Senate committee mulls renewal of New Market Tax Credits

   

By Collin Reischman

JEFFERSON CITY, Mo. — A tax credit program aimed at promoting investment in “high risk” areas and industries is poised to move through the Senate.

The legislation — Senate Bill 112 — would reauthorize the Missouri New Market Tax Credit. In 2013, the program is set to sunset and was never renewed, but now, Sen. Scott Rupp, R-2, is sponsoring legislation to bring it back. The bill comes during in a legislative session when the entire body is promising reforms to tax credit programs.

The NMTC exists on the federal level, and Missouri is one of only 11 states with a NMTC program to supplement the federal credit. The bill stipulates that investment must be aimed at “qualified areas.” Using census data, investors must identify areas with traditionally low wages and high poverty to invest money into local business ventures.

“This credit is specifically to reward people making investments into things like bio-technology or high tech companies, and making them in areas that need them the absolute most,” Rupp said in an interview. “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.”

“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.”

Rupp said Sen. Brad Lager, a Savannah Republican who has been vocally opposed to several tax credits, would be willing to take SB 112 “on its merits.” Rupp did not indicate that he anticipated strong resistance from Lager.

During a hearing before the Jobs, Economic Development and Local Government committee, Rupp emphasized that his bill did not expand the 25 million dollar cap that existed from 2007 until sunset, he also proposed another sunset of 6 years.

“We want this capped, we want it sun-setted,” Rupp said.

Sen. John Lamping, a former investment banker, was the most vocal member of the committee as he sought clarification on a number of the technical elements of the legislation. While he did not make any statements in opposition — which he has done on some other tax credit programs during the session — he voiced concerns about whether or not Missouri’s return on this investment was worth it.

“My concern is that the investment we make, we don’t get that money back, we don’t get that return, unless there’s taxable activity with it,” Lamping said during testimony. “It’s safe to assume that if there is something with a strong return that is worth the investment in the state, the money will come with or without the incentive.

Rupp said the credit was set to reward venture capital investment, and would not involve any state funds for at least two years. He also indicated that competition for the federal credit was “fierce,” and that

“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.”