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Senate Bill 39 Allows Up to $100 Million in Business Incentive Credits for Transformational Mixed-Use Development in the State of Ohio

Client Alert

Ohio Governor Mike DeWine signed Senate Bill 39 on December 29, 2020, which created a new tax credit applicable to insurance premium taxes. This tax credit is designed to provide funding for a transformational mixed-use development or “TMUD” in the state of Ohio.

Effective as of March 31, 2021, Senate Bill 39 authorizes the Ohio Tax Credit Authority (“OTCA”), within the Ohio Development Services Agency (“ODSA”), to award up to $100 million of total business incentive credits in each of the fiscal years 2020-2023, which will then be applied against insurance premium taxes. Individual projects are capped at $40 million. Of the $100 million, there remains a reserved amount of $20 million of such credits each fiscal year for projects not located within a “Major City”, which is within ten miles of a municipality with more than 100,000 people.           

What Qualifies as a TMUD Project?

According to O.R.C. 122.09, the development project may be certified as a TMUD by meeting the following requirements:

  1. Must consist of new construction or redevelopment, rehabilitation, or expansion of an existing vacant structure, or a combination of the two; and
  2. Must have a “transformational economic impact” on the site and surrounding area. Transformational economic impact can be measured through the estimated increased tax collections resulting from the increased activity of the development, which must exceed 10% of the development costs within five (5) years of certification (as measured by a preliminary economic impact study, although not yet defined); and
  3. Must be mixed-use (integrating some combination of retail, office, residential, recreation, structured parking, or other similar uses); and
  4. Must include a structure or structures that meet certain height, square footage, or increased payroll requirements (urban projects must include at least one new or previously vacant building that is a) at least 15 stories high, or b) has a floor area of at least 350,000 square feet, or c) after completion will be the site of employment accounting for at least $4 million in annual payroll, or d) includes two or more connected buildings that collectively have a floor area exceeding 350,000 square feet); and
  5. Cannot be completed unless the applicant receives the credit; and
  6. Must have estimated development costs exceeding $50 million if the project is located within ten miles of a Major City.

Who Can Apply?

Those who may apply for these TMUDs include either a) property owners, or b) insurance companies that contribute capital which is then used in the planning or construction of this type of eligible development. Insurance companies may ultimately claim this credit, as it is a credit against an entity’s Ohio insurance premium taxes. A property owner who originally applies and receives the TMUD credit may either transfer it to an insurance company or sell or transfer the rights to that credit to others in order to raise project capital.

What’s Next?

The state is currently undertaking rulemaking for this new incentive and developing program guidelines. These guidelines, as defined by the Director of ODSA, are expected to be released within the next 30 days. All TMUD projects must be certified by the OTCA by June 30, 2023.

For additional questions on this tax credit, please contact BMD Member Jason Butterworth at jabutterworth@bmdllc.com or (330) 374-3216.


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Inflation Reduction Act: Healthcare Provisions

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The Current State of Assignment of Benefits Litigation in Florida

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Ohio Senate Bill 225 is poised to make dramatic enhancements to certain tax credit programs in Ohio, specifically those surrounding investments in “Opportunity Funds” and historic buildings. Signed into law by Governor Mike DeWine in June 2022, the Bill is positive news for real estate developers working to revitalize Ohio communities with investment and rehabilitation projects.