SPONSOR: Maxwell (Rizzo)

COMMITTEE ACTION: Voted "do pass" by the Committee on Commerce by a vote of 27 to 0.

This substitute makes numerous changes to the Missouri Certified Capital Company (CAPCO) Law. In its main provisions it:

(1) Authorizes agricultural businesses to receive qualified CAPCO investments, including investments which may include secured debt, and defines "qualified Missouri agricultural businesses";

(2) Changes the definition of "affiliate of a certified company" from any person owning or controlling 10% of voting securities to persons owning or controlling 15% of such securities;

(3) Specifies that for certified capital raised by a CAPCO after August 28, 2000, no more than 10% may be considered as a "reasonable cost" for the purpose of forming and syndicating the CAPCO, and no more than 2 1/2% may be considered as a "reasonable cost" for the purpose of managing and operating the CAPCO. Companies designated as CAPCOs after this date are also prohibited from investing more than 5% of their certified capital in a security or policy issued or an account maintained by an insurance company or insurance company affiliate;

(4) Limits the maximum amount of certified capital any one investor or its affiliates may invest in one or more CAPCOs in a given calendar year to $10 million. Current law allows the Director of the Department of Economic Development (DED), with the approval of the Commissioner of Administration, to reduce from 100% the proportion of the investment for which tax credits will be awarded, beginning anytime after August 28, 1999. The substitute changes this date to anytime after August 28, 2003, so that 100% of the investment can qualify for tax credits between 1999 and 2003. The substitute changes the total amount of certified capital for which tax credits are allowed after 1997 from a cap of $10 million in aggregate credits to an additional $5 million in aggregate credits for calendar year 1998 and an additional $10 million in aggregate credits for calendar year 2000; thereafter, the annual aggregate credits are limited to 10% of the cumulative credits earned in previous years;

(5) Changes the criteria for continuing to be certified as a CAPCO, requiring certain investment amounts from the date the company has raised certified capital rather than from the date of certification as a CAPCO;

(6) Requires CAPCOs to invest at least 25% of their required investments of certified capital raised after August 28, 2000, in qualified agricultural businesses;

(7) Defines a "qualified Missouri development stage business" as certain businesses with gross sales in the most recently completed fiscal year of less than $2 million; and clarifies that allowable distributions, other than qualified distributions, are distributions made from certified capital;

(8) Authorizes CAPCOs to organize wholly-owned subsidiaries; and

(9) Allows companies with gross sales of up to $7.5 million to be qualified businesses if they receive an investment from a CAPCO that, within 4 years of its designation as a CAPCO, invests at least one-half of its certified capital in qualified investments in a development stage business.

In addition to the CAPCO provisions, the substitute authorizes a 50% tax credit for individuals who contribute to unplanned pregnancy resource centers. These centers are nonresidential facilities located in the state established to provide assistance to women with crisis or unplanned pregnancies and which do not perform or refer for abortions. Individual taxpayers are limited to a maximum tax credit of $50,000 per year, and aggregate tax credits claimed in any fiscal year are limited to $2 million. The provisions relating to unplanned pregnancy resource centers are effective January 1, 2001.

Finally, the substitute establishes the Missouri Business and Industrial Development Companies Act (BIDCO), to provide financing and management assistance to Missouri firms. The Director of the Department of Economic Development is authorized to administer the act and to issue orders and promulgate rules to implement the BIDCO provisions.

FISCAL NOTE: Estimated Net Cost to General Revenue Fund of $54,811 to $12,054,811 in FY 2001, $57,821 to $12,057,821 in FY 2002, and $59,304 to $12,059,304 in FY 2003.

PROPONENTS: Supporters say that the substitute's business incentives will promote job creation and economic growth in various locales throughout the state.

Testifying for the bill were Senators Maxwell and Flotron; Advantage Capital; Missouri Farm Bureau; Stifel, Nicolaus & Company, Inc.; The Wilshire Group; St. Louis Regional Chamber & Growth Association; and Campaign Life Missouri.

OPPONENTS: There was no opposition voiced to the committee.

Debra Cheshier, Senior Legislative Analyst