HCS HB 1143 -- TAX CREDITS FOR DISTRESSED COMMUNITIES

SPONSOR:  Rizzo

COMMITTEE ACTION:  Voted "do pass" by the Committee on Commerce
and Economic Development by a vote of 16 to 4.

This substitute expands the definition of a "distressed
community" in the law relating to tax credits for investment in
or relocating a business to a distressed community.  A distressed
community will include areas within metropolitan statistical
areas that are designated as either a federal empowerment zone, a
federal enhanced enterprise community, or state enterprise zones
designated prior to January 1, 1986, but will not include the
expansion of those zones done after March 16, 1988.

Relating to the Rebuilding Communities and Neighborhood
Preservation Act, the substitute:

(1)  Expands the definition of "eligible residence" to include
certain condominiums, entire apartment buildings, or single
apartments within an apartment building;

(2)  Expands the definition of "new residence" to include
separate adjacent single-family units;

(3)  Expands the definition of "project" to include the new
construction, rehabilitation, or substantial rehabilitation of
multiple residences, whether comprised of one structure
containing multiple single-family residences (e.g., an apartment
building) or multiple individual structures (e.g., townhouses or
individual homes), in addition to single residences;

(4)  Corrects the definition of "qualifying residence" so that it
accurately references census blocks groups within metropolitan
statistical areas;

(5)  Clarifies the term "nonmetropolitan statistical area" as any
county not located in a metropolitan statistical area;

(6)  Limits the tax credits available for the rehabilitation and
construction of residences in distressed communities and census
blocks to $1.5 million for projects commenced after August 28,
2002.  Under current law, of the $16 million in community
improvement tax credits allowed, $8 million are to be allocated
for "eligible residence" programs and $8 million for "qualifying
residence" programs.  The substitute states that if, by October 1
of the calendar year, the Director of the Department of Economic
Development has issued all $8 million of the credits allowed for
one of these programs and has not issued the entire $8 million
allowance for the other program, the director is required to
reallocate 70% of any unused tax credits from the program which
has not reached its $8 million cap to the one which has.  The
reallocated credits will be given to taxpayers who have applied
for, but have not received, tax credits in that same year and who
are engaged in projects in the area where the tax credit cap has
been met for that same year.  The maximum reallocated tax credit
for any project may not exceed $500,000;

(7)  Increases the value of the "eligible residence" tax credit
from 15% of eligible costs up to $25,000 to 20% of eligible costs
up to $40,000 but does not raise the annual cap for this tax
credit;

(8)  Increases the value of the "qualifying residence" tax credit
from 15% of eligible costs up to $40,000 to 20% of eligible
costs, up to $40,000, but does not raise the annual cap for this
tax credit; and

(9)  Allows one application for tax credits to be submitted to
the department for preliminary approval in the case of projects
involving the new construction, rehabilitation, or substantial
rehabilitation of more than one residence.  Tax credits will be
awarded upon final approval of an application and presentation of
acceptable proof that substantial construction of each individual
residence has been completed, rather than delaying issuance of
the tax credits until the entire project is substantially
complete.

FISCAL NOTE:  Estimated Net Loss to the General Revenue Fund is
Minimal in FY 2003, FY 2004, and FY 2005.

PROPONENTS:  Supporters say that several areas in Kansas City are
not eligible for the seven tax credit programs which currently
rely on the definition of "distressed community" because of the
low population of the census blocks in these areas.  This has led
to a skewed distribution of tax credits.  This skewed
distribution isn't because Kansas City isn't willing to apply for
and use the tax credits, rather, it is the result of bad
criteria.  The current criteria do not make much sense for Kansas
City, St. Louis County, or the rest of the state.  The current
criteria are of great benefit to the City of St. Louis because
all of it is defined by statute as a "distressed community."  The
new criteria proposed in the bill includes a variety of
metropolitan statistical areas, which would open up these tax
credit programs to Kansas City, as well as other areas of the
state.

Testifying for the bill were Representative Rizzo; Greater Kansas
City Chamber of Commerce; City of Kansas City; City of St. Louis;
and St. Louis County.

OPPONENTS:  Those who oppose the bill say that it is intended to
revitalize areas that are already residential and that Kansas
City wants to include areas where there is no population and that
wasn't the intent of the these tax credit programs.  Opponents
are concerned that if the qualifying geographic area is expanded,
the availability of tax credits will only be diluted because the
annual cap on these tax credits is not being increased.

Testifying against the bill was Metropolitan Congregations United
for St. Louis.

Alice Hurley, Legislative Analyst

Missouri House of Representatives
Last Updated October 11, 2002 at 9:00 am