SECOND REGULAR SESSION
SENATE BILL NO. 958
90TH GENERAL ASSEMBLY
INTRODUCED BY SENATOR SIMS.
Read 1st time February 3, 2000, and 1,000 copies ordered printed.
TERRY L. SPIELER, Secretary.
4380S.01I
To amend chapter 135, RSMo, relating to tax relief for research and development by adding thereto one new section relating to the same subject.
Section A. Chapter 135, RSMo, is amended by adding thereto one new section, to be known as section 135.955, to read as follows:
135.955. 1. As used in this section, the following terms mean:
(1) "Business component", any product, process, computer software, technique, formula, or invention which is to be held for sale, lease, or license, or used by the taxpayer in a trade or business of the taxpayer. Any plant process, machinery, or technique for commercial production of a business component shall be treated as a separate business component and not as part of the business component being produced;
(2) "Contract research expenses", sixty-five percent of any amount paid or incurred by a taxpayer to any person other than an employee of the taxpayer for qualified research. Contract research expenses which are paid or incurred during a tax year, but are attributable to qualified research to be conducted after the close of such tax year, shall be treated as paid or incurred during the tax year in which the qualified research is conducted;
(3) "Department", the department of economic development;
(4) "Director", the director of the department of economic development;
(5) "Distressed community", as defined in section 135.530;
(6) "Eligible taxpayer", a taxpayer who employs no more than one hundred fifty employees and who is engaged in a for-profit basis development of medical instruments and devices, medical diagnostic or therapeutic devices, plant science products, pharmaceutical or veterinary products with agricultural applications, or other products derived from life or biomedical sciences;
(7) "In-house research expenses", any wages paid or incurred to an employee for qualified services performed by such employee, any amount paid or incurred for equipment and supplies used in the conduct of qualified research, and any amount paid or incurred to another person for the right to use computers in the conduct of qualified research. The phrase excludes any amount to the extent that the taxpayer receives or accrues any amount from any other person for the right to use substantially identical personal property;
(8) "Qualified research", any research which is undertaken for the purpose of discovering information which is technological in nature, the application of which is intended to be useful in the development of a new or improved business component of the taxpayer and substantially all of the activities of which constitute elements of a process of experimentation for a new or improved function, performance or reliability or quality. Qualified research shall not include any research related to style, taste, cosmetic, or seasonal design factors; any research conducted after the beginning of commercial production of the business component; any research related to the adaptation of an existing business component to a particular customer's requirement or need; any research related to the reproduction of an existing business component in whole or in part from a physical examination of the business component itself or from plans, blueprints, detailed specifications, or publicly available information with respect to such business component; any efficiency survey, activity relating to management function or technique, market research, testing, or development, including advertising or promotions, routine data collection, or routine or ordinary testing or inspection for quality control; any research in the social sciences, arts, or humanities; any research to the extent funded by any grant, contract, or otherwise by another person or governmental entity; and except to the extent provided in state regulations, any research with respect to computer software which is developed by or for the benefit of the taxpayer primarily for internal use by the taxpayer, other than for use in an activity which constitutes qualified research pursuant to this subdivision, or a production process with respect to which constitutes qualified research. A given business component of the taxpayer shall not qualify for a tax credit pursuant to this section unless such business component constitutes qualified research as defined in this subdivision;
(9) "Qualified research expenses", the sum of the amounts of in-house research expenses and contract research expenses which are paid or incurred by the taxpayer during the taxable year for qualified research taking place in the state of Missouri in carrying on any trade or business of the taxpayer; except that, a taxpayer shall also be treated as meeting the trade or business requirement if, at the time such in-house research expenses are paid or incurred, the principal purpose of the taxpayer in making such expenditures is to use the results of the research in the active conduct of a future trade or business of the taxpayer;
(10) "Qualified services", services consisting of engaging in qualified research, or engaging in the direct supervision or direct support of research activities which constitute qualified research; except that, if substantially all of the services performed by an individual for the taxpayer during the tax year consist of services as defined in this subdivision, such phrase shall include all of the services performed by such individual for the taxpayer during the tax year;
(11) "Supplies", any tangible property other than land or improvements to land, and property of a character subject to the allowance for depreciation;
(12) "Tax liability", the tax due pursuant to chapter 143, 147 or 148, RSMo, other than taxes withheld pursuant to sections 143.191 to 143.265, RSMo;
(13) "Taxpayer", any person, partnership, corporation, trust or limited liability company;
(14) "Wages", all remuneration, payable or paid, for personal services, including commissions and bonuses and the cash value of all remuneration paid in any medium other than cash.
2. An eligible taxpayer who incurs qualified research expenses shall, upon application and issuance of a certificate of tax credit, be entitled to receive a credit against such taxpayer's tax liability in an amount equal to ten percent of such taxpayer's qualified research expenses or, in the case of qualified research expenses in a distressed community, in an amount equal to twenty-five percent of such taxpayer's qualified research expenses. The total amount of tax credits available pursuant to this section shall not exceed ten million dollars, and at least two million dollars of the amount authorized by this section shall be reserved for taxpayers incurring qualified research expenses in a distressed community. The maximum credit allowed a taxpayer for research expenses pursuant to this section shall be five hundred thousand dollars or, in the case of qualified research expenses in a distressed community, one million two hundred fifty thousand dollars.
3. To obtain a tax credit pursuant to this section, a taxpayer shall submit an application to the department of economic development in a form approved by the director. Upon satisfaction that the taxpayer meets all requirements of this section, the director shall issue the taxpayer a certificate of tax credit in an appropriate amount and shall certify the amount of such credit to the department of revenue. Tax credit allowed pursuant to this section shall be issued in the order applications therefor are received. The department of economic development is authorized to promulgate any rules deemed necessary to implement this section. No rule or portion of a rule promulgated pursuant to the authority of this section shall become effective unless it has been promulgated pursuant to the provisions of chapter 536, RSMo.
4. The tax credit shall be claimed on such taxpayer's tax return for the tax year in which the qualified research expenses are incurred and any amount of credit which exceeds the tax liability of a taxpayer for the tax year in which the credit is first claimed may be carried forward to any of the taxpayer's ten subsequent tax years, and for tax credits for qualified research expenses in a distressed community, the credit may also be carried back to any of the taxpayer's three prior tax years. Any taxpayer claiming a credit pursuant to this section shall file a copy of such taxpayer's certificate of tax credit with such taxpayer's tax return. The department of revenue shall apply tax credits against a taxpayer's tax liability pursuant to subsection 1 of section 32.115, RSMo. Certificates of tax credit issued pursuant to this section may be transferred, sold or assigned by notarized endorsement thereof which names the transferee.
5. If a taxpayer receiving a tax credit pursuant to this section transfers the conduct of qualified research to a location outside of Missouri within three years after receipt of such tax credit, such tax credit, or the share of such tax credit which was granted with respect to the transferred qualified research, shall be revoked, and the taxpayer shall repay any amount of the tax credit already applied against the investor's state tax liability.