At issue is which state taxes must be “added back” into Missouri income. Missouri requires any state income taxes that have been deducted to be “added back”, but the law does not specify which state taxes are truly “income taxes”. The issue can be confusing, especially when a state tax has some features of an income tax and some features of another type of tax, such as a franchise tax. For example, the DOR believes the California Franchise Tax should be considered an “income tax”, even though they have argued in at least one case before the Administrative Hearing Commission that the California Franchise Tax is NOT an income tax. Regardless, the DOR believes it is better for taxpayers to know where they stand on the issue, while we represent taxpayers that do not want the DOR to attempt to expand the statute by regulation. If the rule is broader than existing law allows, the DOR would in effect be legislating through regulation, a power reserved for the legislature by the Missouri Constitution.
At the invitation of Rep. Bryan Stevenson, Chairman of the Joint Committee on Administrative Rules, AIM and TRIM, along with other business representatives, are forming a group to work with key staff from the Missouri Department of Revenue. The goal of the group will be to see if there is common ground that may allow the DOR to produce a rule that does not go beyond the current statute and case law on the subject. Director of Revenue Omar Davis has indicated he is willing to listen to our concerns and indicated they intend to file the proposed regulation around the end of May. If you would like to work with the group, please contact Ray McCarty, Executive Director of TRIM, at ray@raymccarty.com as soon as possible.
