COMMITTEE ON LEGISLATIVE RESEARCH
OVERSIGHT DIVISION
FISCAL NOTE
L.R. No.:4416H.02C Bill No.:HCS for HB 2587 Subject:Economic Development; Department of Economic Development; Business and
Commerce
Type:Original Date:March 8, 2022Bill Summary:This proposal establishes the Regulatory Sandbox Act.
FISCAL SUMMARY
ESTIMATED NET EFFECT ON GENERAL REVENUE FUNDFUND AFFECTEDFY 2023FY 2024FY 2025
General Revenue
Fund*
Unknown to
Could Exceed
($201,053)
Unknown to
Could Exceed
($235,092)
Unknown to
Could Exceed
($239,202)
Total Estimated Net
Effect on General
Revenue
Unknown to
Could Exceed
($201,053)
Unknown to
Could Exceed
($235,092)
Unknown to
Could Exceed
($239,202)
*Oversight notes that this proposal provides for waiving of regulations (depending upon sandbox
participants) potentially resulting in a loss to general revenue, various state funds, and to local
political subdivisions. Additionally, this proposal may require department FTE that could
potentially result in an impact to the General Revenue. Lastly, the positive amount shown
represents payment for application fees ($300) which must be paid on order to participate in the
Sandbox program.
ESTIMATED NET EFFECT ON OTHER STATE FUNDSFUND AFFECTEDFY 2023FY 2024FY 2025Various State Funds $0 or (Unknown) $0 or (Unknown)$0 or (Unknown)Total Estimated Net
Effect on Other State
Funds
$0 or (Unknown) $0 or (Unknown)$0 or (Unknown)
Numbers within parentheses: () indicate costs or losses. L.R. No. 4416H.02C
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ESTIMATED NET EFFECT ON FEDERAL FUNDSFUND AFFECTEDFY 2023FY 2024FY 2025Total Estimated Net
Effect on All Federal
Funds $0$0$0
ESTIMATED NET EFFECT ON FULL TIME EQUIVALENT (FTE)FUND AFFECTEDFY 2023FY 2024FY 2025General Revenue
Fund 2 FTE 2 FTE2 FTE
Total Estimated Net
Effect on FTE2 FTE 2 FTE2 FTE
☒ 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 AFFECTEDFY 2023FY 2024FY 2025Local Government $0 or (Unknown)$0 or (Unknown)$0 or (Unknown) L.R. No. 4416H.02C
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FISCAL ANALYSIS
ASSUMPTION
Officials from the Office of Administration – Budget & Planning note:
An applicant shall remit to the regulatory relief office an application fee of five thousand dollars
per application for each innovative offering. It is not specified in the bill where this money will
be deposited, therefore B&P assumes it will be GR. This will have an unknown positive impact
on GR and TSR.
This bill would also provide that during the demonstration period, a sandbox participant shall not
be subject to the enforcement of state laws or regulations identified in the written agreement
between the regulatory relief office and the sandbox participant. There is not enough information
on what laws or regulations may be waived or what impact the waiver will have on TSR.
Oversight notes that an applicant shall remit to the regulatory relief office an application fee of
$300 (changed from $5,000 in original bill) per application for each innovative offering.
Therefore, Oversight will reflect a potential positive fiscal impact on State Funds for this
application fee.
Oversight, for the purpose of this fiscal note, retrieved average patent filings in the State of
Missouri to estimate how many entrepreneurs would potentially be participating in this pool.
According to the U.S. Patent and Trademark Office – Patent Technology Monitoring Data
(PTMT) there were on average 868 patents filed by Missourians annually between FY 2000 to
FY 2015.
Oversight notes that the proposal assesses a $300 fee that must be paid in order to participate in
this program. Oversight assumes that the fee structure could potentially result in additional
revenue of $260,400 ($300 x 868 potential innovative entrepreneurs). Therefore, for purpose of
this fiscal note, Oversight will reflect a positive unknown amount to the General Revenue Fund
Oversight assumes that the fee paid to participate will be remitted to the GR, for purpose of this
fiscal note, and as shown above the amounts collected could potentially exceed $250,000.
Officials from the Department of Revenue (DOR) note:
The proposal would create a new government entity, the “regulatory relief office,” which may
enter into agreements to essentially waive the requirements of Missouri’s statutes and regulations
on certain participating businesses. The proposal directs the regulatory relief office to consult
with applicable agencies, including concerning whether the applicable agency has previously
investigated, sanctions, or pursued legal action against the applicant. The proposed legislation
prohibits these agreements from exempting an applicant “from any income, property, or sales tax
liability unless such applicant otherwise qualifies for an exemption from such tax.” L.R. No. 4416H.02C
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Should a participant in this program, be allowed to not pay taxes this will impact state revenue
and DOR. DOR has numerous other tax types besides the income tax and sales tax exempted
under this proposal. Examples include, withholding tax, tire and battery fee taxes, use taxes and
more that do not appear protected under this proposal. Additionally, this regulatory relief office
is given authority to waive state law and regulations. DOR is concerned this would result in
filing deadlines being moved or changed for some filers and not others or payments being
waived.
Additionally, this proposal requires the agencies to provide information on DOR’s relationships
with a participating business to the regulatory relief office. Some of this information is currently
protected under DOR's confidentially laws.
At this time, DOR is unable to estimate a fiscal impact from this proposal. DOR could possibly
need additional FTE to work with the regulatory relief office depending on the number of
participants, as well as have losses to revenue if participants are allowed to not pay taxes.
Oversight notes DOR assumes the proposal would allow for selected companies, who
participate in the Sandbox program, to receive relief from various taxes which would have an
effect on General Revenues and Other State Funds. Additionally, the DOR assumes the need for
additional FTE to ensure compliance with this proposal. Oversight does not have any
information to the contrary. Therefore, Oversight will reflect a potential ($0 or) unknown
negative impact to the General Revenue and Other State Funds, as a result of reduction in a
various tax revenues and potential FTE costs, in the fiscal note.
Officials from the Department of Economic Development (DED) assume the proposal states
that the regulatory relief office will be administered by a sandbox program director. DED has
estimated personal service costs by taking a mid-range salary of a typical Program Director
(Designated Principal Assistant) at DED who oversees an office but does not supervise staff.
DED also believes additional review (e.g., reviews of state laws) would require a legal counsel
FTE. If DED determines that additional staff are needed to administer the sandbox program,
DED will request additional FTE through the normal budget process.
Oversight notes that DED assumes the proposal will have a direct fiscal impact on their
organization. Oversight does not have any information to the contrary. Therefore, Oversight
will reflect an unknown cost for the DED’s FTE in the fiscal note.
Officials from the Missouri Department of Conservation (MDC) assume the proposal will
have an unknown fiscal impact on their organization and could potentially affect MDC funds.
Oversight notes that the Conservation Sales Tax funds are derived from one-eighth of one
percent sales and use tax pursuant to Article IV Section 43 (a) of the Missouri Constitution, thus
MDCs sales taxes are constitutional mandates. L.R. No. 4416H.02C
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Additionally, Oversight notes the Park, Soil, and Water Sales Tax funds are derived from the
one-tenth of one percent sales and use tax pursuant to Article IV Section 47 (a) thus DNR’s sales
taxes are constitutional mandates. Therefore, Oversight will reflect the fiscal impact estimates for
DNR’s funds. Therefore, Oversight will reflect the MDC’s and DNR’s fiscal impact estimates in
the fiscal note.
Officials from the Department of Commerce and Insurance (DCI) assume the proposal,
specifically Sections 620.3900 - 620.3930, would have an unknown impact to DCI depending on
the number of businesses and individuals that would request to participate in the Sandbox
Program.
Oversight notes that changes in the HCS exempt the Division of Professional Registration. DCI
assumes this proposal would have a direct fiscal impact on other areas of their organization.
Oversight does not have any information to the contrary. Therefore, Oversight will reflect a
negative unknown impact to various state funds in the fiscal note.
Oversight notes that there are few examples of various agency costs in similar Sandbox
proposals filed in the States of Utah, Ohio, Nebraska, Nevada, and the Arizona. Each fiscal note
addresses the difficulty of projecting any costs associated with the proposals. However, recent
fiscal note submitted to the Nebraska Legislature for consideration of similar bill LB 1127
(Nebraska Sandbox proposal - 2022) from various agencies claiming costs associated with the
proposal, are provided in the Table 1.
Oversight notes that the Missouri Sandbox proposal requires, among other duties, the
Administrator to:
being of consumers
agencies and other states
Oversight notes that there are many other duties required from the Sandbox Office under this
proposal. Therefore, it is probable that the agencies tasked with the regulatory implementation of
this program, such as DOR or DED, will need additional FTEs in order to provide the regulatory
framework and compliance procedures for this Act. L.R. No. 4416H.02C
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Oversight notes that Missouri population is at least 3 times greater (6.6M – Missouri population
/ 1.94M –Nebraska Population) than that of Nebraska, thus the costs could potentially reach a
higher level of expenditure in Missouri. Therefore, for purpose of this fiscal note, Oversight will
note an unknown negative impact to the General Revenue and Other State Funds, which could
potentially exceed $250,000 in various FTE and forgone tax revenue costs to various state funds
in the fiscal note.
Table 1.
Officials from the Attorney General’s Office, the
Hearing Commission, the Office of Administration – Director’s Office, the Missouri
Department of Transportation, the Department of Natural Resources, and the Office of the
State Auditor 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.
Officials from the City of Kansas City, the City of O’Fallon, the City of Springfield, and the
City of Claycomo each assume this proposal would not have a direct fiscal impact on their
respective organizations. Oversight does not have any information to the contrary. Therefore,
Oversight will reflect a zero impact in the fiscal note for these local political subdivisions.
Oversight notes each county and city assess sales or use tax on the sale of goods in Missouri.
The tax remitted to a various local political subdivisions serves the local political subdivision
needs. DOR assume the companies could receive relief from various taxes. This could have an
effect on the local political subdivisions. Therefore, Oversight will note a potential unknown
A
GENCY
F
Y 2023
F
Y 2024
D
epartment of Economic Development
5
20,380.00
$
6
41,930.00
$
D
epartment of Banking and Finance
2
23,025.00
$
2
15,325.00
$
B
oard of Engineers and Architects
3
,300.00
$
3
,300.00
$
D
epartment of Environment and Energy
2
02,371.00
$
2
02,371.00
$
D
epartment of Agriculture
7
7,500.00
$
7
7,500.00
$
L
iquor Control Commission NFI NFI
N
o Fiscal Impact
N
o Fiscal Impact
M
otor Vehicle Industry Licensing Board No discernable impact No discernable impact
N
o Discernable impact
N
o Discernable impact
N
ebraska State Electrical Division Indeterminable Indeterminable
I
ndeterminable
I
ndeterminable
B
oard of Barber Examiners Indeterminable Indeterminable
I
ndeterminable
I
ndeterminable
A
ttorney General NFI NFI
N
o Fiscal Impact
N
o Fiscal Impact
N
ebraska Real Estate Commission Negligible to significant Negligible to significant
N
egligible to Significant
N
egligible to Significant
S
upreme Court NFI NFI
N
o Fiscal Impact
N
o Fiscal Impact
D
epartment of Labor NFI NFI
N
o Fiscal Impact
N
o Fiscal Impact
D
epartment of Administrative Services
7
1,200.00
$
7
7,000.00
$
D
epartment of Insurance
1
68,900.00
$
1
73,317.00
$
T
otal
1
,127,776.00
$
1
,217,426.00
$
F
TE total
9
.5
1
0.5 L.R. No. 4416H.02C
Bill No. HCS for HB 2587
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March 8, 2022
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negative impact to the local political subdivision funds in the fiscal note, depending upon
sandbox participants and applications.
Officials from the Joint Committee on Administrative Rules assume this proposal is not
anticipated to cause a fiscal impact beyond its current appropriation.
Officials from the Office of the Secretary of State (SOS) note 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 its 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 SOS is provided with core funding to handle a certain amount of activity
each year. Oversight assumes SOS could absorb the costs related to this proposal. Therefore,
Oversight will reflect zero fiscal impact on the fiscal note for above agency. L.R. No. 4416H.02C
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FISCAL IMPACT – State GovernmentFY 2023
(10 Mo.)
FY 2024FY 2025GENERAL REVENUE FUNDRevenue Gain – $300 Fee Paid to
participate in the program (p.3)
§620.3915.2
$0 or
Unknown
$0 or
Unknown
$0 or
Unknown
Cost – Reduction in Revenues – various
tax not paid (p.4)
$0 or
(Unknown)
$0 or
(Unknown)
$0 or
(Unknown)
Cost – DOR– FTE necessary to comply
with the proposal (p.5)
$0 or
(Unknown)
$0 or
(Unknown)
$0 or
(Unknown)
Costs – DED FTE Personnel Service($118,757)($145,358)($148,265) Fringe Benefits($64,469)($78,318)($79,293) Expense & Equipment($17,827)($11,416)($11,644)Total Costs - ($201,053)($235,092)($239,202)FTE Change2 FTE2 FTE2 FTE
NET EFFECT ON THE GENERAL
REVENUE FUND
Unknown to
Could exceed
($201,053)
Unknown to
Could Exceed
($235,092)
Unknown to
Could Exceed
($239,202)
OTHER STATE FUNDS Loss of Revenues - to various State
Funds – various tax not paid (p.4)
$0 or
(Unknown)
$0 or
(Unknown)
$0 or
(Unknown)
NET EFFECT ON THE OTHER
STATE FUNDS
$0 or
(Unknown)
$0 or
(Unknown)
$0 or
(Unknown) L.R. No. 4416H.02C
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FISCAL IMPACT – Local GovernmentFY 2023
(10 Mo.)
FY 2024FY 2025LOCAL POLITICAL
SUBDIVISIONS
Loss of Revenues - to various local
funds –various tax not paid (p.4)
$0 or
(Unknown)
$0 or
(Unknown)
$0 or
(Unknown)
NET EFFECT ON THE LOCAL
POLITICAL SUBDIVISIONS
$0 or
(Unknown)
$0 or
(Unknown)
$0 or
(Unknown)
FISCAL IMPACT – Small Business
Small businesses, who will participate in the Sandbox program, will be able to receive potential
tax reductions resulting in revenue gains.
FISCAL DESCRIPTION
This bill establishes the "Regulatory Sandbox Act", which creates the Regulatory Relief Office
within the Department of Economic Development. The Regulatory Relief Office shall administer
the provisions of the bill with the purpose of identifying state laws or regulations that could
potentially be waived or suspended for participating businesses during a 24 month period in
which the participating business demonstrates an innovative product offering to consumers.
The Regulatory Relief Office shall maintain a web page on the Department's website that invites
residents and businesses to make suggestions regarding laws and regulations that could be
modified or eliminated to reduce the regulatory burden of residents and businesses in the state
(Section 620.3905, RSMo).
The Regulatory Relief Office shall be responsible for evaluating and approving or denying
applications to participate in the Sandbox Program. An applicant shall submit an application
along with a $300 application fee to the Regulatory Relief Office, which shall include contact
information and a description of the innovative offering to be demonstrated, including statements
regarding how the innovative offering is subject to licensing, legal prohibition, or other
authorization requirements outside of the Sandbox Program; each law or regulation that the
applicant seeks to have waived or suspended while participating in the Sandbox Program; how
the innovative offering would benefit consumers; what risks might exist for consumers who use
or purchase the innovative offering; and other required information, as described in the bill.
No later than five business days after the day on which a completed application is received by
the Regulatory Relief Office, the Office shall review the application and refer the application to
each applicable agency, as defined in the bill that regulates the applicant's business. No later than
30 days after the day on which an applicable agency receives a completed application for review,
the applicable agency shall provide a written report to the Sandbox Program director with the L.R. No. 4416H.02C
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applicable agency's findings, including any identifiable, likely, and significant harm to the
health, safety, or financial well-being of consumers that the relevant law or regulation protects
against, and a recommendation to the Regulatory Relief Office that the applicant either be
admitted or denied entrance into the Sandbox Program. An applicable agency may deny an
application for reasons described in the bill. The Regulatory Relief Office shall not approve any
application denied by an applicable agency (Section 620.3915).
Upon the receipt of a report from all applicable agencies, the Regulatory Relief Office shall
provide the application and associated reports to the "General Regulatory Sandbox Program
Advisory Committee", which is created by the bill. The Advisory Committee shall be composed
of eight members, as described in the bill including one member of the House of Representatives
appointed by the Speaker, one member of the Senate appointed by the President Pro Tem and
three members of the public or an institution of higher education appointed one each by the
Governor, the President Pro Tem, and the Speaker. The Advisory Committee shall advise and
make recommendations to the Regulatory Relief Office on whether to approve applications to
the Sandbox Program, and may meet at its own discretion to override a decision of the
Regulatory Relief Office on the admission or denial of an applicant to the Sandbox Program,
provided such override is decided with a majority vote of the members of the Advisory
Committee, and further provided that such vote shall be taken within 10 business days of the
Regulatory Relief Office's decision. Meetings of the Advisory Committee shall not be considered
public meetings for the purposes of the Sunshine Law (Section 620.3910).
Upon approval of an application, a Sandbox participant shall have 24 months after the day on
which its application was approved to demonstrate the innovative offering described in the
Sandbox participant's application. During such period, the Sandbox participant shall be exempt
from the laws and regulations outlined in an agreement entered into with the Regulatory Relief
Office. Innovative offerings shall only be available to consumers who are residents of this state,
and no law or regulation shall be waived or suspended if such waiver or suspension would
prevent a consumer from seeking restitution in the event that the consumer is harmed. A
Sandbox participant shall not be subject to prosecution or administrative penalty for a violation
of any law or regulation that is waived or suspended during the duration of the participant's
demonstration period (Section 620.3920).
Prior to demonstrating an innovative offering, a Sandbox participant shall disclose certain
information to consumers, as described in the bill (Section 620.3925).
At least 30 days prior to the end of a participant's demonstration period, the participant shall
notify the Regulatory Relief Office that it either intends to exit the Sandbox Program or that it
seeks an extension. The Regulatory Relief Office may grant an extension not to exceed 12
months, and a participant may seek additional extensions. If a demonstration includes an
innovative offering that requires ongoing services or duties beyond the 24 month demonstration
period, the participant may continue to demonstrate the offering, but shall be subject to all laws
and regulations that were waived or suspended as part of the Sandbox Program. L.R. No. 4416H.02C
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A Sandbox participant shall retain certain records for a period of 24 months after exiting the
Sandbox Program.
The Regulatory Relief Office shall establish quarterly reporting requirements for each
participant, and each participant shall notify the Regulatory Relief Office and each applicable
agency of any incidents that result in harm to the health, safety, or financial well-being of a
consumer.
No later than 30 days after a Sandbox participant exits the Sandbox Program, such participant
shall submit a written report describing an overview of the demonstration. No later than 30 days
after receiving such report, an applicable agency shall provide a written report to the Regulatory
Relief Office that describes any statutory or regulatory reform the applicable agency
recommends (Section 620.3930).
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
Attorney General’s Office
Office of Administration – Budget & Planning
Office of Administration – Administrative Hearing Commission
Office of Administration
Missouri Department of Conservation
Department of Natural Resources
Department of Revenue
Missouri Department of Transportation
Joint Committee on Administrative Rules
Office of the Secretary of State
City of Kansas City
City of O’Fallon
City of Springfield
City of Claycomo
Julie MorffRoss StropeDirectorAssistant DirectorMarch 8, 2022March 8, 2022