HCS HB 2058 -- TAX INCENTIVES FOR BUSINESS DEVELOPMENT

SPONSOR:  Richard (Pearce)

COMMITTEE ACTION:  Voted "do pass" by the Special Committee on
Job Creation and Economic Development by a vote of 12 to 0.

This substitute changes the laws regarding tax incentives for
business development.

VARIOUS TAX CREDIT PROGRAMS

The substitute:

(1)  Increases the annual cap on the amount of tax credits the
Department of Economic Development may authorize for the Enhanced
Enterprise Zone Program from $14 million to $24 million;

(2)  Increases the fiscal year cap for economic development tax
credits that are approved as part of the Neighborhood Assistance
Program from $4 million to $6 million;

(3)  Allows the Missouri Technology Corporation to authorize up
to $5 million in tax credits per year to encourage equity
investment in technology-based early stage Missouri companies,
commonly referred to as angel investments.  Investors who
contribute the first $500,000 in equity investment to a qualified
Missouri business may be issued a tax credit equal to 30% of the
investment or 40% if the qualified business is in a rural area or
distressed community.  An investor can receive a credit of up to
$50,000 for an investment in a single qualified business and up
to $100,000 for investments in more than one qualified business
per year.  Credits can be carried forward for up to three years
or sold;

(4)  Increases the aggregate cap on the amount of tax credits the
department may authorize for the Small Business Incubators
Program from $500,000 to $2 million; and

(5)  Specifies that all demolition activities are part of
remediation and allows remediation tax credits to include up to
100% of demolition costs that are not directly part of the
remediation but which are necessary to accomplish the planned use
of the facility.  Demolition may occur on adjacent property that
independently qualifies as abandoned or underutilized and is
located in a municipality with fewer than 20,000 residents.
Currently, some demolition activities associated with brownfield
redevelopment are separate from remediation activities.

QUALITY JOBS PROGRAM

The substitute:

(1)  Increases the annual cap on the amount of tax credits the
department may issue for the Quality Jobs Program from $40
million to $60 million;

(2)  Allows tax credits to be issued for job retention projects
until August 30, 2013.  Tax credits for this project type were
only authorized through August 30, 2007;

(3)  Allows a project facility to include separate buildings
within the same county.  Currently, they must be located within
one mile of each other; and

(4)  Allows a company that leases or owns facilities that produce
electricity derived from qualified renewable energy sources, or
which produce fuel for the generation of electricity from
qualified renewable energy sources, to participate in the program
as a technology business project if it meets the other
requirements of the program.  Qualified renewable energy sources
include open-looped biomass, close-looped biomass, solar, wind,
geothermal, and hydropower but not ethanol distillation or
production or biodiesel production.

COMMUNITY IMPROVEMENT DISTRICTS

The substitute:

(1)  Allows community improvement districts (CID) to exist in
special business districts within the City of St. Louis.
Currently, any CID in St. Louis that is also in a special
business district cannot levy a CID sales tax unless special
assessments imposed on real property or businesses within the
special business district are repealed; and

(2)  Excludes sales by public utilities and providers of
communications, cable, or video services from the CID sales tax.

TAX POLICY

The substitute:

(1)  Authorizes the department to issue letter rulings regarding
the New Markets Tax Credit Program.  The letter rulings are
binding in a court of law and must be issued within 60 days of a
request.  The department can refuse to issue the letter ruling
for good cause, but must explain the reason for refusal.  Letter
rulings are closed to the public; however, information can be
released as long as anything which would identify the applicant
or is otherwise protected is redacted; and

(2)  Codifies a letter ruling issued from the Department of
Revenue exempting from state and local sales and use tax all
personal property included on the United States munitions list
that is sold to or purchased by a foreign government for a
governmental purpose.

The bill contains an emergency clause regarding the Small
Business Incubators Program.

FISCAL NOTE:  Estimated Cost on General Revenue Fund of $96,031
to $36,596,031 in FY 2009, $103,498 to $36,603,498 in FY 2010,
and $106,602 to $36,606,602 in FY 2011.  No impact on Other State
Funds in FY 2009, FY 2010, and FY 2011.

PROPONENTS:  Supporters say that the bill will increase the
annual caps on several tremendously successful programs.  The
Quality Jobs Program produces more than $3 for every $1 spent and
is one of the most useful economic development tools the state
has, attracting new jobs and encouraging job growth in Missouri.
The bill establishes a new tax credit program for the angel
investments.  These are investments made in very early-stage,
start-up companies, at a time when the company likely would not
obtain traditional venture capital.  Missouri does a very good
job of receiving federal research dollars, but has not been good
at transitioning this research into creating patents or products,
which in turn create new jobs.  The program will encourage more
patent and product development.  The bill codifies an existing
sales and use tax exemption regarding the sale of aircraft to
foreign countries.  These sales are regulated, controlled, and
monitored by the federal government and are currently exempt from
state and local sales and use tax, based on a binding letter
ruling from the Department of Revenue.

Testifying for the bill were Representative Pearce; Missouri
Economic Development Council; Associated Industries of Missouri;
Taxpayers Research Institute of Missouri; Boeing Company; City of
St. Louis; St. Louis County; St. Louis Community College;
Missouri Community College Association; Benjamin Jones, America's
Heartland Economic Partnership; Cape Girardeau Area Chamber of
Commerce; Don Laird, Columbia Chamber of Commerce; John Thompson,
Centennial Investors Fund; Economic Development Corporation of
Kansas City; Gilbert Bickel, St. Louis Arch Angels; James DeLong,
St. Louis Regional Chamber and Growth Association; Robert
Marcusse, Kansas City Area Development Council; Joshua Harden,
Show Me Energy; Tracy Branter and Delores Hudson, Johnson County
Economic Development Corporation; Matt Robinson, Environmental
Operations, Incorporated; Policy Solutions; Jefferson City Area
Chamber of Commerce; Missouri Enterprise Technology Association;
John W. Bude, Carthage Chamber of Commerce; John Bude, City of
Carthage; Greater Kansas City Chamber of Commerce; Missouri
Chamber of Commerce and Industry; Advantage Capital; Center for
Emerging Technologies; and Missouri Growth Association.

OPPONENTS:  There was no opposition voiced to the committee.

OTHERS:  Others testifying on the bill say that Missouri is
earning the reputation that it's a great state in which to do
business.  Economic development policies are very important.  The
programs included in the bill are very successful and increasing
the caps will only improve them.  The Missouri Technology Program
is a very important program.  Now that we have economic
development policies and programs in place to bring new jobs to
Missouri, we can begin to look toward assisting very small start-
ups when they need investment the most, which is before they can
obtain traditional venture capital.  Missouri is ninth in the
nation for receiving federal research dollars, but we don't
produce enough patents from this research and don't produce
enough products.  The program will change this.  Economic
development growth from within is better than anything we can
draw upon from outside.  Missouri has a lot of momentum, and the
bill will help Missouri build better infrastructure for years to
come.

Testifying on the bill was Department of Economic Development.

Missouri House of Representatives
94th General Assembly, 2nd Regular Session
Last Updated October 15, 2008 at 3:11 pm