Fiscal Note - SB 0418 - Sales Tax Exemption of Food; Increase in State Sales/Use Tax Rate to 4.6%; Income Tax Deductions and Credits
L.R. NO. 1665-01
BILL NO. SB 418
SUBJECT: Taxation and Revenue-General, Income, Sales and Use
TYPE: Original
DATE: February 26, 1997
FISCAL SUMMARY
ESTIMATED NET EFFECT ON STATE FUNDS
FUND AFFECTED FY 1998 FY 1999 FY 2000
General Revenue ($9,986,361) to ($1,841,501) to
$75,011,168 ($16,786,361) ($12,841,501)
School District
Trust ($5,440,959) ($10,859,030) ($9,722,211)
Conservation ($8,780,120) ($9,769,879) ($9,965,276)
Parks and Soil ($7,024,096) ($7,815,903) ($7,972,221)
Motor Fuel Tax $14,925,000 $15,525,000 $16,125,000
Partial Estimated
Net Effect on All ($22,906,173) to ($13,376,209) to
State Funds* $68,690,993 ($29,706,173) ($24,376,209)
* Estimates for the loss to General Revenue for the tax credits allowable to
resident taxpayers and corporations who make cash contributions to a
qualifying charity are unknown. Revenue losses for these credits are not
included in the annual totals.
ESTIMATED NET EFFECT ON FEDERAL FUNDS
FUND AFFECTED FY 1998 FY 1999 FY 2000
None
Total Estimated
Net Effect on All
Federal Funds $0 $0 $0
PARTIAL ESTIMATED NET EFFECT ON LOCAL FUNDS
FUND AFFECTED FY 1998 FY 1999 FY 2000
Local Government ($100,386,438) ($112,063,545) ($114,208,317)
FISCAL ANALYSIS
ASSUMPTION
MATERNITY HOMES AND DOMESTIC VIOLENCE
In a similar proposal officials of the Department of Revenue (DOR) state this
proposal establishes a domestic violence and maternity home tax credit. This
legislation would require modifications to the individual, corporate and
financial institution tax systems, forms and schedules. These modifications
will be completed by existing staff-resources. The Division of Taxation
would request one Tax Processing Specialist I for six months of each tax
processing year for every 1,600 accounts claiming these credits.
Responsibilities would be credit verification, processing and error
correction.
Officials of the Office of Administration (COA) state this proposal
establishes tax credits for donating to a domestic violence shelter or a
maternity home. COA staff state that there is very little data available to
reliably estimate the fiscal impact of giving tax credits for donations
greater than $100 to domestic violence shelters or maternity homes.
Therefore, COA estimates the impact to be between ($0 to $4,000,000), since
the maximum amount of credits that can be issued in one year is $2,000,000
for domestic violence shelter and $2,000,000 for maternity homes.
In a similar proposal officials from the Office of the Secretary of State
(SOS) assume the proposed legislation would require the printing of
additional pages in the Missouri Register and the Code of State Regulations
and have estimated a one-time publishing and distribution cost of $1,345 for
FY 1998. SOS acknowledges that the additional costs of printing could, to
some degree, be offset by those fees collected from subscriptions, given that
the number of subscribers remains constant or increases. Oversight assumes
SOS could increase fees to cover any additional costs, per Section 536.033,
RSMo.
SOS would request one Computer Information Specialist for one third of the
year to handle the computer programs impacted by this legislation and the
increased data storage needs. Oversight assumes for purposes of this fiscal
note that the job duties of the Computer Information Specialist could be
handle by existing resources.
Oversight has allowed the State Data Center costs.
Officials of the Department of Insurance state this proposal allows insurance
companies a tax credit for maternity home and domestic violence shelter
contributions against premium tax payments to the state. Premium tax
payments are split 50/50 between General Revenue and the County Insurance
Funds. The revenue in the County Insurance Funds are allocated annually to
the local school districts by the Commissioners of Administration and the
Department of Elementary and Secondary Education. These credits effectively
reduce the amount of revenue available to the schools districts.
Officials of the Department of Public Safety (DPS) assume this proposal would
require DPS to promulgate regulations for the administration of the domestic
violence shelter program. DPS officials would request 3 FTE to carry out the
new program and the related travel and office expenses. The 3 FTE consist of
one Program Specialist to develop and administer classification regulations
and processing, and also to monitor the shelters; one Program Representative
for regulation of tax credits and equitable redistribution and allocation of
the credits; one Clerk Typist III to provide all clerical support for the
program.
Oversight assumes that the renovation costs requested by DPS would be
absorbed or requested as a budget appropriation.
In a similar proposal officials of the Department of Health (DOH) state this
proposal would essentially put DOH in the business of reapportionment of tax
dollars. It would require an extensive system of fiscal tracking and
monitoring that should be linked with the Department of Revenue. DOH
officials would request three full-time staff to implement and maintain this
proposal. The staff should consist of one Attorney to write and develop
appropriate rules and regulations. Establish procedures to distribute
apportioned funds and respond to legal inquiries regarding reapportionment.
One Management Analyst Specialist I to develop and maintain a system to
apportion tax credits to maternity homes and monitor levels of apportionment
and facility spending to determine reapportionment. One Clerk Typist II to
develop and maintain a registry of maternity homes and provide clerical
support to the attorney and the management analyst I.
Oversight assumes that the rental costs requested by DOH would be absorbed or
requested as a budget appropriation and that the attorney's responsibilities
(writing and developing rules) could be handled by existing staff.
Oversight has shown a loss to General Revenue ranging from $0 to $4,000,000
for the Income Tax Credits for contributions to Domestic Violence Shelters
and Maternity Homes. It should be noted that because these credits can be
used against several different state funds, Oversight is not able to estimate
the impact to local school districts.
PRIVATE PENSION EXEMPTION
In a similar proposal officials of the Department of Revenue (DOR) assume
that exempting private pensions from state income tax would affect
approximately 200,000 taxpayers that receive a private retirement benefit.
The Division of Taxation would request 3.5 Tax Processing Technician I's to
handle the additional pre-edit, exception processing, telephone calls, error
correction and correspondence that would be created from this legislation.
Oversight assumes for purposes of this fiscal note that the Division of
Taxation could handle the volume of work created by this proposal with .5 Tax
Processing Technician I to handle the additional pre-edit and exception
processing and .5 Tax Processing Technician I to handle the error correction
and correspondence generated.
Officials of the Office of Administration (COA) assume that this proposal
would have an estimated fiscal impact of $0 in FY 1998, ($70,615,373) in FY
1999 and ($70,791,912) in FY 2000. The estimates are based on State of
Missouri Individual Income Tax and Federal Income Tax data indicating the
amount of pensions and number of returns filed. In calculating the estimate,
COA staff assume a marginal tax rate of 6% and that the number of pensions
increases at the same rate Missouri's over 65 population increases.
Population figures are from the State Demographer. Withholding are assumed
not to be adjusted until the proposal is fully phased in.
Oversight estimates a loss to General Revenue of $26,414,728 for FY 1998 due
to the possibility of reduced withholding and estimated income tax payments
for five months of calendar year 1998.
Oversight has not estimated or included a potential loss to the General
Revenue Fund for the effects of taxpayers' corresponding increase in federal
income taxes which in turn would result in a slight reduction to income taxes
paid to the State of Missouri. Factors which would influence this amount
include the ability of the taxpayer to itemize deductions, the income level
of the taxpayer and the limitation of the federal income tax deduction on the
Missouri return.
DEPENDENCY DEDUCTION
DOR staff assume that the increase in the personal exemption dependency
amount, from an administrative standpoint could be handled by existing staff.
Office of Administration (COA) officials assume the portion of the proposal
increasing the dependent deduction would have an estimated impact of
approximately ($0) in FY 98, ($32,742,394) in FY 99 and ($32,807,878) in FY
2000 in lost General Revenue funds annually. COA staff assume that taxpayers
will not adjust their withholdings in FY 98 to take advantage of the
increased dependent deduction. COA states the estimate is based on State of
Missouri Individual Income Tax data, data from the Tax Expenditure Report,
and population projections from the State Demographer. COA officials assumed
a marginal income tax rate of 6% in calculating the estimate.
Oversight estimates a loss to General Revenue of $3,063,472 for FY 1998 due
to the possibility of reduced withholding and estimated income tax payments
for five months of calendar year 1998. Oversight assumes 25% of the
taxpayers who are entitled to a dependency deduction would adjust payments,
however, it should be noted that this amount could be less, depending on
taxpayers' awareness of the increase in the dependency deduction and their
desire to adjust tax withholdings or estimated payments.
Oversight has not estimated or included a potential loss to the General
Revenue Fund for the effects of taxpayers' corresponding increase in federal
income taxes which in turn would result in a slight reduction to income taxes
paid to the State of Missouri. Factors which would influence this amount
include the ability of the taxpayer to itemize deductions, the income level
of the taxpayer and the limitation of the federal income tax deduction on the
Missouri return.
INCREASE IN OVERALL STATE SALES TAX RATE
Officials of the Office of Administration (COA) state this portion of the
proposal would raise the overall sales tax rate from 4% to 4.6%. Their
estimates are based on the sales tax forecast found in FY98 Executive Budget
that assumes passage of food exemption effective July 1, 1997.
TAX CREDIT FOR HANCOCK
Officials of the Office of Administration (COA) state with regard to the
generic tax credit should a Hancock refund be anticipated, the Governor's
budget assumes the passage of tax cuts sufficient to preclude a future Total
State Revenue refund. Thus, this provision has no impact.
In a similar proposal officials of the Department of Revenue (DOR) state this
portion of the proposal would require modifications to the individual income
tax systems (manual and computer), forms and schedules. Modifications would
be made with existing resources. The Information Systems Division would need
a Data Entry Operator for six months each year due to the credit information
which would have to be entered from each individual income tax return.
Oversight assumes: 1) this portion of the proposal would not go into effect
until passage of a constitutional amendment allowing a different form of
refund than that mandated in section 18 of article X of the state
constitution, 2) The Office of Administration would certify an excess of
total state revenues for FY 99, and 3) credits could be taken on individual
income tax returns for 1999.
Oversight assumes Section 144.029 of this proposal is permissive and will be
reflected as a positive unknown to local governments. The revenue impact is
unknown since it is unknown which political subdivisions would impose the tax
and the amount of taxable sales that would be subject to the tax.
EXEMPTION OF FOOD FROM SALES TAX
In a similar proposal officials from the Department of Revenue (DOR) assume
there would be increased work due to confusion from taxpayers and retailers;
however, DOR will utilize existing resources to implement this proposal.
Officials of the Office of Administration (COA) assume the purpose of this
proposal is to eliminate the state and local sales tax on food sold for
off-premise consumption. COA staff based their estimates on the following
assumptions:
1. Missouri food consumption based on Department of Commerce estimate of
"Personal Consumption Expenditure" data for U.S. It is assumed Missouri
accounts for about 1.9% of U.S. totals.
2. Food stamp purchases account for 6% of spending.
3. Consumer spending on food is assumed to grow 2% for Fiscal Years 1996 and
beyond.
4. Effective date of July 1, 1997 results in one month lag in impact. This
gives eleven months of fiscal impact in FY 98.
TAX CREDIT FOR HISTORIC STRUCTURES
In a similar proposal the Department of Revenue (DOR) assumes the proposal
would require modifications to the income tax systems, forms and schedules.
The DOR assumes the additional programming, data entry and state data center
expenses required to implement this legislation could be handled using
existing resources. The DOR anticipates they can process this credit with
existing personnel, however, if the taxpayers claiming this credit exceeds
1,600, a Tax Processing Technician for six months of each tax processing year
would be requested.
The Department of Natural Resources (DNR) assumes this proposal would provide
a tax credit program to provide an incentive to rehabilitate historic
properties, similar to the federal investment tax credit for rehabilitation
of historic structures established in 1981. Based on federal tax credit
program data from 1981-1995, and assuming a 25% tax credit, the DNR assumes
an average year's tax credit would amount to approximately $14,000,000.
Because this would be a new state program, the DNR estimates during the first
year approximately 20% of the estimated $14,000,000 credits or $2,800,000
would be claimed. The DNR estimates approximately 50%, or $7,000,000 would
be claimed the following year.
DNR assumes they would request one Architect and related equipment and
expenses including rent expenses to administer this program based on 100
applications per year which is the average number of federal projects during
the same 15-year period. It is estimated that each project requires, at a
minimum, an average of 20 hours. Therefore, a minimum of 2,000 hours per
year will be needed to administer the state income tax credit program.
During the initial years, the resources would be directed toward providing
technical assistance to applicants and potential applicants.
The Architect would review applications including architectural plans &
specifications for compliance with guidelines; provide technical assistance
for applicants; conduct on- site meetings with project architects & owners;
monitor project progress; inspect completed projects to determine eligibility
for tax credit; and complete necessary forms to certify the tax credit.
Oversight assumes the actual credits claimed would depend on future
participation of taxpayers' in historic restoration projects and has
therefore ranged the cost of the tax credit to be from zero to the amount
projected by the DNR based on historical federal data.
As DNR has estimated half of the estimated annual credits would be claimed in
the fiscal note period, Oversight assumes a .5 Architect would be sufficient
to accomplish the requirements of the proposal. Oversight assumes the
architect would be located in existing facilities and has not included costs
for rent. Also, DNR expense and equipment costs have been reduced to conform
with OA guidelines.
TAX CREDIT FOR CONTRIBUTIONS TO QUALIFYING CHARITY
Oversight is unable to determine the amount of revenue loss associated with
the resident taxpayer or corporate tax credit provisions in the proposal.
These unknown amounts could be significant.
This proposal would result in an overall decrease in Total State Revenues.
FISCAL IMPACT - State Government FY 1998 FY 1999 FY 2000
(10 Mo.)
GENERAL REVENUE FUND
MATERNITY HOMES AND DOMESTIC VIOLENCE
Loss to General Revenue Fund
Secretary of State (SOS)
Expense-State Data Center Costs ($334) $0 $0
Loss to General Revenue Fund
Department of Public Safety (DPS)
Personal Service (3 FTE) ($36,959) ($75,796) ($77,691)
Fringe Benefits ($10,544) ($21,625) ($22,165)
Expense and Equipment ($92,059) ($36,964) ($37,916)
Administrative costs to DPS ($139,562) ($134,385) ($137,772)
Loss to General Revenue Fund
Department of Health (DOH)
Personal Service (2 FTE) ($25,103) ($46,333) ($47,491)
Fringe Benefits ($7,162) ($13,219) ($13,549)
Expense and Equipment ($15,595) ($14,420) ($14,853)
Administrative costs to DOH ($47,860) ($73,972) ($75,893)
Loss to General Revenue Fund
Income Tax Credit for Contributions
to Domestic Violence Shelters $0 $0
to to
$0 ($2,000,000) ($2,000,000)
Loss to General Revenue Fund
Income Tax Credit for Contributions
to Maternity Homes $0 $0
to to
$0 ($2,000,000) ($2,000,000)
PRIVATE PENSION EXEMPTION
Cost to General Revenue Fund
Department of Revenue (DOR)
Personal Service (1 FTE) $0 ($8,661) ($17,756)
Fringe Benefits $0 ($2,471) ($5,066)
Expense and Equipment $0 ($3,456) ($446)
Administrative Cost to DOR $0 ($14,588) ($23,268)
Loss to General Revenue Fund
Retirement Benefits Exemption ($26,414,728) ($70,615,373) ($70,791,912)
DEPENDENCY DEDUCTION
Loss to General Revenue Fund
Increased Dependency Deduction ($3,063,472) ($32,742,394) ($32,807,878)
TAX CREDIT FOR HANCOCK
Cost to General Revenue Fund
Department of Revenue (DOR)
Personal Service (.5 FTE) $0 $0 $8,878
Fringe Benefits 0 0 2,533
Expense and Equipment 0 0 0
Administrative costs to DOR $0 $0 ($11,411)
EXEMPTION FOR FOOD
Loss - General Revenue Fund
Elimination of
sales tax on food ($210,722,876)($234,477,091)($239,166,633)
HISTORIC STRUCTURES
Loss - reduced tax revenue due to $0 $0
Historic Renovation Tax Credit to to
$0 ($2,800,000) ($7,000,000)
Costs - DNR
Personal Service - .5 FTE $0 ($16,384) ($16,793)
Fringe Benefits 0 (4,674) (4,791)
Expense and Equipment 0 (7,500) (5,105)
Total Costs $0 ($28,558) ($26,734)
Income to General Revenue Fund
Increase in overall
state sales tax rate $315,400,000 $328,100,000 $341,200,000
PARTIAL ESTIMATED NET EFFECT
TO GENERAL REVENUE FUND* ($9,986,361) ($1,841,501)
to to
$75,011,168 ($16,786,361) ($12,841,501)
* Estimates for the loss to General Revenue for the tax credits allowable to
resident taxpayers and corporations who make cash contributions to a
qualifying charity are unknown. Revenue losses for these credits are not
included in the annual totals.
Income to Motor Fuel Tax Fund
Increase in overall
state sales tax rate $14,925,000 $15,525,000 $16,125,000
(75% of additional .6 cent)
Income to School District Trust Fund
Increase in state sales
tax rate 1/8 of 1% $64,800,000 $67,300,000 $70,000,000
Loss - School District Trust Fund
Elimination of sales tax on food ($70,240,959) ($78,159,030) ($79,722,211)
ESTIMATED NET EFFECT TO
SCHOOL DISTRICT TRUST FUND ($5,440,959) ($10,859,030) ($9,722,211)
Loss - Conservation Fund
Elimination of sales tax on food ($8,780,120) ($9,769,879) ($9,965,276)
Loss - Parks and Soil Fund
Elimination of sales tax on food ($7,024,096) ($7,815,903) ($7,972,221)
FISCAL IMPACT - Local Government FY 1998 FY 1999 FY 2000
(10 Mo.)
Loss to Cities
Elimination of sales tax on food ($63,216,863) ($70,343,127) ($71,749,990)
Loss to Counties
Elimination of sales tax on food ($42,144,575) ($46,895,418) ($47,833,327)
Income to Cities
Sales Tax (15%) $2,985,000 $3,105,000 $3,225,000
Income to Counties
Sales Tax (10%) $1,990,000 $2,070,000 $2,150,000
Income to Political Subdivisions
Sales tax on food unknown unknown unknown
PARTIAL ESTIMATED NET EFFECT
TO LOCAL GOVERNMENT ($100,386,438)($112,063,545)($114,208,317)
FISCAL IMPACT - Small Business
Small businesses would be expected to be fiscally impacted to the extent that
they pay sales tax on taxable items. The businesses that are eligible to
accept food stamps would be able to sell their food exempt from sales tax
while those that are not eligible to participate in the food stamp program
would still be required to collect sales tax on food sales.
DESCRIPTION
SECTION 135.550 and 135.600
This act provides for tax credits against a taxpayer's state tax liability
for contributions to maternity homes and for contributions to shelters for
victims of domestic violence. At least annually the Director of the
Department of Health shall determine which facilities in the state may be
classified as maternity homes. The Director of the Department of Public
Safety shall, at least annually, determine which facilities in the state may
be classified as shelters for victims of domestic violence. The Director of
the Department of Health and the Director of the Department of Public Safety
shall establish procedures so that the cumulative tax credits will be equally
apportioned to the facilities under their respective departments. A taxpayer
shall be permitted to claim a tax credit up to fifty percent of the
taxpayer's contribution to a shelter for victims of domestic violence or to a
maternity home. A taxpayer cannot claim a tax credit unless the total amount
of a taxpayer's contribution in the taxpayer's taxable year is at least one
hundred dollars. The maximum credit is $50,000. The credit may only be used
up to the amount of the taxpayer's tax liability, but may be carried forward
for four years. The aggregate maximum amount of the credits allowed in a
fiscal year is $4 million, $2 million under each section.
SECTION 143.124
This proposal would allow privately funded annuities, pensions or retirement
allowances the pension exemption authorized in section 143.124
SECTION 143.161
DEPENDENCY EXEMPTION -- For all tax years beginning on or after January 1,
1998, the dependency exemption deduction is increased to $800. Until
December 31, 1997, the deduction shall remain at $400.
OVERALL INCREASE IN STATE SALE AND USE TAX RATE
This proposal increases the state sales/use tax rate to 4.6%
HANCOCK TAX CREDIT
This proposal would provide for "excess" state revenues to be returned to
taxpayers via an income tax credit based on the amount of excess revenues and
the number of personal and dependency exemptions available to taxpayers.
EXEMPTION FOR FOOD
This proposal exempts from state and local sales taxes all sales of food
types that are eligible to be purchased through the federal food stamp
program from retail establishments eligible to participate in the federal
food stamp program.
HISTORIC STRUCTURES
A person who rehabilitates a historic building in a historic district is
eligible for a tax credit equal to twenty-five percent of the cost if the
cost exceeds fifty percent of the taxpayer's basis in the property
(investment less depreciation as determined under IRS rules) and the
rehabilitation meets the standards of the State Historic Preservation
Officer. The credit may be carried back for three years or forward for ten
years.
TAX CREDITS FOR QUALIFYING CHARITY
This proposal also allows a tax credit to a resident taxpayer for cash
contributions to a qualifying charity, the credit shall not exceed 50% of the
amount contributed. Corporations with registered agents in the state are
authorized to participate in this credit and are subject to the same 50%
limit. Certain provisions of this proposal are effective 1/1/98.
This legislation is not federally mandated, would not duplicate any other
program and would not require additional capital improvements or rental
space.
SOURCES OF INFORMATION
Office of Administration
Department of Natural Resources
Department of Health
Department of Public Safety
Secretary of State's Office
Department of Insurance
NOT RESPONDING: Department of Revenue
This Fiscal Note is not an official copy and should not be quoted or cited.