If you are an Ohio entrepreneur, you should know about Ohio’s Tech Investment Tax Credit. The TITC is a credit for investors and it is equal to 25% of any approved investment. The credit can be used to offset pretty much any state-level tax. It’s a great selling feature when you are pitching your startup to angels and venture capitalists. The application and approval process is a bit bureaucratic, it’s worth the trouble.
The TITC is available to any investor who makes an approved investment in an approved company in exchange for an ownership interest in the company—that is, stock in a corporation, membership interests in an LLC, or partnership interests in a general or limited partnership. Stock will be by far the most common ownership interest handed out, and the VCs can rest easy since the issuance can be either common or preferred stock. If timed right, the ownership interest can even include the conversion of convertible debt into equity.
The application process, as noted, is formalistic. But it’s straightforward enough. First the company must itself be approved. Then the investment must be approved. Both company and investment must be presented by application—accompanied by a fee—to your local TITC Edison Center. The Edison Center will approve or disapprove the application.
Approved applications are forwarded to the TITC Program office in Columbus. The applications are reviewed again, and a meeting is held on the first Thursday of every month, at which time a committee will vote to approve or disapprove the company. As an entrepreneur, you are encouraged to attend the meeting in order to give a brief presentation on why your company should be TITC approved.
If handled properly, the company and the investment can both be approved at the same meeting. But even then, you’re probably looking at 14 weeks or more from initial application to investment approval. Plan accordingly.
Once the company and the investment have each been approved, the investor has 120 days to make the actual investment and submit a Tax Credit Certification Form to the TITC committee in Columbus. The Tax Credit Certification is then attached to the investor’s tax return. The resulting tax credit can be used against current tax liabilities and carried forward up to 15 years.
The process, as you can see, is fraught with the typical bureaucratic red tape, filing fees, and delay. But if you make it through, you’ll come out on the other side with a pretty sweet kicker for potential angel investors and venture capitalists.