This Fiscal Note is not an official copy and should not be quoted or cited.
Fiscal Note - SB 0480 - Provides $2000 Tuition Deduction For Grades 9-12
L.R. NO.  2183-01
BILL NO.  SB 480
SUBJECT:  Education Income Tax Deduction
TYPE:     Original
DATE:     December 29, 1995

                              FISCAL SUMMARY

FUND AFFECTED              FY 1997             FY 1998           FY 1999
General Revenue       ($2,750,900)        ($3,501,840)      ($3,698,280)

Total Estimated
Net Effect on All
State Funds           ($2,750,900)        ($3,501,840)      ($3,698,280)


FUND AFFECTED              FY 1997             FY 1998           FY 1999

Total Estimated
Net Effect on All
Federal Funds                   $0                  $0                $0


FUND AFFECTED              FY 1997             FY 1998           FY 1999
Local Government                $0                  $0                $0

                              FISCAL ANALYSIS


Officials of the Department of Revenue (DOR) state there is no basis from
which to project a fiscal impact.  A revenue impact of over $100,000 is

The Division of Taxation is estimating that they will need one Tax Audit
Analyst I for every 20,000 returns that claim this deduction. Five Tax Audit
Analyst I's for six months of the tax processing year will be responsible for
exception processing to verify documentation of receipts and deductions. One
Tax Audit Analyst I is needed to handle the additional correspondence and
telephone calls that will be generated by this legislation.

The Information Systems Division requests one Data Entry Operator II for 5%
of twelve months for the additional information that will need to be key

Oversight assumes that the tax deduction would be a modification to the
Missouri Individual Income Tax Return and that DOR could handle this proposal
with their current resources.

Officials of the Department of Elementary and Secondary Education (DES)
report that having any additional income tax deduction would cause a
reduction in state revenue. DES staff estimate the number of students
enrolled in private schools in grade 9-12 is equal to 24,537.

In a similar proposal officials of the Department of Elementary and Secondary
Education stated that there is a possibility of an increase in attendance in
private schools. If this occurs, there would be the possibility of fewer
dollars for distribution to local school districts.

Oversight assumes that individuals would adjust their withholdings
immediately in order to take advantage of the tax deduction provided by this
proposal. Oversight assumes the number of individuals claiming and level of
deductions stabilizes in the third full fiscal year of implementation.
Oversight has based its estimates on the number of students in private
schools that pay tuition times $2000 and used the maximum state income tax
rate of 6% to estimate the loss to General Revenue. Oversight assumed
approximately 27,509 students for FY 1997, 29,182 for FY 1998 and 30,819 for
FY 1999.

Oversight has not estimated or included a potential loss to the General
Revenue fund for the effects of taxpayers' corresponding increase in federal
income taxes which in turn would result in a slight reduction to income taxes
paid to the State of Missouri.  Factors which would influence this amount
include the ability of the taxpayer to itemize deductions, the income level
of the taxpayer and the limitation of the federal income tax deduction on the
Missouri return.

FISCAL IMPACT - State Government FY 1997   FY 1998   FY 1999
                                (10 Mo.)
Loss to General Revenue Fund
   Educational Expense Income
   Tax Deduction            ($2,750,900)        ($3,501,840)   ($3,698,280)

FISCAL IMPACT  - Local Government FY 1997   FY 1998   FY 1999
                                (10 Mo.)

                                       0         0         0


This proposal would provide a tuition deduction on an individual's state
income tax return. The tuition deduction is available only for dependents in
grades 9-12, with the deduction capped at $2000 for each dependent.

This legislation is not federally mandated, would not duplicate any other
program and would not require additional capital improvements or rental


Department of Revenue
Department of Elementary and Secondary Education
Office of Administration-No response