SB 0654 - Fiscal Note

Fiscal Note - SB 0654 - Allows tax credit for 50% of purchase price/manufac. cost of environmental control equipment for charcoal producers

COMMITTEE ON LEGISLATIVE RESEARCH

OVERSIGHT DIVISION

FISCAL NOTE

L.R. NO. 2407-02

BILL NO. SB 654

SUBJECT: Energy; Environmental Protection; Health, Public; Science and Technology; Taxation and Revenue-General-Income

TYPE: Original

DATE: February 9, 1998

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FISCAL SUMMARY

ESTIMATED NET EFFECT ON STATE FUNDS
FUND AFFECTED	FY 1999	FY 2000	FY 2001
General Revenue	($616,382)	($616,382)	($521,554)
Total Estimated Net Effect on All State Funds	($616,382)	($616,382)	($521,554)

ESTIMATED NET EFFECT ON FEDERAL FUNDS
FUND AFFECTED	FY 1999	FY 2000	FY 2001
None
Total Estimated Net Effect on All Federal Funds	$0	$0	$0

ESTIMATED NET EFFECT ON LOCAL FUNDS
FUND AFFECTED	FY 1999	FY 2000	FY 2001
Local Government	$0	$0	$0

Numbers within parentheses: ( ) indicate costs or losses

This fiscal note contains 4 pages.

FISCAL ANALYSIS

ASSUMPTION

Officials of the Department of Revenue (DOR) state this proposal would not fiscally impact their agency.

Officials of the Department of Economic Development (DED) state they have no estimate as to the number of equipment manufacturers located in Missouri that would qualify and claim the credit or assign it to a third party. The number of charcoal producers that would purchase the equipment is also indeterminable. The cost of the equipment is also an unknown so determining the impact of the 50% credit is not possible. The Harris Directory lists 15 charcoal producers in the state of Missouri. Application for approval of a credit goes to the Department of Natural Resources. DED and the Department of Natural Resources certify to DOR that the best available equipment was produced or purchased. DED officials state that this proposal would not fiscally impact their agency.

Officials of the Department of Natural Resources (DNR) state there are approximately 25 charcoal producers in Missouri that would be eligible for the tax credit if they added department approved best available control technology equipment to their facilities. The department assumes that it would be able to review the sales tax credit applications with existing resources. If the number of applications exceeds expectations DNR would request additional resources.

Per an agreement with industry, the DNR, and the U.S. EPA, these facilities will be responsible for installing emission control devices. Installation of these emission control devices is estimated to extend over eight calendar years, beginning in calendar year 1998 and extending through calendar year 2005.

The department assumes a total of 286 charcoal kilns will require these emission control devices. These charcoal kilns are located at 23 separate locations. The department assumes that wherever possible, two charcoal kilns will be controlled by one emission control device. Therefore, the department assumes that of the 286 charcoal kilns at 23 separate locations, 29 are estimated to be controlled by one emission control device. Over the eight years, the department estimates that approximately 158 emission control devices would be installed at these facilities.

The capital equipment cost for each emission control device is estimated to be approximately $47,414 based on the Missouri Charcoal Industry Best Available Control Technology (BACT) analysis provided by the charcoal kiln industry. Therefore, the total capital equipment cost for these emission control devices would be approximately $7,491,412.

ASSUMPTION (continued)

The income tax credit provided in this legislation is equal to 50% of the purchase price or manufacturer's cost of this equipment. Therefore, the department assumes the resulting income tax credit would be approximately $3,745,706.

Since this installation is estimated to extend over eight calendar years, the department assumes the following schedule and corresponding tax reductions:

* 26 emission control devices installed in calendar year 1998 (FY99) and 26 in calendar year 1999 (FY2000) resulting in a tax credit of approximately $616,382 (26 emission control devices x $47,414 cost x 50% tax credit) for each fiscal year ,

* 22 in calendar year 2000 (FY2001) resulting in a tax credit of approximately $521,554 (22 x $47,414 x 50%),

* and the remaining 84 in the out-years resulting in a tax credit of approximately $1,991,388 (84 x $47,414 x 50%).

This proposal would result in a decrease in Total State Revenues.

FISCAL IMPACT - State Government	FY 1999	FY 2000	FY 2001
	(10 Mo.)
Loss to General Revenue Fund
Income Tax Credit for Charcoal Producers	($616,382)	($616,382)	($521,554)
FISCAL IMPACT - Local Government	FY 1999	FY 2000	FY 2001
	(10 Mo.)
	0	0	0
FISCAL IMPACT - Small Business

Small businesses would be expected to be fiscally impacted to the extent that they purchase eligible equipment which may be taken as a credit against their income tax liability.

DESCRIPTION

This act authorizes a state income tax credit equal to 50% of the purchase price (or manufacturing cost, adjusted for inflation) of the best available control technology equipment connected with the production of charcoal in Missouri.

This legislation is not federally mandated, would not duplicate any other program and would not require additional capital improvements or rental space.

SOURCES OF INFORMATION

Department of Revenue

Department of Natural Resources

Department of Economic Development

Jeanne Jarrett, CPA

Director

February 9, 1998