How Your Company Could Benefit from the Missouri Works Program

Businesses that create new full-time jobs in Missouri may be eligible for a tax incentive and payroll benefit through the Missouri Works program, which awards businesses the ability to retain state withholding taxes (WH) of newly created jobs and, in some cases, receive a refundable, saleable, or transferable corporate income tax credit equivalent to a percentage of newly created payroll. For-profit and nonprofits are eligible for the incentives and benefits, which may be statutory or discretionary:

Statutory benefits

Projects that meet specified capital investment and minimum average wage thresholds are calculated as a percentage of payroll for newly created jobs. The benefits are in the form of withholding retention and are not capped based on the number of new jobs listed on the Notice of Intent (NOI); thus, all jobs created for the project, over and above those committed to, can be incentivized.

Discretionary benefits

At the Missouri Department of Economic Development’s (DED) discretion, companies eligible for the Statewide Works or Mega Works programs may be offered enhanced benefits of up to 9% of newly created payroll. The criteria for discretionary benefits encompass the project's competitiveness compared to alternative out-of-state locations, the level of economic distress in the subject location, the project's overall size and quality, the company’s financial wherewithal, local participation, and the net fiscal impact on Missouri. The discretionary benefit is realized in the form of a refundable tax credit once the annual reporting is completed, audited, and approved.

Business Ineligibility

Certain projects are ineligible:

• Gambling establishments, food and drinking places, public utilities, educational services, religious organizations, public administration, ethanol distillation or production, biodiesel production, healthcare and social services, or storefront consumer-based retail trade establishments not located in a third- or fourth-class county. Note that Missouri classifies counties into four classes based on their assessed valuation, with class 1 being the highest valuation and class 4 being the lowest.
• Businesses that are delinquent in payment of any non-protested taxes or other payments (state, federal, local).
• Businesses that have filed for or have publicly announced their intention to file for bankruptcy, unless certain requirements are met.
• Businesses that are relocating jobs from Johnson, Miami, or Wyandotte counties in Kansas to Jackson, Platte, Clay, or Cass Counties in Missouri. However, net new jobs created above a qualified company’s base employment may be eligible for benefits.

Employee Eligibility

An employee of a qualified company is one who is scheduled to work an average of at least 35 hours per week for a 12-month period, and one for whom the qualified company offers health insurance and pays at least 50% of such insurance premiums.

In addition, if an employee spends less than 50% of their work time at the facility, he/she will be considered to be located at that facility if the employee receives his or her directions and control from that facility, is on the facility's payroll, 100% of the employee’s income from such employment is Missouri income, and the employee is paid at or above the applicable percentage of the county average wage.

Wage Requirements

Eligible projects must meet a specified percentage of the county average wage, or the average state wage if it is lower (currently $64,754). These figures are updated annually, effective June 30, based on the Census of Employment and Wages data. Currently, wages are defined as taxable wages reported on Form W-2, Box 16.

The following chart summarizes the eligibility criteria for each of the multiple programs under Missouri Works: 

Note 1: Project facility must be located in an Enhanced Enterprise Zone. 
Note 2: Project facility must be located in a “rural” county, which would NOT include Boone, Buchanan, Clay, Greene, Jackson, Platte, St. Charles, and St. Louis City and County. 
Note 3: Benefit period is 5 years, or 6 years for existing Missouri companies (those that have been operational in Missouri for at least 10 years). 
Note 4: Discretionary incentives are limited to a maximum of 9% of new payroll, and applicants must receive a proposal from the Department of Economic Development.

Application Steps

Prior to the receipt of a DED proposal or approval of an NOI, none of the following can have occurred: 

• Significant, project-specific site work at the project facility
• The purchase of machinery or equipment related to the project
• A public announcement of plans to make a new capital investment at the project facility 

To apply, a proposal of estimated benefits should be requested from the Missouri DED. Following review of the proposal, an NOI will be filed with DED, who will then confirm that the business is eligible; establish the date at which “base employment” is calculated; reserve the estimated tax credits for the project (if any); and establish the two-year deadline date by which the minimum thresholds for the creation of the new jobs, investment, etc., must be met. No job created prior to the date of the NOI shall be deemed a new job.

Compliance

From a compliance standpoint, numerous reports are due throughout the year for both statutory and discretionary benefits. The Verification of Eligibility Thresholds employment spreadsheets must demonstrate that the minimum new job, average wage, and investment (if applicable) criteria were met within two years of the NOI approval. The reports require a combination of data from the project location, human resources, payroll, and tax departments. In addition, base employment data for other company locations in the state must be included to support the job creation reporting.

Conclusion

Missouri Works is an important business attraction tool for the state. The program is well-funded and can provide significant monetary value for a project. If your business would like to pursue this program, needs assistance with compliance, or would like to learn more about other incentives that exist in Missouri, please reach out to one of Site Selection Group’s economic incentives experts.