Senate Committee Substitute

DISTRESSED AREAS LAND ASSEMBLAGE TAX CREDIT PROGRAM

This act creates the distressed areas land assemblage tax credit program, administered by the department of economic development. Tax credits issued under the distressed area land assemblage tax credit act, are non-refundable, fully transferrable income, corporate franchise, and financial institutions, tax credits. Tax credits issued under the act will be equal to fifty percent of the acquisition costs for the land, and one hundred percent of the interest costs. The tax credit program is capped at one hundred million dollars and the total amount of tax credits issued annually is limited to twelve million dollars.

SECTIONS 135.535 & 135.562

The act enables a taxpayer making less than $30,000 per year who modifies their home to be accessible to a disabled person who resides with the taxpayer to claim a credit against their income tax for one hundred percent of the costs of modification, up to $2,500. For taxpayers making between $30,000 and $60,000, a credit will be allowed in the amount equal to fifty percent of the costs of modification, up to $2,500. All tax credits will be refundable, up to $2,500 per year. The credits are not transferrable. The credit has a statewide maximum of $100,000 per year. If ten million dollars in tax credits are not approved, for programs authorized under the rebuilding communities tax credit program, then up to the first one hundred thousand dollars in tax credits shall be used for the home modification tax Credit created by this act.

If any portion of the modification was claimed as a deduction on the taxpayer's federal income tax, then the amount of the tax credit shall be reduced by 1/3.

The credit applies to tax years beginning January 1, 2008, and expires December 31, 2013.

The modifications to these sections are similar to Senate Bill 877 (2006).

NEW MARKETS TAX CREDIT PROGRAM

This act provides an income tax credit in an amount equal to the applicable percentage of the adjusted purchase price paid to the issuer of a qualified equity investment. The amount of investments in any one qualified low-income community business which may be used for calculating the amount of tax credits is limited to ten million for such business including investments in any affiliates of such business. The applicable percentage is zero percent for each of the first two credit allowance dates and seven percent for the third credit allowance date and eight percent for the next four credit allowance dates. The tax credit is non-refundable and non-transferrable, but tax credits earned by "pass - through entities" may be allocated to the partners, members, or shareholders of the entity for their direct use. To the extent that the tax credits issued exceed a taxpayer's liability, the remaining tax credits may be carried forward to the taxpayer's five subsequent tax years. The department of economic development must limit the amount of investments to a level necessary to limit tax credit utilization to no more than fifteen million dollars per fiscal year without regard to the potential for taxpayers carrying forward credits to later years. The act contains provisions allowing the Department of Economic Development to recapture tax credits issued under the act in certain situations.

This section contains a sunset provision and a reauthorization procedure for fiscal years following fiscal year 2010. For fiscal years following fiscal year 2010, annual reauthorization must be made in the form of a concurrent resolution clearly describing the amount of tax credits which will be made available for the next fiscal year, unless provisions of the Missouri Sunset act require reauthorization by general law. The sunset date and annual reauthorization requirement shall not preclude a taxpayer who makes a qualified equity investment prior to the such date from claiming credits issued under the act.

FILM PRODUCTION TAX CREDIT PROGRAM

The act modifies provisions of the film production tax credit program by lowering the minimum expected in-state budget expenditure, from $300,000 to $50,000 for qualified film production projects less than thirty minutes in length or to $100,000 for a project longer than thirty minutes, for tax years beginning on or after January 1, 2008. The act removes the limitation on the amount of tax credits which may be issued annually per taxpayer for all tax years beginning on or after December 31, 2007. The annual aggregate cap on all tax credits certified under the program is increased from one million five hundred thousand dollars to ten million dollars.

The provisions of this section will automatically sunset in six years if not re-authorized.

This section is similar to House Bill 360 (2007).

ENHANCED ENTERPRISE ZONE PROGRAM

The act:

(1) Increases the cap on the amount of tax credits that can be issued in a calendar year for the program from seven million dollars per year to twenty-five million dollars per year;

(2) Modifies the definition of an "employee" to a person employed by the enhanced business enterprise that is scheduled to work an average of at least 1,000 hours per year. Health insurance must be offered to employees at all times and must be partially paid by the employer. Currently, the definition of an "employee" includes full-time, part-time, and seasonal employees;

(3) Adds educational services, religious organizations, and public administration to the list of entities which are prohibited from being enhanced business enterprises. However, headquarters or administrative offices which would otherwise be excluded may qualify for benefits if the offices serve a multi-state territory. Currently, utilities regulated by the Missouri Public Service Commission are excluded from being an enhanced business enterprise. The act changes this to public utilities with a NAICS code 221, including water and sewer services;

(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; and

(5) Requires the department 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.

SALES TAX EXEMPTIONS FOR MANUFACTURING

This act exempts purchases of certain energies, gases, utilities, chemicals, machinery and equipment used in the manufacture or processing of products including those consumed in the processing of recovered materials from state and local sales and use taxation.

NEW JOBS TRAINING PROGRAM

The act:

(1) Allows community college districts to sell certificates until July 1, 2018. Currently, they cannot sell certificates after July 1, 2008; and

(2) Extends the program until July 1, 2028. Currently, it will expire on July 1, 2018.

SECTION 178.715

Residents of certain counties in the southeast part of the state are authorized to create a taxing district for the purposes of creating a vocational school in that part of the state.

QUALITY JOBS PROGRAM

The act:

(1) Increases the cap on the amount of tax credits that can be issued in a calendar year for the program from twelve million dollars to thirty million dollars;

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

(3) Modifies 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 by Sections 143.191 - 143.265;

(4) 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;

(5) 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;

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

(7) 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 that is scheduled to work an average of 35 hours per week, but leaves the remaining requirements of the definition unchanged;

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

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

(10) Specifies the method in which new payroll will be calculated;

(11) 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, headquarters or administrative offices which would otherwise be excluded may qualify for benefits if the offices serve a multi-state territory;

(12) 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;

(13) Creates a new tax credit within the program for small business job retention and flood survivors relief. The amount of the tax credit will be equal to the amount of withholding tax generated by the full-time jobs retained over a period of three years. The calendar year maximum amount of tax credits which may be issued for small business retention and flood survivor relief is two hundred and fifty thousand dollars, but such amount may be increased up to five hundred thousand dollars if proposed by the department of economic development. No tax credits for small business job retention and flood survivor relief may be issued after August 30, 2010;

(14) Requires the department of economic development to give preference, in providing benefits under the quality jobs act, to qualified companies and projects targeted at areas of the state which have recently been classified as disaster areas by the federal government;

(15) Requires the department 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; and

(16) Allows a qualified company to begin retaining withholding taxes upon reaching the minimum number of new jobs where the average wage exceeds the county average wage. A qualified company will not receive tax credits if in its annual report, the average wage is below the county average wage, the company has not maintained the required employee insurance, or if the number of new jobs is below the minimum.

MODIFICATIONS TO TAX CREDIT DEFINITIONS & TRANSFERABILITY PROVISIONS

The act modifies the definitions of the terms "person" and "taxpayer" with regard to provisions authorizing tax credit programs within chapters 32, 100, 135, 143, 173, 208, 348 & 620 RSMo, so as to include charitable organizations which are exempt from federal income tax. The act further amends the tax credit provisions contained in such chapters so as to allow for the full transferability of the tax credits authorized therein.

JASON ZAMKUS