Topic:
BUSINESS (GENERAL); EMPLOYMENT (GENERAL); RESEARCH AND DEVELOPMENT; TAX CREDITS; WAGES;
Location:
CORPORATIONS; JOB DEVELOPMENT; TAXATION;

OLR Research Report


October 3, 2008

 

2008-R-0536

MISSOURI'S R&D TAX CREDIT PROGRAM

By: John Rappa, Principal Analyst

You asked for a description of Missouri's R&D tax credit program.

Missouri's R&D tax credits expired in 2005, but “technology” and “high impact” businesses qualify for benefits, including business tax credits, under the state's job creation program. This “Quality Jobs program allows businesses to keep a portion of the state income tax they withhold for the employees filling new jobs. The credits kick in only when the amount a business withholds falls short of the amount it expected to withhold when it applied for this benefit. The credit equals a portion of this difference (Mo. Rev. Stat 620.1875-620.1900).

The amount of income tax the business can keep and the amount of tax credit it can claim depends on two factors: (1) the number of full-time (35 hours) jobs it creates and (2) their average wages. The business cannot keep the allotted share of the income tax withholdings until it creates the requisite number of jobs. The minimum number of jobs the business must create and the deadline for doing so vary depending on several factors, including whether it qualifies as a technology business under the North American Industrial Classification System.

The business cannot claim the benefits until it creates the requisite number of jobs, which it must do within two years after the Department of Economic Development (DED) approved its benefit application. Once it creates these jobs, the business may keep a portion of the income tax withholding from three to five years, but it must claim the credits within one year after they were issued. The state reimburses businesses for unused credits and allows them to be sold, transferred, or assigned. The business qualifies for extra benefits if it meets specified wage targets and receives local and county incentives.

As Table 1 shows, the Quality Jobs Program consist of three components based on business type, each with different new-job targets and benefit levels. Most types of nonprofit organizations, as well as businesses, qualify for the program's benefits. Excluded organizations include casinos, restaurants, churches, and biodiesel producers.

(Connecticut's comparable job creation program allows businesses to claim a credit against their business taxes based on the amount of income taxes they withhold from new employees filling new, full-time jobs. The credit equals 60% of the withholding for up to five successive years (CGS 12-217ii).)

Table 1: Quality Jobs Program Requirements and Benefits

Component

Minimum Job

Creation Requirement

Withholding Benefit

Withholding Bonuses

Maximum Tax Credit

Average Wage

Local Incentive

Small and Expanding Businesses

20 in rural areas within to years of DED approval

40 in other areas within two years of DED approval

100% of the withheld tax for:

Three years if the average wage of the new jobs is between 100% and 119% of the county average

Five years if the average wage of these jobs is at least 120% of the county average

No bonuses under this component

No bonuses under this component

No credits available under this component

Technology Businesses

10 within two years of DED approval

5% of the withheld tax for five years

0.5% if average wage is between 120% to 140% of the county average

1% if the average is over 140% of the county average

1% if the local incentives equal between 10%-24% of the new local tax revenues business generates

2% if the incentives equal between 25%-49% of the local revenue

3% if the incentives exceed 50% of the local revenue

$500,000

High Impact Businesses

100 within two years of the date of the first new job is filled

First new job must be filled within one year of DED approval

3% of the withheld taxes for five years

Same as above

Same as above

$750,000

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