Missouri tax credit panel almost finished
Thursday, November 11, 2010
JEFFERSON CITY, Mo. -- It looks like the governor's commission on tax credits will meet its deadline of a pre-Thanksgiving final report.
But that final report appears to give no final up or down nod to the efficacy of tax credit programs as a whole. Subcommittees have been studying the 61 tax credit programs and have formulated their recommendations on each of the programs. The committees endorsed some programs, targeted others for elimination and suggested that the legislature reconfigure some.
"Our committees are tying up loose ends now, and they will get back to us by the end of the week," said commission co-chairman Chuck Gross.
New Senate President Pro Tem Robert Mayer, R-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 legislature, 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, and I think my caucus feels the same. We want to work on jobs creation first, all the other things will take a back seat initially."
The two biggest tax credit programs in terms of tax dollars deferred are the historic preservation tax credit and the low-income housing development credit.
As the tax credit review committee finalizes its recommendations, "those are the two credits we will spend the most time talking about," Gross said.
The subcommittee focused on historic preservation recommended the program keep its current $140 million cap. A study done for the committee showed that the 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 program currently includes a three-year "carryback" period for tax credits. 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 includes a 10-year "carryforward" period for the tax credits, which allows the credit to be applied up to 10 years following the year of issuance.
The committee recommended 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 committee said.
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. The state can issue these credits up to $192 million.
The committee 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 credits and their effect on the state budget. The committee also recommended that any growth or reduction in the amount of tax credits available be tied to the growth, or decline of the state budget from year to year.
Currently the program has more than $1 billion in credits outstanding through the year 2022. The committee recommends buying back some of those credits to lessen the state's indebtedness.
The committee also recommends several changes to the program that it feels will help it operate more efficiently.
"It's a lot to get your arms around," Gross said.
Overall, Gross said the tax credit commission will not come back with any sweeping generalization about Missouri's tax credit programs.
"Some programs have out lived their useful life... and some have sunsets we will allow to sunset," said Gross. "Those are not going to be controversial, they were probably headed to the ash heap anyways."
As for the rest of the 61 programs, changes, limits and different sunsets may be in store, but it appears that state tax credit 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.