COMMITTEE ON LEGISLATIVE RESEARCH
OVERSIGHT DIVISION
FISCAL NOTE
L.R. No.:4292S.03C Bill No.:SCS for HB 2170 Subject:Tax Credits; Taxation and Revenue - Income; Children and Minors; Economic
Development; Department of Economic Development,
Type:Original Date:May 6, 2024Bill Summary:This proposal modifies provisions relating to income taxes.
FISCAL SUMMARY
ESTIMATED NET EFFECT ON GENERAL REVENUE FUNDFUND AFFECTEDFY 2025FY 2026FY 2027General Revenue
Fund*/**Up to ($1,843,737)Up to ($70,671,733)Up to ($86,680,095)
Total Estimated Net
Effect on General
RevenueUp to ($1,843,737)Up to ($70,671,733)Up to ($86,680,095)
*Oversight notes the above costs includes up to the maximum cap in tax credits of $20 million
per year PLUS the potential add-on 15% adjustment ($3M) for childcare desert for all three
Sections. Section(s) 135.1310 & 135.1325 "Child Care Contribution Tax Credit Act" and the
"Employer-Provided Child Care Assistance Tax Credit Act", and 135.1350 "Child Care
Providers Tax Credit" effective FY 2025. Additionally, Oversight reflect FTE for DOR, DED
and DESE. Lastly, the totals includes DESE & DOR costs for ITSD creation and annual
maintenance of software and update of various tax credit forms.
**Oversight reflects the program’s $16 million annual cap on tax credit issuance beginning in
FY 2027 for Section(s) 620.3500 to 620.3530. Additionally, Oversight reflects 1 FTE 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. 4292S.03C
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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 3 FTE4 FTE4 FTE
General Revenue –
DED 7 FTE7 FTE7 FTE
General Revenue
Fund – DESE4 FTE4 FTE4 FTE
Total Estimated Net
Effect on FTE14 FTE15 FTE15 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. 4292S.03C
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FISCAL ANALYSIS
ASSUMPTION
Oversight was unable to receive some of the agency responses in a timely manner due to the
short fiscal note request time. Oversight has presented this fiscal note on the best current
information that we have or on prior year information regarding a similar bill. Upon the receipt
of agency responses, Oversight will review to determine if an updated fiscal note should be
prepared and seek the necessary approval to publish a new fiscal note.
Section 135.1310 Child Care Contribution Tax Credit Act
Officials from the Department of Revenue (DOR) note:
Starting January 1, 2025, a qualified taxpayer would be able to claim a tax credit against their
state tax liability, in the amount of 75% of a qualified contribution to a qualified childcare
provider. The qualifying contribution could be cash, stocks, bonds or securities. To be a
qualified the childcare provider must be licensed under Section 210.221. The minimum amount
of the credit that may be issued in credit is $100 ($175 donation) while the maximum qualifying
amount of the credit is limited to $200,000 ($350,000 donation) annually.
The childcare provider receiving the contribution must be issued a written verification of the
contribution to the taxpayer and file a copy with the Department of Economic Development
(DED). This proposal allows the credit to be recaptured if the contribution is not used for
providing childcare.
This credit is not refundable, cannot be transferred or sold but they can be carried forward up to
six years. The credits are to be distributed on a first-come, first-serve basis with a cumulative $20
million annual cap. This proposal is scheduled to sunset on December 31, 2029.
This proposal allows that if the cumulative $20 million cap is authorized in a single year, then
the credit can be increased by 15%. However, the increased amount is reserved for childcare
providers in a childcare desert. It should be noted that the cap resets to $20 million each year.
This proposal does establish a provision in Section 135.1310.7, that should a tax-exempt
organization as defined by the IRS qualify to receive the credit, they would be able to have the
credit refunded to them without having a state tax liability. This allows DOR to establish a
procedure should such an organization qualify for the credit.
This provision says the credit is to begin with tax years beginning on or after January 1, 2025.
This would impact the Department starting when the tax returns are filed in January 2026. L.R. No. 4292S.03C
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Fiscal YearLoss to General Revenue2025$02026(Could exceed $20,000,000)2027(Could exceed $20,000,000)
This proposal creates a new tax credit program that will require a new line being added to the
Form MO-TC ($7,138), updates to their website and changes to the 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 officials from the DOR assume the proposal will have a direct fiscal impact
on their organization. Oversight does not have any information to the contrary. Therefore,
Oversight will reflect cost to the general revenue for 1 FTE at $35,880 (with applicable E&E)
annually in the fiscal note. Additionally, Oversight will reflect DOR’s cost for updates to form
and computer system changes in amount of $8,923 FY 2025.
In response to the similar proposal, SB 742 – 2024, officials from the Department of Economic
Development (DED) noted:
RSMo. 135.1310. creates the "Child Care Contribution Tax Credit Act". Administered by the
Department of Economic Development.
Child Care Desert - A census tract with poverty rate at least 20% or a median family income of
less than 80% statewide average and at least 500 people or 33% of the population are located at
least 1/2 mile away from a child care provider in urbanized areas or at least 10 miles away in
rural areas.
Tax years beginning on or after 1/1/2025. Tax credit for contribution program. 75% tax credits.
Minimum amount of any tax credit issued cannot be less than $100 and cannot exceed $200K per
tax year. Credits are not transferable, sellable or refundable. 6-year carry forward period. Tax
credits approved first-come-first-served.
Program cap: $20M per CY. If the full amount is authorized in a CY, the cap for the next CY
will be increased by 15%. That increased amount must be used for child care providers located in
a child care desert. The DED Director must publish the new amount. Contribution verifications
must be turned into DED with 60 days of the contribution date. Donations must be used for child
care for youth age 12 and younger, including by acquiring or improving child care facilities,
equipment, or services, or improving staff salaries, staff training, or the quality of child care.
The department may promulgate rules. This program will sunset on 12/31/2030, unless
reauthorized by the general assembly. L.R. No. 4292S.03C
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In response to the similar proposal, SB 742 – 2024, officials from the Office of Administration
– Budget & Planning (B&P) assumed this section would create a tax credit for donations made
to eligible childcare providers. The tax credits would begin for tax year 2025 and be equal to
75% of a qualifying donation. B&P notes that this provision may impact revenues beginning in
FY26, when tax year 2025 annual income tax returns are filed.
A taxpayer may receive a tax credit of $100 ($175 donation) to $200,000 ($350,000 donation).
The tax credits are non-refundable, unless a qualifying contributor is a 501(c)(3) non-profit. The
tax credits may not be sold, transferred, or otherwise conveyed. The tax credits may be carried
forward for up to six years.
Per subdivision 135.1310.8(1), no more than $20 million in tax credits may be authorized per
year. However, per subdivision 135.1310.8(2) if the full $20 million is authorized, then an
addition 15% ($3 million) may be authorized. The additional $3 million may only be used for
contributions made to childcare facilities located within a childcare desert. Therefore, B&P
estimates that this provision may reduce TSR and GR by up to $23 million annually beginning in
FY26.
Oversight notes that for informational purposes the Office of Childhood (DESE), in response to
the similar proposal HB 870 (1993.01) 2023, provided Oversight with six years of statistic on
licensed childcare facilities in Missouri as follows:
Year
Licensed Childcare Provider –
Sum
2017 1,6762018 1,5942019 1,4882020 1,1912021 1,324
Reported as of 11/20221,176
Oversight notes that Section 135.1310, the "Child Care Contribution Tax Credit Act" , allows
taxpayers (corporations, charitable organizations which are exempt from federal income tax, and
whose Missouri unrelated business taxable income, if any, would be subject to the state income
tax, and individuals or partnerships subject to the state income tax) to claim tax credit against
state tax liability for the tax year in which a verified contribution was made.
Oversight notes that only contributions directed to child care providers and intermediaries (a
nonprofit organization that is, or agrees to become, subject to the jurisdiction of this state for the
purposes of the administration and enforcement of this section) are able to receive tax credit. L.R. No. 4292S.03C
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Oversight notes the taxpayer is allowed to claim credit against the taxpayer's state tax liability
for the tax year in which a verified contribution was made in an amount equal to up to seventy-
five percent of the verified contribution to a childcare provider.
Oversight notes that under this section the minimum amount of any tax credit issued shall not be
less than one hundred dollars, and shall not exceed two hundred thousand dollars per tax year.
Oversight notes that any childcare facility receiving funds from taxpayer must provide the
taxpayer with contribution verification. In any case where such a facility fails to do so the facility
must provide the taxpayer with refund of his or her contribution.
Oversight notes that the cumulative amount of tax credits authorized pursuant to this section
shall not exceed twenty million dollars for each calendar year. Additionally, this section allows
for additional 15% ($ 3 million add-on) in tax credits to be issued specifically to childcare
facilities located in childcare deserts in Missouri. Therefore, Oversight will note the overall
potential impact under the Section 135.1310 could potentially reach Up to $23 million annually
beginning in FY 2026.
Section 135.1325 Employer Provided Child Care Assistance Tax Credit
Officials from the Department of Revenue (DOR) note:
Starting January 1, 2025, a qualified taxpayer would be able to claim a tax credit in the amount
of 30% of a qualified childcare expenditures paid or incurred with respect to a childcare facility.
This proposal identifies what is a qualifying expenditure and facility. The maximum amount of
credits that can be issued to any taxpayer is $200,000 annually.
This credit is not refundable, cannot be transferred or sold but they can be carried forward up to
five years and carried back one year. The credits are to be distributed on a first-come, first-serve
basis with a cumulative $20 million annual cap. This proposal is scheduled to sunset on
December 31, 2029.
This proposal allows that if the cumulative $20 million cap is authorized in a single year, then
the credit can be increased by 15%. However, the increased amount is reserved for childcare
providers in a childcare desert. It should be noted that the cap resets to $20 million each year.
This proposal does establish a provision in Section 135.1325.6, that should a tax-exempt
organization as defined by the IRS qualify to receive the credit, they would be able to have the
credit refunded to them without having a state tax liability. This allows DOR to establish a
procedure should such an organization qualify for the credit.
This provision says the credit is to begin with tax years beginning on or after January 1, 2025.
This would impact the Department starting when the tax returns are filed in January 2026. L.R. No. 4292S.03C
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Fiscal YearLoss to General Revenue2025$02026(Could exceed $20,000,000)2027(Could exceed $20,000,000)
This proposal creates a new tax credit programs that will require a new line being added to the
Form MO-TC ($7,138), updates to their website and changes to the 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 officials from the DOR assume the proposal will have a direct fiscal impact
on their organization. Oversight does not have any information to the contrary. Therefore,
Oversight will reflect cost to the general revenue for 1 FTE at $35,880 (with applicable E&E)
annually in the fiscal note. Additionally, Oversight will reflect DOR’s cost for updates to form
and computer system changes in amount of $8,923 FY 2025.
In response to the similar proposal, SB 742 - 2024, officials from the Office of Administration
– Budget & Planning (B&P) noted:
Section 135.1325 – Employer Provided Child Care Assistance Tax Credit Act
This section would create a tax credit for qualified childcare expenditures, for employers with at
least two employees. The tax credits would begin for tax year 2025 and be equal to 30% of
qualifying expenditures. B&P notes that this provision may impact revenues beginning in FY26,
when tax year 2025 annual income tax returns are filed.
A taxpayer may receive a tax credit of up to $200,000 ($666,667 expenditures). The tax credits
are non-refundable, unless a qualifying taxpayer is a 501(c)(3) non-profit. The tax credits may
not be sold, transferred, or otherwise conveyed. The tax credits may be carried forward for up to
six years.
Per subdivision 135.1325.7(1), no more than $20 million in tax credits may be authorized per
year. However, per subdivision 135.1325.7(2) if the full $20 million is authorized, then an
addition 15% ($3 million) may be authorized. The additional $3 million may only be used for
childcare facility expenditures located within a childcare desert. Therefore, B&P estimates that
this provision may reduce TSR and GR by up to $23 million annually beginning in FY26.
In response to the similar proposal, SB 742 – 2024, officials from the Department of Economic
Development (DED) noted:
135.1325. creates the "Employer Provided Child Care Assistance Tax Credit Act". Administered
by the Department of Economic Development. L.R. No. 4292S.03C
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Applies to tax years beginning on or after 1/1/2025.
Program cap: $20M per calendar year. If the full amount is authorized in a CY, the cap for the
next CY will be increased by 15%. That increased amount must be used for child care providers
located in a child care desert. The DED Director must publish the new amount. A tax credit for
employers’ eligible child care assistance expenditures. The tax credit is for up to 30% of child
care expenditures, with a total taxable year limit of $200,000 per taxing entity. Credits are not
transferable, sellable or refundable. 6-year carry forward period. Tax credits approved first-
come-first-served.
The department may promulgate rules.
This program will sunset on 12/31/2030, unless reauthorized by the general assembly.
DED will need to hire 5.0 FTE to administer the two DED programs included in the act. The two
DED administered tax credit programs will likely reduce annual TSR by $20M each ($40M
total). With the FY2024 budget, 5.0 FTE for this program was appropriated; therefore, that cost
is not reflected here because the appropriation has been approved.
Oversight notes the DED officials assume need to hire 5.0 FTE (Senior Economic Development
Specialist at $74,664 +E&E and fringe benefits) to administer the Section(s) 135.1310 and
135.1325. Officials from the DED stated that they received appropriation approval for the 5
FTE’s in 2024; however, for purpose of the fiscal note, Oversight will reflect DED’s FTE cost in
FY 2026, and FY 2027, in the fiscal note.
Oversight notes that Section 135.1325 "Employer Provided Child Care Assistance Tax Credit
Act" allows, after January 1, 2025, for a taxpayer (with two or more employees) to claim a tax
credit in an amount equal to thirty percent of the qualified childcare expenditures paid or
incurred with respect to a child care facility.
Oversight notes the acceptable expenditures are defined as follow:
a) To acquire, construct, rehabilitate, or expand property that will be, or is, used as part of a
child care facility that is either operated by the taxpayer or contracted with by the
taxpayer and which does not constitute part of the principal residence of the taxpayer or
any employee of the taxpayer; or
b) For the operating costs of a child care facility of the taxpayer, including costs relating to
the training of child care employees, scholarship programs, and for compensation to child
care employees; or
c) Or under a contract with a child care facility to provide child care services to employees
of the taxpayer; or L.R. No. 4292S.03C
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d) As an employer matching contribution, but only to the extent such employer matching
contribution is restricted by the taxpayer solely for the taxpayer's employee to obtain
child care services at a child care facility and is used for that purpose during the tax year
Oversight notes the qualified expenditure includes to acquire, construct, rehabilitate, or expand
property that will be, or is, used as part of a childcare facility that is either operated by the
taxpayer, or contracted with by the taxpayer, and which does not constitute part of the principal
residence of the taxpayer or any employee of the taxpayer.
Section 135.1350 Child Care Providers Tax Credit
Officials from the Department of Revenue (DOR) note:
Starting January 1, 2025, a qualified childcare provider with three or more employees would be
able to claim a tax credit in the amount equal to the child care provider’s eligible employer
withholding tax and may claim another credit in an amount up to 30% of the child care
provider’s capital expenditures. To be a qualified childcare provider the provider must be
licensed under Section 210.221. Capital expenditures must be greater than $1,000 to qualify for
the credit. No childcare provider shall receive more than $200,000 in tax credits annually.
To claim the credit the childcare credit the provide must submit an application to the Department
of Economic Development (DED). If DED approves the application, they will issue the tax
credits.
These two credits are not refundable, cannot be transferred or sold but they can be carried
forward up to six years. The credits are to be distributed on a first-come, first-serve basis with a
shared cumulative $20 million annual cap. This proposal will sunset on December 31, 2029.
This proposal allows that if the cumulative $20 million cap is authorized in a single year, then
the credit can be increased by 15%. However, the increased amount is reserved for childcare
providers in a childcare desert. It should be noted that the cap resets to $20 million each year.
This proposal does establish a provision in Section 135.1310.6, that should a tax-exempt
organization as defined by the IRS qualify to receive the credit, they would be able to have the
credit refunded to them without having a state tax liability. This allows DOR to establish a
procedure should such an organization qualify for the credit. L.R. No. 4292S.03C
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This provision says the credit is to begin with tax years beginning on or after January 1, 2025.
This could impact the Department starting when the tax returns are filed in January 2026.
Fiscal YearLoss to General Revenue2025$02026(Could exceed $20,000,000)2027(Could exceed $20,000,000)
This proposal creates a new tax credit program that will require a new line being added to the
Form MO-TC ($7,138), updates to their website and changes to the 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 officials from the DOR assume the proposal will have a direct fiscal impact
on their organization. Oversight does not have any information to the contrary. Therefore,
Oversight will reflect cost to the general revenue for 1 FTE at $35,880 (with applicable E&E)
annually in the fiscal note. Additionally, Oversight will reflect DOR’s cost for one-time update
to form and computer system in amount of $8,923 FY 2025.
In response to the similar proposal, SB 742 – 2024, officials from the Office of Administration
– Budget & Planning (B&P) noted:
This section would create two tax credits starting in tax year 2025. For childcare providers with
at least three employees, the provider may claim a tax credit equal to qualified withholdings
and/or a tax credit equal to 30% of capital expenditures. A childcare provider must make at least
$1,000 in capital expenditures to claim the capital expenditures credit. B&P notes that this
provision may impact revenues beginning in FY26, when tax year 2025 annual income tax
returns are filed.
A taxpayer may receive a maximum tax credit of up to $200,000 per year. B&P notes that the
$200,000 per taxpayer limit is for both tax credits. Therefore, a taxpayer may either use
$200,000 in withholding taxes or $1,000 in capital expenditures and any combination in between
to claim the maximum credit.
The tax credits are non-refundable, unless a qualifying taxpayer is a 501(c)(3) non-profit. The tax
credits may not be sold, transferred, or otherwise conveyed. The tax credits may be carried
forward for up to six years.
Per subdivision 135.1350.7(1), no more than $20 million in tax credits may be authorized per
year. However, per subdivision 135.1350.7(2) if the full $20 million is authorized, then an
addition 15% ($3 million) may be authorized. The additional $3 million may only be used for L.R. No. 4292S.03C
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childcare facility expenditures located within a childcare desert. Therefore, B&P estimates that
this provision may reduce TSR and GR by up to $23 million annually beginning in FY26.
In response to the similar proposal, SB 742 – 2024, officials from the Department of Economic
Development (DED) stated section 135.1350 creates the "Child Care Providers Tax Credit Act"
which will be administered by the Department of Elementary and Secondary Education.
Officials from the Department of Elementary and Secondary Education (DESE) note:
The tax credit in section 135.1350 could reduce Total State Revenue by up to $20 million per
year.
Legislation is being proposed to develop the "Child Care Providers Tax Credit Act." This tax
credit is designed to support childcare providers with a tax credit towards eligible employer
withholding tax and capital expenditure investments. DESE assumes a new tax credit section
would be required to administer this program. The team: one coordinator, one administrative
support assistant and two program specialists, would be responsible for approval issuance, and
monitoring of the credits for approximately 2,500 licensed childcare providers in the state. The
FTE and ongoing costs were included in the FY 2024 budget. One-time costs have been reduced
in the FY 2025 budget request. These one-time costs have not and will not be used in FY 2024 as
the legislation did not pass nor have the FTE been filled. If the language passes these costs will
be needed to set up the new section and process the tax credits.
DESE assumes the administration of this new credit would require the development and
programming of a new system to track the tax credit applications, approvals and monitoring data.
DESE estimates a cost of $500,000 for the development and initial programming with ongoing
annual costs of $50,000.
Oversight notes all childcare providers claiming the tax credit must submit an application for the
tax credit for preliminary approval to DESE.
Oversight notes this Section states that DESE may promulgate rules and adopt statements of
policy, procedures, forms and guidelines to implement and administer the provisions of this
section.
DESE, in further comments via e-mail responding to the similar proposal HB 1488 (2024),
clarified that it will need 1 Program Coordinator ($68,808), 1 Administrative Support Assistant
($38,184), and 2 Program Specialist ($59,120) annually in order to implement and comply with
the required provisions under this Section.
Oversight notes officials from the DESE state the FTE and ongoing costs were included in the
FY 2024 budget; however, the one-time ITSD costs have been reduced in the FY 2025 budget
request. Therefore, Oversight will reflect the DESE one time cost for software development and
ongoing ITSD maintenance cost, as well as the FTE costs in the fiscal note beginning FY 2025. L.R. No. 4292S.03C
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Sections 620.3500 – 620.3530 -Missouri Rural Access to Capital Act
In response to the previous version of the bill, officials from the Department of Economic
Development (DED) assumed 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).
In response to the previous version of the proposal, 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. L.R. No. 4292S.03C
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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) assume 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 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 L.R. No. 4292S.03C
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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.
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: L.R. No. 4292S.03C
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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.
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. L.R. No. 4292S.03C
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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 2025.
Therefore, Oversight will report a revenue gain to GR equal to $0 (no applications submitted) up
to $60,000 (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. L.R. No. 4292S.03C
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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.
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. L.R. No. 4292S.03C
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Officials from the Oversight Division
Report pursuant to Section 23.253 RSMo; however, Oversight can absorb the cost with the
current budget authority.
In response to the previous version of the bill, officials from the Department of Natural
Resources assumed the proposal will have no fiscal impact on their organization. Oversight
does not have any information to the contrary. Therefore, Oversight will reflect a zero impact in
the fiscal note for this agency.
In response to the previous version of the bill, officials from the Missouri Department of
Agriculture City of Kansas City each assumed the proposal would 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 entities.
Responses regarding the proposed legislation as a whole
Officials from the Department of Commerce and Insurance (DCI) state a potential unknown
decrease of premium tax revenues (up to the tax credit limit established in the bill) in FY2026
and FY2027 as a result of the creation of the Child Care Contribution Tax Credit Act and
Employer Provided Child Care Assistance Tax Credit Act. 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 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 DCI assumed 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, DCI 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. L.R. No. 4292S.03C
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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 and the Department of Natural
Resources both assume the proposal will have no fiscal impact on their organization. Oversight
does not have any information to the contrary. Therefore, Oversight will reflect a zero impact in
the fiscal note for DNR and MDA 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) noted 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 FUNDCost – Section 135.1310 "Child Care
Contribution Tax Credit Act" (p.3-6)$0
Up to
($23,000,000)
Up to
($23,000,000)
Cost – Section 135.1325 "Employer
Provided Child Care Assistance Tax
Credit Act" (p.6-9)$0
Up to
($23,000,000)
Up to
($23,000,000)
Costs – DOR FTE Section(s) 135.1310
135.1325, & 135.1350 (p.4,7 &10)
Personnel Service($89,700)($109,793)($111,989) Fringe Benefits($71,688)($86,810)($87,612) Expense & Equipment($39,933)($1,711)($1,745) L.R. No. 4292S.03C
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FISCAL IMPACT – State GovernmentFY 2025
(10 Mo.)
FY 2026FY 2027 Other Cost – ITSD Form updates
(p.9)($26,769)$0$0
Total Costs – DOR ($228,090)($198,314) ($201,346)FTE Change3 FTE3 FTE3 FTECosts – DED Section(s) 135.1310 &
135.1325 (p.8)Up to…Up to…Up to…
Personnel Service($323,668)($396,170)($404,093) Fringe Benefits($186,018)($227,685)($232,239) Expense & Equipment($63,348)($23,171)($23,635)Total Costs – DED ($573,034)($647,026)($659,967)FTE Change5 FTE5 FTE5 FTECost – Section 135.1350 "Child Care
Providers Tax Credit Act." (p.9-11)$0
Up to
($23,000,000)
Up to
($23,000,000)
Costs – DESE Section(s) 135.1350
(p.9-11)Up to…Up to…Up to…
Personnel Service($195,970)($239,867)($244,665) Fringe Benefits($125,266)($153,325)($156,391) Expense & Equipment($55,809)($45,951)($46,870)Total Costs – DESE ($377,045)($439,144)($447,926)FTE Change4 FTE4 FTE4 FTECost – DESE – ITSD New Database
and ongoing maintenance (p.11)($500,000)($50,000)($50,000)
Revenue Gain- Section 620.3510 –
Nonrefundable Application Fee of
$5,000 – (p. 16)
$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. 14-15)$0$0
$0 up to
($16,000,000)
Revenue Gain – Transfer In – Section
620.3520.3 – Recapture of Tax Credits
From Rural Investor (p. 17)$0$0$0 to Unknown L.R. No. 4292S.03C
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FISCAL IMPACT – State GovernmentFY 2025
(10 Mo.)
FY 2026FY 2027Revenue Loss – Transfer Out – Section
620.3520 – Recaptured Tax Credits
(Re)Allocated to Missouri DED (p. 16-
17) $0$0$0 to (Unknown)
Cost – Section(s) 620.3510, 620.3515
& 620.3520 – 2 FTE DED – (p.12)
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 FTECost – Section(s) 620.3510, 620.3515
& 620.3520 – 1 FTE DOR – (p.14)
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
($1,843,737)
Up to
($70,671,733)
Up to
($86,680,095)
Estimated Net FTE Change on General
Revenue14 FTE15 FTE15 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. L.R. No. 4292S.03C
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FISCAL DESCRIPTION
This proposal modifies provisions relating to income taxes.
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 Economic Development
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 DirectorMay 6, 2024May 6, 2024