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SECOND REGULAR SESSION
HOUSE BILL NO. 1845
103RD GENERAL ASSEMBL Y
INTRODUCED BY REPRESENT A TIVE GALLICK.
5418H.01I JOSEPH ENGLER, Chief Clerk
AN ACT
T o amend chapter 348, RSMo, by adding thereto two new sections relating to tax credits to
qualified businesses.
Be it enacted by the General Assembly of the state of Missouri, as follows:
Section A. Chapter 348, RSMo, is amended by adding thereto two new sections, to be
2 known as sections 348.273 and 348.274, to read as follows:
348.273. 1. This section and section 348.274 shall be known and may be cited as
2 the "Missouri Angel Investment Incentive Act".
3 2. As used in this section and section 348.274, the following terms mean:
4 (1) "Cash investment", any moneys or money-equivalent contribution in
5 consideration of qualified securities;
6 (2) "Department", the department of economic development;
7 (3) "Designated geographic reg ions", the following four reg ions:
8 (a) Region 1: Counties of Andr ew , Bates, Benton, Buchanan, Cass, Clay , Clinton,
9 DeKalb, Gentry , Henry , Holt, Jackson, Johnson, Lafayette, Platte, Ray , and W orth;
10 (b) Region 2: Counties of Franklin, Jefferson, Lincoln, St. Charles, W arr en, and
11 St. Louis, and the City of St. Louis;
12 (c) Region 3: Counties geographically north of the Missouri River , excluding any
13 counties in reg ion 1 or regi on 2; and
14 (d) Region 4: Counties geographically south of the Missouri River , excluding any
15 counties in reg ion 1 or regi on 2;
16 (4) "Investor", one of the following persons or entities:
EXPLANA TION — Matter enclosed in bold-faced brackets [thus] in the above bill is not enacted and is
intended to be omitted from the law . Matter in bold-face type in the above bill is proposed language.
17 (a) A natural person who is an accr edited investor as defined under 17 CFR
18 230.501(a)(5) or 230.501(a)(6), as in effect on July 24, 2013;
19 (b) A permitted entity investor who is an accred ited investor as defined under 17
20 CFR 230.501(a)(8) as in effect on July 24, 2013; or
21 (c) A natural person or permitted entity investor making an investment who
22 qualifies under the federal Jumpstart Our Business Startups (JOBS) Act, Pub. L. 1 12-
23 106 as in effect on April 5, 2012.
24
25 The term "investor" shall not include any person who serves as an executive, officer , or
26 employee of the business in which an otherwise qualified cash investment is made, and
27 such person shall not qualify for the issuance of tax cred its for such investment.
28 However , an investor who serves solely as a dir ector may qualify for the issuance of tax
29 cr edits;
30 (5) "MTC", the Missouri technology corporation established under section
31 348.251;
32 (6) "Owner", any natural person who is, dir ectly or indirectl y , a partner ,
33 stockholder , or member in a permitted entity investor;
34 (7) "Permitted entity investor", any general partnership; limited partnership;
35 corporation that has in effect a valid election to be taxed as an S corporation under the
36 Internal Revenue Code of 1986, as amended; r evocable living trust; nonpr ofit
37 corporation; or limited liability company that has elected to be taxed as a
3 8 partnership under the Internal Revenue Code of 1986, as amended, and that was
39 established and is operated for the purpose of making investments in other entities;
40 (8) "Qualified knowledge-based company", a company engaged in the res ear ch,
41 development, implementation, and commer cialization of innovative technologies,
42 pr oducts, and services for use in the commer cial marketplace;
43 (9) "Qualified Missouri business", a Missouri business that is appr oved as a
44 qualified knowledge-based company by the MTC and meets at least one of the following
45 criteria:
46 (a) Any partnership, association, limited liability company , or corporation
47 domiciled in Missouri; or
48 (b) Any limited liability company or corporation that is domiciled outside the
49 state of Missouri but has its business operations located primarily in Missouri or does
50 substantially all of such business’ s pr oduction in Missouri;
51 (10) "Qualified securities", a cash investment thr ough any form or combination
52 of forms of financial assistance as provi ded under this subdivision. Such forms of
53 financial assistance include, but ar e not limited to:
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54 (a) Any form of equity , such as:
55 a. A general or limited partnership intere st;
56 b. Common stock;
57 c. Simple agreement for future equity (SAFE); or
58 d. Pr eferr ed stock, without r egard to voting rights or seniority position and
59 r egardless of whether convertible into common stock; and
60 (b) Any debt instrument subordinate to the general credi tors of the qualified
61 Missouri business debtor that req uires no payment fr om the qualified Missouri business
62 debtor and that shall convert to some form of equity prior to, or in conjunction with, the
63 qualified Missouri business raising any additional funds;
64 (1 1) "Rural county", any county in the state of Missouri with fewer than one
65 hundr ed thousand inhabitants, and such term shall be deemed to include both the farm
66 and nonfarm population ther eof. The number of inhabitants specified in this
67 subdivision shall be incr eased by six percen t every ten years after each decennial
68 census beginning in 2030;
69 (12) "T ax credi t", a cr edit against the tax otherwise due under chapter 143,
70 excluding withholding tax imposed by sections 143.191 to 143.265.
71 3. (1) For all tax years beginning on or after January 1, 2027, a tax cr edit shall
72 be allowed for an investor's cash investment in the qualified securities of a qualified
73 Missouri business. The credi t shall be in a total amount equal to forty per cent of such
74 investor's cash investment in any qualified Missouri business, subject to the limitations
75 set forth in this subsection. The cred it shall be in a total amount equal to fifty per cent
76 wher e the investor's cash investment is in the qualified securities of a qualified Missouri
77 business that is headquarter ed in a rural county . If the amount of the credi t allowed by
78 this section exceeds the investor's tax liability in any one tax year , the rem aining portion
79 of the credi t may be carried forward five years or until the total amount of the cred it is
80 used, whichever occurs first. If the investor is a permitted entity investor , the credi t
81 pr ovided by this section shall be claimed by the permitted entity investor in prop ortion
82 to such owner's equity investment in the permitted entity investor .
83 (2) A cash investment in a qualified security shall be deemed to have been made
84 on the date of acquisition of the qualified security , as such date is determined in
85 accordance with the pr ovisions of the Internal Revenue Code of 1986, as amended.
86 (3) The department and the MTC shall not allow tax credi ts of mor e than
87 seventy-five thousand dollars for a single qualified Missouri business per investor who is
88 a natural person or a permitted entity investor and shall not allow a total of thr ee
89 hundr ed thousand dollars in tax cred its for a single tax year per investor who is a
90 natural person or a permitted entity investor . No tax cr edit authorized by this section or
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91 section 348.274 shall be allowed for any cash investments in qualified securities made in
92 any year after December 31, 2033. The total amount of tax cre dits that may be allowed
93 under this section shall not exceed six million dollars during either calendar year 2027
94 or 2028. Beginning in calendar year 2029, the total amount of tax cr edits allowed under
95 this section shall be annually incr eased by twenty percen t of the total amount of tax
96 cr edits allowed in the immediately pr eceding calendar year , so long as the total amount
97 of tax credits allowed in the immediately prec eding calendar year was issued during
98 such calendar year . For each successive year ther eafter , if the total amount of tax
99 cr edits allowed in the immediately prec eding calendar year under this section is issued,
100 the total amount of tax cred its shall be increa sed by an additional twenty per cent. Such
101 incr ease of twenty percen t of tax credits allowed shall continue, so long as the total
102 amount of tax credits allowed in the immediately pr eceding calendar year was
103 completely issued. The balance of unissued tax credi ts may be carried over for issuance
104 in futur e years before December 31, 2035. The balance of unissued tax cr edits carried
105 over , if any , shall not be used in the calculation of the total amount of tax cred its allowed
106 in a given calendar year .
107 (4) At the beginning of each calendar year , the MTC shall equally designate the
108 total amount of tax cred its available during the first six months of that calendar year to
109 each designated geographic r egion. As soon as practicable at the end of the first six
110 months of that calendar year , the MTC shall pr epare and issue a report to the dir ector
111 of the department designating all tax credi t awards for that year to date, so that the
112 department may issue such tax cr edits in accordance with the pr ovisions of this section
113 and section 348.274.
114 (5) During the last six months of the calendar year , any unissued tax cred its
115 pr eviously allocated to any designated geographic regi on may be awarded at the
116 discr etion of the MTC to a qualified Missouri business in any designated geographic
117 r egion thr oughout the state.
118 4. (1) Befor e an investor is entitled to r eceive tax cr edits under this section and
119 section 348.274, such investor shall have made a cash investment in a qualified security
120 of a qualified Missouri business. The business shall have been appr oved as a qualified
121 Missouri business before the date on which the cash investment was made. T o be
122 designated as a qualified Missouri business, a business shall apply to the MTC.
123 (2) The application by a business shall be in the form and substance requ ired by
124 the MTC in coordination with the department by and thr ough its service on the MTC
125 board of dir ectors but shall include at least the following:
126 (a) The name of the business and certified copies of the organizational
127 documents of the business;
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128 (b) A business plan, including a description of the business and the management,
129 pr oduct, market, and financial plan of the business;
130 (c) A statement of the potential economic impact of the business, including the
131 number , location, and types of jobs expected to be creat ed;
132 (d) A description of the qualified securities to be issued, the consideration to be
133 paid for the qualified securities, and the amount of any tax credi ts req uested;
134 (e) A statement of the amount, timing, and pr ojected use of the pr oceeds to be
135 raised fr om the prop osed sale of qualified securities; and
136 (f) Such other information as may be reas onably requ ested.
137 (3) The designation of a business as a qualified Missouri business shall be made
138 by the MTC, and each qualified Missouri business shall annually apply to ren ew such
139 designation, to be appr oved by the MTC. A business shall be so designated if the MTC
140 determines, based upon the application submitted by the business and any additional
141 information prov ided in connection with such application or as reas onably req uested by
142 the MTC, that such business meets established criteria, including at least the following:
143 (a) The business shall not have had annual gross r evenues of mor e than five
144 million dollars in the most recent tax year of the business;
145 (b) Businesses that are not bioscience businesses shall have been in operation for
146 less than five years, and bioscience businesses shall have been in operation for less than
147 ten years;
148 (c) The ability of investors in the business to r eceive tax cr edits for cash
149 investments in qualified securities of the business is beneficial to advancing the goals of
150 this section and section 348.274;
151 (d) The business shall not have ownership interes ts including, but not limited to,
152 common or pr eferr ed shares of stock that can be traded via a public stock exchange
153 befor e the date that a qualifying investment is made;
154 (e) The business shall not be engaged primarily in any one or mor e of the
155 following enterprises:
156 a. The business of banking, savings and loan or lending institutions, credi t or
157 finance, or financial brok erage or investments;
158 b. The pr ovision of pro fessional services, such as legal, accounting, or
159 engineering services; however , contract res earch or manufacturing organizations,
160 sometimes referr ed to as CROs or CMOs, shall not be subject to this exclusion;
161 c. Governmental, charitable, religi ous, or trade organizations;
162 d. The ownership, development, br okerage, sales, or leasing of r eal estate;
163 e. Insurance;
164 f. Construction, construction management, or contracting;
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165 g. Business consulting or brok erage;
166 h. Any business engaged primarily as a passive business, having irregu lar or
167 noncontiguous operations, or deriving substantially all of the income of the business
168 fr om passive investments that generate interes t, dividends, roy alties, or capital gains or
169 any business arrangements the effect of which is to immunize an investor fro m risk of
170 loss;
171 i. Any activity that is in violation of the law;
172 j. Any business raising moneys primarily to pur chase rea l estate, land, or
173 fixtur es; and
174 k. Any gambling-r elated business;
175 (f) The business has a rea sonable chance of success;
176 (g) The business has the reas onable potential to cr eate measurable employment
177 within the regi on, this state, or both;
178 (h) The business is based on an innovative technology , pr oduct, or service
179 designed to be used in the commer cial marketplace;
180 (i) The existing owners of the business and other founders have made or are
181 committed to making a substantial financial or time commitment to the business;
182 (j) The securities to be issued and pur chased are qualified securities;
183 (k) The business has the reas onable potential to addr ess needs and opportunities
184 specific to the r egion, this state, or both;
185 (l) The business has made binding commitments to the MTC for adequate
186 r eporting of financial data, including a r equir ement for an annual repo rt or , if r equir ed,
187 an annual audit of the financial and operational r ecords of the business; the right of
188 access to the financial r ecords of the business; the right of the department and the MTC
189 to reco rd and publish normal and customary data and information r elated to the
190 issuance of tax cr edits that ar e not otherwise determined to be trade or business secr ets;
191 and other such pr otections as may be in the best interes t of Missouri taxpayers to
192 achieve the goals of this section and section 348.274; and
193 (m) The business shall satisfy all other req uirements of this section and section
194 348.274.
195 (4) A qualified Missouri business shall have the burden of pr oof to demonstrate
196 the qualifications of the business under this section.
197 (5) The MTC shall establish an application fee for qualified Missouri businesses
198 and investors or transfer ees. This fee shall be utilized by MTC to administer this act,
199 issue the tax cr edits, and rev iew the applications.
348.274. 1. (1) The MTC is authorized to allocate tax cr edits to qualified
2 Missouri businesses, and the department is authorized to issue tax cr edits to investors in
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3 such qualified Missouri businesses. Such tax cred its shall be allocated to those qualified
4 Missouri businesses that, as determined by the MTC, are most likely to pro vide the
5 gr eatest economic benefit to the r egion or the state, or both. The MTC may allocate,
6 and the department may issue, whole or partial tax credits in accordance with the report
7 issued to the dire ctor of the department based on the MTC's assessment of the qualified
8 Missouri businesses. The MTC may consider numerou s factors in such assessment
9 including, but not limited to, the quality and experience of the management team, the
10 size of the estimated market opportunity , the risk fr om curren t or futur e competition,
11 the ability to defend intellectual pr operty , the quality and utility of the business model,
12 and the quality and r easonableness of financial pr ojections for the business.
13 (2) Each qualified Missouri business for which the MTC has allocated tax cred its
14 such that the department can issue tax cre dits to the investors of such qualified Missouri
15 business shall submit to the MTC a rep ort before such tax cred its ar e issued. Such
16 r eport shall include the following:
17 (a) The name, addr ess, and taxpayer identification number of each investor who
18 has made cash investment in the qualified securities of the qualified Missouri business;
19 (b) Pr oof of such investment, including copies of the securities' pur chase
20 agr eements and canceled checks or wir e-transfer recei pts; and
21 (c) Such other information as may be reas onably requ ired under this section and
22 section 348.273 or rea sonably requ ested by the department or the MTC.
23 2. (1) The state of Missouri, the department, or the MTC shall not be held liable
24 for any damages to any investor that makes an investment in any qualified security of a
25 qualified Missouri business, any business that applies to be designated as a qualified
26 Missouri business and is denied, or any investor that makes an investment in a business
27 that applies to be designated as a qualified Missouri business and is denied.
28 (2) Each qualified Missouri business shall have the obligation to notify the MTC,
29 which shall notify the dir ector of the department, of any changes in the qualifications of
30 the business or in the eligibility of investors to claim a tax cr edit for cash investment in a
31 qualified security .
32 (3) The dir ector of the department, in cooperation with the MTC, shall provi de
33 the information specified under subdivision (3) of subsection 4 of this section to the
34 dir ector of the department of rev enue on an annual basis. The MTC shall conduct an
35 annual rev iew of the activities undertaken under this section and section 348.273 to
36 ensur e that tax cr edits issued under this section and section 348.273 are issued in
37 compliance with the pro visions of this section and section 348.273 and rules and
38 r egulations promulg ated by the MTC or the department with respect to this section and
39 section 348.273. The r easonable costs of the annual revie w shall be paid to the MTC
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40 according to a reas onable fee schedule adopted by the MTC in cooperation with the
41 department by and thr ough its service on the MTC board of dir ectors.
42 (4) If the MTC determines that a business is not in substantial compliance with
43 the re quir ements under this section and section 348.273 to maintain its designation, the
44 department or MTC, by written notice, may inform the business that such business will
45 lose its designation as a qualified Missouri business one hundre d twenty days fr om the
46 date of mailing of the notice unless such business corr ects the deficiencies and is once
47 again in compliance with the requ irem ents for designation and provi des the MTC with
48 evidence of corr ecting the deficiencies as the MTC reas onably requ ests.
49 (5) At the end of the one-hundred -twenty-day period, if the qualified Missouri
50 business is still not in substantial compliance, the department or MTC may send a notice
51 of loss of designation to the business, the dir ector of the department of reven ue, and to
52 all known investors in the business.
53 (6) A business may lose its designation as a qualified Missouri business under
54 this section and section 348.273 by moving either its headquarters outside of Missouri or
55 a substantial number of the jobs creat ed in Missouri to a location outside Missouri
56 within ten years after rec eiving financial assistance under this section and section
57 348.273, provi ded that no business may lose its designation as a qualified Missouri
58 business under this section and section 348.273 if such move is in connection with the
59 acquisition of the business by sale of all or substantially all of its business, whether by
60 merger , sale of stock, sale of assets, or otherwise.
61 (7) In the event that a business loses its designation as a qualified Missouri
62 business, such business shall be precl uded fr om being issued any additional tax cred its
63 available under this section and section 348.273 with r espect to the business, shall be
64 pr ecluded fr om being appr oved as a qualified Missouri business, and shall be subject to
65 an appr opriate clawback provi sion that the MTC, in cooperation with the department
66 by and thr ough its service on the MTC board of dir ectors, may institute.
67 (8) Investors who lawfully make an investment in a qualified Missouri business
68 shall not have issued tax cr edits disallowed solely due to the business subsequently losing
69 its designation as a qualified Missouri business. In the event such qualified business
70 loses its designation as a qualified Missouri business, the amount of tax credi ts issued
71 under this section and section 348.273 shall be subject to clawback prov isions fro m the
72 qualified Missouri business, to be determined by the department and the MTC board of
73 dir ectors.
74 (9) The portions of documents and other materials submitted to the department
75 or MTC that contain confidential information shall be kept confidential and shall be
76 maintained in a secured envir onment. For the purposes of this section and section
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77 348.273, confidential information shall include, but not be limited to, such portions of
78 trade secr ets, documents, any customer lists, and other materials; any formula,
79 compound, pr oduction data, or compilation of information that will allow certain
80 individuals within a commerc ial concern using such portions of documents and other
81 material the means to fabricate, pr oduce, or compound an article of trade; or any
82 service having commer cial value that gives the user an opportunity to obtain a business
83 advantage over competitors who do not know or use such service.
84 (10) The department and the MTC may prep are and adopt proced ures, rules,
85 and published guidance concerning the performance of the duties placed upon each
86 r espective entity by this section and section 348.273.
87 3. Any investor who makes a cash investment in a qualified security of a
88 qualified Missouri business may transfer the tax cred its such investor may receive under
89 subsection 3 of section 348.273 to any natural person. So long as the investor has not
90 claimed the tax cred it against the investor's Missouri income tax liability , such
91 transfer ee may claim the tax cred it against the transfer ee's Missouri income tax liability
92 as pro vided in subdivision (1) of subsection 3 of section 348.273, subject to all
93 r estrictions and limitations set forth in this section and section 348.273. Documentation
94 of any tax cred it transfer under this section shall be provi ded by the investor in the
95 manner established by the MTC and the department by and thr ough its service on the
96 MTC board of direc tors.
97 4. (1) Each qualified Missouri business for which tax cred its were issued under
98 this section and section 348.273 shall rep ort to the MTC annually on or before February
99 first. The MTC shall pr ovide copies of the r eports to the department under appr opriate
100 confidentiality agr eements as may be necessary under the circu mstances. Such rep orts
101 shall include the following:
102 (a) The name, addr ess, and taxpayer identification number of each investor who
103 has made a cash investment in the qualified securities of the qualified Missouri business
104 and has re ceived tax cred its for this investment during the preced ing year;
105 (b) The amounts of cash investments by each investor and a description of the
106 qualified securities issued in consideration of such cash investments; and
107 (c) Such other information as may be reas onably requ ired under this section and
108 section 348.273.
109 (2) The MTC shall r eport quarterly to the dire ctor of the department on the
110 allocation of the tax cr edits in the pr eceding calendar quarter . Such repo rts shall
111 include:
112 (a) The number of applications re ceived;
113 (b) The number and ratio of successful applications to unsuccessful applications;
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114 (c) The amount of tax cred its allocated but not issued in the pr evious quarter ,
115 including what per centage was allocated to individuals and what percen tage was
116 allocated to investment firms; and
117 (d) Such other information as reas onably agr eed upon fr om time to time.
118 (3) The MTC and the department, as applicable, shall also rep ort annually to the
119 governor , the dir ector of the department of economic development, the pr esident pr o
120 tempor e of the senate, and the speaker of the house of repr esentatives, on or before
121 April first, on the allocation and issuance of the tax cr edits. Such repo rts shall include:
122 (a) The amount of tax cr edits issued in the pr evious fiscal year , including what
123 per centage was issued to individuals and what per centage was issued to investment
124 firms;
125 (b) The types of businesses that benefited fr om the tax cred its;
126 (c) The amount of allocated but unissued tax credi ts and the information about
127 the unissued tax cr edits set forth in subdivision (2) of this subsection;
128 (d) Any aggreg ate job creat ion or capital investment in the region that res ulted
129 fr om the use of the tax cred its for a period of five years beginning fr om the date on
130 which the tax credits were awarded;
131 (e) The manner in which the purpose of this section and section 348.273 has been
132 carried out with regar d to a designated geographic reg ion;
133 (f) The total cash investments made for the pur chase of qualified securities of
134 qualified Missouri businesses within the state during the pre ceding year and
1 3 5 cumulatively since the effective date of this section and section 348.273;
136 (g) An estimate of jobs cr eated and jobs preserved by cash investments made in
137 qualified Missouri businesses within the state;
138 (h) An estimate of the multiplier effect on the economy of the cash investments
139 made under this section and section 348.273; and
140 (i) Information rega rding what businesses deriving benefits fr om the tax cred its
141 r emained in the designated geographic r egion, what businesses ceased business, what
142 businesses were pur chased, and what businesses may have moved out of a designated
143 geographic region or the state.
144 (4) Any violation of the rep orting req uirements of this subsection by a qualified
145 Missouri business may be gr ounds for the loss of designation as a qualified Missouri
146 business, and any such business that loses its designation as a qualified Missouri
147 business shall be subject to the r estrictions upon loss of designation set forth in
148 subsection 2 of this section.
149 5. Notwithstanding any pro vision of section 105.1500 to the contrary , any
150 r equir ement to pr ovide information, documents, or record s under section 348.273 or
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151 348.274, and any requi rem ent established by the MTC or any state agency to provi de
152 information, documents, or record s for the purpose of administering these sections,
153 shall be exempt fr om section 105.1500 of the personal privacy protect ion act.
154 6. T ax credi ts issued under section 348.273 or 348.274 shall be classified as
155 "entr epr eneurial tax cre dits" under section 135.800 of the tax cr edit accountability act.
156 7. Section 348.273 and this section shall expir e on December 31, 2033.
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