HOUSE BILL NO. 2679 103RD GENERAL ASSEMBLY
INTRODUCED BY REPRESENTATIVE JOHNSON.
5745H.01I JOSEPH ENGLER, Chief Clerk
AN ACT To amend chapter 143, RSMo, by adding thereto seven new sections relating to the first-time business owner savings account act, with penalty provisions.
Be it enacted by the General Assembly of the state of Missouri, as follows:
Section A. Chapter 143, RSMo, is amended by adding thereto seven new sections, to 2 be known as sections 143.1140, 143.1141, 143.1143, 143.1144, 143.1145, 143.1146, and 3 143.1147, to read as follows: 143.1140. 1. This section shall be known and may be cited as the "First-Time 2 Business Owner Tax Deduction Act". 3 2. As used in this section, the following terms mean: 4 (1) "Deduction", an amount subtracted from the taxpayer's Missouri adjusted 5 gross income to determine Missouri taxable income for the tax year in which such 6 deduction is claimed; 7 (2) "Eligible expenses", the same meaning as that term is defined under section 8 143.1143; 9 (3) "First-time business owner savings account", the same meaning as that term 10 is defined under section 143.1143; 11 (4) "First-time business owner savings account act", sections 143.1141 to 12 143.1147; 13 (5) "Taxpayer", any individual who is a resident of this state and subject to the 14 income tax imposed under this chapter, excluding withholding tax imposed under 15 sections 143.191 to 143.265.
EXPLANATION — Matter enclosed in bold-faced brackets [thus] in the above bill is not enacted and is intended to be omitted from the law. Matter in bold-face type in the above bill is proposed language. HB 2679 2
16 3. For all tax years beginning on or after January 1, 2027, a taxpayer shall be 17 allowed a deduction equal to fifty percent of the taxpayer's contributions to a first-time 18 business owner savings account in the tax year of the contribution. 19 4. The amount of the deduction claimed shall not exceed the amount of the 20 taxpayer's Missouri adjusted gross income for the tax year the deduction is claimed. 21 5. The assets of a first-time business owner savings account and any income 22 therefrom shall be exempt from all taxation by the state or any of its political 23 subdivisions. Income earned or received as a result of assets in a first-time business 24 owner savings account shall not be subject to state income tax imposed under chapter 25 143. The exemption from taxation under this section shall apply only to assets and 26 income maintained, accrued, or expended under the requirements of the first-time 27 business owner savings account act, and no exemption shall apply to assets and income 28 expended for any other purposes. Annual contributions made to the savings program, 29 up to and including eight hundred dollars per participating taxpayer or up to and 30 including one thousand six hundred dollars for married individuals filing a combined 31 tax return, shall be subtracted from gross income to determine Missouri adjusted gross 32 income under section 143.121. 33 6. If any deductible contributions to or earnings from the program referred to in 34 this section are distributed and not used to pay for eligible expenses or are not held for 35 the minimum length of time under subsection 2 of section 143.1145, the amount so 36 distributed shall be added to the Missouri adjusted gross income of the participant or, if 37 the participant is not living, the amount shall be added to the Missouri adjusted gross 38 income of the participant's beneficiary. 39 7. The department of revenue shall promulgate all necessary rules and 40 regulations for the administration of this section. Any rule or portion of a rule, as that 41 term is defined in section 536.010, that is created under the authority delegated in this 42 section shall become effective only if it complies with and is subject to all of the 43 provisions of chapter 536 and, if applicable, section 536.028. This section and chapter 44 536 are nonseverable and if any of the powers vested with the general assembly 45 pursuant to chapter 536 to review, to delay the effective date, or to disapprove and annul 46 a rule are subsequently held unconstitutional, then the grant of rulemaking authority 47 and any rule proposed or adopted after August 28, 2026, shall be invalid and void. 48 8. Under section 23.253 of the Missouri sunset act: 49 (1) The provisions of the new program authorized under this section shall 50 automatically sunset on December thirty-first six years after the effective date of this 51 section unless reauthorized by an act of the general assembly; and HB 2679 3
52 (2) This section shall terminate on September first of the calendar year 53 immediately following the calendar year in which the program authorized under this 54 section is sunset. 143.1141. Sections 143.1141 to 143.1147 shall be known and may be cited as the 2 "First-Time Business Owner Savings Account Act". 143.1143. As used in sections 143.1141 to 143.1147, the following terms mean: 2 (1) "Account holder", an individual who establishes an account with a financial 3 institution that is designated as a first-time business owner savings account in 4 accordance with section 143.1144; 5 (2) "Department", the department of revenue; 6 (3) "Eligible expenses", any business expenses that result from the start-up of a 7 new business or that occur during the first month of a new business including, but not 8 limited to, incorporation fees, legal fees, marketing expenses, purchases of equipment, 9 inventory, real estate, or supplies, rent, security deposits, vehicles, or wages of 10 employees; 11 (4) "Financial institution", any state bank, state trust company, savings and loan 12 association, federally chartered credit union doing business in this state, credit union 13 chartered by the state of Missouri, national bank, broker-dealer, mutual fund, insurance 14 company, or other similar financial entity qualified to do business in this state; 15 (5) "First-time business owner", an individual who: 16 (a) Either individually or jointly, has never owned, been a partner in, or held the 17 majority of shares in a sole proprietorship, partnership, corporation, or limited liability 18 company; and 19 (b) Is a member of a minority; 20 (6) "First-time business owner savings account" or "account", an account with a 21 financial institution designated as such in accordance with subsection 1 of section 22 143.1144; 23 (7) "Member of a minority", any individual who has been subjected to racial or 24 ethnic prejudice or cultural bias because of his or her identity as a member of a group 25 without regard to his or her individual qualities. Such groups shall include, but not be 26 limited to, groups based on race, color, religion, sex, or national origin; 27 (8) "Qualified beneficiary", a first-time business owner, designated by an 28 account holder, for whose eligible expenses the moneys in a first-time business owner 29 savings account are or will be used. 143.1144. 1. Beginning January 1, 2027, any individual may open an account 2 with a financial institution and designate the account, in its entirety, as a first-time 3 business owner savings account to be used to pay or reimburse a qualified beneficiary's HB 2679 4
4 eligible expenses for starting a new business. An individual may be the account holder 5 of multiple accounts, and an individual may jointly own the account with another 6 person if such persons file a joint income tax return. To be eligible for the tax deduction 7 under section 143.1140, an account holder shall comply with the requirements of this 8 section. 9 2. An account holder shall designate, no later than April fifteenth of the year 10 following the tax year in which the account was established, a first-time business owner 11 as the qualified beneficiary of the first-time business owner savings account. The 12 account holder may designate himself or herself as the qualified beneficiary. The 13 account holder may change the designated qualified beneficiary at any time, but no 14 first-time business owner savings account shall have more than one qualified beneficiary 15 at any time. No account holder shall have multiple accounts with the same qualified 16 beneficiary, but an individual may be designated as the qualified beneficiary of multiple 17 accounts. 18 3. (1) The following limits apply to a first-time business owner savings account: 19 (a) The maximum contribution to a first-time business owner savings account is 20 one thousand six hundred dollars per year for an individual and three thousand two 21 hundred dollars per year for account holders who file a joint tax return; 22 (b) The maximum amount of all contributions for all tax years to a first-time 23 business owner savings account is twenty thousand dollars; and 24 (c) The maximum balance of a first-time business owner savings account is 25 thirty thousand dollars. 26 (2) If a limit in subdivision (1) of this subsection is exceeded, thereafter no 27 interest or other income earned on the investment of moneys in the first-time business 28 owner savings account shall be included in the tax exemption under section 143.1140. 29 (3) Moneys may remain in a first-time business owner savings account for an 30 unlimited duration without the interest or income being subject to recapture or penalty. 31 4. The account holder shall not use moneys in an account to pay expenses of 32 administering the account, except that a service fee may be deducted from the account 33 by a financial institution. The account holder shall be responsible for maintaining 34 documentation for the first-time business owner savings account and for eligible 35 expenses related to the qualified beneficiary starting a new business. 143.1145. 1. (1) For purposes of the tax benefit conferred under the first-time 2 business owner savings account act, the moneys in a first-time business owner savings 3 account may be: 4 (a) Used for eligible expenses related to a qualified beneficiary starting a new 5 business located in this state; HB 2679 5
6 (b) Used for eligible expenses related to a qualified beneficiary starting a new 7 business located outside this state if the qualified beneficiary is active-duty military and 8 was stationed in Missouri for any time after the creation of the account; 9 (c) Transferred to another newly created first-time business owner savings 10 account; and 11 (d) Used to pay a service fee that is deducted by the financial institution. 12 (2) Subdivision (1) of this subsection applies whether the qualified beneficiary is 13 the sole owner of the new business or a joint owner with another person who does not 14 qualify as a qualified beneficiary. 15 2. Moneys withdrawn from a first-time business owner savings account shall be 16 subject to recapture in the tax year in which such moneys are withdrawn if: 17 (1) At the time of the withdrawal, it has been less than a year since the first 18 deposit in the first-time business owner savings account; or 19 (2) The moneys are used for any purpose other than those specified under 20 subsection 1 of this section. 21 22 The recapture shall be an amount equal to the moneys withdrawn and shall be added to 23 the Missouri adjusted gross income of the account holder or, if the account holder is not 24 living, the qualified beneficiary. 25 3. If any moneys are subject to recapture under subsection 2 of this section, the 26 account holder shall pay to the department a penalty in the same tax year as the 27 recapture. If the withdrawal was made in ten or fewer years after the first deposit in the 28 first-time business owner savings account, the penalty shall be equal to five percent of 29 the amount subject to recapture, and, if the withdrawal was made more than ten years 30 after the first deposit in the account, the penalty shall be equal to ten percent of the 31 amount subject to recapture. These penalties shall not apply if: 32 (1) The withdrawn moneys are used for eligible expenses related to a qualified 33 beneficiary starting a new business outside of the state; or 34 (2) The withdrawn moneys are from a first-time business owner savings account 35 for which the qualified beneficiary died and the account holder does not designate a new 36 qualified beneficiary during the same tax year. 37 4. If the account holder dies or, if the first-time business owner savings account is 38 jointly owned, the account holders die and the account does not have a surviving 39 transfer-on-death beneficiary, all of the moneys in the account that were used for a tax 40 deduction under section 143.1140 shall be subject to recapture in the tax year of the 41 death or deaths, but no penalty shall be due to the department. HB 2679 6
143.1146. 1. The department shall establish forms for an account holder to 2 annually report information about a first-time business owner savings account 3 including, but not limited to, how the moneys withdrawn from the fund are used, and 4 shall identify any supporting documentation that is required to be maintained. To be 5 eligible for the tax deduction under section 143.1140, an account holder shall annually 6 file with the account holder's state income tax return all forms required by the 7 department under this section, any Internal Revenue Service Form 1099 Series forms 8 for the account issued by the financial institution, and any other supporting 9 documentation the department requires. 10 2. The department may promulgate rules and regulations necessary to 11 administer the provisions of the first-time business owner savings account act. Any 12 rule or portion of a rule, as that term is defined in section 536.010, that is created under 13 the authority delegated in this section shall become effective only if it complies with and 14 is subject to all of the provisions of chapter 536 and, if applicable, section 536.028. This 15 section and chapter 536 are nonseverable and if any of the powers vested with the 16 general assembly pursuant to chapter 536 to review, to delay the effective date, or to 17 disapprove and annul a rule are subsequently held unconstitutional, then the grant of 18 rulemaking authority and any rule proposed or adopted after August 28, 2026, shall be 19 invalid and void. 143.1147. 1. No financial institution shall be required to: 2 (1) Designate an account as a first-time business owner savings account or 3 designate the beneficiaries of an account in the financial institution's account contracts 4 or systems or in any other way; 5 (2) Track the use of moneys withdrawn from a first-time business owner savings 6 account; or 7 (3) Report any information to the department or any other governmental agency 8 that is not otherwise required by law. 9 2. No financial institution shall be responsible or liable for: 10 (1) Determining or ensuring that an account holder is eligible for a tax deduction 11 under section 143.1140; 12 (2) Determining or ensuring that moneys in the account are used for eligible 13 expenses; or 14 (3) Reporting or remitting taxes or penalties related to use of moneys in a first- 15 time business owner savings account. HB 2679 7
16 3. In implementing section 143.1140 and sections 143.1141 to 143.1147, the 17 department shall not establish any administrative, reporting, or other requirements on 18 financial institutions that are outside the scope of normal account procedures. ✔
Statutes affected: