COMMITTEE ON LEGISLATIVE RESEARCH
OVERSIGHT DIVISION
FISCAL NOTE
L.R. No.:4366H.02C Bill No.:HCS for HB 2157 Subject:Business and Commerce; Secretary of State; Corporations Type:Original Date:April 13, 2022Bill Summary:This proposal creates provisions relating to business entities.
FISCAL SUMMARY
ESTIMATED NET EFFECT ON GENERAL REVENUE FUNDFUND
AFFECTED
FY 2023FY 2024FY 2025Fully
Implemented
(FY 2028)
General RevenueCould exceed
($1,298,983)
Could exceed
($1,478,484)
Could exceed
($1,219,018)
Could exceed
($1,159,915)
Total Estimated
Net Effect on
General
Revenue
Could exceed
($1,298,983)
Could exceed
($1,478,484)
Could exceed
($1,219,018)
Could exceed
($1,159,915)
ESTIMATED NET EFFECT ON OTHER STATE FUNDSFUND
AFFECTED
FY 2023FY 2024FY 2025Fully
Implemented
(FY 2028)
Technology
Trust Fund$180$216$224,032$274,525
Total Estimated
Net Effect on
Other State
Funds $180$216$224,032$274,525
Numbers within parentheses: () indicate costs or losses. L.R. No. 4366H.02C
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ESTIMATED NET EFFECT ON FEDERAL FUNDSFUND
AFFECTED
FY 2023FY 2024FY 2025Fully
Implemented
(FY 2028)
Total Estimated
Net Effect on
All Federal
Funds $0$0$0$0
ESTIMATED NET EFFECT ON FULL TIME EQUIVALENT (FTE)FUND
AFFECTED
FY 2023FY 2024FY 2025Fully
Implemented
(FY 2028)
Total Estimated
Net Effect on
FTE 000$0
☒ Estimated Net Effect (expenditures or reduced revenues) expected to exceed $250,000 in any
of the three fiscal years after implementation of the act or at full implementation of the act.
☒ Estimated Net Effect (savings or increased revenues) expected to exceed $250,000 in any of
the three fiscal years after implementation of the act or at full implementation of the act.
ESTIMATED NET EFFECT ON LOCAL FUNDSFUND
AFFECTED
FY 2023FY 2024FY 2025Fully
Implemented
(FY 2028)
Local
Government$0$0$0$0 L.R. No. 4366H.02C
Bill No. HCS for HB 2157
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FISCAL ANALYSIS
ASSUMPTION
Section 130.029 LLC Political Contributions
In response to similar legislation, HCS for HB 1803 from 2022, officials from Office of
Administration - Budget and Planning (B&P) note this section would allow limited liability
companies (LLCs) to make political contributions. Section 130.029.4(2) requires LLCs be
operational for at least one year prior any contributions and to file a form with the Missouri
Ethics Commission.
This provision will not impact TSR or the calculation under Article X, Section 18(e).
Officials from the Department of Revenue (DOR) note this provision allows a limited liability
company that is not classified as a corporation, to make contributions to any candidate
committee. This will not have a fiscal impact on the Department.
Oversight notes officials from the Department of Revenue and the Office of Administration -
Budget and Planning both assume this provision will have no fiscal impact on state and local
funds. Oversight does not have any information to the contrary.
Section 143.081 Tax Credit for S-Corporation
In response to similar legislation, HCS for HB 1803 from 2022, officials from Office of
Administration - Budget and Planning (B&P) noted this provision would grant a tax credit for
S-Corporation shareholders for income earned outside of Missouri, if the income earned out of
state is not subject to income taxes in the state in which it was earned. The tax credit shall be
equal to the shareholders proportion of Missouri income tax owed on such out of state S-
Corporation income. This credit would begin on August 28, 2022. Since this is before the end
of the 2022 tax year, B&P assumes that the credit would be available for taxpayers filing their
annual 2022 tax returns.
B&P notes that shareholders are already allowed a resident income tax credit if income earned
out of state is subject to another state’s income tax. B&P further notes that this would essentially
eliminate the Missouri tax on all out of state income earned by any S-Corporation, if that income
is not subject to any other state’s income tax.
Based on information provided by DOR, for tax year 2018 fewer than 1% of S-Corporations
claimed out-of-state income. However, B&P was unable to determine how much of such S-
Corporations income was derived from out-state-sources and how much of that income came
from other states that do not levy an income tax. Therefore, B&P estimates that this provision
will have an unknown negative impact on TSR and GR beginning in FY23. L.R. No. 4366H.02C
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Officials from the Department of Revenue (DOR) note this provision would allow a resident
shareholder in an S-Corp to be eligible for a credit issued pursuant to this section in an amount
equal to the shareholder's pro rata share of any income tax imposed pursuant to Chapter 143 on
income derived from sources in another state of the United States, or a political subdivision
thereof, or the District of Columbia, and which is subject to tax pursuant to Chapter 143 but is
not subject to tax in such other jurisdiction.
S-Corps are required to file a MO-1120S (S-Corporation Income Tax Return) with the
Department of Revenue annually. One of the questions on the form requires S-Corps to
disclosure if any of the income they receive is from sources other than those located in Missouri.
Of the 87,907 S-Corps that completed the 2018 MO-1120S form less than 1% indicated income
outside Missouri.
The Department is unable to estimate the amount of the income that was reported as out of the
state. Additionally, the Department cannot determine if any of that income is from jurisdictions
that do not tax. The Department assumes an unknown impact that could exceed $250,000
annually.
No administrative fiscal impact is expected to the Department from this provision.
Oversight is unable to estimate the amount of out of state income reported. Therefore,
Oversight will show a negative unknown impact that could exceed $250,000 annually for this
section.
Section 143.436 – SALT Parity Act
In response to similar legislation, HCS for HB 1803 from 2022, officials from Office of
Administration - Budget and Planning (B&P) noted this proposal would allow pass-through
businesses (LLCs, partnerships, sole proprietorships, and S-corporations) to file their Missouri
income tax at the entity level, rather than the individual level starting with tax year 2023. B&P
notes that the election to complete an entity level tax return shall be made on a voluntary year-
by-year basis.
B&P notes that the purpose of this bill is to allow businesses to fully deduct their state and local
taxes (SALT) at the federal level, while minimizing the impact to states that pass this or similar
language. Under the Tax Cut and Jobs Act (TCJA, 2017) individuals cannot claim a SALT
deduction greater than $10,000, while businesses can claim their full SALT expenses. This has
created a significant federal tax increase for pass-through businesses whose SALT deduction is
greater than the $10,000 cap x the number of pass-through members. For example:
o
combined SALT limit for the 4 members would be $40,000 (4 members x
$10,000 per member cap). L.R. No. 4366H.02C
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o
provision.
o
combined SALT limit of $40,000 (4 members x $10,000 per member cap) is less
than the $80,000 entity SALT liability.
o
B&P further notes that as of the creation of this fiscal note, the IRS is allowing this particular
SALT cap work around. If the IRS disallows this work around, B&P assumes that entities would
no longer choose to file a Missouri return at the entity level.
Currently each member of a pass-through business must file their own Missouri income tax
return showing their portion of business income and deductions. The individual is then
responsible for their portion of the Missouri income tax. Individuals are also granted a tax credit
for taxes paid in other states, for businesses that operate in multiple states.
Under this proposal, the entity itself could elect to file a Missouri income tax return. The
business is to include the same income, deductions, and credits granted at the federal level. If the
calculations result in a net loss, the loss is not refundable, but the business may carry the loss
forward until fully used. B&P notes that individuals are not granted a similar net operating loss
credit. Therefore, this provision may have an unknown impact on TSR and GR.
B&P notes that businesses would be required to use the corporate income allocation method, as
opposed to the current individual allocation method, when determining the amount of income to
allocate to Missouri and other states. Therefore, this provision may have an unknown positive or
negative impact to TSR and GR depending on the composition of a business’s income.
In exchange for filing at the entity level, the entity must calculate their tax due using the highest
individual income tax under Section 143.011 in a given tax year. Currently individuals calculate
their tax due using the graduated brackets and rates under Section 143.011. This may have
minimal impact to TSR and GR.
This proposal would allow non-Missouri residents, with no other Missouri source income other
than the income now reflected at the entity level, to not file a Missouri income tax return.
This proposal would further grant Missouri residents, non-residents with other Missouri source
income, and s-corporation partners a tax credit for their pro-rata share of the taxes paid to other
states at the entity level. This credit would only be granted for the taxes paid at the entity level to
other states. This may have an unknown impact to TSR and GR. B&P notes that the impact
would depend on the impacts created by changing how business income is allocated between
states. The credit is non-refundable, but may be carried forward until fully used.
B&P does not know how many businesses would elect to pay Missouri taxes at the entity level. L.R. No. 4366H.02C
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Further, B&P does not know the income composition of such businesses or the current tax
liability of members and thus cannot estimate how this proposal may impact their Missouri tax
liability. Therefore, B&P estimates that this provision may have an unknown positive or negative
impact on TSR and GR beginning with FY24.
Officials from the Department of Revenue (DOR) note under the Tax Cut and Jobs Act (2017)
the federal government limited the amount of state and local taxes (SALT) an individual could
deduct for federal income tax purposes to no more than $10,000 ($5,000 for those married filed
separately) annually. However, there were no changes to the limitations on the amount of a
deduction connected with a business entity directly.
Capping the amount of the SALT deduction at the federal level resulted in fewer taxpayers being
able to reduce their federal tax liability.
Under current law a pass-through entity’s (S Corporations or Partnership) shareholders pay
income tax on the shareholder's pro rata share of the entity's income attributable to Missouri.
They file their share on their individual income tax return rather than the business entity filing a
corporate income tax return. Therefore, each member reports their proportion of the entity’s
whole income. Therefore, each of the individual members is subject to the $10,000 SALT limit
on their return.
This proposal creates the SALT Parity Act. The purpose of the act is to help companies increase
the amount of itemized deductions they can claim at the federal level by finding a work-around
of the $10,000 SALT deduction. Increasing their itemized amount would result in a savings to
taxpayers, as their federal tax liability would decrease.
A business entity is not bound by the $10,000 limit. So a plan was created in several states and
appears to be allowed by the federal government that would allow the business entity to report
the group’s income and pay the taxes of the group as a whole. The business entity then receives
the greater itemized deduction on their federal return and lowers their overall tax liability. This
results in a savings to the business entities.
This proposal is setting up this work around at the state level for Missouri businesses. This
proposal in Section 143.436.3 & 143.4360.4 would allow partnerships and S Corporations to pay
as a whole. The partnership or S Corp would report income for the whole business and file a
return on behalf of the entire group. For tax years beginning on or after January 1, 2023, this act
would allow the pass-through business entity to elect to pay a company tax. The tax is to equal
the sum of each member's income and loss items, as described in federal law, reduced by a
deduction allowed for qualified business income, as described in federal law, and modified by
current provisions of state law relating to the taxation of pass-through entities, with such sum
multiplied by the highest rate of tax in effect for the state personal income tax rate.
Per this proposal they would be required to use the highest individual income tax rate for the tax
rate. That rate is currently 5.3% for TY 2022. Currently, if members of the business entity pay L.R. No. 4366H.02C
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taxes, the amount paid depends on their income and which tax bracket they are assessed at.
Having these business entities pay the state the highest individual income tax rate could
potentially result in an increase in revenue to the state as opposed to each member filing
separately.
Upon filing the business entity tax return, the business entity notifies the Department of its
election to file as a group and provides a report to the Department of the proportional share of
income earned and tax paid of each member. The individual members of the business entity are
then required to file an individual income tax return. They must report the amount of the pro rata
share that was paid by the business entity. They are then allowed a credit against the tax already
paid by the business entity.
The credit is equal to their pro rata share of the tax paid. This proposal states these credits are
not refundable but can be carried over until fully taken. The lack of refundability of the credits
could result in some members not being able to use their credits. If credits are never redeemed
this results in revenue to the state.
This proposal is Section 143.436.11 requires these business entities to annually elect whether or
not to participate in this business entity tax program. This program is strictly voluntary. Due to
the voluntary nature of this program, the Department is not able to determine how many potential
S Corps or partnerships would chose to participate each year.
The Department assumes that business entities would chose to participate based on what is best
for the majority of its members. While a business entity may choose what is best for the
majority of its members, some members may not see a benefit under this program. Individual
income tax returns are specific to each taxpayer’s life situation. Two people with the same job
and same income may have very different life situations that can impact the amount of tax
liability they will have. One may be married with kids while the other may be single with no
kids but an illness that requires extensive medical payments. Their final tax liability may be
different.
Is it possible that due to an individual’s life situation they end up owing less in taxes to the State
than they otherwise would have it their business reported under current law? It is possible. It is
also possible they could owe more. Depending on which happened, additional or less revenue to
the state is possible.
The Department notes it is unable to estimate the actual fiscal impact of this proposal. The
Department cannot predict the number of business entities that would chose to participate in this
voluntary program. Nor are they able to predict how many of the individual taxpaying business
entity members would benefit or be hurt by this proposal. The Department notes that business
entity members would benefit from the increased federal deduction and receive a savings on their
federal return. However, based on the taxes paid by the business entity as a whole and the
credits provided the members this proposal would not result in more than a minimal impact to
the state. L.R. No. 4366H.02C
Bill No. HCS for HB 2157
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The Department notes this proposal would ease an administrative burden on the Department.
Under current law, in order to audit the Department spends a lot of time trying to identify all the
members of a business entity to ensure all the tax is paid. With the business entities filing the
taxes and reporting the number of partners and pro rata share of the income, this would allow the
Department to more easily audit these businesses, saying time and resources. This proposal with
the previous partnership audit reporting laws that passed in 2020 will ease some of the time
consuming tracking of these business entities. The amount of the impact can’t be determined
due to the voluntary nature of the program.
The Department notes this will require making changes to their existing tax reporting forms and
potentially the creation of a new form for identifying the business entity members and their pro
rata share. These changes are estimated to cost $5,000. Additional programming and other
website updates would result in $3,596 in costs.
Oversight assumes the Department of Revenue is provided with core funding to handle a certain
amount of activity each year. Oversight assumes DOR could absorb the form and programming
(administrative) costs related to this provision. If multiple bills pass which require additional
staffing and duties at substantial costs, DOR could request funding through the appropriation
process. Officials from the DOR assume the provision will have minimal fiscal impact on their
organization.
Oversight notes that DOR and B&P both note the deductions for purpose of the state and local
taxes (SALT) paid by pass-through business owners are currently capped at $10,000.
Conversely, C corporations are allowed to fully deduct these same expenses. In states that tax
pass-through firms at the owner level, the disparate treatment puts their firms at a significant
disadvantage compared to C corporations. As such, restoring the federal SALT deduction in its
entirety for pass-through entities has been a key priority for S-CORP Main Street
Employers coalition since the cap was implemented back in 2017.
Oversight notes, that according to the taxpolicycenter.org, a joint project from the Urban
Institute and the Brookings Institution, in 2017, 16 percent of tax filers with income between
$20,000 and $50,000, 76 percent of tax filers with income between $100,000 and $200,000, and
over 90 percent of tax filers with income above $200,000 claimed SALT.
Oversight notes since 2018, the Main Street Employers coalition has led advocacy efforts to
restore the State and Local Tax (SALT) deduction for pass-through businesses. More than a half
dozen states have enacted various version of such a legislation to date and, following the 2020
Treasury Department announcement, IRS Notice 2020-75 (11/2020), validating this legislative
approach, SALT Parity measures are being actively considered in more than a dozen states this
year. L.R. No. 4366H.02C
Bill No. HCS for HB 2157
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https://news.bloombergtax.com/tax-insights-and-commentary/salt-cap-workaround-pass-
through-entity-tax-update-part-ii
Oversight notes that under this provision, a small business may elect to pay tax at the entity
level, and a corresponding credit is allowed at the partner, member, or shareholder level. There
are four main categories of businesses, which would qualify for such a deduction as shown
below:
a) General Partnerships
b) Limited Partnerships
c) Limited Liability Companies
d) Sub-Chapter S Corporations
Additionally, there are no restrictions as to Multi-tier Partnerships or Trusts that are entity
partner members.
Oversight notes that officials from the DOR and SOS added, via additional e-mails, that there
are currently at least 81,000 S-Corporations in Missouri. The Department of Revenue is not able
to discern how many partnerships are currently in Missouri. Officials from the SOS note that a
partnership can exist and function as a business without any kind of document setting out the
rights or responsibilities of the partners. These partnerships function similarly to a sole
proprietorship, but have two or more owners (partners). The only partnerships which have to
register with the SOS are those which intend to limit the liability of the individual partners or the L.R. No. 4366H.02C
Bill No. HCS for HB 2157
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April 13, 2022
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partner company, and in this regard, function similarly to a corporation. Therefore, neither DOR
nor SOS can estimate the collective number of partnerships which operate in Missouri at any
given time, as they are not all required to register.
Oversight notes that by paying tax at the entity level, members of the PTE are deducting
expenses and taxes incurred by the trade or business (i.e., an above-the-line deduction) versus a
conventional below-the-line deduction at an individual level that would be subject to the SALT
limitation of $10,000. Moreover, according to estimates from the U.S. Congress’ Joint
Committee on Taxation, less than 15% of taxpayers currently qualify to itemize their deductible
amounts while filing taxes with average AGI of $60,981 and an average SALT amount of
$9,958.
As provided in the provision, companies file their income tax at the individual level while using
the 95% credit for filing at the entity level as a deduction. For the purpose of this provision,
Oversight will assume that the company election process will happen throughout FY 2023 due
to various companies’ filing tax schedules. (I.e. some filing monthly, quarterly, annually, etc.)
For information purpose, Oversight will show the various impact of the provision below:
Table 1
Oversight notes the example in Table 1 shows how the 95% tax credits would work against the
personal income taxes at the individual member level from the current law.
Table 2
P
roposed - *assuming $200,000 deductible without SALT cap
E
ntity Level
A
BC LLP - 2 Members 50/50 Partners
N
et Income
8
00,000
T
ax laibility paid
3
2,000
M
ember level
A
- 50%
B
-50%
N
et Income
4
00,000.00
$
4
00,000.00
$
T
ax
2
1,200.00
$
2
1,200.00
$
T
ax Credit at 95%
(
$32,000/2)*.95
(
$32,000/2)*.95
T
ax credit amount awarded
1
5,200.00
$
1
5,200.00
$
T
ax liability amount at members level
6
,000.00
$
6
,000.00
$
T
otal tax paid
2
2,000.00
$
2
2,000.00
$
4
4,000.00
$
L.R. No. 4366H.02C
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Oversight notes in Table 2, the current law provides lesser tax deductions beyond SALT
allowable deductions. However, Table 3 also shows that due to the personal income of each
member within the partnership, the overall collected tax in Missouri would not be lesser or
higher, but minimally higher or lesser depending on the individual company and each member’s
personal tax consequence.
Table 3.
Oversight is not able to discern the level of gain or loss to general revenue in any given year
because there is currently no data showing the amount of individual income levels or tax rate for
each affected company specified within the provision. (I.e. LLP, LP, S-Corp. etc.
C
urrent Law
E
ntity Level
A
BC LLP - 2 Members 50/50 Partners
N
et Income
1
,000,000
T
ax laibility paid
0
M
ember level
A
- 50%
B
-50%
N
et Income (entity + other income)
6
00,000.00
$
6
00,000.00
$
T
ax
3
1,800.00
$
3
1,800.00
$
T
ax Credit at 95%
T
ax credit amount awarded
T
ax liability amount at members level
T
otal tax paid to the State
3
1,800.00
$
3
1,800.00
$
6
3,600.00
$
E
ntity Level
A
BC LLP - 2 Members 50/50 Partners
N
et Income
8
00,000
T
ax laibility paid
3
2,000
M
ember level
A
- 50%
B
-50%
N
et Income (entity + other income)
6
00,000.00
$
6
00,000.00
$
T
ax
3
1,800.00
$
3
1,800.00
$
T
ax Credit at 95%
(
$32,000/2)*.95
(
$32,000/2)*.95
T
ax credit amount awarded
1
5,200.00
$
1
5,200.00
$
T
ax liability amount at members level
1
6,600.00
$
1
6,600.00
$
(
31,800-15,200)
T
otal tax paid
3
2,600.00
$
3
2,600.00
$
p
artner 1+ partner 2 tax totals
6
5,200.00
$
L.R. No. 4366H.02C
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Oversight notes the provision shall be apply to tax years ending on or after December 31, 2022.
The taxpayers will not be filing their 2022 income taxes until January 1, 2023 (FY 2023).
Therefore, Oversight will note a minimum Unknown positive to Unknown negative impact
beginning in FY 2023 in the fiscal note.
Oversight notes that while the Tax Cuts and Jobs Act placed a $10,000 cap on the SALT
deduction, it’s only temporary. The cap applies to taxable years 2018 through 2025. After tax
year 2025, the cap will end, and taxpayers will once again be able to deduct 100 percent of their
eligible state and local taxes, unless other tax code changes are passed before then.
Sections 347.020 - 358.470 LLC Provisions
In response to similar legislation, HCS for HB 1803 from 2022, officials from the Office of the
Secretary of State (SOS) assumed state General Revenue regarding these particular filings will
decrease, for Limited Liability Companies, and decrease for Limited Liability Partnerships in the
first five years.
A new filing of Information Statement for LLCs will start in 2025 and affect LLCs every five
years thereafter for each new registration resulting in a positive fiscal impact.
State revenue in 10 years would then level back as the fee cut shifts to the information statement
required every five years.
These estimates assume various rate(s) of participation and use of an averaging of historical data
to determine estimations.
347.044-347.183 (LLC)
FYGR 0101TECH 0266FY2023 $ (1,258,214) $ 180 FY2024 $ (1,227,894) $ 216 FY2025 $ (1,295,576) $ 344,544
358.460-358.470 (LLP)
FYGR 0101TECH 0266FY2023$ (565.00)FY2024$ (590.00)FY2025$ (545.00)
Current customer ratio of paper vs online is 25% to 75% for creation filings the change in fees
would strive to move that ratio to 5% paper and 95% online. Filing online will have a cost
savings as the system is set up to auto process creation documents. While this cost saving is not L.R. No. 4366H.02C
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true for all filings, as manual review by an examiner is required for those documents, there are
added benefits to customer submitting online.
It is assumed that 30% of the current LLCs listed as active are actually doing business and will
file an information statement as required under 347.044, with an increase rate over time as new
LLCs will know before creating that an information statement will be required in five years. The
first LLC was created in December of 1993, since that time over 800,000 entities have been
created, or converted to the entity type of Limited Liability Company.
Series LLC is a growing area of the LLC entity type. It is unknown how many filings will be
effected by the change in cost, as SOS does not currently have revenue collected for these filings.
The best estimate is based on what an examiner thinks LLCs file per month annualized.
The technology trust fund is not impacted until January of 2025 when 347.044 starts.
Expenditures for notices mailed to the affected LLCs are estimated at $206,974 in FY25,
$426,044 in FY26, $199,186 in FY27, and $82,950 in FY28. These will be split between GR
and Tech Fund each fiscal year.
SOS states the overall impact is estimated at:
Fund
AffectedFY 2023FY 2024FY 2025FY 2026FY 2027FY 2028
General
Revenue($1,048,982)($1,228,484)($969,018) ($688,411)($960,640)($909,915)
Technology
Trust Fund$180$216$224,032$395,613$213,412$274,525
Total
Estimated
Net Effect
on All
State
Funds($1,048,802)($1,228,268)($744,986) ($292,798)($747,228)($635,390)
The Secretary of State reserves the right to offset or request additional resources for estimated
fiscal note impacts during the budget process.
Oversight notes that on similar legislation, SB 286 from 2021, SOS stated all changes to
software would require working with a third party vendor and/or the Information Technology
department. Resulting in an estimated expenditure of $77,600. SOS is now handling this in-
house; therefore, Oversight will no longer reflect this cost on the fiscal note.
Oversight will reflect the estimated fiscal impact as provided by SOS. L.R. No. 4366H.02C
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The SOS also assumes many bills considered by the General Assembly include provisions
allowing or requiring agencies to submit rules and regulations to implement the act. The SOS is
provided with core funding to handle a certain amount of normal activity resulting from each
year’s legislative session. The fiscal impact for this fiscal note to the SOS for Administrative
Rules is less than $5,000. The SOS recognizes that this is a small amount and does not expect
that additional funding would be required to meet these costs. However, the SOS also
recognizes that many such bills may be passed by the General Assembly in a given year and that
collectively the costs may be in excess of what the office can sustain with the core budget.
Therefore, the SOS reserves the right to request funding for the cost of supporting administrative
rules requirements should the need arise based on a review of the finally approved bills signed by
the governor.
Oversight assumes the SOS could absorb the costs of printing and distributing regulations
related to this proposal. If multiple bills pass which require the printing and distribution of
regulations at substantial costs, the SOS could require additional resources.
In response to similar legislation, HCS for HB 1803 from 2022, officials from the Office of
Administration - Budget and Planning (B&P) noted these sections make multiple changes
regarding the formation, dissolution, information filings, and fees charged to LLCs.
Section 347.020 requires a one-year wait period before an LLC name can be reused.
Section 347.044 requires LLCs to file information reports with the Secretary of State every five-
years.
Section 347.179 would lower existing business fees and create new fees charged by the
Secretary of State. B&P notes that this provision could have an unknown impact on TSR.
Section 347.183 would apply existing late fees to the new information reports created under
Section 347.044. Section 347.183 would also allow the Secretary of State to cancel a LLCs
articles of organization 60 days after failing to file an information report. In addition, Section
347.183 creates new provisions related to the reinstatement of a LLCs articles of organization, if
the articles were administratively canceled by the Secretary of State. B&P notes that these
provisions could have an unknown impact on TSR.
Section 347.186 would limit the number of series that may be impacted per filing.
Sections 358.460 and 358.470 reduces existing LLC filing fees. B&P notes that these
provisions could have an unknown impact on TSR.
Officials from the Department of Revenue note these provisions are in regards to business
filings at the Office of the Secretary of State’s Office. These provisions will not fiscally impact
the Department and DOR defers to the Office of the Secretary of State for any impact. L.R. No. 4366H.02C
Bill No. HCS for HB 2157
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April 13, 2022
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Officials from the Department of Economic DevelopmentOffice of the State Treasurer
Joint Committee on Administrative Rules, Missouri Office of Prosecution Services, and the
State Tax Commission, each assume the proposal will have no fiscal impact on their
organizations. Oversight does not have any information to the contrary. Therefore, Oversight
will reflect a zero impact in the fiscal note for these agencies.
In response to similar legislation, HCS for HB 1803 from 2022, officials from Attorney
General’s Office and Office of the State Courts Administrator assumed the proposal will
have no fiscal impact on their organization. Oversight does not have any information to the
contrary. Therefore, Oversight will reflect a zero impact in the fiscal note for these agencies.
Officials from the City of Kansas City and City of Springfield both assume the proposal will
have no fiscal impact on their organizations. Oversight does not have any information to the
contrary. Therefore, Oversight will reflect a zero impact in the fiscal note for these agencies. L.R. No. 4366H.02C
Bill No. HCS for HB 2157
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FISCAL
IMPACT – State
Government
FY 2023
(10 Mo.)
FY 2024FY 2025Fully
Implemented
(FY 2028)
GENERAL
REVENUE
Loss - §143.081
Tax Credit for S-
Corporation
p. (3-4)
(Unknown –
could exceed
$250,000)
(Unknown –
could exceed
$250,000)
(Unknown –
could exceed
$250,000)
(Unknown –
could exceed
$250,000)
Loss or Gain -
§143.436 SALT
Parity Act: Entity
And Individual
Tax Liability Paid
p. (4-12)
Minimum
Unknown to
Minimum
(Unknown)
Minimum
Unknown to
Minimum
(Unknown)
Minimum
Unknown to
Minimum
(Unknown)
Minimum
Unknown to
Minimum
(Unknown)
Loss - §§347.020
- 358.470 SOS
Fee Revenue
reduction (LLC)
p. (12-14)
($1,052,162)($1,234,098)($1,303,151)($1,279,240)FISCAL
IMPACT – State
Government
continued
FY 2023
(10 Mo.)
FY 2024FY 2025Fully
Implemented
(FY 2028)
Loss - §§347.020
- 358.470 SOS
Fee Revenue
reduction (LLP)
p. (12-14)
($471)($590)($545)$0Cost - §§347.020
- 358.470 SOS -
notices mailed to
affected LLCs
p. (12-14)
$0$0($120,512)($41,475) L.R. No. 4366H.02C
Bill No. HCS for HB 2157
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April 13, 2022
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Income -
§§347.020 -
358.470 SOS
Fee Revenue for
LLC p. (12-14)
$3,650$6,204$455,190$410,800ESTIMATED
NET EFFECT
TO GENERAL
REVENUE
Could exceed
($1,298,983)
Could exceed
($1,478,484)
Could exceed
($1,219,018)
Could exceed
($1,159,915)
FISCAL
IMPACT – State
Government
continued
FY 2023
(10 Mo.)
FY 2024FY 2025Fully
Implemented
(FY 2028)
TECHNOLOGY
TRUST FUND
Income -
§§347.020 -
358.470 SOS
Filing fees LLC
p. (12-13)
$180$216$344,544$316,000Cost-§§347.020 -
358.470 SOS -
notices mailed to
affected LLCs p.
(12-13)
$0$0($120,512)($41,475) L.R. No. 4366H.02C
Bill No. HCS for HB 2157
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April 13, 2022
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ESTIMATED
NET EFFECT
TO THE
TECHNOLOGY
TRUST FUND
$180$216$224,032$274,525
FISCAL
IMPACT –
Local
Government
FY 2023
(10 Mo.)
FY 2024FY 2025Fully
Implemented
(FY 2028)
$0$0$0$0
FISCAL IMPACT – Small Business
Section 130.029 LLC Political Contributions - No direct fiscal impact to small businesses would
be expected as a result of this provision.
Section 143.081 Tax Credit for S-Corporation - Businesses who qualify for the tax credits
mentioned in this may be impacted.
Section 143.436 "SALT Parity Act"- Businesses who qualify for the tax credits mentioned in this
provision may be impacted.
Sections 347.020 - 358.470 LLC Provisions - The fees that small businesses pay to the Office of
the Secretary of State could change as a result of this provision.
FISCAL DESCRIPTION
This act provisions relating to entities registered with the state.
(Section 130.029)
The act permits any limited liability company that has not elected to be classified as a
corporation under federal law to make campaign contributions to any committee, provided such
limited liability company has been in existence for at least one year prior to making such
contribution and such entity submits a form to the Missouri Ethics Commission indicating that
such LLC is a legitimate business with a legitimate business interest and is not created for the
sole purpose of making campaign contributions.
(Section 143.081)
Current law authorizes a tax credit for the amount of income tax paid to another state for income
that is also taxed in this state. This act allows such tax credit to be claimed by resident L.R. No. 4366H.02C
Bill No. HCS for HB 2157
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April 13, 2022
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shareholders of an S corporation for the amount of tax imposed by this state on income earned in
another state but not taxed by such state.
(Section 143.436)
This act establishes the "SALT Parity Act".
Current law provides that, in lieu of a corporate income tax on a pass-through entity,
shareholders of such pass-through entity shall pay income tax on the shareholder's pro rata share
of the entity's income attributable to Missouri. For tax years ending on or after December 31,
2022, this act allows the pass-through entity to elect to pay the tax, as described in the act. The
tax shall be equal to the sum of each member's income and loss items, as described in federal
law, reduced by a deduction allowed for qualified business income, as described in federal law,
and modified by current provisions of state law relating to the taxation of pass-through entities,
with such sum multiplied by the highest rate of tax in effect for the state personal income tax.
A nonresident who is a member, as defined in the act, shall not be required to file a tax return for
a tax year if, for such tax year, the only income derived from this state for such member is from
one or more affected business entities, as defined in the act, that has elected to pay the tax
imposed under this act.
Each partnership and S Corporation shall report to each of its members, for each tax year, the
member's pro rata share of the tax imposed by this act.
Each taxpayer, including part-year residents, that is subject to the state personal income tax shall
be allowed a tax credit if such taxpayer is a member of an affected business entity that elects to
pay the tax imposed by this act. The tax credit shall be equal to the taxpayer's pro rata share of
the tax paid under this act. Such tax credit shall be nonrefundable, but may be carried forward to
subsequent tax years, except that a tax credit authorized for taxes paid to other states shall not be
carried forward.
Each corporation that is subject to the state corporate income tax shall be allowed a tax credit if
such corporation is a member of an affected business entity that elects to pay the tax imposed by
this act. The tax credit shall be equal to the corporation's pro rata share of the tax paid under this
act. Such tax credit shall be nonrefundable, but may be carried forward to subsequent tax years.
Partnerships and S corporations may elect to pay the tax imposed under this act by submitting a
form to be provided by the Department of Revenue. A separate election shall be made for each
tax year. Such election shall be signed either by each member of the electing entity, or by any
officer, manager, or member of the electing entity who is authorized to make such election and
who attests to having such authorization under penalty of perjury.
An affected business entity shall designate an affected business entity representative for the tax
year to act on behalf of the affected business entity in any action required or permitted to be
taken by an affected business entity pursuant to this act, a proceeding to protest taxes, an appeal L.R. No. 4366H.02C
Bill No. HCS for HB 2157
Page 20 of 21
April 13, 2022
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to the Administrative Hearing Commission, or review by the judiciary with respect to such
action, and the affected business entity's members shall be bound by those actions.
(Section 347.020)
The act prohibits the name of any dissolved or canceled LLC from being used by any other for a
period of one year following the dissolution or cancellation.
(Section 347.044, 347.179, 347.183)
Every limited liability company (LLC) and foreign limited liability company (foreign LLC) is
required to file an information statement with the Secretary of State (SOS) once every 5 years,
accompanied by a fee of $15, or $5 if filed electronically. The SOS is permitted to
administratively cancel the articles of incorporation of an LLC or the registration of a foreign
LLC for failure to timely file an information statement. The act provides procedures for allowing
a foreign LLC to apply to the SOS to have its registration reinstated following such a
cancellation. Procedures are also created allowing an LLC to apply for reinstatement following
the erroneous or accidental filing of a notice of winding up or notice of termination.
(Sections 347.179, 347.183, 358.460, and 358.470)
The act reduces various filing fees imposed on LLC's and partnerships for filing certain
documents with the SOS and provides for reduced fees for filing certain documents in an
electronic format. Additionally, the act creates the following new fees:
· A fee of $95 for filing a withdrawal of an erroneously or accidentally filed notice of winding up
or articles of termination;
· A fee of $10 for a filing relating to a limited liability series an additional fee of ten dollars for
each series effected or $5 if filing online in an electronic format prescribed by the secretary; and
· A fee of $95 for filing an application for reinstatement or $45 for filing online in an electronic
format prescribed by the secretary.
(Section 347.186)
For purposes of Series LLCs, the maximum number of designated series that can be affected by a
single filing made with the Secretary of State is 50.
This legislation is not federally mandated, would not duplicate any other program and would not
require additional capital improvements or rental space.
SOURCES OF INFORMATION
Office of the Secretary of State
Department of Economic Development
Department of Revenue L.R. No. 4366H.02C
Bill No. HCS for HB 2157
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April 13, 2022
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Office of the State Treasurer
Office of Administration – Budget and Planning
Joint Committee on Administrative Rules
Missouri Office of Prosecution Services
State Tax Commission
Attorney General’s Office
Office of the State Courts Administrator
City of Kansas City
City of Springfield
Julie MorffRoss StropeDirectorAssistant DirectorApril 13, 2022April 13, 2022