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Missouri Works Program Expansion

08.08.2013

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Missouri Works Program

The Missouri Works Program is established to provide tax incentives for qualified companies. A ”qualified company” is generally a firm, partnership, joint venture, association, private or public corporation, or headquarters of such entity registered to do business in Missouri that is the owner or operator of a project facility at which new or retained jobs and any new capital investment are or will be located, and which certifies that it offers health insurance to all full-time employees of all its facilities located in the state and pays at least 50% of the premiums for such insurance. However, the term ”qualified company” does not include any of the following:

  • gambling establishments;
  • storefront consumer-based retail trade establishments, except with respect to any company headquartered in the state with a majority of its full-time employees engaged in non-disqualified operations;
  • food and drinking places;
  • public utilities;
  • any company that is delinquent in the payment of any nonprotested taxes or any other amounts due the state or federal government or any other political subdivision of the state;
  • any company requesting benefits for retained jobs that has filed for or has publicly announced its intention to file for bankruptcy protection, unless the company certifies to the department that it plans to reorganize and not to liquidate and, after its bankruptcy petition has been filed, produces proof that it is not delinquent in filing any tax returns or making any payment due to the state;
  • educational service companies;
  • religious organizations;
  • public administration companies;
  • ethanol distillation or production companies;
  • biodiesel production companies; or
  • health care and social services companies.

Notwithstanding the above provisions, the headquarters, administrative offices, or research and development facilities of an otherwise excluded business may qualify for benefits if the offices or facilities serve a multistate territory. In the event that a national, state, or regional headquarters operation is not the predominant activity of a project facility, the jobs and investment of such operation will be considered eligible for benefits if the other requirements are satisfied.

New jobs incentives: A qualified company may retain an amount equal to the withholding tax for new jobs for five years after the date the jobs are created, or for six years if the company is an existing Missouri business, if it:

  • creates 10 or more new jobs at an average wage of 90% or more of the county average wage;
  • creates two or more new jobs in a rural area at an average wage of 90% or more of the county average wage and commits at least $100,000 to new capital investment at the project facility within two years; or
  • creates two or more new jobs in an enhanced enterprise zone, the average wage of the new jobs equals or exceeds 80% of the county average wage, and it commits at least $100,000 to new capital investment at the project facility within two years.

A qualified company may also receive a tax credit of up to 6% of new payroll to be issued each year for five years, or for six years if the company is an existing Missouri business, provided that the combined tax credit and retained withholding benefits must not exceed 9% of the new payroll in any year. Also, the amount of the tax credit cannot exceed the projected net fiscal benefit to the state, as determined by the Department of Economic Development, and cannot exceed the least amount necessary to obtain the company’s commitment to initiate the project. In determining the amount of tax credits to award to a qualified company, the department must consider the following factors:

  • the significance of the company’s need for program benefits;
  • the amount of projected net fiscal benefit to the state and the period in which the state would realize such benefit;
  • the overall size and quality of the proposed project;
  • the financial stability and creditworthiness of the company;
  • the level of economic distress in the area;
  • the competitiveness of alternative locations for the project facility; and
  • the percent of local incentives committed.

In lieu of the above benefits, a qualified company may, for a period of five years from the date the new jobs are created, or for six years if the company is an existing Missouri business, retain an amount that would otherwise be remitted as withholding tax for the new jobs equal to:

  • 6% of new payroll if the company creates 100 or more new jobs and the average wage equals or exceeds 120% of the county average wage; or
  • 7% of new payroll if the company creates 100 or more new jobs and the average wage equals or exceeds 140% of the county average wage.

The department must issue a refundable tax credit for any difference between this allowed benefit amount and the amount of withholding tax retained by the company if the withholding tax is not sufficient to provide the entire amount of benefit due. A qualified company that meets the requirements for this benefit may also receive an additional tax credit of up to 3% of new payroll for five years, or for six years if the company is an existing Missouri business, provided that the total benefits awarded do not exceed 9% of new payroll in any year. Also, the amount of tax credits awarded to a company cannot exceed the projected net fiscal benefit to the state, as determined by the department, and cannot exceed the least amount necessary to obtain the company’s commitment to initiate the project.

No benefits will be available for a qualified company that has performed significant, project-specific site work at a project facility, purchased machinery or equipment related to the project, or publicly announced its intention to make new capital investment at the facility prior to receipt of a proposal for benefits or the approval of the company’s notice of intent, whichever occurs first.

Retained jobs incentives: A qualified company may be awarded benefits for retained jobs if the department determines that there is a significant probability that the company would relocate to another state in the absence of these benefits. A qualified company may be authorized to retain an amount not to exceed 100% of the withholding tax from full-time jobs for a period of 10 years if the average wage of the retained jobs equals or exceeds 90% of the county average wage. The amount of benefits awarded to a company cannot exceed the projected net fiscal benefit to the state and cannot exceed the least amount necessary to obtain the company’s commitment to retain the necessary number of jobs and make the required new capital investment. To be eligible for the benefits, a qualified company must retain at least 50 jobs for a period of 10 years and make a new capital investment at the project facility within three years in an amount equal to 50% of the total benefits offered to the company. The total amount of benefits available to all qualified companies under this provision must not exceed $6 million in any fiscal year.

Limitations: Any taxpayer who is awarded benefits under this program who knowingly hires individuals who are not allowed to work legally in the United States will immediately forfeit such benefits and must repay the state an amount equal to any state tax credits already redeemed and any withholding taxes already retained.

Also, if a qualified company’s average wage is below the applicable percentage of the county average wage, the company has not maintained the requisite employee insurance, or the number of jobs is below the number required, the company will not receive tax credits or be allowed to retain the withholding tax for the balance of the project period.

Excess credit may not be carried forward, but the Director of Revenue will issue a refund to a qualified company to the extent that the amount of tax credits allowed under the program exceeds the amount of the company’s tax liability.

Relation to other incentives: The benefits available to a qualified company under any other state programs for which the company is eligible that utilize withholding tax from the new or retained jobs of the company must first be credited to the other state program before the withholding retention level applicable under this program will begin to accrue. If any qualified company also participates in a job training program utilizing withholding tax, the company must retain no withholding tax under this program, but the department will issue a refundable tax credit for the full amount of benefit allowed under the program. The calendar year annual maximum amount of tax credits that may be issued to a qualifying company that also participates in a job training program will be increased by an amount equivalent to the withholding tax retained by that company under the jobs training program.

Beginning August 28, 2013, no new benefits may be authorized for any project that has not already been approved by the department for benefits prior to August 28, 2013, under the Development Tax Credit Tax Program, the Rebuilding Communities Tax Credit Program, the Enhanced Enterprise Zone Tax Credit Program, or the Missouri Quality Jobs Program. A company receiving benefits under the Missouri Works Program cannot simultaneously receive benefits under these other programs for the same capital investment and cannot receive benefits under the Manufacturing Jobs Act for the same jobs. The total amount of all tax credits authorized for each fiscal year under the Missouri Works Program, including any outstanding authorizations for tax credits under the other four specified programs, cannot exceed $106 million for fiscal year 2014, $111 million for fiscal year 2015, and $116 million each year for fiscal years after 2015.

Procedural requirements: The department is required to respond to a written request for a proposed benefit award under the program within five business days of the receipt of the request. The response must contain a proposal of benefits or a written refusal stating the reasons for the refusal. Failure by the department to respond to a notice of intent within 30 days will result in it being deemed approved.

A qualified company receiving benefits under the program must provide an annual report, no later than 90 days prior to the end of the company’s tax year, on the number of jobs and other information as may be required by the department to document the basis for the program benefits available.

Tax credits provided under the program may be transferred, sold, or assigned by filing a notarized endorsement thereof with the department.

By no later than January 1, 2014, and quarterly thereafter, the department must provide a report to the General Assembly detailing the benefits authorized under the program during the immediately preceding quarter.

The provisions of the program will automatically sunset on August 28, 2019, unless reauthorized by an act of the General Assembly. If reauthorized, the program will automatically sunset 12 years after the effective date of the reauthorization.

Enhanced Enterprise Zones

The process for designating an enhanced enterprise zone is revised by repealing the requirements that the governing authority notify the Director of the Department of Economic Development of the public hearing regarding the designation at least 30 days prior to the hearing and publish notice of the hearing in a newspaper in the area at least 20 days but not more than 30 days prior to the hearing. After a public hearing, the governing authority may adopt an ordinance or resolution to designate an area as an enhanced enterprise zone, rather than filing a petition with the department requesting the designation.

Other Changes

The legislation also includes provisions replacing the state and local use taxes on the storage, use, or consumption of motor vehicles, trailers, boats, and outboard motors with a sales tax on such property and allowing Pettis County to spend revenue from the county transient guest tax on salaries. These provisions are similar to provisions in S.B. 23, Laws 2013. (TAXDAY, 2013/07/09, S.28 )

H.B. 184 , Laws 2013, effective August 28, 2013
For more information on this or other tax legislation, please contact your Brown Smith Wallace Tax Advisor, or Pam Huelsman at 314.983.1392 or Phuelsman@bswllc.com.

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