HB 197 -- TAX CREDITS FOR DISTRESSED COMMUNITIES

CO-SPONSORS:  Johnson (47), Pratt, Yates, Skaggs, LeVota,
Dempsey, Wright

COMMITTEE ACTION:  Voted "do pass" by the Committee on Job
Creation and Economic Development by a vote of 18 to 0 with 1
present.

Relating to the Rebuilding Communities and Neighborhood
Preservation Act, this bill:

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

(2)  Expands the definition of "new residence" to include
condominiums, owner-occupied units or units intended to be owner-
occupied in an apartment building, and separate, adjacent single-
family units even when these types of units are not located in a
distressed community;

(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)  Increases the tax credit amount from 15% to 20% for eligible
costs associated with a new residence in a distressed community
or within a census block group or for multiple unit condominiums.
The bill does not change the dollar value of the tax credit,
which cannot exceed $40,000 per new residence in any 10-year
period;

(5)  Limits the tax credits available for the rehabilitation and
construction of residences in distressed communities and census
blocks to $1.5 million per project for those commenced after
August 28, 2003.  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 bill 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; and

(6)  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.

Relating to tax credits for investment in or relocating a
business to a distressed community, the bill:

(1)  Reduces the population requirement for a United States
census block group or contiguous group of block groups within a
metropolitan statistical area from 2,500 to 500 for an area to be
a "distressed community"; and

(2)  Expands the definition of a "distressed community" to
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.

FISCAL NOTE:  Estimated Net Cost to the General Revenue Fund in
FY 2004, FY 2005, and FY 2006 will be minimal.

PROPONENTS:  Supporters say that this is a good bill because it
expands the use of tax credits for rehabilitation, housing, and
businesses in distressed communities by allowing more communities
to qualify for these incentives.  Currently, the distressed
community criteria heavily favor St. Louis City.  Kansas City and
the rest of the state do not have the same opportunities.  St.
Louis City receives the vast majority of tax credit money
available from the eight programs which rely on the "distressed
community" definition.   The bill allows more areas of the state
to utilize these tax credits.

Testifying for the bill were Representative Johnson (47);
Economic Development Corporation of Kansas City; and Greater
Kansas City Chamber of Commerce.

OPPONENTS:  There was no opposition voiced to the committee.

Alice Hurley, Legislative Analyst

Missouri House of Representatives
Last Updated July 25, 2003 at 10:11 am