following:	565

(1) A detailed description of the project that is the subject	566
of the agreement, including the amount of the investment, the	567
period over which the investment has been or is being made, the	568
number of full-time equivalent employees at the project site, and	569
the anticipated income tax revenue to be generated.	570

(2) The term of the credit, the percentage of the tax credit,	571
the maximum annual value of tax credits that may be allowed each	572
year, and the first year for which the credit may be claimed.	573

(3) A requirement that the taxpayer maintain operations at	574
the project site for at least the greater of (a) the term of the	575
credit plus three years, or (b) seven years.	576

(4)(a) In the case of a credit granted under division (B)(1)	577
of this section, a requirement that the taxpayer retain at least	578
five hundredthe number of full-time equivalent employees required	579
to be retained under division (A)(2)(a) of this section at the	580
project site and within this state for the entire term of the	581
credit, or a requirement that the taxpayer maintain an annual	582
payroll of at least thirty-five million dollarsthe amount	583
required under division (A)(2)(a) of this section for the entire	584
term of the credit;	585

(b) In the case of a credit granted under division (B)(2) of	586
this section, a requirement that the taxpayer retain at least one	587
thousand full-time equivalent employees at the project site and	588
within this state for the entire term of the credit;	589

(c) In the case of a credit granted under division (B)(3) of	590
this section, either of the following:	591

(i) A requirement that the taxpayer retain at least five	592
hundred full-time equivalent employees at the project site and	593
within this state for the entire term of the credit and a	594
requirement that the taxpayer maintain an annual payroll of at	595
least twenty million dollars for the entire term of the credit;	596

(ii) A requirement that the taxpayer maintain an annual	597
payroll of at least thirty-five million dollars for the entire	598
term of the credit.	599

(5) A requirement that the taxpayer annually report to the	600
director of development services employment, tax withholding,	601
capital investment, and other information the director needs to	602
perform the director's duties under this section.	603

(6) A requirement that the director of development services	604
annually review the annual reports of the taxpayer to verify the	605
information reported under division (E)(5) of this section and	606
compliance with the agreement. Upon verification, the director	607
shall issue a certificate to the taxpayer stating that the	608
information has been verifiedwhether the taxpayer is in	609
compliance with the agreement and identifying the amount of the	610
credit for the taxable year or calendar year that includes the tax	611
period. In determining the number of full-time equivalent	612
employees, no position shall be counted that is filled by an	613
employee who is included in the calculation of a tax credit under	614
section 122.17 of the Revised Code.	615

(7)(6) A provision providing that the taxpayer may not	616
relocate a substantial number of employment positions from	617
elsewhere in this state to the project site unless the director of	618
development services determines that the taxpayer notified the	619
legislative authority of the county, township, or municipal	620
corporation from which the employment positions would be	621
relocated.	622

For purposes of this section, the movement of an employment	623
position from one political subdivision to another political	624
subdivision shall be considered a relocation of an employment	625
position unless the movement is confined to the project site. The	626
transfer of an employment position from one political subdivision	627
to another political subdivision shall not be considered a	628
relocation of an employment position if the employment position in	629
the first political subdivision is replaced by another employment	630
position.	631

(8)(7) A waiver by the taxpayer of any limitations periods	632
relating to assessments or adjustments resulting from the	633
taxpayer's failure to comply with the agreement.	634

(F) If a taxpayer fails to meet or comply with any condition	635
or requirement set forth in a tax credit agreement, the tax credit	636
authority may amend the agreement to reduce the percentage or term	637
of the credit. The reduction of the percentage or term may take	638
effect in the current taxable or calendar year.	639

(G) Financial statements and other information submitted to	640
the department of development services or the tax credit authority	641
by an applicant for or recipient of a tax credit under this	642
section, and any information taken for any purpose from such	643
statements or information, are not public records subject to	644
section 149.43 of the Revised Code. However, the chairperson of	645
the authority may make use of the statements and other information	646
for purposes of issuing public reports or in connection with court	647
proceedings concerning tax credit agreements under this section.	648
Upon the request of the tax commissioner, or the superintendent of	649
insurance in the case of an insurance company, the chairperson of	650
the authority shall provide to the commissioner or superintendent	651
any statement or other information submitted by an applicant for	652
or recipient of a tax credit in connection with the credit. The	653
commissioner or superintendent shall preserve the confidentiality	654
of the statement or other information.	655

(H) A taxpayer claiming a tax credit under this section shall	656
submit to the tax commissioner or, in the case of an insurance	657
company, to the superintendent of insurance, a copy of the	658
director of development services' certificate of verification	659
under division (E)(6)(5) of this section with the taxpayer's tax	660
report or return for the taxable year or for the calendar year	661
that includes the tax period. Failure to submit a copy of the	662
certificate with the report or return does not invalidate a claim	663
for a credit if the taxpayer submits a copy of the certificate to	664
the commissioner or superintendent within sixty days after the	665
commissioner or superintendent requests it.	666

(I) For the purposes of this section, a taxpayer may include	667
a partnership, a corporation that has made an election under	668
subchapter S of chapter one of subtitle A of the Internal Revenue	669
Code, or any other business entity through which income flows as a	670
distributive share to its owners. A partnership, S-corporation, or	671
other such business entity may elect to pass the credit received	672
under this section through to the persons to whom the income or	673
profit of the partnership, S-corporation, or other entity is	674
distributed. The election shall be made on the annual report	675
required under division (E)(5) of this section.The taxpayer shall	676
make the election by annually submitting a notice to the director	677
of development services. The notice may be included in an annual	678
report submitted under division (O) of this section. The election	679
applies to and is irrevocable for the credit for which the report	680
is submitted. If the election is made, the credit shall be	681
apportioned among those persons in the same proportions as those	682
in which the income or profit is distributed.	683

(J) If the director of development services determines that a	684
taxpayer that received a certificate under division (E)(6)(5) of	685
this section is not complying with the requirement under division	686
(E)(3) of this section, the director shall notify the tax credit	687
authority of the noncompliance. After receiving such a notice, and	688
after giving the taxpayer an opportunity to explain the	689
noncompliance, the authority may terminate the agreement and	690
require the taxpayer, or any related member or members that	691
claimed the tax credit under division (N) of this section, to	692
refund to the state all or a portion of the credit claimed in	693
previous years, as follows:	694

(1) If the taxpayer maintained operations at the project site	695
for less than or equal to the term of the credit, an amount not to	696
exceed one hundred per cent of the sum of any tax credits allowed	697
and received under this section.	698

(2) If the taxpayer maintained operations at the project site	699
longer than the term of the credit, but less than the greater of	700
(a) the term of the credit plus three years, or (b) seven years,	701
the amount required to be refunded shall not exceed seventy-five	702
per cent of the sum of any tax credits allowed and received under	703
this section.	704

In determining the portion of the credit to be refunded to	705
this state, the authority shall consider the effect of market	706
conditions on the taxpayer's project and whether the taxpayer	707
continues to maintain other operations in this state. After making	708
the determination, the authority shall certify the amount to be	709
refunded to the tax commissioner or the superintendent of	710
insurance. If the taxpayer, or any related member or members who	711
claimed the tax credit under division (N) of this section, is not	712
an insurance company, the commissioner shall make an assessment	713
for that amount against the taxpayer under Chapter 5726., 5733.,	714
5736., 5747., or 5751. of the Revised Code. If the taxpayer, or	715
any related member or members that claimed the tax credit under	716
division (N) of this section, is an insurance company, the	717
superintendent of insurance shall make an assessment under section	718
5725.222 or 5729.102 of the Revised Code. The time limitations on	719
assessments under those chapters and sections do not apply to an	720
assessment under this division, but the commissioner or	721
superintendent shall make the assessment within one year after the	722
date the authority certifies to the commissioner or superintendent	723
the amount to be refunded.	724

(K) The director of development services, after consultation	725
with the tax commissioner and the superintendent of insurance and	726
in accordance with Chapter 119. of the Revised Code, shall adopt	727
rules necessary to implement this section. The rules may provide	728
for recipients of tax credits under this section to be charged	729
fees to cover administrative costs of the tax credit program. The	730
fees collected shall be credited to the business assistance fund	731
created in section 122.174 of the Revised Code. At the time the	732
director gives public notice under division (A) of section 119.03	733
of the Revised Code of the adoption of the rules, the director	734
shall submit copies of the proposed rules to the chairpersons of	735
the standing committees on economic development in the senate and	736
the house of representatives.	737

(L) On or before the first day of August of each year, the	738
director of development services shall submit a report to the	739
governor, the president of the senate, and the speaker of the	740
house of representatives on the tax credit program under this	741
section. The report shall include information on the number of	742
agreements that were entered into under this section during the	743
preceding calendar year, a description of the project that is the	744
subject of each such agreement, and an update on the status of	745
projects under agreements entered into before the preceding	746
calendar year.	747

(M)(1) The aggregate amount of tax credits issued under	748
division (B)(1) of this section during any calendar year for	749
capital investment projects reviewed and approved by the tax	750
credit authority may not exceed the following amounts:	751

(a) For 2010, thirteen million dollars;

752

(b) For 2011 through 2023, the amount of the limit for the	753
preceding calendar year plus thirteen million dollars;	754

(c) For 2024 and each year thereafter, one hundred	755
ninety-five million dollars.	756

(2) The aggregate amount of tax credits authorized under	757
divisions (B)(2) and (3) of this section and allowed to be claimed	758
by taxpayers in any calendar year for capital improvement projects	759
reviewed and approved by the tax credit authority in 2011, 2012,	760
and 2013 combined shall not exceed twenty-five million dollars. An	761
amount equal to the aggregate amount of credits first authorized	762
in calendar year 2011, 2012, and 2013 may be claimed over the	763
ensuing period up to fifteen years, subject to the terms of	764
individual tax credit agreements.	765

The limitations in division (M) of this section do not apply	766
to credits for capital investment projects approved by the tax	767
credit authority before July 1, 2009.	768

(N) This division applies only to an eligible business that	769
is part of an affiliated group that includes a diversified savings	770
and loan holding company or a grandfathered unitary savings and	771
loan holding company, as those terms are defined in section	772
5726.01 of the Revised Code. Notwithstanding any contrary	773
provision of the agreement between such an eligible business and	774
the tax credit authority, any credit granted under this section	775
against the tax imposed by section 5725.18, 5729.03, 5733.06,	776
5747.02, or 5751.02 of the Revised Code to the eligible business,	777
at the election of the eligible business and without any action by	778
the tax credit authority, may be shared with any member or members	779
of the affiliated group that includes the eligible business, which	780
member or members may claim the credit against the taxes imposed	781
by section 5725.18, 5726.02, 5729.03, 5733.06, 5747.02, or 5751.02	782
of the Revised Code. Credits shall be claimed by the eligible	783
business in sequential order, as applicable, first claiming the	784
credits to the fullest extent possible against the tax that the	785
certificate holder is subject to, then against the tax imposed by,	786
sequentially, section 5729.03, 5725.18, 5747.02, 5751.02, and	787
lastly 5726.02 of the Revised Code. The credits may be allocated	788
among the members of the affiliated group in such manner as the	789
eligible business elects, but subject to the sequential order	790
required under this division. This division applies to credits	791
granted before, on, or after March 27, 2013, the effective date of	792
H.B. 510 of the 129th general assembly. Credits granted before	793
that effective date that are shared and allocated under this	794
division may be claimed in those calendar years in which the	795
remaining taxable years specified in the agreement end.	796

As used in this division, "affiliated group" means a group of	797
two or more persons with fifty per cent or greater of the value of	798
each person's ownership interests owned or controlled directly,	799
indirectly, or constructively through related interests by common	800
owners during all or any portion of the taxable year, and the	801
common owners. "Affiliated group" includes, but is not limited to,	802
any person eligible to be included in a consolidated elected	803
taxpayer group under section 5751.011 of the Revised Code or a	804
combined taxpayer group under section 5751.012 of the Revised	805
Code.	806

(O) The director of development services may require a	807
taxpayer subject to an agreement entered into under this section	808
to report annually to the director employment, tax withholding,	809
capital investment, and other information the director needs to	810
perform the director's duties under this section.	811

Section 2.  That existing sections 122.17 and 122.171 of the	812
Revised Code are hereby repealed.	813