Ohio H.B. 756 Could Bring a Spring “Downpour” of R&D Tax Relief
"April showers" (tax season, with deadlines often falling around April 15) can indeed bring Research & Development (R&D) tax credits. Introduced on March 11, 2026, and referred to the Ways and Means Committee on March 18, 2026, H.B. 756 of the 136th General Assembly aims to expand the R&D non-refundable tax credit to the state income tax for “qualified research expenses” incurred in Ohio by enacting section 5747.88 and amending ORC sections 5747.98 and 5751.51. At this time, the bill has been introduced and is in the committee phase. No further action has taken place.
Under current law, ORC 5751.51 establishes a nonrefundable Commercial Activity Tax (CAT) credit for qualified Ohio research expenses, calculated as 7% of the excess research spending over a three-year average. With the CAT exclusion threshold increasing from three million in annual taxable gross receipts (2024) to six million in annual taxable gross receipts (2025), many smaller, R&D‑intensive startups now fall below the CAT and cannot use the existing nonrefundable credit.
If H.B. 756 is enacted, the bill would extend the same nonrefundable R&D credit to the Ohio state income tax, not just the CAT, while retaining the 7% calculation on qualified expenses above a three‑year average. If the credit exceeds the taxpayer’s income tax due, any unused amount could be carried forward for up to seven years. The tax commissioner could audit claimed expenses, and taxpayers would need to retain substantiating records for at least four years. The bill makes it clear that a credit cannot be claimed against income tax if it has already been used to offset the CAT (current R&D credit).
Under H.B. 756, companies in the state’s high growth technology, manufacturing, and life sciences sectors that invest heavily in research will now be able to claim the nonrefundable credit regardless of whether their gross receipts are less than six million and regardless of whether the entity is a flow-through entity, i.e., an LLC or S corporation, or a corporate entity, i.e., C corporation or an LLC taxed as a corporation. Activities such as prototyping and testing new products or manufacturing processes, software development for internal use or commercial sale, material science experiments to improve product durability or efficiency, and engineering and product design improvements would all be considered “qualified research expenses” and therefore would be eligible for this nonrefundable tax credit. Upon implementation of this bill, businesses will be incentivized to invest in research and development which will in turn promote competition.
April may bring showers – and for Ohio innovators, potentially a fresh “downpour” of R&D tax relief if this measure advances. Keep monitoring this Ohio HB 756 to see whether your entity can tap this nonrefundable credit in future years. If you need assistance with determining your R&D tax credit qualification, please reach out to any member our Corporate and Tax Team.
