Several year-end changes occurred to federal programs that may be of interest to OEDA members.
The Federal Tax Cuts and Jobs Act passed in late December preserved the main provisions of Private Activity Bonds (PABs), Historic Preservation Tax Credits (HPTC) and New Markets Tax Credits. Unfortunately, the Act repealed tax-exemption for advance refunding bonds issued after December 31, 2017.
Federal Tax Cuts and Jobs Act: On December 22, 2017, H.R. 1, the “Tax Cuts and Jobs Act”, was signed into law. During consideration by the House and Senate, the bill caused great concern for economic development professionals due to proposed negative treatment of Private Activity Bonds (PABs), Advance Refunding Bonds (ARBs), Historic Preservation Tax Credits (HPTC) and New Markets Tax Credits. Luckily, in the final law, the main provisions of PABs and the HPTC program were preserved, but slight revisions were made that will be further studied. For example, a tweak to HPTC in the final bill repeals the 10% non-historic rehabilitation tax credit for non-residential pre-1936 properties, subject to transition rules. Credits from the HPTC program also apparently will now have to be used over 5 years.
Unfortunately, as to ARBs, the Act repealed tax-exemption for advance refunding bonds issued after December 31, 2017. Refunding bonds are obligations issued to pay debt service on, and typically to retire, outstanding bonds; under federal tax law, a transaction is characterized as an advance refunding if the refunded bonds remain outstanding for more than ninety days after the date on which the refunding bonds are issued. Before passage of the Act, state and local governmental issuers and 501(c)(3) borrowers have been eligible to use tax-exempt advance refunding bonds as a debt management tool, most often to capture interest rate savings. This tool will no longer be available under the new law.
The Act also repealed qualified tax credit and direct-pay subsidy bonds such as new clean renewable energy bonds, qualified energy conservation bonds, qualified zone academy bonds and qualified school construction bonds. This provision of the Act also is effective for bonds issued after December 31, 2017.
Finally, the Act preserved the low-income housing tax credit (LIHTC) as well as the 2018 and 2019 new markets tax credit (NMTC) allocation application rounds.
State Legislative Activity:
Right-to-Work Constitutional Amendments: Rep. John Becker (R-Cincinnati) and Rep. Craig Riedel (R-Defiance) announced on December 18 that they were introducing six separate constitutional amendments that address right-to-work issues. The proposals could each appear on the November 3, 2020 ballot, but a long process has to occur first. House leadership would first have to move them out of committee for a floor vote, where a supermajority passage of three-fifths is required. The process would then repeat for the Senate. Then, Gov. John Kasich would have to sign the resolutions. While the chances of that process being accomplished are slim, interesting dialogue should occur along the way.
State legislative activity resumed January 9.
On January 10, House Republican screening panels selected a former member and a former member’s son to fill two vacant seats. Jim Hoops, who served in the House from 1999-2006, was chosen to represent the 81st District, which was left open when Sen. Rob McColley (R-Napoleon) was appointed to the Senate. Riordan McClain, son of former Rep. Jeff McClain, was chosen to replace Wes Goodman in the 87th District in the seat previously held by his father. Mr. Hoops, of Napoleon, is currently associate vice president for Strategic Initiatives at Northwest State Community College. He also previously served as Henry County auditor. Mr. McClain, of Upper Sandusky, is director of Finance and Customer Service at Doc Investments LLC. He holds degrees from Bluffton University and the University of Findlay. The two new lawmakers are expected to be sworn in on Wednesday, January 17.
Internet access has become a vital part of our everyday way of life. The ability to access the internet is critical for job searching, conducting government business, shopping, accessing important medical and financial information, and all levels of education. However, as a report by Connect Ohio indicates, there are approximately 2.5 million Ohioans who lack access to reliable broadband service.[1] In addition, nearly 90,000 businesses in Ohio do not have access to broadband internet. A recent Ohio State University study indicates that these underserved populations largely live in less populated rural regions where it is cost prohibitive for internet service providers to extend service.[2]