§ 143.2115 RSMo — Definitions — income tax deduction for increased qualified trade activities or capital investment for trade activities — amount, claiming procedure, exclusions — aggregation of claims — recapture — guidelines

1. As used in this section, unless the context requires a different meaning, the following terms shall mean:

(1) "Affiliated companies" , two or more companies related to each other so that:

(a) One company owns at least eighty percent of the voting power of the other or others; or

(b) The same interest owns at least eighty percent of the voting power of two or more companies;

(2) "Capital investment" , the amount properly chargeable to a capital account for improvements to rehabilitate or expand depreciable real property placed in service during the tax year and the cost of machinery, tools, and equipment used in an international trade facility directly related to the movement of cargo. Capital investment includes expenditures associated with any exterior, structural, mechanical, or electrical improvements necessary to expand or rehabilitate a building for commercial or industrial use and excavations, grading, paving, driveways, roads, sidewalks, landscaping, or other land improvements. For purposes of this section, machinery, tools, and equipment shall be deemed to include only that property placed in service by the international trade facility on or after January 1, 2017. Machinery, tools, and equipment excludes property:

(a) For which a deduction under this section was previously granted;

(b) Placed in service by the taxpayer, a related party as defined in Subsection (b) of Section 267 of the Internal Revenue Code, as amended, or by a trade or business under common control as described in Subsection (b) of Section 52 of the Internal Revenue Code, as amended; or

(c) Previously in service in the state that has a basis in the hands of the person acquiring it, determined in whole or in part by reference to the basis of such property in the hands of the person from whom it was acquired or Subsection (a) of Section 1014 of the Internal Revenue Code, as amended.

a. The cost of acquiring any real property or building;

b. The cost of furnishings;

c. Any expenditure associated with appraisal, architectural, engineering, or interior design fees;

d. Loan fees, points, or capitalized interest;

e. Legal, accounting, realtor, sales and marketing, or other professional fees;

f. Closing costs, permit fees, user fees, zoning fees, impact fees, and inspection fees;

g. Bids, insurance, signage, utilities, bonding, copying, rent loss, or temporary facilities costs incurred during construction;

h. Utility hook-up or access fees;

i. Outbuildings; or

j. The cost of any well or septic system;

(3) "Deduction year" , the first tax year following the tax year in which the international trade facility commenced or expanded its operations. A separate deduction year and a three-year allowance shall exist for each distinct international trade facility of a single taxpayer;

(4) "International trade facility" , a company that:

(a) Is engaged in port related activities including, but not limited to, warehousing, distribution, freight forwarding and handling, and goods processing;

(b) Uses water-connected port facilities or airports located in the state; and

(c) Transports at least ten percent more cargo, measured in TEU containers or the noncontainerized cargo equivalent, through water-connected port facilities or airport in the state during the tax year than was transported by the company through such facilities during the preceding tax year;

(5) "New permanent full-time position" , a job of indefinite duration, created by the company after establishing or expanding an international trade facility in the state, requiring a minimum of thirty-five hours of employment per week for each employee for the entire normal year of the company's operations, or a position of indefinite duration that requires a minimum of thirty-five hours of employment per week for each employee for the portion of the tax year that the employee was initially hired for or transferred to the international trade facility in the state. Seasonal or temporary positions, or a job created if a job function is shifted from an existing location in the state to the international trade facility and positions in building and grounds maintenance, security, and other such positions that are ancillary to the principal activities performed by the employees at the international trade facility shall not qualify as new permanent full-time positions;

(6) "Normal year" , at least forty-eight weeks in a calendar year;

(7) "Qualified full-time employee" , an employee filling a new permanent full-time position in an international trade facility in the state;

(8) "Qualified trade activities" , the completed exportation or importation of at least one International Organization for Standardization ocean container or the noncontainerized equivalent with a minimum twenty-foot length, through a Missouri port authority-operated cargo facility or an airport in this state. An export container or the noncontainerized cargo equivalent with an ultimate international destination shall be loaded on a barge or airplane and an import container or the noncontainerized cargo equivalent originating from an international destination shall be discharged from a barge or airplane at such facility.

2. For tax years beginning on or after January 1, 2017, but before January 1, 2023, a taxpayer satisfying the requirements of this section shall be allowed to claim a deduction in an amount equal to either three thousand five hundred dollars per qualified full-time employee that results from increased qualified trade activities by the taxpayer or an amount equal to two percent of the capital investment made by the taxpayer to facilitate the increased qualified trade activities. The election of which deduction amount to claim shall be the responsibility of the taxpayer. Both deductions shall not be claimed for the same activities that occur within a calendar year. The portion of the three thousand five hundred dollar * deduction earned with respect to any qualified full-time employee who works in the state for less than twelve full months during the deduction year shall be determined by multiplying the deduction amount by a fraction, the numerator of which is the number of full months such employee worked for the international trade facility in the state during the deduction year and the denominator of which is twelve.

3. In no case shall more than five hundred thousand ** dollars in deductions be claimed under this section in any fiscal year of the state. The taxpayer shall not be allowed to claim any deduction under this section unless it has applied to the department for the deduction and the department has approved the deduction. The department shall determine the deduction amount allowable for the tax year and shall provide a written certification to the taxpayer, which certification shall report the amount of the deduction approved by the department. The taxpayer shall attach the certification to the applicable income tax return.

4. The amount of the deduction allowed under this section shall not exceed fifty percent of the taxpayer's Missouri adjusted gross income.

5. No deduction shall be earned for any employee:

(1) For whom a deduction under this section was previously earned by a related party as defined in Subsection (b) of Section 267 of the Internal Revenue Code, as amended, or a trade or business under common control as described in Subsection (b) of Section 52 of the Internal Revenue Code, as amended;

(2) Who was previously employed in the same job function in Missouri by a related party as defined in Subsection (b) of Section 267 of the Internal Revenue Code, as amended, or a trade or business under common control as described in Subsection (b) of Section 52 of the Internal Revenue Code, as amended; or

(3) Whose job function was previously performed at a different location in Missouri by an employee of the taxpayer, by a related party as defined in Subsection (b) of Section 267 of the Internal Revenue Code, as amended, or by a trade or business under common control as described in Subsection (b) of Section 52 of the Internal Revenue Code, as amended.

6. For the purposes of this section, two or more affiliated companies may elect to aggregate the number of jobs created for qualified full-time employees or the amounts of capital investments as the result of the establishment or expansion by the individual companies in order to qualify for the deduction allowed under this section.

7. Recapture of the deduction amount under the following circumstances shall be accomplished by increasing the tax in any of the five years succeeding the tax year in which a deduction has been earned pursuant to this section if the number of qualified full-time employees falls below the average number of qualified full-time employees during the tax year. The Missouri taxable income increase amount shall be determined by recalculating the deduction that would have been earned for the original tax year using the decreased number of qualified full-time employees and subtracting the recalculated deduction amount from the amount previously earned. In the event that the average number of qualified full-time employees employed at an international trade facility falls below the number employed by the taxpayer prior to claiming any deductions under this section in any of the five tax years succeeding the year in which the deductions were earned, all deductions earned with respect to the international trade facility shall be recaptured. No deduction amount shall be recaptured more than once under this subsection. Any recapture under this subsection shall reduce deductions earned, but not yet allowed, before the taxpayer's Missouri taxable income is increased.

8. The department shall issue guidelines for:

(1) The computation and recapture of the deductions provided under this section;

(2) The establishment of criteria for:

(a) International trade facilities;

(b) Qualified full-time employees at such facilities; and

(c) Capital investments; and

(3) The computation, recapture, and redemption of the deductions by affiliated companies.