Governor Nixon today signed SB 635, a bill that will prevent the use of incentives for businesses relocating from four counties in Kansas to four counties in Missouri, if Kansas agrees to a similar prohibition.
The Associated Industries of Missouri Tax Committee previously expressed concern over the constitutionality of this limitation and discussed some difficulties with the bill with legislators, but the bill has now been signed into law by Gov. Nixon. Kansas officials have publicly indicated they have no interest in calling a truce in the so called “border war.”
Even without incentives, S corporations and other flow-through entities may find the zero tax environment in Kansas more attractive, so the importance of incentives to Kansas economic developers may be waning as the state lowers the overall cost of doing business in Kansas. While Missouri has taken steps to move toward a lower tax burden on these businesses (over the objections of Governor Nixon), the AIM business income deduction will not be a reality for several years.
A “grandfather clause” was added for existing deals that are already in place, but this new bill could affect any new deals with existing Missouri companies that may want to move jobs from one of the select counties in Kansas to one of the four counties in Missouri. And it is still unclear how courts will view the new law as it may discriminate against employers that are moving from certain counties in Kansas to certain counties in Missouri. Of course, nothing is unconstitutional until the courts rule it so.
Here is a link to the Governor’s tweet with a picture of the signing ceremony: https://twitter.com/GovJayNixon/status/484006791122931712