Fiscal Note - SB 0004 - $200 Income Tax Credit For Educational Expenses
L.R. NO. 0252-02
BILL NO. SB 4
SUBJECT: Education, Elementary and Secondary; Education, Higher; Taxation
and Revenue-General; Taxation and Revenue-Income
TYPE: Corrected
DATE: January 22, 1997
# This fiscal note is corrected to reflect a mathematical error.
#FISCAL SUMMARY
ESTIMATED NET EFFECT ON STATE FUNDS
FUND AFFECTED FY 1998 FY 1999 FY 2000
General Revenue ($12,216,765) ($130,366,071) ($130,401,613)
Total Estimated
Net Effect on All
State Funds ($12,216,765) ($130,366,071) ($130,401,613)
ESTIMATED NET EFFECT ON FEDERAL FUNDS
FUND AFFECTED FY 1998 FY 1999 FY 2000
None
Total Estimated
Net Effect on All
Federal Funds $0 $0 $0
ESTIMATED NET EFFECT ON LOCAL FUNDS
FUND AFFECTED FY 1998 FY 1999 FY 2000
Local Government $0 $0 $0
FISCAL ANALYSIS
ASSUMPTION
Officials of the Department of Revenue (DOR) state this proposal would
require modifications to the individual income tax and corporate income tax
systems. The modifications will be completed by existing personnel. There
would also be additional information to be key entered from the income tax
returns. DOR would request one Data Entry Operator II for four months of each
tax year to key enter the additional information. State Data Center costs
would be requested for testing and additional storage.
The Division of Taxation would request 8 Tax Processing Tech I's for six
months of each tax year to pre-edit the income tax returns claiming this
credit and 6 Tax Processing Tech I's for six months of each tax year to
correct errors. An estimated one million Taxpayers could benefit from this
credit, the administrative costs have been based on 800,000 taxpayers
claiming the credit.
Oversight assumes for purposes of this fiscal note that the Division of
Taxation could handle the volume of work created by this proposal with 3.5
Tax processing Tech I's for six months of each tax year and one Data Entry
Operator II for four months of each tax year. State Data Center costs have
been allowed for testing and additional storage.
Officials of the Department of Elementary and Secondary Education (DES) state
this deduction would apply to certain expenses for students attending public,
private or parochial schools. There are approximately 105,000 students in
private elementary and secondary schools, plus approximately 35,000 students
in Adult Basic Education classes. In addition, most parents of the
approximately 850,000 public school students would also qualify for some
deduction. DES staff can not estimate the amount of impact this proposal
would have due to insufficient data.
#Based on the Missouri Statistics of Income Report: Individual Income Tax
Returns for 1994, Oversight has estimated the revenue impact of this proposal
to be a loss of approximately $130,312,165 annually. This estimate takes into
account the number of students per the graduated income level and the amount
of credit allowable at each level. It should be noted that actual revenue
losses could be less depending on the utilization of the new credit. Factors
affecting this include taxpayer awareness of the credit, taxpayers who may
not otherwise be required to file a tax return who choose not to file, etc.
#Oversight estimates a loss to General Revenue of $12,216,765 for FY 1998 for
this portion of the proposal due to the possibility of reduced withholding
and estimated income tax payments for five months of calendar year 1998.
Oversight assumes 25% of those eligible would adjust payments, however, it
should be noted that this amount could be less, depending on taxpayers'
awareness of the new credit and their desire to adjust tax withholdings or
estimated payments.
This proposal would result in a decrease in Total State Revenues since the
Individual Income tax collections are included in the calculation of Total
State Revenue.
FISCAL IMPACT - State Government FY 1998 FY 1999 FY 2000
(6 Mo.)
GENERAL REVENUE FUND
Cost to General Revenue Fund
Department of Revenue (DOR)
Personal Service (3.9 FTE) $0 ($33,780) ($69,247)
Fringe Benefits $0 ($9,637) ($19,756)
Expense and Equipment $0 ($10,489) ($445)
Administrative Cost to DOR $0 ($53,906) ($89,448)
#Loss to General Revenue Fund
Educational Expense Tax Credit ($12,216,765) ($130,312,165) ($130,312,165)
#ESTIMATED NET EFFECT TO
GENERAL REVENUE FUND ($12,216,765) ($130,366,071) ($130,401,613)
FISCAL IMPACT - Local Government FY 1998 FY 1999 FY 2000
(6 Mo.)
0 0 0
FISCAL IMPACT - Small Business
Small businesses would be expected to be fiscally impacted to the extent that
they pay educational expenses to a qualified school and may take the
educational expense tax credit.
DESCRIPTION
This proposal provides an income tax credit for educational expenses and
contributions to qualified scholarship charities. The maximum amount of the
credit for educational expenses incurred in attending a qualified school is
$200, with the amount phased out for taxpayers with a Missouri adjusted gross
income in excess of $55,000. If the credit exceeds the income tax payable,
the excess shall be considered an overpayment of the income tax. Qualified
school includes any public or private elementary or secondary school located
in Missouri. Such schools must be accredited by the Missouri Department of
Elementary and Secondary Education and any other agencies set out in Section
1 of this act. Educational expenses include tuition, education fees, school
supplies or other educational expenses as defined by Department of Revenue
regulations and which are incurred in attending a qualified school. For cash
contributions to a qualifying scholarship charity, the credit shall not
exceed 50% of the amount contributed. Corporations with registered agents in
the state are authorized to participate in both of these credits, subject to
the same $200 and 50% limits.
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 Elementary and Secondary Education
Missouri Statistics of Income-Published by the Department of Revenue
This Fiscal Note is not an official copy and should not be quoted or cited.