SB 0983 - Fiscal Note

Fiscal Note - SB 0983 - Authorizes income tax deduction for tuition and school expenses for children in K-12; capped at $1,000 per child

COMMITTEE ON LEGISLATIVE RESEARCH

OVERSIGHT DIVISION

FISCAL NOTE

L.R. NO. 4030-01

BILL NO. SB 983

SUBJECT: Children and Minors; Education, Elementary and Secondary; Taxation and Revenue-General-Income

TYPE: Corrected

DATE: March 17, 1998

# Corrected to correct a typographical error.

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FISCAL SUMMARY

ESTIMATED NET EFFECT ON STATE FUNDS
FUND AFFECTED	FY 1999	FY 2000	FY 2001
General Revenue	$0	($19,567,160)	($19,556,570)
Total Estimated Net Effect on All State Funds	$0	($19,567,160)	($19,556,570)

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 4 pages.

#FISCAL ANALYSIS

ASSUMPTION

# Officials of the Department of Elementary and Secondary Education (DES) state this proposal would not fiscally impact their agency.

Officials of the Department of Revenue (DOR) state this proposal allows an income tax deduction for tuition and school expenses for children in grades K-12. The deduction may not exceed $1,000 per child.

ADMINISTRATIVE IMPACT:

It is projected by the Office of Administration that there are 889,699 children attending public school and 102,432 children attending private school. The Department of Revenue would have the following impact, based on 50% participation:

Division of Taxation:

The Central Processing Bureau would have to verify the receipts and age on the income tax return in pre-edit. One temporary Clerk I would be requested for six months for every 500,000 returns impacted. For every 20,000 additional errors generated by this deduction, one Tax Processing Technician would be needed for six months. Additional correspondence and telephone inquiries relating to this deduction would be received during the income tax season. One Tax Processing Technician I would be requested for six months to handle the additional workload. Changes to the telefile system will have to be coordinated with MCI. MCI charges $250 for each script change and $.21 for each additional minute used by a taxpayer when telefiling. It is estimated that the deduction would increase the amount of time to telefile by at least one minute and cost the Department an additional $20,000 in the 800 number usage.

Information Systems Division:

The cost to the State Data Center is estimated to be $5,784. All other changes to the income tax system, forms and reports would be completed with existing staff and resources.

Oversight has allowed the Department of Revenue 2 FTE, the fringe benefits and the appropriate expense and equipment to handle the provisions of this proposal.

Officials of the Office of Administration (COA) state this proposal provides an individual income tax deduction of up to $1,000 for the school tuition or expenses in grades K-12. There are 102,432 students in private elementary and secondary schools in Missouri. The average tuition for private elementary school is $2,138 and the average tuition for private secondary schools is $4,578 as stated in table 271 of the 1997 Statistical Abstract. Therefore, it is assumed that all of

ASSUMPTION (continued)

these students will take the full $1,000 deduction. There are 889,699 students in public elementary and secondary schools in Missouri. It is assumed that these students have school expenses of $250 annually. A 6% marginal tax rate was assumed. COA staff assume that taxpayers would not adjust their withholdings in FY99 to take advantage of this new deduction.

The revenue reduction would be ($19,491,405) annually.

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

FISCAL IMPACT - State Government	FY 1999	FY 2000	FY 2001
	(10 Mo.)
Loss to General Revenue Fund
Income Tax deduction for
Education Expenses	$0	($19,491,405)	($19,491,405)
Cost to General Revenue Fund
Department of Revenue (DOR)
Personal Service (2 FTE)	$0	($32,816)	($33,637)
Fringe Benefits	0	($9,188)	($9,418)
Expense and Equipment	0	($33,751)	($22,110)
Administrative Costs to DOR	$0	($75,755)	($65,165)
ESTIMATED NET EFFECT ON
GENERAL REVENUE FUND	$0	($19,567,160)	($19,556,570)
FISCAL IMPACT - Local Government	FY 1999	FY 2000	FY 2001
	(10 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 act authorizes an income tax deduction for tuition, attendance fees and school supplies paid by a taxpayer for any dependent attending grades kindergarten through twelve. The deduction is capped at $1,000 per dependent. The act has an effective date of January 1, 1999, and applies to all taxable years after December 31, 1998.

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

Department of Elementary and Secondary Education

Jeanne Jarrett, CPA

Director

March 17, 1998