This Fiscal Note is not an official copy and should not be quoted or cited.
This Fiscal Note is not an official copy and should not be quoted or cited.
Fiscal Note - SB 0518 - Allows new economic development and tourism sales taxes and relates to economic development tax credits
21COMMITTEE ON LEGISLATIVE RESEARCH
OVERSIGHT DIVISION
FISCAL NOTE
L.R. NO.: 2197-04
BILL NO.: HCS for SB 518
SUBJECT: Economic Development: Taxation and Revenue-Income
TYPE: Updated
DATE: April 19, 1999
# Updated to reflect revised response from the Department of Economic Development.
#FISCAL SUMMARY
|
ESTIMATED NET EFFECT ON STATE FUNDS | |||
| FUND AFFECTED | FY 2000 | FY 2001 | FY 2002 |
| General Revenue | #$5,281,047 to ($218,953) | #($255,481) to ($4,755,481) | #($266,200) to ($4,766,200) |
| School District Trust | ($43,750) | ($55,125) | ($57,881) |
| Conservation | ($5,469) | ($6,891) | ($7,235) |
| Parks and Soil | ($4,375) | ($5,513) | ($5,788) |
| Partial Estimated
Net Effect on All State Funds* |
$5,227,453 to ($272,547) | ($323,010) to ($4,823,010) | ($337,104) to ($4,837,104) |
*Partial net effect to GR Fund does not include unknown income from 1% collection fee.
|
ESTIMATED NET EFFECT ON FEDERAL FUNDS | |||
| FUND AFFECTED | FY 2000 | FY 2001 | FY 2002 |
| Total Estimated
Net Effect on All Federal Funds |
$0 | $0 | $0 |
Numbers within parentheses: ( ) indicate costs or losses
This fiscal note contains 8 pages.
|
ESTIMATED NET EFFECT ON LOCAL FUNDS | |||
| FUND AFFECTED | FY 2000 | FY 2001 | FY 2002 |
| Local Government | ($65,625) | ($82,688) | ($86,822) |
FISCAL ANALYSIS
ASSUMPTION
SECTION 67.1000-REVENUE IMPACT OF 5% SLEEPING ROOM TAX:
Oversight assumes that any county whose voters approved the imposition and collection of a tax on sleeping rooms which could not exceed 5% per occupied room, per night would receive income that could only be used for the sole purpose of funding a convention and visitor's bureau. Income and costs cannot be determined and will be shown as unknown. Oversight assumes annual costs would not exceed annual income resulting in either a net zero or positive fund balance. Fiscal impact will be shown as zero. Oversight assumes that the sleeping room tax would be collected by the county that imposed the sleeping room tax.
SECTION 67.1300-1/2 OF 1% SALES TAX FOR ECONOMIC DEVELOPMENT:
Officials of the Department of Revenue (DOR) state this proposal authorizes a certain counties to adopt a economic development sale tax. DOR staff state this proposal would not fiscally impact their agency.
Oversight assumes that this proposal is permissive. Voter approval is required before any county governing body would be authorized to adopt a sales tax for economic development. However, there would be fiscal impact if the governing body of a county would seek and receive voter approval to impose a sales tax for economic development. There also would be a positive unknown revenue impact to General Revenue for the 1% collection fee by DOR.
# SECTION 135.750 - FILM PRODUCTION TAX CREDIT
Officials from the Department of Economic Development (DED) state this portion of the proposal allows qualified film production projects to qualify for tax credits in place of qualified film production companies. Limits qualified projects to one per year per film production company. Leaves the credits allowed per year at $1 million total and deletes the provision that restricted claiming of credits by taxpayers in the first year to 50% of the credits granted.
ASSUMPTION (continued)
DED assumes this change would have minimal impact and no positive or negative impact was projected.
SECTION 620.495 - SMALL BUSINESS INCUBATORS ACT
Officials of the Department of Economic Development (DED) state this portion of the proposal deletes the Small Business Incubator program and would increase Total State Revenue by $100,000 realistically or a maximum of $500,000 by deleting the credit. For projection purposes, $500,000 positive impact on Total State Revenue was used.
Oversight assumes the changes in the language of this section would result in savings of $0 to $500,000 annually.
SECTION 620.1039 - QUALIFIED RESEARCH EXPENSES TAX CREDIT
Officials of the Department of Economic Development (DED) state this portion of the proposal reduces the qualified research credits authorized to be issued each year from $10 million to $5 million starting in January 2000 through 2003 and then the limit goes back to $10 million per year. This change would positively impact Total State Revenue by $5 million dollars in tax credits per year.
SECTIONS 1-6-MISSOURI NEW ENTERPRISE CREATION ACT
Officials of the Department of Economic Development (DED) state this language would establish the Missouri Seed Capital Investment Board which would work with 4 innovation centers and Springfield to solicit funds to be used as seed capital for Missouri based businesses. The innovation centers and Springfield would develop the Missouri Seed Capital and Commercialization Strategy which would be reviewed and approved by the Board. Once the Missouri Seed Capital and Commercialization Strategy would be approved, DED would grant, up to, $40 million in tax credits for contributions to a qualified fund approved by the Board. The credits would be granted at a rate of 100% of the amount contributed. The approved fund would be used to assist businesses in Missouri to obtain seed capital. The Department would be required to provide support services necessary to carry out the work of the Board.
This change would negatively impact Total State Revenue by $10 million per year. Tax credits are granted at a rate of $10 million per year.
DED assumes that one Economic Development Incentive Coordinator ($36,888) would be
ASSUMPTION (continued)
needed to administer the tax credit program and provide support services for the Board. The Economic Development Incentive Coordinator plus associated expenses and equipment would process the tax credit requests, provide support to the Missouri seed capital investment board, and track, reassign, and transfer tax credits when appropriate. Forms would be developed and correspondence answered. Attendance at Board meetings and functions would be necessary. Additional personnel may be needed, if the program grows or the Board requests more support than one person can provide. DED assumes that the full amount of tax credits would be issued.
DED assumes responsibility for payment of costs associated with Board members travel costs and supplies. The costs are grouped under a heading of Board Support Costs in the fiscal note. There would 13 Board members. DED assumes they would meet once per month and receive reimbursement for all travel associated costs at a per diem rate of $100. This figure includes meals and mileage. There would be other costs for meeting rooms, printing, etc. The total cost is estimated to be $26,000. Oversight assumes a fiscal cost range of $0 to ($10,000,000) annually.
SECTION 7 - CUSTOMIZED MOTION PICTURE
Officials of the Department of Economic Development (DED) assumes no administrative impact for the language concerning master and first copy of customized motion picture or video production. This portion of the proposal provides a sales tax exemption for the 1st sale of major motion pictures and video productions in Missouri. DED can not estimate the full impact of this
portion of the proposal. This bill was drafted so as to exempt the sales of the master copy of a film/video production (a commercial for a local business). DED does not track local commercial production as they are not typically, involved in such productions and because the sheer volume of such production. SIC codes are too broad to use as a measure, because the feature movies you buy at Wal-Mart are included in the same code. Hence, DED cannot provide an estimate on the fiscal impact on Total State Revenue.
Officials from the Department of Revenue (DOR) assume no administrative impact on the
department. DOR states they calculated the revenue impact as follows:
Standard Industrial Classification Codes sampled in DOR indicate gross sales during 1998 for Motion Picture Productions to be $2,433,462. DOR estimates that video productions such as special events, weddings, and other productions would approximately double this figure so DOR used $5,000,000 as a sales figure for 1999 and projected a five percent growth rate for subsequent years.
For purposes of this fiscal note, Oversight has reflected the Department of Revenue's fiscal
ASSUMPTION (continued)
estimate for this portion of the proposal.
This proposal would result in a decrease in Total State Revenues.
#
# PARTIAL ESTIMATED NET EFFECT TO ESTIMATED NET
EFFECT ON
FISCAL IMPACT - State
Government
FY 2000
FY 2001
FY 2002
(10 Mo.)
GENERAL REVENUE FUND Income to General Revenue Fund 1 % Collection Fee(Econ.
Dev.)
$0
$0
$0
to
to
to
unknown
unknown
unknown Savings to General Revenue Fund Department of Economic Development Repeal of Small Business
Incubator Act
$0 to
$0 to
$0 to
$500,000
$500,000
$500,000 Qualified Research Expenses Tax Credit Cap reduced from $10 to $5
million
$0 to
$0 to
$0 to
$5,000,000
$5,000,000
$5,000,000 # Loss to General Revenue Fund Seed capital tax credits
$0
$0 to
$0 to
($10,000,000)
($10,000,000) Motion Picture exemption
($131,250)
($165,375)
($173,644) Cost to General Revenue Fund Department of Economic Development (DED) Personal Service (1 FTE)
($31,496)
($38,755)
($39,724) Fringe Benefits
($9,625)
($11,844)
($12,140) Expense and Equipment
($46,582)
($39,507)
($40,692) Total Administrative Costs to
DED
($87,703)
($90,106)
($92,556) # FISCAL IMPACT - State
Government
FY 2000
FY 2001
FY 2002 (Continued)
(10 Mo.)
GENERAL REVENUE
FUND
$5,281,047
($255,481)
($266,200)
to
to
to
($218,953)
($4,755,481)
($4,766,200) *Partial net effect to GR Fund does not include unknown income from 1% collection fee. SCHOOL DISTRICT TRUST FUND Loss to School District Trust Fund Motion Picture exemption
($43,750)
($55,125)
($57,881) CONSERVATION FUND Loss to Conservation Fund Motion Picture exemption
($5,469)
($6,891)
($7,235) PARKS AND SOIL FUND Loss to Parks and Soil Fund Motion Picture exemption
($4,375)
($5,513)
($5,788) FISCAL IMPACT - Local
Government
FY 2000
FY 2001
FY 2002
(10 Mo.)
CITIES AND COUNTIES PROMOTION OF CONVENTION BUREAU Income to Political Subdivision From 5% sleeping room tax
Unknown
Unknown
Unknown Cost to Political Subdivision From collection and administration of tax and promotion of tourism
(Unknown)
(Unknown)
(Unknown) FISCAL IMPACT - Local
Government
FY 2000
FY 2001
FY 2002 (Continued)
(10 Mo.)
SALES TAX FOR ECONOMIC DEVELOPMENT This portion of the proposal is permissive, however there would be fiscal impact if the governing body of a county would
seek and receive voter approval to impose a sales tax for economic development. There would be income which would be
earmarked for economic development purposes only. Loss to Cities Motion Picture exemption
($39,375)
($49,613)
($52,093) Loss to Counties Motion Picture exemption
($26,250)
($33,075)
($34,729)
LOCAL GOVERNMENT
($65,625)
($82,688)
($86,822) FISCAL IMPACT - Small Business Small businesses could be affected because of costs related to payment and collection of the taxes, authorized by this
proposal.
DESCRIPTION
This proposal provides various economic development incentives for communities and businesses. In its main provisions, the bill:
(1) Establishes seed capital for Missouri businesses through the Missouri New Enterprise Creation Act, with oversight provided by a 13 member board. By July 1, 2000, the qualified innovation centers are to submit to the board a Missouri Seed Capital and Commercialization Strategy, by which to recommend between one and 4 qualified funds for investing seed capital in Missouri businesses. Board approval of a strategy is required before tax credit incentives can be awarded. After the strategy is approved by the board, the Department of Economic Development
(DED) is to authorize the use of up to $40 million in tax credits, with not more than $10 million in tax credits issued in any one year. Persons making cash contributions to qualified funds are eligible for a 100% credit against income taxes, corporate franchise taxes, or taxes on financial institutions. The tax credits may be carried forward 10 years, and may be assigned, sold, or transferred. Cash contributions are to be used to invest seed capital, start-up capital, or follow-up
DESCRIPTION
(Continued)
capital in certain Missouri businesses; not more than 10% of the moneys in a qualified fund may be invested in a single qualified business. A tax of 15% is to be assessed against any moneys in a qualified fund which are not used for qualified investments or allowable administrative costs. The qualified funds are required to contract with the innovation centers to entitle all of the qualified innovation centers to receive and share equally the equity, dividends, or other earnings of the fund generated from the cash contributions. These moneys may be used only for reinvestment in qualified funds in order to provide ongoing seed capital, start-up capital, and follow-up capital for qualified Missouri businesses; (2) Reduces the annual cap from $10 million to $5 million for the tax credits authorized through the Qualified Research Expenses program for 4 years, effective January 1, 2000, through December 31, 2003. Taxpayers receiving this credit may either carry forward the amount of credit exceeding the tax liability for 15 years, or receive a refund for unused credits at the rate of 85 cents per dollar claimed;
(3) Repeals the Small Business Incubators Act; (4) Authorizes Newton County to impose a 5% guest tax on hotels and motels, subject to voter approval; (5) Authorizes St. Francois County, Worth County, Holt County, and Nodaway County to impose a local sales tax not to exceed one-half of one percent, to be used solely for economic development purposes and subject to voter approval; (6) Exempts from state and local sales and use tax all sales of a master and first copy of a customized motion picture or video production; and (7) Clarifies that the investment which qualifies a taxpayer for the existing income tax credit for film production investments applies to investments in film projects, rather than in companies, and limits each film production company to one qualified film production project each year.
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
Department of Economic Development
Jeanne Jarrett, CPA
Director
April 19, 1999