Expand research, development tax credit to apply to income tax

As Introduced

136th
General Assembly

Regular
Session
H. B. No. 756

2025-2026

Representatives Daniels, Thomas, J.

To
amend sections 5747.98 and 5751.51 and to enact section 5747.88 of
the Revised Code
to
expand a research and development tax credit to apply to the income
tax.

BE
IT ENACTED BY THE GENERAL ASSEMBLY OF THE STATE OF OHIO:

Section
1.
That
sections 5747.98 and 5751.51 be amended and section 5747.88 of the
Revised Code be enacted to read as follows:

Sec.
5747.88.
(A)
As used in this section, "qualified research expenses" has
the same meaning as in section 41 of the Internal Revenue Code.

(B)
There is allowed a nonrefundable credit against a taxpayer's
aggregate tax liability under section 5747.02 of the Revised Code
equal to seven per cent of the excess of (1) the qualified research
expenses incurred by the taxpayer in this state in a taxable year
over (2) the average annual qualified research expenses incurred by
the taxpayer in this state in the three previous taxable years.

(C)
A taxpayer shall claim the credit allowed under this section in the
order prescribed by section 5747.98 of the Revised Code. If the
amount of the credit exceeds the amount of tax otherwise due after
deducting all other credits preceding the credit in the order
prescribed in section 5747.98 of the Revised Code, the excess may be
carried forward for not more than seven ensuing taxable years. The
amount of the excess credit claimed in any such year shall be
deducted from the balance carried forward to the next tax year.

(D)
A taxpayer that claims a credit under this section shall retain
records to substantiate the claim. Required records include those
relating to any expenses used in calculating the credit and incurred
in the current taxable year and in the three preceding taxable years.

The
taxpayer shall retain the required records until the date that is
four years after the due date for the return on which the credit was
claimed or four years after the date the return was actually filed,
whichever is later.

(E)
The tax commissioner may audit a sample of the taxpayer's qualified
research expenses over a representative period to ascertain the
amount of tax credit the taxpayer may claim under this section and
may issue an assessment under section 5747.13 of the Revised Code
based on the audit. The commissioner shall make a good faith effort
to reach an agreement with the taxpayer in selecting a representative
sample. The commissioner is not, however, precluded from proceeding
under this division if an agreement is not made.

(F)
No credit shall be allowed under this section if the credit was
available against the tax imposed by section 5751.02 of the Revised
Code, except to the extent the credit was not applied against that
tax.

Sec.
5747.98.
(A)
To provide a uniform procedure for calculating a taxpayer's aggregate
tax liability under section 5747.02 of the Revised Code, a taxpayer
shall claim any credits to which the taxpayer is entitled in the
following order:

Either
the retirement income credit under division (B) of section 5747.055
of the Revised Code or the lump sum retirement income credits under
divisions (C), (D), and (E) of that section;

Either
the senior citizen credit under division (F) of section 5747.055 of
the Revised Code or the lump sum distribution credit under division
(G) of that section;

The
dependent care credit under section 5747.054 of the Revised Code;

The
credit for displaced workers who pay for job training under section
5747.27 of the Revised Code;

The
twenty-dollar personal exemption credit under section 5747.022 of the
Revised Code;

The
joint filing credit under division (E) of section 5747.05 of the
Revised Code;

The
earned income credit under section 5747.71 of the Revised Code;

The
nonrefundable credit for education expenses under section 5747.72 of
the Revised Code;

The
nonrefundable credit for donations to scholarship granting
organizations under section 5747.73 of the Revised Code;

The
nonrefundable credit for tuition paid to a nonchartered nonpublic
school under section 5747.75 of the Revised Code;

The
nonrefundable vocational job credit under section 5747.057 of the
Revised Code;

The
nonrefundable job retention credit under division (B) of section
5747.058 of the Revised Code;

The
enterprise zone credit under section 5709.66 of the Revised Code;

The
credit for beginning farmers who participate in a financial
management program under division (B) of section 5747.77 of the
Revised Code;

The
credit for commercial vehicle operator training expenses under
section 5747.82 of the Revised Code;

The
nonrefundable welcome home Ohio (WHO) program credit under section
122.633 of the Revised Code;

The
nonrefundable credit for transformational mixed use development tax
credit certificate holders under section 5747.87 of the Revised Code;

The
credit for selling or renting agricultural assets to beginning
farmers under division (A) of section 5747.77 of the Revised Code;

The
credit for purchases of qualifying grape production property under
section 5747.28 of the Revised Code;

The
small business investment credit under section 5747.81 of the Revised
Code;

The
nonrefundable lead abatement credit under section 5747.26 of the
Revised Code;

The
nonrefundable credit for qualified research expenses under section
5747.88 of the Revised Code;

The
opportunity zone investment credit under section 5747.86 of the
Revised Code;

The
enterprise zone credits under section 5709.65 of the Revised Code;

The
research and development credit under section 5747.331 of the Revised
Code;

The
credit for rehabilitating a historic building under section 5747.76
of the Revised Code;

The
nonrefundable Ohio low-income housing tax credit under section
5747.83 of the Revised Code;

The
nonrefundable affordable single-family home credit under section
5747.84 of the Revised Code;

The
nonresident credit under division (A) of section 5747.05 of the
Revised Code;

The
credit for a resident's out-of-state income under division (B) of
section 5747.05 of the Revised Code;

The
refundable motion picture and broadway theatrical production credit
under section 5747.66 of the Revised Code;

The
refundable jobs creation credit or job retention credit under
division (A) of section 5747.058 of the Revised Code;

The
refundable credit for taxes paid by a qualifying entity granted under
section 5747.059 of the Revised Code;

The
refundable credits for taxes paid by a qualifying pass-through entity
granted under division (I) of section 5747.08 of the Revised Code;

The
refundable credit under section 5747.80 of the Revised Code for
losses on loans made to the Ohio venture capital program under
sections 150.01 to 150.10 of the Revised Code;

The
refundable credit for rehabilitating a historic building under
section 5747.76 of the Revised Code;

The
refundable credit under section 5747.39 of the Revised Code for taxes
levied under section 5747.38 of the Revised Code paid by an electing
pass-through entity.

(B)
For any credit, except the refundable credits enumerated in this
section and the credit granted under division (H) of section 5747.08
of the Revised Code, the amount of the credit for a taxable year
shall not exceed the taxpayer's aggregate amount of tax due under
section 5747.02 of the Revised Code, after allowing for any other
credit that precedes it in the order required under this section. Any
excess amount of a particular credit may be carried forward if
authorized under the section creating that credit. Nothing in this
chapter shall be construed to allow a taxpayer to claim, directly or
indirectly, a credit more than once for a taxable year.

Sec.
5751.51.
(A)
As used in this section, "qualified research expenses" has
the same meaning as in section 41 of the Internal Revenue Code.

(B)(1)
For calendar years beginning on or after January 1, 2008, a
nonrefundable credit may be claimed under this chapter equal to seven
per cent of the excess of (a) qualified research expenses incurred in
this state by the taxpayer in the calendar year for which the credit
is claimed over (b) the taxpayer's average annual qualified research
expenses incurred in this state for the three preceding calendar
years.

(2)
The taxpayer shall claim the credit allowed under division (B)(1) of
this section in the order required by section 5751.98 of the Revised
Code. A credit claimed in calendar year 2008 may not be applied
against the tax otherwise due under this chapter for a tax period
beginning before July 1, 2008. Any credit amount in excess of the tax
due under section 5751.03 of the Revised Code, after allowing for any
other credits that precede the credit under this section in the order
required under that section, may be carried forward for seven years,
but the amount of the excess credit claimed against the tax for any
tax period shall be deducted from the balance carried forward to the
next tax period.

(3)
No credit shall be allowed under this chapter if the credit was
available against the tax imposed by section 5733.06 of the Revised
Code, except to the extent the credit was not applied against such
tax.

(C)
In the case of a taxpayer that is a consolidated elected taxpayer or
combined taxpayer, each person in the taxpayer's group shall
separately calculate the credit claimed under this section using the
qualified research expenses incurred by that person on a form
prescribed by the tax commissioner, which shall be used by the
taxpayer to claim the credit.

Such
a taxpayer may only claim the credit with respect to persons included
in the taxpayer's group as of the thirty-first day of December of the
calendar year in which the qualified research expenses are incurred.
Such a taxpayer may only claim any excess credit carried forward
under division (B)(2) of this section with respect to persons
included in that group as of the last day of the tax period for which
the return claiming the credit is filed.

(D)
A taxpayer that claims a credit under this section shall retain
records to substantiate the claim. Required records include those
relating to any expenses used in calculating the credit and incurred
in the current calendar year and in the three preceding calendar
years.

The
taxpayer shall retain the required records until the date that is
four years after the due date for the return on which the credit was
claimed or four years after the date the return was actually filed,
whichever is later.

(E)
The tax commissioner may audit a sample of the taxpayer's qualified
research expenses over a representative period to ascertain the
amount of tax credit the taxpayer may claim under this section and
may issue an assessment under section 5751.09 of the Revised Code
based on the audit. The commissioner shall make a good faith effort
to reach an agreement with the taxpayer in selecting a representative
sample. The commissioner is not, however, precluded from proceeding
under this division if an agreement is not made.

(F)
No credit shall be allowed under this section if the credit was
available against the tax imposed by section 5747.02 of the Revised
Code, except to the extent the credit was not applied against that
tax.

Section
2.
That
existing sections 5747.98 and 5751.51 of the Revised Code are hereby
repealed.

Section
3.
The
enactment by this act of section 5747.88 applies to taxable years
ending on or after the effective date of this section.