HCS SCS SB 801 -- BUSINESS TAX CREDITS

SPONSOR: Mathewson (O'Toole)

COMMITTEE ACTION: Voted "do pass" by the Committee on Miscellaneous Bills and Resolutions by a vote of 15 to 0.

This substitute makes numerous changes to current business tax credit statutes. In its main provisions, the substitute:

(1) Modifies the definition of the term "cotton linters" to mean fibers from any plant or wood pulp material used to make cellulose casings. Current law provides a tax credit against state sales or use taxes if a manufacturer recycles the casings. The substitute also requires documentation from the Department of Natural Resources that the activity constitutes recycling at the time the credit is claimed. This provision has an emergency clause (Section 260.285, RSMo);

(2) Deletes reference to the development and reserve fund and export finance fund to which taxpayers may contribute under the Missouri Development Finance Board Act in return for a tax credit against income tax (Section 100.286);

(3) Modifies the definition of the term "community development corporation" as it pertains to small business development. The substitute removes the term "target area" from the definitions pertaining to small business development and removes reference to the term "target area" as it applies to a tax credit equal to 40% of the qualified investment in a small business in a distressed community. It also reduces the amount of tax credits available from $6 million to $500,000 annually for investments in community banks or community development corporations (Sections 135.400 and 135.403);

(4) Requires at least $2.5 million of the total amount of small business tax credits available for qualified investments in small businesses to be used for qualified investments in small businesses engaged solely in pharmaceutical research and development. These credits are exempt from certain limitations in current law, and the Director of the Department of Economic Development is required to give these tax credits preference (Section 135.406);

(5) Repeals the requirement that interest and penalty provisions and procedural matters for the small business tax credit program be determined according to the appropriate chapter of law, unless otherwise specified in the statutes pertaining to small business tax credits (Section 135.429);

(6) Repeals the requirement that the Department of Social Services make rules to define and certify target areas and the requirement that the Department of Economic Development make rules to implement the small business development provisions after target areas have been defined and certified by Department of Social Services (Section 135.430);

(7) Repeals the Small Business Administration guaranty fee credit (Section 135.766);

(8) Modifies the definition of the term "industry" as it relates to the New Jobs Training Program to allow health firms and professional services firms to apply (Section 178.892);

(9) Modifies the definition of the term "community-based organization" as it applies to the Family Development Account Program to include not-for- profit organizations approved by the Director of the Department of Economic Development. Currently, the term includes only certain religious or charitable associations (Section 208.750);

(10) Authorizes the Director of the Department of Economic Development, with the approval of the Director of the Department of Natural Resources, to grant a demolition tax credit for up to 100% of the demolition costs that are not part of the voluntary remediation activities as long as the demolition is part of a redevelopment plan approved by the local government and the Department of Economic Development. These credits are in addition to remediation tax credits allowed under current law (Section 447.708);

(11) Modifies the definition of the term "industry" as it applies to the Customized Training Program to include consortia organized to provide common training to the member entities' employees and allows investment other than capital investment and investments other than those in manufacturing to count toward qualification for the program (Sections 620.470 and 620.474);

(12) Changes the Qualified Research Expenses Tax Credit from an entitlement program to a discretionary program. The substitute also allows the transfer of up to 40% of the tax credits issued but not claimed during any tax year between January 1, 1996, and December 31, 1999, and decreases the amount of tax credits authorized from $10 million to $9,700,000 per year (Section 620.1039);

(13) Items (2) through (12) will be effective on January 1, 2001; and

(14) References the definitions of the terms "eligible residence" and "qualifying residence" as defined in current law relating to the Distressed Communities tax credits program.

FISCAL NOTE: Estimate Net Effect on the General Revenue Fund of a cost of $1,700,000 in FY 2001, a savings of $4,300,000 in FY 2002, and a savings of $4,300,000 in FY 2003.

PROPONENTS: Supporters say that cellulose casings are no longer made only from cotton; they are also made from wood pulp or plant fibers. Changing the definition allows manufacturers to take the tax credit for recycling the cellulose casings.

Testifying for the bill was Senator Mathewson.

OPPONENTS: There was no opposition voiced to the committee.

Donna Schlosser, Legislative Analyst