What Is Chapter 353 Tax Abatement in Missouri?

Chapter 353 tax abatement in Missouri is a redevelopment incentive that lets a developer pay no property tax on new buildings or improvements for up to 10 years, then pay tax on no more than half the property’s true value for up to 15 years after that. The program, formally the Urban Redevelopment Corporations Law, is meant to pull private investment into areas the market has written off. In return for as much as 25 years of reduced property taxes, a developer has to form a special corporation, accept a cap on profits, and operate under ongoing municipal oversight.

What the Abatement Is Worth

The tax break comes in two phases.

In the first phase, lasting up to 10 years, the redevelopment corporation pays property tax only on the assessed value of the bare land as it stood the year before the corporation took ownership. New buildings, renovations, and other improvements are not taxed at all, and the land assessment itself is frozen, so rising values in the neighborhood cannot push the bill up.¹

In the second phase, up to 15 additional years, the property including all improvements is taxed at no more than 50% of its true value. That capped valuation stays locked for the full second phase as long as the corporation still owns the property and follows the approved plan.¹

When the full 25-year window closes, the property returns to the regular tax rolls at full assessed value. A corporation can also elect to start paying full taxes earlier; once it does, every Chapter 353 restriction on the property falls away immediately.¹

Where Chapter 353 Can Be Used

Two threshold questions decide whether the program is available at all: is the location in a jurisdiction that can use it, and has that jurisdiction declared the area blighted?

Chapter 353 is open to any city in Missouri. It also extends to certain charter counties: first-classification charter counties with a population of at least 900,000 (which covers St. Louis County) and charter counties with a population between 600,000 and 700,000. In those counties the authority is limited to unincorporated areas.²

No abatement is available until the city council or board of aldermen officially designates the target area as blighted. Chapter 353 does not spell out its own blight definition; it borrows the one from Missouri’s Tax Increment Financing statute at RSMo 99.805, which looks at deterioration, obsolescence, buildings below minimum code standards, excessive vacancies, inadequate utilities, and other conditions harmful to public health, safety, or welfare.²

A designated area can take in parcels that are not individually blighted if their inclusion is necessary for effective redevelopment of the broader area. Project boundaries often need to cover entire blocks or corridors rather than only the worst buildings.²

If the city has not already studied the area, the developer typically commissions an independent blight study documenting vacancies, code violations, and structural deterioration. Without that empirical record, the blight designation is vulnerable to legal challenge.

You Have to Form a Special Corporation

A Chapter 353 project cannot run through an existing LLC or ordinary corporation. The statute requires a purpose-built entity called an urban redevelopment corporation, formed by filing articles of incorporation with the Missouri Secretary of State. The name must include the words “redevelopment corporation,” the articles must state that the entity exists to acquire, build, maintain, and operate redevelopment projects under Chapter 353, and the articles must declare that the corporation serves a public purpose.³

This structure is not a formality. It locks the developer into statutory obligations around profits, oversight, and surplus payments that last for the life of the project.

The 8% Profit Cap

The statute caps the corporation’s annual net earnings at 8% of total project cost, including land. Net earnings are calculated by subtracting operating costs, maintenance, taxes, insurance, and debt amortization from gross earnings. The amortization schedule must retire the full project cost within 60 years of completion.³

Earnings above 8% in any given year cannot simply be distributed. The corporation can hold the surplus as a reserve, use it to pay down debt faster, reinvest it in expanding the project, or apply it to reduce rents. Any surplus still on hand when the abatement expires goes to the city.³

Payments in Lieu of Taxes

The statute itself does not require payments in lieu of taxes, but many Missouri cities impose PILOTs by contract as part of the redevelopment agreement. A common structure requires annual PILOT payments during the first 10 years equal to what the property’s existing improvements generated in tax revenue before the project started. Terms vary significantly between municipalities, so expect PILOT obligations to be a point of negotiation rather than a fixed figure.

How a Project Gets Approved

Every Chapter 353 project needs a development plan authorized by the city’s legislative body. The plan describes the geographical boundaries of the project, the proposed land uses, and the structural improvements.²

Before the public hearing, the city has to give every affected political subdivision (school district, fire district, library district, and similar entities) written notice and a tax impact statement showing the assessed value of the property both before and after redevelopment, so each taxing body can see what the abatement will cost it.¹

At the hearing, affected political subdivisions and any interested person have the right to be heard. The statute does not set a minimum advance notice period, leaving that to local ordinance.¹

After the hearing, the city council or board of aldermen votes on an ordinance authorizing the abatement. The ordinance can set a deadline by which the corporation must acquire property within the plan area, and development rights (including the abatement) expire if the corporation misses that deadline.¹

The final step is a redevelopment agreement between the city and the corporation. That contract sets performance milestones, construction timelines, reporting duties, and consequences for noncompliance. The city keeps the right to review the corporation’s financial records and operations throughout the abatement period. Application forms, filing fees, and supplementary documentation vary by city, so contact the municipal clerk or economic development office early. Accurate documentation of the property’s current assessed value matters because that number becomes the frozen tax baseline for the first 10 years.

Buying the Land: No Eminent Domain for New Projects

A redevelopment corporation can acquire property through purchase, gift, lease, or grant, and can buy through nominees to keep sellers from inflating prices once they learn a redevelopment project is coming.⁴

Eminent domain is a different story. The statute historically gave redevelopment corporations the power to condemn property within their plan area if the city specifically authorized it. In 2006, Missouri amended the law to cut off that authority for any new redevelopment agreement executed after December 31, 2006. Corporations operating under agreements signed on or before that date keep eminent domain power; no new project can use it.⁴

Even for pre-2007 agreements, the corporation cannot condemn government-owned property without the owning entity’s consent. For any new Chapter 353 project today, that means assembling the site through voluntary transactions, which can stall when a holdout refuses to sell.

Federal Income Tax Treatment

A Chapter 353 abatement does not create federal taxable income for the corporation. When Congress amended Internal Revenue Code Section 118 in 2017 to end the general exclusion of government incentives from corporate gross income, the conference report accompanying the legislation stated that tax abatements are not contributions to capital and are not subject to Section 118. Because an abatement reduces taxes owed rather than transferring money to the developer, it does not trigger a federal tax bill.

When the Abatement Ends

Once the full abatement period runs out, the property returns to the regular tax rolls at full assessed value and every Chapter 353 restriction on it disappears. The corporation can operate without the profit cap, reporting requirements, or municipal oversight that applied during the abatement years.¹

The abatement can also end sooner. If the approving ordinance set an acquisition deadline and the corporation missed it, the development rights (abatement included) can expire. Any surplus earnings still held by the corporation when the abatement terminates must be turned over to the city.¹³

A corporation that wants out early can voluntarily elect to pay full taxes at any time. Once it does, the property is released from all Chapter 353 conditions immediately.¹

1
Missouri Revisor of Statutes. Missouri Revised Statutes 353.110 – Real Property Exempt From Taxation, Limitation
2
Missouri Revisor of Statutes. Missouri Revised Statutes 353.020 – Definitions
3
Missouri Revisor of Statutes. Missouri Revised Statutes 353.030 – Organization of Corporation, Contents of Articles of Agreement
4
Missouri Revisor of Statutes. Missouri Revised Statutes 353.130 – Redevelopment Corporation May Acquire Property