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2012-071_fiscalnote

2012-071_fiscalnote

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Published by: ProgressMissouri on Sep 14, 2011
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MISSOUlUSTATEAUDITOR'SOFFICEFISCALNOTE(11-59)SubjectInitiativepetition
from
MarcEllingerregardingaproposedconstitutionalamendmentto
ArticleX.
(ReceivedAugust
15,2011)
DateSeptember
2,2011
DescriptionThisproposalwouldamend
Article
X
oftheMissouriConstitution.TheamendmentistobevotedoninNovember,
2012_
PubliccommentsandotherinputTheStateAuditor'sofficerequestedinputfromtheAttorneyGeneral'soffice,theDepartmentofAgriculture,
the
DepartmentofEconomicDevelopment,
the
DepartmentofElementaryandSecondaryEducation,theDepartmentofHigherEducation,theDepartmentofHealthandSeniorServices,theDepartmentofInsurance,FinancialInstitutionsandProfessionalRegistration,theDepartmentofMentalHealth,theDepartmentofNaturalResources,theDepartmentofCorrections,theDepartmentofLaborandIndustrialRelations,theDepartmentofRevenue,theDepartmentofPublicSafety,theDepartmentofSocialServices,theGovernor'soffice,theMissouriHouseofRepresentatives,theDepartmentofConservation,theDepartmentofTransportation,theOfficeofAdministration,theOfficeofStateCourtsAdministrator,
the
MissouriSenate,theSecretaryofState'soffice,theOfficeoftheStatePublicDefender,theStateTreasurer'soffice,AdairCounty,BooneCounty,CallawayCounty,CassCounty,ClayCounty,ColeCounty,GreeneCounty,JacksonCountyLegislators,JasperCounty,St.CharlesCounty,St.LouisCounty,TaneyCounty,theCityofCapeGirardeau,theCityofColumbia,theCityofJefferson,theCityofJoplin,theCityofKansasCity,
the
CityofKirksville,theCityofKirkwood,
the
CityofMexico,theCityofRaymore,theCityofSt.Joseph,
the
CityofSt.Louis,
the
CityofSpringfield,theCityofUnion,theCityofWentzville,
the
CityofWestPlains,CapeGirardeau
63
SchoolDistrict,Hannibal
60
SchoolDistrict,Rockwood
R-Vl
SchoolDistrict,LinnStateTechnicalCollege,MetropolitanCommunityCollege,University
of
Missouri,St.LouisCommunityCollege,thePublicServiceCommission,
and
theStateTaxCommission.TheCivicCouncilofGreaterKansasCityprovidedinformationasanopponentoftheproposaltotheStateAuditor'soffice.
1
 
MarcH.EllingerprovidedinformationasaproponentoftheproposaltotheStateAuditor'soffice.AssumptionsOfficialsfromtheAttorneyGeneral'sofficeindicated
they
assumethatcostsare
unknown.
OfficialsfromtheDepartmentofAgricultureindicatedthereis
unknown
impactontheirdepartment.ThedepartmentdeferstotheDepartmentofRevenueand/ortheOfficeofAdministrationregardingthefiscalimpactofthisinitiativepetition.OfficialsfromtheDepartmentofEconomicDevelopment(DED)indicatedthisproposalwillresultinanunknownfiscalimpactinexcessof$100,000tothedepartment.Uponvoterapproval,thisproposalrepealsexistingstatetaxesonormeasuredbyincomeorearningsofanindividualeffectiveJanuary1,2014,andeliminatesthepoweroftheGeneralAssemblytoenactsuchtaxesonorafterJanuary
1,
2016.BetweenJanuary1,2014andJanuary1,2016,therepealedtaxesaretobereplacedwithasalestaxofuptofivepercentonthepurchaseofgoodsandservicesotherthanfoodanduptofourpercentonthepurchaseoffood.OnorafterJanuary1,2016,theratesmaynotexceedsevenpercentandfiveandone-halfpercent,respectively.Theproposalexemptsfromthenewsalestaxnumerousenumeratedgoodsandservices.AspertainstotheDepartmentofEconomicDevelopment,thisproposalwouldimpactexistingtaxcreditandeconomicdevelopmentprogramsutilizingthetaxesrepealedunderthisproposal.ImpactonCurrentIncentiveProgramsThisproposalwouldeliminatethestatescurrenteconomicincentivesbasedonretainedwitbholdingtaxesbecauseitrepealsthewithholdingtaxuponwhichsuchprogramsarebased.DEDadministersanumberofprogramsthatofferincentivesforjobcreationandretentionintheformofretainedwithholdingtaxesforthejobscreatedorretained,includingMissouri
QUality
Jobs,theMissouriManufacturingJobsProgram,theCommunityCollegeNewJobsTrainingProgram,andtheCommunityCollegeRetainedJobTrainingProgram.Ifthewithholdingtaxwererepealed,allowingabusinesstoretainwithholdingtaxeswouldprovidenomonetaryincentivetobusinessesforthecreationorretentionofjobs.Theproposalcouldalsonegativelyimpacttheeffectivenessofthestate'stax-creditincentiveprogramsbylimitingthetaxesagainstwhichthecreditscouldberedeemed.TheDepartmentassumesthatunderthisproposaltaxcreditscouldcontinuetobeauthorized,but
they
couldnolongerberedeemedagainstpersonalincometaxliability.Instead,taxcreditscouldonlyberedeemedagainstanyapplicableremainingtaxes,which,formanytaxcredits,wouldincludethecorporateincometax,financial2
 
institutionstax,bankandcorporatefranchisetaxes,andinsurancepremiumtaxes.
It
isuncleartheextenttowhichtheinabilitytoredeemtaxcreditsagainstpersonalincometaxwouldnegativelyimpactthevalueofthecreditsandtheextenttowhichthatdeclineinvaluewouJdreducetheeffectivenessofthecreditsinincentivizingthedesiredeconomicactivity.ImpactonOutstandingTax:CreditsThisproposalcouldalsonegativelyimpactthevalueof
any
outstanding
tax
creditsauthorizedorissuedpriortoDecember31,2013byrestrictingthetaxesagainstwhichsuchtaxcreditscanberedeemed.DEDassumesthatoutstandingtaxcreditscouldcontinuetoberedeemedagainstanyapplicabletaxtypesnotrepealedunderthisproposal,which,formanytaxcredits,wouldincludethecorporateincometax,financialinstitutionstax,bank.andcorporatefranchisetaxes,andinsurancepremiumtax.DEDalsoassumesthattheproposalwouldallowtaxcreditsauthorizedorissuedpriortoDecember31,2013tostillberedeemedagainstanyprioryearpersonalincometaxliabilitythroughthefilingof
an
amendedreturnand/orutilizinganyapplicablecarrybackfeature.Even
with
theaboveassumptions,thisproposalwouldreduce,toanunknownextent,thevalueofoutstandingtaxcreditsauthorizedorissuedatanytimepriorto.theproposal'seffectivedatebecausesuchcreditscouldnolongerbeutilizedtotheextenttheycouldhaveatauthorizationorissuancebecausetheycouldnolongerberedeemedagainstthepersonalincometax.Anynegativeimpacttothevalueofoutstandingcreditscouldnegativelyimpactdeveloperswhopreviouslypledgedthecreditstolenders
in
ordertoobtainfinancingforapprovedprojectsandlenderswhoprovidedfundingfortheprojectbasedontheexpectationofreceivingtaxcreditsofacertainvalueuponprojectcompletion.
Any
decreaseincreditvaluesisalsolikelytonegativelyimpact
any
subsequentpurchasersofsuchcreditswhosepurchasewasbasedontheexpectationofacertainvaluebasedonthelawexistingasofthetimethecreditwasauthorizedorissued.Duetothenegativeimpacttotaxcreditvaluesasaresultofthisproposal,holdersofoutstanding
tax
creditsaremorelikelytoredeemtheircreditsearlierthantheyotherwisewouldhaveor,ifunabletoredeem,transfercreditsforapricelowerthanwhattheyotherwisecouldhavecommandedintheabsenceofthisproposal.Anyrushtoredemption
will
leadtoamorehighlyconcentratedfiscalimpacttothestateasaresultof
tax
creditredemptions,whilediscountedtransferpriceswillresultinlessequitybeingcreatedthan
was
anticipatedatthetimeprojectswereapprovedandfmancingobtainedbasedontheanticipatedtaxcreditvalue.
In
lightofthenegativeimpactthisproposalwouldhaveonthevalueofoutstandingtaxcredits,thereisapotentialforlitigationbetweentaxcreditrecipientsandthestateoverwhoshouldbearthelossfortaxcreditholdersasaresultofthisproposal.Ifacourtweretorequirethestatetomaketaxcreditholderswhole)thestatecouldberequiredto3

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