SB 0972 - Fiscal Note

Fiscal Note - SB 0972 - Allows income tax deduction for contributions to religious institutions for non-itemizers

COMMITTEE ON LEGISLATIVE RESEARCH

OVERSIGHT DIVISION

FISCAL NOTE

L.R. NO. 4027-01

BILL NO. SB 972

SUBJECT: Charities; Religion; 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	($19,200,000)	($19,800,000)
Total Estimated Net Effect on All State Funds	$0	($19,200,000)	($19,800,000)

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 from the Office of Administration (COA) state there are approximately 2,341,827 returns after adjusting for the non-resident percentage. COA states that according to the Fall, 1997 SOI Table 7, twenty-nine percent of all returns itemize. COA also states that according to the 1997 Statistical Abstract, forty-eight percent of households contributed to a religious institution. COA assumes a contribution of $400. COA also assumes a six percent tax rate. COA assumes a three percent growth rate. COA projects the fiscal impact to be $0 in FY1999, ($19,200,000) in FY2000, and ($19,800,000) in FY2001.

Department of Revenue (DOR) officials state the proposal allows an income tax deduction for contributions made to religious institutions and would only apply to non-itemizers.

ADMINISTRATIVE IMPACT:

DOR states that last year there were 1,774,863 Missouri returns filed taking the standard deduction. DOR states it is unknown the number of these taxpayers that would take the deduction for contributions made to religious institutions. For every one million returns impacted, DOR states the Division of Taxation would need one Clerk I for six months. For every 20,000 errors generated from this deduction, the Division of Taxation would need one Tax Processing Technician I. Changes to the telefile script would have to be coordinated with MCI. MCI charges a $250 fee for each script change. An extra line would have to be placed on the income tax return for this deduction. This extra line would increase the time a taxpayer spends telefiling by over one minute, at a cost of $.21 per minute.

Oversight assumes that DOR would absorb the processing costs of this proposal. However, if the amount of returns that claim the deduction for contributions to religious institutions would increase DOR could request additional resources through the budgetary process.

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 - General Revenue Fund
Increase in charitable religious
deduction claims	$0	($19,200,000)	($19,800,000)
FISCAL IMPACT - State Government	FY 1999	FY 2000	FY 2001
(continued)	(6 Mo.)
ESTIMATED NET EFFECT ON
GENERAL REVENUE FUND	$0	($19,200,000)	($19,800,000)
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 state income tax deduction for contributions made to churches, religious societies and other religious institutions by taxpayers who do not itemize their deductions.

The proposal has an effective date of 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

Office of Administration

Division of Budget and Planning

Department of Revenue

Jeanne Jarrett, CPA

Director

March 9, 1998