SB 0938 - Fiscal Note

Fiscal Note - SB 0938 - Authorizes state income tax credit for child care equal to federal child care credit

COMMITTEE ON LEGISLATIVE RESEARCH

OVERSIGHT DIVISION

FISCAL NOTE

L.R. NO. 3938-01

BILL NO. SB 938

SUBJECT: Children and Minors; Revenue Department; Taxation and Revenue - General; Taxation and Revenue - Income

TYPE: Original

DATE: March 9, 1998

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FISCAL SUMMARY

ESTIMATED NET EFFECT ON STATE FUNDS
FUND AFFECTED	FY 1999	FY 2000	FY 2001
General Revenue	$0	($53,892,510)	($55,502,392)
Total Estimated Net Effect on All State Funds	$0	($53,892,510)	($55,502,392)

ESTIMATED NET EFFECT ON FEDERAL FUNDS
FUND AFFECTED	FY 1999	FY 2000	FY 2001
None
TotaL Estimated Net Effect on All Federal Funds	$0	$0	$0

ESTIMATED NET EFFECT ON LOCAL FUNDS
FUND AFFECTED	FY 1999	FY 2000	FY 2001
Local Government	$0	$0	$0

Numbers within parentheses: ( ) indicate costs or losses

This fiscal note contains 3 pages.

FISCAL ANALYSIS

ASSUMPTION

Officials of the Department of Revenue (DOR) assume that the Office of Administration would project revenue impact related to this proposal. Statistics of income figures indicate six million federal returns nationwide claimed a dependent care credit in 1994. This figure was multiplied by 1.9% to arrive at a Missouri figure, and expanded by 2% to cover increases. It was then rounded off to estimate 116,000 dependent care credits used in Missouri. DOR officials stated one tax processing technician (TPT) can process and pre edit approximately 80,000 returns in a six month period. DOR officials assume they would request two (2) TPT's for a six month period. The 116,000 credits claimed would generate errors at the rate of 25% or 29,000. One TPT can reconcile approximately 20,000 errors in a six month period. Therefore, DOR officials would request 1.75 TPT's as a result of this proposal. Automated system modifications and additional key entry would also result from this proposal, but DOR officials assume they could accomplish those tasks with existing personnel.

Officials of the Office of Administration - Budget and Planning (B&P) state this proposal allows a Missouri income tax credit of 100% of the federal income tax credit for child care expenses. The Fall 1997 Statistics of Income Table 1 reports that the federal child care tax credit was $2,517,962,000 in 1995, and was taken on 5,964,253 returns. It is assumed that Missouri's share is 1.9% of the federal total. A growth rate of 3% annually was assumed. This proposal would become effective for tax years beginning Jan. 1,1999 and costs are not reflected until returns were filed in FY2000.

This proposal would result in a decrease in Total State Revenues.

FISCAL IMPACT - State Government	FY 1999	FY 2000	FY 2001
	(6 Mo.)
GENERAL REVENUE FUND
Loss to General Revenue Fund
Income tax credit for Child Care Expenses	$0	($53,845,780)	($55,461,153)
Cost-Department of Revenue (DOR)
Personal Service (1.75)	$0	($31,189)	($31,969)
Fringe Benefits	$0	($8,733)	($8,951)
Expense and Equipment	$0	($6,808)	($319)
Total Cost to DOR	$0	($46,730)	($41,239)
FISCAL IMPACT - State Government	FY 1999	FY 2000	FY 2001
(Continued)	(6 Mo.)
ESTIMATED NET EFFECT TO
GENERAL REVENUE FUND	$0	($53,892,510)	($55,502,392)
FISCAL IMPACT - Local Government	FY 1999	FY 2000	FY 2001
	(6 Mo.)
	$0	$0	$0
FISCAL IMPACT - Small Business

No direct fiscal impact to small businesses would be expected as a result of this proposal.

DESCRIPTION

This proposal would authorize a taxpayer who takes the federal child care credit to take a credit for the same amount on his or her state income tax return.

The proposal would be effective on January 1, 1999.

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

Department of Revenue

Office of Administration - Budget and Planning

Jeanne Jarrett, CPA

Director

March 9, 1998