SB 0742 - Fiscal Note

Fiscal Note - SB 0742 - Tax Credits For Affordable Housing Assistance

L.R. NO.  2636-01
BILL NO.  SB 742
SUBJECT:  Housing, Taxation
TYPE:     Original
DATE:     February 6, 1996



                              FISCAL SUMMARY
                    ESTIMATED NET EFFECT ON STATE FUNDS


FUND AFFECTED              FY 1997             FY 1998           FY 1999
General Revenue $0 to ($1,000,000)  $0 to ($1,000,000) $0 to ($1,000,000)

Total Estimated
Net Effect on All
State Funds     $0 to ($1,000,000)  $0 to ($1,000,000)$0 to ($1,000,000)

                   ESTIMATED NET EFFECT ON FEDERAL FUNDS


FUND AFFECTED              FY 1997             FY 1998           FY 1999
None

Total Estimated
Net Effect on All
Federal Funds                   $0                  $0                $0

                    ESTIMATED NET EFFECT ON LOCAL FUNDS


FUND AFFECTED              FY 1997             FY 1998           FY 1999
Local Government                $0                  $0                $0

                              FISCAL ANALYSIS

ASSUMPTION

Officials of the Department of Revenue (DOR) state the revisions to the
income tax systems to allow this credit would be minimal and would be
completed by existing staff and resources. However, the Division of Taxation
would request personnel if additional credits are created by this legislation
including one Tax Audit Analyst I for every 6,000 additional claims to
complete pre-edit and processing functions and one Tax Audit Analyst I for
every 50,000 additional claims to complete error corrections.

Officials of the Department of Economic Development (DED) state this proposal
would:
     a)   allow taxpayers who make contributions to approved neighborhood
          organizations to earn tax credits (55%) if a "significant" part of
          such contribution is used for affordable housing assistance
          activities; and

     b)   requires the Missouri Housing Development Commission (MHDC) to
          approve/disapprove proposals and certify taxpayers' eligibility to
          earn tax credits; and

     c)   restrict or limit the tax credit to an amount less than the sum of
          the tax credit and the value of the federal income tax deduction
          for having made the contribution; and

     d)   establishes a "clawback" provision vesting authority with the MHDC
          to recapture any kind of NAP tax credits if the MHDC determines the
          project is not in compliance with law.

     e)   changes the tax credits for affordable housing and changes
          numbering on other NAP legislation.

Officials of the Missouri Housing Development Commission (MHDC) state that
since MHDC already has trained staff on hand to administer the Affordable
Housing Tax Credit Program, they would not request any additional personnel
to handle any increased workload relating to the proposed changes in the
Affordable Housing Tax Credit Program.

Although neither DOR nor DED provided estimates of the potential loss to
general revenue as a result of possible additional tax credits, the
legislation limits the total amount claimed in any fiscal year to $1 million.
The legislation does not have a specified effective date; therefore Oversight
assumes that the earliest such credits could be claimed would be in the
state's FY 1997, with business returns filed during the first quarter of
calendar year 1997.  Oversight has shown a range of possible loss to general
revenue of $0 to $1 million annually.

FISCAL IMPACT - State Government   FY 1997      FY 1998        FY 1999
                                  (10 Mo.)
Loss to General Revenue Fund
  Tax credits claimed                   $0           $0             $0
                                        to           to             to
                              ($1,000,000) ($1,000,000)   ($1,000,000)

ESTIMATED NET EFFECT TO
GENERAL REVENUE FUND                    $0           $0             $0
                                        to           to             to
                              ($1,000,000) ($1,000,000)   ($1,000,000)

FISCAL IMPACT  - Local Government  FY 1997   FY 1998   FY 1999
                                  (10 Mo.)

                                         0         0         0

DESCRIPTION

This act would allow affordable housing tax credits to be issued on a
multi-year basis. The act would allow the tax credits to be awarded to
business firms which make contributions to neighborhood organizations which
aid in affordable housing assistance activities. If a project is determined
to be in non-compliance, the Missouri Housing and Development Commission may
seek injunctive enforcement action against the owner, seek legal damages
against the owner or foreclose on the lien in the land use restriction
agreement and sell the project at public sale. The amount of the tax credit
for business firms shall not exceed 55% of the total amount contributed to
the neighborhood organization although the excess may be carried over for 10
years.

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
Missouri Housing Development Commission
Department of Economic Development