COMMITTEE ON LEGISLATIVE RESEARCH
OVERSIGHT DIVISION
FISCAL NOTE
L.R. No.:2071H.02C Bill No.:HCS for HB 959 Subject:Agriculture; Business and Commerce Type:Original Date:April 11, 2023Bill Summary:This proposal creates provisions relating to rural access to capital incentives.
FISCAL SUMMARY
ESTIMATED NET EFFECT ON GENERAL REVENUE FUNDFUND AFFECTEDFY 2024FY 2025FY 2026
General Revenue
Fund*
($220,568) Up to
$1,359,432
($244,376) Up to or
could exceed
$1,335,624
($248,740) Up to
($14,668,740)
Total Estimated Net
Effect on General
Revenue
($220,568) Up to
$1,359,432
($244,376) Up to or
could exceed
$1,335,624
($248,740) Up to
($14,668,740)
*Oversight notes the HCS allows the program have a $16 million annual cap on tax credit
issuance beginning in FY 2026 and 2 FTE for DED’s administration beginning FY 2024.
ESTIMATED NET EFFECT ON OTHER STATE FUNDSFUND AFFECTEDFY 2024FY 2025FY 2026Total Estimated Net
Effect on Other State
Funds 000
Numbers within parentheses: () indicate costs or losses. L.R. No. 2071H.02C
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ESTIMATED NET EFFECT ON FEDERAL FUNDSFUND AFFECTEDFY 2024FY 2025FY 2026Total Estimated Net
Effect on All Federal
Funds $0$0$0
ESTIMATED NET EFFECT ON FULL TIME EQUIVALENT (FTE)FUND AFFECTEDFY 2024FY 2025FY 2026General Revenue
Fund 2 FTE2 FTE2 FTE
Total Estimated Net
Effect on FTE2 FTE2 FTE2 FTE
☒ Estimated Net Effect (expenditures or reduced revenues) expected to exceed $250,000 in any
of the three fiscal years after implementation of the act or at full implementation of the act.
☒ Estimated Net Effect (savings or increased revenues) expected to exceed $250,000 in any of
the three fiscal years after implementation of the act or at full implementation of the act.
ESTIMATED NET EFFECT ON LOCAL FUNDSFUND AFFECTEDFY 2024FY 2025FY 2026Local Government$0$0$0 L.R. No. 2071H.02C
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FISCAL ANALYSIS
ASSUMPTION
Officials from the Department of Economic Development (DED) note:
Section 620.3500 creates the “Missouri Rural Access to Capital Act”.
This proposed legislation requires DED to accept applications from “rural funds” that seek to
have an equity investment certified as a “capital investment” eligible for tax credits. A “Rural
Fund” is any entity certified by DED under this proposed legislation. A “Capital Investment” is
an investment in a rural fund by a rural investor that is acquired after the effective date of this
proposed legislation at its original issuance solely in exchange for cash, has one hundred percent
(100%) of its cash purchase price used by the rural fund to make qualified investments in eligible
businesses located in this state by the third anniversary of the initial credit allowance date, and is
designated by the rural fund as a capital investment and certified by DED as a capital investment.
DED notes, upon making a capital investment, a rural investor shall have a vested right to a
credit against the investor’s state tax liability in an amount equal to the applicable percentage for
such credit allowance date multiplied by the purchase price paid to the rural fund for the capital
investment. DED states that no eligible business that receives a qualified investment, or any
affiliates of such eligible business, shall directly or indirectly own or have the right to acquire an
ownership interest in a rural fund.
The program will automatically sunset on six years after the effective date unless reauthorized by
an act of the general assembly.
DED will need to hire 2.0 FTE to administer the program. There will be an estimated cost of $16
M per year. Impact to revenue for tax credits starts in FY26 since applicable percentage for first
two credits allowance dates are zero. FTE impact starts in FY24.
Oversight will include DED’s FTE costs, as reported by DED, less the costs reported for in-state
and out-of-state travel, as this proposed legislation does not require DED to inspect or audit any
site(s).
Officials from the Department of Commerce and Insurance (DCI) assume the proposal,
specifically Section(s) 620.3500 to 620.3530 could affect their agency.
A potential unknown decrease of premium tax revenues (up to the tax credit limit established in
the bill) in FY2024, FY2025 and FY2026 as a result of the creation of the Missouri Rural
Workforce Development Act tax credit. Premium tax revenue is split 50/50 between General
Revenue and County Foreign Insurance Fund except for domestic Stock Property and Casualty
Companies who pay premium tax to the County Stock Fund. The County Foreign Insurance
Fund is later distributed to school districts throughout the state. County Stock Funds are later L.R. No. 2071H.02C
Bill No. HCS for HB 959
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distributed to the school district and county treasurer of the county in which the principal office
of the insurer is located. It is unknown how each of these funds may be impacted by tax credits
each year and which insurers will qualify for the new tax credit. Oversight will assume, for
fiscal note simplification purposes that all credits will be taken against income tax liabilities.
The department will require minimal contract computer programming to add this new tax credit
to the premium tax database and can do so under existing appropriation. However, should
multiple bills pass that would require additional updates to the premium tax database, the
department may need to request more expense and equipment appropriation through the budget
process.
Oversight notes additional staff and expenses are not being requested by DCI with this single
proposal, but if multiple proposals pass during the legislative session which require form
reviews, DCI will need to request additional staff to handle the increase in workload. Therefore,
Oversight will reflect the no fiscal impact assumed by DCI for fiscal note purposes.
Officials from the Office of Administration – Budget & Planning (B&P) assume the proposed
legislation would create a tax credit for taxpayers making a capital investment in a rural fund
against such investor’s state tax liability. The tax credit shall be equal to a proportion of their
investment into the rural fund. There is a cap of $16 million that can be redeemed each calendar
year; therefore, TSR could be reduced by up to $16 million. The tax credit has a five year carry
forward, so in a particular calendar year more than $16 million may be redeemed. The credit
shall not be refundable or sellable.
In addition, a rural fund that seeks to have an equity investment certified as a capital investment
eligible for credits shall pay a nonrefundable application fee of five thousand dollars to DED.
B&P assumes this money would go into GR. Therefore, GR could be increased by an unknown
amount. There is not enough available data for B&P to estimate the potential revenues.
At the time a rural fund exists the program, it should be subject to a penalty if projected job
creation metrics are not achieved. To the extent any penalties are deposited in the state treasury,
TSR may increase.
This proposal could impact the calculation pursuant to Art. X, Sec. 18(e).
Officials from the Department of Revenue (DOR) note:
Sections 620.3500 – 620.3530 Missouri Rural Access to Capital Act
This proposal would add new sections 620.3500 to 620.3530, known as the “Missouri Rural
Access to Capital Act.” It would be administered by DED. DOR is not mentioned in the
proposal, but would be responsible for processing the tax credits claimed by taxpayers on returns
and coordinate, as necessary, with DED. L.R. No. 2071H.02C
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Section 620.3515 sets the annual cap for the tax credit at $16 million. These credits are not
refundable or sellable.
Section 620.3520 - Authorizes the tax credit, not exceeding the amount of the rural investor’s
income tax for the year in which the credit is claimed. Unused portions of the credit may be
carried forward to the next five tax years but may not be carried back.
Section 620.3520.3 - Sets forth the circumstances under which DED may recapture from a rural
investor that claimed the credit. Section 620.3520.4, provides that recaptured credits are to be
re-distributed, pro rata, to credit applicants whose allocations were previously reduced. They
assume that DED would notify DOR of any recaptured credits. DOR would then recalculate the
taxpayer's return and bill the taxpayer for any shortcomings. DOR assumes they could absorb
this duty with existing staff should it be necessary for DED to do a recapture of credits.
This proposal would become effective on August 28, 2023. This proposal states that a capital
investment is any equity investment in a rural fund by a rural investor and that investment must
be made AFTER the effective date of this proposal. After August 28, 2023 potential investors
could make the required investments and then file an application with DED along with a $5,000
application fee. Upon certification by DED, the investors would be eligible to receive the tax
credit for the six credit allowance dates. Those credit allowance dates are the date of
certification and each of the five anniversary dates thereafter. Based on the requirements of the
investment, for fiscal note purposes they will assume the first date of certification will be January
1, 2024.
This proposal states the tax credit is based on an applicable percentage of the investment. The
percentage for the first two years is zero (0%) and each of the next four years the percentage is
fifteen percent (15%). Therefore with a certification date of January 1, 2024, the first two years
no credits would be issued. Starting January 1, 2026 the first credits would be issued. They
could potentially (depending on when issued) be redeemed in that same year.
This will be a loss to general revenue of up to the $16 million annually starting in FY 2026.
This would be a new income tax credit and it would be added to the MO-TC and information
about the credit would be added to the website and changes would be needed in the individual
income tax system. DOR notes the costs to update these items is $7,193. DOR assumes it can
absorb this credit with existing staff. Should the number of redemptions/correspondence justify
the hiring of additional FTE, the Department will request those FTE through the appropriation
process.
1 FTE Associate Customer Service Rep for every 6,000 credits redeemed
• 1 FTE Associate Customer Service Rep for every 7,600 errors/correspondence generated
Oversight notes that DOR assumes the proposal will function as follows: L.R. No. 2071H.02C
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A taxpayer qualifies for a $1 million dollar investment on January 1, 2024. Here is the estimated
amount of credit received and when.
YEAR CREDIT ALLOWANCE
DATE
CREDIT AMOUNT1/1/20241$01/1/20252$01/1/2026 3$150,000 ($1,000,000 x 15%)1/1/2027 4$150,000 ($1,000,000 x 15%)1/1/2028 5$150,000 ($1,000,000 x 15%)1/1/2029 6$150,000 ($1,000,000 x 15%)
This will be a loss to general revenue of up to the $16 million (maximum) cap annually starting
in FY 2026.
Oversight notes this proposed legislation would award tax credits to rural investors who have
made an equity investment in a rural fund so long as such equity investment is later certified by
the Missouri Department of Economic Development as a capital investment.
In order for an equity investment to be certified as a capital investment, a rural fund must apply
with the Missouri Department of Economic Development to have the equity investment certified
as a capital investment. The applicant must complete an application including the amount of
capital investment requested, a copy of the applicant’s, or the affiliate of the applicant’s, license
as a Rural Business Investment Company (RBIC) under 7 U.S.C. Section 2009cc (U.S.D.A
Rural Business Investment Program) or as a Small Business Investment Company (SBIC) under
15 U.S.C. Section 681 (SBA Small Business Investment Program), evidence that the applicant or
affiliates of the applicant have invested at least a) one hundred million dollars ($100,000,000) in
nonpublic companies located in counties within the United States with a population of less than
fifty thousand, or b) at least thirty million dollars inn nonpublic companies located in Missouri.
The business plan that includes a revenue impact assessment, and a nonrefundable application
fee of $5,000.
Per the latest available data from the Small Business Investment Company Program Overview,
as of September 30, 2021, there were approximately 307 privately owned and managed SBA
licensed SBICs.
Table 1: Program Composition of the Types of Operating SBICs
Type of Operating SBICs
FY End
2017
FY End
2018
FY End
2019
FY End
2020
FY End
2021
Total Number of Type of Operating
SBICs 315305300302307
Number of Debenture SBICs 227227224232235Number of Participating Security SBICs 332522129Number of Bank-Owned or Non-
Leveraged SBICs 4747485256 L.R. No. 2071H.02C
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Number of Specialized SBICs 86667
Per correspondence received from the United States Department of Agriculture in February
2021, there are approximately 10 certified RBICs. In addition, there have been four (4)
investments made in Missouri totaling almost $12,000,000.
Oversight assumes SBICs and RBICs are nationally oriented; various companies may focus on
specific regions but no one entity is specific to the State of Missouri.
Oversight notes this proposed legislation states that a capital investment is any equity
investment in a rural fund by a rural investor which, is acquired after the effective date of this
proposed legislation.
Oversight notes this proposed legislation would require applicants under this proposed
legislation to submit an application to the Missouri Department of Economic Development
accompanied with a nonrefundable $5,000 application fee.
Oversight notes this proposed legislation does not specifically state where the application fee(s)
shall be deposited. For the purpose of this fiscal note, Oversight will assume such application
fee(s) will be deposited into GR.
Oversight notes the Missouri Department of Economic Development shall begin accepting
applications ninety days after the effective date of this proposed legislation. Therefore, Oversight
assumes applications, accompanied with the nonrefundable fee of $5,000 could be submitted as
early as Fiscal Year 2024.
Therefore, Oversight will report a revenue gain to GR equal to $0 (no applications/fee(s)
submitted) or $5,000 (one application/fee is submitted) up to $1,585,000 ($5,000 * 307 (# of
SBICs) + 10 (# of certified RBICs)) beginning in Fiscal Year 2024.
Oversight notes, once an equity investment is certified as a capital investment, the rural investor
shall have a vested right to a tax credit to be issued to be used against the rural investor’s state
income tax liability that may be utilized on each credit allowance date of such capital investment
in an amount equal to the applicable percentage for such credit allowance date multiplied by the
purchase price paid to the rural fund.
Oversight, then, assumes the following example describes a tax credit allocation under this
proposed legislation:
If Company A were to have $100,000,000 certified as a capital investment on January 1, 2024,
Company A’s credit allowance date(s) would be: January 1, 2024 (0%), January 1, 2025, (0%)
January 1, 2026 (15%), January 1, 2027 (15%), January 1, 2028 (15%), and January 1, 2029
(15%). L.R. No. 2071H.02C
Bill No. HCS for HB 959
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Oversight assumes, then, Company A would not receive a tax credit (a tax credit equal to zero
percent (0%) multiplied by the amount certified as a capital investment) on January 1, 2024 and
January 1, 2025.
Each January thereafter, with the last January being January 1, 2029, Company A would receive
a tax credit equal to fifteen percent (15%) of the amount certified as a capital investment; or
$15,000,000.
Oversight assumes, then, Company A would receive a total of $60,000,000 in tax credits over
the course of six (6) years to be used throughout a total of eleven (11) years.
Oversight notes the Missouri Department of Economic Development shall begin accepting
applications ninety days after the effective date of this proposed legislation. Therefore, Oversight
assumes applications could be submitted as early as Fiscal Year 2024.
Oversight assumes, then, based on the tax credit allocation equation created under this proposed
legislation, a rural investor could receive a tax credit in an amount greater than zero ($0)
beginning two (2) years after the initial certification date: Fiscal Year 2026.
Therefore, Oversight estimates the tax credit provision of this proposed legislation could result
in a revenue reduction ranging from $0 (no certified capital investments were awarded) up to
$16,000,000 (up to the tax credit authorization cap) beginning in Fiscal Year 2026.
Oversight notes this proposed legislation would allow for the recapture of tax credits issued to
taxpayers provided rural fund(s) do not meet the requirements established in this proposed
legislation.
Oversight notes this proposed legislation states that recaptured tax credits would be reverted to
the Missouri Department of Economic Development and be reissued to applicants whose capital
investment allocations were reduced in accordance with the application process (authorization
cap).
Oversight further notes this proposed legislation does not specifically state where the payment
of recaptured tax credits would be deposited. For the purpose of this fiscal note, Oversight will
assume recaptured tax credit payments will be deposited into GR with the assumption that the
Missouri Department of Economic Development will distribute the funds for further tax credit
authorization(s).
Oversight notes tax credits authorized may be recaptured as early as the third anniversary date.
Therefore, Oversight assumes this could be as early as Fiscal Year 2026.
Oversight is unable to determine the actual fiscal impact of the tax credit recapture provision.
Therefore, for the purpose of this fiscal note, Oversight will report a revenue gain equal to “$0 to
Unknown” and a revenue reduction equal to “$0 or Unknown” beginning in Fiscal Year 2026. L.R. No. 2071H.02C
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Oversight notes that any company can choose to exit the rural fund agreement after 6 years
being in existence and DED must provide the company with approval of such an action within 30
days of the notice. If such an application is denied, the DED must provide the company with
valid reasons for such an action.
Oversight notes the provisions of this proposed legislation state the Missouri Department of
Economic Development shall not accept any new applications for tax credits after 2029.
Overall Bill:
Oversight notes the HCS allows for the program to have a $16 million maximum cap and offers
additional language corrections which will have no additional impact.
Officials from the Department Of Higher Education and Workforce Development, the
Department of Labor and Industrial Relations, the,
the City of Kansas City, City of O’Fallon City of Springfield each assume the
proposal will have no fiscal impact on their respective organizations. Oversight does not have
any information to the contrary. Therefore, Oversight will reflect a zero impact in the fiscal note
for these agencies.
Rule Promulgation
Officials from the Joint Committee on Administrative Rules assume this proposal is not
anticipated to cause a fiscal impact beyond its current appropriation.
In response to the previous version of the bill, officials from the Office of the Secretary of State
(SOS) note many bills considered by the General Assembly include provisions allowing or
requiring agencies to submit rules and regulations to implement the act. The SOS is provided
with core funding to handle a certain amount of normal activity resulting from each year's
legislative session. The fiscal impact for this fiscal note to the SOS for Administrative Rules is
less than $5,000. The SOS recognizes that this is a small amount and does not expect that
additional funding would be required to meet these costs. However, the SOS also recognizes that
many such bills may be passed by the General Assembly in a given year and that collectively the
costs may be in excess of what the office can sustain with its core budget. Therefore, the SOS
reserves the right to request funding for the cost of supporting administrative rules requirements
should the need arise based on a review of the finally approved bills signed by the governor. L.R. No. 2071H.02C
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FISCAL IMPACT –
State Government
FY 2024
(10 Mo.)
FY 2025FY 2026GENERAL
REVENUE FUND
Revenue Gain- Section
620.3510 –
Nonrefundable
Application Fee of
$5,000 – p. 6
$0 or $5,000 up to
$1,585,000
$0 or $5,000 up to
$1,585,000
$0 or $5,000 up to
$1,585,000
Revenue Reduction –
Section 620.3515 – Tax
Credit For Certified
Capital Investment(s) --
(p. 6-8) $0$0
$0 up to
($16,000,000)
Revenue Gain –
Transfer In – Section
620.3520.3 – Recapture
of Tax Credits From
Rural Investor (p. 7-8)$0$0$0 to Unknown
Revenue Loss –
Transfer Out – Section
620.3520 – Recaptured
Tax Credits
(Re)Allocated to
Missouri DED (p. 7-8)
$0$0$0 to (Unknown)
Cost – Section(s)
620.3510, 620.3515 &
620.3520 – 2 FTE DED
– (p.3)
Personnel Services($124,440)($152,315)($155,361)Fringe Benefits($72,530)($88,153)($89,293)Equipment & Expense
($28,599)($8,909)($9,087)
Total Cost($225,568)($249,376)($253,740)FTE Change – DED
2 FTE2 FTE2 FTE L.R. No. 2071H.02C
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ESTIMTED NET
EFFECT ON
GENERAL
REVENUE FUND
($220,568) Up to
$1,359,432
($244,376) Up to or
could exceed
$1,335,624
($248,740)
Up to ($14,668,740)
FISCAL IMPACT –
Local Government
FY 2024
(10 Mo.)
FY 2025FY 2026$0$0$0
FISCAL IMPACT – Small Business
This proposed legislation could positively impact any small business that qualifies for a tax
credit under this proposed legislation as such small business could reduce or eliminate such small
business’s state tax liability.
FISCAL DESCRIPTION
This bill establishes the "Missouri Rural Access to Capital Act", which provides a tax credit for
certain investments made in businesses located in rural areas in this state.
The bill allows investors to make capital investments in a rural fund. A rural fund wishing to
accept investments as capital investments must apply to the Department of Economic
Development. The application must include the amount of capital investment requested, a copy
of the applicant's license as a rural business or small business investment company, evidence that
the applicant has made at least $100 million in investments in nonpublic companies located in
counties throughout the United States with a population less than 50,000, evidence that the
applicant has made at least $30 million in investments in nonpublic companies located in
Missouri, and a business plan that includes a revenue impact statement projecting state and local
tax revenue to be generated by the applicant's proposed qualified investments. The rural fund
must also submit a nonrefundable application fee of $5,000. The Department must grant or deny
an application within 60 days of receipt.
The Department must deny an application if such application is incomplete or insufficient, if the
revenue impact assessment does not demonstrate that the business plan will result in a positive
economic impact on the state over a 10 year period, or if the Department has already approved
the maximum amount of capital investment authority.
Investors are allowed a tax credit for a period of six years beginning with the year the investor
made a capital investment. The tax credit must be equal to a percentage of the capital investment
as explained in the bill. Tax credits issued must not be refundable, but may be carried forward to L.R. No. 2071H.02C
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any of the five subsequent tax years. No more than $16 million dollars in tax credits may be
authorized in a given calendar year as set out in the bill.
Rural funds must use capital investments made by investors to make qualified investments in
eligible businesses. An eligible business is a business that, at the time of the qualified
investment, has fewer than 250 employees and has its principal business operations in the state.
The Department may recapture tax credits if the rural fund does not invest 60% of its capital
investment authority in qualified investments within two years of the date of the capital
investment, and 100% of its capital investment authority within three years, if the rural fund fails
to maintain qualified investments equal to 90% of its capital investment authority in years three
through six, if prior to exiting the program or 30 days after the sixth year, the rural fund makes a
distribution or payment that results in the fund having less than 100% of its capital investment
authority invested in qualified investments, or if the rural fund violates provisions of the bill.
Rural funds must submit annual reports to the Department, including the name and location of
each eligible business receiving a qualified investment, the number of jobs created and jobs
retained as a result of qualified investments, the average salary of such jobs, and any other
information required by the Department, all as detailed in the bill.
At any time after the sixth anniversary of the capital investment, a rural fund may apply to the
Department to exit the program. The Department must respond to such application within 30
days. If the exit application is denied, the Department's notice shall include the reasons for its
decision. A rural fund shall be subject to penalties for not meeting projected job creation metrics
as indicated in the bill. The provisions of the new program automatically sunset six years after
the effective date of the bill.
This legislation is not federally mandated, would not duplicate any other program and would not
require additional capital improvements or rental space. L.R. No. 2071H.02C
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SOURCES OF INFORMATION
Department of Labor and Industrial Relations
Office of the Secretary of State
Missouri Department of Agriculture
Department of Economic Development
Department of Commerce and Insurance
Department of Higher Education and Workforce Development
Missouri Department of Agriculture
City of Kansas City
City of Springfield
City of O’Fallon
Julie MorffRoss StropeDirectorAssistant DirectorApril 11, 2023April 11, 2023