COMMITTEE ON LEGISLATIVE RESEARCH

OVERSIGHT DIVISION



FISCAL NOTE



L.R. NO.: 2777-13

BILL NO.: Truly Agreed to and Finally Passed CCS for HS for HCS for SB 896

SUBJECT: Corporations: Business and Commerce

TYPE: Original

DATE: May 24, 2000




FISCAL SUMMARY



ESTIMATED NET EFFECT ON STATE FUNDS
FUND AFFECTED FY 2001 FY 2002 FY 2003
General Revenue ($840,592) ($851,247) ($855,237)
Insurance Dedicated $0 $0 $0
School District Trust ($5,719) ($8,007) ($8,408)
Conservation ($715) ($1,001) ($1,051)
Parks and Soil ($572) ($801) ($841)
Total Estimated

Net Effect on All

State Funds

($847,598) ($861,056) ($865,537)



ESTIMATED NET EFFECT ON FEDERAL FUNDS
FUND AFFECTED FY 2001 FY 2002 FY 2003
Total Estimated

Net Effect on All

Federal Funds

$0 $0 $0









ESTIMATED NET EFFECT ON LOCAL FUNDS
FUND AFFECTED FY 2001 FY 2002 FY 2003
Local Government ($8,579) ($12,011) ($12,611)

Numbers within parentheses: ( ) indicate costs or losses.

This fiscal note contains 11 pages.





FISCAL ANALYSIS



ASSUMPTION



Officials of the Department of Labor and Industrial Relations, Missouri Lottery Commission, and Office of Administration assume no fiscal impact.



Officials of the Office of Attorney General assume no fiscal impact.



Officials of the Department of Economic Department - Division of Finance assume no fiscal impact.



Officials of the Office of Secretary of State has identified several sections in this proposal

that would create additional duties and would have fiscal impact.



Officials estimate that the securities division would require 2 FTE and would need 600 Square feet of additional office space at an estimated annual cost of $5,100. SOS Officials stated the following:

Chapter 347: this legislation requires publishing notice of winding up in the Missouri Register

if a dissolving company wishes to bar unknown claims against the company. Last year limited liability corporations filed approximately 200 voluntary dissolutions with the Missouri Secretary of State. This bill provides that the notice be published in the Missouri Register, where the estimated cost of a page is $22.50. The actual cost could be more or less than the number given. The maximum estimated cost based on 1999 records would be $4,500.

Chapter 351: contains certain technical changes. Also, proposed section 351.055(9) would permit a corporation to include a provision in its articles of incorporation that impacts the potential personal liability of its directors. Section 351.482 of this legislation permits publishing notice of winding up at the request of the corporation by the Secretary of State in an electronic format accessible to the public in order to bar unknown claims against the corporation. Last year general corporations filed approximately 2,925 voluntary dissolutions were filed with the Missouri Secretary of State. Some, but not all, of these dissolving corporations will wish to publish notice in order to bar unknown claims. This office has no record of the number of companies that actually publish such a notice. In order to assist filers, convert the notice to an electronic format, and publish the notice will require additional FTE for a Clerk typist III and associated E&E. Also, Section 351.690(2) provides that the provision of chapter 351 are to be applicable to Banks, trust companies and safe deposit companies when chapter 351 "supplements" chapter 362.



ASSUMPTION (continued)



It is unclear what this provision means. If it is interpreted to mean that entities regulated under chapter 362 must also comply with all provisions of chapter 351, then such entities would be required to submit numerous filings to SOS (such as amendments, etc.). If such broad interpretation were employed, it would result in a substantial increase in filings made with the SOS. It is likely additional FTE (and associated E & E) would be required to process such filing in a timely manner.



Chapter 359:

1) would permit a limited partnership to have a perpetual existence. The current SOS mainframe system would have to be modified to accommodate this change. It is possible that additional temporary FTE would be required to implement this requirement.

2) would permit a limited partnership to dispose of unknown claims by filing a notice of winding up with SOS. The current SOS mainframe would have to be modified to accommodate this change. It is possible that additional temporary FTE would be required to implement this requirement. This legislation also requires publishing notice of winding up in the Missouri Register if a dissolving limited partnership wishes to bar unknown claims against the limited partnership. Last year limited partnerships filed approximately 100 voluntary dissolutions with the Missouri Secretary of State. Some, but not all of these dissolving limited partnerships will wish to publish notice in order to bar unknown claims. This office has no record of the number of companies that actually published such notice in a local newspaper under the current law. This bill provides that the notice be published in the Missouri Register, where the estimated cost of a page is $22.50. The actual cost would be more or less than the number given. The maximum estimated cost based on 1999 records if every dissolving limited partnership chose to publish would be $2,250.



The Administrative Rules Division estimates a Range 18 Associated Editor would be necessary to work with filers and receive, review and edit these additional notices in preparation for publication.



Officials of the Department of Insurance stated this proposal amends the laws relating to dissolving and winding up the affairs of domestic limited liability companies, general business corporations and limited partnerships.



This proposal also creates a license for organizational credit agencies. Legislation allows employees of a licensed credit agency organization to act as agents for the following types of insurance: credit life, credit accident and health, credit property, credit involuntary unemployment and any other form of credit or credit related insurance. Credit agencies would be licensed annually and submit a list of employees to the department who could act on the agency's behalf in soliciting, negotiating and procuring credit insurance. An insurer authorized to do business in the state must appoint the credit agency and its employees. Language has been added in sections 376.350 and 379.105 that prohibits the department from disclosing information regarding compensation of any employee or officer of an insurance company.





ASSUMPTION (continued)



Department of Insurance officials stated that an Organizational Credit Agency license fee is set at $100.00 and annual renewal at $50.00. Each licensed credit agency must pay a fee of $18.00 annually to the department for each employee submitted on the list of those employees that are authorized to act on its behalf. The insurer would be required to pay a $10.00 appointment or cancellation fee for each applicant designated under 375.065 2.(2). The department currently licenses 9,476 agents who do credit insurance. We are unable to determine how many of the 9,200 agencies we license are credit agencies. The department assumes that there would be minimal change within the number of agencies currently licensed. It further assumes that a minimal number of agents licensed under the current method would choose to be licensed as a organizational credit agency or would be an employee under such an organization therefore there would be minimal change within the number of agents currently licensed. The department assumes the legislation would most likely affect businesses and individuals that previously had not been licensed as either an agent or agency. These businesses and individuals might be those in retail sales who sell goods and services on credit and could now sell credit insurance in conjunction with their other business. The department anticipates an increase in the number of new businesses and individuals licensed as credit organizations. The department cannot estimate how many businesses or individuals would become licensed organizational credit agencies or how many employees acting on the agency's behalf would be submitted to the department. The department assumes there will be sufficient volume to require at least 1.00 additional licensing technician.



The department will also require contract computer programming to modify the existing

licensing system to accommodate the new license and track employees authorized to act on their behalf. This information is included in the annual statements filed with the department. The fiscal note reflects estimated cost for the department and unknown increased revenue from

licensing and appointment fees.

Insurance Licensing Technicians II: Review and process original applications and annual renewal applications for organizational credit agencies, maintain information on employees authorized to conduct business on the agencies behalf, process appointments by insurers.



Department of Insurance officials stated that they expect income from fees to be in an amount sufficient to cover the costs to the Insurance Dedicated Fund.



Oversight will show costs to the Insurance Dedicated Fund as zero.



Officials of the Office of Administration stated there would be fiscal impact related to Section 148.064.6 of this proposal.









ASSUMPTION (continued)



Division of Budget and Planning officials stated that according to the Department of Revenue there are 352 banks that would qualify for this credit, and they have outstanding shares and

surplus of $4,541,413,111. The revenue reduction to GR for a tax credit of 1/60th of 1% is $756,902.



Oversight for the purposes of this fiscal note assumes no fiscal impact related to the changes of filing certain documents with the Recorder of Deeds. Throughout this proposal certain documents have been required to be filed with the Recorder of Deeds of the county or city in which the corporation is either located, or in which the articles of Agreement have been filed. This proposal changes this requirement and requires all filings to be done in the public records section of the Division of Finance. Oversight assumed there would be a loss of income to those funds that receive monies from Recorder of Deeds filing fees. Oversight contacted the Boone County Recorder of Deeds for their response and found that these filings were unheard of. The Boone County Recorder then checked with the Recorder of Deeds of St. Louis City and Jackson County and determined that they were also unaware of any filings of records found in this proposal. Therefore, if these types of record filings are not currently being filed with the proper recording authority Oversight assumes there would be no loss of income to those funds which receive a portion of recording fees.



Section 144.815



Officials from the Department of Revenue (DOR) state this proposal creates a sales and use tax exemption for bullion and investment coins. The DOR states the proposal would have no administrative impact to their department, and would have unknown fiscal impact to total state

revenues.



Officials from the Office of Administration, Budget and Planning state this proposal would have an unknown impact on total state revenues.



Oversight assumes, according to the Merchandise Product Lines report from the 1992 Census of Retail Trade, that coins, metals and other numismatic items account for roughly 0.1% of retail sales at jewelry stores. Oversight assumes this would represent coins and gold bullion as defined in this proposal. Also, total sales of jewelry in the United States totaled $25,872,289,000.



Therefore, assuming that coins and metals sold outside of jewelry stores is proportionate to coins and metals sold within jewelry stores, the total sales of coins and metals in the United States in 1992 is estimated to be $25,872,289. Assuming that Missouri sales represent 1.9% of this total,

$491,573 of sales in Missouri in 1992 were for coins and metals. Growing the jewelry sales by

5% for all years since 1992, estimated sales in FY's 2001, 2002 and 2003 for coins and gold bullion are estimated to be $762,591, $800,721 and $840,757 respectively. This would result in a loss in sales tax revenue of $24,165 in FY 2001 (9 months), $33,830 in FY 2002 ans $35,522

in FY 2003.

FISCAL IMPACT - State Government FY 2001

(10 Mo.)

FY 2002 FY 2003
GENERAL REVENUE FUND
Costs to Secretary of State
Personal Services (2 FTE) ($42,790) ($53,403) ($55,539)
Fringe Benefits ($13,077) ($16,320) ($16,973)
Equipment ($10,665) ($600) ($600)
Expense $0 $0 $0
Estimated net expense to

Secretary of State



($66,532)


($70,323)


($73,112)
Loss to General Revenue Fund

from tax credit of 1/60th of 1%

(Section 148.064.6)





($756,902)




($756,902)




($756,902)
Loss-Sales tax exemption for sales of gold bullion and investment coins

(Section 144.815)





($17,158)




($24,022)




($25,223)
ESTIMATED NET EFFECT TO

GENERAL REVENUE FUND



($840,592)


($851,247)


($855,237)
INSURANCE DEDICATED FUND
Income to Insurance Dedicated Fund

from fees



$79,304


$34,362


$35,232
Costs to Insurance Dedicated Fund
Personal Service 1FTE ($20,041) ($24,660) ($25,277)
Fringe Benefits ($6,163) ($7,583) $7,773
Equipment ($7,426) $0 $0
Expense ($45,674) ($2,119) ($2,182)
Total costs to INS ($79,304) ($34,362) ($35,232)
ESTIMATED NET EFFECT TO

INSURANCE DEDICATED FUND



$0


$0


$0

*Insurance officials expect income from new fees to offset the administrative costs.



FISCAL IMPACT - State Government FY 2001

(10 Mo.)

FY 2002 FY 2003
SCHOOL DISTRICT TRUST
Loss - Sales tax exemption for sales of gold bullion and investment coins

(Section 144.815)





($5,719)




($8,007)




($8,408)
CONSERVATION
Loss-Sales tax exemption for gold bullion and investment coins

(Section 144.815)





($715)




($1,001)




($1,051)
PARKS AND SOIL
Loss-Sales tax exemption for sales of gold bullion and investment coins

(Section 144.815)





($572)




($801)




($841)




FISCAL IMPACT - Local Government FY 2001

(10 Mo.)

FY 2002 FY 2003
$0 $0 $0
CITIES AND COUNTIES
Loss-Sales tax exemption for sales of gold bullion and investment coins

(Section 144.815)





($8,579)




($12,011)




($12,611)


FISCAL IMPACT - Small Business



Small business that expect to be fiscally impacted due to the numerous changes in this proposal, including tax credits for banks that filed returns after December 31, 2000.



Small businesses that sell or purchase investment coins or gold bullion would be fiscally impacted by this proposed legislation from changed collection and reporting standards.

(Section 144.815)













DESCRIPTION

This substitute modifies the law relating to business organizations. In its major provisions, the substitute:

(1) Authorizes a $2.50 charge for processing a notice of lien (Section 136.055, RSMo);

(2) Requires county collectors to first apply payments for real property taxes to back delinquent taxes (Section 140.110);

(3) Modifies the definition of a resident estate or trust to require at least one income beneficiary

to be a resident of Missouri (Section 143.331);

(4) Allows banks a tax credit for returns filed after December 31, 2000 (Section 148.064);



(5) Allows liens on motor vehicles and boats to be effective with minor errors (Sections 301.600, 306.400);



(6) Modifies procedures for lienholders to secure and perfect future advances on motor vehicles

and boats (Sections 306.410, 306.420);

(7) Modifies procedures relating to the dissolution of limited liability companies (Sections 347.137, 306.141, 347.141);



(8) Extends from August 31, 2000, to August 31, 2001, the expiration date of certain provisions

relating to health services corporations organized as not-for-profit corporations (Sections 351.025, 354.065);

(9) Allows a corporation's articles of incorporation to limit the personal liability of a director and the indemnification of a director, officer, or employee when that person has been successful in an action related to the person's position with the corporation (Sections 351.355, 351.055);

(10) Prohibits a person from being admitted to vote on shares belonging to the corporation which issued the shares (Section 351.245);

(11) Allows a corporation to pay cash equal to the value of a fractional share (Section 351.300);

(12) Allows publication of a corporation's notice of dissolution in the Missouri Register. At request of the corporation, the Secretary of State could publish in an electronic format. (Section 351.482)

DESCRIPTION(continued)



(13) Allows bank and trust companies to operate in the same manner as other corporations when

the banking statutes do not apply (Section 351.690);

(14) Modifies procedures for the winding up of a limited partnership (Sections 359.451, 359.481, 359.091);

(15) Modifies several sections within Chapters 361 and 362 to facilitate a centralized filing system by allowing banks to file public documents with the Division of Finance;

(16) Requires presentation of claims under Section 361.540 to the circuit court of Cole County for determination of the priority of payment (Section 361.540);

(17) Allows state-chartered bank and trust companies to establish subsidiaries subject to the limitations that would be applicable to national banks (Section 362.105);



(18) Adds the Federal Home Loan Bank, the Federal Farm Credit Bank, and the Student Loan Marketing Association to the list of exclusions related to bank investment limits. This section is subject to an emergency clause (Section 362.170);

(19) Establishes procedures for banks to conduct reverse stock splits and to determine the value in a reverse stock split (Sections 362.325, 362.730, 362.740, 362.750);

(20) Allows foreign corporations to establish trust representative offices (Section 362.600);

(21) Expands the definition of "motor vehicle" in the Motor Vehicle Time Sales Act to include all-terrain vehicles, motorized bicycles, mopeds, and motor tricycles (Section 365.020);

(22) Allows savings and loan associations to invest in the Federal Home Loan Bank, the Federal Farm Credit Bank, and the Student Loan Marketing Association (Section 369.219);



(23) Creates a licensing process for credit insurance companies (Sections 375.022, 375.065);

(24) Prohibits the Department of Insurance from disclosing the compensation of an employee or officer of an insurance company (Sections 376.350, 379.105);

(25) Excludes fees charged for necessary services performed in connection with residential real estate loans and second mortgages from the determination of annual percentage rates (Sections 408.052, 408.234);

DESCRIPTION(continued)



(26) Regulates business opportunities and defines "business opportunity" as the sale or lease of any product, equipment, supplies, or services for which more than $500 has been paid for the

start-up of a business and in which written guarantees or other conditions are represented by the seller. A seller is prohibited from engaging in certain activities, including making certain

misrepresentations and false claims. A purchaser who suffers damages as a result of violations of the provisions may bring a civil action for damages and attorney's fees (Sections 407.125, 407.2000, 407.2015, and 407.2021);

(27) Requires persons requesting records from a savings and loan association for civil cases to reimburse the association $15 plus $0.35 per page and to pay reasonable expenses if an

association officer must appear in court or at a deposition (Section 369.371);



(28) Allows mortgage insurance to cover 100% of the market value of the property. Under current law, mortgage insurance may cover up to 97% of the value (Section 443.415);

(29) Updates several garnishment statutes (Sections 525.080 through 525.250);

(30) Requires limited liability companies that own or lease real property in Kansas City to file with the city clerk an affidavit listing the name and address of a person who has management responsibility for that real property (Section 1); and

(31) Requires the Speaker of the House and the President Pro Tem of the Senate to appoint a

state banking association to report recommendations for the removal or replacement of a corporate trustee when the original trustee has been replaced by a subsequent corporate trustee because of a merger, acquisition, or cessation of business by the original corporate trustee.

This section is subject to an emergency clause (Section 21.650).



(32) Setsforth Insurance Broker licensing procedures for out-of-state applicants and the procedures for the Department of Insurance to follow. (Section 375.017)



(33) The three year time line on Collectors of Revenue for the collection of delinquent and back

taxes would not apply if any real estate having a tax exempt status and would again become taxable real property would not be allowed for sale until the transfer instrument is recorded, (Section 140.160).



(34) Deletes trust companies from certain provisions relating to stock investment restrictions (Sections 362.119, 362.172);



(35) This proposal exempts from state and local sales and use tax any purchase of bullion and investment coins. (Section 144.815)





DESCRIPTION(continued)



(36) Requires securities and other related assets not exclusively controlled by and insurance company to be held by banks, trust companies, or securities depositories that are members of or regulated by the Securities and Exchange Commission, the Federal Reserve System, or the

appropriate bank regulatory authority (Section 375.347).

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



SOURCES OF INFORMATION



Missouri Lottery Commission

Office of Secretary of State

Office of Attorney General

Office of Administration

Department of Revenue

Department of Economic Development - Division of Finance

Department of Insurance

Department of Labor and Industrial Relations

Boone County Recorder of Deeds

Jackson County Recorder

City of St. Louis Recorder of Deeds













Jeanne Jarrett, CPA

Director May 24, 2000