Representative Derek Merrin (R-Monclova Township) has introduced legislation to repeal the Ohio Financial Institutions Tax (FIT) on Small Business Investment Companies (SBICs). The FIT became effective in Fiscal Year 2014 on financial institutions that do business in Ohio as a replacement for the corporate franchise tax.
“Our tax code has misclassified SBICs as financial institutions creating an unfair tax liability, which is discouraging capital investment into Ohio’s small businesses,” said Representative Merrin.
House Bill 592 is a common-sense fix that correctly updates the definitions of the FIT, which applies to all financial institutions and bank organizations. Under the creation of the tax, SBICs were defined as a bank organization, but they do not operate as banks or other lenders. Rather, SBICs invest in and provide capital to small businesses, helping them to succeed and create jobs. The bill would remove SBICs from the definition of a financial institution.
According to Rep. Merrin, “House Bill 592 is a pro-growth change that will treat SBICs fairly. Without a legislative fix, Ohio risks losing millions in capital investment by being at a competitive disadvantage with other states.”
The repeal of the FIT on SBICs will enable the investment companies to invest more capital into Ohio’s small businesses, especially those in underserved industries or regions. According to the Small Business Investor Alliance, SBICs have invested approximately $522 million in 135 Ohio small businesses since 2010. Their investments generate thousands of new jobs annually in varying industries, such as manufacturing, transportation, and healthcare.
Rep. Merrin said, “Without the repeal of the tax on SBICs, they will likely shift their investments to businesses in states that have a more favorable tax climate.”
House Bill 592 is cosponsored by Representatives Ron Amstutz (R-Wooster), Tim Schaffer (R-Lancaster), Scott Ryan (R-Granville Twp.), and Ryan Smith (R-Bidwell). It now awaits a committee designation.