SB 0475 - Fiscal Note

Fiscal Note - SB 0475 - Revises income tax exemption for certain new business facilities located in an enterprise zone

COMMITTEE ON LEGISLATIVE RESEARCH

OVERSIGHT DIVISION

FISCAL NOTE

L.R. NO.: 1948-01

BILL NO.: SB 475

SUBJECT: Enterprise Zones; Taxation and Revenue - General

TYPE: Original

DATE: March 8, 1999

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FISCAL SUMMARY

ESTIMATED NET EFFECT ON STATE FUNDS
FUND AFFECTED	FY 2000	FY 2001	FY 2002
General Revenue	($3,400,379)	($1,130,000)	($1,130,000)
Total Estimated Net Effect on All State Funds	($3,400,379)	($1,130,000)	($1,130,000)

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 4 pages.

FISCAL ANALYSIS

ASSUMPTION

Officials from the Department of Revenue assume this proposal would not fiscally impact their agency.

Department of Economic Development (DED) officials assume that 376 taxpayers would want to file amended returns for three years and that they would not be able to go back any further

than three years based on Chapter 143 tax statutes regarding amended returns. DED states that prior to filing amended returns DED would have to recertify the credits and income modifications for any of the 376 taxpayers making application for re-certification. DED assumes that all 376 made application for re-certification this would result in 1,128 recertifications.

DED assumes that the recertifications would take approximately 30 minutes each to calculate. DED projects that this would result in 14.1 weeks of work based on a 40 hour work week (564 hours). Since this is a one time issue, DED assumes the work would be conducted by existing staff working overtime. One Economic Development Incentive Coordinator at range 26 step L ($36,888) as a code one employee would be paid straight time at an hourly rate of $17.74 X 564 hours for a total cost of $10,006.00. Postage would also be required to mail the re-certifications.

DED assumes that enterprise zone income modifications will result in $3,390,000 cost in FY 2000 for three years worth of amended returns plus a minimum of an additional $1,130,000 in additional costs for each subsequent year. DED arrived at these estimates by comparing the FY 93 income modifications claimed to FY 97 and FY 98 income modifications, taking the difference between the FY 93 amount and each of FY 97 and FY 98 figures, multiplying this difference by a tax rate of 6.25%, dividing by 2 to get an average, and projecting this average into a cost for the 3 years worth of amended returns for the first years cost and then using the same average to project the recurring cost for future years.

Officials from the Office of Administration - Budget and Planning deferred to the estimates provided by DED.

FISCAL IMPACT - State Government	FY 2000	FY 2001	FY 2002
	(10 Mo.)
GENERAL REVENUE FUND
Loss - General Revenue Fund
Increase in enterprise zone tax credits	($3,390,000)	($1,130,000)	($1,130,000)
FISCAL IMPACT - State Government	FY 2000	FY 2001	FY 2002
(continued)	(10 Mo.)
Cost - Department of Economic Development
One-time costs	($10,379)	$0	$0
ESTIMATED NET EFFECT ON
GENERAL REVENUE FUND	($3,400,379)	($1,130,000)	($1,130,000)
FISCAL IMPACT - Local Government	FY 2000	FY 2001	FY 2002
	(10 Mo.)
	$0	$0	$0
FISCAL IMPACT - Small Business
Small businesses would be expected to be fiscally impacted to the extent that they would be located in an enterprise zone and receive the economic benefits.

DESCRIPTION

Current law allows the exemption from state income taxes of one half of the Missouri taxable income of a new business facility located in an Enterprise Zone for a period not to exceed ten years. This proposal would vest the right to the exemption upon commencement of operation, but would be waived for any year in which the taxpayer fails to meet other statutory requirements. The tax credit allowances would be calculated every year with the same formula used in the first year.

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 Economic Development

Department of Revenue

Office of Administration

Division of Budget and Planning

Jeanne Jarrett, CPA

Director

March 8, 1999