HCS HB 1374 -- TAX CREDITS

CO-SPONSORS:  Rizzo (Scheve)

COMMITTEE ACTION:  Voted "do pass" by the Committee on Commerce
by a vote of 19 to 0.

This substitute creates the Missouri Certified Capital Company
Law, and the Missouri Business and Industrial Development
Company (BIDCO) Act.  In its main provisions, the Missouri
Certified Company Law:

(1) Provides for a credit against the state insurance premium
tax for cash investments in a Missouri "Certified Capital
Company," a profit or not-for-profit partnership, corporation,
trust or limited liability company which is primarily organized
to invest capital in qualifying businesses;

(2) Restricts the allowable credits to that portion of the
premium tax which is deposited into the General Revenue Fund, so
that there is no decrease in funds to schools as a result of
this program;

(3) Restricts the aggregate of all credits allowed in a calendar
year to $5 million in 1997, and $10 million in 1998;

(4) Defines a qualifying business as a Missouri-based business
employing no more than 300 employees and with gross sales of $7
million or less, excluding real estate development companies;

(5) Stipulates that the amount of the tax credit is to equal
100% of the investment for at least the first 3 years of the
program, and that no more than 10% of an investor's credit may
be applied against the tax liability in any taxable year.  After
3 years following the effective date of this substitute, the
General Assembly may reduce the applicable percentage rate (100%
of the amount invested) allowed for credits.  While the credit
may not exceed the tax liability in a given year, the credit may
be carried forward indefinitely;

(6) Requires the Department of Economic Development (DED) to
issue or to deny an application for certification as a certified
capital company within 60 days, and to notify the Department of
Revenue and the Department of Insurance of those companies
receiving certification;

(7) Provides that in order to continue in the program, a
certified capital company must, within 3 years of certification,
have at least 30% of certified capital in qualified investments,
and, within 5 years, have at least 50% of certified capital in
qualified investments.  Once a certified capital company has
invested 100% of its certified capital in qualified investments,
and complied with all other program requirements, it is no
longer subject to regulation by DED;

(8) Prohibits insurance companies licensed by or doing business
in Missouri from managing the investments of a Missouri
certified capital company;

(9) Requires certified capital companies to submit informational
reports and an annual audited financial statement to DED.  In
addition, the Division of Finance within the DED is required to
conduct an annual review of each company to insure program
compliance;

(10) Provides for decertification if program requirements are
violated.  If decertified, a company forfeits the premium tax
credits for the tax year in which decertification arose and for
future tax years;

(11) Provides that the tax credits may be sold or transferred
according to regulations adopted by DED; and

(12) Allows documents submitted by certified capital companies
to remain confidential and not part of the public record, if so
requested by any interested party.

In its main provisions, the Missouri BIDCO Act:

(1) Allows Missouri entities, defined as general partnerships,
limited partnerships, and limited liability or not-for-profit
corporations, to apply for licensure to DED as a Missouri
Business and Industrial Development Company (BIDCO).  Missouri
BIDCO's provide financial assistance and management assistance
to business firms;

(2) Outlines the requirements of the application process, and
the requirements which must be met by the BIDCO before an
application for licensure is approved, including a minimum net
worth of $1 million;

(3) Authorizes the Director of DED to make public or private
investigations related to an application, with the power to
subpoena witnesses and to take evidence;

(4) Authorizes the Director of DED to establish a schedule of
fees to pay for implementing and enforcing the provisions of the
BIDCO Act, including a license application fee of between $2,500
and $8,000.  The fees and the monetary penalties established for
noncompliance are to be deposited in the DED Administrative Fund;

(5) Authorizes DED to regulate BIDCO's; DED may require a
licensee to maintain a reserve to offset anticipated losses, and
must approve any application by the licensee for a merger,
purchase, or sale;

(6) Requires each licensee to include the term BIDCO in its
name, and to maintain at least one office in the state.  Upon
written notice to the Director of DED, a licensee may establish,
relocate, or close an office; and

(7) Outlines the powers of licensees, which include the
borrowing of money, the issuing of corporate bonds or notes, the
making of contracts, purchasing or conveying real or personal
property, and participating, if eligible, in the programs of the
federal Small Business Administration.

FISCAL NOTE:  Loss to General Revenue Fund of $0 to $5,000,000
in FY 97, $0 to $10,000,000 in FY 98, and $0 to $75,172,710 in
FY 99.

PROPONENTS:  Supporters say that this substitute will provide
for much needed investment in small businesses.

Testifying for the bill were Representative Scheve; David
Bergman; Advantage Capital; and National Federation of
Independent Business.

OPPONENTS:  There was no opposition voiced to the committee.

Debra Cheshier, Research Analyst

HB 1374 -- Tax Credits

Sponsor:  Scheve

This bill creates the Missouri Certified Capital Company Law,
and the Missouri Business and Industrial Development Company
(BIDCO) Act.  The Missouri Certified Company Law:

(1) Provides for a credit against the state insurance premium
tax for cash investments in a Missouri Certified Capital
Company, a profit or not-for-profit partnership, corporation,
trust, or limited liability company which is primarily organized
to invest capital in qualifying businesses;

(2) Restricts the allowable credits to that portion of the
premium tax which is deposited into the General Revenue Fund, so
that there is no decrease in funds to schools as a result of
this program;

(3) Restricts the aggregate of all credits allowed in a calendar
year to no more than 40% of the aggregate state premium tax
liability for the preceding year;

(4) Defines a qualifying business as a Missouri-based business
employing no more than 300 employees and with gross sales of $7
million or less, excluding real estate development companies;

(5) Stipulates that the amount of the tax credit is to equal
100% of the investment for at least the first 2 years of the
program, and that no more than 10% of the aggregate credit may
be applied against the tax liability in any taxable year.  While
the credit may not exceed the tax liability in a given year, the
credit may be carried forward indefinitely;

(6) Requires the Department of Economic Development (DED) to
issue or to deny an application for certification as a certified
capital company within 60 days, and to notify the Department of
Revenue and the Department of Insurance of those companies
receiving certification;

(7) Provides that in order to continue in the program, a
certified capital company must, within 3 years of certification,
have at least 30% of certified capital in qualified investments,
and, within 5 years, have at least 50% of certified capital in
qualified investments;

(8) Requires certified capital companies to submit quarterly
reports and an annual audited financial statement to DED.  In
addition, DED is required to conduct an annual review of each
company to insure program compliance;

(9) Provides for decertification if program requirements are
violated.  If decertified, a company forfeits the premium tax
credits for the tax year in which decertification arose and for
future tax years;

(10) Provides that the tax credits may be sold or transferred
according to regulations adopted by DED;

(11) Allows documents submitted by certified capital companies
to remain confidential and not part of the public record if an
interested party so requests; and

(12) Specifies that the program is effective December 31, 1995,
and the provisions apply to tax years beginning on or after
January 1, 1996.

The Missouri BIDCO Act:

(1) Allows Missouri entities, defined as a general partnership,
limited partnership, limited liability or not-for-profit
corporation, to apply for licensure to DED as a Missouri
Business and Industrial Development Company (BIDCO).  Missouri
BIDCO's provide financial assistance and management assistance
to business firms;

(2) Outlines the requirements of the application process, and
the requirements which must be met by the BIDCO before an
application for licensure is approved;

(3) Authorizes the Director of DED to make public or private
investigations related to an application, with the power to
subpoena witnesses and to take evidence;

(4) Authorizes the Director of DED to establish a schedule of
fees to pay for implementing and enforcing the provisions of the
BIDCO Act, including a license application fee of between $2,500
and $8,000.  The fees and the monetary penalties established for
noncompliance are to be deposited in the DED Administrative Fund;

(5) Authorizes DED to regulate BIDCO's; DED may require a
licensee to maintain a reserve to offset anticipated losses, and
must approve any application by the licensee for a merger,
purchase, or sale;

(6) Requires each licensee to include the term BIDCO in its
name, and to maintain at least one office in the state.  Upon
written notice to the Director of DED, a licensee may establish,
relocate or close an office; and

(7) Outlines the powers of licensees, which include the
borrowing of money, the issuing of corporate bonds or notes, the
making of contracts, purchasing or convey real or personal
property, and participating, if eligible, in the programs of the
federal Small Business Administration.