HB 26 -- Tax Credits

Sponsor:  Cunningham (86)

This bill changes various provisions related to tax credits.

TAX CREDITS FOR EDUCATION-RELATED CHARITABLE DONATIONS

The bill authorizes an income tax, corporation franchise tax, or
express company tax credit of up to 50% of any contribution of
$200 or more to a certified nonprofit educational assistance
organization.  The cumulative amount of tax credits statewide are
capped at $5 million per year.

The Department of Economic Development will administer the tax
credit program.  The department will select designated nonprofit
oversight organizations to assist in the administration of the
tax credit program and in the selection of certified nonprofit
educational assistance organizations that meet the criteria
provided in the bill.

The eligible pupil count in the computation of state aid to
school districts is required to be adjusted so that no school
district receives aid for any student that transfers as the
result of using the proceeds of an educational scholarship.

The bill also eliminates several economic programs and makes
changes to several others.  Specifically, the bill:

(1)  Creates a new tax credit program called the Sustainable
Neighborhoods and Communities Tax Credit Act, which will expire
on January 1, 2006;

(2)  Creates a new tax credit program called the Competitive
Communities Tax Credit Act;

(3)  Eliminates tax credits for homeless assistance projects for
low-income Missourians, effective January 1, 2006;

(4)  Adds an expiration date to the Neighborhood Assistance, the
Youth Opportunities and Violence Prevention, and the Development
Tax Credit programs.  No projects can be approved for these tax
credits after August 28, 2003, and no tax credits can be issued
for these programs after January 1, 2006;

(5)  Eliminates tax credits for investing in a distressed
community or relocating a business to a distressed community,
effective January 1, 2004;

(6)  Eliminates tax credits for investing in the transportation
development of a distressed community, effective January 1, 2004;

(7)  Eliminates tax credits for film production companies;

(8)  Eliminates the Missouri Individual Training Account Program;
and

(9)  Eliminates the Mature Worker Child Care Program.

TAX CREDITS FOR NEIGHBORHOOD ASSISTANCE, AFFORDABLE HOUSING
ASSISTANCE, AND CONTRIBUTIONS TO CERTAIN NEIGHBORHOOD
ORGANIZATIONS

Effective January 1, 2006, the bill:

(1)  Eliminates the neighborhood assistance tax credits;

(2)  Authorizes the Missouri Housing Development Commission
instead of the Department of Revenue to grant affordable housing
tax credits;

(3)  Allows affordable housing tax credits and tax credits for
businesses that make a contribution to certain neighborhood
organizations to be transferred or sold; and

(4)  Changes the name of the Neighborhood Assistance Act to the
Affordable Housing Act.

BUSINESS-USE INCENTIVES FOR LARGE-SCALE DEVELOPMENT

The bill:

(1)  Removes the $75 million limit on the total amount of
outstanding revenue bonds the Missouri Development Finance Board
can sell;

(2)  Limits the amount of authorized tax credits for large-scale
development to $11 million annually;

(3)  Reduces the minimum amount of money an eligible industry
must invest in most economic development projects from $15
million to $7 million.  For office industry projects, the minimum
investment remains at $10 million;

(4)  Reduces the minimum number of new jobs an eligible industry
must create with most economic development projects from 100 to
50.  For office industry projects, the minimum number of jobs
remains at 500.  For office industry projects in distressed
communities, the minimum number of new jobs remains at 200; and

(5)  Removes health and professional services from the exclusion
clause in the definition of "eligible industry."

ENTERPRISE ZONES

The bill:

(1)  Allows only approved taxpayers to receive the tax credits,
tax exemptions, and other economic incentives related to
enterprise zones, rather than allowing any taxpayer to receive
them as allowed by current law;

(2)  Limits the amount of tax credits authorized for taxpayers
who begin operations in an enterprise zone on or after August 28,
2003, to $50 million annually;

(3)  Requires a taxpayer who begins operations in an enterprise
zone between January 1, 1999, and August 28, 2003, to have an
approved letter of intent to be eligible for the economic
incentives related to enterprise zones;

(4)  Requires taxpayers to file the initial application for tax
credits in the tax period immediately following the tax period in
which commercial operations begin at the new business; and

(5)  Expands the list of revenue producing enterprises to include
local exchange telecommunications services, certain photo
finishing activities, targeted industries, unspecified industries
deemed beneficial to the economy that are considering a new or
expanded business facility in an enterprise zone, and enterprises
identified by a Standard Industry Classification (SIC) number
that is the same as a corresponding number in subsequent federal
industry classification systems.

SUSTAINABLE NEIGHBORHOODS AND COMMUNITIES TAX CREDIT ACT

The bill:

(1)  Creates a new tax credit program called the Sustainable
Neighborhoods and Communities Tax Credit Act, which will expire
on January 1, 2006;

(2)  Limits the amount of these tax credits authorized annually
to $15 million; and

(3)  Allows a tax credit for several different types of projects
that can be undertaken by a community-based organization or
business.  Projects must be approved by the Director of the
Department of Economic Development.  The amount of the tax credit
will be 50% of expenses associated with eligible projects.  A tax
credit equal to 70% of expenses associated with eligible projects
can be awarded if the town in which the project occurs has fewer
than 15,000 residents and is located in a rural county.  If a
town with fewer than 15,000 residents is located in a county that
is part of a metropolitan statistical area, but the county has
only one town with more than 15,000 residents and a substantial
number of residents in the county derive their income from
agriculture, then a 70% tax credit may also be awarded.  The
exact amount of the tax credit will be determined by the
director.

COMPETITIVE COMMUNITIES TAX CREDIT ACT

The bill:

(1)  Creates a new tax credit program called the Competitive
Communities Tax Credit Act;

(2)  Limits the amount of these tax credits authorized to $5
million annually;

(3)  Requires the Department of Economic Development to adopt a
multi-year plan determining program priorities in which projects
will be eligible to receive these tax credits.  The bill explains
the criteria which should be used when making determinations of
eligibility;

(4)  Allows businesses seeking the department's approval for a
project to submit an application;

(5)  Requires the director to approve or disapprove a project and
establish the amount of the tax credit to be granted; and

(6)  Allows these tax credits to be transferred or sold.

HISTORIC STRUCTURES REHABILITATION TAX CREDIT

The bill:

(1)  Requires the individual or entity wishing to receive the tax
credit to file a pre-application with the Department of Economic
Development for preliminary approval;

(2)  Requires a project to be in service no later than three
years after the date of preliminary approval; and

(3)  Requires that an application for the issuance of tax credits
be received by the department no later than the end of the tax
year following the tax year in which the project went into
service.  Applications received after this date will not be
allowed a tax credit.

MISSOURI TECHNOLOGY CORPORATION

The bill:

(1)  Requires that certain documents submitted to the Missouri
Technology Corporation be deemed closed records;

(2)  Expands the corporation's board from 15 members to 16 and
requires that the Commissioner of Higher Education be a member;
and

(3)  More fully explains the powers of the corporation.

TAX CREDITS FOR QUALIFIED RESEARCH EXPENSES

Effective January 1, 2004, the bill:

(1)  Allows the Director of the Department of Economic
Development to authorize a tax credit up to 6.5% of the qualified
research expenses that are greater than the average amount of
qualified research expenses for the previous three tax years; and

(2)  Prohibits the transfer or sale of these tax credits.

INDUSTRIAL DEVELOPMENT PROJECTS

Current law requires municipalities to file an annual report with
the Department of Revenue regarding revenue bonds and general
obligation bonds issued in the previous year.  In addition to the
information the annual report must currently contain, the bill
requires municipalities to include the amount of any state sales
taxes that were not paid on the project because the buyer was
tax-exempt.  This will become effective on January 1, 2004.

TAX CREDITS FOR NEW OR EXPANDED BUSINESS FACILITIES

The bill states that facilities which begin operating on or after
August 28, 2003, will not receive tax credits for new or
expanding business facilities.

TAX CREDITS FOR CHARCOAL PRODUCERS

The bill requires charcoal producers who elect to assign their
tax credits to a third party to file all appropriate forms with
the Department of Natural Resources rather than the Department of
Economic Development, as currently required.

TAX CREDITS FOR MISSOURI LOW-INCOME HOUSING

The bill allows taxpayers to receive a Missouri low-income
housing tax credit only if they have received a federal tax
credit, rather than requiring that taxpayers receive the tax
credit regardless of whether or not they have received the
federal tax credit as is currently allowed.  These tax credits
can be transferred or sold.  This will become effective on
January 1, 2004.

OTHER PROVISIONS

Current law requires that for any contract or agreement between
the Department of Economic Development and another party that
provides grants, loans, or other assistance to which a monetary
value can be assigned, the department must specify that the
recipient will use the grant, loan, or other assistance solely as
required by the program through which the assistance was provided
and that misappropriated funds be repaid in full to the
department.  The bill applies the same conditions to tax credits.

In addition, the bill requires the department for each grant,
loan, tax credit, or other financial incentive to:

(1)  Describe the economic incentive, including its amount and
type;

(2)  State why the economic incentive is needed;

(3)  State the public purpose for the incentive;

(4)  State the goals for the incentive and the time periods by
which these goals must be met;

(5)  Describe the financial obligations of the party if the
requirements of the contract or agreement are not met;

(6)  State the name and address of the parent corporation of the
recipient, if any; and

(7)  State all other financial assistance known by the department
that was received by the recipient for the same project.  All
contracts and agreements are governed by the applicable
provisions of contract law.

The bill also requires the department to submit an annual report
to the Governor, Speaker of the House of Representatives, and the
President Pro Tem of the Senate regarding all economic incentives
administered in the previous calendar year.  The bill specifies
the requirements of the report.

These other provisions will become effective on January 1, 2004.

Missouri House of Representatives
Last Updated July 10, 2003 at 4:13 pm