Ohio Governor John Kasich recently signed into law House Bill (HB) 327 to allow employers who meet wage and employment requirements to receive a refundable job creation tax credit for home-based employees. Lawmakers estimate that the legislation will yield approximately $340,000 in new tax credits per year.

The credit is based on a percentage of state income taxes withheld from off-site workers. The percentage is established under the agreement between the employer and the Tax Credit Authority. The credit may be claimed against the individual income tax, the domestic insurance tax, the foreign insurance tax, the commercial activity tax, and the corporate franchise tax.

To qualify, a home-based employee must meet the following requirements:

• perform services from the employee’s Ohio residence
• perform services exclusively for the benefit of the covered project
• earn at least 131 percent of the federal minimum wage, which equals $9.50 per hour at the current federal minimum wage of $7.25

To meet the job creation requirements, a business must employ at least 200 employees more than the number of workers employed on June 30, 2011. Businesses that employ both on-site and home-based workers must submit separate applications for separate tax credit agreements for each group of employees. Home-based employees may not be combined with on-site workers when claiming the credit.

In addition, HB 327 provides that the director of development may require employers claiming the tax credit for home-based workers to offer health care benefits and tuition reimbursement to employees.

The home-based tax credits will be available for 6 years. At that point, the director of development will issue a report on the impact of the credits for review.

The law takes effect September 6, 2012.