Ohio R&D Tax Credit Summary

 

The Ohio Research and Development Investment Tax Credit, which is authorized within Section 5751.51 of the Ohio Revised Code, is a nonrefundable credit against the Commercial Activity Tax (CAT) liability. It is available annually and is based upon QREs in Ohio as defined in I.R.C. Section 41. To receive an Ohio R&D tax credit, the taxpayer must be allowed a research credit for the taxable year against federal income tax for qualified research expenses under I.R.C. Section 41.

Ohio’s definition of research and development expense is the same as the federal and generally includes in-house expenses paid for wages, supplies and 65 percent of contract expenses paid to outside research firms.

Ohio R&D Credit Commercial Activity Tax (CAT) Summary

  • For calendar years 2008 and thereafter, eligible taxpayers may calculate the available nonrefundable credit by multiplying 7% by the difference between the taxpayer’s research and development expenses incurred in Ohio during the calendar year and the taxpayer’s average annual research and development expenses incurred in Ohio during the three preceding calendar years.

  • See Ohio Rev. Code Ann. §5733.351(C)

R&D Sales Tax Exemption Summary

  • The Research and Development Sales Tax Exemption exempts business from the entire state and county sales tax for purchases of qualified machinery and equipment used primarily for research and development.

    • This exemption provides significant savings for companies undertaking research and development activities in Ohio.

  • The exemption applies to machinery and equipment included in research and development activity in both direct and pure research.

    • Direct research refers to research conducted to design, create or formulate new or better products, equipment or processes. Pure research refers to scientific or technological inquiry and experimentation in the physical sciences.​

Eligible Entities: C-Corporations, S-Corporations, LLCs, Partnerships

Deadline for Tax Filing: Due with Ohio Tax Return

  • Ohio Research and Development Tax Credit against Commercial Activity Tax (CAT)

    • There is no special application or approval process for this tax credit. The credit may be claimed on a tax return, subject to audit by the Department of Taxation.

    • See Ohio Development Services Agency. 

  • R&D Sales Tax Exemption

    • To receive the tax exemption, the purchaser/vendor must complete an Ohio Department of Taxation Sales and Use Tax Blanket Exemption Certificate.​

Data Required to Compute Credit:

  • Claim Period Qualified R&D Expenses (QREs)

  • QREs for Prior 3 Years

Credit Carryforward: 

  • The credit is nonrefundable, but any unused credit can be carried over for seven years.​

Refundable/Transferable Tax Credit: No

Important Links and Forms:

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