- Committee -

SCS/SB 1099 - This act makes various changes to the various Missouri tax credits. The act:

(1) Establishes a system of classifications for tax credits and minimum requirements for each classification. The requirements are designed to verify compliance and instill confidence in the tax credit system, but avoid undue burdens on the individuals and businesses who apply for the credits.

The act follows established classifications and application requirements where possible. The administering state agencies are enabled to implement rules to include additional requirements or explain the listed requirements. Any such rules are subject to the standard rules promulgation and approval requirements.

(2) Implements reporting requirements focused on gathering meaningful information in order to assist future legislatures in assessing the value of tax credit programs. The reporting requirements are varied to reflect the diverse landscape of the currently enacted tax credits.

The requirements reflect differences between economic development credits and social benefit credits that have benefits that are not revealed in the same empirical fashion. Reporting occurs over a period of three years for most credits. Annual reporting is fixed to a date certain (June 30) for all reports.

Reporting is the duty of the recipient of the credit, and not any subsequent purchaser, in the case of a transferred credit. An exception to this is made in the case of contribution based credits. These credits are obtained differently from other credits. Contribution based credits are given to the a contributor who donates money to a specific program. The state policy is the promotion of the program, and thus reporting is the duty of the recipient of the contribution and not the recipient of the credit. Additionally, the act requires that a taxpayer receiving a credit be made aware of the future reporting requirements prior to issuance.

(3) Implements a compliance system for reporting. Failure to meet the annual reporting requirements will result in graduated penalties. A six month grace period and at least one notice by certified mail to the last known address of the taxpayer is included. Penalties also accompany fraud in the application process. If fraud is found by a court of competent jurisdiction, a one hundred percent penalty will be incurred.

Penalties are assessed against a noncompliant taxpayer as of the end of the taxpayer's taxable year and due and owing as of the last date of filing of the taxpayer's return. Further collection procedures follow the existing collection procedures for income taxes.

(4) Requires that prior to approval of any tax credit application, an administering agency shall verify through the department of revenue that the tax credit applicant does not owe any delinquent taxes, including penalties and interest. Such delinquency will not affect the approval of the application for such tax credits, except that the amount of credits issued are reduced by the applicant's tax delinquency.

(5) Requires two months notice to the state whenever more than a million income tax credits are going to be redeemed. The notice must come prior to the assessment of tax liability (the date when income tax liability is actually fixed, due and owing) whenever a large sum of credits are going to be claimed against a taxpayer's income tax liability. The act provides that an early filing of tax liability will count as notice so long as it is at least two month prior to assessment date. (For individual filers, the assessment date is typically April 15, regardless of when the return is actually filed.)

(6) Provides that the minimum application requirements specified in (1) are made open records once the credits have been issued. In the case where state approval of a credit application comes prior to actual issuance, the application data become open records at the time such application is approved. However, information relating to the application for a special needs adoption tax credit and transfers of tax credits are excluded from the open record policy.

(7) Expands the existing audit statutes for state sponsored cost benefit analysis to require periodic examination of all credits. Current law only subjects credits administered by the Department of Economic Development to be analyzed. All audits are required to be provided to the governor, the legislature and, specifically, the Joint Committee on Tax Policy.

(8) Charges the Joint Committee on Tax Policy with an automatic review by the committee after each of the Auditor's tax credit program audits. After this period of review, the committee is given the option to make an official recommendation to the General Assembly as to the merit and suggested future treatment of each credit.

JEFF CRAVER