JEFFERSON CITY, Mo. – After passing the Senate with a 23-11 vote, the New Markets Tax Credit program — through Senate Bill 112 — is set to head out of the House Rules Committee and then to the floor.
Missouri was the first state in the nation to implement the state version that compliments the federal tax credit. It was also the first Missouri tax credit to be capped, have a sunset, have a two-year waiting period on the credit and has a return on investment greater than one-to-one through the economic model.
“This tax credit is geared specifically to reward people making investments into things like bio-technology or high-tech companies,” the bill’s sponsor, Sen. Scott Rupp, R-St. Charles, 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.’”
This being the first “reformed” tax credit passed since 2007, and it has some of the most detailed economic analysis to show the possible impact.
Tom Tanner, an economist from the Carl Vinson Institute of Government at the University of Georgia at Athens, performed the preliminary New Markets study in Missouri and estimated the potential impact of $187.5 million of New Markets investments and more than 5,600 jobs.
Six years later, Don Phares, professor emeritus from University of Missouri — St. Louis, found that New Markets is responsible for 4,997 direct jobs and 2,327 indirect jobs, totaling to more than 7,000 jobs.
While there are still two years to go before the initial seven-year investments expire, the REMI economic model shows the New Markets Credit falls between $1.21 return for the state with a zero percent job retention (worst case scenario), and counted and $2.61 return for the state for the with 100 percent job retention (best case scenario).
Missouri U.S. Sen. Roy Blunt, R, is set to propose making the federal New Markets Credit permanent this week.
Eleven other states have followed Missouri’s lead in New Markets Tax Credits. Recently, Arkansas created a New Markets program to compete with Missouri. Florida passed its third program last week and Illinois already extended its sunset by 5 more years. In Nebraska, where they launched New Markets during the fall, Senator Schumacher from Columbus Nebraska said the state initiated the credits “with the intent of creating jobs in economically distressed areas of the state.”
“Although the program is still in it’s infancy, there are a number of investments working their way through the pipeline and we are very pleased to see investment capital beginning to flow into Nebraska,” Schumacher added
The bill withstood a near two-hour filibuster because of an attempt to add a housing amendment, which opponents characterized as turning the New Markets program into another low-income housing tax credit program.
After supporting the New Markets program during 2007 and 2009, the Realtors Association supported an amendment that would have resulted in the bill failing in the Senate.
In the House, the General Laws Committee attached several amendments and many are speculating that Senate Bill 112 may become one of the select omnibus bills to move through both bodies next week.
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