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SECOND REGULAR SESSION
SENATE BILL NO. 1004
103RD GENERAL ASSEMBLY
INTRODUCED BY SENATOR GREGORY (21).
5481S.01I KRISTINA MARTIN, Secretary
AN ACT
To amend chapter 348, RSMo, by adding thereto two new sections relating to tax credits for
investments in certain Missouri 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 1
two new sections, to be known as sections 348.273 and 348.274, 2
to read as follows:3
348.273. 1. This section and section 348.274 shall be 1
known and may be cited as the "Missouri Angel Investment 2
Incentive Act". 3
2. As used in this section and section 348.274, the 4
following terms mean: 5
(1) "Cash investment", any moneys or money-equivalent 6
contribution in consideration of qualified securities; 7
(2) "Department", the department of economic 8
development; 9
(3) "Designated geographic regions", the following 10
four regions: 11
(a) Region 1: Counties of Andrew, Bates, Benton, 12
Buchanan, Cass, Clay, Clinton, DeKalb, Gentry, Henry, Holt, 13
Jackson, Johnson, Lafayette, Platte, Ray, and Worth; 14
(b) Region 2: Counties of Franklin, Jefferson, 15
Lincoln, St. Charles, Warren, and St. Louis, and the City of 16
St. Louis; 17
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(c) Region 3: Counties geographically north of the 18
Missouri River, excluding any counties in region 1 or region 19
2; and 20
(d) Region 4: Counties geographically south of the 21
Missouri River, excluding any counties in region 1 or region 22
2; 23
(4) "Investor", one of the following persons or 24
entities: 25
(a) A natural person who is an accredited investor as 26
defined under 17 CFR 230.501(a)(5) or 230.501(a)(6), as in 27
effect on July 24, 2013; 28
(b) A permitted entity investor who is an accredited 29
investor as defined under 17 CFR 230.501(a)(8) as in effect 30
on July 24, 2013; or 31
(c) A natural person or permitted entity investor 32
making an investment who qualifies under the federal 33
Jumpstart Our Business Startups (JOBS) Act, Pub. L. 112-106 34
as in effect on April 5, 2012. 35
The term "investor" shall not include any person who serves 36
as an executive, officer, or employee of the business in 37
which an otherwise qualified cash investment is made, and 38
such person shall not qualify for the issuance of tax 39
credits for such investment. However, an investor who 40
serves solely as a director may qualify for the issuance of 41
tax credits; 42
(5) "MTC", the Missouri technology corporation 43
established under section 348.251; 44
(6) "Owner", any natural person who is, directly or 45
indirectly, a partner, stockholder, or member in a permitted 46
entity investor; 47
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(7) "Permitted entity investor", any general 48
partnership; limited partnership; corporation that has in 49
effect a valid election to be taxed as an S corporation 50
under the Internal Revenue Code of 1986, as amended; 51
revocable living trust; nonprofit corporation; or limited 52
liability company that has elected to be taxed as a 53
partnership under the Internal Revenue Code of 1986, as 54
amended, and that was established and is operated for the 55
purpose of making investments in other entities; 56
(8) "Qualified knowledge-based company", a company 57
engaged in the research, development, implementation, and 58
commercialization of innovative technologies, products, and 59
services for use in the commercial marketplace; 60
(9) "Qualified Missouri business", a Missouri business 61
that is approved as a qualified knowledge-based company by 62
the MTC and meets at least one of the following criteria: 63
(a) Any partnership, association, limited liability 64
company, or corporation domiciled in Missouri; or 65
(b) Any limited liability company or corporation that 66
is domiciled outside the state of Missouri but has its 67
business operations located primarily in Missouri or does 68
substantially all of such business's production in Missouri; 69
(10) "Qualified securities", a cash investment through 70
any form or combination of forms of financial assistance as 71
provided under this subdivision. Such forms of financial 72
assistance include, but are not limited to: 73
(a) Any form of equity, such as: 74
a. A general or limited partnership interest; 75
b. Common stock; 76
c. Simple agreement for future equity (SAFE); or 77
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d. Preferred stock, without regard to voting rights or 78
seniority position and regardless of whether convertible 79
into common stock; and 80
(b) Any debt instrument subordinate to the general 81
creditors of the qualified Missouri company debtor that 82
requires no payment from the qualified Missouri company 83
debtor and that shall convert to some form of equity prior 84
to, or in conjunction with, the qualified Missouri company 85
raising any additional funds; 86
(11) "Rural county", any county in the state of 87
Missouri with fewer than one hundred thousand inhabitants, 88
and such term shall be deemed to include both the farm and 89
nonfarm population thereof. The number of inhabitants 90
specified in this subdivision shall be increased by six 91
percent every ten years after each decennial census 92
beginning in 2030; 93
(12) "Tax credit", a credit against the tax otherwise 94
due under chapter 143, excluding withholding tax imposed by 95
sections 143.191 to 143.265, chapter 147, or chapter 148. 96
3. (1) For all tax years beginning on or after 97
January 1, 2027, a tax credit shall be allowed for an 98
investor's cash investment in the qualified securities of a 99
qualified Missouri business. The credit shall be in a total 100
amount equal to forty percent of such investor's cash 101
investment in any qualified Missouri business, subject to 102
the limitations set forth in this subsection. The credit 103
shall be in a total amount equal to fifty percent where the 104
investor's cash investment in the qualified securities of a 105
qualified Missouri business are in a rural county. If the 106
amount by which that portion of the credit allowed by this 107
section exceeds the investor's tax liability in any one tax 108
year, the remaining portion of the credit may be carried 109
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forward five years or until the total amount of the credit 110
is used, whichever occurs first. If the investor is a 111
permitted entity investor, the credit provided by this 112
section shall be claimed by the permitted entity investor in 113
proportion to such owner's equity investment in the 114
permitted entity investor. 115
(2) A cash investment in a qualified security shall be 116
deemed to have been made on the date of acquisition of the 117
qualified security, as such date is determined in accordance 118
with the provisions of the Internal Revenue Code of 1986, as 119
amended. 120
(3) The department and the MTC shall not allow tax 121
credits of more than seventy-five thousand dollars for a 122
single qualified Missouri business per investor who is a 123
natural person or a permitted entity investor and shall not 124
allow a total of three hundred thousand dollars in tax 125
credits for a single tax year per investor who is a natural 126
person or a permitted entity investor. No tax credit 127
authorized by this section or section 348.274 shall be 128
allowed for any cash investments in qualified securities 129
made in any year after December 31, 2033. The total amount 130
of tax credits that may be allowed under this section shall 131
not exceed six million dollars during either calendar year 132
2027 or 2028. Beginning in calendar year 2029, the total 133
amount of tax credits allowed under this section shall be 134
annually increased by twenty percent of the total amount of 135
tax credits allowed in the immediately preceding calendar 136
year, so long as the total amount of tax credits allowed in 137
the immediately preceding calendar year was issued during 138
such calendar year. For each successive year thereafter, if 139
the total amount of tax credits allowed in the immediately 140
preceding calendar year under this section is issued, the 141
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total amount of tax credits shall be increased by an 142
additional twenty percent. Such increase of twenty percent 143
of tax credits allowed shall continue, so long as the total 144
amount of tax credits allowed in the immediately preceding 145
calendar year was completely issued. The balance of 146
unissued tax credits may be carried over for issuance in 147
future years before December 31, 2034. The balance of 148
unissued tax credits carried over, if any, shall not be used 149
in the calculation of the total amount of tax credits 150
allowed in a given calendar year. 151
(4) At the beginning of each calendar year, the MTC 152
shall equally designate the total amount of tax credits 153
available during the first six months of that calendar year 154
to each designated geographic region. As soon as 155
practicable at the end of the first six months of that 156
calendar year, the MTC shall prepare and issue a report to 157
the director of the department designating all tax credit 158
awards for that year to date, so that the department may 159
issue such tax credits in accordance with the provisions of 160
this section and section 348.274. 161
(5) During the last six months of the calendar year, 162
any unissued tax credits previously allocated to any 163
designated geographic region may be awarded at the 164
discretion of the MTC to a qualified Missouri company in any 165
designated geographic region throughout the state. 166
4. (1) Before an investor is entitled to receive tax 167
credits under this section and section 348.274, such 168
investor shall have made a cash investment in a qualified 169
security of a qualified Missouri business. The business 170
shall have been approved as a qualified Missouri business 171
before the date on which the cash investment was made. To 172
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be designated as a qualified Missouri business, a business 173
shall apply to the MTC. 174
(2) The application by a business shall be in the form 175
and substance required by the MTC in coordination with the 176
department by and through its service on the MTC board of 177
directors but shall include at least the following: 178
(a) The name of the business and certified copies of 179
the organizational documents of the business; 180
(b) A business plan, including a description of the 181
business and the management, product, market, and financial 182
plan of the business; 183
(c) A statement of the potential economic impact of 184
the business, including the number, location, and types of 185
jobs expected to be created; 186
(d) A description of the qualified securities to be 187
issued, the consideration to be paid for the qualified 188
securities, and the amount of any tax credits requested; 189
(e) A statement of the amount, timing, and projected 190
use of the proceeds to be raised from the proposed sale of 191
qualified securities; and 192
(f) Such other information as may be reasonably 193
requested. 194
(3) The designation of a business as a qualified 195
Missouri business shall be made by the MTC, and each 196
qualified Missouri business shall annually apply to renew 197
such designation, to be approved by the MTC. A business 198
shall be so designated if the MTC determines, based upon the 199
application submitted by the business and any additional 200
information provided in connection with such application or 201
as reasonably requested by the MTC, that such business meets 202
established criteria, including at least the following: 203
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(a) The business shall not have had annual gross 204
revenues of more than five million dollars in the most 205
recent tax year of the business; 206
(b) Businesses that are not bioscience businesses 207
shall have been in operation for less than five years, and 208
bioscience businesses shall have been in operation for less 209
than ten years; 210
(c) The ability of investors in the business to 211
receive tax credits for cash investments in qualified 212
securities of the business is beneficial to advancing the 213
goals of this section and section 348.274; 214
(d) The business shall not have ownership interests 215
including, but not limited to, common or preferred shares of 216
stock that can be traded via a public stock exchange before 217
the date that a qualifying investment is made; 218
(e) The business shall not be engaged primarily in any 219
one or more of the following enterprises: 220
a. The business of banking, savings and loan or 221
lending institutions, credit or finance, or financial 222
brokerage or investments; 223
b. The provision of professional services, such as 224
legal, accounting, or engineering services; however, 225
contract research or manufacturing organizations, sometimes 226
referred to as CROs or CMOs, shall not be subject to this 227
exclusion; 228
c. Governmental, charitable, religious, or trade 229
organizations; 230
d. The ownership, development, brokerage, sales, or 231
leasing of real estate; 232
e. Insurance; 233
f. Construction, construction management, or 234
contracting; 235
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g. Business consulting or brokerage; 236
h. Any business engaged primarily as a passive 237
business, having irregular or noncontiguous operations, or 238
deriving substantially all of the income of the business 239
from passive investments that generate interest, dividends, 240
royalties, or capital gains or any business arrangements the 241
effect of which is to immunize an investor from risk of loss; 242
i. Any activity that is in violation of the law; 243
j. Any business raising moneys primarily to purchase 244
real estate, land, or fixtures; and 245
k. Any gambling-related business; 246
(f) The business has a reasonable chance of success; 247
(g) The business has the reasonable potential to 248
create measurable employment within the region, this state, 249
or both; 250
(h) The business is based on an innovative technology, 251
product, or service designed to be used in the commercial 252
marketplace; 253
(i) The existing owners of the business and other 254
founders have made or are committed to making a substantial 255
financial or time commitment to the business; 256
(j) The securities to be issued and purchased are 257
qualified securities; 258
(k) The business has the reasonable potential to 259
address needs and opportunities specific to the region, this 260
state, or both; 261
(l) The business has made binding commitments to the 262
MTC for adequate reporting of financial data, including a 263
requirement for an annual report or, if required, an annual 264
audit of the financial and operational records of the 265
business; the right of access to the financial records of 266
the business; the right of the department and the MTC to 267
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record and publish normal and customary data and information 268
related to the issuance of tax credits that are not 269
otherwise determined to be trade or business secrets; and 270
other such protections as may be in the best interest of 271
Missouri taxpayers to achieve the goals of this section and 272
section 348.274; and 273
(m) The business shall satisfy all other requirements 274
of this section and section 348.274. 275
(4) A qualified Missouri business shall have the 276
burden of proof to demonstrate the qualifications of the 277
business under this section. 278
(5) The MTC shall establish an application fee for 279
qualified Missouri businesses and investors or transferees. 280
This fee shall be utilized by MTC to administer this act, 281
issue the tax credits, and review the applications. 282
348.274. 1. (1) The MTC is authorized to allocate 1
tax credits to qualified Missouri businesses, and the 2
department is authorized to issue tax credits to investors 3
in such qualified Missouri businesses. Such tax credits 4
shall be allocated to those qualified Missouri businesses 5
that, as determined by the MTC, are most likely to provide 6
the greatest economic benefit to the region or the state, or 7
both. The MTC may allocate, and the department may issue, 8
whole or partial tax credits in accordance with the report 9
issued to the director of the department based on the MTC's 10
assessment of the qualified Missouri businesses. The MTC 11
may consider numerous factors in such assessment including, 12
but not limited to, the quality and experience of the 13
management team, the size of the estimated market 14
opportunity, the risk from current or future competition, 15
the ability to defend intellectual property, the quality and 16
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utility of the business model, and the quality and 17
reasonableness of financial projections for the business. 18
(2) Each qualified Missouri business for which the MTC 19
has allocated tax credits such that the department can issue 20
tax credits to the investors of such qualified Missouri 21
business shall submit to the MTC a report before such tax 22
credits are issued. Such report shall include the following: 23
(a) The name, address, and taxpayer identification 24
number of each investor who has made cash investment in the 25
qualified securities of the qualified Missouri business; 26
(b) Proof of such investment, including copies of the 27
securities' purchase agreements and cancelled checks or wire- 28
transfer receipts; and 29
(c) Such other information as may be reasonably 30
required under this section and section 348.273 or 31
reasonably requested by the department or the MTC. 32
2. (1) The state of Missouri, the department, or the 33
MTC shall not be held liable for any damages to any investor 34
that makes an investment in any qualified security of a 35
qualified Missouri business, any business that applies to be 36
designated as a qualified Missouri business and is denied, 37
or any investor that makes an investment in a business that 38
applies to be designated as a qualified Missouri business 39
and is denied. 40
(2) Each qualified Missouri business shall have the 41
obligation to notify the MTC, which shall notify the 42
director of the department, of any changes in the 43
qualifications of the business or in the eligibility of 44
investors to claim a tax credit for cash investment in a 45
qualified security. 46
(3) The director of the department, in cooperation 47
with the MTC, shall provide the information specified under 48
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subdivision (3) of subsection 4 of this section to the 49
director of the department of revenue on an annual basis. 50
The MTC shall conduct an annual review of the activities 51
undertaken under this section and section 348.273 to ensure 52
that tax credits issued under this section and section 53
348.273 are issued in compliance with the provisions of this 54
section and section 348.273 or rules and regulations 55
promulgated by the MTC or the department with respect to 56
this section and section 348.273. The reasonable costs of 57
the annual review shall be paid by the MTC according to a 58
reasonable fee schedule adopted by the MTC in cooperation 59
with the department by and through its service on the MTC 60
board of directors. 61
(4) If the MTC determines that a business is not in 62
substantial compliance with the requirements under this 63
section and section 348.273 to maintain its designation, the 64
department or MTC, by written notice, may inform the 65
business that such business will lose its designation as a 66
qualified Missouri business one hundred twenty days from the 67
date of mailing of the notice unless such business corrects 68
the deficiencies and is once again in compliance with the 69
requirements for designation and provides the MTC with 70
evidence of correcting the deficiencies as the MTC 71
reasonably requests. 72
(5) At the end of the one-hundred-twenty-day period, 73
if the qualified Missouri business is still not in 74
substantial compliance, the department or MTC may send a 75
notice of loss of designation to the business, the director 76
of the department of revenue, and to all known investors in 77
the business. 78
(6) A business may lose its designation as a qualified 79
Missouri business under this section and section 348.273 by 80
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moving either its headquarters outside of Missouri or a 81
substantial number of the jobs created in Missouri to a 82
location outside Missouri within ten years after receiving 83
financial assistance under this section and section 348.273, 84
provided that no business may lose its designation as a 85
qualified Missouri business under this section and section 86
348.273 if such move is in connection with the acquisition 87
of the business by sale of all or substantially all of its 88
business, whether by merger, sale of stock, sale of assets, 89
or otherwise. 90
(7) In the event that a business loses its designation 91
as a qualified Missouri business, such business shall be 92
precluded from being issued any additional tax credits 93
available under this section and section 348.273 with 94
respect to the business, shall be precluded from being 95
approved as a qualified Missouri business, and shall be 96
subject to an appropriate clawback provision that the MTC, 97
in cooperation with the department by and through its 98
service on the MTC board of directors, may institute. 99
(8) Investors who lawfully make an investment in a 100
qualified Missouri business shall not have issued tax 101
credits disallowed solely due to the business subsequently 102
losing its designation as a qualified Missouri business. In 103
the event such qualified business loses its designation as a 104
qualified Missouri business, the amount of tax credits 105
issued under this section and section 348.273 shall be 106
subject to clawback provisions from the qualified Missouri 107
business, to be determined by the department and the MTC 108
board of directors. 109
(9) The portions of documents and other materials 110
submitted to the department or MTC that contain confidential 111
information shall be kept confidential and shall be 112
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maintained in a secured environment. For the purposes of 113
this section and section 348.273, confidential information 114
shall include, but not be limited to, such portions of trade 115
secrets, documents, any customer lists, and other materials; 116
any formula, compound, production data, or compilation of 117
information that will allow certain individuals within a 118
commercial concern using such portions of documents and 119
other material the means to fabricate, produce, or compound 120
an article of trade; or any service having commercial value 121
that gives the user an opportunity to obtain a business 122
advantage over competitors who do not know or use such 123
service. 124
(10) The department and the MTC may prepare and adopt 125
procedures, rules, and published guidance concerning the 126
performance of the duties placed upon each respective entity 127
by this section and section 348.273. 128
3. Any investor who makes a cash investment in a 129
qualified security of a qualified Missouri business may 130
transfer the tax credits such investor may receive under 131
subsection 3 of section 348.273 to any natural person. So 132
long as the investor has not claimed the tax credit against 133
the investor's Missouri income tax liability, such 134
transferee may claim the tax credit against the transferee's 135
Missouri income tax liability as provided in subdivision (1) 136
of subsection 3 of section 348.273, subject to all 137
restrictions and limitations set forth in this section and 138
section 348.273. Documentation of any tax credit transfer 139
under this section shall be provided by the investor in the 140
manner established by the MTC and the department by and 141
through its service on the MTC board of directors. 142
4. (1) Each qualified Missouri business for which tax 143
credits were issued under this section and section 348.273 144
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shall report to the MTC annually on or before February 145
first. The MTC shall provide copies of the reports to the 146
department under appropriate confidentiality agreements as 147
may be necessary under the circumstances. Such reports 148
shall include the following: 149
(a) The name, address, and taxpayer identification 150
number of each investor who has made a cash investment in 151
the qualified securities of the qualified Missouri business 152
and has received tax credits for this investment during the 153
preceding year; 154
(b) The amounts of cash investments by each investor 155
and a description of the qualified securities issued in 156
consideration of such cash investments; and 157
(c) Such other information as may be reasonably 158
required under this section and section 348.273. 159
(2) The MTC shall report quarterly to the director of 160
the department on the allocation of the tax credits in the 161
preceding calendar quarter. Such reports shall include: 162
(a) The number of applications received; 163
(b) The number and ratio of successful applications to 164
unsuccessful applications; 165
(c) The amount of tax credits allocated but not issued 166
in the previous quarter, including what percentage was 167
allocated to individuals and what percentage was allocated 168
to investment firms; and 169
(d) Such other information as reasonably agreed upon 170
from time to time. 171
(3) The MTC and the department, as applicable, shall 172
also report annually to the governor, the director of the 173
department of economic development, the president pro 174
tempore of the senate, and the speaker of the house of 175
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representatives, on or before April first, on the allocation 176
and issuance of the tax credits. Such reports shall include: 177
(a) The amount of tax credits issued in the previous 178
fiscal year, including what percentage was issued to 179
individuals and what percentage was issued to investment 180
firms; 181
(b) The types of businesses that benefitted from the 182
tax credits; 183
(c) The amount of allocated but unissued tax credits 184
and the information about the unissued tax credits set forth 185
in subdivision (2) of this subsection; 186
(d) Any aggregate job creation or capital investment 187
in the region that resulted from the use of the tax credits 188
for a period of five years beginning from the date on which 189
the tax credits were awarded; 190
(e) The manner in which the purpose of this section 191
and section 348.273 has been carried out with regard to a 192
designated geographic region; 193
(f) The total cash investments made for the purchase 194
of qualified securities of qualified Missouri businesses 195
within the state during the preceding year and cumulatively 196
since the effective date of this section and section 348.273; 197
(g) An estimate of jobs created and jobs preserved by 198
cash investments made in qualified Missouri businesses 199
within the state; 200
(h) An estimate of the multiplier effect on the 201
economy of the cash investments made under this section and 202
section 348.273; and 203
(i) Information regarding what businesses deriving 204
benefits from the tax credits remained in the designated 205
geographic region, what businesses ceased business, what 206
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businesses were purchased, and what businesses may have 207
moved out of a designated geographic region or the state. 208
(4) Any violation of the reporting requirements of 209
this subsection by a qualified Missouri business may be 210
grounds for the loss of designation as a qualified Missouri 211
business, and any such business that loses its designation 212
as a qualified Missouri business shall be subject to the 213
restrictions upon loss of designation set forth in 214
subsection 2 of this section. 215
5. Notwithstanding any provision of section 105.1500 216
to the contrary, any requirement to provide information, 217
documents, or records under section 348.273 or 348.274, and 218
any requirement established by the MTC or any state agency 219
to provide information, documents, or records for the 220
purpose of administering these sections, shall be exempt 221
from section 105.1500 of the personal privacy protection act. 222
6. Tax credits issued under section 348.273 or 348.274 223
shall be classified as "entrepreneurial tax credits" under 224
section 135.800 of the tax credit accountability act. 225
7. Section 348.273 and this section shall expire on 226
December 31, 2033. 227
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