COMMITTEE ON LEGISLATIVE RESEARCH
OVERSIGHT DIVISION
FISCAL NOTE
L.R. No.:4292H.01I Bill No.:HB 2170 Subject:Economic Development; Department of Economic Development; Business and
Commerce
Type:Original Date:January 21, 2024Bill Summary:This proposal establishes the Missouri Rural Access to Capital Act to
promote rural economic development.
FISCAL SUMMARY
ESTIMATED NET EFFECT ON GENERAL REVENUE FUNDFUND AFFECTEDFY 2025FY 2026FY 2027General Revenue
Fund*Up to ($225,568)Up to ($337,260)Up to ($16,320,856)
Total Estimated Net
Effect on General
RevenueUp to ($225,568)Up to ($337,260)Up to ($16,320,856)
*Oversight reflects the program’s $16 million annual cap on tax credit issuance beginning in FY
2027. Additionally, Oversight reflects 1FTE for DOR (Associate Customer Service
Representative $35,880 annually) beginning in FY 2026 and 2 FTE for DED (Senior Economic
Development Specialist at 74,664 annually) beginning in FY 2025.
ESTIMATED NET EFFECT ON OTHER STATE FUNDSFUND AFFECTEDFY 2025FY 2026FY 2027Total Estimated Net
Effect on Other State
Funds $0$0$0
Numbers within parentheses: () indicate costs or losses. L.R. No. 4292H.01I
Bill No. HB 2170
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ESTIMATED NET EFFECT ON FEDERAL FUNDSFUND AFFECTEDFY 2025FY 2026FY 2027Total Estimated Net
Effect on All Federal
Funds $0$0$0
ESTIMATED NET EFFECT ON FULL TIME EQUIVALENT (FTE)FUND AFFECTEDFY 2025FY 2026FY 2027General Revenue -
DOR 0 FTE1 FTE1 FTE
General Revenue –
DED 2 FTE2 FTE2 FTE
Total Estimated Net
Effect on FTE2 FTE3 FTE3 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 2025FY 2026FY 2027Local Government$0$0$0 L.R. No. 4292H.01I
Bill No. HB 2170
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FISCAL ANALYSIS
ASSUMPTION
Sections 620.3500 – 620.3530 -Missouri Rural Access to Capital Act
Officials from the Department of Economic Development (DED) note:
In response to the similar proposal, SB 802 (2024), officials from the Department of Economic
Development (DED) noted: 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 08/28/2030 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
$16M per year. Impact to revenue for tax credits starts in FY27 since applicable percentage for
first two credits allowance dates are zero. FTE impact starts in FY25.
Oversight will include DED’s 2 FTE (Senior Economic Development Specialist at 74,664
annually plus fringe benefits and E&E) costs, 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) note:
A potential unknown decrease of premium tax revenues (up to the tax credit limit established in
the bill) in FY2025, FY2026, and FY2027 as a result of the creation of the Missouri Rural
Access to Capital 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 L.R. No. 4292H.01I
Bill No. HB 2170
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distributed to school districts throughout the state. County Stock Funds are later 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.
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 the Missouri Department of Commerce and Insurance assumes the contract
computer programming can be absorbed with existing resources. Oversight does not have any
information to the contrary. However, should multiple bills pass, the Missouri Department of
Commerce and Insurance may seek additional equipment and expense appropriation through the
appropriation process.
Additionally, Oversight assumes the fiscal note does not reflect the possibility that some of the
tax credits could be utilized by insurance companies against insurance premium taxes. If this
occurs, the loss in tax revenue would be split between the General Revenue Fund and the County
Foreign Insurance Fund, which ultimately goes to local school districts.
Officials from the Office of Administration – Budget & Planning (B&P) note:
The proposed legislation would create a tax credit for taxpayers making a capital investment in a
rural fund against such investors’ 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.
Section 620.3530.4 creates a new penalty provision for rural funds exiting the program. To the
extent any penalties are deposited in the state treasury, TSR may be impacted.
This proposal could impact the calculation pursuant to Art. X, Sec. 18(e).
Officials from the Department of Revenue (DOR) note: L.R. No. 4292H.01I
Bill No. HB 2170
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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. DOR
may coordinate, as necessary, with DED.
Section 620.3505- Defines the what the terms shall mean.
Section 620.3510- A rural fund that seeks to have an equity investment certified as a capital
investment eligible for credits under sections 620.3500 to 620.3530. DED shall begin accepting
applications within ninety days of the effective date of the new sections 620.3500 to 620.3530.
Section 620.3515- This sets the annual cap for the tax credit at $16 million. This will allow in
state tax credits to be claimed against state tax liability in any calendar year, excluding any credit
amounts carried forward as provided under subsection 1 of section 620.3520. Within ninety days
of the applicant receiving notice of certification, the rural fund shall issue the capital investment
to, and receive cash in the amount of the certified amount from, a rural investor. At least ten
percent of the rural investor's capital investment shall be composed of affiliate capital.
Section 620.3520 - Authorizes the tax credit, the amount of the credit claimed by a rural investor
shall not exceed the amount of such entity's state tax liability for the tax year for 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 to prior taxable years. The credit is not refundable or sellable on the
open market.
Section 620.3520.3 - Sets forth the circumstances under which DED may recapture from a rural
investor that claimed the credit. 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.
This proposal would become effective on August 28, 2024. 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, 2024, 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 anniversary dates
of the initial credit allowance date. Based on the requirements of the investment, for fiscal note
purposes they assumed the first date of certification will be January 1, 2025.
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, 2025, the first two years
no credits would be issued. Starting January 1, 2027, the first credits would be issued and fully
implemented 2030. This could potentially (depending on when issued) be redeemed in that same
year. L.R. No. 4292H.01I
Bill No. HB 2170
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This credit will expire on August 28, 2030, unless reauthorized by the general assembly. This
will be a loss to general revenue of up to the $16 million annually starting in FY 2027. This
credit will be fully implemented in 2030.
Fiscal YearGR ImpactFY 2025$0FY 2026$0FY 2027($16,000,000)FY 2028($16,000,000)FY 2029($16,000,000)FY 2030($16,000,000)
This proposal creates a new tax credit that would require a new line being added to the Form
MO-TC ($7,138), updates to their website and changes to their individual income tax computer
system ($1,785). These changes are estimated to cost $8,923. DOR’s existing tax credit staff is
no longer able to take on any additional tax credits without additional resources. Due to the
intensive knowledge of credits that is needed DOR is not able to use temporary staff to help with
processing these returns. This proposal would require at least 1 FTE Associate Customer Service
Rep at a salary of $35,880.
Oversight notes the official from DOR assume need for one additional FTE Associate Customer
Service Representative $35,880 annually beginning FY 2026. Therefore, Oversight will note
DOR’s 1 FTE cost effective FY 2026.
Oversight notes that DOR assume the proposal will function as follows:
An investor provide investment in an amount of $1 million dollar on January 1, 2025. Here is the
estimated amount of credit received and when.
YEAR CREDIT ALLOWANCE
DATE
CREDIT AMOUNT1/1/20251$01/1/20262$01/1/2027 3$150,000 ($1,000,000 x 15%)1/1/2028 4$150,000 ($1,000,000 x 15%)1/1/2029 5$150,000 ($1,000,000 x 15%)1/1/2030 6$150,000 ($1,000,000 x 15%)
Oversight will reflect loss to general revenue of up to the $16 million cap annually starting in
FY 2027. L.R. No. 4292H.01I
Bill No. HB 2170
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Oversight notes this proposed legislation would award tax credits to investors who have made
an equity investment in a rural fund so long as such equity investment is 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 applicants, 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 in 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 Directory, as of
August 15, 2023 there were approximately 10 privately owned and managed SBA licensed
SBICs located in Missouri. Additionally, per correspondence with the United States Department
of Agriculture, there are approximately 2 certified RBIC funds managed in Missouri. There are a
total of 6 investments in Missouri out of 115 total RBIP investments throughout the United
States. The total amount invested in these 6 investments is over $22M out of a combined total
Regulatory Capital of $1.4B for the program.
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 L.R. No. 4292H.01I
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assumes applications, accompanied with the nonrefundable fee of $5,000 could be submitted as
early as Fiscal Year 2025.
Therefore, Oversight will report a revenue gain to GR equal to $0 (no applications submitted) up
to $60,0000 (if 12 applications were submitted 10 SBIC + 2 RBIC funds), beginning in Fiscal
Year 2025. Oversight will reflect unknown positive gain for FY 2026, and thereafter, since this
fee is a one-time fee paid by the applicants at the onset of the process. (Unless applicant re-
submits application due to certain issues as per Section 620.3510 3.)
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 Investor A were to have $100,000,000 certified as a capital investment on January 1, 2025,
Investor A’s credit allowance date(s) would be: January 1, 2025 (0%), January 1, 2026, (0%)
January 1, 2027 (15%), January 1, 2028 (15%), January 1, 2029 (15%), and January 1, 2030
(15%).
Oversight assumes, then, Investor 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, 2025 and
January 1, 2026.
Each January thereafter, with the last January being January 1, 2030, Investor 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, Investor 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 2025.
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 2025. L.R. No. 4292H.01I
Bill No. HB 2170
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Therefore, Oversight estimates the tax credit provision of this proposed legislation could result
in a revenue reduction equal to $0 (no certified capital investments) up to $16,000,000 (tax credit
authorization cap) beginning in Fiscal Year 2027.
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 2027.
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 2027.
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 2030.
Officials from the Oversight Division
Report pursuant to Section 23.253 RSMo; however, Oversight can absorb the cost with the
current budget authority.
Officials from the Missouri Department of Agriculture, the Department of Natural
Resources, and the City of Kansas City 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.
L.R. No. 4292H.01I
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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.
FISCAL IMPACT – State GovernmentFY 2025
(10 Mo.)
FY 2026FY 2027GENERAL REVENUE FUNDRevenue Gain- Section 620.3510 –
Nonrefundable Application Fee of
$5,000 – (p. 8)
$0 or Could
exceed $60,000$0 or Unknown$0 or Unknown
Revenue Reduction – Section 620.3515
– Tax Credit For Certified Capital
Investment(s) -- (p. 5)$0$0
$0 up to
($16,000,000)
Revenue Gain – Transfer In – Section
620.3520. 3. – Recapture of Tax Credits
From Rural Investor (p. 5)$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)($89,292)Equipment & Expense($28,598)($8,909)($9,087)Total Cost($225,568)($249,377)($253,740)FTE Change – DED2 FTE2 FTE2 FTE L.R. No. 4292H.01I
Bill No. HB 2170
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FISCAL IMPACT – State GovernmentFY 2025
(10 Mo.)
FY 2026FY 2027Cost – Section(s) 620.3510, 620.3515
& 620.3520 – 1 FTE DOR – (p.6)
Personnel Services$0($36,598)($37,330)Fringe Benefits$0($28,937)($29,204)Equipment & Expense$0($22,338)($582)Total Cost$0($87,883)($67,116)FTE Change – DOR0 FTE1 FTE1 FTEESTIMATED NET EFFECT ON
GENERAL REVENUE FUND
Up to
($225,568)
Up to
($337,260)
Up to
($16,320,856)
Estimated Net FTE Change on General
Revenue2 FTE3 FTE3 FTE
FISCAL IMPACT – Local GovernmentFY 2025
(10 Mo.)
FY 2026FY 2027$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 creates the "Missouri Rural Access to Capital Act".
This bill allows investors to make capital investments in a rural fund, as defined in the bill. Such
investors shall be allowed a tax credit for a period of six years beginning with the year the
investor made a capital investment. The tax credit shall be equal to a percentage of the capital
investment. The percentage shall be zero for the first two years, and 15% for the subsequent four
years. Tax credits shall not be refundable, but may be carried forward to any of the five
subsequent tax years. No more than $16 million in tax credits shall be authorized in a given
calendar year. L.R. No. 4292H.01I
Bill No. HB 2170
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These provisions shall sunset on August 28, 2030.
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 Commerce and Insurance
Department of Revenue
Department of Natural Resources
Missouri Department of Agriculture
Office of Administration – Budget & Planning
Joint Committee on Administrative Rules
Office of the Secretary of State
Oversight Division
City of Kansas City
Julie MorffRoss StropeDirectorAssistant DirectorJanuary 21, 2024January 21, 2024