Federal and state tax credits and incentives can help fund new business ventures and offset project expenses, saving your company time and money. Whether your company is adding jobs, investing in new technology or expanding its footprint to additional locations, there are credits designed to help fund these projects. Below we have outlined relevant tax credits your Missouri business can take advantage of.
Missouri Credits
Missouri Works Program – Employment Tax Credit
The Missouri Works Program helps businesses create jobs and expand facilities by saving on state withholding tax and/or receiving state tax credits based on a payroll percentage of the new jobs. There are five benefit zones based on the number of new jobs created and new private capital investment.
How You Can Benefit
If your company is opening another location, expanding an existing location, or is planning on adding full-time staff, you may be eligible for a state withholding tax benefit. Missouri Works Program benefits are provided after the minimum new job threshold is met and the company meets the average wage and health insurance requirements.
Eligibility
For-profit and non-profit Missouri businesses are eligible for the credit. Eligible wages include:
- Gross wages
- Bonuses
- Deferred comp payouts
- Overtime
- Commissions
- Shift premium
- Vacation pay
- Sick pay
Eligible “new jobs” must meet the following criteria:
- Full-time: 35+ hours/week each year
- The company offers/pays 50% of health insurance
- Located at the project facility
- Based on the increase from the “base employment” which includes either the number of full-time employees on the date of the Notice of Intent, or the average number of full-time employees for the 12 month period prior to the date of the Notice of Intent, whichever is greater.
If the company reduces jobs at another facility in Missouri with related operations, the eligible new jobs at the project facility would be reduced accordingly.
Businesses looking into expanding their internal training programs may also receive funding through the Missouri Works Training Program. Learn more about the Missouri Works Program requirements and benefits.
Missouri Low Income Housing Tax Credit
The Low Income Housing Tax Credit (LIHTC) provides a federal and state housing tax credit to those who invest in affordable housing projects. To qualify, 40% of the total number of units must be affordable to people at 60% of the area’s median income, or 20% of total units affordable to people at 50% of the area’s median income.
How You Can Benefit
If you or your company invests in low income housing you can apply for the LIHTC each year for 10 years. Investors must take an ownership interest in the development to utilize the tax credits, therefore generating equity to construct or buy and rehabilitate the development.
Eligibility
For-profit and not-for-profit developers are eligible to apply for the LIHTC. Applicants must demonstrate prior, successful housing experience and engage the services of housing professionals such as architects, appraisers, attorneys, accountants, contractors, and property managers with LIHTC and housing experience. Developers must have the financial capacity to successfully complete and operate the proposed housing development.
Proposed housing developments must:
- Meet a demonstrated affordable housing need
- Provide housing for low-income persons and families
- Demonstrate local support;
- Leverage tax credit funding with other financing and/or rental assistance;
- Be economically feasible; and
- Balance sources and uses of funds.
Learn more about the Low Income Housing Tax Credit Program.
Missouri Alternative Fuel Infrastructure Tax Credit
The Missouri Alternative Infrastructure Tax Credit is a state tax credit available for investments in qualified alternative fuel vehicle refueling properties.
How You Can Benefit
If you or your company decides to install and operate an electric car or alternative fuel charging station, you may be able to use state tax credits. Individuals can receive a credit up to $1,500, and businesses can receive up to $20,000 or 20% of eligible costs, whichever is less. Costs must be directly associated with the purchase and installation of any alternative fuel storage and dispensing equipment or any recharging equipment on any qualified property.
Eligibility
A qualified property is either an electric vehicle recharging property or an alternative fuel vehicle refueling property which, if constructed after August 28, 2014, was constructed with at least 51 percent of the costs being paid to qualified Missouri contractors for:
- Fabrication of pre-manufactured equipment or process piping used in the construction of facility
- Construction of facility
- General maintenance during the time period the facility receives any alternative fuel infrastructure tax credit
The following costs are NOT eligible:
- Costs associated with the purchase of land where a qualified property is placed
- Costs associated with the purchase of an existing qualified alternative fuel vehicle refueling property
- Costs for the construction or purchase of any structure
Learn more about the Missouri Alternative Fuel Infrastructure Tax Credit.
Missouri Wine and Grape Production Credit
The Missouri Wine and Grape Production Credit helps vineyards and wine producers buy needed equipment and materials through state tax credits. The tax credit can be applied to income tax, excluding withholding tax.
How You Can Benefit
If you or your company owns or decides to invest in a Missouri vineyard for wine production, you can receive a state tax credit equal to 25% of the purchase price of new equipment and materials used. The new equipment and materials must be:
- Used on land owned or leased for the purpose of producing wine or growing grapes and
- Used directly in the production of wine or growing of grapes in the state of Missouri
Eligibility
Equipment and materials must be new purchases. The purchase price is defined as the selling price excluding sales tax, delivery, shipping and handling, installation and other unrelated costs.
The new equipment and materials will be considered used directly based upon:
- Where the item in question is used
- When the item in question is used
- How the item in question is used to produce wine or grow grapes
Learn more about the Missouri Wine and Grape Production Credit.
Missouri Youth Opportunity Tax Credit
Youth Opportunity Tax Credits are allocated to organizations administering positive youth development or crime prevention projects.
How Your Company Can Benefit
If your company offers an internship or apprenticeship to Missouri youth, you may be eligible to receive tax credits for their wages. There are 50% tax credits for monetary contributions and wages paid to youth in an approved internship, apprenticeship or employment project, and 30% tax credits for property or equipment contributions used specifically for the project.
Eligibility
Eligible Projects include:
- Degree Completion
- Internship/Apprenticeship
- Youth Clubs/Associations
- Adopt-A-School
- Mentor/Role Model
- Substance Abuse Prevention
- Violence Prevention
- Youth Activity Centers
- Conflict Resolution
- Employment
- Counseling
*Schools and faith-based organizations must meet certain criteria
Each project is limited to $250,000 in tax credits, and each contributor is limited to $200,000 in annual credits.
Learn more about the Missouri Youth Opportunities Tax Credit Program.
Federal Credits
Research and Development (R&D) Tax Credits
The R&D (Experimentation) Tax Credit is a general business tax credit available to companies who incur research and development (R&D) costs in the United States. The credit is generally calculated based on a percentage of qualified R&D costs incurred during the year.
How You Can Benefit
The Research & Experimentation Tax Credit (R&D) is now a permanent tax law, making it easier and more efficient for businesses to do year-end tax planning.
Businesses with less than $50 million in gross receipts have the ability to claim the R&D Tax Credit against the alternative minimum tax (AMT). Startup companies without taxable income can also benefit as the R&D tax credit can be applied against an employer’s payroll tax liability. To qualify, the startup company must be within their first five years of operations and have less than $5 million of revenue. The annual cap on the amount of payroll tax liability that can be offset is $250,000.
Eligibility
There are a wide variety of companies/industries that qualify for the credit. Some examples include:
- Companies who continually manufacture/research/engineer new processes and products
- Businesses designing and developing product alternatives and more efficient designs
- Companies improving techniques, formulas, inventions, and software
- Businesses that employ engineers, scientists, software programmers, etc.
Eligible R&D expenses:
Wages of labor performed in qualified services such as:
- Concept development
- Prototype development and testing
- Manufacturing equipment design and development
Supplies used in qualified research activities such as:
- Internal and external prototype costs
- Lab supplies used during testing
- Prototype equipment sold to customers
Contract research paid or incurred to non-employees for qualified activities such as:
- Independent contractors
- Engineering consultants
- Design firms
- Engineering firms
- Programming services
Learn more about the R&D Tax Credit.
Historic Preservation/Rehabilitation Tax Credit
The Rehabilitation Tax Credit is a federal credit that applies to costs incurred for rehabilitation and reconstruction of buildings placed in service before 1936 and certified historic buildings. Missouri has a state Historic Preservation Tax Credit Program providing historic tax credits (HTC) for eligible buildings.
The tax credit can be applied to income tax (excluding withholding tax), bank tax, insurance premium tax or other financial institution tax. The credit can carry back 3 years, carry forward 10 years, and is sellable and transferable.
How You Can Benefit
If you or your company is looking at buying and redeveloping a historic property, you may be eligible for federal and state historic tax credits. Missouri’s program provides state tax credits equal to 25% of eligible costs. The rehab costs and expenses must exceed 50% of the total acquisition cost.
Eligibility
An eligible property must be:
- Listed individually on the National Register of Historic Places
- Certified by the Missouri Department of Natural Resources as contributing to the historical significance of a certified historic district listed on the National Register, or
- Of a local historic district that has been certified by the U.S. Department of the Interior.
There is a program cap of $140 million for projects receiving tax credits over $275,000. Owner occupied residential has a project cap of $250,000 and projects receiving less than $275,000 do not fall under the program cap.
Learn more about the Missouri Historic Preservation Tax Credit Program.
Healthcare Premium Credit
The healthcare premium tax credit (PTC) is a refundable credit that helps eligible individuals and families cover the premiums for their health insurance purchased through the Health Insurance Marketplace.
How You Can Benefit
The PTC can help individuals who are not offered an employer-sponsored plan offset high insurance premium costs. This credit may be helpful for part-time employees not eligible for employer-sponsored health care plans. To claim the premium tax credit, individuals must file a federal income tax return and attach Form 8962 Premium Tax Credit to the return.
Eligibility
To be eligible for the credit, you must:
- Have household income of at least 100%, but no more than 400% of the federal poverty line for you family size
- Not file as Married Filing Separately
- Not be claimed as a dependent by another person
Additionally, in the same month, you or a family member must:
- Have health insurance coverage through a Health Insurance Marketplace
- Not be able to get affordable coverage through an eligible employer-sponsored plan that provides minimum value
- Not be eligible for coverage through a government program, like Medicaid, Medicare, CHIP or TRICARE
- Pay the share of premiums not covered by advance credit payments
Learn more about the PTC qualifications and claiming requirements.
New Market Tax Credit
New Market Tax Credits provide a credit against federal income taxes for investors that make Qualified Equity Investments (QEI) in low-income and blighted areas and communities.
How You Can Benefit
If your company is building, moving or expanding to a low-income area, you may be able to take advantage of the New Market Tax Credit.
The New Market Tax Credit gives businesses access to flexible and affordable financing. Most investments into businesses involve more favorable conditions and terms than typically offered including lower interest rates.
Eligibility
Eligible properties in low-income communities may include:
- Commercial offices and retail services/products
- Mixed-use (commercial/residential) properties
- Factories and industrial facilities
- Community centers
- Educational facilities
- Entertainment/cultural facilities
- Health-related facilities
- Hotels and hospitality properties
- Businesses that buy, develop, build, rehabilitate or sell residential property
- Small business loan funds
The credit is taken over a 7-year period, with 5% of the original investment amount in each of the first three years and 6% in each of the four final years.
Missouri offers a variety of miscellaneous tax credits in addition to those listed above. View a list of the DOR’s miscellaneous MO tax credits. We can help determine which tax credits and deductions your business is eligible for and for other tax saving opportunities. Contact an Anders advisor to learn how your business can take advantage of state and federal tax credits.
