The Enterprise Zone Tax Benefit
The purpose of Missouri's enterprise zone tax credit program is to
facilitate the expansion of new or existing businesses in the state's
66 enterprise zones. The program works by providing state income tax
credits to a business based on the number of new jobs and amount of
new investment created at the qualifying facility. The business may
earn credits based on the facility's new jobs and investment, the number
of zone residents and the number of "special" employees hired
and trained for the facility.
There is a possible income exemption, partial tax credit refund and
property tax abatement on improvements to real property provided certain
requirements are met. The credits are provided each tax year for up
to a 10-year period after the project commences operations. Each enterprise
zone has a different expiration date for the income tax credits.
To be eligible for this program, the proposed project must be located
in one of Missouri's 66 enterprise zones. Zones are certified by the
Department of Economic Development (BED). This is based on demographic
eligibility and approval of a request by the local governments. The
statutes limit the number of zones that may be authorized.
Eligible projects include facilities primarily engaged in manufacturing,
warehousing, wholesale distribution, mining, insurance, research and
development, recycling operations, computer-related services and certain
office activities. The business must have created at least two new jobs
and $100,000 in new investment ($1,000,000 for replacement facilities)
at the project site. Facility eligibility is determined by its primary
Standard Industrial Classification (SIC) code as designated by the Division
of Workforce Development.
A business may reduce its total Missouri income tax by up to 100 percent,
depending on whether it operates other Missouri facilities; the more
jobs and investment created at the qualifying facility, the more Missouri
income tax the earned credit can offset. The application procedure requires
that the business must submit a form letter of intent (pre-application)
to DED at least 15 days prior to commencement of facility operations
in order for the project to be eligible. In addition, the business must
submit Missouri Form 135 with Schedules S and M the year immediately
following the tax period the project commenced operations. The DED reviews
the application, determines eligibility, and if the project is eligible,
issues the tax credit certification to the Department of Revenue authorizing
the taxpayer to claim the credits.
The credits are based on the original cost of new machinery, equipment,
furniture, fixtures, land and building and/or eight times the annual
rental rate paid for the same. Inventory is not eligible. There are
funding limits on the tax credits. The tax credits are earned each tax
period for up to a 10-year period, depending on the zone's expiration
date. Possible tax credits include:
- $400 for each new job created at the project;
- 2 percent of the new capital investment over $100,000 created at
the project;
- $400 for each zone resident employee (prorated on 365 days);
- $400 prorated on 365 days for each "special" employee
hired (person must be unemployed for at least 90 days when hired,
or eligible for AFDC or the General Relief program);
- $400 per trained employee hired who is a zone resident or was unemployed
for 90 days;
- Up to $75,000 refund of unused credits earned by new facilities
only; and
- At least a 50 percent abatement for at least 10 years on improvements
made to real property used for manufacturing, mining, warehousing
or wholesale distribution. Abatement may be offered to other types
of companies if the facility creates at least 50 new full-time jobs.
There are special program requirements. Credits may be applied to Chapter
143, excluding withholding taxes imposed under 143.191 to 143.261, or
148, RSMo (insurance companies and banks). If the taxpayer is an S-corporation
or partnership, the individual shareholders or partners may take the
credits on business income only. Also, there are no carry-forward provisions.
Credits are re-earned each tax year for up to 10 years, depending on
the life of the enterprise zone.
For more complete information you may contact the Missouri Department
of Economic Development Incentives Section at 301 West High Street,
P.O. Box 118 Jefferson City, MO 65102, Phone: 573-751-0717, Fax: 573-751-7384
or send an email to dedfin@ded.mo.gov
The information presented here was taken from the Missouri Business and Community Services website at: www.missouridevelopment.org.
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Authored by: Rick Sparks, Business and Industry
Specialist, University of Missouri Extension
Source: Creating Quality Newsletter, Volume
12, Number 3, March 2003
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