COMMITTEE ON LEGISLATIVE RESEARCH
OVERSIGHT DIVISION
FISCAL NOTE
L.R. No.: 2668-01
Bill No.: SB 808
Subject: Taxation - Income; Revenue Dept.; County Government
Type: Original
Date: January 18, 2002
FISCAL SUMMARY
| FUND AFFECTED | FY 2003 | FY 2004 | FY 2005 |
| General Revenue | ($281,394,843) | ($287,040,220) | ($292,843,726) |
| Total Estimated
Net Effect on All State Funds |
($281,394,843) | ($287,040,220) |
($292,843,726) |
| FUND AFFECTED | FY 2003 | FY 2004 | FY 2005 |
| None | |||
| Total Estimated
Net Effect on All Federal Funds |
$0 | $0 | $0 |
| FUND AFFECTED | FY 2003 | FY 2004 | FY 2005 |
| Local Government | $0 | $0 | $0 |
Numbers within parentheses: ( ) indicate costs or losses.
This fiscal note contains 4 pages.
ASSUMPTION
Officials of the Department of Revenue (DOR) state this legislation allows a tax credit up to $150 per taxpayer for taxes paid on residential property owned by the taxpayer. The tax credit is nonrefundable, and will be reduced by the amount of the property tax credit claimed pursuant to Section 135.010 through 135.035, RSMo. This legislation is effective for tax years beginning on or after January 1, 2002.
In order to process the tax credits, the Division of Taxation will need one temporary tax season employee (a cost of $6,067) for every 75,000 returns filed with this credit and one tax season employee for every 4,000 pieces of correspondence received regarding the credit. The Division will also need one Tax Processing Tech I for every 30,000 additional errors generated by this credit.
There were approximately 2,292,957 Missouri resident returns filed in 1998. In a similar fiscal note, it was reported that 61% of Missourians live in owner occupied housing. Therefore, the Department anticipates 1,398,703 taxpayers will take the tax credit, requiring 19 additional tax season temporary employees to maintain current processing time. The additional employees needed for correspondence and new errors are unknown, and will be requested through the normal budget process.
This legislation will require modifications to the individual income tax systems. The Division of Taxation estimates these modifications, including programming changes, will require 1,730 hours of overtime at a cost of $57,713. Modifications to the income tax returns and schedules will be completed with existing resources. State Data Center charges will increase due to the additional storage and fields to be captured. Funding in the amount of $11,323 is requested for implementation costs.
Oversight, for purposes of this fiscal note, has assumed DOR could handle the provisions of this proposal utilizing 519 hours of overtime at a cost of $25,950. In addition to the programming changes, Oversight has allowed $11,323 in funding for State Data Center changes.
Officials of the Office of Administration - Division of Budget and Planning (BAP) state this legislation creates an individual income tax credit for property tax paid of $150 per return.
There are approximately 1,052,084 combined filers and 1,117,388 single resident filers in Missouri. The estimate assumes that 72% of filers will take the property tax credit. According to the 2000 third quarter Housing Vacancies and Home ownership Survey by the U.S. Census
Bureau approximately 72% of Midwesterners live in owner occupied housing. The average
residential property tax in Missouri is $720. BAP assumed a two percent annual growth. BAP
ASSUMPTION (continued)
estimates losses of $347.9 million in FY03, $354.9 million in FY04 and $362 million in FY05.
According to research from the University of Missouri, the 2000 census shows 1,542,149 owner-occupied households with married couples making up 52 percent of the households. The maximum amount of credit would be: $351.6 million ($150 x 1,542,149 x 1.52) less $80 million from Property Tax Credit and approximately $35 million from returns with a liability under $150 equals $236.6 million total estimated cost.
Oversight assumes 84% (2,183,111/2,608,795) of income tax filers will have a tax liability, based on the 1999 returns. Using BAP's estimates and adjusting for out-of-state returns, zero tax liability returns and Form 40 returns filed with PTC for rent paid, Oversight estimates losses of $281.3 million in FY03, $286.9 million in FY04 and $292.7 million in FY05.
Officials of the Missouri Tax Commission (TAX) assume this bill will have no fiscal impact on their agency. However, TAX notes that the 2000 census indicates there are 2.2 million households in Missouri of which 70% are owner occupied. TAX does not have data regarding the number of taxpayers submitting income tax returns.
This legislation will reduce total state revenues.
| FISCAL IMPACT - State Government | FY 2003
(10 Mo.) |
FY 2004 | FY 2005 |
| GENERAL REVENUE FUND | |||
| Loss to General Revenue Fund
Residential property tax credit |
($281,300,000) |
($286,900,000) |
($292,700,000) |
| Cost - Department of Revenue | |||
| Temp. Personal Service (19) | ($68,400) | ($140,220) | ($143,726) |
| Programming changes | ($37,273) | $0 | $0 |
| Total Costs - DOR | ($94,843) | ($140,220) | ($143,726) |
| ESTIMATED NET EFFECT ON GENERAL REVENUE FUND |
($281,394,843) |
($287,040,220) |
($292,843,726) |
| FISCAL IMPACT - Local Government | FY 2003
(10 Mo.) |
FY 2004 | FY 2005 |
| $0 | $0 | $0 | |
FISCAL IMPACT - Small Business
No direct fiscal impact to small businesses would be expected as a result of this proposal.
DESCRIPTION
This act allows individual income taxpayers to claim a credit against their state income tax liability for up to $150 of their property tax liability. The credit can be taken for the 2002 tax year and thereafter.
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
Office of Administration
Division of Budget and Planning
Missouri Tax Commission
University of Missouri
Mickey Wilson, CPA
Acting Director
January 18, 2002