Section 620.6024

Title XL ADDITIONAL EXECUTIVE DEPARTMENTS

Chapter 620

Effective - 28 Aug 2026, see footnote   

  620.6024.  Office-to-residential conversion incentive — definitions — tax credit, amount, requirements — rules. — 1.  This section establishes an office-to-residential conversion incentive.

  2.  As used in this section, the following terms mean:

  (1)  "Qualified conversion expenditures", any amount properly chargeable to a capital account for federal income tax purposes that is incurred in connection with the conversion of a qualified converted building, consistent with the definition of qualified rehabilitation expenditures under 26 U.S.C. Section 47 and applicable United States Treasury regulations, as in effect on January 1, 2027, and shall include only costs incurred for rehabilitation, reconstruction, or adaptive reuse of an existing structure.  The term qualified conversion expenditures shall not include:

  (a)  The cost of acquisition;

  (b)  Any expenditure attributable to the enlargement of an existing building; or

  (c)  Tax-exempt properties;

  (2)  "Qualified converted building", any building and its structural components if:

  (a)  Prior to conversion, such building was nonresidential real property, as defined in 26 U.S.C. Section 168(e)(2)(B), as amended, that was leased, or available for lease, to office tenants, or utilized for office purposes by the owner-occupant;

  (b)  Such building has been substantially converted from an office use to a predominantly residential use, defined as more than fifty percent of the gross square footage of the building, and may also include retail, or other commercial use, and may also include accessory on-site or required off-site parking; and

  (c)  Such building was initially placed in service at least twenty-five years before the beginning of the conversion;

  (3)  "State tax liability", any liability incurred by a taxpayer pursuant to chapter 143, chapter 144, or chapter 148, exclusive of the provisions relating to the withholding of taxes provided for in sections 143.191 to 143.265 and related provisions;

  (4)  "Substantially converted", qualified conversion expenditures incurred during the twenty-four-month period preceding final approval of tax credits that in total are greater than the higher of either:

  (a)  The adjusted basis of such building and its structural components, as determined as of the beginning of the first day of such twenty-four-month period, or of the holding period of the building, whichever is later; or

  (b)  Fifteen thousand dollars if the property is located in a qualified Missouri main street district, or five hundred thousand dollars if the property is not located in a qualified Missouri main street district.  In the case of any conversion that may reasonably be expected to be completed in phases set forth in architectural plans and specifications completed before the conversion begins, qualified conversion expenditures shall be totaled for the sixty-month period preceding final approval of tax credits rather than the twenty-four-month period preceding such final approval;

  (5)  "Tax credit", the office-to-residential conversion tax credit authorized by this section, which may be applied, at the election of the taxpayer, against:

  (a)  The taxpayer's liability under chapter 143, excluding any tax required to be withheld or remitted on behalf of another person under chapter 143 or 148; or

  (b)  The taxpayer's liability for state sales and use taxes under chapter 144; provided, however, that notwithstanding any provision of this section to the contrary, the tax credits authorized under this section may be applied against state sales and use tax liability under chapter 144 only for any tax year in which the top rate of tax imposed pursuant to section 143.011 is equal to or less than two and one half percent;

  (6)  "Taxpayer", any individual or entity subject to tax under chapter 143, chapter 144, or chapter 148 and eligible to claim a tax credit under this section.  The term shall not include any organization exempt from taxation under section 501(c) of the Internal Revenue Code unless such organization has unrelated business taxable income subject to tax under chapter 143 or 148;

  (7)  "Upper-floor housing", any housing that is attached to or contained in the same building as commercial property, whether located on the ground floor behind the traditional storefront or on other floors of the building.

  3.  (1)  For all tax years beginning on or after January 1, 2027, the department shall issue a taxpayer a tax credit of up to twenty-five percent of qualified conversion expenditures incurred on or after January 1, 2027, with respect to a qualified converted building or upper-floor housing located either:

  (a)  Within a certified Missouri innovation zone; or

  (b)  Within a qualified Missouri main street district that is not located within a certified Missouri innovation zone, provided that the city in which such main street district is located has established a certified Missouri innovation zone under sections 620.6000 to 620.6033.

  (2)  A project qualifying under paragraph (b) of subdivision (1) of this subsection shall not be deemed to be located within a Missouri innovation zone and shall not be eligible for, or subject to, any other incentive, governance structure, reinvestment mechanism, overlay designation, or program authorized exclusively for certified Missouri innovation zones under sections 620.6000 to 620.6033.

  (3)  If the amount of such tax credit exceeds the taxpayer's state tax liability for the year in which tax credits are issued, the amount that exceeds the state tax liability may be carried forward for credit against state tax liability for the succeeding ten tax years, or until the full credit is used, whichever occurs first.

  (4)  Tax credits authorized under this section may be transferred, sold, or assigned, and shall retain the same attributes as in the hands of the assignor.  Tax credits may be transferred multiple times.  In order to transfer a tax credit authorized under this section, the assignor and assignee shall complete and submit a tax credit transfer form provided by the department of revenue.  Such transfers may be facilitated through an intermediary entity as permitted by law without affecting the nature or attributes of the tax credit.

  (5)  Tax credits authorized for a partnership, a limited liability company taxed as a partnership, or multiple owners of property shall be passed through to the partners, members, or owners respectively pro rata, or under an executed agreement among the partners, members, or owners documenting an alternate distribution method.

  (6)  The assignee of a tax credit may use the acquired tax credits to offset up to one hundred percent of the taxpayer's state tax liability.  The assignor shall perfect such transfer by notifying the department in writing within thirty calendar days following the effective date of the transfer and shall provide any information as may reasonably be required by the department.

  (7)  A taxpayer shall not receive a tax credit pursuant to this subsection and subsection 4 of this section for the same qualified conversion expenditures.

  (8)  Nothing in this section shall be construed to permit a taxpayer to reduce, offset, or eliminate any tax liability by an amount greater than the amount of tax credit properly issued, transferred, or otherwise allowed to such taxpayer under this section.

  4.  (1)  For all tax years beginning on or after January 1, 2027, the department shall issue a taxpayer a tax credit of up to thirty percent of qualified conversion expenditures incurred on or after January 1, 2027, with respect to upper-floor housing located in a qualified Missouri main street district.  If the amount of such tax credit exceeds the taxpayer's state tax liability for the year in which tax credits are issued, the amount that exceeds the state tax liability may be carried forward for credit against state tax liability for the succeeding ten tax years, or until the full credit is used, whichever occurs first.

  (2)  Tax credits authorized under this section may be transferred, sold, or assigned, and shall retain the same attributes as in the hands of the assignor.  Tax credits may be transferred multiple times.  In order to transfer a tax credit authorized under this section, the assignor and assignee shall complete and submit a tax credit transfer form provided by the department of revenue.  Such transfers may be facilitated through an intermediary entity as permitted by law without affecting the nature or attributes of the tax credit.

  (3)  Tax credits authorized for a partnership, a limited liability company taxed as a partnership, or multiple owners of property shall be passed through to the partners, members, or owners respectively pro rata, or under an executed agreement among the partners, members, or owners documenting an alternate distribution method.

  (4)  The assignee of a tax credit may use the acquired tax credits to offset up to one hundred percent of the taxpayer's state tax liability.  The assignor shall perfect such transfer by notifying the department in writing within thirty calendar days following the effective date of the transfer and shall provide any information as may be required by the department.

  (5)  A taxpayer shall not receive a tax credit pursuant to this subsection and subsection 3 of this section for the same qualified conversion expenditures.

  (6)  Nothing in this section shall be construed to permit a taxpayer to reduce, offset, or eliminate any tax liability by an amount greater than the amount of tax credit properly issued, transferred, or otherwise allowed to such taxpayer under this section.

  5.  (1)  The tax credits authorized under this section shall constitute a single tax credit program.  Qualified conversion expenditures with respect to any building, project, or portion thereof may be used to claim a tax credit under only one subdivision or subsection of this section, and in no event shall the same qualified conversion expenditures be counted, allocated, transferred, sold, assigned, or otherwise used more than once for purposes of claiming or supporting a tax credit under this section.  A taxpayer shall not receive both the credit authorized for a qualified converted building or upper-floor housing under subsection 3 of this section and the credit authorized for upper-floor housing under subsection 4 of this section with respect to the same qualified conversion expenditures, building, project, or portion thereof.  If a project could qualify under more than one provision of this section, the taxpayer may elect only one such provision with respect to the same qualified conversion expenditures.

  (2)  The total amount of tax credits authorized under this section shall not exceed fifty million dollars in any fiscal year.

  (3)  Fifty percent of the maximum amount of tax credits available to be authorized to taxpayers in a fiscal year under this subsection shall be authorized solely for structures of more than seven hundred fifty thousand gross square feet.  If the total amount of such reserved tax credits has been authorized, structures of more than seven hundred fifty thousand gross square feet may receive tax credits from the remaining unreserved amount of tax credits.  If the total amount of reserved tax credits has not been authorized by the department, structures of less than seven hundred fifty thousand gross square feet may be authorized to receive tax credits from such reserved amount.  The total amount of tax credits for a structure of more than seven hundred fifty thousand gross square feet may be allocated to the annual limits provided in this section over a period of up to ten years if:

  (a)  The project otherwise meets all the requirements of this section and section 620.6000; and

  (b)  The project meets the ten percent incurred costs test under this section within thirty-six months after an award is authorized.

  (4)  Nothing in this subsection shall be construed to require allocation over multiple tax years where sufficient annual capacity exists.

  (5)  Twenty-five percent of the maximum amount of tax credits available to be authorized to taxpayers in a fiscal year under this subsection shall be authorized solely for upper-floor housing projects located in a qualified Missouri main street district.  If the total amount of such reserved tax credits has been authorized, upper-floor housing projects located in a qualified Missouri main street district may receive tax credits from the remaining unreserved amount of tax credits.  If the total amount of reserved tax credits has not been authorized by the department, projects not located in a qualified Missouri main street district may be authorized tax credits from such reserved amount.

  6.  In the event the department authorizes tax credits equal to the total amount available under this section, or sufficient that when totaled with all other approvals, the amount available under this section is exhausted, all taxpayers with applications then awaiting approval or thereafter submitted for approval shall be notified by the department that no additional approvals shall be granted during the fiscal year and shall be notified of the priority given to such taxpayer's application then awaiting approval.  Such applications shall be kept on file by the department and shall be considered for approval for tax credits in the order established in this section in the event that additional tax credits become available due to the rescission of approvals, or when a new fiscal year's allocation of tax credits becomes available for approval.

  7.  (1)  To obtain approval for tax credits under this section, a taxpayer shall submit to the department for preliminary approval an application for tax credits authorization to the department.  The department shall have forty-five calendar days to review the application and shall notify the applicant in writing within forty-five calendar days of the decision of whether the application has been authorized for tax credits.  Each application for approval, including any applications received for supplemental allocations of tax credits, as provided under this section, shall be authorized for tax credits in the order of submission.

  (2)  Each application shall be reviewed by the department for approval.  In order to receive approval, an application shall include:

  (a)  Proof of ownership or site control, which shall include evidence that the taxpayer is the fee simple owner of the eligible property, such as a warranty deed or a closing statement.  Proof of site control may be evidenced by a leasehold interest or an option to acquire such an interest.  If the taxpayer is in the process of acquiring fee simple ownership, proof of site control shall include an executed sales contract or an executed option to purchase the eligible property;

  (b)  Floor plans of the existing structure, architectural plans and, where applicable, plans of the proposed conversion of the structure, as well as proposed additions;

  (c)  The estimated cost of conversion, the anticipated total costs of the project, the estimated qualified conversion expenditures, the actual basis of the property, as shown by proof of actual acquisition costs, the anticipated total labor costs, the estimated project start date, and the estimated project completion date;

  (d)  Proof that the property is an eligible property;

  (e)  A copy of all land use and building approvals reasonably necessary for the commencement of the project; and

  (f)  Any other information that the department may reasonably require to review the project for approval to determine compliance with the requirements of this section.

  8.  Only the property for which a property address is provided in the application shall be reviewed for approval.  Once selected for review, a taxpayer shall not be permitted to request the review of another property for approval in the place of the property contained in such application.  The department shall notify the applicant of incomplete applications and the applicant shall have a thirty-day period from the date of such notice to submit missing information or documentation to remedy the failure.  Any application that is not complete after this opportunity to cure shall be disapproved by the department.  Any disapproved application shall be removed from the review process.  If an application is removed from the review process, the department shall notify the taxpayer in writing of the decision to remove such application.  The taxpayer may subsequently submit a revised application.  For the purposes of determining the order of submission and authorization of credits, the revised application shall be considered a new application.

  9.  The department shall use the innovation zone master scorecard under sections 620.6000 to 620.6033 to determine the credit amount.

  10.  If the department determines that the application meets the requirements of this section and section 620.6003 to receive an authorization of tax credits, the taxpayer shall be notified in writing within forty-five days of the approval for an amount of tax credits equal to the amounts provided in this section, subject to the provisions of section 620.6003, unless approval of such credits would cause the total aggregate amount of tax credits approved under this section for all projects in the applicable tax year to exceed the annual limitation established herein.  Tax credits approved under this section shall be approved and administered independently of any other state tax credit program and shall not be aggregated or evaluated in combination with other state tax credits for purposes of determining eligibility, scoring, leverage ratios, or maximum award limitations under such other programs.  Such approvals shall be granted to applications in the order of priority established under this section and shall require full compliance thereafter with all other requirements of law as a condition to any claim for such tax credits.

  11.  Following approval of an application, the identity of the taxpayer contained in such application shall not be modified except:

  (1)  The taxpayer may add partners, members, or shareholders as part of the ownership structure, so long as the principal remains the same; provided, however, that subsequent to the commencement of renovation and the expenditure of at least ten percent of the proposed rehabilitation budget, removal of the principal for failure to perform duties and the appointment of a new principal thereafter shall not constitute a change of the principal; or

  (2)  Where the ownership of the project is changed due to a foreclosure, deed in lieu of a foreclosure or voluntary conveyance, to avoid foreclosure, or a transfer in bankruptcy.

  12.  Upon approval of a tax credit application, a taxpayer shall:

  (1)  Submit within one hundred twenty days from the date of the award of such credits, evidence of the capacity of the applicant to finance the costs and expenses for the conversion of the eligible property in the form of a line of credit or letter of commitment subject to the lender's termination for a material adverse change impacting the extension of credit.  If the department determines that a taxpayer has failed to comply with the requirements of this subdivision, the department shall notify the applicant of such failure and the applicant shall have a thirty-day period from the date of such notice to submit additional evidence to remedy the failure; and

  (2)  Commence conversion within twelve months of the date of issuance of the letter from the department granting the approval for tax credits.  For the purposes of this subsection, "commence conversion" shall mean that, as of the date in which actual physical work, contemplated by the architectural plans submitted with the application, has begun, the taxpayer has incurred no less than ten percent of the estimated qualified conversion expenditures provided in the application.  Taxpayers with approval of a project shall submit evidence of compliance with the provisions of this subsection.  If the department determines that a taxpayer has failed to comply with the requirements of this subdivision, the department shall provide the taxpayer written notice of noncompliance.  The taxpayer shall have thirty calendar days from receipt of such notice to respond in writing to the department and demonstrate that conversion has commenced, substantial steps toward commencement have been taken, or good cause exists for the delay.  Upon a showing of good cause, including delays beyond the taxpayer's reasonable control, the department shall grant a cure period of not less than ninety calendar days to allow commencement of conversion.  Tax credits approved under this section shall be rescinded only if the taxpayer fails to commence conversion within the applicable cure period following written notice and opportunity to cure.  Rescinded tax credits shall be included in the total amount of tax credits from which approvals may be granted.  In such a case, the applicant may submit a new application for the project.

  13.  To claim a tax credit authorized under this section, a taxpayer with approval shall apply for final approval and issuance of tax credits from the department, which shall determine the final amount of qualified conversion expenditures and whether the project meets the requirements of this section.  A taxpayer shall submit to the department a final application demonstrating:

  (1)  That the taxpayer has substantially converted a qualified converted building or upper-floor housing;

  (2)  Satisfactory evidence of any qualified conversion expenditures for the structure, as determined by the department; and

  (3)  Any other information reasonably requested by the department to verify qualified conversion expenditures or compliance with the requirements of this section or section 620.6000.

  14.  Tax credits authorized under this section shall be deemed to be redevelopment tax credits for the purposes of sections 135.800 to 135.830.  The approval of all applications and the issuing of certificates of tax credits to taxpayers shall be performed by the department.  The department shall inform a taxpayer of final approval by letter and shall issue to the taxpayer tax credit certificates.  The taxpayer shall attach the certificate to all Missouri tax returns on which the credit is claimed.

  15.  (1)  The department shall issue seventy-five percent of the approved tax credits under this section within forty-five calendar days of receiving all required final application materials.  Within ninety calendar days of receiving all required final application materials, the department shall make a final determination of qualified conversion expenditures and issue the remaining twenty-five percent of approved tax credits, or request repayment from the applicant if the final determination results in an over-issuance of tax credits.  In the event the amount of qualified conversion expenditures incurred by a taxpayer would result in the issuance of an amount of tax credits in excess of the amount authorized under this section, such taxpayer may apply to the department for issuance of tax credits in an amount equal to such excess.  Applications for issuance of tax credits in excess of the amount provided under a taxpayer's authorization shall be made on a form prescribed by the department.  Such applications shall be subject to all provisions regarding priority provided under this section.

  (2)  For tax credits authorized under this section, the applicant may submit to the department an application for the issuance of tax credits annually prior to final completion of the project.  Upon approval of the annual application for issuance, the department shall issue eighty percent of the amount of tax credits that would result from the qualified conversion expenditures, provided the total amount of credits issued to date does not exceed the total amount of credits authorized for the project to date.  Any remaining authorized tax credits shall be issued upon the final approval of the project.  The department shall issue eighty percent of the approved credits within forty-five calendar days of receiving all required application materials.  Within ninety calendar days of receiving all required application materials, the department shall make a final determination of qualified conversion expenditures and issue any remaining authorized tax credits upon the final completion of the phased project, or request repayment if an over-issuance of credits is determined.

  16.  No taxpayer shall be issued tax credits for qualified conversion expenditures on a qualified converted building within twenty-seven years of a previous issuance of tax credits under this section on such qualified converted buildings.

  17.  A taxpayer may be authorized and issued tax credits under this section in addition to tax credits authorized and issued under sections 253.544 to 253.559 for the same building.

  18.  The department of economic development, in coordination with the department of revenue, shall promulgate all necessary rules and regulations to administer the provisions of this section.  Any rule or portion of a rule, as that term is defined in section 536.010, that is created under the authority delegated in this section shall become effective only if it complies with and is subject to all of the provisions of chapter 536 and, if applicable, section 536.028.  This section and chapter 536 are nonseverable and if any of the powers vested with the general assembly pursuant to chapter 536 to review, to delay the effective date, or to disapprove and annul a rule are subsequently held unconstitutional, then the grant of rulemaking authority and any rule proposed or adopted after August 28, 2026, shall be invalid and void.

  19.  The provisions of this section shall not be construed to limit or in any way impair:

  (1)  A taxpayer's ability to complete a project and be issued tax credits under this section for any project for which the taxpayer has received an authorization of tax credits under this section from the department on or before the date this section expires;

  (2)  The department's ability to issue and the department of revenue's ability to redeem tax credits authorized by the department on or before the date the program authorized under this section expires, or a taxpayer's ability to redeem such credits.

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(L. 2026 H.B. 3231 & 2531)