senate research-ss scs sb8 memo, 0031s01m03f

8/4/2019 Senate Research-SS SCS SB8 Memo, 0031S01M03F

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MISSOURI SENATEDIVISION OF RESEARCH

State Capitol, Room B-9, Jefferson City, MO 65101

TEL. (573) 522-7910 FAX (573) 751-4778

H:\11BILL-SPECIAL\0031S01M.03F

TO: Senator Mayer

FROM: Jason Zamkus, Staff Attorney

DATE: September 8, 2011

Re: SS/SCS/SB 8 - Taxation

Per your request, please find attached yellow-backed copiesof a Senate Substitute for Senate Committee Substitute for Bill 8relating to taxation.

This version differs from the Senate Committee Substitute in

that it:

1) Phases-in reductions to the amount of low-income housing

tax credits which may be authorized each fiscal year but allows

increases to such amounts by appropriation (Sections 135.350 and

135.352);

2) Phases-in reductions to the amount of historic

preservation tax credits which may be authorized each fiscal year

but allows increases to such amounts by appropriation (Sections253.550-253.559;

3) Prohibits the authorization of Missouri Development

Finance Board infrastructure contribution and bond guarantee tax

credits on or after the effective date of the act (Sections

100.286 and 100.297);

4) Incorporates various changes to the Compete Missouri

Program; (Section 620.2000-620.2020);

5) Removes provisions regarding MOSIRA from the bill

(Sections 196.1109, 196.1115, 348.251, 348.253, 348.256, 348.261,

348.262, 348.263,348.264, 348.271, and 348.300); and

6) Removes sections 135.950, 135.973, 144.062, and 144.540from the bill.

SUMMARY

This act modifies provisions of existing tax credit programsin a manner consistent with the recommendations of the Tax CreditReview Commission and establishes new tax incentive programs.


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TAX CREDITS TO ATTRACT SPORTING EVENTS

The act creates a refundable income and financialinstitutions tax credit which may be available for sportscommissions, convention and visitors bureaus, certain nonprofitorganizations, counties, and municipalities to offset expenses

incurred in attracting sporting events to the state. Applicantsfor the tax credit must submit game support contracts to thedepartment of economic development for approval. The tax creditwill be equal to the lesser of five dollars for each admissionticket sold for the event or one hundred percent of eligibleexpenses incurred. No more than three million dollars in taxcredits may be issued per fiscal year. The tax credits are fullytransferrable, provided a notarized endorsement is filed with thedepartment of economic development. The department of economicdevelopment is prohibited from certifying game support contractsafter August 28, 2017, but may certify game support contractsprior to such date which pertain to games to be held after August10, 2017.

The act also creates an income tax credit equal to fiftypercent of the amount of an eligible donation made, on or afterJanuary 1, 2011, to a certified sponsor or local organizingcommittee for the purposes of attracting sporting events to thestate. The tax credit may not be applied against withholdingtaxes. The tax credit is non-refundable, but may be carriedforward four years. The tax credit is transferable. Certifiedsponsors and local organizing committees may apply to thedepartment of economic development for the tax credits.Applications for tax credits must be accompanied by payment in anamount equal to the tax credits requested. The department ofeconomic development is prohibited from issuing more than tenmillion dollars in tax credits each fiscal year. The provisionsof this act shall automatically sunset six years after theeffective date of the act unless reauthorized.

AEROTROPOLIS TRADE INCENTIVE AND TAX CREDIT ACT

The Aerotropolis Trade Incentive and Tax Credit Act isestablished, which authorizes the owners of property consistingof at least fifty contiguous acres located within a fifty mile

radius of Lambert International Airport to petition for thedesignation of a gateway zone. The collector of revenue for anycity or county in which a gateway zone is located will annuallylevy special assessments on facilities located within such zonewhich receive benefits provided under the act. Revenues derivedfrom the special assessments will be expended to promote andadvertise the gateway zone.


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For all taxable years beginning on or after January 1, 2011,the act authorizes air export tax credits for freight forwardersin an amount equal to thirty cents per chargeable kilo shipped ona qualifying outbound flight. In lieu of the previouslymentioned tax credit, a freight forwarder will be entitled to an

air export tax credit equal to thirty-five cents per chargeablekilo if the shipment contains perishable freight. The departmentof economic development is required to adjust the tax creditamounts based upon fluctuations in fuel costs for over-the-roadtransportation. In order to receive air export tax credits,freight forwarders must file an application with the departmentcontaining the master airway bill for the shipment. The actrequires the department to establish procedures to allow freightforwarders to receive air export tax credits within ten businessdays of the departure of the qualifying flight.

The total amount of air export tax credits which may be

authorized under the act cannot exceed sixty million dollars.The act establishes annual caps on issuance of air export taxcredits, and to the extent that in any given year more taxcredits are authorized than may be issued, the amount in excessof the cap on issuance will be carried forward for issuance inthe following year. The authorization of air export tax creditsis prohibited after August 28, 2019, but the act allows for thesubsequent issuance of any tax credits which are authorized priorto such date.

For all taxable years beginning on or after January 1, 2013,any tenant operating within an eligible facility which satisfiesthe requirements of the act and employees of such tenant will beentitled to an exemption from local earnings taxes imposed by theCity of St. Louis for a period of up to seven years.

For all taxable years beginning on or after January 1, 2013,owners of qualified facilities, in which at least twenty percentof the total cargo activity consists of international cargo, willbe entitled to receive tax credits over a seven-year period equalto six percent of the eligible costs of such facility, providedsuch owner can demonstrate that at least ten new jobs areprojected to be created at the facility by the end of theeligibility period. The total amount of tax credits issued tosuch an owner cannot exceed thirty percent of the facility'seligible costs. Owners of qualified facilities, in which atleast ten percent of the total cargo activity consists ofinternational cargo, as well as any qualifying assembly andmanufacturing, or qualifying cold-chain facility will be entitledto receive tax credits over a seven-year period equal to four


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percent of the eligible costs of such facility, provided suchowner can demonstrate that at least ten new jobs are projected tobe created at the facility by the end of the eligibility period.The total amount of tax credits issued to such an owner cannotexceed twenty percent of the facility's eligible costs.

In order to receive tax incentives provided under the act,owners and tenants of qualifying facilities and entitiesoperating within such facilities must file applications with thedepartment of economic development accompanied by a certificateof compliance. The act establishes limits on the amount of taxcredits which may be issued annually to owners of qualifyingfacilities. No more than three hundred million dollars in taxcredits, based upon the eligible costs of a qualifying facility,may be authorized for owners of qualified facilities under theact.

All tax credits provided under the act will be fully

transferrable and non-refundable, but may be carried forward upto six years.

DATA CENTERS

The act authorizes state and local sales and use taxexemptions for new and expanding data centers and permitsdonation lease agreements between municipalities and data centerprojects.

COMPETE MISSOURI

This act establishes the Compete Missouri Program which combinessix existing business incentive programs and will provide taxincentives for job creation, job retention, and capitalinvestment. The act also establishes the Compete Missouri JobTraining Program which combines three existing job trainingprograms and provides funding for job training.

The act establishes the Compete Missouri Job TrainingProgram which will provide financial assistance for job trainingfor new jobs created by qualified companies. Financialassistance will also be available to business and technologycenters established by Missouri community colleges, or state-owned postsecondary technical colleges, to provide business and

training services for growth industries. The act provides forthe diversion of withholding taxes from new or retained jobs ofqualified companies to pay costs incurred by new or retained jobstraining projects administered by local educational agencies suchas community and technical colleges.

The provisions of the act creating the Compete Missouri


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Training Program will automatically sunset July 1, 2018, unlessreauthorized. (Sections 620.800 to 620.809)

The Compete Missouri Program is established to provide taxincentives in the form of sales and use tax exemptions, retainedwithholding taxes, and refundable income and financial

institutions tax credits for qualified companies that create newor retain existing jobs and make capital investments. Theprogram provides both entitlement and discretionary benefits forqualified companies that offer health insurance to all employeesand pay at least fifty percent of the premiums. Tax creditsprovided under the program are fully transferrable and must beused within one taxable year following the close of the taxableyear in which they are issued. (Sections 620.2000 to 620.2020)

Qualified companies, which create a minimum of twenty newjobs with an average wage equal to or exceeding ninety percent ofthe county average wage or retain at least one hundred and

twenty-five jobs with an average wage equal to or in excess ofninety percent of the county average wage and make at leastfifteen million dollars in capital investment, will be eligibleto receive up to three years of state and local sales taxexemption for purchases of tangible personal property andbuilding materials used to construct, repair, or remodel aproject facility. The department of economic development willcertify qualified companies for the state sales tax exemptionswhile local governments will have the option to certify qualifiedcompanies for exemptions from their local sales taxes. The actcontains recapture provisions requiring repayment of taxincentives in the event a qualified company fails to meet programrequirements. (Sections 144.062 and 144.540)

Qualified companies that create twenty or more new jobs withan average wage equal to or in excess of ninety percent of thecounty average wage will be entitled to retain withholding taxesfrom new payroll for a period of five years. Such a company willalso be entitled to tax credits equal to up to two percent of newpayroll to be issued each year for five years, provided that thecombined tax credit and retained withholding benefits cannotexceed five percent of new payroll. The act gives the departmentof economic development the discretion to issue such companyadditional tax credits, equal to up to four percent of payroll,for five years provided that the total amount of all benefitsreceived does not exceed nine percent of new payroll annually.In addition, discretionary tax credits authorized by thedepartment cannot exceed the projected net state benefit.

If a qualified company is in a targeted industry and it


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creates ten or more new jobs with an average wage equal to or inexcess of ninety percent of the county average wage, it will beentitled to retain withholding taxes from new payroll for aperiod of five years. Such a company will also be entitled totax credits equal to up to three percent of new payroll to beissued each year for five years, provided that the combined tax

credit and retained withholding benefits cannot exceed sixpercent of new payroll. The act gives the department of economicdevelopment the discretion to issue such company additional taxcredits, equal to up to six percent of new payroll, for fiveyears provided that the total amount of all benefits receiveddoes not exceed nine percent of new payroll annually.Discretionary tax credits authorized by the department cannotexceed the projected net state benefit.

Qualified companies, located within an enhanced enterprisezone, that create two or more new jobs with an average wage equalto or in excess of eighty percent of the county average wage and

make a capital investment of at least one hundred thousanddollars will be entitled to retain withholding taxes for a periodof five years.

Any qualified company that is an existing Missouri businessand meets the aforementioned conditions under the competeMissouri program will be entitled to retain withholding taxes foran additional year.

The department of economic development may provide up-frontfinancing to qualified companies in the form of refundable taxcredits capable of being issued upon approval of the project. Toreceive such benefits, a qualified company must enter into awritten agreement with the department that provides performancerequirements and clawback provisions. Qualified companies intargeted industries could receive tax credits equal to as much asnine percent of new payroll projected over a five year period.Non-targeted industry qualified companies could receive taxcredits equal to as much as seven percent of new payrollprojected over a five year period.

The department of economic development may allow qualified

companies, that agree to retain at least one hundred and twenty-five existing jobs with an average wage equal to or in excess ofninety percent of the county average wage for at least ten yearsand agree to make a capital investment equal to one-half of theamount of state benefits provided within three years, to retainwithholding taxes from the retained jobs for a period of tenyears. The department of economic development may provide up-front financing to qualified companies in the form of refundable


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year.

The provisions of the act creating the Compete MissouriProgram will automatically sunset six years after the effectivedate of the act unless reauthorized.

RETALIATORY TAXESThe act prohibits an insurance company claiming a state

premium tax credit or deduction from be required to pay anyadditional retaliatory tax under Section 375.916 as a result ofclaiming the credit or deduction.

TAX CREDIT REFORM

This act also modifies provisions of Missouri tax creditprograms in accordance with recommendations made by the MissouriTax Credit Review Commission Report.

SPECIAL NEEDS ADOPTION TAX CREDITSThe act makes international adoptions ineligible for special

needs adoption tax credits.

LOW-INCOME HOUSING TAX CREDITSThe act establishes a one hundred million dollar cap for

authorizations of 9% low-income housing tax credits for FY 2012.Subject to appropriation, up to an additional ten million dollarsin 9% credits may be authorized for such fiscal year. For eachsubsequent fiscal year the amount of 9% low-income housing taxcredits which may be authorized is reduced by ten million dollarsand the additional amount which may be authorized, subject toappropriation, is increased by a corresponding amount. BeginningFY 2015, no more than seventy million dollars in 9% low-incomehousing tax credits may be authorized each fiscal year, butsubject to appropriation up to an additional forty milliondollars in tax credits may be authorized.

Authorizations of 4% low-income housing tax credits arecapped at fifteen million dollars for FY 2012. Subject toappropriation, an additional five million dollars in 4% low-income housing tax credits may be authorized for such fiscalyear. For each subsequent fiscal year the amount of 4% low-income housing tax credits which may be authorized is reduced by

five million dollars and the additional amount which may beauthorized, subject to appropriation, is increased by acorresponding amount. Beginning FY 2015, no more 4% low-incomehousing tax credits may be authorized each fiscal year, unless anappropriation is made. In any such fiscal year in which anappropriation is made, no more than the lesser of the amountappropriated or twenty million dollars in 4% low-income tax


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credits may be authorized.

The act prohibits the authorization of 4% low-income housingtax credits after June 30, 2015. The stacking of state 9% low-income housing tax credits with state historic preservation taxcredits for the same project is prohibited. The carry-back for

low-income housing tax credits is reduced from three years to twoyears.

WINE AND GRAPE PRODUCER TAX CREDITSBeginning January 1, 2012, the authorization of wine and

grape producer tax credits will be limited to no more than twohundred thousand dollars each year.

RESIDENTIAL TREATMENT AGENCY TAX CREDITSUnder current law, residential treatment agencies are

prohibited from applying for residential treatment agency taxcredits in an amount greater than forty percent of the payments

received by the agency from the department of social services.This act would allow residential treatment agencies to apply forsuch tax credits in an amount which does not exceed the amount ofpayments received by the agency from the department of socialservices.

HISTORIC PRESERVATION TAX CREDITSUnder current law, the department of economic development is

prohibited from issuing more than one hundred forty milliondollars in historic preservation tax credits in any fiscal yearfor projects which will receive more than two hundred andseventy-five thousand dollars in tax credits.

Large Projects:For FY 2012, this act would prohibit the department of

economic development from approving more than seventy-six milliondollars in historic preservation tax credits, increased by theamount of any recisions of approved applications for such taxcredits, for projects which would receive more than two hundredand seventy-five thousand dollars in tax credits. Subject toappropriation, the amount of historic preservation tax creditswhich may be authorized by the department may be increased by upto four million dollars for such fiscal year. For eachsubsequent fiscal year the amount of historic preservation taxcredits which may be authorized is reduced by four milliondollars and the additional amount which may be authorized,subject to appropriation, is increased by a corresponding amount.Beginning FY 2015, the department of economic development will beprohibited from approving more than sixty-four million dollars inhistoric preservation tax credits, increased by the amount of any


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recisions of approved applications for such tax credits, forprojects which would receive more than two hundred and seventy-five thousand dollars in tax credits no more than fifty milliondollars each fiscal year, but subject to appropriation up to anadditional sixteen million dollars in tax credits may beauthorized for such projects.

Small Projects:For FY 2012, this act would prohibit the department of

economic development from approving more than nine milliondollars in historic preservation tax credits, increased by theamount of any recisions of approved applications for such taxcredits, for projects which would receive less than two hundredand seventy-five thousand dollars in tax credits. Subject toappropriation, the amount of historic preservation tax creditswhich may be authorized by the department may be increased by upto one million dollars for such fiscal year. Each subsequentfiscal year, the amount of historic preservation tax credits

which may be authorized is reduced by one million dollars and theadditional amount which may be authorized, subject toappropriation, is increased by a corresponding amount. BeginningFY 2015, the department of economic development will beprohibited from approving more than six million dollars inhistoric preservation tax credits, increased by the amount of anyrecisions of approved applications for such tax credits, forprojects which would receive less than two hundred and seventy-five thousand dollars in tax credits no more than fifty milliondollars each fiscal year, but subject to appropriation up to anadditional four million dollars in tax credits may be authorizedfor such projects.

Non-Income Producing Residential Projects:The act prohibits the department from issuing more than one

hundred twenty-five thousand dollars in historic preservation taxcredits per project for non-income producing residentialrehabilitation projects.

Transition Rules:Applicants for projects that, as of the effective date of theact, have: received approval from the department of economicdevelopment; incurred certain levels of expenses; or receivedcertification from the state historical preservation officer willnot be subject to the new limitations on tax credit issuance, butwill be subject to the current law limitations on tax creditissuance.Stacking:The act also prohibits the stacking of state historic


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preservation tax credits with state 9% low-income housing taxcredits. Historic preservation tax credits will now be capableof being carried back one year or forward five years.

Cost Certification and Tax Credit Issuance:The act requires historic preservation tax credit

applications to include a cost certification performed by alicensed certified public accountant. Within forty-five daysfollowing receipt of a tax credit application and costcertification, the department of economic development must issuethe lesser of seventy-five percent of the amount of tax creditscertified as eligible under the cost certification or the amountof tax credits the project was preliminarily approved to receive.Within one hundred fifty days following the receipt of the taxcredit application and cost certification the department ofeconomic development must determine the final amount of taxcredits available for the project and, if applicable, issue anyremaining credits. If the department determines more tax credits

were issued during the preliminary issuance than the project iseligible to receive, the department will recapture the excess.Additional cost certification requirements and recaptureprovisions are created for projects which claim accrued developerfees as eligible costs for tax credits. The act creates a thirdparty appeals process in which developers can challengeeligibility determinations made by the department.

BROWNFIELD REMEDIATION TAX CREDITSThe act prohibits the authorization of more than forty

million dollars in brownfield remediation tax credits in eachfiscal year for FY 2012 - FY 2015. Beginning in FY 2016, no morethan thirty-five million dollars in brownfield remediation taxcredits may be authorized in each fiscal year. The actprohibits the authorization of more than ten million dollars inBrownfield tax credits each fiscal year, for FY 2012 - FY 2015,for projects that receive benefits under the Distressed AreasLand Assemblage program. Beginning FY 2016, no more than fivemillion dollars in Brownfield tax credits may be authorized eachfiscal year for projects that receive benefits under theDistressed Areas Land Assemblage program.

SUNSET PROVISIONS FOR CERTAIN TAX CREDIT PROGRAMSDue to the Tax Credit Review Commission's recommendation

that reforms to programs be made on a prospective basis, ratherthan utilizing traditional sunset provisions, this act prohibitsthe authorization of tax credits under the following programsafter the effective date of the act:

1) The Neighborhood Preservation Tax Credit;


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2) The Brownfield Jobs and Investment Tax Credit;3) The Small Business Incubator Tax Credit;4) The MDFB Bond Guarantee Tax Credit; and5) The MDFB Infrastructure Development Contribution Tax

Credit

The authorization of tax credits under the followingprograms will be prohibited after August 28, 2014:

1) The Family Farm Breeding Livestock Tax Credit;2) The Agricultural Product Utilization Tax Credit;3) The New Generation Cooperative Tax Credit;4) The Qualified Beef Tax Credit; and5) The Wine and Grape Producer Tax Credit.


1) The Domestic Violence Shelter Tax Credit;2) The Maternity Home Tax Credit;3) The Pregnancy Resource Center Tax Credit;4) The Shared Care Tax Credit;5) The Youth Opportunities Tax Credit;6) The Disabled Access Tax Credit;7) The Family Development Account Tax Credit;8) The Residential Treatment Agency Tax Credit;9) The Food Pantry Tax Credit;10) The Neighborhood Assistance Program;11) The Property Tax Credit (Circuit Breaker);12) The Public Safety Officer Surviving Spouse Tax Credit;13) The Affordable Housing Tax Credit;14) The Special Needs Adoption Tax Credit;15) The Children in Crisis Tax Credit; and16) The Residential Dwelling Access Tax Credit.


1) The Low-Income Housing Tax Credit;2) The Historic Preservation Tax Credit; and3) The Brownfield Remediation Tax Credit.

Where, under current law, a tax credit was subject to thesunset act, the sunset provision is modified to sunset suchprogram on the date provided above.

The limitations on tax credit authorizations provided in theact will not impair an administering agencies ability to issue


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tax credits that were authorized prior to the date on whichauthorizations are prohibited, nor will they affect a taxpayer'sability to redeem such tax credits.

REPEAL OF CERTAIN TAX CREDIT PROGRAMSThis act repeals the following tax credit programs:

1) The Charcoal Producers Tax Credit;2) The Self-Employed Health Insurance Tax Credit; and3) The Health Care Access Fund Tax Credit.

Provisions contained in this act are similar to provisionscontained in the SS/SCS/HCS/HB's 116 & 316 (2011). This actcontains an emergency clause.

Please do not hesitate to contact me if you feel I may be offurther assistance.

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