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Susan Montee, CPA
Missouri State Auditor


Report No. 2007-05

February 2007

State Estimated to Lose $13.5 million on Agricultural Products Utilization Contributor Tax Credit Program

This audit reviewed the cost-benefit to the state of the Agricultural Products Utilization Contributor (APU) tax credit program and found the credit would not create enough economic activity to offset the tax credits used. The Missouri Agricultural and Small Business Development Authority (MASBDA) manages this tax credit program. Its purpose is to induce contributions to MASBDA for funding agricultural product grants as described in state law for rural agricultural business concepts. Contributors receive up to a 100 percent tax credit for contributions.  As of June 30, 2006, state officials had issued $12.1 million in tax credits for this program, and $8.6 million had been redeemed. State law requires state auditors to perform a cost-benefit analysis of all state tax credit programs, and this report is a part of such ongoing work.









Loss of $13.5 million from the APU program

The software used to model the program estimates the economic activity resulting from the grant funding will result in about a $168,000 net revenue gain. However, when total projected tax credit redemptions of $13.6 million are considered, the gain becomes a projected total loss to the state of $13.5 million. The model evaluated the impact of the grants resulting solely from the tax credit and not the total investment for any business which may have been started because other state, federal, local and private funding sources are available for the remaining investment portion of the projects. We were unable to measure the social benefits this tax credit may have on the rural communities that received the majority of the tax credit's benefits.  (See page 9)








Limited permanent jobs created

The analysis predicts the tax credit program will have limited impact on jobs and the gross state product. For example, the program's resulting employment growth peaks at 20.5 net new jobs created in 2011. However, only 5 of those jobs remain by 2020, the end of the modeled period. Rural areas benefit from most of the predicted new jobs.  (See page 9)






APU credit is more generous than other similar credits

State law allows up to a 100 percent tax credit for funding donated to the APU grant program. Most contributors request a 100 percent tax credit, limiting the number of contributors receiving less than 100 percent for donations made when MASBDA issues the credits. Five other Missouri contribution-based tax credit programs eligible to businesses, individuals or corporations limit the tax credit to 55 percent or less of the contribution.  (See page 12)





Cost-benefit analysis


MASBDA's cost-benefit analysis for the tax credit overstated the credit's indirect economic benefit by $4.6 million for fiscal years 2004 and 2005 based on the methodology used by MASBDA.  (See page 12)






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Missouri State Auditor's Office