To repeal sections 143.124, 143.161 and 143.805, RSMo 1994, relating to tax relief, and to enact in lieu thereof eight new sections relating to the same subject, with an effective date for certain sections.

BE IT ENACTED BY THE GENERAL ASSEMBLY OF THE STATE OF MISSOURI, AS FOLLOWS:

     Section A. Sections 143.124, 143.161, and 143.805, RSMo 1994, are repealed and eight new sections enacted in lieu thereof, to be known as sections 143.124, 143.161, 143.805, 1, 2, 3, 4 and 5, to read as follows:

     143.124. 1. Other provisions of law to the contrary notwithstanding, the total amount of all annuities, pensions, or retirement allowances above the amount of six thousand dollars annually provided by any law of this state, the United States, or any other state to any person except as provided in subsection 4 of this section, shall be subject to tax under the provisions of this chapter, in the same manner, to the same extent and under the same conditions as any other taxable income received by the person receiving it. For purposes of this section, annuity, pension, or retirement allowance shall be defined as an annuity, pension or retirement allowance provided by the United States, this state, any other state or any political subdivision or agency or institution of this or any other state.

     2. For all tax years beginning on or after January 1, 1998, for purposes of this section, annuity, pension or retirement allowance shall be defined to include any annuity, pension or retirement allowance which is funded by any private source as well as an annuity, pension or retirement allowance provided by the United States, this state, any other state or any political subdivision or agency or institution of this or any other state.

     [2. For the period beginning July 1, 1989, and ending December 31, 1989, there shall be subtracted from Missouri adjusted gross income for that period, determined pursuant to section 143.121, the first three thousand dollars of retirement benefits received by each taxpayer:

     (1) If the taxpayer's filing status is single, head of household or qualifying widow(er) and Missouri adjusted gross income is less than twelve thousand five hundred dollars; or

     (2) If the taxpayer's filing status is married filing combined and their combined Missouri adjusted gross income is less than sixteen thousand dollars; or

     (3) If the taxpayer's filing status is married filing separately and Missouri adjusted gross income is less than eight thousand dollars.

     3. For the tax years beginning on or after January 1, 1990,]

     3. There shall be subtracted from Missouri adjusted gross income, determined pursuant to section 143.121, the first six thousand dollars of retirement benefits received by each taxpayer:

     (1) If the taxpayer's filing status is single, head of household or qualifying widow(er) and [his] the taxpayer's Missouri adjusted gross income is less than twenty-five thousand dollars; or

     (2) If the taxpayer's filing status is married filing combined and their combined Missouri adjusted gross income is less than thirty-two thousand dollars; or

     (3) If the taxpayer's filing status is married filing separately and [his] the taxpayer's Missouri adjusted gross income is less than sixteen thousand dollars.

     4. To determine the maximum Missouri adjusted gross income limits referenced in this section, any social security benefits included in Missouri adjusted gross income shall be subtracted. But social security benefits shall not be subtracted for purposes of other computations under this chapter, and are not to be considered as retirement benefits for purposes of this section.

     5. The provisions of subdivisions (1) and (2) of subsection 3 of this section shall apply during all tax years in which the federal Internal Revenue Code provides exemption levels for calculation of the taxability of social security benefits that are the same as the levels in subdivisions (1) and (2) of subsection 3 of this section. If the exemption levels for the calculation of the taxability of social security benefits are adjusted by applicable federal law or regulation, the exemption levels in subdivisions (1) and (2) of subsection 3 of this section shall be accordingly adjusted to the same exemption levels.

     6. [For each tax year beginning on or after January 1, 1990,] The portion of a taxpayer's lump sum distribution from an annuity or other retirement plan not otherwise included in Missouri adjusted gross income as calculated under this chapter, but subject to taxation under Internal Revenue Code section 402 shall be taxed in an amount equal to ten percent of the taxpayer's federal liability on such distribution for the same tax year.

     7. The exemptions provided for in this section shall not affect the calculation of the income to be used to determine the property tax credit provided in sections 135.010 to 135.035, RSMo.

     [8. The provisions of this section shall apply to all other annuities, pensions and retirement allowances as subsequently defined and provided by law for tax years beginning on or after January 1, 1991.]

     143.161. 1. For all tax years beginning before January 1, 1998, a resident may deduct four hundred dollars for each dependent for whom he is entitled to a dependency exemption deduction for federal income tax purposes.

     2. For all tax years beginning on or after January 1, 1998, a resident may deduct one thousand dollars for each dependent for whom he is entitled to a dependency exemption deduction for federal income tax purposes.

     [2.] 3. A resident who qualifies as an unmarried head of household or as a surviving spouse for federal income tax purposes may deduct an additional eight hundred dollars.

     143.805. 1. Credits granted by other provisions of the statutes shall be applied against the tax imposed by this chapter in the following order:

     (1) Credit for income tax paid to another state authorized in section 143.081;

     (2) New business facility credit authorized in sections 135.100 to 135.160, RSMo;

     (3) Economic development credit authorized in subsection 6 of section 100.286, RSMo;

     (4) Missouri low-income housing tax credit authorized in subsection 2 of section 135.352, RSMo;

     (5) Employment of unemployed agriculture workers tax credit authorized in sections 135.275 to 135.287, RSMo;

     (6) Wood energy producer tax credit authorized in sections 135.300 to 135.311, RSMo;

     (7) Contributions to innovations centers and the corporation for science and technology tax credit authorized in sections 348.300 to 348.318, RSMo;

     (8) Neighborhood assistance credit authorized in sections 32.105 to 32.125, RSMo;

     (9) Special needs child adoption credit authorized in section 135.327, RSMo;

     (10) Enterprise zone credit authorized in sections 135.200 to 135.255, RSMo;

     (11) Senior citizens property tax credit authorized in sections 135.010 to 135.035, RSMo[.];

     (12) Educational expenses and scholarship contributions tax credit authorized in sections 1 to 5 of this act.

     2. The director of revenue may prescribe the priority of any other credit authorized by law.

     Section 1. As used in sections 1 to 5 of this act, the following terms shall mean:

     (1) "Educational expenses", tuition, attendance fees, school supplies, or other educational expenses as defined by regulation of the department of revenue incurred in attending a qualified school;

     (2) "Qualified school", any public or private postsecondary education institution situated in Missouri;

     (3) "Qualifying scholarship charity", a charitable organization in Missouri that is exempt from federal taxation pursuant to section 501(c)(3) of the Internal Revenue Code and that allocates at least ninety percent of its annual revenue for educational scholarships or tuition grants to persons to allow them to attend a qualified school.

     Section 2. 1. A resident shall be allowed a credit against the tax imposed by chapter 143, RSMo, pursuant to this section for all educational expenses incurred by such resident in the same taxable year for which the Missouri return is being filed.

     2. Such expenses shall be on behalf of the taxpayer or any other person or persons attending a qualified school.

     3. The allowable credit shall be an amount not to exceed five hundred dollars for each person for which educational expenses are incurred.

     4. The total amount of allowable credit calculated after application of subsection 3 of this section shall be determined by the following table:

If the taxpayer's Missouri                    The total amount of

adjusted gross income is:                    allowable credit is:

Under $20,000           100% of the credit

$20,000 to $30,000           75% of the credit

$30,001 to $40,000           50% of the credit

$40,001 to $50,000           25% of the credit

Over $50,000           0% of the credit.

     5. If the total amount of allowable credit pursuant to this section exceeds the income tax reduced by other credits, then the excess shall be considered an overpayment of the income tax.

     Section 3. 1. A resident shall be allowed a credit against the tax imposed by chapter 143, RSMo, pursuant to this section for all cash contributions to a qualifying scholarship charity made by such resident in the same taxable year for which the Missouri return is being filed.

     2. The allowable credit shall be an amount not to exceed fifty percent of the contribution.

     Section 4. 1. A corporation with a registered agent in this state shall be allowed a credit against the tax imposed by chapter 143, RSMo, pursuant to this section for all educational expenses incurred by such corporation in the same taxable year for which the Missouri return is being filed.

     2. Such expenses shall be on behalf of any person or persons attending a qualified school.

     3. The allowable credit shall be an amount equal to fifty percent of the incurred educational expenses for each person but such amount shall not exceed five hundred dollars per each such person.

     Section 5. 1. A corporation with a registered agent in this state shall be allowed a credit against the tax imposed by chapter 143, RSMo, pursuant to this section for all cash contributions to a qualifying scholarship charity made by such corporation in the same taxable year for which the Missouri return is being filed.

     2. The allowable credit shall be an amount not to exceed fifty percent of the contribution.

     Section B. Sections 143.805, 1, 2, 3, 4 and 5 of this act shall become effective January 1, 1998, and shall apply to all taxable years beginning after December 31, 1997.