Senate advances Downtown Main Streets tax-credit bill after debate over scope, safeguards

The Missouri Senate on March 6 debated Senate Bill 35, a proposal to create a state tax-credit program to encourage conversion of older commercial and office buildings into housing and mixed-use projects.

Sponsor and intent: The senator from the Fifth District, the bill sponsor, framed the measure as a tool to revive downtowns and main streets across Missouri. “The Downtown Main Streets Act will provide a state tax credit to fill the gaps in the marketplace that have resulted in spaces across our state cities and towns lying dormant,” the senator from the Fifth District said, arguing the credit would “unlock private investment” and “reinvigorate our cultural centers.”

Why it matters: Supporters said the credit aims to make conversions that are otherwise too expensive viable — examples cited included the long-vacant AT&T building in downtown St. Louis — and to increase downtown residential populations that proponents say will boost local retail and street-level activity.

Major provisions and fiscal terms: Under the version debated in the chamber, the tax credit would be: - Equal to 25% of qualified conversion expenditures for a qualified converted building; a 30% credit would apply to upper-floor housing in a qualified Missouri Main Street district for tax years beginning on or after Jan. 1, 2026. The sponsor described the 25%/30% distinction and higher Main Street percentage as designed to help smaller, historically important main-street projects. - Transferable and salable; credits may be assigned and retain the same attributes in the hands of assignees, and may offset up to 100% of the assignee’s state tax liability. - Subject to an annual cap: total tax credits authorized under the bill would not exceed $50,000,000 in any fiscal year, the fiscal note cited by senators during debate. - Limited by project thresholds and timing rules: the bill sets minimum qualified conversion-expenditure thresholds (the sponsor said $15,000 minimum for projects in a qualified Main Street district and a higher minimum for other projects), requires that a majority of gross square footage be converted to residential use for a building to qualify (more than 50% residential), and establishes look-back periods for counting qualified expenditures (24 months in many cases, with longer windows for phased projects). The Department of Economic Development (DED) would review applications, determine final qualified conversion expenditures and issue tax-credit certificates only after projects meet statutory requirements.

Questions from senators: Senators asked detailed questions about mechanics and safeguards. The senator from the Eleventh District pressed the sponsor for definitions and the practical effects in smaller communities, asking whether the bill would encourage “high-density” rental development and whether there was evidence that converting office space to housing reduces crime. The sponsor responded that many downtown buildings are too costly to redevelop without a credit and said projects must be completed before credits are issued, and that increased foot traffic can reduce opportunities for crime.

Concerns about constitutionality and broader policy: The senator from Lawrence raised a constitutional objection grounded in Article I, Section 2 of the Missouri Constitution, arguing some tax credits can confer unequal advantages and that he has voted against credits on principle. The senator from the Eleventh also voiced policy objections linking the bill to broader development trends he described as contributing to higher-density, walkable urban neighborhoods; he framed those trends as undesirable for other reasons.

Checks, approvals and anti-abuse language: The sponsor repeatedly emphasized that DED would verify compliance before credits are awarded. He described the program as requiring proof of ownership or site control, architectural plans, cost estimates, evidence that at least 10% of the rehabilitation budget had been spent to commence construction within specified deadlines, and final DED approval before issuance. The sponsor pointed to the bill’s provisions that approvals can be rescinded if a project does not start or meet timelines and that the department would publish priorities if demand exceeded the annual cap.

Amendments and legislative outcome: Senator Cass offered a sunset amendment. An initial sunset amendment (moved by the senator from Cass) proposing a 6-year review was defeated by voice vote. A later amendment from the same sponsor — negotiated with the bill sponsor — established an 8-year sunset with a carve-out allowing projects already underway to continue to receive credits through their completion; that amendment was adopted. After amendments, the chamber adopted the senate substitute and later declared the bill perfected and ordered it printed. The transcript records voice approvals rather than recorded roll-call tallies for the substitute and amendment votes.

What the bill does not do yet: The Senate adopted the substitute and perfected the bill in this session but did not enact a final law in the recorded proceedings; further legislative steps or a final enrolled version were not recorded in the transcript.

Ending: Supporters said the credit is intended to unlock development that otherwise would not occur, while opponents warned of taxpayer cost and constitutional inequities. The bill leaves most administrative detail to DED rulemaking and would create an annual program subject to the $50 million cap and the newly adopted sunset timetable.