Tax Information

Summary of Tax Abatement Available Under Chapter 100, RSMO

Real and personal property owned by municipalities is exempt from ad valorem property taxes.
In a typical Chapter 100 tax abatement structure, title to property (either real or personal) is transferred to the municipality (thereby creating the tax exemption) and leased to the Company.
To ensure that the Company’s leasehold interest in the property has no taxable value, the municipality must issue industrial development bonds equal to the cost of the project and then charge lease payments equal to the debt service on the bonds.
Generally, the Company will be the purchaser of the bonds, resulting in a transaction that can be completed on paper without the need for actual money to change hands (i.e., the Company’s lease payments are paid back to the Company as debt service on the bonds, which can be accomplished using only book entries).
The debt service on the bonds is secured only by the lease payments made by the Company. Accordingly, the municipality will not need to come out-of-pocket for any debt service payments. The Company, as the bondowner, assumes the risk of the bonds.
Because of the municipal ownership and bond issuance, projects may qualify for a sales tax exemption on construction materials. In addition, a Company may apply to the Missouri Department of Economic Development for a sales tax exemption on personal property.
The value of the tax exemption can be adjusted by requiring the Company to make “payments in lieu of taxes” equal to a percentage of the taxes that would be due on property, but for the municipal ownership. These payments are made to the County Collector and distributed pro rata to all applicable taxing districts in the same manner as if they were property taxes.
At the end of the tax abatement/lease period, the municipality will sell the property back to the Company for nominal consideration, thereby putting the property back on the tax rolls.