Summary of the Perfected Version of the Bill

HB 1593 -- INVESTMENT INCENTIVES (Jones, 89)

COMMITTEE OF ORIGIN: Committee on Economic Development

This bill changes the laws regarding the Missouri New Markets

Development Program and establishes the Missouri Angel Investment

Incentive Act.

The bill repeals the requirement that no qualified equity

investments for the Missouri New Markets Development Program can

be permitted unless the General Assembly adopts a concurrent

resolution granting authority to the Department of Economic

Development to approve qualified equity investments and clearly

describing the amount of tax credits available for the next

fiscal year.

The Missouri Angel Investment Incentive Act is established which

is to be administered by the regional Missouri Small Business and

Technology Development Center (SBTDC) and the SBTDC home office

with the primary goal of encouraging individuals to provide

seed-capital financing for emerging Missouri businesses engaged

in the development, implementation, and commercialization of

innovative technologies, products, and services. Each regional

SBTDC must establish a regional committee of at least three but

no more than five people to review applications from businesses

requesting designation as a qualified Missouri business and

allocate and issue tax credits to qualified investors who make

cash investments in the qualified Missouri businesses. The

coordinator must establish its own rules of procedure, including

the form and substance of applications to be used by each

regional SBTDC and the criteria to be considered by each regional

SBTDC when evaluating a qualified Missouri business.

A tax credit must be allowed for an investor's cash investment in

the qualified securities of a qualified Missouri business. The

credit must be in a total amount equal to 50% of the investor's

cash investment in any qualified Missouri business. This tax

credit may be used in its entirety in the taxable year in which

the cash investment is made. If the amount by which that portion

of the credit allowed exceeds the investor's liability in any one

taxable year, beginning in 2012, the remaining portion of the

credit may be carried forward until the total amount of the

credit is used. If the investor is a permitted entity investor,

the credit must be claimed by the owners of the permitted entity

investor in proportion to their cash investment in the permitted

entity investor. The maximum tax credit allowed is $50,000 for a

single qualified Missouri business or a total of $250,000 in tax

credits for a single year per investor who is a natural person or

owner of a permitted entity investor. No tax credits can be

allowed for any cash investments in qualified securities for any year beginning after December 31, 2022. The total amount of tax

credits cannot exceed $6 million during any tax year. The

balance of unissued tax credits may be carried over for issuance

in future years until December 31, 2022.

The tax credits must be administered by the regional SBTDCs. At

the beginning of each year, the coordinator must equally

designate the tax credits available during that year to each

regional SBTDC. At the beginning of each calendar quarter, the

coordinator must allocate to each regional SBTDC one-fourth of

the total tax credits designated to the regional SBTDC for the

year so the regional SBTDC can allocate tax credits to qualified

Missouri businesses and issue tax credits to qualified investors

for cash investments in the qualified Missouri businesses during

that quarter.

At the end of each calendar quarter, each regional SBTDC must

report to the coordinator any unallocated tax credits for the

preceding quarter. The coordinator must aggregate all the tax

credits and reallocate them equally among the regional SBTDCs as

soon as possible during the next consecutive calendar quarter.

Each regional SBTDC must receive the reallocation in addition to

the new allocation of designated tax credits for the quarter.

During the fourth calendar quarter, a regional SBTDC may request

that another regional SBTDC with unallocated tax credits permit

the unallocated tax credits to be allocated by the requesting

SBTDC. No regional SBTDC can be required to grant the request.

When a granting SBTDC transfers the allocation of the unallocated

tax credits to a requesting SBTDC, the granting SBTDC must

provide to the requesting SBTDC a written confirmation

authorizing the transfer. The granting and the requesting SBTDC

must include a copy of the written confirmation in its reports.

Before an investor may be entitled to receive tax credits, the

investor must have made a cash investment in a qualified security

of a qualified Missouri business. The business must have been

approved by a regional SBTDC as a qualified Missouri business

before the date on which the cash investment was made. To be

designated as a qualified Missouri business, a business must make

application to a regional SBTDC which must include specified

information.

The designation of a business as a qualified Missouri business

must be made by the regional SBTDC and must be renewed annually.

A business must be so designated if the regional SBTDC determines

specified criteria as established by the coordinator. A business

may be considered as a qualified Missouri business under the

provisions of the bill if it falls within a standard industrial

classification code established by the coordinator. A qualified

Missouri business must have the burden of proof to demonstrate to the regional SBTDC the qualifications of the business.

Each regional SBTDC is authorized to allocate tax credits to

qualified Missouri businesses and then to issue tax credits to

qualified investors in those qualified Missouri businesses. The

tax credits must be awarded to those qualified Missouri

businesses which, as determined by the regional SBTDC, are most

likely to provide the greatest economic benefit to the region or

the state, or both. The regional SBTDC may allocate and issue

whole or partial tax credits based on an assessment of the

qualified Missouri businesses. The regional SBTDC may consider

numerous factors in the assessment including, but not limited to,

the quality and experience of the management team, the size of

the estimated market opportunity, the risk from current or future

competition, the ability to defend intellectual property, the

quality and utility of the business model, and the quality and

reasonableness of financial projections for the business.

Each qualified Missouri business for which a regional SBTDC has

authorized the issuance of tax credits to the qualified investors

of the qualified Missouri business must submit to the regional

SBTDC a report before the tax credits are issued which includes

specified information.

The State of Missouri cannot be held liable for any damages to

any investor that makes an investment in any qualified security

of a qualified Missouri business, any business that applies to be

designated as a qualified Missouri business and is turned down,

or any investor that makes an investment in a business that

applies to be designated as a qualified Missouri business and is

turned down.

Each qualified Missouri business must notify in a timely manner

the regional SBTDC that issued the tax credits of any changes in

the qualifications of the business or in the eligibility of

investors to claim a tax credit for cash investment in a

qualified security.

The coordinator must provide specified information to the

Department of Revenue on an annual basis. The coordinator must

conduct an annual review of the activities to ensure that tax

credits issued under these provisions are issued in compliance

with the bill or rules and regulations promulgated by each

regional SBTDC or the coordinator. If the coordinator determines

that a business is not in substantial compliance to maintain its

designation, the coordinator, by written notice, may inform the

business that the business will lose its designation as a

qualified Missouri business 120 days from the date of mailing of

the notice unless the business corrects the deficiencies and is

once again in compliance with the requirements for designation. After the 120-day period, if the qualified Missouri business is

still not in compliance, the coordinator may send a notice of

loss of designation to the business, each regional SBTDC, the

secretary of the Department of Revenue, and to all known

investors in the business. A business may lose its designation

as a qualified Missouri business by moving its operations outside

Missouri within 10 years after receiving financial assistance

under the bill. In the event that a business loses its

designation as a qualified Missouri business, it will be

precluded from being issued any additional tax credits with

respect to the business, must be precluded from being approved as

a qualified Missouri business, and must repay any financial

assistance to the regional SBTDC in an amount to be determined by

the regional SBTDC. Each qualified Missouri business that loses

its designation must enter into a repayment agreement with the

regional SBTDC specifying the terms of the repayment obligation.

Investors in a qualified Missouri business must be entitled to

keep all of the tax credits properly issued to the investors

under these provisions.

The portions of documents and other materials submitted to any

regional SBTDC or the coordinator that contain trade secrets must

be kept confidential and must be maintained in a secured

environment by the regional SBTDC and the coordinator.

Any qualified investor who makes a cash investment in a qualified

security of a qualified Missouri business may transfer the tax

credits to any natural person. Only the full credit for any one

investment must be transferred and this interest must only be

transferred one time. Documentation of any tax credit transfer

must be provided by the qualified investor in the manner required

by the coordinator.

Each qualified Missouri business for which tax credits have been

issued must report specified information to the applicable

regional SBTDC on an annual basis, on or before February 1.

Any violation of the reporting requirements may be grounds for

the loss of designation of the qualified Missouri business, and

the business must be subject to the specified restrictions.

The provisions of the bill expire December 31, 2022.

FISCAL NOTE: Estimated Net Cost of General Revenue Fund of $0 to

$6,240,000 in FY 2013, $0 to $6,000,000 in FY 2014, and $0 to

$6,000,000 in FY 2015. No impact on Other State Funds in FY

2013, FY 2014, and FY 2015.

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