Missouri tax credit commission has spoken | Tax Credit Archives | Informative Articles | Missouri Tax Credits

Tax credit commission finalizing recommendations
By Missouri News Horizon on November 11, 2010

The commission tasked by Missouri Gov. Jay Nixon to review the state's tax credit programs will hit its deadline. But the final report appears to give no final up-or-down nod to the efficacy of the programs as a whole.

Missouri Gov. Jay Nixon

Subcommittees of the Tax Credit Review Commission have been studying the 61 individual tax credit programs and have formulated their recommendations on each of the programs.

The subcommittees endorsed some program, targeted others for elimination, and suggested legislators reconfigure some.

"Our committees are tying up loose ends now," said Chuck Gross, co-chair of the tax credits commission. His full-time job is director of administration for St. Charles County.

The governor, a Democrat, addressed the 25-person, bi-partisan commission, he nominated, in early September, declaring that tax credit reforms are needed in Missouri.

While Nixon sees reforming tax credits as essential for state budget management, the new, larger, Republican majority in the Missouri General Assembly may not share his priorities.

New state Sen. President Pro Tem Robert Mayer, a Republican from Dexter, said discussion on tax credits "needs to happen." But when pressed on how soon that discussion would take place in the upcoming session of the Missouri General Assembly, Mayer demurred.

"First, we need to get to work on job creation and see what we can do there," Mayer said.

"That's my top priority. We want to work on jobs creation first, all the other things will take a back seat initially."

An audit from Missouri Auditor Susan Montee in April shows tax credit redemptions increased faster than general revenue from fiscal 2001 to 2009. Redemptions increased 57 percent from $372 million to more than $584 million in eight years. Meanwhile, general revenue increased 15.7 percent from $6.44 billion to $7.45 billion.

The two biggest tax credit programs out of the state's 61, in terms of tax dollars deferred, are the historic preservation tax credit and the low-income housing development credit. As the tax credit committee finalizes its recommendations, "those are the two credits we will spend the most time talking about," Gross said.

Old Post Office, courtesy of Missouri Court of Appeals

One of the meetings held around the state to hear testimony about the tax credit programs was held at the Missouri Court of Appeals, Eastern District, inside the Old Post Office Building in late September.

The building in downtown St. Louis was restored in 2000 by the DESCO Group and DFC Group using historic tax credits. Steve Stogel, co-chair of the tax credit commission, is president of DFC Group.

The subcommittee focused on historic preservation recommends the program keep its current $140 million cap. A study done for the committee showed that the Missouri Department of Economic Development had not issued more than $140 million in credits under the program since fiscal year 2008.

In fiscal year 2010, the department authorized $99.5 million for such credits.

The historic preservation program includes a three-year "carryback" period. In other words, an issued tax credit may be applied to taxes of a taxpayer for any tax year up to three years prior to the year of issuance.

Further, the program currently includes a ten-year "carryforward" period for the tax credits, which allows the credit to be applied up to 10 years following the year of issuance. The subcommittee recommends reducing those to one year for "carryback" purposes and five years for "carryforward" for any credit that is transferred from the original owner of the credit. The "carryforward" could remain at 10 years for the original tax credit owner.

The low-income housing subcommittee found that the program is a good investment for Missouri because it creates economic activity in excess of the amount of tax dollars deferred by the credit. Currently, the state can issue these credits up to $192 million. The subcommittee recommends that the credit period, which now stands at 10 years, be shortened to either one, three or five years to better control the amount of tax credits.

Missouri State Capitol in Jefferson City

The subcommittee also recommends any growth or reduction in the amount of tax credits available be tied to the growth, or decline of the state budget.

The low-income housing program has more than $1 billion in credits outstanding through the year 2022. The subcommittee recommends buying back some of those credits to lessen the state's indebtedness.

"It's a lot to get your arms around," Gross said.

The tax credit commission will not come back with any sweeping generalizations about the 61-different tax credit programs in Missouri, Gross said.

"Some programs have out lived their useful life... and some have sunsets we will allow to sunset. Those are not going to be controversial," he said.

"They were probably headed to the ash heap anyways."

As for the rest of the tax credits, changes, limits and different sunsets may be in store, but it appears the programs will be part of the political landscape this coming legislative session and well beyond.

The commission will meet as a whole next week to review its final recommendations.

By Dick Aldrich, Missouri News Horizon, daldrich@monewshorizon.org

Brian R. Hook, brhook@missouriwatchdog.org, (314) 482-7944, contributed

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Posted under Featured.
Tags: Audit, Bi-Partisan Commission, Budget, Buying Back, Carryback, Carryforward, Chuck Gross, Democrat, Democrats, DESCO Group, Dexter, DFC Group, Final Recommendations, General Revenue, Gov. Jay Nixon, Historic Preservation Tax Credit, Historic Tax Credits, Jay Nixon, Job Creation, Jobs, Legislative Session, Legislators, Low-Income Housing Development Credit, Mayer, Missouri Auditor Susan Montee, Missouri Court of Appeals Eastern District, Missouri Department of Economic Development, Missouri General Assembly, Missouri Gov. Jay Nixon, Missouri News, Missouri News Horizon, Missouri Watchdog, Montee, News, Nixon, Old Post Office Building, Redemptions, Republican, Republicans, Revenue, Robert Mayer, Sen. President Pro Tem Robert Mayer, St. Charles County, St. Louis, State Budget, State Legislators, Steve Stogel, Stogel, Sunset, Sunsets, Susan Montee, Tax Credit Committee, Tax Credit Program, Tax Credit Programs, Tax Credit Redemptions, Tax Credit Reforms, Tax Credit Review Commission, Tax Credits, Tax Dollars Deferred, Taxes, Taxpayer, Taxpayers
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