In January of this year, Governor Eric Greitens issued an executive order establishing the Committee on Simple, Fair and Low Taxes. The mission of the committee was to review the state’s tax code and tax credit system and to produce a report and recommendations by June 30, 2017.
The committee, which was comprised of ten members appointed by the Governor, Speaker of the House and President Pro Tem, began meeting in February and held a series of town halls to gather information and input from Missourians.
The full report can be read here and a summary of the report’s recommendations are below.
Missouri Works
As the state’s number one incentive tool for expansion and retention, this program helps businesses access capital through withholdings or tax credits to embark on facility expansions and create jobs. This program can also help businesses purchase equipment to maintain its facility in Missouri.
Recommendations:
- The Committee recommends maintaining current funding levels. There is no annual limit on the retained withholding taxes. Tax credits issued for the program are capped at $116 million annually.
- The Committee recommends removing the distinction within Missouri Works Training between “new” and “retained” jobs. Incentives would now be considered for all jobs seeking training assistance.
- The Committee recommends giving the Director of the Department of Economic Development the discretion to deny an application for a project that does not have a positive fiscal return as measured by a REMI analysis. Discretion would also be granted to deny applications for projects that fail the “but for” test – where the jobs would be created without the incentives. Finally, discretion would be granted to deny an application for a project that could not reasonably be brought to fruition.
- The Department would have 5 days to issue a rejection of an application.
Low Income Housing Tax Credit
Missouri’s Low-Income Housing Tax Credit (LIHTC) is designed to supplement the federal LIHTC and provides a state tax credit to investors in affordable housing. The LIHTC can be used each year for 10 years and is allocated to the owner of an affordable housing development. Tax credits must be used for new construction, rehabilitation, or acquisition and rehabilitation.
Recommendations:
- The Committee recommends restructuring the program as a “soft loan” instead of a tax credit. The loans could be repaid, extended, or forgiven as needed to complete a project.
- The program would have a $50 million annual cap. The program issued $101 million in tax credits in Fiscal Year 2016.
- The Committee recommends the creation of a tax credit clearing house to buy up existing tax credits from this program.
- The Committee recommends that this program’s funding be subject to the annual appropriations process of the General Assembly.
Historic Preservation Tax Credit
This program incentivizes developers to maintain the integrity of Missouri’s historic buildings, giving them new life.
Recommendations:
- The Committee recommends combining the Historic Preservation tax credit program with the Brownfield Remediation tax credit program.
- The combined program would have a $50 million annual cap. The annual cap for the Historic Preservation program is currently $140 million. The Brownfield Remediation program does not currently have a cap. That program issued approximately $10 million in tax credits in Fiscal Year 2016.
- The Committee recommends that this program’s funding be subject to the annual appropriations process of the General Assembly.
