The Ohio General Assembly has recently enacted Senate Bill 39 to authorize a new tax credit to help developers and property owners in raising capital for the completion of “transformational mixed-use developments” (TMUDs). A TMUD is a multiple-purpose construction project that meets certain minimum criteria and is expected to have a “transformational economic impact” on the surrounding area. The drafters and supporters of the legislation envision the potential for broad economic development benefits for the larger community such as: municipal revenues from retail, entertainment or dining sales; job creation; increased property values; revenue from sales, income or lodging taxes;
as well as the livability benefits for citizens like walkability and access to local amenities when deciding where to live.
The bill intentionally limits the types of projects that are available for the credit. Only the largest projects, likely to found in and near the state’s urban centers, will be eligible. All projects must be mixed use, have a transformational impact on the project site and surrounding areas, and would not be completed but for the tax credit. Additionally, there are different criteria for the size of the projects based on whether the site is within 10 miles of a city with a population greater than 100,000 or outside that radius. Projects will need to consist of multi-storied buildings or multiple buildings and have at least 350,000 enclosed square feet for
urban projects and 75,000 enclosed square feet for projects outside major cities.
In short, Senate Bill 39’s financing provisions:
- Authorize a nonrefundable insurance premiums tax credit for capital contributions to the construction of TMUDs
- Specify that the credit amount and when it is awarded depend on the property owner’s development costs or the insurance company’s capital contribution and the increase in state and local tax collections at the project site and in the surrounding area
- Allow insurance companies to apply directly for the credit or to purchase the right to claim the credit from the property owner
- Limit the tax credits awarded for the same project to the lesser of $40 million or 10% of the property owner’s development costs or the insurance company’s
capital contribution and permits unclaimed credit amounts to be carried forward for up to five years
- Limit the credits to $100 million for each of Fiscal Year 2020 to Fiscal Year 2023 and disallows the issuance of credits thereafter
- Reserve $20 million in each fiscal year for projects not located within 10 miles of a city with a population greater than 100,000.
The program will be administered by the Ohio Development Services Agency.
In unrelated provisions, Senate Bill 39 also restores a state income tax credit for campaign contributions to candidates for statewide office and the General Assembly and modifies the law governing commercial real estate broker liens. Governor DeWine signed the bill into law on December 29, 2020.