2002 Missouri Tax Law Changes new 10/15/02

Depreciation changes

§ 143.121.2 was modified, effective June 19, 2002, to NOT allow the 30% bonus depreciation on assets purchased between July 1, 2002, and June 30, 2003, implemented under the Federal Job Creation and Worker Assistance Act of 2002. Taxpayers electing the 30% bonus depreciation for federal purposes will be required to keep two depreciation schedules, one for Federal and a separate one for Missouri without taking the bonus depreciation into consideration. This will also require separate calculation of gain on sale, balance sheet for corporate franchise tax, and possibly other items. There is no line on the current 2001 Missouri corporate income/franchise return for this adjustment and taxpayers will need to add back the difference between the federal and Missouri depreciation as an "addition modification". In the later years the difference will create a "subtraction modification" by writing it in on Part 1, below line 2. On the 2002 corporate income/franchise tax return a line will be added to Part 1 (Addition Modifications) and Part 2 (Subtraction Modifications).

The $4,600 increase in depreciation for automobiles on the federal return is capped on the Missouri return at $3,060 for 2002, again requiring separate depreciation schedules.

Net Operating Losses (NOL)

§ 143.121.2 was modified to disallow the 5-year NOL carry-back implemented with the Federal Job Creation and Worker Assistance Act of 2002, and Missouri law only provides for a 2-year carry-back. When a taxpayer carries the NOL back for federal purposes, the Missouri amended return will reflect the new federal taxable income, but the NOL carry-back used on the federal return will need to be added back as a "positive addition" on Part 1 (Addition Modifications) of the Missouri return. Also, the federal income tax deduction will need to be adjusted to reflect the revised federal income tax from the amended federal return, increasing Missouri tax. Unlike the depreciation change, the NOL is lost, not just deferred.

Interest on refunds to change quarterly

§ 32.068 was added to provide that effective January 1, 2003, the interest rate paid on refunds will change quarterly. The state treasurer will calculate the annual quarterly interest rate and provide it to the Department of Revenue no later than 30 days prior to the end of each calendar quarter applied to the following quarter.

§ 32.069 was added providing interest will be paid on any refund (including corporate income and franchise tax) not refunded within 120 days from the latest of the following:

  1. The last day prescribed for filing a tax return or refund claim, without regard to any extension of time granted;
  2. The date the return, payment, or claim is filed; or
  3. The date the taxpayer files for a credit or refund and provides accurate and complete documentation to support the claim.
    § 32.069 provides … "Not withstanding any other provision of law to the contrary … ", § 32.069 will now govern and will determine the interest rate paid on refunds. § 143.811.1 (corporate income) and § 147.120.5 (franchise) previously provided interest on refunds was calculated using § 32.065.

Amnesty [the amnesty deadline has passed so this relief is no longer available]

§ 136.320 was added implementing an amnesty program under which individuals and businesses can pay state tax liabilities due on or before December 31, 2001, without paying any interest or penalty. The Department must receive a signed Amnesty Eligibility Notice or Amnesty Application with full payment of the tax by October 31, 2002. Any payments made through amnesty are not refundable. The department sent a notice to all individuals and businesses that have a state tax liability owed. The notice separately noted the eligible and non-eligible periods.
Amnesty is not eligible for the following (non-eligible periods):

  1. Periods that are under criminal investigation by the department;
  2. Periods that involve bankruptcy;
  3. Periods on which a civil suit was filed and or judgment was taken; or
  4. Periods due after December 31, 2001.
    Lien fees and bad check charges are not eligible for amnesty.

Tax credit carry-backs

§ 143.811 was revised to provide interest on overpayments from a carry-back of a tax credit will not be paid for any time prior to the close of the taxable year in which the tax credit was authorized.

Offers in Compromise

§ 32.378 was added to the statute [essentially mirroring federal provisions] to allow the Department of Revenue to compromise any tax interest or additions to tax assessed or collected by the director for the following:

  1. Doubt as to liability;
  2. Doubt as collectibility;
  3. To promote effective tax administration [Where full payment results in economic hardship; or Collection is detrimental to voluntary compliance].

When a taxpayer compromises the liability, the state shall keep:

  1. all payments and credit applied; and
  2. all overpayments for periods ending before the end of the calendar year in which the offer is accepted, unless it exceeds the liability compromised.

The taxpayer:

  1. does not have the right to contest the amount of liability compromised in court;
  2. bears their own cost including attorney fees; and
  3. must comply with all tax obligations that were the basis of the tax compromised.

Adoption Tax Credit

The Department of Revenue has reached the $2 million statutory limit on the credit which can be redeemed for the 2002 fiscal year, so no further adoption tax credit will be approved for returns filed the remainder of this fiscal year (June 30, 2003). Returns filed on or after July 1, 2003 will be eligible for the credit until the fiscal year 2003 credit limit is reached. The solution appears to be to file the 2001 return without claiming the credit and to file an amendment after the end of the June 30 fiscal year end in hopes that funds will be available then.