Missouri Senate

Senate Committee Substitute

INDIVIDUAL INCOME TAX

Current law provides for a reduction in the top rate of income tax over a period of years from 6% to 5.5%, with each cut becoming effective if net general revenue collections meet a certain trigger. In addition to such reductions, beginning in the 2019 calendar year, this act provides that the top rate of tax shall be reduced by 0.4%. The Director of Revenue shall adjust the tax tables as provided in the act.

This act provides that when an income bracket is eliminated from the tax table, the top remaining tax rate shall apply to all income in excess of the second highest remaining income bracket.

This act provides for an additional 0.1% reduction in the top rate of tax if the U.S. Supreme Court renders a decision, the U.S. Congress passes a law, or the U.S. Constitution is amended, which allows the state to require out-of-state sellers with no physical presence in the state to collect and remit state and local sales taxes and the Director of the Department of Revenue notifies the General Assembly that the Department is prepared to enforce such collection of taxes, provided that the tax reduction shall become effective if such notification has not been made within nine months of the issuance of a Supreme Court decision or the passage of a federal law or constitutional amendment.

This act also creates a definition for "net general revenue collected", which includes all revenue deposited into the general revenue fund, less refunds and revenues originally deposited into the general revenue fund but designated by law for a specific distribution or transfer to another state fund. (Section 143.011)

This act provides that Missouri personal and dependency exemptions shall not be allowed if the federal exemption amount is zero. (Sections 143.151 and 143.161)

INCOME TAX DEDUCTIONS

Current law provides for an individual income tax deduction in the amount of 20% of a taxpayer's business income, which is phased in at 5% increments over a period of years if net general revenue collections meet a certain trigger. This act modifies such deduction by reducing the maximum deduction from 25% to 20%. (Section 143.022)

For all tax years beginning on or after January 1, 2019, this act also modifies the income tax deduction for federal tax liability paid by indexing the amount that may be deducted to the taxpayer's Missouri adjusted gross income, as described in the act. The deduction is allowed at 35% for adjusted gross income of $25,000 or less, and is phased out to 0% for adjusted gross income of $125,001 or more. (Section 143.171)

MISSOURI WORKING FAMILY TAX CREDIT

This act establishes the Missouri Working Family Tax Credit Act.

For all tax years beginning on or after January 1, 2019, this act creates a tax credit to be applied to a taxpayer's Missouri income tax liability after all reductions for other credits for which the taxpayer is eligible have been applied. The tax credit shall not exceed the amount of the taxpayer's tax liability, and shall not be refundable. For the tax year beginning on or after January 1, 2019, the amount of such tax credit shall be ten percent of the amount of a taxpayer's federal earned income tax credit. For all tax years beginning on or after January 1, 2020, the amount of such tax credit shall be twenty percent of the amount of a taxpayer's federal earned income tax credit.

The Department of Revenue shall determine whether a taxpayer who did not apply for the tax credit established by this act is eligible and shall notify such taxpayer of his or her potential eligibility.

The Department shall prepare an annual report regarding the tax credit established by this act containing certain information as described in the act. (Section 143.177)

This provision shall sunset after six years unless reauthorized by the General Assembly.

This provision is identical to a provision contained in SS#2/SCS/SBs 617, 611, & 667 (2018), is substantially similar to SB 615 (2018), SB 197 (2017), SB 342 (2017), HCS/HB 109 (2017), and to a provision contained in HCS/HB 1605 (2016), and is similar to HB 2154 (2016), SB 1018 (2016), SB 40 (2015), SB 687 (2014), HB 1120 (2014), HB 895 (2013), HB 1606 (2012), HB 581 (2011), and HB 1915 (2010).

EFFECTIVE DATES

Certain provisions of this act shall become effective on January 1, 2019. (Section B)

The Missouri Working Family Tax Credit shall become effective if the Supreme Court of the United States renders a decision, a law is passed by the federal government, or the Constitution of the United States is amended which enables the state of Missouri to require out-of-state sellers with no physical presence in the state to collect and remit state and local sales taxes and the Director of the Department of Revenue notifies the General Assembly that the Department is prepared to enforce such collection of taxes. (Section C)

JOSHUA NORBERG