active State Tax Credit

Ohio Research & Development Investment Tax Credit

Ohio Department of Taxation

7% of Ohio QRE above the 3-year average

See if you qualify — free Visit official program ↗

Researched for this program: 5 rejection traps · 5 required documentsWhat decides this award ↓

The short version

7% of Ohio R&D spending above your 3-year average

Ohio's R&D Investment Tax Credit (R.C. 5751.51) is a nonrefundable credit against the Ohio Commercial Activity Tax (CAT) equal to 7% of the taxpayer's Ohio qualified research expenses above its average annual Ohio qualified research expenses for the three preceding years. Unused credit carries forward up to 7 years. Available to entities subject to the CAT that conduct qualifying research in Ohio.

Funding type: Tax Credit
Level: State
Amount: 7% of the excess of Ohio qualified research expenses for the year over the average of the three preceding years, applied against Ohio Commercial Activity Tax (CAT) liability. Non-refundable; unused credits carry forward 7 years.
Realistic amount: A company whose Ohio research spending rose from a $400K three-year average to $500K this year earns $7,000 (7% × $100K). Companies with flat or falling Ohio research spending earn little or nothing.
Deadline: Rolling — claimed on Ohio CAT annual return (CAT AR) or franchise tax return (Form FT-1120) for the applicable tax period
Status: active
States: OH
Payment model: tax offset

Who qualifies

Any entity subject to Ohio Commercial Activity Tax (CAT) or Ohio corporate franchise tax — includes C-corps, S-corps, LLCs, partnerships, and limited partnerships
Conducted qualified research activities within Ohio during the taxable period
Qualified research expenses must meet the federal IRC §41 definition (technological in nature, process of experimentation, qualified purpose)
Ohio QRE must be attributable to activities conducted within Ohio — multi-state companies must apportion R&D expenses to Ohio activity
No minimum revenue or employee threshold — available to startups and small businesses from day one

What it covers

Eligible expenses

Wages paid to Ohio employees directly conducting qualified research activities
65% of amounts paid to Ohio contractors for qualified research services
Supplies consumed during qualified research conducted in Ohio
Computer leasing costs directly attributable to Ohio qualified research

Ineligible expenses

Research funded by federal, state, or local government grants or contracts
Research conducted outside Ohio (must apportion expenses geographically)
Research in social sciences, arts, humanities, or management sciences
Routine product testing, quality control, or debugging that does not meet the §41 four-part test
Funded research where results ownership and financial risk rest with a third party

How to apply

1

Document Ohio-located QRE

Identify all qualified research expenses for activities conducted in Ohio: employee wages (W-2 employees working on qualifying research in Ohio), supply costs, and 65% of contract research paid to third parties for Ohio-sited work. Document each project with contemporaneous records showing technological uncertainty and process of experimentation.

~3 hrs
2

Apply 7% to Ohio QRE above the 3-year average

Subtract your average annual Ohio QRE for the three preceding years from this year's Ohio QRE and multiply the excess by 7%. This is the current-year credit before any liability cap. If Ohio QRE is $400K against a $300K average, the credit is $7,000. Keep a project-by-project log to support audit.

~3 hrs
3

Apply credit on CAT return (Form CAT-CR)

Report the R&D credit on Form CAT-CR (Credit Schedule) filed with your Ohio CAT annual return. Apply against Ohio CAT liability for the period. Any excess credit over current-period liability carries forward up to 7 years.

~3 hrs
4

Track carryforward on subsequent returns

If credit exceeds CAT liability in any year, carry forward the unused balance on Form CAT-CR in subsequent filings. The 7-year window begins from the year the credit was generated. No separate election is needed to preserve carryforward credits.

~3 hrs

Industry & certifications

NAICS codes: 541511, 541512, 541714, 541715, 325412, 336411, 334

Insider tip

Ohio's credit is incremental: it pays 7% only on Ohio research spending above your three-year average, so it rewards growing R&D budgets. Keep three years of Ohio QRE records to compute the base.

Deadline & timing

No competitive application or pre-certification required. The credit is self-computed and claimed on the Ohio CAT annual return. Ohio CAT annual return is due May 10 of the following year for calendar-year filers (quarterly returns due 40 days after each quarter end). Carryforward credits are tracked on Form CAT-CR (Credit Schedule) in subsequent years. Ohio also operates a separate R&D Loan Fund (administered by Ohio Development Services Agency) for companies needing upfront capital — distinct from this tax credit.

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Research & Development Tax Credit (Section 41)

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