Missouri Tax Credits Missouri Senate September 21, 2011

General Revenue Distribution Source: Missouri Senate Appropriations Committee “2011 Annual Fiscal Report”

General Revenue Distribution Source: Missouri Senate Appropriations Committee “2011 Annual Fiscal Report”

Missouri Net General Revenue Collections General Revenue Fiscal YearNet GR Collections (in Billions)% Growth/(Decline) 1998$ $ % 2000$ % 2001$ % 2002$6.211(2.8%) 2003$5.926(4.6%) 2004$ % 2005$ % 2006$ % 2007$ % 2008$ % 2009$7.451(6.9%) 2010$6.774(9.1%) 2011$ % Source: Missouri Senate Appropriations

Tax Credit Redemptions Fiscal YearTax Credit Redemptions (in Millions)% Growth/(Decline) 1998$ $ % 2000$ % 2001$ % 2002$365.2(8.4%) 2003$356.0(2.5%) 2004$ % 2005$ % 2006$ % 2007$ % 2008$ % 2009$ % 2010$521.5(10.8%) 2011$ % Source: Missouri Senate Appropriations

Tax Credit Redemptions as % of GR Fiscal YearTC Redemptions (Millions) GR Collections (Billions)% of GR 1998$102.7$ % 1999$170.0$ % 2000$314.5$ % 2001$398.7$ % 2002$365.2$ % 2003$356.0$ % 2004$408.0$ % 2005$414.9$ % 2006$417.4$ % 2007$484.5$ % 2008$504.8$ % 2009$584.7$ % 2010$521.5$ % 2011$545.1$ % Source: Missouri Senate Appropriations

Future Tax Credit Obligations Tax Credit Process: 1) Authorized 2) Issued 3) Redeemed Tax Credit Obligations: 1) Credits Issued But Not Redeemed:  $673,473,118 2) Streaming Tax Credits:  $1,411,773,841 3) Credits Authorized But Not Issued:  $476,106,314 Total Obligations:  $2,561,353,273 Source: “Outstanding Tax Credits Report,” Requested from DED on September 15, 2011

Historic Preservation Tax Credit  Incentive to Rehabilitate Historic Structures  Created in 1997 Special Session  State Program “Piggy-backs” off of Federal Tax Credit Program  Building Must Be:  At Least 50 Years Old; and  Individually Listed on the National Register of Historic Places; or  Within a Certified Historic District  Credit Value  Federal Credit = 20% of Eligible Costs  State Credit = 25% of Eligible Costs  Fiscal Note Assumed Annual Cost of the Program Would Be $14,000,000 Source: “Fiscal Note TAFP CCS for HCS for SB 1, 1997, 1 ST Extraordinary Session 1997”

Historic Preservation Tax Credit Fiscal YearAuthorizedIssuedRedeemed 1998$24,650 $0 1999$20,000,000 $2,559, $41,000,000$20,701,046$8,874, $72,500,000$41,583,979$33,169, $116,000,000$60,011,382$41,401, $142,939,000$89,214,177$43,153, $100,649,000$75,692,322$66,089, $116,566,180$80,213,374$74,532, $237,000,000$105,071,006$103,134, $128,334,628$171,508,564$132,841, $170,058,700$161,621,537$140,111, $211,950,941$119,914,948$186,426, $99,510,175$107,229,218$107,973, $82,389,495$116,244,410$107,767,393 TOTAL$1,538,922,769$1,169,030,613$1,048,036,221 Sources: “DED Tax Credit History ,” 2007, 2008, 2009, 2010, Historic Preservation Form 14s, & DOR “FY 11 Credits Master 72711”

Low Income Housing Tax Credit  Created in 1990  Government Subsidizes Building/Renovation Costs of Housing in Exchange for Reduced Rents for Low Income Individuals and Families  State Program “Piggy-backs” off of Federal Program  9% Tax Credits  4% Tax Credits  Expanded in 1997 to Allow Up to100% of the Federal Credit  Fiscal Note Assumed Annual Cost of the Program Would Be $5,280,000 Sources: “Fiscal Note TAFP SS HB 578, 1997”

Low Income Housing Tax Credit Fiscal YearAuthorizedIssuedRedeemed 1998$6,704,187$3,281,690$2,907, $11,367,660$16,662,499$4,323, $80,455,840$25,035,856$10,105, $138,783,050$35,681,150$12,368, $125,558,880$45,098,066$19,474, $134,388,920$56,054,266$29,978, $202,644,630$72,407,466$36,916, $183,106,160$83,477,412$65,392, $273,640,430$97,151,549$61,963, $169,445,790$114,584,066$81,646, $124,120,070$133,724,820$98,305, $316,175,550$145,997,420$105,967, $149,068,300$155,703,625$142,141, $102,960,000$156,016,305$143,055,387 TOTAL$2,018,419,467$1,140,876,190$814,546,170 Sources: “DED Tax Credit History ,” 2007, 2008, 2009, & 2010 Low Income Housing Form 14s, & DOR “FY 11 Credits Master 72711”

Senate Bill 8, Senate Third Read- Tax Credit Reforms  Historic Preservation  $80 Million Cap for Projects Receiving $275,000 or More in Tax Credits  $10 Million Cap for Projects Receiving Less than $275,000 in Tax Credits  Establishes Transition Rules for Projects Currently in Pipeline  Prohibit Stacking of Historic Preservation Tax Credit and 9% Tax Credits for the Same Projects  Limits Owner Occupied Residential Projects to $125,000 in Tax Credits Per Project  Reduce Carry-Back of Tax Credits from 3 Years to 1 Year  Sunset Date- August 28, 2018

Senate Bill 8, Senate Third Read- Tax Credit Reforms  Low Income Housing Tax Credit  9% Projects  $110 Million Cap in FY 2012  $97 Million Cap in FY 2013  $84 Million Cap in FY 2014  $70 Million Cap in FY 2015 and FYs After  4% Projects  $15 Million Cap in FY 2012  $10 Million Cap in FY 2013  $5 Million Cap in FY 2014  No Tax Credits Authorized in FY 2015 and FYs After  Prohibit Stacking of Historic Preservation Tax Credit and 9% Tax Credits for the Same Projects  Reduce Carry-Back of Tax Credit from 3 Years to 2 Years  Sunset Date- August 28, 2018

Senate Bill 8, Senate Third Read- Tax Credit Reforms  Brownfield Remediation  $40 Million Cap for Fiscal Years  $35 Million Cap in FY 2016 and FYs After  Projects Receiving Distressed Area Land Assemblage Tax Credits Cannot Receive More than $10 Million in Remediation Tax Credits in Fiscal Years and More than $5 Million in FYs 2016 and After  Sunset Date: August 28, 2018

Senate Bill 8, Senate Third Read- Tax Credit Reforms  Special Needs Adoption Tax Credit Program  Excludes International Adoptions from Being Eligible for the Tax Credit  Residential Treatment Agency Tax Credit  Expands Definition of Taxpayer  Increases the Limitation on the Amount of Tax Credits for which a Provider Can Apply  New Generation Cooperative Incentive Program & Agricultural Product Utilization Contributor Program  Limits Projects to Rural Areas  Allows MASBDA to Allocate Tax Credits to Either Program Based on the Greatest State Benefit While Providing the Least Amount of Tax Credits Necessary  Family Farm Breeding Livestock  Tax Credit Is Awarded to an Applicant Based on the Purchase Price of the Livestock Rather than First Year’s Interest on Loan  Tax Credit Accountability Act  Allows an Administering Agency, By Rule, to Provide for the Recapture of Tax Credits for Noncompliance with Program Requirements  Requires the Joint Committee on Legislative Research to Conduct a Review of Any Tax Credit Program by September 1 of the Year Prior to the Year in Which the Program Is Prohibited from Authorizing or Issuing Tax Credits

Senate Bill 8, Senate Third Read- Tax Credit Reforms  Programs Prohibited from Authorizing Tax Credits After the Effective Date of the Act  Neighborhood Preservation (Unless an Appropriation is Made for Projects in Disaster Areas)  Brownfield Jobs and Investment  Small Business Incubator  Self-Employed Health Insurance  Health Care Access Fund  MDFB Bond Guarantee  MDFB Infrastructure  Programs with a 3 Year Sunset  Wine and Grape Producer  New Generation Cooperative Incentive  Agricultural Product Utilization  Family Farm Breeding Livestock  Qualified Beef

Senate Bill 8, Senate Third Read- Tax Credit Reforms  Programs with a 4 Year Sunset  Neighborhood Assistance Program (NAP)  Affordable Housing Assistance Program (AHAP)  Public Safety Surviving Spouse  Special Needs Adoption  Children in Crisis  Youth Opportunities Program (YOP)  Small Business Disabled Access  Residential Dwelling Access  Domestic Violence Shelter  Maternity Home  Pregnancy Resource Center  Food Pantry  Residential Treatment Agency  Family Development Account  Shared Care

Senate Bill 8, Senate Third Read- New Programs  Aerotropolis  $60 Million in Air Export Tax Credits over 8 Years (Freight Forwarders)  Amateur Sports Event Tax Credit  $3 Million Annually Awarded on Ticket Sales Basis  $10 Million for Contributions to Sponsors (Tax Credits Must Be Purchased at Face Value from State)  Developmental Disability Tax Credit  Tax Credit for Contributions to Providers (Tax Credits Must Be Purchased at Face Value from State)  Data Centers  Authorization of Donation/Lease Agreements Between Municipalities and Technology Business Projects  Sales Tax Exemptions for Construction, Machinery, and Utilities  Requires a 1:1 Return on Investment to the State

Senate Bill 8- Senate Third Read- Compete Missouri  Job Creation Benefits  Allows for Performance-Based and Discretionary Benefits of Retained Withholding Taxes and Refundable Tax Credits Based on the Number of Jobs Created and the Type of Industry  Limits the Benefits to the Projected Net Fiscal Benefit to the State  Authorizes Up-Front Benefits for Job Creation Projects (Subject to Appropriation)  Training Programs  Replaces the Community College New Jobs Training Program, the Community College Job Retention Program, and the Job Development Fund with Similar Programs with Standard Definitions  Retention Benefits  Authorizes the Award of Retained Withholding Taxes for a Period of 10 Years for Companies that Retain More than 125 Jobs and Meet Certain Capital Investment Requirements  Limits the Benefits to the Projected Net Benefit to the State  Authorizes Up-Front Funding for Retention Projects (Subject to Appropriation)  Programs It Replaces:  Business Facility  Enhanced Enterprise Zone  BUILD  Quality Jobs  Development Tax Credit  Rebuilding Communities  Annual Cap (Reduced by Obligations of Programs Being Replaced)  $111 Million in FY 2012  $126 Million in FY 2013  $141 Million in FY 2014

Senate Bill 8, Senate Third Read- Compete Missouri New Jobs 5-6 Year Benefit Minimum Eligibility Entitlement Benefits Maximum Additional Discretionary Maximum Possible Enhanced Enterprise Zones - 2 New Jobs - 80% County Average Wage - Investment $100K - Withholding - 5 Year Benefit - 6 Years for 10 yr MO Business Targeted Industry- 10 New Jobs - 90% County Average Wage -Withholding + 3% Tax Credits (Max 6%) -5 Year Benefit -6 Years for 10 yr MO Business -Up to 6% Tax Credits -Up to 5 Years -Up to 12% Payroll -5 Year Benefit -6 Years for 10 yr MO Business Non-Targeted Industry - 20 New Jobs - 90% County Average Wage -Withholding + 2% Tax Credits (Max 5%) -5 Year Benefit -6 Years for 10 yr MO Business -Up to 4% Tax Credits -Up to 5 Years -Up to 9% Payroll -5 Year Benefit -6 Years for 10 yr MO Business

Senate Bill 8, Senate Third Read- Compete Missouri New Jobs Up-Front Funding Minimum Eligibility Entitlement Benefits Maximum Additional Discretionary Maximum Possible Up-Front Funding Targeted Industry -10 New Jobs -90% County Average Wage - Up to 9% Tax Credits (Projected over 5 yrs) Up-Front Funding Non-Targeted Industry -20 New Jobs - 90% County Average Wage -Up to 7% Tax Credits (Projected over 5 yrs)

Senate Bill 8, Senate Third Read- Compete Missouri Retained JobsMinimum Eligibility Entitlement Benefits Maximum Additional Discretionary Maximum Possible Ten-Year Period Benefit -125 Retained Jobs -90% County Average Wage - Up to 100% of Withholding for 10 yrs Up-Front Funding -125 Retained Jobs -90% County Average Wage - Up to 80% of Withholding Projected over 10 yrs