Missouri Governor’s Tax Committee Proposes Changes to State Tax Credits

With the goal of creating a simpler, lower and fairer tax burden, Missouri Governor Eric Greitens created a tax-specific Governor’s Committee in January 2017. The Committee evaluates Missouri tax policies and tax credit programs to provide recommendations for a reform, which will directly impact Missouri businesses.

The Committee first investigated whether a tax reform of special interest tax credit programs could fund tax rate cuts for all Missourians, and met on June 30th to recommend comprehensive tax reform legislation to the Governor. Their recommendations will specifically affect the real estate and construction industries with changes to credits such as the Historic Preservation Tax Credit and Low Income Housing Credit.

Tax Credit Reform Recommendations

Main highlights of the Committee’s recommendations include:

  • Appropriation of underperforming tax credit programs – The Committee recommends that a broad majority of underperforming tax credit programs should be subject to the appropriations process, ensuring that special interest tax credits are not unfairly privileged overspending on schools, roads and other vital government services.
  • Denial of tax credits that fail to meet a public purpose – All tax credits would be required to meet a “public purpose”. The example provided by the Committee was accepting a tax credit with the purpose of addressing urban blight, but denying credits for the use of improving an existing four star luxury hotel.
  • State Low Income Housing Tax Credit (LIHTC) program conversion – The Committee proposes that the LIHTC program be converted into a low interest loan program for affordable housing construction. The program currently returns 42-cents of housing for every state dollar invested. The state would also repurchase outstanding LIHTCs in exchange for state issued bonds, saving taxpayers an estimated $200-250 million over 10 years.
  • State Historic Preservation Tax Credit Program and State Brownfield Redevelopment Program conversion – Both programs would be converted to a new State Rehabilitation Tax Credit program with an annual cap of $50 million, significantly lower than the current Historic Preservation cap of $140 million. The incentive would not be available for redevelopment of private homes, and would be capped at $2 million per project.

While these changes proposed by the Governor’s Committee are significant, they would need to be approved before going into effect. Anders is keeping an eye on evolving state and federal tax reform, and will post updates when available. If you have any questions on how your business could be affected by the proposed tax changes, contact an Anders advisor.