HOUSE BILL NO. 2975 103RD GENERAL ASSEMBLY
INTRODUCED BY REPRESENTATIVE BOYKO.
6241H.03I JOSEPH ENGLER, Chief Clerk
AN ACT To repeal sections 143.011, 143.021, and 143.121, RSMo, and to enact in lieu thereof three new sections relating to income tax, with a referendum clause.
Be it enacted by the General Assembly of the state of Missouri, as follows:
Section A. Sections 143.011, 143.021, and 143.121, RSMo, are repealed and three 2 new sections enacted in lieu thereof, to be known as sections 143.011, 143.021, and 143.121, 3 to read as follows: 143.011. 1. For all tax years ending on or before December 31, 2026, a tax is 2 hereby imposed for every [taxable] tax year on the Missouri taxable income of every resident. 3 The tax shall be determined by applying the tax table or the rate provided in section 143.021, 4 which is based upon the following rates: 5 If the Missouri taxable income The tax is: 6 is: 7 Not over $1,000.00 1 1/2% of the Missouri taxable income 8 Over $1,000 but not over $15 plus 2% of excess over $1,000 9 $2,000 10 Over $2,000 but not over $35 plus 2 1/2% of excess over $2,000 11 $3,000 12 Over $3,000 but not over $60 plus 3% of excess over $3,000 13 $4,000 14 Over $4,000 but not over $90 plus 3 1/2% of excess over $4,000 15 $5,000
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 2975 2
16 Over $5,000 but not over $125 plus 4% of excess over $5,000 17 $6,000 18 Over $6,000 but not over $165 plus 4 1/2% of excess over $6,000 19 $7,000 20 Over $7,000 but not over $210 plus 5% of excess over $7,000 21 $8,000 22 Over $8,000 but not over $260 plus 5 1/2% of excess over $8,000 23 $9,000 24 Over $9,000 $315 plus 6% of excess over $9,000 25 2. (1) Notwithstanding the provisions of subsection 1 of this section to the contrary, 26 beginning with the 2023 calendar year, but ending on December 31, 2026, the top rate of tax 27 pursuant to subsection 1 of this section shall be four and ninety-five hundredths percent. 28 (2) The modification of tax rates made pursuant to this subsection shall apply only to 29 tax years that begin on or after January 1, 2023. 30 (3) The director of the department of revenue shall, by rule, adjust the tax table 31 provided in subsection 1 of this section to effectuate the provisions of this subsection. The 32 top remaining rate of tax shall apply to all income in excess of seven thousand dollars, as 33 adjusted pursuant to subsection 5 of this section. 34 3. (1) In addition to the rate reduction under subsection 2 of this section, beginning 35 with the 2024 calendar year, but ending on December 31, 2026, the top rate of tax under 36 subsection 1 of this section may be reduced by fifteen hundredths of a percent. A reduction in 37 the rate of tax shall take effect on January first of a calendar year and such reduced rates shall 38 continue in effect until the next reduction occurs. 39 (2) A reduction in the rate of tax shall only occur if the amount of net general revenue 40 collected in the previous fiscal year exceeds the highest amount of net general revenue 41 collected in any of the three fiscal years prior to such fiscal year by at least one hundred 42 seventy-five million dollars. 43 (3) Any modification of tax rates under this subsection shall only apply to tax years 44 that begin on or after a modification takes effect. 45 (4) The director of the department of revenue shall, by rule, adjust the tax tables under 46 subsection 1 of this section to effectuate the provisions of this subsection. 47 4. [(1) In addition to the rate reductions under subsections 2 and 3 of this section, 48 beginning with the calendar year immediately following the calendar year in which a 49 reduction is made pursuant to subsection 3 of this section, the top rate of tax under subsection 50 1 of this section may be further reduced over a period of years. Each reduction in the top rate 51 of tax shall be by one-tenth of a percent and no more than one reduction shall occur in a HB 2975 3
52 calendar year. No more than three reductions shall be made under this subsection. 53 Reductions in the rate of tax shall take effect on January first of a calendar year and such 54 reduced rates shall continue in effect until the next reduction occurs. 55 (2) (a) A reduction in the rate of tax shall only occur if: 56 a. The amount of net general revenue collected in the previous fiscal year exceeds the 57 highest amount of net general revenue collected in any of the three fiscal years prior to such 58 fiscal year by at least two hundred million dollars; and 59 b. The amount of net general revenue collected in the previous fiscal year exceeds the 60 amount of net general revenue collected in the fiscal year five years prior, adjusted annually 61 by the percentage increase in inflation over the preceding five fiscal years. 62 (b) The amount of net general revenue collected required by subparagraph a. of 63 paragraph (a) of this subdivision in order to make a reduction pursuant to this subsection shall 64 be adjusted annually by the percent increase in inflation beginning with January 2, 2023. 65 (3) Any modification of tax rates under this subsection shall only apply to tax years 66 that begin on or after a modification takes effect. 67 (4) The director of the department of revenue shall, by rule, adjust the tax tables under 68 subsection 1 of this section to effectuate the provisions of this subsection. The bracket for 69 income subject to the top rate of tax shall be eliminated once the top rate of tax has been 70 reduced below the rate applicable to such bracket, and the top remaining rate of tax shall 71 apply to all income in excess of the income in the second highest remaining income bracket.] 72 Beginning January 1, 2027, a tax is hereby imposed for every tax year on the Missouri 73 taxable income of every resident. The tax shall be determined by applying the tax table 74 or the rate provided in section 143.021, which is based upon the following rates: 75 If the Missouri taxable income is: The tax is: 76 Not over $2,000.00 $0 77 Over $2,000 but not over $7,500 2.9% of excess over $2,000 78 Over $7,500 but not over $30,000 $159 plus 4.55% of excess over $7,500 79 Over $30,000 but not over $1,183.25 plus 4.7% of excess over 80 $1,000,000 $30,000 81 Over $1,000,000 $46,773 plus 5.9% of excess over 82 $1,000,000 83 5. (1) Beginning with the 2017 calendar year, the brackets of Missouri taxable 84 income identified in subsection 1 of this section for all tax years beginning on or before 85 December 31, 2026, shall be adjusted annually by the percent increase in inflation. The 86 director shall publish such brackets annually beginning on or after October 1, 2016. HB 2975 4
87 Modifications to the brackets shall take effect on January first of each calendar year and shall 88 apply to tax years beginning on or after the effective date of the new brackets. 89 (2) Beginning with the 2028 calendar year, the brackets of Missouri taxable 90 income identified in subsection 4 of this section shall be adjusted annually for inflation 91 using the same measurement and rate that the Social Security Administration uses to 92 calculate the percentage increase of the Social Security benefit cost-of-living adjustment 93 (COLA), as provided under the federal Social Security Act, 42 U.S.C. Section 301, et 94 seq., as amended. The director shall publish such brackets annually beginning on or 95 after October 1, 2027. Modifications to the brackets shall take effect on January first of 96 each calendar year and shall apply to tax years beginning on or after the effective date 97 of the new brackets. 98 6. As used in this section, for all tax years beginning on or before December 31, 99 2026, the following terms mean: 100 (1) "CPI", the Consumer Price Index for All Urban Consumers for the United States 101 as reported by the Bureau of Labor Statistics, or its successor index; 102 (2) "CPI for the preceding calendar year", the average of the CPI as of the close of the 103 twelve-month period ending on August thirty-first of such calendar year; 104 (3) "Net general revenue collected", all revenue deposited into the general revenue 105 fund, less refunds and revenues originally deposited into the general revenue fund but 106 designated by law for a specific distribution or transfer to another state fund; 107 (4) "Percent increase in inflation", the percentage, if any, by which the CPI for the 108 preceding calendar year exceeds the CPI for the year beginning September 1, 2014, and 109 ending August 31, 2015. 143.021. 1. Every resident having a taxable income shall determine his or her tax 2 from the rates provided in section 143.011. For all tax years beginning on or before 3 December 31, 2022, there shall be no tax on a taxable income of less than one hundred 4 dollars. 5 2. (1) Notwithstanding the provisions of subsection 1 of section 143.011 to the 6 contrary, for all tax years beginning on or after January 1, 2023, but on or before December 7 31, 2026, there shall be no tax on taxable income of less than or equal to one thousand dollars, 8 as adjusted pursuant to subsection 5 of section 143.011. 9 (2) The modifications made pursuant to this subsection shall only apply to tax years 10 that begin on or after January 1, 2023. 11 (3) The director of the department of revenue shall, by rule, adjust the tax table 12 provided in subsection 1 of section 143.011 to effectuate the provisions of this subsection. 13 3. (1) Notwithstanding the provisions of section 143.011 to the contrary, for all 14 tax years beginning on or after January 1, 2027, there shall be no tax on a taxable HB 2975 5
15 income of less than or equal to two thousand dollars, as adjusted under subdivision (2) 16 of subsection 5 of section 143.011. 17 (2) The modifications made under this subsection shall apply only to tax years 18 that begin on or after January 1, 2027. 19 (3) The director of the department of revenue shall, by rule, adjust the tax table 20 provided under subsection 4 of section 143.011 to effectuate the provisions of this 21 subsection. 143.121. 1. The Missouri adjusted gross income of a resident individual shall be the 2 taxpayer's federal adjusted gross income subject to the modifications in this section. 3 2. There shall be added to the taxpayer's federal adjusted gross income: 4 (1) The amount of any federal income tax refund received for a prior year which 5 resulted in a Missouri income tax benefit. The amount added pursuant to this subdivision 6 shall not include any amount of a federal income tax refund attributable to a tax credit 7 reducing a taxpayer's federal tax liability pursuant to Public Law 116-136 or 116-260, enacted 8 by the 116th United States Congress, for the tax year beginning on or after January 1, 2020, 9 and ending on or before December 31, 2020, and deducted from Missouri adjusted gross 10 income pursuant to section 143.171. The amount added under this subdivision shall also not 11 include any amount of a federal income tax refund attributable to a tax credit reducing a 12 taxpayer's federal tax liability under any other federal law that provides direct economic 13 impact payments to taxpayers to mitigate financial challenges related to the COVID-19 14 pandemic, and deducted from Missouri adjusted gross income under section 143.171; 15 (2) Interest on certain governmental obligations excluded from federal gross income 16 by 26 U.S.C. Section 103 of the Internal Revenue Code, as amended. The previous sentence 17 shall not apply to interest on obligations of the state of Missouri or any of its political 18 subdivisions or authorities and shall not apply to the interest described in subdivision (1) of 19 subsection 3 of this section. The amount added pursuant to this subdivision shall be reduced 20 by the amounts applicable to such interest that would have been deductible in computing the 21 taxable income of the taxpayer except only for the application of 26 U.S.C. Section 265 of the 22 Internal Revenue Code, as amended. The reduction shall only be made if it is at least five 23 hundred dollars; 24 (3) The amount of any deduction that is included in the computation of federal 25 taxable income pursuant to 26 U.S.C. Section 168 of the Internal Revenue Code as amended 26 by the Job Creation and Worker Assistance Act of 2002 to the extent the amount deducted 27 relates to property purchased on or after July 1, 2002, but before July 1, 2003, and to the 28 extent the amount deducted exceeds the amount that would have been deductible pursuant to 29 26 U.S.C. Section 168 of the Internal Revenue Code of 1986 as in effect on January 1, 2002; HB 2975 6
30 (4) The amount of any deduction that is included in the computation of federal 31 taxable income for net operating loss allowed by 26 U.S.C. Section 172 of the Internal 32 Revenue Code of 1986, as amended, [other than the deduction allowed by 26 U.S.C. Section 33 172(b)(1)(G) and 26 U.S.C. Section 172(i) of the Internal Revenue Code of 1986, as 34 amended,] for a net operating loss the taxpayer claims in the tax year in which the net 35 operating loss occurred or carries forward for a period of more than twenty years and carries 36 backward for more than two years. Any amount of net operating loss taken against federal 37 taxable income but disallowed for Missouri income tax purposes pursuant to this subdivision 38 after June 18, 2002, may be carried forward and taken against any income on the Missouri 39 income tax return for a period of not more than twenty years from the year of the initial loss; 40 and 41 (5) For nonresident individuals in all [taxable] tax years ending on or after December 42 31, 2006, the amount of any property taxes paid to another state or a political subdivision of 43 another state for which a deduction was allowed on such nonresident's federal return in the 44 [taxable] tax year unless such state, political subdivision of a state, or the District of 45 Columbia allows a subtraction from income for property taxes paid to this state for purposes 46 of calculating income for the income tax for such state, political subdivision of a state, or the 47 District of Columbia; 48 (6) For all tax years beginning on or after January 1, 2018, any interest expense paid 49 or accrued in a previous [taxable] tax year, but allowed as a deduction under 26 U.S.C. 50 Section 163, as amended, in the current [taxable] tax year by reason of the carryforward of 51 disallowed business interest provisions of 26 U.S.C. Section 163(j), as amended. For the 52 purposes of this subdivision, an interest expense is considered paid or accrued only in the first 53 [taxable] tax year the deduction would have been allowable under 26 U.S.C. Section 163, as 54 amended, if the limitation under 26 U.S.C. Section 163(j), as amended, did not exist. 55 3. There shall be subtracted from the taxpayer's federal adjusted gross income the 56 following amounts to the extent included in federal adjusted gross income: 57 (1) Interest received on deposits held at a federal reserve bank or interest or dividends 58 on obligations of the United States and its territories and possessions or of any authority, 59 commission or instrumentality of the United States to the extent exempt from Missouri 60 income taxes pursuant to the laws of the United States. The amount subtracted pursuant to 61 this subdivision shall be reduced by any interest on indebtedness incurred to carry the 62 described obligations or securities and by any expenses incurred in the production of interest 63 or dividend income described in this subdivision. The reduction in the previous sentence 64 shall only apply to the extent that such expenses including amortizable bond premiums are 65 deducted in determining the taxpayer's federal adjusted gross income or included in the HB 2975 7
66 taxpayer's Missouri itemized deduction. The reduction shall only be made if the expenses 67 total at least five hundred dollars; 68 (2) The portion of any gain, from the sale or other disposition of property having a 69 higher adjusted basis to the taxpayer for Missouri income tax purposes than for federal 70 income tax purposes on December 31, 1972, that does not exceed such difference in basis. If 71 a gain is considered a long-term capital gain for federal income tax purposes, the modification 72 shall be limited to one-half of such portion of the gain; 73 (3) The amount necessary to prevent the taxation pursuant to this chapter of any 74 annuity or other amount of income or gain which was properly included in income or gain and 75 was taxed pursuant to the laws of Missouri for a [taxable] tax year prior to January 1, 1973, to 76 the taxpayer, or to a decedent by reason of whose death the taxpayer acquired the right to 77 receive the income or gain, or to a trust or estate from which the taxpayer received the income 78 or gain; 79 (4) Accumulation distributions received by a taxpayer as a beneficiary of a trust to the 80 extent that the same are included in federal adjusted gross income; 81 (5) The amount of any state income tax refund for a prior year which was included in 82 the federal adjusted gross income; 83 (6) The portion of capital gain specified in section 135.357 that would otherwise be 84 included in federal adjusted gross income; 85 (7) The amount that would have been deducted in the computation of federal taxable 86 income pursuant to 26 U.S.C. Section 168 of the Internal Revenue Code as in effect on 87 January 1, 2002, to the extent that amount relates to property purchased on or after July 1, 88 2002, but before July 1, 2003, and to the extent that amount exceeds the amount actually 89 deducted pursu