HCS HB 1684 -- ECONOMIC DEVELOPMENT

SPONSOR:  Flook (Zerr)

COMMITTEE ACTION:  Voted "do pass" by the Committee on Job
Creation and Economic Development by a vote of 14 to 0 with 1
present.

This substitute changes the laws regarding economic development.

PORT AUTHORITY DISTRICTS (Sections 68.025 - 68.370, RSMo)

Regarding port authorities, the substitute:

(1)  Authorizes every local and regional port authority to:

(a)  Establish a port improvement district;

(b)  Carry out certain specified projects;

(c)  Levy, upon voter approval, a sales and use tax, a real
property tax, or both within the boundaries of the district for
the purpose of paying project costs.  The sales tax must be
levied in increments of one-eighth of 1% but cannot exceed 1%;
and

(d)  Pledge all revenues generated by any district and any other
port authority revenue source to the repayment of outstanding
obligations;

(2)  Requires any matching grants awarded by the Highways and
Transportation Commission under the Port Capital Improvement
Program to be transportation related and authorizes a local or
regional port authority that is a political subdivision to issue
revenue bonds to finance port improvement projects;

(3)  Establishes the Port Improvement District Act which allows a
port authority to establish one or more port improvement
districts within its boundaries for the purpose of funding
qualified projects costs associated with an approved port
authority improvement project.  However, in Clay County, a
district can only be established within 5,000 feet of the center
of the Missouri River;

(4)  Specifies the procedures for forming a district, the public
hearing process, and the procedures for terminating a district;

(5)  Authorizes a port authority to levy, upon voter approval, a
property tax on all real property within the district except for
property owned by a railroad, unless the railroad agrees to the
levy in writing;

(6)  Authorizes a port authority to levy, upon voter approval, a
sales tax within the district.  The tax must be imposed in
increments of 1/8% and cannot exceed 1%;

(7)  Requires the board of a port authority to submit an annual
report regarding the district's services provided and revenues
collected and expended during the fiscal year and specifies that
the report must be submitted to the municipal or county clerk and
the Department of Transportation within 120 days after the port
authority's fiscal year ends;

(8)  Authorizes the State Auditor to audit any port authority
within the state in the same manner in which any other state
agency is audited; and

(9)  Requires any expenditure that is more than $25,000 to be
competitively bid by the port authority.

TAX EXEMPTIONS (Sections 144.010, 144.019, 144.020, and 144.058)

Regarding tax exemptions, the substitute:

(1)  Specifies that when tangible real property or taxable
services are purchased for the purpose of resale, the purchase is
exempt or excluded from taxation if the subsequent sale is:

(a)  Taxed in Missouri or any other state;

(b)  For resale;

(c)  Excluded from tax under Chapter 144; or

(d)  Subject to tax but exempt under Chapter 144 or, if the
subsequent sale is in another state, it is exempt under the laws
of that state;

(2)  Clarifies that operators of amusement parks and places of
entertainment or recreation, including games or athletic events,
must charge sales taxes on the amount of gross receipts charged
for admission, but any subsequent sale of the admissions or
seating accommodations will not be subject to the taxes and
clarifies that operators of hotels, motels, taverns, restaurants,
drugstores, dining cars, or tourist camps must charge sales taxes
on the amount of gross receipts charged for all rooms, meals, and
drinks furnished at the establishment, but any subsequent sale of
those same rooms, meals, and drinks is exempt from sales and use
taxes;

(3)  Specifies that "operator" as it relates to sales taxes on
hotels, motels, taverns, restaurants, drugstores, dining cars, or
tourist camps will mean a person or entity who has the primary
responsibility for the operation of the establishment and does
not include any third party who provides services to or on behalf
of an operator; and

(4)  Authorizes a state and local sales tax exemption on all
electrical energy, gas, water, and other utilities including
telecommunications services, machinery, and equipment that is
used by a business which, after August 28, 2010, relocates to a
facility within an underground mine that is no longer used for
mining and contains at least 500,000 square feet if the facility
is used for data processing, hosting, and related services or
Internet publishing and broadcasting and web search portals.  Any
business which utilizes these exemptions cannot simultaneously
receive benefits from the Quality Jobs Act.

DATA STORAGE CENTERS AND SERVER FARM FACILITIES (Section 144.810)

Beginning August 28, 2010, the substitute authorizes a state and
local sales and use tax exemption on items related to new data
storage centers or server farm facilities including:

(a)  All electrical energy, gas, water, and other utilities
including telecommunications services;

(b)  All machinery, equipment, and computers; and

(c)  All retail sales of tangible personal property and materials
for the purposes of constructing, repairing, or remodeling a new
data storage center or server farm facility.

Any new data storage center and server farm facility wishing to
utilize these exemptions must submit a project plan to the
Department of Economic Development.  The department must
determine whether the project is eligible for exemption by
verifying that a new facility will invest at least $5 million
within 36 consecutive months.  The departments of Economic
Development and Revenue must cooperate in conducting random
audits on these provisions.

Beginning August 28, 2010, the substitute authorizes a sales tax
exemption on items related to expanding data storage centers or
server farm facilities including:

(a)  All electrical energy, gas, water, and other utilities
including telecommunications services which, on an annual basis,
exceed the amount used in the existing or the replaced facility
prior to expansion;

(b)  All machinery, equipment, and computers, the cost of which
on an annual basis, exceeds the amount used in the existing or
the replaced facility prior to expansion; and

(c)  All retail sales of tangible personal property and materials
for the purposes of constructing, repairing, or remodeling an
expanding data storage center or server farm facility.

Any expanding data storage center and server farm facility
wishing to utilize these exemptions must submit an expanding
project plan to the Department of Economic Development.  The
department must determine whether the project is eligible for
exemption by verifying that an expanding facility will invest at
least $1 million within 12 consecutive months.  The departments
of Economic Development and Revenue must conduct random audits.

TECHNOLOGY-BASED EARLY STAGE COMPANIES (ANGEL INVESTMENTS)
(Sections 348.273 and 348.274)

The Department of Economic Development is authorized to annually
allocate up to $5 million in tax credits to encourage equity
investment in technology-based early stage Missouri companies,
commonly known as angel investments.  Investors who contribute
the first $500,000 in equity investment to a qualified Missouri
business may be issued a tax credit equal to 30% of the
investment or 40% if the qualified business is in a rural area or
distressed community.  An investor can receive a credit of up to
$50,000 for an investment in a single, qualified business or up
to $100,000 for investments in more than one qualified business
per year.  Credits can be carried forward for up to three years
or sold.

RESEARCH AND DEVELOPMENT TAX CREDIT (Section 620.1039)

The substitute authorizes a tax credit equal to no more than 6.5%
of a taxpayer's qualified research expenses.  The annual cap is
$10 million.  Qualified research expenses will be limited to
those incurred in the research and development of agricultural
biotechnology, plant genomics products, diagnostic and
therapeutic medical devices, and prescription pharmaceuticals
consumed by humans or animals.  Expenses incurred in the
research, development, and manufacturing of power system
technology for aerospace, space, defense, and implantable or
wearable medical devices are also permitted.

MISSOURI JOBS FOR THE FUTURE (Section 620.1894)

The substitute authorizes the establishment of Missouri Jobs for
the Future (MO-JFF) districts.  In its main provisions, the
substitute:

(1)  Allows the governing body of a municipality to establish a
MO-JFF district in which MO-JFF projects may be implemented
according to a MO-JFF plan.  The district, plan, and project must
be established and adopted by ordinance.  The substitute
specifies the requirements of a MO-JFF plan and the findings a
municipality must make before adopting a plan;

(2)  Defines MO-JFF revenues as 50% of the incremental increase
in the general revenue portion of eligible state sales tax
revenues received under Section 144.020 and the state income tax
withheld on behalf of new employees by the businesses located
within the MO-JFF project.  The substitute specifies what portion
of sales tax revenue will be deemed MO-JFF revenue for businesses
that existed before the formation of the district and for
businesses which relocate to the district;

(3)  Requires a MO-JFF project to be completed within 25 years
after a municipality's adoption of the project by ordinance;

(4)  Specifies that a MO-JFF project cannot obtain land by
eminent domain; and

(5)  Requires the Department of Economic Development to conduct a
comprehensive review of the plan 10 years after implementation.
The review will cover the implementation and performance,
including the number of jobs created, increased payrolls, capital
investment, and overall economic growth generated.

MANUFACTURING JOBS ACT (Section 620.1910)

The Manufacturing Jobs Act is established which provides
incentives for qualified suppliers or manufacturing facilities
that create or retain Missouri jobs.  In its main provisions, the
substitute:

(1)  Defines a "qualified manufacturing facility" as a business
which:

(a)  Manufactures goods in Missouri;

(b)  Derives more than 10% of its total sales revenues from goods
produced at the facility which are ultimately exported outside
the United States or that derives more than 20% of its total
sales revenues from goods produced at the facility which are
exported outside of Missouri;

(c)  Makes an additional capital investment of at least $50,000
per full-time employee equivalent retained at the facility;

(d)  Manufactures a new product that has not been manufactured in
Missouri by the company that owns the facility at any time prior
to the date of the notice of intent; and

(e)  Continues to manufacture these goods for a period of at
least five years from the date of the notice of intent;

(2)  Defines "qualified supplier" as a company which:

(a)  Derives more than 10% of its total annual revenues from
sales to a qualified manufacturing facility;

(b)  Adds five or more new jobs;

(c)  Pays wages for new jobs that are equal to or exceed the
industry average wage for Missouri as determined by the
Department of Economic Development using the National American
Industry Classification System (NAICS) industry classifications;
and

(d)  Provides health insurance to employees and pays at least 50%
of the insurance premiums;

(3)  Allows a qualified manufacturing facility, upon approval of
a notice of intent by the department, to retain 50% of the
withholding taxes from retained jobs for 10 years and also remain
eligible to participate in the Missouri Quality Jobs Program if
it meets its requirements.  Qualified manufacturing facilities
cannot simultaneously receive benefits from:

(a)  New or expanded business facilities (Sections 135.100 -
135.150, RSMo);

(b)  Enterprise zones (Sections 135.200 - 135.286);

(c)  Relocation of a business to a distressed community (Section
135.535); or

(d)  Rural empowerment zones (Sections 135.900 - 135.906);

(4)  Specifies that if the facility is utilizing withholding
taxes from the new jobs for any other state program, the taxes
will first be credited to the other state program before they
will begin to accrue to this program.  If the facility is
participating in the New Jobs Training Program, it cannot retain
any withholding taxes that are already allocated for use in that
program;

(5)  Allows a qualified supplier, upon approval of a notice of
intent by the department, to retain 100% of the withholding taxes
from new jobs for three years.  If the qualified supplier pays
wages for the new jobs that are equal to or greater than 120% of
the industry average wage for Missouri as determined by the
department using NAICS industry classifications, it can retain
the withholding taxes for five years;

(6)  Requires the department to respond with an approval or
rejection within 30 days to a qualified manufacturing facility or
qualified supplier who provides a notice of intent to receive
benefits under this program.  Failure of the department to
respond will result in the notice of intent being deemed an
approval;

(7)  Specifies that any taxpayer who is awarded benefits under
this program and knowingly hires individuals who are not allowed
to work legally in the United States will immediately forfeit
these benefits and repay the state an amount equal to any
withholding taxes already retained;

(8)  Requires a qualified manufacturing facility or qualified
supplier that fails to comply with the provisions of the program
to repay all benefits previously obtained from the state with an
interest of 5% per year from the date the benefit was originally
received;

(9)  Requires the department to submit an annual report by
March 1 to the General Assembly with information on the
participating facilities and suppliers, the amount of benefits
provided, the net state fiscal impact, and the number of new and
retained jobs;

(10)  Limits the aggregate amount of retained withholding taxes
authorized under the program to $35 million per year; and

(11)  Specifies that taxpayers awarded benefits under the program
will not be required to obtain affidavits from subcontractors
regarding the employment of illegal immigrants.

MISSOURI BUSINESS FIRST (Section 620.1920)

The Missouri Business First Act is established which requires the
Director of the Department of Economic Development, upon a
finding of economic benefit to the state, to authorize an
increase in the amount of a tax credit, withholding retention, or
other economic benefit by up to an additional 10% for the
expansion of certain Missouri businesses.

Eligible businesses are those with employees and a physical
presence in Missouri that have been operating in Missouri for at
least five years prior to applying for any tax credit,
withholding retention, or other economic benefit.

The programs in which the department director can increase
benefits include:

(1)  The withholding tax percentage authorized under an approved
State Tax Increment Finance Plan under Section 99.845;

(2)  The rebuilding communities tax credit authorized under
Section 135.535;

(3)  The enhanced enterprise zone tax credit authorized under
Section 135.967;

(4)  The retained jobs training tax credit or withholding tax
retention authorized under Section 178.762;

(5)  The new jobs training tax credit or withholding tax
retention authorized under Section 178.894;

(6)  The customized industry training and retraining assistance
benefit authorized under Section 620.472; or

(7)  The quality jobs tax credit or withholding tax retention
authorized under Section 620.1881.

The provisions regarding the Manufacturing Jobs Act expire six
years from the effective date.

The provisions regarding the clarification on tax exemptions on
tangible real property and the sales and use taxes by certain
establishments contain an emergency clause.

FISCAL NOTE:  Estimated Cost on General Revenue Fund of $377,913
to Unknown - could exceed $50,377,913 in FY 2011, $326,845 to
Unknown - could exceed $50,326,845 in FY 2012, and $336,649 to
Unknown - could exceed $50,336,649 in FY 2013.  Estimated Cost on
Other State Funds of Unknown in FY 2011, FY 2012, and FY 2013.

PROPONENTS:  Supporters say that Missouri's current economic
development programs focus on job creation.  The bill rewards
businesses which are located in Missouri by giving them increased
benefits when they expand in the state.  It does not increase
annual program caps, but increases individual project caps within
the program.  The longer a business is located in Missouri, the
greater an increase it can receive.

Testifying for the bill were Representative Zerr; Department of
Economic Development; Springfield Area Chamber of Commerce;
Economic Development Corporation of Kansas City, Missouri;
Associated Industries of Missouri; St. Louis Regional Chamber and
Growth Association; Missouri Chamber of Commerce and Industry;
Missouri Economic Development Council; Greater Kansas City
Chamber of Commerce; National Federation of Independent Business;
Civic Council of Greater Kansas City; and Greater Kansas City
Local Initiatives Support Corporation.

OPPONENTS:  Those who oppose the bill say that it promotes
specific welfare, not the general welfare of the citizens of
Missouri; and it reduces Missouri's economic freedom which
results in inflation, among other things.  Special tax incentives
for one company, instead of giving all companies the same
incentives, negatively affects the free market.

Testifying against the bill was Bruce Hillis, Missouri First.

Missouri House of Representatives
95th General Assembly, 2nd Regular Session
Last Updated September 16, 2010 at 2:39 pm