HCS HB 1 -- BUSINESS GROWTH THROUGH INCENTIVES (Richard)

COMMITTEE OF ORIGIN:  Special Committee on Job Creation and
Economic Development

This substitute changes the laws regarding economic incentive and
development programs.

ADMISSION TICKET SALES (Sections 67.306 and 578.395, RSMo)

Cities, counties, and other political subdivisions may not
prohibit the sale or resale of tickets for admission to any legal
event at any price or the charging of any fee associated with the
sale or resale of the tickets.  Ordinances or regulations related
to criminal activity, consumer fraud, false advertising, or other
deceptive business practices will still be enforced.

The substitute decriminalizes ticket scalping by repealing
Section 578.395.

TAX INCREMENT FINANCING (Sections 99.805 and 99.843)

The substitute defines "greenfield area" as it relates to tax
increment financing (TIF).

New TIF projects are prohibited from being authorized in any
greenfield area located within St. Louis City or the counties of
Franklin, Jefferson, St. Charles, and St. Louis.

DISTRESSED AREAS LAND ASSEMBLAGE TAX CREDIT ACT (Section 99.1205)

The substitute establishes the Distressed Areas Land Assemblage
Tax Credit Act which authorizes, beginning January 1, 2008, a tax
credit equal to 50% of the costs and 100% of the interest
incurred for the acquisition of an eligible parcel of land.
Applicants can receive these credits for up to five years after
the land's acquisition.  These credits may be carried forward for
up to six years or sold.

Eligible parcels must be located within an eligible project area
which is to be redeveloped and must be acquired before the
applicant begins condemnation proceedings.  Parcels acquired by
the applicant from a municipal authority are not included.  The
applicant cannot redevelop more than 75% of the area identified
in the redevelopment plan.  The remainder of the area must be
redeveloped by a redeveloper to whom the applicant has assigned
its redevelopment rights under the plan.  Funds raised through
the use or sale of these tax credits must be used to redevelop
the eligible project area.

No more than $10 million tax credits can be issued annually, and
no more than $95 million can be issued for the life of the
program.  If applications for the tax credit exceed $10 million
in any year, the Department of Economic Development can issue the
entire amount to one applicant if there is only one eligible
applicant or on a pro rata basis to all the eligible applicants.
Any eligible amount which is not issued because of the $10
million annual limit will be carried forward and reserved for the
applicant in future years.

Eligible project areas must meet the following requirements:

(1)  The area must consist of at least 75 acres, which can
include parcels which are not eligible parcels;

(2)  At least 80% of the area must be located within a Missouri
qualified census tract area or a distressed community;

(3)  Eligible parcels acquired by the applicant within in the
project area must be at least 50 acres; however, the parcels are
not required to be contiguous;

(4)  The average number of parcels per acre must be at least
four; and

(5)  Less than 5% of the acreage within the area's boundaries can
consist of owner-occupied residences which the applicant has
identified for acquisition.

An applicant is any person or company which has incurred
acquisition costs for land meeting the requirements for an
eligible project area and who has been appointed or selected by a
municipal authority to redevelop an urban renewal area, a
redevelopment area that includes all of an eligible project area,
or a redevelopment plan or area which has been approved or
adopted under a Missouri economic incentive act.

No tax credits can be authorized for the program after August 28,
2013.

TAX CREDIT ELIGIBILITY

The substitute revises the definition of "business firm" to
include charitable organizations that are exempt from federal
income tax as it relates to the Neighborhood Assistance Program
(Section 32.105).

The definition of "taxpayer" is revised to include charitable
organizations that are exempt from federal income tax as it
relates to the Missouri Development Finance Board (Section
100.286), Neighborhood Preservation Act (Section 135.478),
Transportation Development in a Distressed Area Tax Credit
(Section 135.545), Domestic Violence Shelters Tax Credit
(Section 135.550), Maternity Home Tax Credit (Section 135.600),
Residential Treatment Agency Tax Credit (Section 135.1150), Small
Business Incubator Tax Credit (Section 620.495), and Qualified
Research Expenses Tax Credit (Section 620.1039).

The definition of "person" is revised to include charitable
organizations that are exempt from federal income tax as it
relates to the Missouri Certified Capital Company Law (Section
135.500), Seed Capital Tax Credit (Section 348.300), and New
Enterprise Creation Tax Credit (Section 620.638).

The substitute also revises the definition of "taxpayer" to
include charitable organizations that are exempt from federal
income tax as it relates to the Pregnancy Resource Center Tax
Credit (Section 135.630) and Missouri Higher Education
Scholarship Donation Fund (Section 173.196) and allows these
credits to be sold or transferred for at least 75% of par value.

QUALIFIED BEEF TAX CREDIT ACT (Section 135.679)

The Qualified Beef Tax Credit Act is established which allows a
tax credit for each qualifying sale of a qualifying beef animal.
From January 1, 2009, to December 31, 2016, the credit will be
equal to 10 cents per pound for each pound above the animal's
baseline weight, as long as the sale weight is at least 200
pounds above the baseline weight.  The Agricultural and Small
Business Development Authority can waive a portion of the weight
gain requirement, but only in circumstances where a disaster
declaration is issued by the United States Department of
Agriculture.

A qualifying beef animal must be born in Missouri after August
28, 2008; raised and backgrounded or finished in Missouri by the
taxpayer; less than 30 months old; and certified by the
authority.

The tax credit must be claimed in the year in which the
qualifying sale occurs.  Any unused portion may be carried back
three years and carried forward five years.  No more than $3
million in credits can be issued in a fiscal year.

NEW MARKETS - QUALIFIED EQUITY INVESTMENT TAX CREDIT (Section
135.680)

The substitute authorizes a tax credit equal to 7% of the
adjusted purchase price paid to the issuer of a qualified equity
investment for the third credit allowance date and 8% for the
next four credit allowance dates.  The tax credits are not
transferable or refundable but may be carried forward for up to
five years.  No more than $15 million of these tax credits can be
utilized annually.

The state is allowed to recapture credits when permissible under
federal law and in situations where the issuer redeems or makes
any principal repayments with respect to the qualified investment
before the seventh anniversary of the investment's issuance.  Any
tax credit subject to recapture will be taken from the taxpayer
that claimed the tax credit on a return.

No qualified equity investments can be made after Fiscal Year
2010 unless the program is reauthorized by the General Assembly.

FILM PRODUCTION TAX CREDITS (Section 135.750)

For tax years beginning January 1, 2008, the substitute lowers
the minimum budget expenditure from $300,000 to $50,000 for a
qualified film production project less than 30 minutes in length
or $100,000 for a project longer than 30 minutes.  The substitute
removes the individual project credit cap of $1 million and
increases the total annual program cap from $1.5 million to $4.5
million.  The credit will be equal to 35% of the qualifying
expenses for the project, which cannot include wages for highly
compensated individuals.

ENHANCED ENTERPRISE ZONES (Sections 135.950, 135.963, and
135.967)

The substitute changes the laws regarding enhanced enterprise
zones.  The substitute:

(1)  Revises the definition of "employee" to a person employed by
the enhanced business enterprise who is scheduled to work an
average of at least 1,000 hours per year and has health insurance
offered to him or her at all times which is partially paid by the
employer.  Currently, the definition of "employee" includes full-
time, part-time, and seasonal employees;

(2)  Adds educational services, religious organizations, and
public administration to the list of entities which are
prohibited from being enhanced business enterprises.  However,
the headquarters or administrative offices which would otherwise
be excluded may qualify for benefits if the offices serve a
multi-state territory;

(3)  Defines "facility base employment," "facility base payroll,"
"new job," "notice of intent," "related facility," and "related
facility base employment";

(4)  Allows speculative industrial or warehouse buildings
constructed by a public entity, or a private entity if the land
is leased by a public entity, to be exempt from ad valorem taxes,
upon the approval of the governing authority.  If the speculative
building is owned by a private entity, the exemption cannot
exceed two years.  If it is owned or leased by a public entity,
the exemption cannot exceed five years.  Currently, only enhanced
business enterprises can be exempt from these taxes;

(5)  Increases the cap on the amount of tax credits that can be
issued in a calendar year from $7 million to $14 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, Financial
Institutions, and Professional Registration that the applicant
does not owe any delinquent insurance taxes prior to issuing any
tax credits.  The amount of tax credits issued will be reduced by
any tax delinquency.

TAX EXEMPTION FOR AUTO MANUFACTURING (Section 144.030)

Currently, electricity used in the primary manufacturing of
automobiles is exempt from local and state sales taxes if the raw
materials used in the processing contain at least 25% recovered
materials.  The substitute specifies that raw materials used
during the primary manufacturing of automobiles will be assumed
to contain at least 25% recovered materials.

VOCATIONAL SCHOOL DISTRICTS (Section 178.716)

The counties of Bollinger, Butler, Cape Girardeau, Dunklin,
Mississippi, New Madrid, Pemiscot, Ripley, Scott, Stoddard, and
Wayne are authorized to organize a vocational school district.
The Coordinating Board for Higher Education must establish
specified standards for the district.

COMMUNITY COLLEGE NEW JOB TRAINING PROGRAM (Sections 178.895 and
178.896)

The substitute allows community college districts to sell new job
training program certificates until July 1, 2018, and extends the
program until July 1, 2028.  Currently, the program will expire
on July 1, 2018; and the authorization to sell certificates
expires July 1, 2008.

MISSOURI WORKFORCE INVESTMENT BOARD (Sections 620.511 - 620.513,
620.521 - 620.530, and 620.537)

The Missouri Workforce Investment Board is established to provide
workforce investment activities that increase the employment,
retention, and earnings of participants and improve the quality
of the workforce, reduce welfare dependency, and enhance the
productivity and competitiveness of Missouri.

The substitute specifies the membership and terms of the board
members and requires the board to meet the requirements of the
federal Workforce Investment Act (WIA) of 1998 and assist the
Governor with the functions described in Section 111(d) of the
WIA 29 U.S.C. 2821d.  The board must meet at least four times per
year and submit an annual report of its activities to the
Governor and General Assembly.

The Missouri Training and Employment Council Act is repealed and
the Missouri Training and Employment Council is dissolved.

QUALITY JOBS PROGRAM (Sections 620.1878 and 620.1881)

The substitute changes the laws regarding the Quality Jobs
Program.  The substitute:

(1)  Defines "approval," "project facility base payroll," and
"related facility base payroll";

(2)  Allows tax credits to offset taxes due from financial
institutions under Chapter 148.  Currently, the credits can only
be used to offset state income taxes imposed under Chapter 143;

(3)  Specifies the way in which the county average wage will be
calculated when a qualified company relocates employees from one
county to another;

(4)  Revises the definition of "full-time employee" from an
employee who works an average of 35 hours per week to an employee
of the qualified company who is scheduled to work an average of
35 hours per week, but leaves the remaining requirements of the
definition unchanged;

(5)  Changes the calculation of new direct local revenue so that
local earnings taxes are excluded;

(6)  Specifies that no jobs created before the notice of intent
will be deemed new;

(7)  Specifies the way in which new payroll will be calculated;

(8)  Adds educational services, religious organizations, public
administration, and utilities regardless of whether or not they
are regulated by the Missouri Public Service Commission to the
list of entities which are prohibited from being qualified
companies.  However, the headquarters or administrative offices
which would otherwise be excluded may qualify for benefits if the
offices serve a multi-state territory;

(9)  Expands the definition of "technology business project" to
include a qualified company that researches, develops, or
manufactures power system technology for aerospace, space,
defense, hybrid vehicles, or implantable or wearable medical
devices;

(10)  Revises the definition of "withholding tax" to a
computation using a schedule determined by the Department of
Economic Development based on average wages.  Currently, the
definition is the state tax imposed under Sections 143.191 -
143.265;

(11)  Increases the cap on the amount of tax credits that can be
issued in a calendar year for the program from $12 million to $40
million;

(12)  Expands the types of projects which are eligible to receive
benefits to include small business job retention and flood
survivor relief projects.  In this case, a qualified company may
receive a tax credit for the retention of jobs and flood survivor
relief in this state for each job retained over a three-year
period.  The substitute specifies the requirements which must be
met for this type of project, including that the qualified
company has fewer than 100 employees, the company's average wage
must meet or exceed the county average wage, all of the company's
facilities are located in Missouri, and its facilities were
directly damaged by flood water rising above the level of a
500-year flood at least two years, but less than eight years,
before an application to the program is made.  The qualified
company must also invest at least $2 million in capital
improvements in facilities and equipment located at facilities
that are not located within a 500-year flood plain.  For this
project type, the tax credit is equal to up to 100% of the
withholding taxes generated by the full-time jobs at the project
facility during a three-year period.  The calendar year's annual
maximum amount of tax credits which can be issued to a qualified
company cannot exceed $250,000.  The department can propose that
this maximum amount be doubled to $500,000; however, this must be
approved by the Quality Jobs Advisory Task Force.  The total
annual program cap is $500,000.  No tax credits will be issued
for projects approved by the department after August 30, 2010;

(13)  Prohibits a qualified company from participating in the
Quality Jobs Program's Small Business Job Retention and Flood
Survivor Relief project type if it received any state or federal
benefits, incentives, tax relief, or abatement for locating its
facility to a flood plain;

(14)  Requires any taxpayer who participates in the Quality Jobs
Program and knowingly hires illegal immigrants to forfeit the
program's benefits and repay the state an amount equal to any tax
credits redeemed or withholding taxes already retained;

(15)  Allows the calendar year's maximum amount of quality jobs
tax credits issued to a qualifying company that participates in
both the Quality Jobs Program and the New Job Training Program to
be increased by an amount equivalent to the withholding tax
retained by that company under the New Job Training Program if
the combined benefits do not exceed the projected state benefits
of the project;

(16)  Requires that if the calendar year's annual maximum amount
of quality jobs tax credits issued to any qualified company is
increased by $1 million, the number of new jobs must exceed 500.
Currently, this increase in tax credits can occur by receiving
the approval of the department and the Quality Jobs Advisory Task
Force;

(17)  Requires the department to give preference to qualified
companies and projects targeted at an area of the state which has
recently been classified as a disaster area by the federal
government;

(18)  Allows qualified companies to retain withholding taxes once
the minimum number of new jobs has been attained and the county
average wage has been exceeded; and

(19)  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, Financial
Institutions, and Professional Registration that the applicant
does not owe any delinquent insurance taxes prior to issuing any
tax credits.  The amount of tax credits issued will be reduced by
any tax delinquency.

The provisions regarding the New Markets - Qualified Equity
Investment Tax Credit and the Film Production Tax Credits will
expire six years from the effective date.

The substitute contains an emergency clause.

FISCAL NOTE:  Estimated Cost on General Revenue Fund of More than
$480,676 - could exceed $35,480,676 in FY 2008, More than
$745,043 - could exceed $48,745,043 in FY 2009, and More than
$757,650 - could exceed $66,757,650 in FY 2010.  Estimated Cost
on Other State Funds of Unknown in FY 2008, FY 2009, and FY 2010.

Missouri House of Representatives
94th General Assembly, 1st Special Session
Last Updated September 11, 2007 at 3:25 pm