HCS#2 SS SCS SB 718 -- TAX INCENTIVES FOR BUSINESS DEVELOPMENT
SPONSOR: Kennedy (Pearce)
COMMITTEE ACTION: Voted "do pass" by the Special Committee on
Job Creation and Economic Development by a vote of 10 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 department 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;
(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;
(6) Allows an existing headquarters to receive the tax credit
for new or expanded business facilities for expansions done
before January 1, 2018. At least 25 new employees and at least
$1 million in new investment must be attributed to the expansion.
Buildings on multiple, non-contiguous property will be considered
one facility if the buildings are within five miles of each
other;
(7) Increases the amount of tax credits available for taxpayers
who modify their home to be accessible for a disabled individual
who resides with the taxpayer. Currently, up to $100,000 in tax
credits from the Rebuilding Communities Tax Credit Program can be
used for this purpose. The substitute allows all unused tax
credits from this program to be used by taxpayers who modify
their homes for this purpose. The cap on the program will be $10
million annually; and
(8) Allows certain municipal library districts which have
transferred a structure at least 72 years old to a nonprofit
entity for rehabilitation to be deemed a corporation and a
for-profit entity for the purposes of the Historic Preservation
Tax Credit Program.
TAX CREDIT FOR QUALIFIED RESEARCH EXPENSES
Currently, no tax credits for qualified research expenses can be
approved, awarded, or issued. The substitute removes these
restrictions and allows a tax credit equal to no more than 6.5%
of a taxpayer's qualified research expenses. The annual
aggregate cap on the amount of these tax credits that can be
authorized by the department is $10 million.
Qualified research expenses will be limited to those incurred in
the research and development of agricultural biotechnology, plant
genomics products, diagnostic and therapeutic medical devices,
and prescription pharmaceuticals consumed by humans or animals.
Expenses incurred in the research, development, and manufacturing
of power system technology for aerospace, space, defense, or
implantable or wearable medical devices are also permitted.
The department director may allow a taxpayer to transfer up to
40% of the tax credits issued, but not yet claimed, between
January 1, 2009, and December 31, 2015. The substitute requires
the credits to be issued and the department director to act on
tax credit applications filed between January 1 and July 1 for
claims for the previous year between August 1 and August 15.
The formula is specified by which tax credits will be issued if
the eligible claims for the credits exceed the annual cap. No
one taxpayer can be issued more than 30% of the total amount of
tax credits authorized in any calendar year.
QUALITY JOBS PROGRAM
The substitute:
(1) Eliminates the cap on the Quality Jobs Program. Currently,
the department cannot issue more than $40 million in tax credits
for this program annually;
(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, the buildings 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
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 AND TAXATION
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;
(2) Establishes in statute an exemption from state and local
sales and use tax on all tangible personal property included on
the United States munitions list that is sold to or purchased by
a foreign government for a governmental purpose. Currently, this
exemption is granted by the Department of Revenue through a
letter ruling;
(3) Specifies that the true value in money for assessment
purposes of any possessory interest in real property located on
or within the ultimate airport boundary shown by a federal
airport layout plan of the Kansas City International Airport will
be the true value in money of the possessory interest in the real
property less the total costs paid toward any new construction or
improvements completed on the property after January 1, 2008, if
included in the possessory interest, unless paid by the political
subdivision, regardless of the year the costs were incurred;
(4) Authorizes a property tax credit, beginning January 1, 2009,
for expenses incurred to manufacture, maintain, or improve a
freight line company's qualified rolling stock up to the amount
of its tax liability. The state will annually reimburse a
political subdivision for any loss in revenue;
(5) Expands the state and local sales tax exemption to include
materials, replacement parts, and equipment purchased for use
directly upon and for the modification, repair, replacement, and
maintenance of aircraft, aircraft power plants, and aircraft
accessories from January 1, 2009, to January 1, 2015. Currently,
materials, replacement parts, and equipment purchased for use
directly upon and for the repair and maintenance or manufacture
of aircraft engaged as common carriers of people or property are
exempt from state and local sales tax; and
(6) Revises the definition of "commercial aircraft" as it
relates to the taxation of aircraft by lowering the maximum
certified gross take-off weight from 7,000 to 3,000 pounds.
The substitute contains an emergency clause for the provisions
regarding the Small Business Incubators Program.
FISCAL NOTE: Estimated Cost on General Revenue Fund of $261,869
to Unknown in FY 2009, $281,658 to Unknown in FY 2010, and
$290,109 to Unknown in FY 2011. Estimated Cost on Other State
Funds of Unknown 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 is one of the most useful economic
development tools the state has, attracting new jobs and
encouraging job growth in Missouri. 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 substitute bill codifies an
existing sales and use tax exemption regarding the sale of
aircraft to foreign countries. The tax credits for mega-projects
will lead to the biggest economic development project in Missouri
history. A Canadian company, Bombardier, is considering building
an assembly plant at the Kansas City International Airport to
manufacture the new C-Series aircraft. It will bring in more
than 1,000 jobs to the site and thousands more in related
industries. This is a once-in-a-lifetime opportunity for
Missouri, and the substitute bill is necessary to make it happen.
This program is unique because it requires Bombardier to pay the
state a fee for each aircraft sold. This will repay the state's
tax credits, resulting in an overall positive net impact for
Missouri. However, if Bombardier does not choose Missouri for
its assembly site, the mega-project tax credit will be in place
for future projects. This tool is vital to Missouri's future
economic development success with large-scale manufacturing
projects. The tax credit for qualified research expenses is a
very important program to reinstate because Missouri is poised to
become a leader in life sciences research. Businesses,
universities, and research institutes engaged in these activities
create good jobs, and this program will encourage them to begin
or continue research and development.
Testifying for the bill were Senator Kennedy; Greater Kansas City
Chamber of Commerce; St. Louis Regional Chamber and Growth
Association; Associated Industries of Missouri; Taxpayers
Research Institute of Missouri; Missouri Economic Development
Council; National Multiple Sclerosis Society; Boehringer-
Ingelheim Pharmaceuticals, Incorporated; Holcim, Incorporated;
Kathi Harness, St. Louis Library District; Missouri Biotechnology
Association; City of St. Louis; Center for Emerging Technologies;
Jim Farrell, Missouri Innovation Centers Network; St. Louis
County Economic Council; Johnson County Economic Development
Corporation; Midwest Alliance for Renewable Energy; and Missouri
Chamber of Commerce and Industry.
OPPONENTS: Those who oppose the substitute bill say that the
language pertaining to the mega-project fund poses a fiscal
problem to the state.
Testifying against the bill was Rex Sinquefield.
OTHERS: Others testifying on the bill offered informational
assistance.
Testifying on the bill was Department of Economic Development.
Copyright (c) Missouri House of Representatives
Missouri House of Representatives
94th General Assembly, 2nd Regular Session
Last Updated October 15, 2008 at 3:12 pm