Provide supplemental funding for investment entities that have been approved for the Federal New Markets Tax Credit (NMTC) program in order to direct more funding to Missouri projects. The NMTC program provides state and federal tax credits to investors that make investments into approved funds, which will make investments in eligible projects located in low income census tracks in Missouri.This program does not provide tax credits directly to businesses. Eligible businesses interested in obtaining funding should contact the approved "Community Development Entities" that are listed on the website below.
Section 135.680, RSMo, enacted in 2007.
Low-income communities (LIC) are census tracts that have a poverty rate of 20% or more, or the median income is below 80% of the greater than (a) statewide median income; or (b) metropolitan median income.
Community Development Entities (CDEs) which have been allocated federal New Markets Tax Credits for Missouri. The state New Markets Tax Credits are provided to investors which invest in the funds established by a CDE for projects in Missouri.
A CDE may make an investment (loan or equity) into a Qualified Active Low-Income Community Business (QALICB), which is any corporation (including a nonprofit corporation) or partnership which meets the following criteria for any taxable year:
- At least 50 percent of total gross income of the QALICB is derived within any Low-Income Community.
- A substantial portion of the use of the tangible property of the QALICB (whether owned or leased) is within any Low-Income Community.
- A substantial portion of the services performed of the QALICB by its employees are performed in any Low-Income Community.
- Less than 5 percent of the average of the aggregate unadjusted bases of the property of the QALICB is attributable to collectibles, other than collectibles that are held primarily for sale to customers in the ordinary course of such business; and
- Less than 5 percent of the average of the aggregate unadjusted bases of the property of the QALICB is attributed to nonqualified financial property.Any business that derives or projects to derive 15 percent or more of its annual revenue from the rental or sale of real estate shall not be considered to be a QALICB.
PROGRAM BENEFITS/ELIGIBLE USES:
The tax credit amount shall be equal to the applicable percentage of the adjusted purchase price paid to the issuer of such qualified investment:
- 0% for each of the first 2 credit allowance dates;
- 7% for the third credit allowance date;
- 8% for the next four credit allowance dates
The amount of tax credit claimed shall not exceed the amount of the taxpayer’s state tax liability for the tax year for which the tax credit is claimed. The maximum state tax credit in any fiscal year for all CDEs is $25 million. There is no limit per CDE, and state tax credits are allocated on a first come basis.
The CDEs that have been certified by the Federal NMTC program are eligible to apply for the state NMTC program. The state application will be a two part process:
- The CDE submits an application to the Department of Economic Development (which is available on the website below).
- Once eligibility is determined, DED will send a preliminary approval letter to the applicant CDE, which will include an allocated amount of NMTC contingent upon qualified investments being made within 30 days of the date of the preliminary approval letter.
- If an approved CDE is not successful in gaining proof of the investment, the CDE will be required to reapply and will be required to obtain a commitment that secures the investment in the amount of the application to accompany the new submittal.
Twelve months from the date of the official allocation letter, the Applicant CDE must notify DED where the QEI was invested, provide adjusted purchase price, Senator and Representative information on where investment was made, and how much of a tax credit will be available for the taxpayer.
SPECIAL PROGRAM REQUIREMENTS:
Fee Imposed on Tax Credit Recipients (Section 620.1900, RSMo)
The DED has the authority to charge a fee in an amount up to 2.5% of the amount of tax credits issued. The implementation of this fee is effective on all applications received by the Department (and subsequently approved) after September 7, 2005. Applications for entitlement tax credit programs currently held by the department where hard construction commences by October 15, 2005 shall not be subject to the fee. The fee shall be payable for deposit in the Economic Development Advancement Fund prior to the issuance of tax credits.
- The tax credit is not refundable or transferable. Any amount of credit that cannot be used in the taxable year may be carried forward to any of the taxpayer’s five subsequent taxable years.
- Tax credits earned by a partnership, limited liability company, S-corporation, or other “pass through” entity may be allocated to the partners, members or shareholders of such entity for their direct use in accordance with the provisions of any agreement among such partners, members, or shareholders.
- Qualified investments shall not be made following fiscal year 2010, unless the program is reauthorized by the general assembly.
Missouri Department of Economic Development
Division of Business and Community Services
Development Finance Team
301 West High Street, Room 770
P.O. Box 118
Phone: (573) 751-4539
Fax: (573) 522-4322