Jefferson City, MO — In a session where legislators are scrutinizing historic and low income tax credit programs closer than ever, Senator Scott Rupp, R-2, is looking to revive the New Markets Tax Credit Program — targeted at promoting investment in companies that spur advancements in technology and environmentally friendly businesses.
The program, which has has a roster of several prominent employers throughout the state, is set to be heard in committee next week. The legislation is Senate Bill 112, which reauthorizes the Missouri New Market Tax Credit. In 2010, the program reached its cap, and is set to sunset at the end of 2013.
“This tax credit is geared specifically to reward people making investments into things like bio-technology or high tech companies,” Rupp told The Missouri Times. “There are companies that are new and maybe can’t find the traditional sources of capital to get off the ground, but they have a lot of potential. This bill says, ‘invest in those companies and if they succeed, you’ll get a credit for that investment.’”
Rupp said that companies that had successfully acquired “traditional” loans through banks or other investors would not be eligible and that the credit was designed for companies that were “innovating.”
One such company, Group 360, the parent company of Color Associates, is a strategic marketing communications company with world headquarters located in downtown St. Louis. Founded in 1956, the company “provides solutions for achieving national and international marketing goals and objectives,” according to their website. Group 360 received a $9 million dollar investment thanks to the New Market Tax Credit, and an additional $9.1 million dollars after they began to see success. With 285 current employees, Group 360 reports they are expected to grow their operation by more than 40 full time employees as a direct result of investment.
“The way this works is, you aren’t eligible for the credit on that investment for the first two years,” Rupp said. “That way, we’re saying, we have to see a positive result in terms of jobs created before we reward you.”
Rupp said the Senate had been open to tax credit reform this session, and that he anticipated some resistance on the issue from the more fiscally conservative members of the chamber.
“I think there is resistance when you have trouble demonstrating that a [tax credit] program works,” Rupp said. “But I think this legislation will show how responsible it is, and that it is not wasteful.”
Sterotaxis Inc., which produces advanced cardiology equipment, had an initial investment of more than $4 million thanks to the credit. Since, the company has exploded in size, with more than $200 million dollars in non-credit eligible investments since. They currently employ 195 people.
Rupp said Senator Brad Lager, R-12, who has been vocally opposed to several tax credits, would be willing to judge SB 112 “on its merits.” With calls from both sides of the aisle and even the Governor’s office to keep Missouri’s tax credit programs under control, special attention has come to the Low Income Housing Tax Credit as well as the Historic Preservation Tax Credit. If Rupp can avoid his own proposed legislation getting tied into an anti-tax credit debate in the Senate, he says, it might be successful.
Rupp said that while Lager had voiced strong concerns over the low income and historic tax credit programs, he believed Lager would be willing to accept the New Market’s legislation “on its merits,” and did not indicate there would be significant opposition from Lager.
Rupp said the credit was set to reward venture capital investment, and would not involve any state funds for at least two years.
“That’s the beauty, I think,” Rupp said. “This isn’t the taxpayer’s money, this is private money and we’re trying to find a way to make it benefit everyone.”
SB 112 was set for a hearing on Wednesday, February 20. However, the hearing was cancelled due to concerns about inclement weather, and the matter will be postponed until next week.
Collin Reischman can be reached by emailing him at email@example.com or on twitter at @CReischman