This Fiscal Note is not an official copy and should not be quoted or cited.
Fiscal Note - SB 0901 - Missouri Certified Capital Company Law
L.R. NO.  3292-03
BILL NO.  SB 901
SUBJECT:  Business; Corporation; Economic Development; Taxation
TYPE:     Original
DATE:     February 19, 1996



                              FISCAL SUMMARY
                    ESTIMATED NET EFFECT ON STATE FUNDS


FUND AFFECTED                FY 1997              FY 1998             FY 1999
General Revenue   $0 to ($30,069,084) $0 to ($60,138,168) $0 to ($60,138,168)

Total Estimated
Net Effect on All
State Funds       $0 to ($30,069,084) $0 to ($60,138,168) $0 to ($60,138,168)

                   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), Department of Elementary and
Secondary Education (DES) and the Attorney General's Office (AGO) assume this
proposal would not fiscally impact their agencies.

Officials of the Department of Insurance (INS) assume this proposal would
allow credits not to exceed forty percent in the aggregate against premium
taxes paid to the state. No more than twelve percent of an investor's credit
may be used in any taxable year and may be carried forward indefinitely until
the credits are utilized. All premium tax credits shall only reduce the
amounts apportioned to the General Revenue Fund of the state and shall not
reduce any moneys apportioned to the school districts or the County Foreign
Insurance Tax Fund. Fifty percent of the premium tax revenue goes to General
Revenue, if a maximum of forty percent of all credits against state premium
tax liability are claimed, all credits will come out of General Revenue's
portion of the tax. INS staff state the total premium tax certified for
collection by the DOR for 1994 was $150,345,421. The aggregate maximum credit
for a year given this amount of certified tax would be $60,138,168. This
would come out of General Revenue only and not reduce any amounts apportioned
to the school districts and the County Foreign Insurance tax Fund.

INS officials indicate that they would need one Accountant I to monitor,
analyze, track and record information from DED, the actual credits taken
against premium taxes on annual statements filed with the INS, tracking the
balance of credits through full utilization, and record and track credits
transferred\sold pursuant to 135.529 of this proposal. Oversight assumes that
the provisions of this legislation could be carried out by existing
personnel.

Oversight recognizes that actual credits claimed would depend on future
contributions made by investors to the certified capital companies. It can be
assumed that since the credits allowed are equal to 120% of the investment
made, there would substantial incentive for potential investors to take
advantage of this credit. Because this legislation is effective for tax years
beginning on or after January 1, 1997 and insurance companies make quarterly
tax payments, it is assumed that any claimed credits could not be realized
before March 1, 1997, and therefore will show only two payments in FY 97.
Oversight has shown a range for the impact of this proposal.

Officials of the Department of Economic Development (DED) state this proposal
would establish  a   program  to provide financial aid and other assistance
to businesses.  This  program encourages insurance companies to invest in
Certified Capital Companies (CCC).  DED must approve and certify the
establishment of a CCC. DED would request one Economic Development Incentive
Specialist I to administer its provisions. Additionally, expense and
equipment funding would also be requested. The Economic Development Incentive
Specialist I would be responsible for establishing policies and procedures
for administering the tax credit provisions, certifying the investor s
eligibility and certifying same to the Departments of Revenue and Insurance.
The employee would also be responsible for preparing all tax forms and
schedules necessary to perfect such certifications and transferring of tax
credits and monitoring the program.

Oversight assumes that the provisions of this legislation could be carried
out by existing personnel.

FISCAL IMPACT - State Government         FY 1997       FY 1998       FY 1999
                                         (6 Mo.)
GENERAL REVENUE FUND

Loss-reduced tax revenues due to tax credits  $0            $0            $0
                                              to            to            to
                                   ($30,069,084) ($60,138,168) ($60,138,168)

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

                                               0             0             0

DESCRIPTION

This act provides tax credits for Missouri Certified Capital Companies for
investments in a "qualified Missouri business", defined in the act as a
business headquartered in Missouri, with no more than 300 employees, a
majority of whom are employed in Missouri, with gross sales during the last
complete fiscal year of $7 million or less. Any investor making an investment
in a qualified Missouri business shall receive a credit against state
insurance premium tax liability for 120% of the investment.  No more than 12%
of the aggregate credit may be taken in any taxable year, however, the
General Assembly may change the allowable yearly percentage by concurrent
resolution any time after January 1, 1999. The amount of the credit may not
exceed the amount of the tax liability in any taxable year and unused credits
may be carried forward indefinitely. The certified capital company shall have
a funding period of one year from certification by the Department of Economic
Development. The Department shall review and approve applicant capital
companies and administer the tax credits. The Department shall conduct an
annual review of each certified capital company. Violation of the act shall
be grounds for decertification meaning tax credits for the current and future
tax years will be forfeited. The Department may revoke certification for any
misrepresentation by the company to the Department. The act requires the
certified capital company to invest at least 30% in qualified businesses
within 3 years and at least 50% within 5 years. Qualified investments must
satisfy requirements of Chapter 409, RSMo, regarding the regulation of
securities. Tax credits may be sold or transferred pursuant to rules
promulgated by the Department. The Department may promulgate rules necessary
to carry out the requirements of the act, and such rules shall be subject to
review and approval of the Joint Committee on Administrative Rules. The
premium tax credits authorized pursuant to this act shall only reduce state
general revenue fund collections and shall not reduce any school district or
county foreign insurance tax fund collections. This act shall be effective
for all taxable years beginning on or after January 1, 1997.

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 Economic Development
Department of Revenue
Attorney General's Office
Department of Insurance
Department of Elementary and Secondary Education