Missouri Tax Credits
Eligible businesses are company headquarters, administrative, or research and development offices. The following table itemizes additional eligibility criteria:
Min. New Min New Min. % Ave.
Program Jobs Investment Co. Wage Automatic Benefit
Zone Works 2 $100,000 80% WH, 5 or 6 years
Rural Works 2 $100,000 90% WH, 5 or 6 years
Statewide 10 N/A 90% WH, 5 or 6 years
Mega Works 120 100 N/A 120% 6% of new payroll, 5 or 6 years
Mega Works 140 100 N/A 140% 7% of new payroll, 5 or 6 years
"WH" is retention of the state withholding tax of the new jobs.
Zone Works project facility must be located in an Enhanced Enterprise Zone. Rural Works project facility must be located in a “rural” county, which would NOT include Boone, Buchanan, Clay, Greene, Jackson, St. Charles, and St. Louis City and County. For all programs, except Mega Works 140, the benefit period is 5 years, or 6 years for existing Missouri companies, which are those that have been operational in Missouri for at least 10 years. In addition to the Automatic Benefit indicated above, the Statewide Works or Mega Works proj- ects may be considered for discretionary benefits, limited to the net state fiscal benefit. The criteria for the discretionary benefits include:
Program benefits are (a) the retention of the state withholding tax of the new jobs and/or (b) state tax credits, which are refundable, transferable and/or saleable. The program benefits are based on a percentage of the payroll of the new jobs. The program benefits are not provided until the mini- mum new job threshold is met and the company meets the average wage and health insurance requirements.
“New jobs” are defined as full-time (average 35 or more hours/week each year and for whom the company offers/pays 50% of health insurance) employees of the company located at the project facility, based on the increase from the “base employment”.
“Base Employment” is the greater of (a) the number of full-time employees on the date of the Notice of Intent, or (b) the average number of full-time employees for the 12 month period prior to the date of the Notice of Intent. In the event the company (or a related company) reduces jobs at another facility in Missouri with related opera- tions, the new jobs at the project facility would be reduced accordingly.
There is no annual limit on the retained withholding taxes. Tax credits issued for the entire program shall not exceed $106 million for FY2014, $111 million for FY2015, and $116 million for 2016 forward.
The tax credits may be applied to Chapter 143 (state income tax, excluding withholding tax) and Chapter 148 (financial institution tax). Tax credits must be claimed within one year of the close of the taxable year for which they were issued. Tax credits can only be applied to tax liability for the year in which they were earned. Any annual un- used balance is fully refundable. The credits may also be transferred, sold or assigned.
Business Use Incentives for Large Scale Development (BUILD)
Eligible industries are manufacturing, processing, assembly, research and development, agricultural processing or services in interstate commerce must invest a minimum of $15 million; or $10 million for an office industry (regional, national or international headquarters, telecommunications operations, computer operations, insurance companies or credit card billing and processing centers) in an economic development project; and create a minimum of one hundred new jobs for eligible employees at the economic development project or a minimum of 500 jobs if the economic development project is an office industry or a minimum of 200 new jobs if the economic development project is an office industry located within a distressed community as defined in Section 135.530, RSMo.
Ineligible industries are retail, health or professional services, intra-state relocations or replacement facilities.
The bonds may be used to finance public or private infrastructure to support the project, or the new capital improvements of the business at the project location. Bond proceeds may not be used for working capital, inventory or other operating costs of the business or another entity.
This tax credit can be applied to the following:
The amount of bonds to be issued will be determined by the Missouri Department of Economic Development (DED) and the Missouri Development Finance Board (MDFB), based on the need for funding to initiate the project, and limited to the state’s economic benefit. The minimum bond issue is $500,000.
Brownfield Redevelopment Program
Provides financial incentives for the redevelopment of commercial/industrial sites that are contaminated with hazardous substances and have been abandoned or underutilized for at least three years. The applicant cannot be a party who intentionally or negligently caused the release or potential release of hazardous substances at the project. If the property is not owned by a public entity, the city or county must endorse the project. The project must be accepted into the “Voluntary Cleanup Program” of the Missouri Department of Natural Resources (DNR). The project must be projected by the Missouri Department of Economic Development (DED) to result in the creation of at least ten new jobs or the retention of 25 jobs by a private commercial operation.
DED may issue tax credits for up to 100% of the cost of remediating the project property. DED will issue 75% of the credits upon adequate proof of payment of the costs; the remaining 25% will not be issued until a clean letter has been issued by DNR. The tax credit may also include up to 100 percent of the costs of demolition that are not directly part of the remediation activities, provided that the demolition is on the property where the voluntary remediation activities are occurring, the demolition is necessary to accomplish the planned use of the facility where the remediation activi- ties are occurring, and the demolition is part of a redevelopment plan approved by the municipal or county government and the department of economic development. The demolition may occur on an adjacent property if the project is located in a municipality which has a population less than twenty thousand and the above conditions are otherwise met. The adjacent property shall independently qualify as abandoned or underutilized. The amount of the credit available for demolition not associated with remediation cannot exceed the total amount of credits approved for remedia- tion including demolition required for remediation.
The tax credits can be applied to the following:
The remediation tax credits can be carried forward 20 years or they are sellable or transferable.
The total state costs of the project tax credits must be less than the projected state economic impact of the project, as determined by DED.
The amount of remediation tax credits issued must be the least amount necessary to cause the project to occur.
Tax Abatement is an incentive that can be utilized by cities to encourage the rede- velopment of blighted areas by providing real property tax abatement. Tax abatement is only available to for-profit “Urban Redevelopment Corporations” organized pursuant to the Urban Redevelopment Corporations Law. The articles of association of Urban Redevelopment Corporations must be pre- pared in accordance with the general corporations laws of Missouri and must contain certain items set forth in Section 353.030, RSMo. of the Urban Redevelopment Corporations Law. There are also special requirements for life insurance companies operating as Urban Redevelopment Corporations. 353.040, RSMo.
Tax abatement under the Urban Redevelopment Corporations Law is only extended to real property that has been found to be a “blighted area” by the city. For purpose of 353 tax abatement the term “blighted area” is defined as: "That portion of the city within which the legislative authority of such city determines that by reason of age, obsolescence, inadequate or outmoded design or physical deterioration, have become economic and social liabilities, and such conditions are con- ducive to ill health, transmission of disease, crime or inability to pay reasonable taxes."
Real property may be property found to be blight- ed even though it contains improvements, which by themselves do not constitute blight. (Maryland Plaza Redevelopment Corporation v. Greenberg, 594S.W.2d 284 (1979).) Tax abatement may also be extended to a tract of real property, which by itself does not meet the definition of a blighted area if such tract is necessary to the redevelopment project and the area on the whole constitutes a blighted area. (Parking systems, Inc. v. Kansas City Downtown Redevelopment Corporation, 518 S.W.2d 1191974).
Tax abatement is available for a period of 25 years, which begins to run when the Urban Redevelopment Corporation takes title to the property. During the first 10 years, the property is not subject to real property taxes except in the amount of real property taxes assessed on the land, exclusive of improvements, during the calendar year preceding the calendar year during which the Urban Redevelopment Corporation acquired title to the real property. 353.110.1, RSMo. If the property was tax exempt during such preceding calendar year, then the county assessor is required to assess the land, exclusive of improvements, immediately after the Urban Redevelopment Corporation takes title. During the next 15 years, the real property may be assessed up to 50% of its true value. 353.110.2, RSMo. This means that the city may approve a development plan, which provides full tax abatement for 25 years.
Payments in lieu of taxes (PILOTS) may be imposed on the Urban Redevelopment Corporation by contract with the city. PILOTS are paid on an annual basis to replace all or part of the real estate taxes, which are abated. The PILOTS must be allocated to each taxing district according to their proportionte share of ad valorem property taxes. 353.110.4, RSMo.