Governor Mike Parson signs historic tax cut and ag credit extensions into law
Updated: Oct 6, 2022
October 5, 2022 - Governor Mike Parson called legislators into a special legislative session to enact historic tax relief for taxpayers and to extend tax credits that benefit agricultural and forestry businesses. Today, he signed the two bills passed by the General Assembly into law.
PERMANENT TAX RELIEF
SS SCS SBs 3 & 5, sponsored by Sen. Lincoln Hough and Sen. Andrew Koenig and handled in the House by House Budget Chairman Cody Smith, contains the tax cut provisions.
Importantly, the tax cuts in the bill apply to individual income taxes, which also impact 95% of businesses that are entities such as S corporations, LLC's, LLP's, partnerships, sole proprietorships, etc. Operators of these "flow-through entities" pay their business income taxes on their individual income tax returns. That's why Associated Industries of Missouri supported the bill - the only statewide business organization to fully support the bill from beginning of the special session to the end.
"Every Missourian can support sending less of their money to the government, and we trust Missourians to make decisions with their own money," Governor Parson said. "Throughout my career, I've committed to exploring every opportunity to reduce Missourians' tax burden, and thanks to our strong financial position and balanced approach, the time is now. This historic tax cut means more money for Missourians to spend, invest, and save. It means economic growth, business expansions, and good-paying jobs for Missourians both today and tomorrow."
"Because Associated Industries of Missouri worked hard in previous years to enact a business income deduction that will reach 20% in tax year 2023, these flow-through entities will enjoy both a reduction in the amount of income that is taxed as well as the lower rates provided by this tax cut bill," said Ray McCarty, president and CEO of Associated Industries of Missouri. "We applaud Governor Mike Parson for calling the special legislative session and legislators in the House and Senate that passed this responsible permanent tax cut bill. Taxes will be reduced for everyone paying Missouri income taxes, from the Chairman of the Board to entry level workers - everyone benefits from this tax cut."
WHAT'S IN THE BILL?
The lowest income tax bracket is eliminated. The current $100 personal exemption will increase to $1,000 for tax years beginning on or after January 1, 2023;
The highest two income tax brackets are also eliminated as the new highest rate will apply to income over $7,000 (adjusted for inflation);
The highest income tax rate will be lowered to:
4.95% for tax years beginning on or after January 1, 2023;
4.8% for tax year beginning on or after January 1, 2024, provided net general revenue in Fiscal Year 2023 is at least $175 million more than the highest amount of net general revenue collected in the previous three fiscal years. The FY 23 year is July 1, 2022, through June 30, 2023 and is the current fiscal year. Unless there is a dramatic change in net general revenue, revenues appear to be on track to reach this threshold;
An additional three (3) reductions in the amount of 0.1% each may be made in future tax years beginning after the tax year in which the 4.8% rate is enacted if two conditions are met:
Net general revenue in the previous fiscal year is at least $200 million more than the highest amount of net general revenue collected in the previous three fiscal years, AND
The amount of net general revenue exceeds the amount of net general revenue in the fiscal year five years prior, adjusted for inflation.
"The revenue requirements in the bill will insulate the state against making a permanent reduction in taxes during periods of recession," McCarty said. "Unlike other states that don't have such protections, this measured approach has served Missouri well since enactment of a similar set of income tax reductions in 2014."
TAX CREDIT EXTENSIONS
HCS HB 3, sponsored by Rep. Brad Pollitt and handled in the Senate by Sen. Jason Bean, contains the following tax credits, exemptions and other provisions:
Land survey language allowing reestablishment of boundaries when lost over time;
Wood Energy Tax Credit is reenacted and extended to June 30, 2028;
Meat Processing Facility Investment Tax Credit through December 31, 2028, for the expansion or modernization of meat processing facilities employing less than 500 people nationwide;
Ethanol Retailers Incentive providing a tax credit of 5 cents per gallon for retailers selling higher ethanol blends until December 31, 2028;
Biodiesel Incentive Program for wholesale and retail sales of biodiesel blends of 2-5 cents per gallon depending on the level of biodiesel in the blend and a refundable tax credit for biodiesel producers of 2 cents per gallon produced. Both of these provisions expire December 31, 2028;
Urban Farms tax credit for 50% of the eligible expenses of establishing or improving an urban farm that produces agricultural products for distribution to the public through December 31, 2028;
Reenactment and extension of the Rolling Stock Tax Credit through August 28, 2028;
Sales tax exemption for ATV's and UTV's used for agricultural purposes;
Provisions regarding soybean producer assessments;
Updated weight and distance limits for "local log trucks" with fines for load limit violations;
Agricultural Product Utilization Contributor Tax Credit and New Generation Tax Credit programs are reenacted through December 31, 2028;
A new Specialty Agricultural Crops Act loan program is established (expires December 31, 2028);
Increases in the amount of gross sales allowed to farmers under the Family Farm Livestock Loan Program; and,
Responsibility for regulating anhydrous ammonia is shifted from the Missouri Dept. of Agriculture to the Air Conservation Commission within the Missouri Dept. of Natural Resources, supported by fees that are contained in the bill.
"These wins will help further develop Missouri’s agriculture industry, create opportunities for farmers, ranchers, and ag-businesses, and help ensure Missouri agriculture remains not only our state’s top economic driver but that its spirit and tradition continues to live on in the next generations," Governor Parson said. "We thank all of Missouri's agriculture groups for their trust in us to get this done. We appreciate their leadership and commitment in securing a better deal for Missouri's farm and ranch families."
Associated Industries of Missouri also testified in support of the tax credits bill.