SB 0427 - Fiscal Note

Fiscal Note - SB 0427 - Authorizes additional $15 million in certified capital tax credits; allocates $10 million to start-up businesses

COMMITTEE ON LEGISLATIVE RESEARCH

OVERSIGHT DIVISION

FISCAL NOTE

L.R. NO.: 0662-03

BILL NO.: SB 427

SUBJECT: Economic Development; Economic Development Department; Revenue Department; Taxation and Revenue - General; Taxation and Revenue - Income

TYPE: Original

DATE: February 22, 1999

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FISCAL SUMMARY

ESTIMATED NET EFFECT ON STATE FUNDS
FUND AFFECTED	FY 2000	FY 2001	FY 2002
General Revenue	($5,051,440)	($5,052,997)	($5,054,364)
Total Estimated Net Effect on All State Funds	($5,051,440)	($5,052,997)	($5,054,364)

ESTIMATED NET EFFECT ON FEDERAL FUNDS
FUND AFFECTED	FY 2000	FY 2001	FY 2002
None
Total Estimated Net Effect on All Federal Funds	$0	$0	$0

ESTIMATED NET EFFECT ON LOCAL FUNDS
FUND AFFECTED	FY 2000	FY 2001	FY 2002
Local Government	$0	$0	$0

Numbers within parentheses: ( ) indicate costs or losses

This fiscal note contains 4 pages.

FISCAL ANALYSIS

ASSUMPTION

Department of Revenue and Department of Insurance officials assume this proposal would not fiscally impact their agency.

Officials from the Department of Economic Development (DED) assume that the change in the proposal would reduce workload minimally by deleting the Qualified Research Tax Credit and would increase the workload by expanding the Certified Capital Company (CAPCO) Program. DED states there would be a need for one (1) additional Economic Development Incentive Specialist II ($32,628) and associated expense and equipment. DED assumes CAPCOs would increase in number and result in additional work. The CAPCO programs require on-going monitoring of the investments to make sure the CAPCO reaches the required benchmark. DED would set up and administer the entire allocation process, which includes reviewing CAPCO applications for compliance and following the rules and statutes. DED would authorize the tax credit to the investors and complete transfers if needed. DED states they would be required to approve and monitor investments, review quarterly and annual reports, work with the Division of Finance to complete annual department reviews, provide information about the CAPCO program to the general public. DED would work very closely with the CAPCOs to maintain communication and work through problems/concerns. DED states these functions would be performed by the additional FTE.

Oversight assumes no additional rental space would be required.

Officials from the Office of Administration - Budget and Planning deferred to the estimates provided by DED.

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

FISCAL IMPACT - State Government	FY 2000	FY 2001	FY 2002
	(10 Mo.)
GENERAL REVENUE FUND
Savings - General Revenue Fund
Elimination of research expense tax credit	$10,000,000	$10,000,000	$10,000,000
Loss - General Revenue Fund
Increase in certified capital tax credits	($15,000,000)	($15,000,000)	($15,000,000)
FISCAL IMPACT - State Government	FY 2000	FY 2001	FY 2002
(continued)	(10 Mo.)
Cost - Department of Economic Development
Personal service (1 FTE)	($27,859)	($34,280)	($35,137)
Fringe benefits	($8,514)	($10,476)	($10,738)
Expense and equipment	($15,067)	($8,241)	($8,489)
Total Cost - DED	($51,440)	($52,997)	($54,364)
ESTIMATED NET EFFECT ON
GENERAL REVENUE FUND	($5,051,440)	($5,052,997)	($5,054,364)
FISCAL IMPACT - Local Government	FY 2000	FY 2001	FY 2002
	(10 Mo.)
	$0	$0	$0
FISCAL IMPACT - Small Business
No direct fiscal impact to small businesses would be expected as a result of this proposal.

DESCRIPTION

This proposal would add the definition of "qualified Missouri seed business" to the certified capital companies (CAPCO) statute. The proposal would remove the discretionary authority of the director of the Department of Economic Development in granting and apportioning the CAPCO tax credits. Aggregate credits would be increased from $10 million to $25 million, with $10 million of the authorized credits to be utilized for investments in qualified Missouri seed businesses. The proposal would also repeal the current statute authorizing the qualified research tax credit.

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 Insurance

Department of Economic Development

Department of Revenue

Office of Administration

Division of Budget and Planning

Jeanne Jarrett, CPA

Director

February 22, 1999