Tracked Senate Bills – July 2019

Chris Schmenk
Bricker & Eckler LLP

Governor’s Budget Bill: After missing the statutory deadline of June 30 and enacting a 17 day budget extension for the first time in many years, the General Assembly finally approved the state’s operating budget for the 2020-2021 Biennium (HB 166) on July 17.  The bill was then sent to Governor DeWine and on July 18 after issuing 25 line-item vetoes, the Governor signed the bill into law.

The Governor’s veto message is available at: https://content.govdelivery.com/attachments/OHOOD/2019/07/18/file_attachments/1250127/Veto%20Message%20Signed%20%287.18.19%29.pdf

OEDA worked with a local government coalition to obtain a line-item veto of the provisions of HB 149.  The program would have frozen property taxes on undeveloped land in residential developments that have been subdivided and slated for development until the land was either sold or housing construction began. OEDA’s concerns were based on the fact that the exemptions were automatic, and the failure to include an “opt-in” provision stripped local economic development professionals and governments of the ability to assess the need.  OEDA was also concerned that the resulting decrease in communities’ property tax revenues could have negatively impacted their abilities to fund infrastructure, transportation, schools, libraries, and other projects necessary to support existing businesses and attract new ones.   The OEDA is grateful to Governor DeWine for his help on this matter.

Other economic development provisions in the Budget Bill include:

• Rural Industrial Park Loan Fund (provisions of HB 98 as summarized below): The program is available to counties with a population less than 125,000 that meet certain economic distress criteria.
• Opportunity Zone Tax Credits (provisions of SB 8 below with some revisions): The variations from the Governor’s original bill include:
  • Credits may be transferred;
  • 100% amounts invested into an opportunity fund must then be invested in an opportunity zone to be eligible for the credit;
  • Excess credits may be carried forward for up to 5 years, and
  • Taxable trusts, estates and pass-through entities are eligible for the credit.
• TIF Term Extension: The bill provides that project or parcel TIFs may be extended by the political subdivision that enacted them for up to an additional 30 years if they: 1. had service payments that exceeded $1.5 million in the calendar year preceding the adoption of the extension; 2. had service payments that did not exceed $1.5 million in prior years, but this condition only applies to extensions adopted on or after January 1, 2021, and 3. provide in the extension for compensation to the local school district in which the parcel(s) is located equal to the amount of taxes that would otherwise have been paid if the extension had not been granted;
• Motion Picture Tax Credit: The program is included in the bill as modified by the provisions of Senate Bill 37 (see below);
• Modification of Job Retention Tax Credit program under ORC 122.171:  This program was promoted by manufacturers in the state and will expand the eligibility of the JRTC program based on new capital investment rather than payroll or employee count, per the provisions of SB 153 (see below);
• TechCred Program: This is a new program among the Ohio Department of Higher Education, the Development Services Agency, and the Governor’s Office of Workforce Transformation.  It will reimburse employers and employees for technical training courses to equip employees with the skills needed for employment and advancement.  $15 million was appropriated for each year of the biennium for this part of the program.  The Budget Bill also provided funding of $2.5 million per year to assist the formation and operation of regional industry sector partnerships which collectively work to address local workforce needs.
• Small Business Pass-through Entity Income Tax Deduction: This deduction was maintained for the first $250,000 of small-business income; provided, however, this will no longer be available to attorneys and lobbyists, and
• Tax Cut: A 4% across-the-board income tax cut was provided for Ohioans.

Bills Being Tracked: Changes from last month are noted below in bold.

Senate Bills:

SB 1 REGULATIONS  (McColley, R., Roegner, K.)  This bill would require each state agency to reduce the regulatory restrictions contained in its rules by 30% by 2022, according to a schedule and criteria set forth in the bill.  It also prohibits an agency from adopting new regulatory restrictions that would increase the percentage of restrictions in the agency’s rules and requires an agency that does not achieve a reduction in regulatory restrictions according to the required schedule to eliminate two restrictions before enacting a new rule containing a restriction.  It allows the Joint Committee on Agency Rule Review (JCARR) to lessen an agency’s required reduction in regulatory restrictions if the agency fails to meet a reduction goal and show cause why the agency’s required reduction should be lessened.  Effective January 1, 2023, it limits the total number of regulatory restrictions that may be in effect in Ohio. The bill passed in the Senate May 8 and has been referred to the House State and Local Government Committee, where a first hearing occurred June 12.

SB 8 OPPORTUNITY ZONES  (Schuring, K.)  This bill would authorize tax credits for investments in an Ohio Opportunity Zone.  As introduced, to qualify for the tax credit, investors must invest at least $250,000 during the taxable year, and the amount of the credit allowed shall be equal to one percent of the amount invested.  At a fourth hearing in the Senate Ways & Means Committee, a substitute bill was introduced March 12 which establishes an Opportunity Zone Investment Tax Credit program and a new opportunity zone fund that must be used exclusively for projects in opportunity zones. The new program creates a non-refundable 10% tax credit that that would be capped at $50 million over the course of a biennium. The revisions would prohibit a single entity from utilizing both the proposed program and the Invest Ohio program credit. The bill was passed by the Senate April 3 and referred to the House Economic and Workforce Development Committee, where a first hearing occurred May 8. As noted above, the provisions of this bill were included in the final Budget Bill (HB 166).

SB 37 TAX CREDIT  (Schuring, K.)  This bill would extend eligibility for and make other changes to the motion picture tax credit.  Among other changes, “Broadway theatrical productions” would become eligible for the credit, the types of expenses upon which the credit is based would be broadened to include post-production, advertising, and promotional expenditures, and the Director of Ohio Development Services Agency would begin awarding motion picture and Broadway theatrical production tax credit certificates in two competitive rounds each fiscal year. The first round of applications would be approved by July 31, and the second round would be approved by January 31.  The bill passed in the Senate May 8 and was referred in the House to the Finance Committee.  As noted above, the main provisions of this bill were included in the Budget Bill. 

SB 39 INSURANCE TAX  (Schuring, K.)  This measure would authorize an insurance premiums tax credit for capital contributions to transformational mixed use development projects.  To qualify, projects must:

(a)        have a transformational economic impact within the project area approved by the director of the development services agency;

(b)       be a mixed use development that integrates some combination of retail, office, residential, recreation, structured parking, and other similar uses; and

(c)        include at least one building that is fifteen or more stories in height or has a floor area of at least three hundred  fifty thousand square feet.

The bill was assigned to the Senate Finance Committee, which passed it out of committee with two amendments:

• allowing projects involving two or more connected buildings to qualify for the credit as long as they collectively meet the program’s square-footage requirements, and
• establishing public reporting requirements regarding projects supported by the program.

The bill passed in the Senate June 26 and has been referred to the House Economic & Workforce Development Committee.

SB 89   CAREER-TECH EDUCATION AND ENTERPRISE ZONE TAX ABATEMENTS (Huffman, M.) This bill, introduced March 6, would make changes to Ohio’s career-tech education programs.  Of interest to economic development, it would modify the Ohio Revised Code sections relating to enterprise zone tax exemptions and require that if an agreement is negotiated between the legislative authority and the school district in which the project is located to compensate the district for all or part of the taxes exempted, the legislative authority must also compensate the joint vocational school district within which the property is located at the same rate and under the same terms received by the school district.  It has been assigned to the Senate Education Committee where a third hearing occurred May 7.

SB 95 BUSINESS INVESTMENTS  (Peterson, B., Kunze, S.) Introduced as SB 309 in the last General Assembly, this bill would lengthen the maximum term of the job creation tax credit available under ORC 121.171 from 15 to 30 years for businesses making substantial fixed asset and employment investments (and meeting the definition of “megaprojects” as set forth in the bill) and for their suppliers, authorize commercial activity tax exclusions for receipts of those suppliers from sales to such businesses, and authorize local governments to grant longer term (up to 30 years) property tax exemptions (enterprise zones or community reinvestment areas) for such businesses or suppliers.  To qualify as a “megaproject”, projects must involve unique sites, extremely robust utility service, and a technically skilled workforce;  the megaproject operator of the project must compensate the project’s employees at an average hourly wage of at least three hundred per cent of the federal minimum wage under U.S.C. 206, exclusive of employee benefits, at the time the tax credit authority approves the project for a credit under this section; and the project must satisfy either of the following by the metric evaluation date applicable to the project : (i) The megaproject operator makes at least one billion dollars in fixed-asset investments in the project, or (ii) The megaproject operator creates at least seventy-five million dollars in Ohio employee payroll at the project.  The bill passed in the Senate June 12 and now moves to the House, where it has been referred to the Ways and Means Committee.

SB 109  TAX CREDITS  (Schuring, K.)  Introduced on March 13, this bill would establish a Workforce Scholarship Program and authorize the Chancellor of Higher Education to designate five public or private institutions to participate in the program.  It also authorizes the granting of scholarships and tax credits to students who pursue and complete the training programs for in-demand jobs at these designated institutions.  The bill was referred to the Finance Committee and a first hearing occurred April 24.

SB 132 GAS TAX ALLOCATIONS  (Williams, S.)  This bill would modify the amount of revenue derived from any increase in the motor fuel tax rate that is allocated to local governments and to change the manner in which that revenue is divided between municipal corporations, counties, and townships. It was referred to the Senate Transportation, Commerce & Workforce Committee on May 1.

SB 153 TAX CREDITS (Dolan, M.)  Introduced May 21, this bill is focused on assisting manufacturers and entities with significant corporate administrative functions in Ohio by amending the state’s Job Retention Tax Credit program under ORC 122.171 to expand eligibility based on new capital investment rather than payroll or employee count.  Manufacturers that invest the lesser of either $50 million or 5% of the book value of their tangible personal property used at the project site over a 3 year consecutive period would be eligible.  If such manufacturers receive the credit, they must commit to maintain an agreed-upon number of full-time equivalent employees during the term of the credit.  Entities with significant corporate administrative functions are eligible if: 1. They are either located in a foreign trade zone, employ at least five hundred full-time equivalent employees, or have an annual Ohio employee payroll of at least thirty-five million dollars; and 2.  They make a capital investment of at least $20 million at the project site over 3 consecutive calendar years. Such entities must commit either: 1. To retain at least 500 FTEs at the project site during the term of the credit, or 2. Maintain an annual Ohio employee payroll of at least $35 million for the term of the credit or remain in a foreign trade zone for the entire term of the credit. As noted above, the bill’s provisions were included in the final Budget Bill (HB 166).