HB 2040 -- Economic Development

Sponsor:  Flook

This bill changes the laws regarding several economic development
programs.

TAX CREDIT PROGRAMS

In its main provisions, the bill:

(1)  Changes the name of the Neighborhood Assistance Act to the
Affordable Housing Assistance Act and reduces the amount of total
tax credits available from $32 million to $26 million annually;

(2)  Establishes the Community Assistance Program which will
issue tax credits for contributions to projects that include
community development, education, physical revitalization, job
training, and youth development.  These tax credits may be
carried over for the next five tax periods, sold, or transferred.
The tax credit's value will be equal to 30% of the contribution
for in-kind contributions; 50% of the contribution for monetary
contributions; or 70% of the contribution for monetary
contributions to a rural community project;

(3)  Establishes the Small Business Incubators Program which
consists of a loan, loan guarantee, and grant program for the
establishment and operation of small business incubators.  A
local sponsor can submit an application to the Department of
Economic Development to obtain a loan, loan guarantee, or grant.
The bill specifies the requirements of the application, criteria
which must be met in order to accept an application, the purposes
for which a loan or grant can be used, and the responsibilities
of the local sponsor.  The Missouri Small Business Incubator Fund
is established which will consist of appropriations, gifts, and
other contributions.  Taxpayers who make a contribution to the
fund or to an approved local sponsor are entitled to a tax credit
equal to 50% of the contribution.  These tax credits may be
carried over for the next five tax periods, sold, or transferred;

(4)  Limits the total amount of tax credits granted under the
Community Assistance Program and the Small Business Incubator
Program to $26 million for Fiscal Year 2008 and after;

(5)  Establishes the Development Tax Credit Program.  Any
business firm may apply to the department to conduct economic
development projects.  The department will approve applications
on a case-by-case basis giving priority to manufacturing,
processing, or assembly; corporate headquarters; services in
interstate commerce; and warehouse or distribution projects
proposing wages above the average for the area and which provide
health benefits.  These tax credits may be carried over for the
next five tax periods, sold, or transferred.  Tax credits
approved for all economic development projects cannot exceed $6
million in any fiscal year.  Tax credits for economic development
projects will be equal to the lesser of $10,000 per quality job
created or retained; 50% of the purchase price of new capital
improvements or equipment; $500,000 per project; or the least
amount needed to cause the project to occur;

(6)  Allows the department to terminate participation in the
programs, require a refund of any donations, and require the
participant to repay the state for any tax credits that have
already been redeemed if the participant in the Community
Assistance Program, Small Business Incubator Program, or
Development Tax Credit Program fails to abide by the conditions
of the program;

(7)  Prohibits tax credits from being approved, awarded, or
issued after January 1, 2007, to any person or entity claiming a
tax credit under the Youth Opportunities and Violence Prevention
Act, Family Development Account Program, or the current Small
Business Incubator Program established in Section 620.495, RSMo;
and

(8)  Transfers the tax credit program for grape and wine
producers from the department to the Missouri Agriculture and
Small Business Development Authority and requires that activities
qualifying the grower or producer for the tax credit be
pre-approved by the authority based on established priority
criteria.  These tax credits may be transferred or sold and no
more than $500,000 can be issued in one year.

TAX INCREMENT FINANCING

The bill:

(1)  Specifies the manner in which the incremental increase in
the general revenue portion of state sales tax revenues will be
calculated; and

(2)  Increases the amount of new state revenue approved for
disbursement from the Missouri Supplemental Tax Increment
Financing Fund from $32 million to $50 million annually.

MISSOURI DOWNTOWN ECONOMIC STIMULUS ACT (MODESA)

The bill:

(1)  Specifies the manner in which the incremental increase in
the general revenue portion of state sales tax revenues will be
calculated;

(2)  Eliminates the requirement that the Department of Economic
Development submit MODESA applications to the Missouri
Development Finance Board;

(3)  Allows the department to determine whether or not a
particular applicant will receive funding from the State
Supplemental Downtown Development Fund, rather than having the
board do so as currently required;

(4)  Reduces the amount of other net new revenues approved for
disbursements from the State Supplemental Downtown Development
Fund from $108 million to $58 million; however, this amount must
include the other net new revenues approved for disbursement from
the State Supplemental Rural Development Fund; and

(5)  Specifies that the State Supplemental Downtown Development
Fund will consist of other net new revenues generated annually by
the development projects up to an amount approved by the
department, rather than requiring that the first $150 million of
other net new revenues generated annually by the projects be
deposited into the fund.

MISSOURI RURAL ECONOMIC STIMULUS ACT (MORESA)

The bill:

(1)  Increases the amount of other net new revenues approved for
disbursements from the State Supplemental Rural Development Fund
from $12 million to $58 million; however, this amount must
include the other net new revenues approved for disbursement from
the State Supplemental Downtown Development Fund; and

(2)  Specifies that the State Supplemental Rural Development Fund
will consist of other net new revenues generated annually by the
development projects up to an amount approved by the department,
rather than requiring that the first $12 million of other net new
revenues generated annually by the projects be deposited into the
fund.

DOWNTOWN REVITALIZATION PRESERVATION PROGRAM

The bill specifies the manner in which the incremental increase
in state sales tax revenue will be calculated.

MISSOURI DEVELOPMENT FINANCE BOARD

The bill:

(1)  Allows bonds issued by the Missouri Development Finance
Board to mature within 40 years, rather than 30 as currently
required;

(2)  Specifies that any proceedings involving the validity or
enforceability of any security for any bond issued by the board
will be deemed to have been completed by the development agency
in accordance with the laws under which the proceedings were
authorized.  These proceedings are not subject to legal challenge
after the board issues the bonds on behalf of the development
agency unless the challenge is brought within 90 days of the
proceeding's end;

(3)  Allows the security for any bond issued by the board to
include a pledge of payments in lieu of taxes or economic
activity tax revenues generated within a redevelopment area, even
if the infrastructure facilities that are financed with the bonds
are located within the redevelopment area generating the taxes or
revenues;

(4)  Removes the limit on loans the board can approve for
infrastructure facility projects.  Currently, the loan limit is
$10 million;

(5)  Changes the limit on tax credits given to entities which
donate money to certain funds.  Currently, the total tax credits
awarded annually are equal to $10 million or 5% of the average
growth in general revenue receipts in the three preceding fiscal
years, whichever is less.  The bill increases this to $20 million
or 5% of the average growth in general revenue receipts in the
three preceding fiscal years, whichever is less;

(6)  Increases the aggregate principal amount of revenue bonds
outstanding at any time with respect to which a tax credit can be
issued from $50 million to $75 million; and

(7)  Reduces the conditions which the board must find before
agreeing to issue business use incentive for large-scale
development (BUILD) tax credits to an eligible industry.
Currently, the board must find that there is at least one other
state that the eligible industry is considering for the project's
location and a significant disparity must exist between the
applicant's projected costs if the project is located in Missouri
and if it is located in the competing state.  Both of these are
eliminated from the list of conditions which must exist before
BUILD tax credits can be agreed to.

TAX CREDITS FOR SMALL BUSINESSES

The bill allows $500,000 to be available for tax credits for
qualified investment in Missouri small businesses and qualified
investors in community banks or community development
corporations, rather than authorizing that this amount come from
the Neighborhood Assistance Program as it is currently.

ENHANCED ENTERPRISE ZONES

The bill:

(1)  Changes the definition of "employee" to include only
full-time workers.  The current definition includes full-time,
part-time, and seasonal employees; and

(2)  Requires the Department of Economic Development to verify
through the Department of Revenue that the tax credit applicant
does not owe any delinquent taxes, interest, or penalties and to
verify through the Department of Insurance that the applicant
does not owe any delinquent insurance taxes prior to issuing any
tax credits.  If the applicant is delinquent, the amount of tax
credits issued will be reduced by the applicant's tax
delinquency.

TAX CREDITS FOR ABANDONED PROPERTY AND REDEVELOPMENT PROJECTS

The bill allows tax credits for abandoned property and
redevelopment projects to include up to 100% of the demolition
costs that are not directly part of the remediation activities if
the demolition is necessary to accomplish the planned use of the
facility where the remediation activities are occurring.

MISSOURI QUALITY JOBS PROGRAM

The bill:

(1)  Excludes educational services, religious organizations, and
public administration from the definition of "qualified company";

(2)  Allows the annual maximum amount of tax credits issued to
any qualified company for a project to be increased to $1 million
if the number of new jobs will increase by 500;

(3)  Allows the qualified company to begin retaining withholding
taxes when it reaches the minimum number of new jobs and the
average wage exceeds the county average wage;

(4)  Prohibits the qualified company from receiving tax credits
or withholding taxes if the average wage is below the county
average wage, if the qualified company has not maintained the
required employee insurance, or if the number of new jobs does
not meet the minimum.  If a qualified company initially filed a
notice of intent and received approval from the department for
high impact benefits and the minimum number of jobs is below the
required minimum, the company will not receive tax credits for
the balance of the benefit period but may continue to retain
withholding taxes if it otherwise meets the requirements of a
small and expanding business under the program;

(5)  Increase the maximum amount of tax credits issued annually
from $12 million to $24 million; and

(6)  Requires the Department of Economic Development to verify
through the Department of Revenue that the tax credit applicant
does not owe any delinquent taxes, interest, or penalties and to
verify through the Department of Insurance that the applicant
does not owe any delinquent insurance taxes prior issuing any tax
credits.  If the applicant is delinquent, the amount of tax
credits issued will be reduced by the applicant's tax
delinquency.

OTHER PROVISIONS

The bill repeals:

(1)  Tax credits for neighborhood assistance;

(2)  Tax credits for homeless assistance;

(3)  Youth Opportunities and Violence Prevention Act;

(4)  Small business guaranty fees;

(5)  Family Development Account Program; and

(6)  Small Business Incubators Act.

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