THE PROFITABILITY PICTURE
When Gov. George Voinovich proposed, and the Ohio Legislature passed, a series of incentives in the early 1990s, it was the final push that Ohio needed to propel itself out of the doldrums of the "Rust Belt" era and into the nation's star economic development performer. For the last three years, the state has ranked No. 1 in number of new plants and expansions in Site Selection's widely quoted annual tally of economic developments in the nation.
| Among the most important of the incentives for plastics companies are the machinery and equipment investment tax credit (M&E) and the job creation tax credit. Whether your company is labor-or capitalintensive, these are attractive incentives to encourage expansion in Ohio.
The job creation tax credit is a tax credit or refund against the corporate franchise or income tax , based on the state income tax withheld on new full-time employees. The tax credit can be up to 75 percent for up to 10 years. Businesses must agree to create at least 25 new full-time jobs with a minimum average wage of at least 150 percent of the federal minimum wage within three years of operation. |
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| Gov. George Voinovich, initiator of a popular series of tax incentives, visits with workers at the Plasticon plant in Delta in Northwest Ohio. The company, which employs 80, makes PET containers. |
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The M&E tax credit provides a non-refundable corporate franchise or state income tax credit for a manufacturer that purchases new machinery and equipment located in Ohio and used in the production and assembly of a manufactured good. The credit is 7.5 percent on the increase in investment over the 1992-94 annual average M&E investment in a given county. The credit rises to 13.5 percent if the investment is made in certain designated communities with higher levels of unemployment. The qualifying period for purchases is Jan. 1, 1996, through Dec. 31, 1998.
Eligible equipment includes engines, machinery, tools and implements of every kind used in refining and manufacturing. Retooling of existing machinery and equipment may qualify if the retooling is capitalized and depreciated for federal income tax purposes.
Used equipment may qualify if it has never been used in Ohio and has never been considered taxable personal property for an entity within Ohio. Leased equipment is eligible for the credit if the user considers the lease a purchase for federal income tax purposes (a capital lease).
Several other incentives lower the cost of doing business in Ohio. Among them:
An Export Tax Credit encourages companies to expand export activities. Companies that increase their export sales, and at the same time expand either their Ohio payroll or capital expenditures, can claim a franchise tax credit. The credit is 10 percent of the pre-tax profit from the expanded export activity.
A Research & Development Tax Exemption forgives sales tax on machinery and equipment used in R&D activities.
A Warehouse Inventory Tax Exemption allows all products shipped into Ohio, held for storage only, and shipped outside Ohio to be exempt from the property tax.
A number of other measures are designed to make Ohio's communities attractive to industry by removing any infrastructure deficiencies. A highway funding program expedites projects that are vital to business development. Tax increment financing can be used to pay for any infrastructure necessary to get a project going. Programs provide a tax credit to encourage the private sector to clean up "brownfield" sites, and the state has dedicated funds for site clean-up loans.