SB 0105 - Fiscal Note

Fiscal Note - SB 0105 - Authorizes claim of right credit for taxes paid in error in previous year

COMMITTEE ON LEGISLATIVE RESEARCH

OVERSIGHT DIVISION

FISCAL NOTE

L.R. NO.: 0061-01

BILL NO.: Perfected SB 105

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

TYPE: Original

DATE: February 23, 1999

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FISCAL SUMMARY

ESTIMATED NET EFFECT ON STATE FUNDS
FUND AFFECTED	FY 2000	FY 2001	FY 2002
General Revenue	(Unknown)	(Unknown)	(Unknown)
Total Estimated Net Effect on All State Funds *	(UNKNOWN)	(UNKNOWN)	(UNKNOWN)

*Expected to be less than $100,000.

ESTIMATED NET EFFECT ON FEDERAL FUNDS
FUND AFFECTED	FY 2000	FY 2001	FY 2002
None
Total Estimated Net Effect on All Federal Funds	$0	$0	$0

ESTIMATED NET EFFECT ON LOCAL FUNDS
FUND AFFECTED	FY 2000	FY 2001	FY 2002
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) state this proposal would allow Missouri resident taxpayers to utilize the claim of right credit pursuant to section 1341 of the Internal Revenue Code against their Missouri income tax. DOR staff state the number of Missouri taxpayers able to utilize the claim of right credit is unknown. The Division of Taxation does not anticipate a large impact of filers for this credit, but DOR would need one temporary tax season employee for every 3,680 credits filed. This legislation would require modifications to the individual income tax system. The Division of Taxation and Collections estimates these modifications, including programming changes, would require 260 hours of overtime at a cost of $5,202. Modifications to the income tax return and schedules would be completed with existing resources.

Officials of the Office of Administration state they have not been able to locate any empirical basis to estimate the fiscal impact of this proposal.

While data is not available to accurately estimate the revenue impact of this proposal, Oversight assumes that the revenue loss would be less than $100,000 annually.

Oversight assumes this proposal would result in a decrease in Total State Revenues.

FISCAL IMPACT - State Government	FY 2000	FY 2001	FY 2002
	(10 Mo.)
GENERAL REVENUE FUND
Loss to General Revenue Fund
Claim of Right Credit *	(Unknown)	(Unknown)	(Unknown)
Cost-Department of Revenue
Programming overtime	$0	($5,202)	$0
ESTIMATED NET IMPACT ON
GENERAL REVENUE FUND	(UNKNOWN)	(UNKNOWN)	(UNKNOWN)
*Expected to be less than $100,000.
FISCAL IMPACT - Local Government	FY 2000	FY 2001	FY 2002
	(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

Under the "claim of right" provision of federal law, a taxpayer is allowed to recalculate taxes previously paid, but subsequently determined to have been paid in error. The usual situation is when a taxpayer claims income in a taxable year and pays tax on it, discovers at a later time that the income should have not have been claimed, and returns that amount in a later year. The federal statute allows that taxpayer to calculate income tax for the year in which the amount is returned and to take either a deduction or a credit.

Under current law, Missouri taxpayers are allowed to take the deduction in these circumstances, but not a credit. This proposal would authorize the credit.

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

Division of Budget and Planning

Jeanne Jarrett, CPA

Director

February 23, 1999