To repeal sections 136.315, 143.451, 143.631, 143.751, 143.781, 143.811, 144.027 and 144.190, RSMo 1994, relating to taxation and to enact in lieu thereof eight new sections relating to the same subject.

BE IT ENACTED BY THE GENERAL ASSEMBLY OF THE STATE OF MISSOURI,

AS FOLLOWS:

Section A. Sections 136.315, 143.451, 143.631, 143.751, 143.781, 143.811, 144.027 and 144.190, RSMo 1994, are repealed and eight new sections enacted in lieu thereof to be known as sections 136.315, 143.451, 143.631, 143.751, 143.781, 143.811, 144.027 and 144.190, to read as follows:

136.315. 1. As used in this section the following terms [shall] mean:

(1) "Party", a natural person [or sole proprietorship with a Missouri adjusted gross income of less than seventy-five thousand dollars in each of the two taxable years preceding the date of filing; a corporation or partnership with a federal taxable income of less than one hundred thousand dollars in each of the two taxable years preceding the date of filing; or an association, labor union or not for profit organization with less than fifty employees on the date of filing; provided, however, that a corporation that is a subsidiary or affiliate of a corporation with a federal taxable income of one hundred thousand dollars or more in each of the two taxable years preceding the date of filing is not a "party" under this section], partnership, corporation, or other organization bringing a proceeding before a court or the administrative hearing commission;

(2) "Prevail", to obtain disposition by final judgment or order, dismissal, or default which is favorable on all or substantially all issues;

(3) "Proceeding", a case before the administrative hearing commission or a court with respect to a tax imposed under chapter 143, RSMo, or any sales or use tax imposed by chapter 144, RSMo, or section 43(a) of article IV of the Missouri Constitution;

(4) "Reasonable litigation expenses", those actual expenses, not in excess of ten thousand dollars, that the administrative hearing commission or court finds were reasonably incurred in opposing the department's action, including, but not limited to, court costs, attorneys' fees and fees for expert and other witnesses.

2. When a party prevails in a proceeding filed after January 1, 1984, the court or administrative hearing commission may award the party reasonable litigation expenses if it finds that the position of the state was vexatious or was not substantially justified. Fees and expenses shall not be awarded if the final disposition is substantially the same as a settlement previously offered by the department to the taxpayer.

3. When the department of revenue prevails in a proceeding filed after the effective date of this section, the court or administrative hearing commission may award the department reasonable litigation expenses if it finds that the position of the party was patently frivolous.

[3.] 4. A party seeking an award for fees and other expenses pursuant to this section shall, not later than thirty days after final disposition is made in the proceeding, submit to the court or administrative hearing commission an application which provides evidence of eligibility for an award pursuant to this section, alleges in what particulars the department was vexatious or not substantially justified in its position and which specifies the amount sought. If the amount sought includes an attorney's fee or the fee for an expert witness, the application shall include an itemized statement for each such fee indicating the actual time expended in service to the applicant and the rate at which the fees were computed. The burden of proof shall be on the party seeking an award under this section to demonstrate the facts required as a condition to recovery.

[4.] 5. The court or administrative hearing commission, in its discretion, may reduce the amount to be awarded pursuant to this section, or deny an award, to the extent that the prevailing party, during the course of the proceedings, engaged in conduct which unduly and unreasonably protracted the final resolution of the matter in controversy or when an overriding public interest exists which would make an award unjust.

143.451. 1. Missouri taxable income of a corporation shall include all income derived from sources within this state.

2. A corporation described in subdivision (1) of subsection 1 of section 143.441 shall include in its Missouri taxable income all income from sources within this state, including that from the transaction of business in this state and that from the transaction of business partly done in this state and partly done in another state or states. However:

(1) Where income results from a transaction partially in this state and partially in another state or states, and income and deductions of the portion in the state cannot be segregated, then such portions of income and deductions shall be allocated in this state and other state or states as will distribute to this state a portion based upon the portion of the transaction in this state and the portion in such other state or states.

(2) The taxpayer may elect to compute the portion of income from all sources in this state in the following manner:

(a) The income from all sources shall be determined as provided, excluding therefrom the figures for the operation of any bridge connecting this state with another state.

(b) The amount of sales which are transactions wholly in this state shall be added to one-half of the amount of sales which are transactions partly within this state and partly without this state, and the amount thus obtained shall be divided by the total sales or in cases where sales do not express the volume of business, the amount of business transacted wholly in this state shall be added to one-half of the amount of business transacted partly in this state and partly outside this state and the amount thus obtained shall be divided by the total amount of business transacted, and the net income shall be multiplied by the fraction thus obtained, to determine the proportion of income to be used to arrive at the amount of Missouri taxable income. The investment or reinvestment of its own funds, or sale of any such investment or reinvestment, shall not be considered as sales or other business transacted for the determination of said fraction.

(3) For the purposes of this section, a transaction involving the sale of tangible property is:

(a) "Wholly in this state" if both the seller's shipping point and the purchaser's destination point are in this state;

(b) "Partly within this state and partly without this state" if the seller's shipping point is in this state and the purchaser's destination point is outside this state, or the seller's shipping point is outside this state and the purchaser's destination point is in this state;

(c) Not "wholly in this state" or not "partly within this state and partly without this state" only if both the seller's shipping point and the purchaser's destination point are outside this state;

(d) [This subdivision shall not apply and subdivision (2) of subsection 2 of this section shall apply to transactions in which tangible property was moved from within this state to another state prior to shipment to the purchaser or in which both the seller's shipping point and the purchaser's destination point of tangible property are determined to be in states which do not have jurisdiction to impose a franchise or an income tax on the taxpayer regardless of whether the states impose such a tax;

(e)] For purposes of this subdivision the purchaser's destination point shall be determined without regard to the FOB point or other conditions of the sale, and the seller's shipping point is determined without regard to the location of the seller's principle office or place of business.

3. Any corporation described in subdivision (1) of subsection 1 of section 143.441 organized in this state or granted a permit to operate in this state for the transportation or care of passengers shall report its gross earnings within the state on intrastate business and shall also report its gross earnings on all interstate business done in this state which report shall be subject to inquiry for the purpose of determining the amount of income to be included in Missouri taxable income. The previous sentence shall not apply to a railroad.

4. A corporation described in subdivision (2) of subsection 1 of section 143.441 shall include in its Missouri taxable income all income arising from all sources in this state and all income from each transportation service wholly within this state, from each service where the only lines of such corporation used are those in this state, and such proportion of revenue from each service where the facilities of such corporation in this state and in another state or states are used, as the mileage used over the lines of such corporation in the state shall bear to the total mileage used over the lines of such corporation. The taxpayer may elect to compute the portion of income from all sources within this state in the following manner:

(1) The income from all sources shall be determined as provided;

(2) The amount of investment of such corporation on December thirty-first of each year in this state in fixed transportation facilities, real estate and improvements, plus the value on December thirty-first of each year of any fixed transportation facilities, real estate and improvements in this state leased from any other railroad shall be divided by the sum of the total amount of investment of such corporation on December thirty-first of each year in fixed transportation facilities, real estate and improvements, plus the value on December thirty-first of each year, of any fixed transportation facilities, real estate and improvements leased from any other railroad. Where any fixed transportation facilities, real estate or improvements are leased by more than one railroad, such portion of the value shall be used by each railroad as the rental paid by each shall bear to the rental paid by all lessees. The income shall be multiplied by the fraction thus obtained to determine the proportion to be used to arrive at the amount of Missouri taxable income.

5. A corporation described in subdivision (3) of subsection 1 of section 143.441 shall include in its Missouri taxable income one-half of the net income from the operation of a bridge between this and another state. If any such bridge is owned or operated by a railroad corporation or corporations, or by a corporation owning a railroad corporation using such bridge, then the figures for operation of such bridge may be included in the return of such railroad or railroads; or if such bridge is owned or operated by any other corporation which may now or hereafter be required to file an income tax return, one-half of the income or loss to such corporation from such bridge may be included in such return by adding or subtracting same to or from another net income or loss shown by the return.

6. A corporation described in subdivision (4) of subsection 1 of section 143.441 shall include in its Missouri taxable income all income arising from all sources within this state. Income shall include revenue from each telephonic or telegraphic service rendered wholly within this state; from each service rendered for which the only facilities of such corporation used are those in this state; and from each service rendered over the facilities of such corporation in this state and in other state or states, such proportion of such revenue as the mileage involved in this state shall bear to the total mileage involved over the lines of said company in all states. The taxpayer may elect to compute the portion of income from all sources within this state in the following manner:

(1) The income from all sources shall be determined as provided;

(2) The amount of investment of such corporation on December thirty-first of each year in this state in telephonic or telegraphic facilities, real estate and improvements thereon, shall be divided by the amount of the total investment of such corporation on December thirty-first of each year in telephonic or telegraphic facilities, real estate and improvements. The income of the taxpayer shall be multiplied by fraction thus obtained to determine the proportion to be used to arrive at the amount of Missouri taxable income.

7. From the income determined in subsections 2, 3, 4, 5 and 6 of this section to be from all sources within this state shall be deducted such of the deductions for expenses in determining Missouri taxable income as were incurred in this state to produce such income and all losses actually sustained in this state in the business of the corporation.

8. If a corporation derives only part of its income from sources within Missouri, its Missouri taxable income shall only reflect the effect of the following listed deductions to the extent applicable to Missouri. The deductions are: (a) its deduction for federal income taxes pursuant to section 143.171, and (b) the effect on Missouri taxable income of the deduction for net operating loss allowed by Section 172 of the Internal Revenue Code. The extent applicable to Missouri shall be determined by multiplying the amount that would otherwise affect Missouri taxable income by the ratio for the year of the Missouri taxable income of the corporation for the year divided by the Missouri taxable income for the year as though the corporation had derived all of its income from sources within Missouri. For the purpose of the preceding sentence, Missouri taxable income shall not reflect the listed deductions.

143.631. 1. Within sixty days (one hundred fifty days if the taxpayer is outside the United States) after the mailing of a notice of deficiency, the taxpayer may file with the director of revenue a written protest against the proposed assessment in which he shall set forth the grounds on which the protest is based. If a protest is filed, the director of revenue shall reconsider the proposed deficiency.

2. A taxpayer's protest may include a request for an informal hearing with the director. If such a request is made, an informal hearing shall be heard. The informal hearing shall be a forum for discussion of the merits of the proposed assessment. The parties shall also consider the possibility of negotiating a settlement of the contested tax liability.

[2.] 3. If a taxpayer has filed a timely protest under subsection 1 of this section, the taxpayer may, at any time before an assessment has become final, make a deposit with the director of revenue of any part or all of the tax, interest, additions to tax or penalties proposed in the notice of deficiency. The deposit shall be accompanied by a written statement setting forth:

(1) The identification of the tax and the tax period to which the deposit applies;

(2) The amount of tax, interest, additions to tax or penalties to which the deposit is to be applied by the director; and

(3) Such other identifying information as the director of revenue may by regulation provide.

[3.] 4. Upon receipt of a timely deposit under subsection 2 of this section, the director of revenue shall issue a receipt to the taxpayer acknowledging receipt of the deposit, and confirming the amount of tax, interest, additions to tax and penalty to which the deposit has been applied. All such deposits shall be deposited in the general revenue fund of the state as payments of tax, interest, additions to tax and penalty, as the case may be. The director of revenue shall refuse the tender of any deposit which does not satisfy the requirements of this section, and shall return such payment to the taxpayer.

[4.] 5. A taxpayer which had made a deposit under this section which has been accepted by the director of revenue may at any time before an assessment has become final or an action has been filed in the circuit court of Cole County under subsection 5 of section 143.841, request in writing that the director of revenue return the deposit to the taxpayer. The director of revenue shall return such deposit without interest if a written request is made. The taxpayer's request for return of a deposit shall not be treated under this chapter as a claim for refund for purposes of section 143.821.

[5.] 6. The payment under protest provision provided by this section shall only apply to taxes imposed by this chapter and shall not be incorporated by reference to apply to taxes imposed by other chapters.

143.751. 1. If any part of a deficiency is due to negligence or intentional disregard of rules and regulations (but without intent to defraud) there shall be added to the tax an amount equal to five percent of the deficiency. The director shall apprise the taxpayer of the factual basis for the finding of negligence, or the specific rules or regulations disregarded, at the time the director issues a proposed assessment. Rules and regulations which have been determined to be inconsistent with the laws of this state, by either the courts of this state or the administrative hearing commission, may not be cited as the basis for an addition to tax under this section.

2. If any part of a deficiency is due to fraud, there shall be added to the tax an amount equal to fifty percent of the deficiency. This amount shall be in lieu of any amount determined under subsection 1 of this section.

3. If any employer, without intent to evade or defeat any tax imposed by sections 143.011 to 143.996 or the payment thereof, shall fail to make a return and pay a tax withheld by him at the time required by or under the provisions of sections 143.011 to 143.996, such employer shall be liable for such taxes and shall pay the same together with interest thereon and the addition to tax provided in subsection 1 of this section, and such interest and addition to tax shall not be charged to or collected from the employee by the employer. The director of revenue shall have the same rights and powers for the collection of such tax, interest, and addition to tax against such employer as are now prescribed by sections 143.011 to 143.996 for the collection of tax against an individual taxpayer.

4. Any person required to collect, truthfully account for, and pay over the tax imposed by sections 143.011 to 143.996 who willfully fails to collect such tax or truthfully account for and pay over such tax or willfully attempts in any manner to evade or defeat the tax or the payment thereof, shall, in addition to other penalties provided by law, be liable to a penalty equal to the total amount of the tax evaded, or not collected, or not accounted for and paid over. No addition to tax under subsections 1 and 2 of this section shall be imposed for any offense to which this subsection applies.

5. Any person who with fraudulent intent shall fail to pay, or to deduct or withhold and pay, any tax, or to make, render, sign, or certify any return, or to supply any information within the time required by or under sections 143.011 to 143.996, shall be liable to a penalty of not more than one thousand dollars, in addition to any other amounts required under sections 143.011 to 143.996, to be imposed, assessed and collected by the director of revenue.

6. For purposes of subsections 4 and 5 of this section, the term "persons" includes an individual, corporation, or partnership, or an officer or employee of any corporation (including a dissolved corporation), or a member or employee of any partnership, who, as such officer, employee, or member, is under a duty to perform the act in respect of which the violation occurs.

143.781. 1. The director of revenue within the applicable period of limitations may credit an overpayment of income tax and interest on such overpayment against any liability in respect of any tax imposed by the tax laws of this state on the person who made the overpayment, and the balance shall be credited or refunded if it exceeds one dollar. Overpayments shall be determined by taking into account any deposit made by a taxpayer under section 143.631, except a deposit which has been returned to a taxpayer pursuant to a written request. Unless directed otherwise by a taxpayer, the director of revenue may credit all or part of the overpayment of a taxpayer on a joint or combined return against the amount of tax due from his spouse.

2. If the amount allowable as a credit for tax withheld from the taxpayer exceeds his tax to which the credit relates, the excess shall be considered an overpayment.

3. If there has been an overpayment of tax required to be deducted and withheld under section 143.191, a credit or refund shall be made to the employer only to the extent that the amount of the overpayment was not deducted and withheld by the employer.

4. The director of revenue may prescribe regulations providing for the crediting against the estimated income tax for any taxable year of the amount determined to be an overpayment of the income tax for a preceding taxable year.

5. If any amount of income tax is assessed or collected after the expiration of the period of limitations properly applicable thereto, such amount shall be considered an overpayment.

6. The provisions of sections 143.781 to 143.841 to the contrary notwithstanding, a credit or refund, or any portion thereof, shall be transferred to the state agency to set off a debt due and owing to the state agency as provided in sections 143.782 to 143.788. When any action is taken pursuant to sections 143.782 to 143.788, the provisions of sections 143.782 to 143.788 shall govern all aspects of any rights and entitlement to credits or refunds covered by such action. If there is a final determination that the taxpayer is entitled to receive all or part of the setoff pursuant to the provisions of sections 143.782 to 143.788, the amount to which the taxpayer is entitled shall bear interest as provided in section 143.811, beginning sixty days after such setoff.

143.811. 1. Under regulations prescribed by the director of revenue, interest shall be allowed and paid at the rate determined by section 32.065, RSMo, on any overpayment in respect of the tax imposed by sections 143.011 to 143.996[; except that, where the overpayment resulted from the filing of an amendment of the tax by the taxpayer after the last day prescribed for the filing of the return, interest shall be allowed and paid at the rate of six percent per annum]. With respect to the part of an overpayment attributable to a deposit made pursuant to subsection 2 of section 143.631, interest shall be paid thereon at the rate in section 32.065, RSMo, from the date of the deposit to the date of refund. No interest shall be allowed or paid if the amount thereof is less than one dollar.

2. For purposes of this section:

(1) Any return filed before the last day prescribed for the filing thereof shall be considered as filed on such last day determined without regard to any extension of time granted the taxpayer;

(2) Any tax paid by the taxpayer before the last day prescribed for its payment, any income tax withheld from the taxpayer during any calendar year, and any amount paid by the taxpayer as estimated income tax for a taxable year shall be deemed to have been paid by him on the fifteenth day of the fourth month following the close of his taxable year to which such amount constitutes a credit or payment.

3. For purposes of this section with respect to any withholding tax:

(1) If a return for any period ending with or within a calendar year is filed before April fifteenth of the succeeding calendar year, such return shall be considered filed April fifteenth of such succeeding calendar year; and

(2) If a tax with respect to remuneration paid during any period ending with or within a calendar year is paid before April fifteenth of the succeeding calendar year, such tax shall be considered paid on April fifteenth of such succeeding calendar year.

4. If any overpayment of tax imposed by sections 143.011 to 143.996 is refunded within four months after the last date prescribed (or permitted by extension of time) for filing the return of such tax or within four months after the return was filed, whichever is later, no interest shall be allowed under this section on overpayment.

5. Any overpayment resulting from a carryback, including a net operating loss and a corporate capital loss, shall be deemed not to have been made prior to the close of the taxable year in which the loss arises.

144.027. 1. When a motor vehicle, trailer, boat or outboard motor for which all sales or use tax has been paid is replaced due to theft or a casualty loss in excess of the value of the unit, the director shall permit the amount of the insurance proceeds plus any owner's deductible obligation, as certified by the insurance company, to be a credit against the purchase price of another motor vehicle, trailer, boat or outboard motor which is purchased or contracted to be purchased within ninety days of the date of payment by the insurance company as a replacement motor vehicle, trailer, boat or outboard motor. As used in this section, the term "boat" includes all motorboats and vessels, as the terms "motorboat" and "vessel" are defined in section 306.010, RSMo.

2. If the owner of a motor vehicle, trailer, boat or outboard motor as described in subsection 1 of this section does not have insurance coverage for the motor vehicle, trailer, boat or outboard motor, the director shall permit the fair market value of the motor vehicle, trailer, boat or outboard motor as determined by the Kelly Blue Book, NADA Used Car Guide, Abos Blue Book or the average of two appraisals from licensed motor vehicle or boat dealers to be a credit against the purchase price of a replacement motor vehicle, trailer, boat or outboard motor which is purchased or contracted to be purchased within ninety days of the date of such loss as certified by a law enforcement agency or such other evidence as the director may require as proof of the date of loss of the motor vehicle, trailer, boat or outboard motor.

3. Where the replacement motor vehicle, trailer, boat or outboard motor is titled more than ninety days after the date of the payment for the loss by the insurance company or the certification of the loss by a law enforcement agency, the credit pursuant to this section shall be made if the person titling such article establishes that the purchase or contract to purchase was finalized prior to the expiration of the ninety-day period.

144.190. 1. If a tax has been incorrectly computed by reason of a clerical error or mistake on the part of the director of revenue, such fact shall be set forth in the records of the director of revenue, and the amount of the overpayment shall be credited on any taxes then due from the person legally obligated to remit the tax under sections 144.010 to 144.525, and the balance shall be refunded to the person legally obligated to remit the tax, his administrators or executors, as provided for in section 144.200.

2. If any tax, penalty or interest has been paid more than once, or has been erroneously or illegally collected, or has been erroneously or illegally computed, such sum with interest as determined by section 32.065, RSMo, shall be credited on any taxes then due from the person legally obligated to remit the tax under sections 144.010 to 144.510, and the balance[, with interest as determined by section 32.065, RSMo,] shall be refunded to the person legally obligated to remit the tax, but no such credit or refund shall be allowed unless duplicate copies of a claim for refund are filed within three years from date of overpayment. The director of revenue shall within ninety days after receiving properly completed documentation from the taxpayer, refund taxes plus any interest due to the taxpayer from whom the tax was collected.

3. Every claim for refund must be in writing under oath, and must state the specific grounds upon which the claim is founded. Any refund or any portion thereof which is erroneously made, and any credit or any portion thereof which is erroneously allowed, may be recovered in any action brought by the director of revenue against the person legally obligated to remit the tax. In the event that a tax has been illegally imposed against a person legally obligated to remit the tax, the director of revenue shall authorize the cancellation of the tax upon his record.

4. Notwithstanding the provisions of this section, the director of revenue shall authorize direct pay agreements to purchasers which have annual purchases in excess of seven hundred fifty thousand dollars pursuant to rules and regulations adopted by the director of revenue. For the purposes of such direct pay agreements, the taxes authorized under chapters 66, RSMo, 67, RSMo, 92, RSMo, and 94, RSMo, shall be remitted based upon the location of the place of business of the purchaser. The deduction allowed in section 144.140 shall not be allowed to any person who is qualified to receive and has received the direct payment authorization as provided by this subsection.