Approval and Notification for Tax Credits to Business Firms

PURPOSE: The Department of Economic Development shall approve or disapprove applications for tax credit to business firms which have invested in approved neighborhood assistance projects. The director of the Department of Economic Development, upon approval of an application, shall notify the director of the Department of Revenue and the governor of those business firms entitled to a tax credit. This rule establishes procedures and identifies requirements for filing a Community Services (1) In order to qualify for credit, donations must occur during the approved project period (with the exception of donated audit services, which may occur anytime during the six- (6-) month period following the project period) and must be directly related to the approved project. (2) Business firms wishing to apply for credit must complete an Application for Claiming Tax Credits. (3) Tax credit applications are to be signed by the neighborhood organization and submitted directly to the respective Neighborhood Assistance Program (NAP) field office of the department no later than one (1) year following the date of donation. (4) The order in which completed credit applications are received by the department will determine the order in which credits are approved. Facsimile copies will not be considered complete applications. (5) The department shall examine all submitted applications and determine whether the donation meets the eligibility criteria. (6) A tax credit not to exceed fifty percent (50%) of the total amount contributed during the business firm’s taxable year may be allowed by the department, with the exception of up to a seventy percent (70%) tax credit for special programs as referred to in subsection (6)(A), or a seventy percent (70%) credit for projects located in any rural community as referred to in subsection (6)(B). (A) A special credit of up to seventy percent (70%) may be allowed for donations to programs where activities fall within the scope of special programs or priorities as defined by regulations promulgated by the director of the department and approved by the governor. (B) A special credit of up to seventy percent (70%) may be allowed for projects located in rural communities defined as follows: 1. Any city, town, or village having a population of fewer than fifteen thousand (15,000) inhabitants located in a county— A. That is not part of a standard metropolitan statistical area (SMSA) as defined by the United States Department of Commerce or its successor agency; B. Designated as part of an SMSA, but having a substantial number of persons in that county who derive their income from agriculture; or C. Designated as part of an SMSA with only one (1) city in that county having a population of more than fifteen thousand (15,000) inhabitants; and 2. These tax credits equal to seventy percent (70%) of donations to projects in rural communities shall not exceed six (6) million dollars in any fiscal year. (C) The following method will be used to determine the value of donations of real or personal property: 1. Outright gifts of real or personal property shall be equal to the lowest of at least two (2) qualified independent ap - praisals, with the following exceptions: commercial property whose value is less than fifty thousand dollars ($50,000) and vacant or residential property which value is less than twenty-five thousand dollars ($25,000) will only require one (1) appraisal. When the tax credit application is submitted, the actual cost of the appraisals may be included as part of the donation on which a tax credit is requested, provided that documentation of the costs is included in the application; and 2. When businesses do not transfer full title to real or personal property, but merely offer the use of real or personal property, the amount of the donation shall equal either the comparable market value of the rental, or the actual rental value, whichever is less. (D) The following method will be used to determine the value of other forms of in-kind contributions: 1. Outright gifts of equipment, materials, supplies, or other goods shall equal either the cost to the donor or the fair market value, whichever is less. Fair market value and cost to the donor shall be determined by the department and may be based on the applicant’s support of the amounts by documentation either from the applicant itself or from an independent appraiser. If an appraisal by an independent appraiser is submitted by the applicant and adopted by the department, the actual costs of the appraisal may be included as part of the contribution. Cost to the donor may include reasonable overhead expenses incurred in making the contribution; 2. When businesses contribute the use of items, the amount of the donation shall equal the actual cost of the item’s use to the contributor, but not more than the fair market value of that use. Cost and fair market value shall be determined in the same fashion as in the case of outright gifts; 3. Contributions of food items will be eligible to receive credit, but will be limited to organizations involved primarily in food redistribution. A. The value of the contribution shall equal the cost to the donor or the fair market value of the items, whichever is less. Fair market value and cost to the donor shall be determined by the department and may be based on the applicant’s support of those amounts. In certain cases, a simple factor for spoilage may be applied against the donor’s cost to arrive at fair market value. Cost to the donor may include reasonable overhead expenses incurred in making the contribution. B. Required documentation shall be determined by the department and shall include, in every case, a copy of the receipt signed by the project director of the recipient organization or his/her designee; and 4. Effective for all projects approved in Fiscal Year 1993 or later, credit will be allowed on the donation of stock, bonds, or both, as follows: A. Market value on the actual date of donation will determine the value that the credit will be based on; and B. Credit will only be approved once the stock, bonds, or both, have been sold, however, the amount of sale proceeds received by the organization will have no effect on the value of the donation for NAP purposes. (E) Business firms lending personnel to render expertise and assistance to a neighborhood organization are eligible for tax credit. Personnel time must be prorated based on the employee’s hourly wage from the firm. The exact amount of time spent on the project must be verified, in writing, by the project director. (F) Contributions of professional services are also eligible for tax credits. At the discretion of the department, individuals may be required to document similar payment for similar work during the six- (6-) month period prior to the date of contribution, whether to the same organization or not. AUTHORITY: section 32.110, RSMo 2016.* Original rule filed Jan. 10, 1978, effective April 13, 1978. Rescinded and readopted: Filed Sept. 7, 1980, effective Feb. 10, 1981. Rescinded and readopted: Filed Sept. 14, 1982, effective Dec. 11, 1982. Amended: Filed March 14, 1984, effective Sept. 15, 1984. Amended: Filed Jan. 3, 1992, effective Aug. 6, 1992. Amended: Filed Dec. 10, 1993, effective July 10, 1994. Amended: Filed Sept. 28, 2018, effective May 30, 2019. *Original authority: 32.110, RSMo 1977, amended 1980, 1989, 1990, 1998, 1999, 2000, 2004.