HCS HB 1928 -- MISSOURI DISCOVERY ALLIANCE

SPONSOR:  Ervin

COMMITTEE ACTION:  Voted "do pass" by the Committee on Small
Business by a vote of 10 to 1 with 1 present.

This substitute creates the Missouri Discovery Fund and
establishes the Missouri Discovery Alliance in the Department of
Economic Development to assist with the recruitment, relocation,
and expansion of technology businesses.  The alliance replaces
the Missouri Technology Corporation, and the substitute
establishes a 13-member board of directors for the alliance.  If
an innovation center's annual report of its activities and
operational plans to coordinate with the small business
development centers is not approved by the department or the
alliance, the department can withhold 75% of the state-allocated
center's funding until the report is accurate and complete.  The
innovation center must provide 100% match for any funding
received from the discovery fund.  Beginning July 1, 2008,
existing and new innovation centers established after that date
will receive funding through the Missouri Discovery Fund for no
more than five years.

The alliance may authorize up to $10 million in tax credits
annually.  A taxpayer will receive a 30% tax credit for a
contribution toward the first $500,000 in venture capital
contributed to a qualifying company or a 40% tax credit if the
company invested in is located in a rural area or distressed
community.  The alliance can reserve tax credits for investors
who have a net loss of investment within five years of
contributing the first $5 million in venture capital to an
approved company.  A taxpayer will receive a 50% tax credit for
contributions to a technology commercialization infrastructure
project or for expenditures for industrial research conducted at
a public research institution or private not-for-profit
collaborative research project approved by the alliance.  The
credits can be used against current income tax, carried over for
three consecutive years, or transferred.

The substitute also establishes the Small Business Tax Credit
Review Committee and authorizes a 30% tax credit for a qualified
investment of up to $100,000 in a Missouri small business or a
40% credit if the investment is in a business in a distressed
community.  The tax credit can be held as a guarantee on a loan
from a financial institution to a qualified business and only
issued and redeemed if the small business defaults on the loan
within the first five years of the loan.

FISCAL NOTE:  Estimated Cost on General Revenue Fund of $0 to
$10,000,000 in FY 2007, FY 2008, and FY 2009.  No impact on Other
State Funds.

PROPONENTS:  Supporters say that the bill will help attract and
expand technology businesses in Missouri by offering a 30% to 40%
credit for investments, up to $5 million.  Missouri is a flyover
state and not attractive to investors.  Companies can align with
the department to get a $100,000 investment tax credit for 30% to
40% of the investment and a tax credit for net losses to
encourage financial institutions to make start-up loans.
Government grants are available, but many businesses are unaware
of them.  The bill will fix that problem.  The two programs, the
credit, and the coaching will come together and be
self-sustaining.  The bill helps put early stage money in the
hands of the inventor of new technology at universities and
encourages St. Louis investors to invest in small businesses in
Missouri instead of other states.

Testifying for the bill were Representative Ervin; Department of
Economic Development; Carter Williams; Missouri Chamber of
Commerce and Industry; National Federation of Independent
Business; Center for Emerging Technologies; University of
Missouri; and Missouri Bankers Association.

OPPONENTS:  There was no opposition voiced to the committee.

Karla Strobel, Legislative Analyst

Missouri House of Representatives
93rd General Assembly, 2nd Regular Session
Last Updated November 29, 2006 at 9:45 am