Governor Jay Nixon signed into law HB 737 on July 7, 2011, creating Missouri’s first comprehensive tax incentive for renewable energy projects. HB 737 amends the Missouri Enhanced Enterprise Zone program to create “renewable energy generation zones” which will allow local municipalities to provide for a reduction in real property tax liability for renewable energy projects. The capital intensive nature of renewable energy projects is a significant impediment to the development renewable energy in Missouri. The level of real property taxation has interfered with Missouri’s ability to compete with its neighboring states in attracting renewable energy projects. For example, and the Missouri Constitution requires that commercial real property be assessed at 32% of its true value. If a project intends to install $40 million worth of hydroelectric turbines in a community with a 6% tax rate, the total tax liability (without accounting for depreciation) would be $769,992.30, effectively killing the project.
HB 737 allows governing municipalities to create “renewable energy generation zones” and effectuate a reduction in real property taxes for a period of up to 25 years. Projects must be located in a “blighted area”, which includes areas which are presently underutilized for renewable energy production, as designated by the governing municipality and the abatement must be approved by the Missouri Department of Economic Development.
Combined with Missouri’s renewable energy portfolio standard requirements as well as the ability of renewable energy producers to sell excess electricity to local electrical grid, this legislation provides a unique opportunity to both renewable energy producers as well building owners and developers who are considering producing renewable energy for on-site energy needs.