January 15, 2021
On December 29, 2020, Ohio Governor Mike DeWine signed Senate Bill 39, creating a new tax credit applicable to insurance premium taxes as a means to provide funding for certain transformational development projects in Ohio. Specifically, Senate Bill 39 creates the Transformational Mixed-Use Development (TMUD) Tax Credit. While the final administrative details of the TMUD Tax Credit program and application requirements are still in process, an outline of key factors in considering whether a project qualifies for TMUD Tax Credits are outlined below.
Senate Bill 39 authorizes the Ohio Tax Credit Authority to award up to $100 million in tax credits available for property owners and insurance companies that invest in eligible TMUD projects through the calendar year 2023. Up to $100 million in total credits may be awarded each calendar year, with up to $80 million in credits being authorized for projects located within 10 miles of a city with more than 100,000 people (“Major City”) per calendar year.
Projects located more than 10 miles outside of a Major City (“Rural Areas”) were allocated $20 million per year in available TMUD Tax Credits and have different eligibility requirements than Major City projects.
Eligibility & Certification
Projects eligible for TMUD Tax Credits include those that will have a transformational economic impact on the development site and surrounding area and have more than one intended use, with some combination of retail, office, hotel, residential, recreation, structured parking, and other similar uses into one project. The investment in Major City projects must exceed $50 million and include one of the following: (i) at least one new or previously vacant building that is at least 15 stories high; (ii) has a floor area of at least 350,000 square feet; (iii) after completion will be the site of employment accounting for at least $4 million in annual payroll; or (iv) includes two or more connected buildings that collectively have a floor area exceeding 350,000 square.
For property owners, the TMUD credit is limited to 10% of the project’s certified development costs (minus any estimated credits preliminarily approved for insurance companies contributing capital to the same project). If an insurance company is the applicant and a direct investor in the TMUD, the credit is capped at 10% of the capital contribution made by the company towards the planning or construction of the development. Eligible projects are capped at $40 million in tax credits to be awarded.
As previously mentioned, projects in Rural Areas have different requirements than those taking place in a Major City. Projects in Rural Areas must meet one of the following criteria: (i) at least one new or previously vacant building that is two or more stories high or at least 75,000 square feet; or (ii) includes two or more new buildings that are located on the same parcel, or on contiguous parcels, and, collectively, are at least 75,000 square feet. There is no minimum investment requirement for projects in Rural Areas.
Transfer of Credits
Any applicant that is preliminarily approved for a TMUD Tax Credit may sell or transfer the rights to that credit to one or more persons for the purpose of raising capital for the certified project. The TMUD Tax Credit is a credit against an entity’s Ohio insurance premium taxes, so it would only ultimately be claimed by insurance companies.
A property owner or an insurance company will begin the process of obtaining TMUD Tax Credits by preparing a development plan for submission to the Ohio Tax Credit Authority. The development plan must include, among other things, a detailed description of the proposed TMUD, an estimate of the associated development costs, a financial plan, and an assessment of the anticipated economic impact of the project. The attorneys at Walter | Haverfield are here to help you analyze and prepare your application for TMUD Tax Credits. If you have any questions feel free to contact us here.