COMMITTEE ON LEGISLATIVE RESEARCH
OVERSIGHT DIVISION
FISCAL NOTE
L.R. No.:4191H.01I Bill No.:HB 2407 Subject:Economic Development; Department of Economic Development, Housing; Tax
Incentives; Tax Credits
Type:Original Date:February 5, 2024Bill Summary:This proposal establishes tax incentives in relation to workforce and disaster
recovery housing.
FISCAL SUMMARY
ESTIMATED NET EFFECT ON GENERAL REVENUE FUNDFUND
AFFECTED
FY 2025FY 2026FY 2027Fully
Implemented
(FY 2031)
General Revenue
Fund*
Up to ($18,923)
(Unknown,
Could Exceed
$12,114,684)
(Unknown,
Could Exceed
$12,076,382)
(Unknown,
Could Exceed
$12,110,156)
Total Estimated
Net Effect on
General
RevenueUp to ($18,923)
(Unknown,
Could Exceed
$12,114,684)
(Unknown,
Could Exceed
$12,076,382)
(Unknown,
Could Exceed
$12,110,156)
*Oversight cannot predict the level of participation in the new tax credit program. Therefore,
Oversight will reflect the life-time costs of the program, $35 million for disaster recovery type of
housing and $35 million for non-disaster recovery type of housing ($70 million total) divided
over six years, 2 FTE for DOR and 2 FTE for DED annually. Oversight notes the program is set
to sunset on December 31, 2030.
ESTIMATED NET EFFECT ON OTHER STATE FUNDSFUND
AFFECTED
FY 2025FY 2026FY 2027Fully
Implemented
(FY 2031)
Total Estimated
Net Effect on
Other State
Funds $0$0$0$0 L.R. No. 4191H.01I
Bill No. HB 2407
Page 2 of
February 5, 2024
BB:LR:OD
Numbers within parentheses: () indicate costs or loss
ESTIMATED NET EFFECT ON FEDERAL FUNDSFUND
AFFECTED
FY 2025FY 2026FY 2027Fully
Implemented
(FY 2031)
General Revenue
Fund – DOR
0 FTE2 FTE2 FTE2 FTE
General Revenue
Fund – DED
0 FTE2 FTE2 FTE2 FTE
Total Estimated
Net Effect on
All Federal
Funds0 FTE4 FTE4 FTE4 FTE
ESTIMATED NET EFFECT ON FULL TIME EQUIVALENT (FTE)FUND
AFFECTED
FY 2025FY 2026FY 2027Fully
Implemented
(FY 2031)
Total Estimated
Net Effect on
FTE 000$0
☒ 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
AFFECTED
FY 2025FY 2026FY 2027Fully
Implemented
(FY 2031)
Local
Government$0(Unknown) (Unknown)(Unknown) L.R. No. 4191H.01I
Bill No. HB 2407
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February 5, 2024
BB:LR:OD
FISCAL ANALYSIS
ASSUMPTION
Section 620.2022 Workforce Housing Program
Officials from the Department of Revenue (DOR) note:
This proposal attempts to create several new incentive programs to fund workforce housing
projects. This section says that an eligible project would be entitled to tax credits and tax
incentives. DED is to approve the projects.
Eligible Housing Projects that meet the following criteria:
• Four or more single family dwelling units located in a small city.
• A multiple dwelling building with three or more individual dwelling units.
• Two or more dwelling units located in an upper story of an existing multi-use building.
DED responsibilities in the program:
• Setting minimum and maximum dwelling unit costs.
• Creating an application for participation in the program.
• Review applications and award the tax credits and tax incentives.
• Collect a one-time $500 compliance fee from the applicants.
• Collect a fee of half of 1% of all incentives given to a project. (Approximately $5,000
per project).
Per the proposal a tax incentive includes:
o
o
o
It should be noted that no project may receive more than $1 million in incentives.
Tax Incentive Caps:
• $17.5 million cumulative cap on projects designated as disaster recovery housing projects
in urban areas. This includes tax credits and tax incentives.
• $17.5 million cumulative cap on projects designated as disaster recovery housing projects
in small towns. This includes tax credits and tax incentives. L.R. No. 4191H.01I
Bill No. HB 2407
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February 5, 2024
BB:LR:OD
• $35 million cumulative cap on housing projects. Does not specify tax credits or tax
incentives.
DOR notes that for fiscal note purposes, DOR will show the full impact of the caps in the first
fiscal year FY 2026 (based on when the returns will be filed claiming the credit).
This proposal allows for the tax credit certification to stand as payment of all taxes starting
January 1, 2025. It is not clear which taxes this refers as DOR handles individual income tax,
corporate tax, sales/use tax, and tire and battery taxes. Additionally, it is unclear if this tax
exemption is just for this project or is it for all projects the business is involved in.
This additionally will allow a state and local sales and use tax refund. It should be noted that the
state sales tax is 4.225% and is distributed 3% to general revenue, 1% to the School District
Trust Fund, 0.125% to the Conservation Commission Fund and 0.1% to the Park, Soil & Water
Funds. This proposal would result in an unknown loss to each of these funds.
In an effort to more accurately reflect the estimated local impact, B&P and DOR have moved
from a population weighted average local sales tax rate to a location weighted average local sales
tax rate. This change was made to reflect where sales actually occur, rather than exclusively
where people live. Refunding sales tax paid would result in lost revenue to the locals as well.
The amount is unknown as it is unknown how many projects may apply for the incentives.
Administration of Proposal
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 the individual income tax computer
system ($1,785). These changes are estimated to cost $8,923.
This proposal creates new sales tax exemption and refund process. This will require changes to
the sales tax use tax system as well as the distribution system. These changes are estimated to
cost $10,000.
This proposal requires that DOR audit and approve the projects after they are complete.
Verification of projects is outside the scope of the Department and would require an Auditor
($50,462) to handle this work. This would best be handled by DED.
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.
Staff will be needed during the duration the claims are coming in. L.R. No. 4191H.01I
Bill No. HB 2407
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February 5, 2024
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Oversight notes the DOR will need to make a change to the tax credit form, update the
individual income tax website, and change sales and use tax system including distribution
system. Therefore, Oversight will reflect $18,923 costs for the DOR changes in the fiscal note
effective FY 2025
Oversight notes DOR assumes the need for 2 additional FTE to properly administer this
program. Therefore, Oversight will reflect costs for one Auditor at a salary of $50,462 annually
and one Associate Customer Service Representative at a salary of $35,880 annually effective FY
2026.
Officials from the Department of Natural Resources (DNR) defer to the DOR for the potential
fiscal impact of this proposal.
Officials from the Office of Administration – Budget & Planning (B&P) note:
Sections 620.2022, 620.2024, 620.2026 and 620.2028 are added and creates the "Workforce
Housing Tax Incentives Program", to be administered by the Department of Economic
Development (DED) and establishes provisions for workforce recovery through housing
development after a disaster. Beginning on or after January 1, 2025, a housing business can
apply for tax incentives and credits for disaster recovery housing projects that are in a declared
state disaster area and eligible for the Federal Emergency Management Agency (FEMA)
Individual Assistance Program (IAP).
Eligible projects must be rehabilitation, repair, or redevelopment projects located at
underutilized, underused, or undeveloped sites that will have single family, multi-family, or
multi-use dwelling units as defined by the statute. A housing business applying for disaster
recovery housing project tax incentives must submit housing project certification that meets the
definition of a disaster recovery housing project. They must also submit documentation that
provides evidence that the qualified disaster recovery housing project is needed due to the impact
of the disaster that is the subject of the major disaster declaration.
Application documentation should include local matching funds of $1,000 per dwelling unit
pledged for the housing project and a funding agreement between the housing business and the
governing body of the community where the housing project will be located. Applications have a
one-time compliance cost fee of $500 and a fee equal to 1/2 percent of the value of tax incentives
claimed under the agreement. Housing companies must complete their housing project within
three years from the date it’s registered by the DED. The DED shall issue tax incentives under
the program on a first-come, first-served basis until all tax incentives are allocated. The
aggregate tax incentives cap for disaster recovery housing projects shall be $35M, with half, or
$17.5M, being reserved for qualified housing projects in small cities. Subsection 620.2026.5(4)
is for all other housing projects under this program which could be $35M once, or $35M
annually, or $35M per project. It is unclear what the language states if it's a cumulative, annual,
or a per project cap. The total aggregate cap for the disaster program is $35M, and an unknown
total fiscal impact for all other programs. L.R. No. 4191H.01I
Bill No. HB 2407
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February 5, 2024
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Prior to completion of a housing project, housing businesses may claim a refund of paid sales
and use taxes that are directly related to a housing project. This program will automatically
sunset 6 years after the date it becomes effective, and terminate on September 1 of the following
year. Therefore, the fiscal impact of this program is up to $70M in general revenue in fiscal year
2026, and is or could exceed $35M in fiscal year 2027 and beyond.
Officials from the Department of Economic Development (DED) note:
620.2022 establishes the "Workforce Housing Tax Incentives Program".
Housing projects including 1 of the following:
1. 4 or more single-family dwelling units, except for a housing project located in a small
city, then 2 or more single-family dwelling units.
2. 1 or more multiple dwelling unit buildings each containing 3 or more individual dwelling
units.
3. 2 or more dwelling units located in the upper story of an existing multi-use building
OR;
The housing project consists of any of the following:
1. Rehabilitation, repair, or redevelopment at a brownfield or grayfield site that results in
new dwelling units.
2. The rehabilitation, repair, or redevelopment of dilapidated dwelling units.
3. The rehabilitation, repair, or redevelopment of dwelling units located in the upper story
of an existing multi-use building.
4. For a housing project located in a small city, development at a greenfield site.
5. For a disaster recovery housing project.
A housing business seeking workforce housing tax incentives shall apply to DED. All housing
project applications must be reviewed and scored on a competitive basis by DED, but disaster
recovery projects are first-come-first-served.
Housing projects have a cumulative cap of $35M, and disaster recovery projects have a
cumulative cap of $35M, which totals to $70M cumulative cap total for the life of the program.
620.2028. Establishes a way for housing businesses to refund of sales and use taxes. This part is
administered by DOR.
For tax credits claimed by housing businesses:
1. For a housing project located in an urban area, 10% of the qualifying new investment.
2. For a housing project located in a small city, 20% of the qualifying new investment.
3. For a disaster recovery housing project, 20% of the qualifying new investment. L.R. No. 4191H.01I
Bill No. HB 2407
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February 5, 2024
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This legislation shall sunset on 12/31 6 years after the effective date, unless reauthorized by the
general assembly.
DED is requesting 2.0 FTE to administer the program.
Oversight notes the DED assumes the need for 2 FTE Senior Economic Development
Specialists at $74,664. Oversight does not have any information to the contrary. Therefore,
Oversight will reflect DED costs in the fiscal note effective FY 2026.
Oversight notes the proposal, §§620.2026.5 (3) specify the aggregate amount of tax credits for
disaster recovery housing projects must not exceed 35 million of which $17.5 million must be
allocated to project in small cities.
Oversight notes the proposal, Section 620.2026.5 (4) states that all other housing projects under
this program that are not disaster recovery housing projects shall be subject to a thirty-five
million dollar cap.
Oversight notes the proposal, §§ 620.2026.3 (6) specify the maximum aggregate amount of tax
incentives that may be awarded and issued under section 620.2028 to a housing business for a
housing project shall not exceed one million dollars.
Oversight notes the provisions of the bill will expire December 31st, six years after the effective
date. Oversight cannot predict the participation level in this tax credit. Therefore, Oversight will
reflect a cost of $35 million divided over six years for both $35 million caps ($70 million in
aggregate over the life of the program / 6 years). The first claims will not be field until FY 2026
with the tax credit sunsetting in FY 2031.
Oversight notes the proposal, §§ 620.2026.1 (2) (b) states the local political subdivisions pledge
and enter into agreements between the entity and the housing businesses offering the form of
cash or cash equivalents or in the form of a local property tax exemption, rebate, refund, or
reimbursement. Therefore, Oversight will reflect loss of local funds of an unknown amount in
cases where the housing businesses do not fulfil the contractual agreements.
Oversight notes the subsection 2 of this section requires payment of fees:
a) one-time compliance cost fee of five hundred dollars to be collected by the authority prior
to the issuance of a tax incentive,
b) a compliance cost fee equal to one-half of one percent of the value of tax incentives
claimed under an agreement that has an aggregate tax incentive value of one hundred
thousand dollars or greater.
Therefore, Oversight will note the collection of both fees as an unknown revenue gain in the
fiscal note effective FY 2026 in the fiscal note.
L.R. No. 4191H.01I
Bill No. HB 2407
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February 5, 2024
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Oversight notes the proposal, §§620.2028.4 stipulates that the DOR and DED both will
promulgate the rules and regulations of this program.
Oversight notes that under the proposal, the contractor and subcontractors are able to receive
refund in form of sales or use tax owed, or tax credits.
Oversight notes that even though the refund could be issued in lieu of payment of use or sales
tax owed in form of refund, it does not alter the tax. Therefore, Oversight will not reflect any
changes to the school district trust fund, conservation fund, soil & water fund, or local funds.
Oversight notes that the proposal, §§620.2028.4 (1) & (2) allows for recapture of the monies
from the contractors or subcontractors due to the non-compliance with the rules under the
proposal from the administrator in the state or local governments. Therefore, Oversight will
reflect avoidance cost of Unknown amount to the general revenue fund in the fiscal note
effective FY 2026.
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 FY2026 and FY2027 as a result of the creation of Workforce Housing Tax Incentives
Program. 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 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. L.R. No. 4191H.01I
Bill No. HB 2407
Page 9 of
February 5, 2024
BB:LR:OD
Officials from the Office of the State Public Defender 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 this agency.
Officials from the Oversight Division
pursuant to Section 23.253 RSMo; however, Oversight assume it can absorb the cost with the
current budget authority.
Officials from the City of OsceolaCity of Kansas City both assume the proposal will have
no fiscal impact on their organization.
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.
FISCAL IMPACT – State
Government
FY 2025
(10 Mo.)
FY 2026FY 2027Fully
Implemented
(FY 2031)
GENERAL REVENUECosts – DOR Section(s)
620.2022-2028 - 2 FTEs
needed p. 5
Personnel Service$0($88,069)($89,830)($97,235) Fringe Benefits$0($63,300)($63,942)($69,213) Expense & Equipment$0($26,857)($1,163)($1,259)Total Costs - DOR$0($178,226)($154,935)($167,707)FTE Change0 FTE2 FTE2 FTE2 FTE L.R. No. 4191H.01I
Bill No. HB 2407
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February 5, 2024
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FISCAL IMPACT – State
Government
FY 2025
(10 Mo.)
FY 2026FY 2027Fully
Implemented
(FY 2031)
Costs - Section(s) 620.2022-
2028 – changes to PTC,
Website, and tax systems
needed p. 5($18,923)$0$0$0
Cost avoidance - Section
620.2028 4. (1) & (2) recapture
of the funds p.8UnknownUnknownUnknownUnknown
Costs - 620.2026 5. (3) Disaster
Housing Recovery Tax Credits
p.7 $0
(Unknown,
Could exceed
$5,833,333)
(Unknown,
Could exceed
$5,833,333)
(Unknown,
Could exceed
$5,833,333)
Costs - Section 620.2026 5(4)
All other housing projects p.7
$0
(Unknown,
Could exceed
$5,833,333)
(Unknown,
Could exceed
$5,833,333)
(Unknown,
Could exceed
$5,833,333)
Costs – DED Section(s)
620.2022-2028 - 2 FTEs
needed p. 7
Personnel Service$0($152,315)($155,361)($168,168) Fringe Benefits$0($89,075)($90,256)($97,696) Expense & Equipment$0($28,402)($9,164)($9,919)Total Costs - DED$0($269,792)($254,781)($275,783)FTE Change0 FTE2 FTE2 FTE2 FTERevenue Gain – Section
620.2026 3 (2) (a) - one time
fee p.7$0Unknown Unknown Unknown
Revenue Gain – Section
620.2026 3 (2) (b) pro rata fee
per project p.7$0Unknown Unknown Unknown
ESTIMATED NET EFFECT
ON GENERAL REVENUE
FUND
Up to
($18,923)
(Unknown,
Could
Exceed
$12,114,684)
(Unknown,
Could
Exceed
$12,076,382)
(Unknown,
Could
Exceed
$12,110,156) L.R. No. 4191H.01I
Bill No. HB 2407
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February 5, 2024
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FISCAL IMPACT – Local
Government
FY 2025
(10 Mo.)
FY 2026FY 2027Fully
Implemented
(FY 2031)
LOCAL POLITICAL
SUBDIVISIONS
Costs - Section 620.2026 1. (2)
(b) local property tax
exemption, rebate, refund, or
reimbursement p.7$0(Unknown) (Unknown)(Unknown)
ESTIMATED NET EFFECT
ON LOCAL POLITICAL
SUBDIVISIONS $0(Unknown) (Unknown)(Unknown)
FISCAL IMPACT – Small Business
A direct fiscal impact to small businesses would be expected as a result of this proposal.
FISCAL DESCRIPTION
This bill establishes the "Workforce Housing Tax Incentives Program" within the Department of
Economic Development. The Program defines significant terms, which include "brownfield" and
"greenfield" sites and different types of communities and housing projects (Section 620.2022,
RSMo.).
Proposed housing projects must meet at least one of three specified dwelling unit minimums;
projects consist of three types of rehabilitation and two project types that relate to greenfield
sites. The bill specifies maximums for average dwelling unit costs for the project type and
location. The Department must primarily consider the most recent annual Census Bureau
building permits survey and historical program data in determining the maximum average
dwelling unit cost. The units must meet the Federal housing quality standards in the Federal code
(24 CFR 982) and all applicable local safety standards (Section 620.2024).
Housing businesses must apply to the Department as specified by rule to access the Program's
tax incentives. Applications must include:
(1) Information about local participation in the project, which includes a supporting resolution by
the governing body of the community where the housing project will be located, and
documentation of local matching funds of at least $1,000 per dwelling unit.; L.R. No. 4191H.01I
Bill No. HB 2407
Page 12 of 13
February 5, 2024
BB:LR:OD
(2) An agreement between the business and the Department that specifies the eligibility
requirements and how they will be maintained. The business must also report any environmental
or worker safety law violations within the last five years, which the Department may use to deny
assistance unless it finds the violations did not seriously affect health, safety, or the environment.
(3) Total costs and funding sources to allow determination of adequate financing, actual dwelling
unit cost, and the qualifying amount of the investment; and
(4) Other necessary information required for the Department's evaluation of the application.
Applications will be reviewed and scored competitively by the Department as specified in the
bill. After all applications are reviewed, the Department may make a tax incentive award to a
housing project, which must be approved by the Department Director. The Department must
notify the housing business of the tax incentive award; the bill specifies the contents of the
notice. The amount is contingent upon completion of requirements. Applicants that do not
receive awards may make new applications during subsequent application periods.
Upon receiving the tax incentive award, the housing business must enter an agreement with the
Department; the agreement identifies the award amount and date, project completion deadline,
and total costs. The bill establishes two compliance fees and requires that projects be completed
in three years from their registration with the Department. The Department may extend the
deadline for good cause by up to 12 months, with the option for another 12 months. Upon
completion of the project, the housing business must submit an examination completed by a
certified public accountant on standards for attestation engagements and a statement of the final
amount of qualifying new investment, plus any other information the Department requires for
compliance.
The maximum aggregate amount of tax incentives for a housing project is $1 million. If a
housing business qualifies for a higher amount than is allowed, the Department and business may
negotiate an apportionment of the reduction in tax incentives between the sales tax refund and
the housing investment tax credits as long as the total aggregate amount of incentives does not
exceed amount set by the bill.
The incentives must be issued on a first-come, first-served basis until the maximum amount of
incentives is reached. The Department must maintain a list of registered projects and projects
awarded incentives; it will also establish await list.
Failure of a housing business to complete a project or to comply with requirements may result in
revocation, reduction, termination, or rescission of awards or incentives. Repayment of
incentives is considered as a tax payment due and payable to the Department of Revenue. The
county has the authority to recover the value of property taxes not collected as a result of
exemption awarded to a business under the Program.
The Department of Economic Development may establish a disaster recovery housing project
application period after the declaration of a major disaster. The bill specifies that tax incentives L.R. No. 4191H.01I
Bill No. HB 2407
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February 5, 2024
BB:LR:OD
will be issued on a first-come, first served basis until the maximum amount of incentives is
allocated. The bill allots $35 million to these projects, with $17.5 million for projects in small
cities. All other housing projects that are not disaster recovery have a $35 million cap (Section
620.2026, RSMo).
The provisions of the bill will expire December 31 six years after the effective date (Section
620.2028).
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 Revenue
Office of Administration – Budget & Planning
Department of Economic Development
Department of Commerce and Insurance
Joint Committee on Administrative Rules
Office of the Secretary of State
Department of Natural Resources
Missouri Office of Prosecution Services
Office of the State Public Defender
Oversight Division
City of Kansas City
City of Osceola
Julie MorffRoss StropeDirectorAssistant DirectorFebruary 5, 2024February 5, 2024