SB 0022 - Fiscal Note

Fiscal Note - SB 0022 - Provides a tax credit for expenses incurred in the adoption of a special needs child

COMMITTEE ON LEGISLATIVE RESEARCH

OVERSIGHT DIVISION

FISCAL NOTE

L.R. NO.: 0190-07

BILL NO.: Perfected SS for SB 22

SUBJECT: Children and Minors; Disabilities; Taxation and Revenue-General

TYPE: Original

DATE: March 1, 1999

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FISCAL SUMMARY

ESTIMATED NET EFFECT ON STATE FUNDS
FUND AFFECTED	FY 2000	FY 2001	FY 2002
General Revenue	($40,422) to ($2,160,422)	($41,942) to ($2,161,942)	($42,994) to ($2,162,994)
County Foreign Insurance	$0 to ($2,120,000)	$0 to ($2,120,000)	$0 to ($2,120,000)
Total Estimated Net Effect on All State Funds	($40,422) to ($4,280,422)	($41,942) to ($4,281,942)	($42,994) to ($4,282,994)

ESTIMATED NET EFFECT ON FEDERAL FUNDS
FUND AFFECTED	FY 2000	FY 2001	FY 2002
None
Total Estimated Net Effect on All Federal Funds	$0	$0	$0

ESTIMATED NET EFFECT ON LOCAL FUNDS
FUND AFFECTED	FY 2000	FY 2001	FY 2002
Local Government	$0	$0 to ($951,668)	$0 to ($951,668)

Numbers within parentheses: ( ) indicate costs or losses

This fiscal note contains 6 pages.

FISCAL ANALYSIS

ASSUMPTION

SECTIONS 135.326, 135.327 and 135.333-SPECIAL NEEDS ADOPTION TAX CREDIT

Officials of the Department of Social Services (DOS) state this portion of the proposal would not fiscally impact their agency.

Officials of the Department of Revenue (DOR) state this portion of the proposal would expand the adoption credit and allow a taxpayer who "proceeds in good faith to adopt" a special needs child the tax credit. Currently, the law states that the taxpayer must legally adopt the child before a tax credit can be taken.

ADMINISTRATIVE IMPACT:

The Division of Taxation does not anticipate a large increase in filers for this tax credit and will not request additional FTE at this time. However, if the number of tax credits exceeds 3,680 a tax year, then the Division of Taxation would request one Tax Processing Technician I through the normal budget process.

Officials of the Secretary of State's Office (SOS) state this proposal contemplates that tax credits in the aggregate of $4 million could be obtained by private entities. Of this amount, $2 million could be claimed by individuals that adopt a child and by businesses that provide assistance to employees who adopt a child. The other $2 million could be claimed by private entities that make contributions to qualifying "unplanned pregnancy resource centers."

Oversight assumes that this portion of the proposal would allow parents or businesses to make tax credit claims on their nonrecurring adoption expenses throughout the adoption process (up to a total of $10,000). Current law only allows credits in the year that the adoption becomes finalized. Approximately $900,000 in Special Needs Adoption Tax Credits are claimed annually. Oversight assumes this proposal would allow those claiming credits to do so sooner in many cases. However, it would also allow credits to be claimed for adoption expenses which do not actually culminate in legally adopting a special needs child. The number of children in temporary adoptive custody that moved consecutively from the Division of Family Services custody to temporary adoptive custody and then back to the Division of Family Services custody average about 12 a year (based on 1996-1998 data). Using the upper limit of $10,000 x 12 attempts per year = $120,000 per year. Oversight assumes this legislation would become effective for tax years beginning Jan. 1, 2000 and that losses would not be reflected until claims were filed in FY2001.

ASSUMPTION (continued)

SECTION 135.630-UNPLANNED PREGNANCY RESOURCE CENTER TAX CREDIT

Officials of the Department of Social Services, Division of Budget and Finance (DBF) state this portion of the proposal would authorize state tax credits for contributions to qualified unplanned pregnancy resource centers in this state.

This proposal would create additional responsibilities for the Division of Budget and Finance(DBF). It is assumed that DBF staff would be responsible for determining which facilities meet the provisions of this portion of the proposal. DBF would also be responsible for establishing procedures to equitably allocate credits to qualifying resource centers.

The cumulative amount of tax credits allowable in any fiscal year is $2,000,000. DBF staff would perform an initial allocation of the credits at the beginning of each fiscal year then redetermine the apportionment of the unused credits to ensure maximum use of the credits.

The number of staff requested is a function of the number of participating facilities. Based on a telephone conversation with Missouri Right to Life staff, there are 120 facilities who are included in a recently compiled listing of organizations that provide assistance to women with crisis pregnancies or unplanned pregnancies. Based on 120 facilities, DBF could perform the requirements of the legislation with one FTE. If the number of facilities wishing to be classified as unplanned pregnancy resource centers exceeds this amount, additional staff may be needed.

Officials of the Department of Insurance (INS) state this portion of the proposal would grant tax credits against an insurer's premium tax payments (chapter 148 RSMo.) for contributions to Unplanned Pregnancy Resource Centers.

There are approximately 300 domiciled insurance companies in Missouri which pay premium tax to the state. There are over 1,800 insurance companies licensed to conduct business in the state. For purposes of estimating fiscal impact, the INS anticipates that only domiciled companies would contribute. Credits are capped at $50,000 per year. A range of $0 to $2,000,000 is projected for decreased payments.

This proposal would result in a decrease in Total State Revenues.

FISCAL IMPACT - State Government	FY 2000	FY 2001	FY 2002
	(10 Mo.)
Loss to General Revenue Fund
Increase Tax credits for Special
Needs Nonrecurring
Adoption Expenses	$0	$0	$0
	to	to	to
	($120,000)	($120,000)	($120,000)
Tax credits for contributions made to
Unplanned Pregnancy Resource Centers	$0	$0	$0
	to	to	to
	($2,000,000)	($2,000,000)	($2,000,000)
Cost to General Revenue Fund
Department of Social Services (DOS)
Personal Service(1 FTE)	($25,666)	($31,582)	($32,371)
Fringe Benefits	($7,672)	($9,440)	($9,676)
Expense and Equipment	($7,084)	($920)	($947)
Total Administrative Costs to DOS	($40,422)	($41,942)	($42,994)
ESTIMATED NET EFFECT ON
GENERAL REVENUE FUND	($40,422)	($41,942)	($42,994)
	to	to	to
	($2,160,422)	($2,161,942)	($2,162,994)
Loss to County Stock Insurance Fund
Increase Tax credits for Special
Needs Nonrecurring
Adoption Expenses	$0	$0	$0
	to	to	to
	($120,000)	($120,000)	($120,000)
Tax credits for contributions made to
Unplanned Pregnancy Resource Centers	$0	$0	$0
	to	to	to
	($2,000,000)	($2,000,000)	($2,000,000)
FISCAL IMPACT - State Government	FY 2000	FY 2001	FY 2002
(Continued)	(10 Mo.)
ESTIMATED NET EFFECT ON
COUNTY STOCK INSURANCE FUND	$0	$0	$0
	to	to	to
	($2,120,000)	($2,120,000)	($2,120,000)
FISCAL IMPACT - Local Government	FY 2000	FY 2001	FY 2002
	(10 Mo.)
Loss to Political Subdivisions
Transfers from County Stock Insurance Fund		$0	$0
		to	to
	$0	($951,668)	($951,668)
ESTIMATED NET EFFECT ON
LOCAL GOVERNMENT		$0	$0
		to	to
	$0	($951,668)	($951,668)
FISCAL IMPACT - Small Business
Small businesses would be expected to be fiscally impacted to the extent that they are involved and incur nonrecurring adoption expenses for a special needs child or make contributions to unplanned pregnancy resource centers. Small businesses who incur these expenses may claim a tax credit for those expenses of up to $10,000 per child or up to $50,000 per year for contributions to unplanned pregnancy resource centers.

DESCRIPTION

This portion on the bill provides for tax credits for expenses incurred in the adoption of a special needs child. A special needs child is defined as a child: 1. Who cannot or should not be returned to the home of his or her parents; 2. Who has a specific factor such as age, membership in minority group, or handicap of which it is reasonable to conclude that the child cannot be easily adopted; or 3. On whose behalf efforts have been made to place the child with adoptive parents. Adoptive parents are allowed to take tax credits, up to a total of $10,000 per child, on nonrecurring adoption expenses incurred throughout the adoption process. The amount of total tax credits claimed in one year may not exceed two million dollars. Business entities providing funds to an employee to enable that employee to proceed in good faith with the adoption of a special needs child are also eligible for a $10,000 per child tax credit. Any tax credits exceeding the tax due may be carried over to the following year. Tax credits for special needs children may

DESCRIPTION (Continued)

also be assigned in their entirety to not for profit organizations, notwithstanding the taxpayer's tax due.

This portion of the bill authorizes certain tax credits for donations to unplanned pregnancy resource centers located in this state. Unplanned pregnancy resource centers are defined as facilities established for the purpose of providing assistance to women with crisis pregnancies or unplanned pregnancies by offering testing, counseling, emotional support, and other services which encourage and assist women in carrying their pregnancies to term. The centers must be affiliated with certain associations and agencies, must offer little or no birth control services, and cannot perform or refer for abortions. The credit for the donation may be taken from individual or corporate income taxes, corporate franchise taxes, insurance premium taxes, financial institution taxes, and express company taxes. The credit will be 50% of any donation made, must be at least $100 of value, and cannot exceed $50,000 in any one year. Total state-wide credits for taxpayers may not exceed $2 million. Excess credits may be carried forward to future tax years, but are not refundable. This bill will become effective January 1, 2000.

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 Insurance

Department of Social Services

Department of Revenue

Secretary of State's Office

Jeanne Jarrett, CPA

Director

March 1, 1999