COMMITTEE ON LEGISLATIVE RESEARCH
OVERSIGHT DIVISION
FISCAL NOTE
L.R. No.: 4939-21
Bill No.: Truly Agreed To and Finally Passed CCS for HS for HCS for SS for SB 1248
Subject: Taxation and Revenue - General; Taxation and Revenue - Income; Taxation and Revenue - Sales and Use
Type: Original
Date: June 6, 2002
FISCAL SUMMARY
| FUND AFFECTED | FY 2003 | FY 2004 | FY 2005 |
|
General Revenue |
$44,825,703 to (Unknown) | $12,870,000 | $12,870,000 |
| Pharmacy Reimbursement Allowance Fund | $0 | $0 | $0 |
| Schools of the Future Fund | $0 | $0 | $0 |
| Lottery Enterprise Fund | $0 | $0 | $0 |
| Escheats Fund | ($6,600,000) | $0 | $0 |
| State School Moneys Fund | $0 | $0 | $0 |
| Abandoned Fund Account | ($300,000) | ($300,000) | ($300,000) |
| Public Schools Fund | $300,000 | $300,000 | $300,000 |
| Lottery Proceeds Fund for Education | ($5,000,000) | $0 | $0 |
| Total Estimated
Net Effect on All State Funds |
$33,225,703 to (Unknown) | $12,870,000 | $12,870,000 |
| FUND AFFECTED | FY 2003 | FY 2004 | FY 2005 |
| Total Estimated
Net Effect on All Federal Funds |
$0 | $0 | $0 |
| FUND AFFECTED | FY 2003 | FY 2004 | FY 2005 |
| School Districts | $114,142,043 | $0 | $0 |
Numbers within parentheses: ( ) indicate costs or losses.
This fiscal note contains 15 pages.
ASSUMPTION
Officials from the Office of Administration - Division of Budget and Planning (BAP) projected revenues resulting from various provisions of this proposed legislation. BAP estimates are based on information provided by the Department of Revenue, State Treasurer's Office, and the Office of Attorney General. These revenue projections are outlined in the individual sections of this analysis.
Officials from the Department of Elementary and Secondary Education were unable to estimate the dollar impact to the "Schools of the Future Fund" resulting from this proposed legislation; however, new funds deposited in the schools of the future fund would appear to lessen the call on general revenue funds required to fully fund state aid to public schools.
Officials from the Secretary of State's Office (SOS) assumed the rules, regulations and forms issued by the Department of Revenue and the Department of Social Services could require as many as 24 pages in the Code of State Regulations. For any given rule, roughly half again as many pages are published in the Missouri Register in the Code because cost statements, fiscal notes and the like are not repeated in the Code. These costs are estimated. The estimated cost of a page in the Missouri Register is $23. The estimated cost of a page in the Code of State Regulations is $27. The actual cost for FY03 is estimated at $1,476 but could be more or less than the numbers given. The impact of this legislation in future years is unknown and depends upon the frequency and length of rules filed, amended, rescinded or withdrawn.
ASSUMPTION (continued)
Oversight assumes the SOS could absorb the costs of printing and distributing regulations related to this proposal. If multiple bills pass which require the printing and distribution of regulations at substantial costs, the SOS could request funding through the appropriations process. Any decisions to raise fees to defray costs would be made in subsequent fiscal years.
Officials from the Office of Attorney General assume that any costs associated with this proposed legislation, including any actions taken on behalf of the State Treasurer pursuant to Section 447.532 (unclaimed property) can be absorbed with existing resources.
Officials from the following agencies indicated there would be no fiscal impact to their agencies resulting from this proposed legislation: Department of Public Safety - Missouri State Highway Patrol and Missouri Gaming Commission, Missouri SenioRx Program, Department of Health and Senior Services, and the Department of Transportation.
SECTION 32.069 - Interest on State Tax Refunds
Officials from the Office of State Treasurer (STO) staff assume that there would be a revenue savings generated from linking the interest rate paid on refunds to the actual rate earned on state funds. However, STO will deferred to the estimate provided by the Department of Revenue for this portion of the proposal.
Officials from the Office of Administration - Division of Budget and Planning and the Department of Revenue (DOR) estimate the saving on non-payment of interest on tax refunds unless the payment is delayed for more than 120 days to be $6,000,000 annually. Additional state revenue received pursuant to this section shall be transferred to the "Schools of the Future Fund".
DOR provided the following assumptions regarding administrative impact as it relates to this portion of the proposed legislation:
Because the interest rate applied to an overpayment is different than delinquencies, modifications to the income, corporate, motor fuel and withholding tax systems will be needed. Information Technology will need 4 Programmers for 4 months at a cost of $92,340 to create a system to handle this process.
This legislation will increase the printing and postage amounts utilized by the department because of the additional notices for underpays being issued to taxpayers. Because of confusion by the taxpayer on delinquent payments, it is anticipated that additional telephone calls will be received on the MOSAIX system. It is anticipated that one Tax Collection Tech I will be needed for every 24,000 calls a year resulting from the fluctuating interest rate on delinquencies.
Oversight assumes the DOR could absorb the work associated with the additional phone calls
ASSUMPTION (continued)
with existing staff. However, if the number of calls and related work increases significantly, the DOR may need to request additional staff through the appropriations process.
SECTION 136.320 - Amnesty of Penalties, Additions, and Interest
Officials from the Office of Administration - Division of Budget and Planning estimate revenues generated by this section would be $20,000,000 which would be transferred to the "Schools of the Future Fund".
Officials of the Department of Revenue - Division of Taxation (DOR) assume the following administrative impact to various divisions of DOR:
Business Tax - MITS will need program changes in order to implement the amnesty program. An amnesty sales tax form will need to be developed. Business Tax will need temporary staff or overtime to handle the increased mail and check processing.
Personal Tax - DOR assumes overtime may be incurred to have the amnesty wrapped up within the 90 days proposed in the legislation with notification back to the taxpayer of approval or not. Additional postage will be incurred; it could be as much as $10,000 but should not exceed $100,000. It will depend on taxpayer response to the amnesty.
Information Tech - DOR assumes this legislation will impact several separate and unique systems MINITS, COINS, Employer Withholding, MITS, Motor Vehicle Delinquent Fee. Each of the systems will need program changes to generate letters to notify taxpayers of the amnesty program. Approval letters will also need to be generated. Each system will need to be programmed to earmark the amount collected as a result of the amnesty to the school moneys fund instead of GR. An amnesty program will need to be developed for each tax system in order to monitor and administer the program. DOR estimates that the above program changes (to all tax systems) will require 6,055 hours of programming for a total cost of $201,995. The State Data Center cost to implement the proposed legislation will be $39,404.
SECTION 143.121 & 143.122 - Decouple from Federal Accelerated Cost Recovery
Officials from the Office of Administration - Division of Budget and Planning (BAP) estimate revenues of $72,000,000 will be generated in FY 03 as a result of this proposed legislation with $27,000,000 to be transferred to the "Schools of the Future Fund".
SECTION 143.811 - Interest on Tax Credit Carry Back
Officials from the Office of Administration - (BAP) assume this portion of the proposal will generate $6,000,000 in savings annually due to elimination of interest on carry-backs of tax credits which will be transferred to the "Schools of the Future Fund".
ASSUMPTION (continued)
Officials from the Department of Revenue (DOR) assume this legislation prevents interest on refunds due to tax credit carry-backs. This will have no administrative impact to DOR.
Section 313.300 and 313.301 - Lottery Winning Claim Period/Lottery Fund Transfer
Officials from the Lottery Commission (LOT) estimate the change in section 313.300 will result in the transfer of $2 million additional dollars from the Lottery Enterprise Fund to the Lottery Proceeds Fund for Education in FY 03. This is a one time transfer and not relevant to future fiscal years. In addition, section 313.301 requires that in fiscal year 03, $5 million will be transferred out of the Lottery Proceeds Fund for Education and deposited to the credit of the Schools of the Future Fund.
Chapter 338 - Provider Tax For Prescriptions
Officials from the Office of Administration - Division of Budget and Planning estimate revenues produced by this portion of the proposed legislation to be approximately $31,500,000 for FY 03.
Officials from the Missouri Consolidated Health Care Plan (HCP) assume the pharmacies will take the increased dispensing fees into account when negotiating with the pharmacy benefit managers and assume no fiscal impact.
Officials from the Department of Conservation (MDC) stated that this proposed legislation would have a fiscal impact on MDC's prescription drug benefit plan, because it imposes up to a six percent tax on retail pharmacy prescription sales. The estimated impact could be $100,000 annually. Oversight assumes this cost will not be passed on to purchasers, therefore there would be no fiscal impact to MDC.
Officials from the Department of Insurance assume the additional workload to commission the impact study and to solicit advice and input for the selection of the economist and actuary could be absorbed with existing staff.
Officials from the Department of Mental Health (DMH) assume pharmacies will not pass the cost of the tax along to cash purchasers, based on discussion with staff from Medicaid's pharmacy program. Therefore, the fiscal impact to DMH from this portion of the legislation remains zero.
Officials of the Department of Revenue - Division of Taxation (DOR) assume the following administrative impact to various divisions of DOR:
Business Tax - If DOR only cashiers the pharmacy tax, there would be no administrative impact on the Division of Taxation and Collection. However, if the language remains as drafted DOR
ASSUMPTION (continued)
would need two Tax Processing Tech I's to process the monthly reports and provide Social Services with the quarterly figures to collect.
Information Technology - According to DOR, the proposed legislation would require a new system. The complexity of the system includes sharing duties and responsibilities with the Department of Social Services (DOS), DOR providing information to DOS to collect the money, which is done separate from reporting, and then payable to DOR. It is estimated that the 6,228 hours of programming would be required to develop a new system to handle the functions mentioned at a cost of $207,766. The State Data Center charges to implement the proposed legislation would be $40,530.
Officials from the Department of Social Services (DOS) assume that they would be the primary agency responsible for the administration of the program. The responsibilities of the DOS would include (1) promulgating the rules on the formula for the tax, (2) notifying the pharmacies of the amount of tax due and amount of tax paid on a quarterly basis, (3) facilitating an offset, if requested by the provider, (4) notifying pharmacies of taxes due greater than 90 days, and (5) filing state plan amendment and make system changes to increase dispensing fees.
The Division of Medical Services (DMS) assumes the implementation and maintenance of this program would require one additional FTE. A Management Analysis Specialist II would be
needed at a cost of $69,482 for salary, fringe benefits and equipment and expense.
The DMS estimates retail pharmacy sales for FY03 at $2.96 billion. This is based on a report produced by Novartis on calendar year 2000 and inflated 3% annually. For the purposes of this fiscal note, DMS assumed that the tax rate would be 1.86%, which would yield revenue of $55,056,000. The Medicaid dispensing fee would be adjusted to equal the tax assessment plus 10% which comes to $60,561,600 ($55,056,000 + ($55,056,000 x 10%)). The GR of $60,561,600 is $23,503,957. The net gain in terms of GR to the state is $31,552,043
($55,056,600-$23,503,957). The GR of $31,552,043 allows DMS to draw federal funds of $49,746,702 for a total of $81,298,745. The increase in the Medicaid dispensing fee has been requested in a separate decision item in the DOS budget.
Sections 447.532; 470.270; 542.301 - Unclaimed Property Time Limit
Officials from the Office of Administration - Division of Budget and Planning estimate this change in legislation would generate approximately $10,000,000 in additional revenue for FY 03.
Chapter 470 - Estate Escheat Fund
Officials from the Office of Administration - Division of Budget and Planning project
revenue estimates for $6,600,000 for FY 03 as a result of this proposed legislation.
ASSUMPTION (continued)
Officials from the Department of Mental Health (DMH) state that section 470.020 indicates that all moneys in the escheats fund on or after December 31, 2002 shall be transferred to the Abandoned Fund account and the Escheats Fund shall be abolished. Currently, there is a specific statute relating to the disposition of unclaimed funds of DMH patients. Section 630.320.2(1) and (2) indicate that amounts less than $100 shall be deposited into the state treasury to the credit of the mental health trust fund. Such money shall escheat and vest absolutely in the State of Missouri. In addition, amounts of $100 or more shall be deposited into the state treasury to the credit of the general revenue fund in a special account designated as escheat. Claims may be made, for a period of two years after deposit into the escheat account. After remaining unclaimed for two years, such moneys shall escheat and vest absolutely in the state of Missouri and be credited to the mental health trust fund.
| DMH assumes the current practice of disposing unclaimed client funds will continue. DMH
further assumes these funds will continue to be transferred to a GR account pursuant to Section 630.320 since these funds do not appear to be unclaimed property as defined under Section 470. Therefore, DMH assumes no fiscal impact. |
| FISCAL IMPACT - State Government | FY 2003 | FY 2004 | FY 2005 |
| GENERAL REVENUE | |||
| Income - Amnesty Tax Revenue (Section 136.320) |
$20,000,000 |
$0 |
$0 |
| Income - Decouple from Fed Accelerated Cost Recovery (143.121) |
$72,000,000 |
$0 |
$0 |
| Income - State Treasurer - Increased Interest Earnings from Abandoned Funds Account due to abolishment of Escheats Fund |
$120,000 |
$240,000 |
$240,000 |
| Savings - Interest on State Tax Refunds (Section 32.069) |
$6,000,000 |
$6,000,000 |
$6,000,000 |
| Savings - Elimination of Interest on Carry-backs of Tax Credits (Section 143.811) |
$6,000,000 |
$6,000,000 |
$6,000,000 |
| Transfer In - Abandoned Fund (Net increase from escheats) |
$315,000 |
$630,000 |
$630,000 |
| GENERAL REVENUE (Continued)
Costs - Department of Social Services - Division of Medical Services |
|||
| Personal Services (1 FTE) | ($22,195) | $0 | $0 |
| Fringe Benefits | ($7,992) | $0 | $0 |
| Expense and Equipment | ($4,554) | $0 | $0 |
| Total Costs - Department of Social Services - Division of Medical Services |
($34,741) |
$0 |
$0 |
| Costs - Department of Revenue | |||
| Personal Services (2 FTE) | ($42,384) | $0 | $0 |
| Fringe Benefits | ($15,262) | $0 | $0 |
| Expense and Equipment | ($17,215) | $0 | $0 |
|
Postage (Amnesty) |
($10,000 to $100,000) | $0 | $0 |
| Programming (Pharmacy) | ($248,296) | $0 | $0 |
| Programming (Amnesty) | ($241,399) | $0 | $0 |
|
Total Costs - Department of Revenue |
($574,556 to $664,556) | $0 | $0 |
| Loss - General Revenue
Decrease in Additions to Tax, Penalties and Interest |
(Unknown) |
$0 |
$0 |
| Transfer Out - Schools of the Future Fund
Amnesty Tax Revenue (Section 136.320) |
($20,000,000) |
$0 |
$0 |
| Transfer Out - Schools of the Future Fund - Tangible Property Depreciation | ($27,000,000) | $0 | $0 |
| Transfer Out - Schools of the Future Fund Interest Savings on Carry-backs of Tax Credits (Section 143.811) |
($6,000,000) |
$0 |
$0 |
| Transfer Out - Schools of the Future Fund
Savings Due to Not Paying Interest on State Tax Refunds (Section 32.069) |
($6,000,000) |
$0 |
$0 |
| ESTIMATED NET EFFECT TO THE GENERAL REVENUE FUND | $44,825,703 to (Unknown) |
$12,870,000 |
$12,870,000 |
| LOTTERY ENTERPRISE FUND | |||
| Transfer In - Unclaimed Prize Money (Section 313.300) |
$2,000,000 |
$0 |
$0 |
| Transfer Out - Lottery Proceeds Fund | ($2,000,000) | $0 | $0 |
| ESTIMATED NET EFFECT ON LOTTERY ENTERPRISE FUND |
$0 |
$0 |
$0 |
| LOTTERY PROCEEDS FOR EDUCATION FUND | |||
| Transfer In - Lottery Enterprise Fund - Unclaimed Prize Money (Section 313.300) |
$2,000,000 |
$0 |
$0 |
| Transfer Out - To Schools of the Future Fund (Sections 313.300 & 313.301) |
($7,000,000) |
$0 |
$0 |
| ESTIMATED NET EFFECT ON LOTTERY PROCEEDS FOR EDUCATION FUND |
($5,000,000) |
$0 |
$0 |
| PHARMACY REIMBURSEMENT ALLOWANCE FUND | |||
| Income - Department of Revenue | |||
| Pharmacy tax | $55,056,000 | $0 | $0 |
| Cost - Dept of Social Services - Increased pharmacy dispensing fee |
($23,503,957) |
$0 |
$0 |
| Transfer Out - State School Monies Fund | ($31,552,053) | $0 | $0 |
| ESTIMATED NET EFFECT TO PHARMACY REIMBURSEMENT ALLOWANCE FUND |
$0 |
$0 |
$0 |
|
|
|||
| ESCHEATS FUND | |||
| Transfer Out - To Abandoned Fund Account (Section 470.020) |
($6,600,000) |
$0 |
$0 |
| ESTIMATED NET EFFECT TO ESCHEATS FUND |
($6,600,000) |
$0 |
$0 |
| ABANDONED FUND ACCOUNT | |||
| Income - Net increase to Abandoned Fund Account due to abolishment of Escheats Fund |
$315,000 |
$630,000 |
$630,000 |
| Income - Unclaimed Property (Sections 447.532; 470.270; 542.301) | $10,000,000 | $0 | $0 |
| Transfer In - Escheats Fund (Section 470.020) |
$6,600,000 |
$0 |
$0 |
| Transfer Out - Schools of the Future Fund | ($16,600,000) | $0 | $0 |
| Transfer Out - General Revenue | ($315,000) | ($630,000) | ($630,000) |
| Transfer Out - Public Schools Fund (Section 470.020) |
($300,000) |
($300,000) |
($300,000) |
| ESTIMATED NET EFFECT TO ABANDONED FUND ACCOUNT |
($300,000) |
($300,000) |
($300,000) |
| SCHOOLS OF THE FUTURE FUND | |||
| Transfer In - General Revenue | $59,000,000 | $0 | $0 |
| Transfer In - Abandoned Fund Account | $16,600,000 | $0 | $0 |
| Transfer In - Lottery Proceeds for Education Fund (Sections 313.300 & 313.301) |
$7,000,000 |
$0 |
$0 |
| Transfer Out - Transfer to State School Moneys Fund |
($82,600,000) |
$0 |
$0 |
| SCHOOLS OF THE FUTURE (Cont) | |||
| ESTIMATED NET EFFECT TO THE SCHOOLS OF THE FUTURE FUND |
$0 |
$0 |
$0 |
| STATE SCHOOL MONEYS FUND | |||
| Transfer In - Transfer from Schools of the Future Fund |
$82,600,000 |
$0 |
$0 |
| Transfer In - Transfer from Pharmacy Reimbursement Allowance Fund |
$31,552,043 |
$0 |
$0 |
| Transfer Out - State Aid Distributions to School Districts |
($114,152,043) |
$0 |
$0 |
| NET EFFECT ON STATE SCHOOL MONEYS FUND |
$0 |
$0 |
$0 |
| PUBLIC SCHOOLS FUND | |||
| Transfer In - Abandoned Fund Account | $300,000 | $300,000 | $300,000 |
| ESTIMATED NET EFFECT ON PUBLIC SCHOOLS FUND |
$300,000 |
$300,000 |
$300,000 |
| FEDERAL FUNDS | |||
| Income - Department of Social Services | |||
| Additional federal draw-downs | $49,746,702 | $0 | $0 |
| Medicaid reimbursements | $34,741 | $0 | $0 |
| Total Income - Department of Social Services - Division of Medical Services |
$49,781,443 |
$0 |
$0 |
| FEDERAL FUNDS (Continued)
Costs - Department of Social Services - Division of Medical Services |
|||
| Personal Services (1 FTE) | ($22,195) | $0 | $0 |
| Fringe Benefits | ($7,992) | $0 | $0 |
| Expense and Equipment | ($4,554) | $0 | $0 |
| Medicaid pharmacy program costs | ($49,746,702) | $0 | $0 |
| Total Costs - Department of Social Services - Division of Medical Services |
($49,781,443) |
$0 |
$0 |
| ESTIMATED NET EFFECT ON FEDERAL FUND |
$0 |
$0 |
$0 |
| FISCAL IMPACT - Local Governments | FY 2003 | FY 2004 | FY 2005 |
| SCHOOL DISTRICTS | |||
| Income - State Aid Distributions from State School Moneys Fund |
$114,142,043 |
$0 |
$0 |
| ESTIMATED NET EFFECT ON SCHOOL DISTRICTS |
$114,142,043 |
$0 |
$0 |
FISCAL IMPACT - Small Business
Small Businesses can expect to be fiscally impacted due to this proposed legislation.
DESCRIPTION
This proposed legislation modifies various provisions related to collection and refund procedures of sales and income taxes:
Section 32.068 - CALCULATION OF INTEREST ON REFUNDS
Requires the State Treasurer to calculate quarterly an annual rate of interest equal to the average rate of return on all funds invested by the State Treasurer. This calculated interest rate will be applied to situations for which Missouri pays interest to parties on various overpayments received by the state. Under current law, interest applied to most overpayments is based on the
DESCRIPTION (continued)
adjusted prime rate charged by banks.
Section 32.069 - INTEREST ON REFUNDS
Allows interest to be paid on state tax refunds or overpayments only if payment is delayed for more than 120 days.
Section 136.320 - TAX AMNESTY PROGRAM
Requires that amnesty shall be granted for all interest and additions to tax with respect to unpaid taxes that are paid in full between August 1, 2002, and October 31, 2002; such amnesty shall not apply to persons involved in a criminal or civil litigation related to the tax liability.
Section 143.121 - DECOUPLE FROM FEDERAL ACCELERATED COST RECOVERY
Returns the current income tax law regarding tangible property depreciation to pre-March 2002 law in reference to the September 11, 2001 terrorist attacks; this section only affects the items purchased between July 1, 2002 to June 30, 2003.
Section 143.121 - NET OPERATING LOSS
Prevents the federal NOL carry forward and carry back change from affecting Missouri; maintains the current 20 year carry forward and two year carry back.
Section 143.811 - INTEREST ON TAX CREDIT CARRY BACK
Eliminates interest on tax credit carry backs claimed by amended returns.
Section 313.300 - LOTTERY WINNINGS CLAIM PERIOD
Changes the period for claiming lottery winning from 1 year to 6 months.
Section 313.301 - LOTTERY FUND TRANSFER
Provides that $5 million of reserve funds in the State Lottery Fund will be transferred to the Schools of the Future Fund on July 1, 2002.
Chapter 338 - PROVIDER TAX FOR PRESCRIPTIONS
Imposes a tax upon licensed retail pharmacies in Missouri for the privilege of providing
DESCRIPTION (continued)
outpatient prescription drugs; an increase to the provider fee is implemented to offset this tax increase.
Sections 447.532; 470.270; 542.301 - UNCLAIMED PROPERTY TIME LIMIT
Accelerates unclaimed property transfers from state entities from state treasurer from five or seven years to three; clarifies that monies help by courts include receiverships and custodianships; property seized and held by police is transferred to unclaimed property fund if not forfeited or claimed by owner.
Section 447.532 and Chapter 470 - ESTATE ESCHEAT FUND
Accelerates transfers of monies from courts into the Abandoned Property Fund where they may be transferred to General Revenue; the rightful owner of funds in the Abandoned Property Fund has a right to such money at all times.
Section 1 - SCHOOLS OF THE FUTURE FUND
Creates "Schools of the Future Fund". Appropriation of the moneys deposited into the schools of the future fund shall be used solely for the purpose of fully funding state aid to public schools pursuant to section 163.031, RSMo.
THIS PROPOSAL HAS AN EMERGENCY CLAUSE
This legislation is not federally mandated, would not duplicate any other program and would not require additional capital improvements or rental space.
THIS PROPOSAL WILL INCREASE TOTAL STATE REVENUE
SOURCES OF INFORMATION
Department of Elementary and Secondary Education
Department of Revenue
Office of Administration
Division of Budget and Planning
Office of Secretary of State
Administrative Rules Division
Office of State Treasurer
Department of Health and Senior Services
Department of Social Services
Office of Attorney General
Department of Mental Health
Department of Conservation
Missouri Consolidated Health Care Plan
Department of Transportation
Department of Public Safety
Missouri Lottery Commission
Office of State Courts Administrator
Department of Insurance
Department of Health - Senior Rx
Mickey Wilson, CPA
Acting Director
June 6, 2002