This Fiscal Note is not an official copy and should not be quoted or cited.
Fiscal Note - SB 0752 - Numerous Changes to Tax Laws Incl. Interest, Hrngs., Refunds
L.R. NO. 2495-05
BILL NO. SCS for SB 752, 789, 843 and 847
SUBJECT: Income tax; vehicles; disability; domestic violence; sales tax;
property tax
TYPE: Original
DATE: March 18, 1996
FISCAL SUMMARY
ESTIMATED NET EFFECT ON STATE FUNDS
FUND AFFECTED FY 1997 FY 1998 FY 1999
General Revenue ($66,176) ($4,054,681) ($4,040,604)
School District
Trust (unknown) (unknown) (unknown)
Conservation (unknown) (unknown) (unknown)
Parks and Soil (unknown) (unknown) (unknown)
Estimated
Net Effect on All
State Funds (Unknown) (Unknown) (Unknown)
*Expected to exceed ($5,000,000) per year
ESTIMATED NET EFFECT ON FEDERAL FUNDS
FUND AFFECTED FY 1997 FY 1998 FY 1999
None
Total Estimated
Net Effect on All
Federal Funds $0 $0 $0
ESTIMATED NET EFFECT ON LOCAL FUNDS
FUND AFFECTED FY 1997 FY 1998 FY 1999
Local Government (Unknown) (Unknown) (Unknown)
FISCAL ANALYSIS
ASSUMPTION
SECTION 32.057
Officials of the following agencies indicate that this section of the
legislation would have no fiscal impact to them:
Department of Revenue (DOR)
Department of Economic Development (DED)
State Auditor's Office (SAU)
Office of Administration (OA)
Oversight assumes that for this section of the proposal, there would be no
substantial fiscal impact. Any fees charged by the Department of Revenue
would be sufficient to offset the cost of providing information. Fees paid
by political subdivisions would be minimal.
SECTION 135.010
Officials of the Department of Revenue and the State Tax Commission indicate
this section of the proposal would not fiscally impact their agencies.
Officials of the Office of Administration assume the purpose of this section
of the legislation is to permit disabled people who were not gainfully
employed prior to becoming disabled to be eligible for a property tax credit.
The TAFP fiscal note 3398-9 for HB 1745 OA Budget & Planning estimated the
maximum loss for the disabled tax credit to be $23.3 million. In 1995, (the
first year of filing) the Department of Revenue reported that about $700,000
was paid out in disabled persons property tax credit. OA assumed the
difference between $23.3 million and $700,000 would be the impact associated
with this proposal.
Oversight obtained additional information regarding the population of estates
which may file on behalf of a person who dies during the calendar year.
Approximately, 40,516 deaths occurred in 1994 of persons age 65 or older.
The total "over 65" population in Missouri is 744,000, of which 64,000
currently claim the circuit breaker credit. This represents 8.6% of the
population claiming the credit. Assuming the same claim rate, 3,485 estates
would be expected to claim the credit at an average of $280 per claim. A
total amount of $975,800 annually in additional circuit breaker credits would
be expected to be paid out. Oversight assumes that the combination of
paying the credit the year of death for deceased persons and the change in
interpretation by DOR could result in a loss to the General Revenue Fund in
excess of $1,000,000 annually.
SECTIONS 136.315, 143.451, 143.631, 143.751, 143.781, 143.811, 144.027 and
144.190
Officials of the Office of Administration indicate these sections of the
proposal would not fiscally impact them.
Officials of the Department of Revenue (DOR) assume these sections of the
proposal would require changes to the various tax systems and tax
forms/schedules. These revisions would be completed by existing personnel.
State Data Center costs would be requested for the additional data storage
requirements and testing. The Department of Revenue states that it has no
basis from which to make a fiscal impact. A revenue impact of over $100,000
is anticipated.
The General Counsel's Office anticipates that they would need one Assistant
Counsel to process the increased tax protests and appeals this legislation
would generate. Job functions would be informal hearings and proposed actions
submitted by all DOR bureaus and final decisions. In addition, the
enlargement of the class of persons who could file a suit for attorney fees
would increase the number of suits and would be handled by this attorney. The
Motor Vehicle Bureau would incur cost for mailing notices to fee offices,
dealers and lienholder of the revisions in 144.027. These costs include
printing of notices, envelopes and postage.
Oversight assumes these sections of the proposal would have a negative
unknown impact to the General Revenue Fund and state and local sales tax
funds. Changing the definition of "party" would enlarge the class of persons
who could file a suit and therefore would negatively impact general revenue.
There could be some revenue generated to the state from lawsuits in which the
state prevailed and litigation expenses were awarded.
SECTION 144.020
Officials of the Department of Revenue state this section of the proposal
would have a minimal fiscal impact to their agency.
SECTION 144.030
Officials of the Department of Revenue states this section of the proposal
would exempt from sales tax materials that blend with other materials in the
manufacture of steel products, slagging materials, firebrick and drug
samples. There would be a loss to all state and local sales tax funds. The
amount of revenue impact due to these exemptions is unknown.
Officials of the Office of Administration state the fiscal impact of this
section of the legislation is unknown. No national or state level data is
available to determine the amount of firebrick and slagging materials used in
Missouri.
SECTION 147.040
Officials of the Department of Revenue state this section of the proposal
would not fiscally impact their agency.
SECTIONS 1 and 2
Officials of the Department of Social Services indicate this section of the
proposal would not fiscally impact their agency.
Officials of the Department of Revenue state this section of the proposal
would require modifications to the individual, corporate and financial
institution tax systems, forms and schedules. These modifications would be
completed by existing personnel.
The Division of Taxation would request one Tax Audit Analyst I for every
25,000 returns that claim this credit. Responsibilities would be credit
verification, processing and error correction.
Oversight assumes the Department of Revenue could handle this section of the
proposal with their current resources.
The Department of Social Services and Department of Revenue did not estimate
a fiscal impact for this section of the proposal, therefore Oversight has
shown a loss to General Revenue ranging from $0 to $4,000,000 for the Income
Tax Credits for contributions to Domestic Violence Shelters and Maternity
Homes.
FISCAL IMPACT - State Government FY 1997 FY 1998 FY 1999
(10 Mo.)
GENERAL REVENUE FUND
Loss to General Revenue Fund
There would be a loss to General Revenue in an indeterminable amount for
the circuit breaker credit refund, which could exceed $1,000,000 annually.
Cost to General Revenue Fund
Department of Revenue (DOR)
Personal Service (1 FTE) ($22,940) ($28,216) ($28,922)
Fringe Benefits ($7,047) ($8,668) ($8,885)
Expense and Equipment ($36,189) ($17,797) ($2,797)
Administrative Cost to DOR ($66,176) ($54,681) ($40,604)
Loss to General Revenue Fund
Definition of "party"
Removal of interstate tax
Interest on amended income tax returns
Sales tax credit within 90 days contracted
Interest on Sales/Use tax
overpayments (unknown) (unknown) (unknown)
Loss to General Revenue Fund
Firebrick, Slagging and
Drug Samples Exemption (unknown) (unknown) (unknown)
Loss to General Revenue Fund
Income Tax Credit for Contributions
to Domestic Violence Shelters $0 $0
to to
$0 ($2,000,000) ($2,000,000)
Loss to General Revenue Fund
Income Tax Credit for Contributions
to Maternity Homes $0 $0
to to
$0 ($2,000,000) ($2,000,000)
ESTIMATED NET EFFECT
TO GENERAL REVENUE FUND* (Unknown) (Unknown) (Unknown)
*Expected to exceed ($5,000,000) per year
Loss to School District Trust Fund
Sales tax credit within 90 days contracted
Interest on Sales/Use tax
overpayments (unknown) (unknown) (unknown)
Loss to School District Trust Fund
Firebrick, Slagging and
Drug Samples Exemption (unknown) (unknown) (unknown)
Loss to Conservation Fund
Sales tax credit within 90 days contracted
Interest on Sales/Use tax
overpayments (unknown) (unknown) (unknown)
Loss to Conservation Fund
Firebrick, Slagging and
Drug Samples Exemption (unknown) (unknown) (unknown)
Loss to Parks & Soils Fund
Sales tax credit within 90 days contracted
Interest on Sales/Use tax
overpayments (unknown) (unknown) (unknown)
Loss to Parks & Soils Fund
Firebrick, Slagging and
Drug Samples Exemption (unknown) (unknown) (unknown)
FISCAL IMPACT - Local Government FY 1997 FY 1998 FY 1999
(10 Mo.)
Loss to Cities
Sales tax credit within 90 days contracted
Interest on Sales/Use tax
overpayment (unknown) (unknown) (unknown)
Loss to Cities
Firebrick, Slagging and
Drug Samples Exemption (unknown) (unknown) (unknown)
Loss to Counties
Sales tax credit within 90 days contracted
Interest on Sales/Use tax
overpayment (unknown) (unknown) (unknown)
Loss to Counties
Firebrick, Slagging and
Drug Samples Exemption (unknown) (unknown) (unknown)
DESCRIPTION
This act proposes numerous changes to various tax sections including: (1)
SECTION 32.057 - Authorizes the Department of Revenue to disclose information
and records pertaining to the collection of cigarette taxes to any employee
of any political subdivision to ensure compliance with the cigarette tax
imposed by the political subdivision. Any unauthorized disclosure is
punishable as a Class D felony. (2) SECTION 135.010 - Under current senior
citizen property tax credit ("circuit breaker") law, a surviving spouse may
claim the income tax credit if a spouse meeting the qualifications dies
before the end of the year, but a decedent's estate is not allowed the credit
on the final return. This legislation deems the residency requirement
fulfilled for claimants who die before December 31 and who meet all of the
other qualifications for the credit. This legislation also clarifies that a
disability need not occur after gainful employment in order to qualify for
the credit. Currently, the Department of Revenue interprets the law to
require a disabled person to have been gainfully employed prior to such
disability in order to qualify for the credit. (3) SECTION 136.315 - Changes
the definition of "party" to include natural persons, partnerships,
corporations and other organizations regardless of any income levels.
Currently, an income limitation is placed on sole proprietors, corporations
and partnerships. This section is also amended to allow a court or the
Administrative Hearing Commission to award the Department of Revenue
reasonable litigation expenses if the tribunal finds the position of the
party to be patently frivolous. (4) SECTION 143.451 - Removes a paragraph
dealing with interstate transactions when the other state(s) do not have
jurisdiction to impose a tax to make the computation of the taxation of this
type of transaction consistent with other interstate transactions. (5)
SECTION 143.631 - Allows a taxpayer's protest to include a request for an
informal hearing. Currently, an informal hearing is only allowed in some
situations. (6) SECTION 143.751 - Requires the Director of the Department of
Revenue to state the reason why a taxpayer was negligent at the time an
assessment of a penalty is proposed. Rules and regulations of the Department
which are inconsistent with state laws, as determined by the courts or
administrative hearing commission, may not be the basis for the assessment of
a penalty. (7) SECTIONS 143.781 and 143.811 - Requires interest to be paid
to the taxpayer on both refunds and credits. Currently, credits taken as a
result of an overpayment of tax are not paid interest, even though refunds
taken as a result of an overpayment are paid interest. (8) SECTION 144.020 -
Allows rental companies which rent or lease their inventory not to have to
collect sales tax on subsequent rentals or leases to customers if the rental
company pays sales tax on the initial lease or rental of the inventory. (9)
SECTION 144.027 - Currently, a sales tax credit is allowed to purchasers of
replacement motor vehicles, trailers, boats or outboard motors if the
purchase is made within 90 days of payment by the insurance company. This act
would allow this sales tax credit as long as the replacement purchase was
contracted for within the 90 days. (10) SECTION 144.030 - Clarifies three
sales tax exemption subsections. Subsection 2 is amended to include gases,
slagging materials and firebrick in the materials permitted to be exempt in
the manufacturing process. Subsection 4 is amended to permit facilities and
equipment which are used exclusively for the collection of recovered
materials for delivery to a material recovery processing plant to be exempt
from sales tax. Currently such facilities and equipment are not exempt if
used solely for such purposes. Subsection 18 is amended to clarify that drug
samples shall be exempt from sales taxes. (11) SECTION 144.190 - Refunds of
overpayments of sales/use taxes shall be paid with interest. (12) SECTION
147.040 - No refund of overpayments of franchise tax fees shall be paid
unless the amount exceeds $10 (currently $1). (13) SECTIONS 1 & 2 - Section
1 grants taxpayers a tax credit for 50% of the amount donated to domestic
violence shelters. Section 2 grants a tax credit for 50% of the amount
donated to maternity homes. In order to receive either credit, at least $100
must be donated and the maximum credit is $50,000. The credit may only be
used up to the amount of the taxpayer's tax liability, but may be carried
forward for four years. The aggregate maximum amount of the credits allowed
in a fiscal year is $4 million, $2 million under each section.
This legislation is not federally mandated, would not duplicate any other
program and would not require additional capital improvements or rental
space.
SOURCES OF INFORMATION
Department of Revenue
Department of Economic Development
State Auditor's Office
State Tax Commission
Department of Social Services
Office of Administration