PURPOSE: This rule clarifies and carries out the provisions of the credit for a new or expanded business facility as provided in sections 135.100–135.160, RSMo.

PUBLISHER’S NOTE: The secretary of state has determined that the publication of the entire text of the material which is incorporated by reference as a portion of this rule would be unduly cumbersome or expensive. Therefore, the material which is so incorporated is on file with the agency who filed this rule, and with the Office of the Secretary of State. Any interested person may view this material at either agency’s headquarters or the same will be made available at the Office of the Secretary of State at a cost not to exceed actual cost of copy reproduction. The entire text of the rule is printed here. This note refers only to the incorporated by reference material.

1. (1) Employee shall be defined as provided in Internal Revenue Code (IRC) Section 3121(d). To qualify as a new business facility employee under section 135.100(5), RSMo, an employee’s work must be in direct connection with the operation of the new business facility. A new business facility employee shall not include a person who works on the average less than twenty (20) hours per week throughout the taxable year or a person employed on a seasonal basis who works less than eighty percent (80%) of the days of the season customary for the position in which the person is employed.
2. (2) The number of new business facility employees shall be determined, for each year the credit is claimed, as provided in section 135.100(4), RSMo. The number of new business facility employees shall be determined by dividing the sum of the number of new business facility employees on the last business day of each month of the taxable year during which the new business facility was in operation by the number of full calendar months during the taxable period the facility was in operation. The number of new business facility employees for each year must be at least two (2) more than the number of persons employed during the year preceding the taxable year in which commencement of commercial operations occurs at the new business facility. In determining the number of new business facility employees pursuant to subdivision 135.100(4), RSMo, any major fractional portion (which shall be deemed to be fifty-one percent (51%) or more) shall be considered one (1) employee for purposes of calculating the credit. For any taxable year, if the number of new business facility employees falls below two (2), the taxpayer shall not be allowed any credit. The number of these years when the credit is not allowed shall be subtracted from the available ten (10)-year period of the credit. If the number of new business facility employees in any year again equals or exceeds two (2) and the ten (10)-year period has not ended, the taxpayer may again claim the credit in each of the remaining years in which there are at least two (2) new business facility employees.
3. (3) Upon the change of ownership or lessee, the use of a facility must be changed substantially from its previous usage to be eligible for the credit, unless the facility had previously qualified for the credit (see section (11)). This section shall not apply to the purchaser of a new business facility who was the facility’s lessee immediately prior to purchase. However, in this case, the credit shall be based upon the investment in the new business facility.
4. (4) “Depreciable tangible personal property,’’ as used in section 135.100(7), RSMo, shall mean the tangible personal property as defined in IRC Section 167 and both acquired and used within the year the credit is claimed. All real and tangible personal property shall be deemed to be acquired and used in the first year of eligibility for the federal depreciation deduction. The property shall have the same original total cost used by the taxpayer for the depreciation deduction for federal income tax purposes.
5. (5) New business facility investment shall be determined for each year in which the credit is claimed. All property shall be valued at its original cost basis, if owned, or eight (8) times the net annual rental rate if leased. If property is not regularly or periodically used by the taxpayer in the operation of the facility, the investment shall decrease by the original cost basis of the property. If the qualifying investment in the new business facility or expansion is increased, the increase may be used in the computation of the existing new business facility’s credit pursuant to the requirements of subdivision 135.100(4), (9) or (6), RSMo. For an expansion or improvement to constitute a separate facility eligible for the credits, the investment must exceed either one hundred thousand dollars ($100,000) or, if less, one hundred percent (100%) of the total investment (original cost plus improvements and additions less retirements) in the original facility immediately prior to expansion. In the case of a facility qualifying under the exception in subdivision 135.100(9), RSMo, the investment in the new facility must exceed either one (1) million dollars or, if less, one hundred percent (100%) of the total investment (original cost plus improvements and additions less retirements) in the old facility at the time commercial operations were discontinued.
6. (6) The credit may be used only in the year for which it is calculated. Unused credits are forfeited and may not be carried forward or back to other years.
7. (7) A partner’s distributive share of the credit shall be determined by the relevant provisions of the partnership agreement. If no such provisions exist, or if the purpose of the relevant provisions of the partnership agreement is tax avoidance, the share shall be determined by the provisions for the division of the general profits or losses as described in IRC Section 702(a)(9). If a partner retires, dies or sells his/her interest in the partnership, his/her distributive share of the credit for the taxable year shall be determined in accordance with the regulations promulgated under IRC Section

8. 706. A shareholder of a corporation described in section 143.471, RSMo shall be allowed an amount of credit equal to the shareholder’s pro rata share of the credit as determined in accordance with IRC Section 1377. The corporation or partnership shall provide to each shareholder or partner the information relating to his/her share or interest. A corporation described in section 143.471, RSMo or a partnership shall attach the following to its income tax return:

   1. (A) A list of shareholders or partners;
   2. (B) Each shareholder’s or partner’s proportionate share of ownership in the corporation or partnership;
   3. (C) Each shareholder’s or partner’s Social Security number;
   4. (D) Each shareholder’s or partner’s proportionate share of the taxpayer’s new business facility income; and
   5. (E) Each shareholder’s or partner’s proportionate share of the credit allowed under Chapter 135, RSMo.
9. (8) The credit available to a new business facility, expanded facility or additional facility may be applied to up to one hundred percent (100%) of the income tax liability on the taxpayer’ new business facility income. The credit may not be applied against a tax liability incurred on income which is not attributed to a new business facility or the expanded portion of a facility which qualifies as a new business facility.
10. (9) The election by the taxpayer to defer commencement of the ten (10)-year period during which the credit is allowable is irrevocable. In the case of a corporation or partnership, the election shall be made by the entity and shall be binding upon all shareholders or partners.
11. (10) To perfect the election to defer commencement of the ten (10)-year period during which the credit is allowable, the taxpayer shall attach to its income tax return, for the taxable year in which commercial operations commenced at the qualifying facility, a written statement providing the following information: the location of the facility, the type of revenue-producing enterprise conducted at the facility, the number of new business facility employees employed at the facility, the number of employees employed at the facility, the number of employees employed in Missouri, the amount of new business facility investment in the facility, the amount of total investment employed in Missouri, the date of taxpayer’s acquisition of the facility, a description of the method of acquisition of the facility, a description of any past business activity at the facility, a description of previous ownership of the facility and a statement that the taxpayer elects to deter the commencement of the credit to a specific taxable year. The taxable year specified may not be later than the third taxable year following the taxable year in which commencement of commercial operations at the new business facility occurs.
12. (11) In order to continue to qualify as a new business facility in the hands of a transferee, the transferee must operate the facility, which qualified for the credit prior to transfer, in a revenue-producing enterprise and otherwise continue to qualify for the credit.
13. (12) A transferor shall include with its income tax return a written statement to the director of revenue as required by subsection 135.130.3., RSMo, containing the following information: name, address and federal employer identification number of the transferor; name, address and federal employer identification number of the transferee; the date of commencement of operations at the new business facility, copies of each Missouri New Business Facility Credit Form filed by the transferor for each year in which the credit provided in section 135.110, RSMo was claimed; a description of the revenue-producing enterprise to be conducted by the transferee, if known; a full accounting of the investment of that portion of the facility to be retained by the transferor; a statement as to whether the transferor is related to the transferee as defined in section 135.100(8), RSMo; and a description of the method of transfer (that is, lease, sale, gift, and the like).
14. (13) Upon termination of the operation of a revenue-producing enterprise, the taxpayer shall notify the director of revenue of the termination in a written statement attached to the income tax return for the year in which the termination occurs. The notice shall include the following information: name, address and federal employer identification number of the taxpayer; the date of commencement of operations at the facility; the date of termination of operations at the facility; a copy of each Missouri New Business Facility Credit Form filed by the taxpayer for the facility for each year in which the credit provided in section 135.110, RSMo was claimed; a copy of the written statement electing to defer commencement of the ten (10)-year period if applicable; a description of the revenue-producing enterprise conducted by the taxpayer at the facility prior to termination; the number of employees retained by the taxpayer but transferred to another operation of the taxpayer; information as to the disposition of investment in the facility; the reason for termination; the probability and possible date of resumption of operations and an accounting of any previous transfer under section 135.130, RSMo. Failure by the 12 CSR 10-2

taxpayer to notify the director of revenue of termination as provided in this section shall be prima facie evidence that the termination was not due to reasonable cause.

1. (14) The director of revenue will consider the following items as major factors in determining whether “resumption of operations of a revenue-producing enterprise at such new business facility will provide increased opportunities for employment and result in a substantial contribution to the economy of the state” and whether “the termination of operations was due to reasonable cause” pursuant to section 135.140, RSMo: the length of time that the facility was dormant, the number of new business facility employees retained by the taxpayer at other operations at the time of termination, and the number of new employees to be hired upon resumption of operations. A dormant period exceeding five (5) years shall constitute prima facie evidence of a lack of reasonable cause for termination as well as lack of increased opportunities and substantial contribution to the economy upon resumption of operations.
2. (15) In the case of a member of an affiliated group of corporations who qualifies and elects to file a Missouri consolidated income tax return pursuant to subdivision 143.431.3(1), RSMo, the computation and use of the credit allowed under sections 135.100–135.160, RSMo shall be limited to that member’s separate income tax liability as though a separate income tax return was filed.
3. (16) If the business is entitled to the credits established by sections 135.100–135.160, RSMo prior to designation of an enterprise zone, the designation of an enterprise zone does not change the character or amount of the prior credits. Any additional investments or employees by that business after designation of an enterprise zone and before the completion of the ten (10)-year period will be limited to the amount of credits available under sections 135.100–135.160, RSMo unless the additional investment and employees qualify by themselves under sections 135.200–135.255, RSMo, in which case the additional investment and employees shall qualify for the credits under sections 135.200–135.255, RSMo. In no case shall the same investment and employees be eligible for the credits available under both sections 135.100–135.160 and 135.200– 135.255, RSMo.
4. (17) All procedural matters related to filing a claim under sections 135.100–135.160, RSMo including refunds, deficiencies, interest, contents of returns, limitations and penalties shall be determined pursuant to sections 143.481–143.996, RSMo.

AUTHORITY: section 135.150, RSMo 1986.* Original rule filed Jan. 15, 1985, effective June 13, 1985.

*Original authority: 135.150, RSMo 1980, amended 1980, 1986, 1991.