HS HCS HB 1566 & 1810 -- SMALL BUSINESS TAX CREDITS (Bray)

This substitute makes various changes to economic development
programs relating to distressed communities and small business
investment tax credits.  The substitute:

(1)  Lowers the investment requirement of principal owners of
Missouri small businesses eligible for investment from 50% of
the business to 20% of the business;

(2)  Reduces the statewide limit on all tax credits for
investments in a small business from $13 million to $6 million;

(3)  Increases the maximum percentage of investment ownership
allowed in a small business to qualify for a tax credit from 50%
to 80%;

(4)  Reduces the time period requirement for investment in a
small business from 5 years to 2 years and excludes any sale,
change of control, or the going public of a business from the
minimum period of time for investment for purposes of the small
business investment tax credit program;

(5)  Reduces the percentage of employees required to be located
at a business contained within distressed communities from 75%
to 60% and increases the maximum number of employees at a
business contained within a distressed community from 100 to 150
to qualify for the distressed communities tax credit program;

(6)  Allows the leasing of certain technology equipment to
qualify as an expense for purposes of obtaining a tax credit and
increases the maximum tax credit for such equipment expense from
$75,000 to $150,000;

(7)  Expands the availability of follow-up capital to include
businesses which have previously received follow-up capital
within the last 3 years for purposes of tax credits for
contributions to innovation centers;

(8)  Increases the allowable tax credit percentage of the amount
of qualified contribution to a qualified fund for purposes of
tax credits for contributions to innovation centers from 50% to
75% and reduces the aggregate maximum statewide credits for
contributions to innovation centers from $9 million to $5
million annually;

(9)  Allows any unused credits for these tax credit programs
from the previous year to be added to any statewide caps for
these programs in future years;

(10)  Requires the Department of Economic Development to pursue
a revocation of the tax credits only from the original applicant
for the tax credit; and

(11)  Removes from the definition of distressed community the
limitation that census block groups that qualify under the
median income guidelines must also meet guidelines related to
population and be contiguous to other qualifying census block
groups.

The substitute contains an emergency clause.

FISCAL NOTE:  Estimated Net Loss to General Revenue Fund of $0
to $11,000,000 in FY 2001, FY 2002, and FY 2003.

HCS HB 1566 & 1810 -- SMALL BUSINESS TAX CREDITS

SPONSOR:  Bray

COMMITTEE ACTION:  Voted "do pass" by the Committee on Ways and
Means by a vote of 16 to 0.

This substitute makes various changes to economic development
programs relating to distressed communities and small business
investment tax credits.  The substitute:

(1)  Lowers the investment requirement of principal owners of
Missouri small businesses eligible for investment from 50% of
the business to 20% of the business;

(2)  Reduces the allowable credit percentage for qualified
investment in small businesses, other than those located in
distressed communities, from 40% of the amount of the investment
to 30% and reduces the statewide limit on all tax credits in a
small business from $13 million to $6 million;

(3)  Excludes any sale, change of control, or the going public
of a business from the minimum period of time for investment for
purposes of the small business investment tax credit program;

(4)  Changes the qualification as a distressed community for
municipalities and census block groups located in
nonmetropolitan areas by comparing median household income of
nonmetropolitan areas to the entire state instead of comparing
just to other nonmetropolitan areas;

(5)  Reduces the percentage of employees required to be located
at a business contained within a distressed community from 75%
to 60% and increases the maximum number of employees at a
business contained within a distressed community from 100 to 150
to qualify for the distressed communities tax credit program;

(6)  Allows the leasing of certain technology equipment to
qualify as an expense for purposes of obtaining a tax credit and
increases the maximum tax credit for such equipment expense from
$75,000 to $150,000;

(7)  Expands the availability of follow-up capital to include
businesses which have previously received follow-up capital
within the last 3 years for purposes of tax credits for
contributions to innovation centers;

(8)  Increases the allowable tax credit percentage of the amount
of qualified contribution to a qualified fund for purposes of
tax credits for contributions to innovation centers from 50% to
75% and reduces the aggregate maximum statewide credits for
contributions to innovation centers from $9 million to $5
million annually; and

(9)  Allows any unused credits for these tax credit programs
from the previous year to be added to any statewide caps for
these programs in future years.

The substitute contains an emergency clause.

FISCAL NOTE:  Estimated Net Loss to General Revenue Fund of $0
to $11,000,000 in FY 2001, FY 2002, and FY 2003.

PROPONENTS:  Supporters say that these tax credits are vital to
the development of small business and the economic expansion of
distressed communities in Missouri and that the bill will expand
the current tax credit programs to meet the needs.

Testifying for the bill were Representatives Bray and Gibbons;
Technology Gateway Alliance; Frank Renick; First Morgan Telecom
Properties; Missouri Chamber of Commerce; Mark Braun; Jeff Dee;
John Davidson; and St. Louis Regional Commerce and Growth
Association.

OPPONENTS:  There was no opposition voiced to the committee.

Bill Tucker, Assistant Director of Research

HB 1566 -- Taxation:  Distressed Communities

Sponsor:  Bray

This bill makes various changes to economic development programs
relating to distressed communities.  The bill:

(1)  Reduces the allowable credit percentage for qualified
investment in small businesses, other than those located in
distressed communities, from 40% of the amount of the investment
to 30% and reduces the state-wide limit on all tax credits in a
small business from $13 million to $6 million;

(2)  Increases the percentage of ownership restriction of
investors in technology-based businesses from 50% to 80% for
purposes of the small business investment tax credit program;

(3)  Decreases the minimum period of time for investment in
technology-based businesses from a minimum of 5 years to a
minimum of 2 years and excludes any sale, change of control, or
the going public of a business from the minimum period of time
for investment for purposes of the small business investment tax
credit program;

(4)  Reduces the percentage of employees required to be located
at a business contained within a distressed community from 75%
to 60% and increases the maximum number of employees at a
business contained within a distressed community from 100 to 150
to qualify for the distressed communities tax credit program;

(5)  Allows the leasing of certain technology equipment to
qualify as an expense for purposes of obtaining a tax credit and
increases the maximum tax credit for such equipment expense from
$75,000 to $150,000;

(6)  Expands the availability of follow-up capital to include
businesses which have previously received follow-up capital
within the last 3 years for purposes of tax credits for
contributions to innovation centers;

(7)  Increases the allowable tax credit percentage of the amount
of qualified contribution to a qualified fund for purposes of
tax credits for contributions to innovation centers from 50% to
75% and reduces the aggregate maximum state-wide credits for
contributions to innovation centers from $9 million to $5
million annually; and

(8)  Allows any unused credits for these tax credit programs
from the previous year to be added to any state-wide caps for
these programs in future years.