Give yourself some credit

In 1994, executives at Plaskolite Inc., a Columbus plastic sheet manufacturer, faced a critical decision. In the process of buying another manufacturing business in Michigan, they debated whether to continue its operations there or bring it to Columbus.

“Bringing it down here requires a certain amount of investment and certain amount of expense just moving a plant, moving assets,” says Richard Larkin, Plaskolite’s vice president of finance.

The decision was made easier when Plaskolite received an Ohio Job Creation Tax Credit through the state’s Department of Development. The 10-year credit encouraged Plaskolite executives to move the $6 million operation to Columbus, bringing with it 43 jobs so far — and giving Plaskolite the opportunity to grow the business faster from home.

The tax credit program, created in 1993 to make Ohio more competitive, provides a refundable tax credit against a company’s corporate franchise or income tax, says Daryl Hennessy, executive director of the Ohio Job Creation Tax Credit Authority. The credit is based on a portion of the state income tax withheld from new, full-time employees hired as a result of the company’s expansion project.

Larkin says Plaskolite’s credit was 60 percent of the new employee tax withholdings, which saved the company $19,000 this past year.

Originally, Plaskolite added about 30 new employees to support the plant. Last year, that number increased to 43.

“So it’s been a good project — a good growth area of new business for the company as well. We certainly added more people than even we thought we might have when we decided to move it down here,” Larkin says. “I think the company benefited from having the business closer to the [main] operations.”

He points out that payroll for those new employees exceeds $1.1 million.

“Of course, in moving it down here we built an extension to our existing plant and we purchased some other new equipment as well to support the operation,” he says, explaining how the state benefits from enticing Plaskolite to expand in Ohio. “So there’s both building and personal property commitments that were made here locally to support that business.”

Larkin expects Plaskolite to recover the estimated $10 million investment over five to seven years.

Hennessy says Plaskolite’s credit is one of 120 to 130 granted each year.

There are about 650 active tax credit projects in the state, he adds, noting the authority generally issues credits ranging from 50 to 75 percent for a period of five to 10 years.

Projects must be reviewed and approved by the authority, which consists of state Development Director C. Lee Johnson; David A. DiManna, an accountant with Plante & Moran LLP of Toledo; David A. Lieser, executive director of the Lancaster-Fairfield County Chamber of Commerce; James A. Wuenker, senior vice president of economic development at the Greater Cincinnati Chamber of Commerce; and Charles E. Webb, vice president of the Greater Cleveland Growth Association.

Larkin says another benefit of applying for a tax credit is the authority makes decisions fairly quickly. He heard of Plaskolite’s approval within months.

Businesses must, however, be prepared before they apply for the credit.

“If they’ve already got [their project] planned out and have a good idea what their investments are going to be and what their planned employee hirings are going to be, I don’t think the process is particularly burdensome at all,” Larkin says. “If they haven’t done some of what I call ‘normal business homework’ to begin with already, they might find it somewhat difficult.”

Some of the criteria businesses must meet to receive a credit are:

  • Creation of at least 25 new, full-time jobs within three years of starting operations of the new project in Ohio. If the project involves an expansion or consolidation of an existing Ohio facility, the company must commit to retaining the current employees.
  • Promise of an average hourly base wage rate, excluding benefits, for the project’s new full-time jobs of at least 150 percent of the federal minimum wage.
  • Investment of substantial capital in land, building, machinery, equipment or infrastructure as part of the project.
  • Demonstration that the company is economically sound and its project is financially viable.
  • Demonstration that a significant portion of the sales or revenues attributable to the project will be generated from outside Ohio or that the company’s products are used by other Ohio business entities as part of another product with a significant portion of sales outside Ohio.
  • Demonstration that the tax credit is a “major factor” in the company’s decision to expand or locate at the Ohio site.
  • Agreement to maintain operations at the project site for at least twice the term of the tax credit.

Eligible projects include manufacturing, high technology, research and development, distribution and certain types of service projects, including computer, telecommunications and other information-based operations. The authority also will consider unique projects such as corporate headquarters. Retail projects and lower paying service projects are not eligible.

How to reach: Ohio Job Creation Tax Credit Authority, Regional Representative Chad Munitz, (614) 466-9627, or Daryl Hennessy, (614) 466-2317