May 22, 2019
The Honorable Kirk Schuring
1stFloor N. Rm. 221
1 Capitol Square
Columbus, OH 43215
Dear Senator Schuring:
Founded in 1884, the Columbus Chamber of Commerce (Chamber) is the leading voice of business within the 11-county Columbus region, representing nearly 2,000 members employing over 500,000 workers. While most of the largest companies in town are members of our Chamber, more than 80 percent of our members have less than 100 employees. Therefore, we view policymaking through the lens of the small business owner.
Due to the strong interest of our members on the topic of opportunity zones, we have formed an Opportunity Zone Working Group comprised of members across numerous impacted and interested industries: financial institutions, developers, investors, accountants, attorneys, and small business owners. This group recently reviewed Substitute Senate Bill 8, and would like to submit the following feedback:
- The Chamber was a proponent of creating the Opportunity Zone program as part of the Tax Cuts and Jobs Act of 2017. We were part of a coalition to designate zones in the region, are actively engaged in advocating for the implementation of a local incentive, and fully support the enactment of a state tax incentive.
- Allowing the tax incentive to be carried forward for the following five taxable years under Sec. 122.84(C)(3) is a favorable change to the bill and will serve to make Ohio more competitive in attracting investment than other states with similar laws. We believe it could be further improved by allowing the incentive to be carried forward for up to ten years to mirror the federal incentive.
- The transferable nature of the credit under Sec. 122.84(C)(3) promotes investment in an opportunity zone and is more attractive to investors, so long as those unable to utilize the credit are permitted to sell it as part of a transfer.
- 122.84(A) at line 39 defines an “Ohio qualified opportunity fund” as one in which 100% of its assets must be situated in an Ohio opportunity zone. We request this definition be adjusted to mirror the 90% requirement under the federal law to provide consistency in application for taxpayers investing in the zones.
- Also in Sec. 84(A) at line 59, S.B. 8 proposes to create a different standard to the federal law by replacing “substantially all” with “all.” Requiring a business to have allof their property in an opportunity zone is a burdensome requirement that would prevent many businesses from being eligible beyond real estate deals. In fact, the IRS has already conceded on this issue in the latest round of federal regulations, which provide that “substantially all” in this context is 70%. We request that Ohio mirror this federal standard to help ensure consistency, ease of application, and adoption of the law.
- 122.84(C)(2) allows for a limit of $50 million with a $1 million credit limit per applicant. That could mean that only 50 applicants will be eligible for the credit, despite 320 opportunity zones designated throughout Ohio with countless opportunities for projects to spur investment in those low income communities. To allow for greater impact and double the amount of applicants, we recommend reducing the credit limit to $500,000.
- 122.84(B)(2) requires the Director of Development Services Agency (DSA) to review applications on a first-come, first-serve basis. Administering the credits in this manner puts taxpayers with lesser means, such as small business owners, at a competitive disadvantage to those with more, and does not put in place safeguards to ensure the intent of the legislation is fulfilled. We therefore request an amendment to the legislation to put in place a competitive, merit-based process for awarding the certificates. We stand ready to submit recommendations for criteria that could be used to score the applications should you wish.
- The federal law aimed to make eligibility as bureaucratically simple as possible, allowing corporations or partnerships to qualify as opportunity funds through self-certification by simply filing a form with the IRS along with its federal income tax return. Under Sec. 122.84(D)(2) of Sub. S.B. 8, once a certificate is awarded by DSA, it is unclear as to whether the credit will be self-certified or the tax commissioner will be responsible for certifying it. We request additional clarification on what the certificate issuance process looks like for both the Department of Taxation and for the taxpayer. While taxpayer compliance is understood and expected, this certification process is new. Our goal is to maintain the democratic spirit and ease intended by the federal program, rather than creating an Ohio program that grants access to only a small segment of taxpayers with the resources to hire an army of experts to help them.
Thank you for the opportunity to submit comments re: Sub. S.B. 8. We stand ready to assist with addressing these concerns as the bill moves through the legislative process.
Vice President, Government Relations
Chairman Matt Dolan, Senate Finance Committee
Chairman Paul Zeltwanger, House Economic and Workforce Development Committee
Director Mihalik, Development Services Agency