Entity Transfer Impact on Commercial Real Estate

As lawmakers return to the Statehouse, Governor DeWine’s Property Tax Working Group is nearing its September 30 deadline. Proposals under discussion include capping property tax increases in line with inflation, reevaluating credits that impact rental and investment properties, and creating “Residential Stability Zones” to protect homeowners from rising values. The outcomes could significantly influence future commercial real estate development proformas, investor returns, and deal feasibility across Ohio.

Here’s what’s at stake:

• Potential for stabilized tax growth –  A cap on increases tied to inflation could create more predictability in deal underwriting and long-term investment returns.
• Rental property tax credit at risk –  Eliminating the 10% non-business credit would raise effective property tax costs on multifamily (up to 3-family) and rental portfolios, impacting operating margins.
• Residential incentives expand –  “Residential Stability Zones” may redirect incentives away from large-scale development and toward homeownership protections, shifting the political landscape on housing policy.

Certain members of the Property Tax Working Group have expressed their view that entity transfers should be taxed and reported in Ohio. However, requiring taxation and reporting of entity transfers would undermine Ohio’s efforts to foster economic development, attract new business, and sustain job growth.

Requiring taxation and reporting of entity transfers could mean higher acquisition costs, and limiting options for tax-efficient deal structures. Mike Sikora recently testified before the Property Tax Working Group on behalf of NAIOP of Ohio and the commercial real estate industry about entity transfer transactions and the potentially harmful impacts of requiring taxing and reporting of entity transfers. See the below testimony.