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         DIVISION OF BUSINESS AND COMMUNITY SERVICES 
         SMALL BUSINESS INCUBATOR PROGRAM 
                                   POLICY GUIDELINES 

THE DEPARTMENT RESERVES THE RIGHT TO UPDATE THESE INSTRUCTIONS 
         AS NECESSARY TO BE CONSISTENT WITH THE LAW. 
         ALL INSTRUCTIONS ARE FOR GUIDANCE ONLY  
         AND DO NOT STATE THE COMPLETE LAW. 

PURPOSE 
The Missouri Department of Economic Development (DED) has the responsibility to approve or 
deny proposals for small business incubators. These guidelines shall serve to assist local 
sponsors and contributing taxpayers in the implementation of the small business incubator 
program (program). The program operates under the provisions of section 620.495, RSMo, as 
amended. 

                                   I. INCUBATOR 
WHAT IS AN INCUBATOR PROGRAM? RSMo 620.495.2(2) 
A program in which small units of space may be leased by a tenant and in which management 
maintains or provides access to business development services for use by tenants or a program 
without infrastructure in which participants avail themselves of business development services to 
assist in the growth of their start-up small businesses. 

An incubator is a building, which can be divided into smaller units of space to be leased by small 
businesses. An incubator is also a program without infrastructure in which participants avail 
themselves of business development services to assist in the growth of their start-up businesses.  
In addition to the space, incubators provide business development services for use by the tenants 
and participants. These services shall include, but are not limited to, financial consulting 
assistance, management and marketing assistance, business education, and physical services such 
as personal computers, copier, facsimile, conference rooms, wetlabs, etc. Because of the shared 
services and efficient use of the available space, costs are usually much less than for a small 
business operating independently.  
The incubator is not intended to be a permanent home for the new firm. After a period 
determined by the incubator’s policy, a tenant will move from the incubator, thereby making 
room available in the incubator for a new start-up firm. The local sponsor shall explain this 
feature of an incubator to all tenants before the execution of the initial lease.  

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WHO MAY APPLY?  
Only local sponsors are eligible to apply for the small business incubator program. 

LOCAL SPONSOR DEFINED RSMo 620.495.2(3) 
Local Sponsor is an organization entering into a written agreement with DED to establish, 
operate, and administer a small business incubator program or to provide funds to another 
organization that operates such an incubator program. Local Sponsor includes: 

1. Missouri municipalities, counties, special tax districts and regional planning 
   commissions; 

2. Missouri universities, community colleges, colleges and area vocational schools; or 
3. Not-for-profit corporations. 
LOCAL SPONSOR MUST DEMONSTRATE - RSMo 620.495.3(1-5) 
1. That a program exists that can be transformed into an incubator at a specified cost; 
2. The ability to directly provide or arrange for the provision of business development 
   services for tenants and participants of the incubator; 

3. A potential for sustained use of the incubator facility by eligible tenants and participants, 
   through a market study or other means; and 

4. The ability to manage and operate the incubator program. 
LOCAL SPONSOR RESPONSIBILITIES ARE TO - RSMo 620.495.6(1-8) 
1. Secure title on a facility for the program or a lease of a facility for the program at least for 
   ten (10) years; 

2. Manage the physical development of the incubator facility, such as personal computers, 
   copiers, facsimile, conference rooms, labs, etc.; 

3. Furnish and equip the program to provide business services to tenants and participants; 
4. Market the program and secure eligible tenants and participants; 
5. Provide financial consulting, marketing and management assistance services or arrange 
   for the provision of these services for tenants and participants of the incubator, including 
   assistance in accessing private financial markets; 

6. Set rental and service fees; 
7. Encourage the sharing of ideas between tenants and participants and otherwise aid tenants 
   and participants in an innovative manner while they are within the incubator; and 

8. Establish policies and criteria for the acceptance, graduation and termination of 
   occupancy of tenants and participants to maximize the opportunity to succeed for the 
   greatest number of tenants. 

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ELIGIBLE TENANTS AND PARTICIPANTS - RSMo 620.495.2(4-5)  
Participants are sole proprietorships, business partnerships or corporations operating a business 
for profit through which the owner avails himself or herself of business development services in 
an incubator program, 
Tenants are sole proprietorships, business partnerships or corporations operating a business for 
profit and leasing or otherwise occupying space in an incubator  

FUNDS AVAILABLE FOR FINANCING 
The provisions of section 620.495, RSMo, allow for the administration of a loan, loan guarantee, 
and grant program, as well as a contribution tax credit.  The only function that is currently being 
utilized is the contribution tax credit. 

HOW TAX CREDITS ARE AWARDED FOR CONTRIBUTIONS MADE - RSMo 
620.495.11 
Certified incubators may receive contributions from taxpayers. The taxpayers in turn may 
receive tax credits in the amount of 50% of the contributions. An incubator must be approved by 
DED before receiving contributions from taxpayers. The overall maximum amount of tax credits 
that can be authorized in any one calendar year is $500,000.  
In order to ensure a fair distribution of the limited authorized tax credits, every certified 
incubator requesting tax credits must complete a “Budget of Revenues and Expenditures” for the 
                                                   st
coming calendar year and send to DED by January 31  of each year. The budget shall include the 
previous two years’ budgets, as well as the projected budget for the upcoming year. Revenues 
must include the expected contributions for which tax credits will be awarded as well as other 
sources of revenue.  
DED will review the budget and authorize tax credits for annual project the incubators.  The 
reserved tax credits will be based upon the eligible use of contributions, need for tax credits, 
overall competition, and prioritization to support new incubators due to start-up costs.  
The contributions for which tax credits are issued shall be used for capital expenditures and non-
operating expenditures only within the incubator. No tax credits will be issued for operating 
expenditures of the incubator.  No tax credits will be issued for contributions used to finance 
expenses of graduate companies. 

ELIGIBLE PROJECT COSTS  
 Acquisition of land and existing buildings; 
 Leasing of land and existing buildings; (10 years minimum) 
 Rehabilitation of buildings or other facilities; 
 Construction of new facilities; 
 Purchase of equipment and furnishings;  
 Business development services included but not limited to business management 
  consulting and business education. 
 Material Donations must be “in hand” when counted. 

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INELIGIBLE PROJECT COSTS 
      Salaries 
      Operating Expenses 
      Labor 

REPORTING REQUIREMENTS 
      September 30 - Every certified incubator must complete a “Missouri Certified 
       Incubators Annual Performance Report” for the Fiscal Year ending June 30th and 
       send to DED by September 30th of each year.   
      January 31 - Every certified incubator requesting tax credits for the upcoming 
       year must complete a “Budget of Revenues and Expenditures for Calendar Year 
                              st                                  st
       ending December 31 , and submitted to DED by January 31  of each year. 
      Annually - Every certified incubator must submit an annual financial report audited 
       by an independent certified public accountant, defining the Incubator Revenues & 
       Expenditures separately.  
June 30 - Every certified incubator must complete a “Tax Credit Accountability Act Reporting 
                                        st
Form” for the Calendar Year ending December 31  and submitted to  The Missouri 
                                 th
Department of Revenue by June 30  of each year. The Tax Credit Accountability Act of 2004 
(Senate Bill 1099, Sections 135.800 through 135.830, RSMo) makes several changes to the tax 
it
cred  programs, specifically: 
 Processing tax credit applications; 
 Additional Annual reporting requirements; and 
 Penalty provisions. 

Please contact The Missouri Department of Revenue for additional information 
or questions: 

E-mail: taxcredit@dor.mo.gov 

Phone:  (573)751-3055 
HOW TO APPLY FOR CERTIFICATION 
A “Sponsor Application for a Certified Missouri Incubator Designation” and a “Project Narrative 
of Application for a Certified Missouri Incubator Designation” shall be completed to 
demonstrate that all the requirements are met, and sent to DED for review.  
A business plan must also be completed and sent to DED and shall include the following topics: 
 Groups of target markets and rationale for such selection.  
 Explanation of the target market needs that relate to the service provided.  
 SWOT analysis that identifies and categorizes strengths, weaknesses, opportunities, and  
  threats   
 Corresponding strategies developed based upon SWOT analysis. 

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  List and description of the services offered including those that are required by RSMo 
   620.495.6(1-8) of the Missouri Revised Statutes as follows: 
   (1) Secure Title on a facility for the program or a lease of a facility for the program; 
   (2) Manage the physical development of the incubator program, including the provision 
   of common conference or meeting space; 
   (3) Furnish and equip the program to provide business services to the tenants and 
   participants; 
   (4) Market the program and secure eligible tenants and participants; 
   (5) Provide financial consulting, marketing and management assistance services or 
   arrange for the provision of these services for tenants and participants of the incubator, 
   including assistance in accessing private financial markets; 
   (6) Set rental and service fees; 
   (7) Encourage the sharing of ideas between tenants and participants and otherwise aid the 
   tenants and participants in an innovative manner while they are within the incubator; 
   (8) Establish policies and criteria for the acceptance of tenants and participants into the 
   incubator and for the termination of occupancy of tenants so as to maximize the 
   opportunity to succeed for the greatest number of tenants, consistent with those specified 
   in this section. 
  Explanation of the break-even table and chart as well as underlying assumptions. 
  Explanation of the sales forecast table and chart. Submit the proposed rental and service 
   fee structure, which will be charged to tenants of the incubator. Separate the sales from 
   rental space, business support services (i.e., secretarial, janitorial, etc.) and technical 
   support services. 
  Explanation and forecast of the expense forecast table and chart. The projections should 
   include: 
   o   General administration – salaries, benefits, insurance, travel, management, and 
       professional fees; and 
   o   Building operation – taxes, utilities, maintenance, depreciation, equipment, interest 
       and principal payments (if any), etc. 
   o   Do not adjust for changes in the price level. 
  Contingency plan. 

NAICS  
NAICS is North American Industry Classification System. The Federal Office of Management 
and Budget (OMB) adopted the NAICS as the industry classification system used by the 
statistical agencies of the United States. NAICS replaces the 1987 Standard Industrial 
Classification (SIC). The NAICS is used for classifying business establishments to assist with 
gathering data related to measuring productivity, unit labor costs, and the capital intensity of 
production, employment and other information. Missouri businesses are assigned a NAICS when 

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the company files a “Report to Determine Liability Status” with the Missouri Department of 
Labor and Industrial Relations, Division of Employment Security to determine Unemployment 
Tax Liability. Normally, a general business employer becomes liable for the tax and responsible 
for providing unemployment insurance for its workers when it:  
   Pays $1,500 in wages (cash and in-kind) in a calendar quarter, or  
   Has an employee in some portion of a day in each of twenty (20) different weeks, or  
   Becomes liable under the Federal Unemployment Tax Act (FUTA) and employs a worker 
    in Missouri, or  
   Acquires and continues without interruption substantially all the business of a liable 
    employer.  

QUALIFYING CRITERIA - RSMo 620.495.4(1-4) 
DED will review applications for the following criteria: 

 1. Ability of the local sponsor to carry out the provisions of section 620.495, RSMo; 
 2. Economic impact of the incubator on the community; 
 3. Conformance with area-wide and local economic development plans, if such exist; and 
 4. Location of the incubator, in order to encourage geographic distribution of incubators 
    across the state. 

                                    II. NOTICES 
The Tax Credit Accountability Act of 2004 (Senate Bill 1099, Sections 135.800 through 135.830, RSMo) 
makes several changes to the tax credit programs, specifically: 
            •   Processing tax credit applications; 
            •   Annual reporting requirements 135.805, RSMo; and, 
            •   Penalty provisions 135.810, RSMo. 
             
 Changes in Processing of Tax Credits (Section 135.815, RSMo)  
 
Prior to the Missouri Department of Economic Development (DED) authorization of a tax credit, the 
DED will contact the Departments of Revenue and Insurance and verify that the applicant does not owe 
any delinquent income, sales, use, or insurance taxes, or interest or penalties on such taxes.   If a 
delinquency exists, the amount of tax credits issued will be reduced by the amount of the delinquency.  
After satisfying all delinquencies, the remaining tax credits shall be issued. 
 Annual Reporting Requirements and Penalty Provisions 
 
All tax credit recipients must be familiar with the annual reporting requirements and penalties for 
non-compliance established under the Tax Credit Accountability Act of 2004.  The 
responsibility for compliance falls with the tax credit recipient.   
 

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Recipients of tax credits are required to submit the Tax Credit Accountability Act Reporting 
Form to the Department of Revenue. You may contact (573) 526-8733 (Personal Tax) or (573) 
751-4541 (Corporate Tax) with any questions.  
 
CLOSED RECORDS (SECTIONS 610.255 and 620.014, RSMo, applicable to Incubator 
and Contributor) 
Before August 28, 2004 and pursuant to Section 620.014, DED had the authority to close certain 
records except for the name of the tax credit recipient and the amount of the tax credit. SB 1099 
removes this broad exception but DED retains the authority to close records or documents that 
“relate to financial investments in a business, or sales projections or other business plan 
information which may endanger the competitiveness of a business” or as also allowed by law. 

                              III. CONTRIBUTOR 
WHO MAY APPLY? 
Any taxpayer, including non-for-profit corporations, except those that benefit directly from General 
Revenue such as public universities, may be a contributor.  Applications can be submitted to DED 
year-round, but decisions will be made on a first-come basis based on the annual amount of tax 
credits allocated to an approved incubator.   

ISSUANCE OF TAX CREDITS 
Taxpayers contributing to the incubator shall receive a tax credit against a tax otherwise due 
under the provisions of chapter 143, RSMo (income tax), excluding withholding tax imposed by 
sections 143.191 to 143.265, RSMo, or chapter 147, RSMo (corporation franchise tax); or 
chapter 148, RSMo (financial institution tax). The tax credit will be 50% of any amount 
contributed to the incubator during the taxpayer’s tax year. Tax credits will be issued for the year 
in which the contribution was made and must be submitted within 12 months of donation.  
Any excess tax credits may be carried forward for up to five (5) years. A taxpayer may sell tax 
credits allowed under section 620.495, RSMo, under the following conditions: 
   For no less than 75% of the par value of such credits; and 
   In an amount not to exceed 100% of the tax credit amount. 
The assignee may use the acquired credits to offset up to 100% of the tax liability under the same 
provisions as the assignor.  

ELIGIBLE CONTRIBUTIONS: 
 1. Cash; including donations made by check, valued at the face amount of the check. 
 2. Marketable securities (publicly traded stocks, bonds, and mutual funds) valued between 
    the high and low market price on the date the stock transfers from the donor into the 
    applicant’s brokerage account; must be sold by the approved agency within 12 months of 
    transfer and must be sold before tax credits will be approved for the donor.  

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Tax credits for donated marketable securities will be awarded based upon evidence of the 
donor’s ownership of stock, transfer of stock by the organization and sale of stock by the 
organization.  Documentation includes the following: 
    a. Documentation of the transfer of stocks from the donor/contributor to the 
        organization indicating the donor/contributor’s name, recipient organization, type of 
        stock/name of security(ies), # of shares and date of transfer The transfer 
        documentation may be in the form of a letter from the broker or  a copy of the donor’s 
        brokerage account portfolio and must come from donor’s stockbroker).   
    b.  AND  Recipient organization must provide proof the donated stock was sold. 
        Documentation of the sale of the stocks by the organization includes a copy of the 
        brokerage statement indicating the sale by the organization of the same security to 
        include type of stock, # of shares, gross value, net value, trade date and settlement 
        date. The sale of the stock documentation must come from the organization’s 
        stockbroker.  A copy of the trade confirmation and brokerage check(front and back) 
        from the sale of the securities or proof of payment from the stock sale is required. 
 b.  The liquidation should take place within fifteen (15) days from the date of receipt. The 
 contribution date is the date the securities are transferred to the approved incubator.  
 c.  Contributor application shall be completed after the liquidation has occurred. The 
 application should be signed by the contributor and the incubator and must be mailed to DED 
 along with documentation satisfactory to the department that the transaction has occurred. 

 3. Equipment, furniture, and construction materials used in the incubator valued at the lesser 
    of either the fair market value or contributor’s cost. 

    a. Note:  The date the items are received by the incubator is the date of contribution. 
        Tax credits for donated equipment, furniture, and construction materials will be 
        awarded based upon an invoice or an appraisal (no more than six months old). Attach 
        a copy of the invoice showing the cost to the donor or appraisal documenting     
        current fair market value, whichever is less. 
 
HOW TO APPLY FOR TAX CREDITS 
A contributor must complete a “Verification of Contribution to a Certified Missouri Incubator” 
and send to DED for review along with the proof of contribution. Acceptable proof of cash 
contribution includes a cancelled check, bank statement, or wire transfer. Once approved, DED 
will send a certificate of tax credit to the contributor.  
To transfer the earned tax credits, the assignor shall enter into a written agreement with the 
assignee establishing the terms and conditions. The assignor must also complete Missouri 
Transfer Form MO-TF and send it to the Missouri Department of Revenue for the issuance of a 
new certificate to the assignee along with the proof of sale. Acceptable proof of sale includes a 
cancelled check, bank statement, or wire transfer. 

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CONTACT INFORMATION 
Missouri Department of Economic Development  
Division of Business and Community Services 
Finance Management 
301 West High Street, Room 770  
P.O. Box 118  
Jefferson City, MO 65102  
Phone: 573-751-4539 Fax: 573-522-4322  
E-mail: dedfin@ded.mo.gov