2007 Legislative Session Status Update

(March 16, 2007) The Taxpayers Research Institute of Missouri has enjoyed some early success in our legislative priorities for the 2007 Legislative Session.

Our top sales and use tax priority, the exemption of manufacturing inputs, is poised for passage from the House following the legislative spring break. House Bill 131, sponsored by Rep. Shannon Cooper (R-120, Clinton) represents two years of hard work on this issue by the Taxpayers Research Institute. Last year our bill focused on eliminating the different tax treatment of gas and electricity purchased for use in manufacturing. This year, we drafted the proposal to also include other manufacturing inputs such as chemicals and other materials that are not currently exempt from sales and use taxes, and research and development machinery and equipment that was recently ruled taxable by the Missouri Supreme Court. The bill will erase a government burden on the manufacturing industry and allow Missouri manufacturers to enjoy exemptions that are already allowed in other states, such as Kansas. Missouri’s ability to compete with these other states will be greatly improved when this legislation becomes law. Disagreements between the taxing authority and taxpayers will also be minimized by this legislation. Currently, many disputes arise because of limitations on the exemptions in current law and differences in the interpretation of those limitations by auditors and taxpayers. Representatives of the Board of Directors and staff of Associated Industries of Missouri and the Taxpayers Research Institute of Missouri met with leadership in the House and Senate and the Governor’s staff regarding this proposal early in the session.

Three bills that would gradually eliminate the Missouri Corporation Franchise Tax are receiving attention this year. Legislators have debated eliminating the tax only for businesses that offer health insurance and pay part of the premiums for their employees – a proposal first recommended by Governor Matt Blunt. Senate Bill 590, sponsored by President Pro Tem Michael Gibbons (R-15, Kirkwood) allows all taxpayers to enjoy the reduction of franchise tax rate, but businesses that offer health insurance may avoid paying the tax altogether by paying a portion of their employees’ premiums. House Bill 219 (sponsored by Rep. Bryan Stevenson) and House Bill 458 (sponsored by Rep. Mike Sutherland) originally contained no health insurance requirement, but the requirement was added during the House debate on HB 458. The chances of one of these bills becoming law this legislative session are good as HB 458 has been approved by the House and sent to the Senate for further consideration.

Efforts are also underway to reduce or eliminate the Missouri Corporation Income Tax. House Bill 218, sponsored by Rep. Bryan Stevenson, would eliminate the corporation income tax over five years. Beginning with the 2012 tax year, no corporation income tax would be due. House Bill 621, sponsored by Rep. Scott Muschany, would reinstate the federal income tax deduction for individual and corporate taxpayers. We have provided the sponsor with language that would eliminate the negative impact to the Outstanding Schools Trust Fund. The bill received a hearing, but no further action has been taken on the bill.

A subcommittee of the AIM Tax Committee drafted a legislative change to the net operating loss calculation in House Bill 129, sponsored by Rep. Shannon Cooper. Companies that experience years of net operating losses could lose their ability to fully claim the net operating loss on their Missouri return under current law. This bill addresses the problem. The House Committee on Ways and Means has approved the bill.

Other bills of interest and their current status:

ADDITIONAL BILLS OF INTEREST 2007 SESSION
Bill Number(s)	Description	Status
HB 360	Provides additional film production tax credits	HOUSE PERFECTION CALENDAR
HCS HB 364	Health insurance deduction for small businesses	PERFECTED in HOUSE
HB 448	Tax credit for state sales tax paid on Missouri manufactured automobile purchased in Missouri	HOUSE PERFECTION CALENDAR
HB 725	Provides tax incentives to encourage the use of alternative fuels and alternative fuel vehicles	HOUSE COMMITTEE PASSED AS PART OF HCS HB 624
HB 768	Sales tax exemption for contractors performing contracts with MoDOT	HOUSE PERFECTION CALENDAR
HB 1000	Eliminates the Corporation Income Tax for the first five years of a new manufacturer’s existence in Missouri	HOUSE COMMITTEE HEARING COMPLETED
HB 1089	Provides certain activities will not create nexus	REFERRED TO HOUSE COMMITTEE
HJR 1	Constitutional amendment restricting Missouri courts’ authority in the areas of taxation, spending and budgeting	PASSED HOUSE - SENATE COMMITTEE HEARING COMPLETED
SB 30	Expands the current sales tax exemption for common carriers to include intrastate carriers	PASSED SENATE - AWAITING COMMITTEE REFERRAL IN HOUSE
SB 40	Creates tax incentives to encourage the use of alternative fuels and alternative fuel vehicles	SENATE INFORMAL PERFECTION CALENDAR
SB 199	Sales tax exemption for contractors performing contracts with MoDOT	PASSED SENATE - AWAITING COMMITTEE REFERRAL IN HOUSE
SB 294	Mandatory electronic filing for certain taxpayers	APPROVED BY SENATE COMMITTEE
SB 400	Provides additional film production tax credits	SENATE PERFECTION CALENDAR
SB 687	Provides certain activities will not create nexus	REFERRED TO SENATE COMMITTEE

For more information on this or other tax legislation, please contact Ray McCarty, Executive Director of the Taxpayers Research Institute of Missouri at raythetaxman@earthlink.net.