COMMITTEE ON LEGISLATIVE RESEARCH
OVERSIGHT DIVISION
FISCAL NOTE
L.R. No.:5213H.01I Bill No.:HB 2473 Subject:Tax Credits; Taxation and Revenue - Income; Taxation and Revenue - General;
Department of Revenue, Labor and Management; Employees - Employers
Type:Original Date:February 6, 2024Bill Summary:This proposal establishes the "Missouri Job Creators Tax Reduction Act"
relating to a Work Opportunity Tax Credit.
FISCAL SUMMARY
ESTIMATED NET EFFECT ON GENERAL REVENUE FUNDFUND AFFECTEDFY 2025FY 2026FY 2027
General Revenue*
($8,923)
Could exceed
($38,754,934)
$0 or
Could exceed
($38,740,800)
Total Estimated Net
Effect on General
Revenue
($8,923)
Could exceed
($38,754,934)
$0 or
Could exceed
($38,740,800)
*Oversight reflects the costs based the average payout per credit in the U.S. at ($903) per each
Missouri WOTC certification. Additionally, the costs include DOR’s 1 FTE (Associate
Customer Service Representative at $35,880 annually) and updates to the TC Form and Website.
Also, the WOTC is authorized until December 31, 2025. Therefore, Oversight has ranged the
impact as $0 (the federal government does not extend the program) to full amount of impact for
FY 2027 and beyond.
ESTIMATED NET EFFECT ON OTHER STATE FUNDSFUND AFFECTEDFY 2025FY 2026FY 2027Total Estimated Net
Effect on Other State
Funds $0$0$0
Numbers within parentheses: () indicate costs or losses. L.R. No. 5213H.01I
Bill No. HB 2473
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ESTIMATED NET EFFECT ON FEDERAL FUNDSFUND AFFECTEDFY 2025FY 2026FY 2027Total Estimated Net
Effect on All Federal
Funds $0$0$0
ESTIMATED NET EFFECT ON FULL TIME EQUIVALENT (FTE)FUND AFFECTEDFY 2025FY 2026FY 2027General Revenue
Fund 0 FTE1 FTE1 FTE
Total Estimated Net
Effect on FTE0 FTE1 FTE1 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 2025FY 2026FY 2027Local Government$0$0$0 L.R. No. 5213H.01I
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FISCAL ANALYSIS
ASSUMPTION
Officials from the Office of Administration – Budget & Planning (B&P) note:
Starting with tax year 2025, this proposal would grant a tax credit equal to 100% of a taxpayer’s
federal work opportunity credit (WOTC) or for non-profits equal to 100% of withholdings for
qualified employees.
B&P notes that this tax credit is non-refundable, cannot be carried forward, and cannot be
transferred, sold, assigned, or otherwise conveyed. B&P also notes that while this credit is
granted for tax year 2025, it will not be taken until taxpayers file their annual tax return in FY26.
B&P notes that FFY23 data has not yet been released. Based on information published by the
U.S. Department of Labor, in federal FY22 there were 2,569,056 employers nationally and
43,820 employers in Missouri certified for a federal WOTC. Table 1 shows the number of
national and Missouri certified employers by year.
Table 1: Federal WOTC Claims per YearFederal
FY
USMissouri
%
MO
20222,569,056 43,820 1.7%20212,081,474 38,657 1.9%20201,620,806 54,033 3.3%20192,068,417 34,609 1.7%20182,204,142 77,310 3.5%
Based on additional information, total WOTC credits were worth approximately $5 billion in
federal FY22. Therefore, B&P estimates that the national average WOTC was about $1,946.24
($5 billion / 2,569,056 national claims) in federal FY22.
Assuming that the average Missouri credit is similar to the average national credit, B&P
estimates that total Missouri credits could be between $67,357,426 ($1,946.24 WOTC x 34,609
employers) and $150,463,828 ($1,946.24 WOTC x 77,310 employers) each year.
Therefore, B&P estimates that this proposal could reduce TSR and GR by $67,357,426 to
$150,463,828 annually beginning FY26. L.R. No. 5213H.01I
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Officials from the Department of Revenue (DOR) note thatstarting January 1, 2025, a
qualified taxpayer shall be allowed to claim a tax credit against their state tax liability for wages
paid or incurred by a qualified taxpayer who hired individuals with barriers to employment. The
credit is the lessor of:
100% of the federal work opportunity credit claimed for the tax year for the employer; or
The Missouri state income tax liability of the taxpayer for that tax year.
These credits are not refundable, not transferrable and are not allowed to be carried forward. The
credits do have a sunset date of December 31, 2030. There is no cap on the number of credits
that can be issued. It should be noted that these credits will not impact the state until FY 2026
when the first returns are filed claiming the credit.
The Federal Work Opportunity Tax Credit (WOTC) is a federal tax credit available to employers
for hiring and employing individuals from certain targeted groups who have faced significant
barriers to employment. Those targeted groups include:
program;
Food and Nutrition Act of 2008;
SSA; and
Before receiving the federal credit, the employer must be preapproved from the state designated
agency, which is the Department of Higher Education and Workforce Development (DHEWD)
in Missouri. The preapproval involves verifying that the employee is in one of the targeted
groups. Once approved they can apply for the credit at the federal level. The credit is equal to
approximately 40% of the first $6,000 in wages paid with no more than $2,400 per credit. The
credit also requires the employee to work a minimum number of hours. If less hours are worked,
then a lesser amount of credit may be earned.
The Department notes that the state credit is 100% of the federal amount or the amount paid in
Missouri income tax. The Department was able to find data on the number of Missouri residents
approved by DHEWD to claim the credit. At the time of completion of the fiscal note, 2023
numbers were not yet available.
Federal Fiscal YearApprovedDenied202243,82072,929 L.R. No. 5213H.01I
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202138,65767,123202054,03375,355201934,60941,062201877,310109,495Average49,686
DOR was unable to determine how many of them actually completed the number of required
hours to receive the full amount of the credit. Additionally, the Department was unable to
determine the pay of these employees that qualified for the credit. Therefore, for the purposes of
the fiscal note only, DOR will assume that all 49,686 people would qualify for the state credit
and that they will only choose to receive the 100% of federal credit for their state credit.
Therefore, all 49,686 would receive a tax credit of the full $2,400 federal credit amount. This
would result in a loss of general revenue of $119,246,400 ($2,400 credit * 49,686 employees)
annually.
This proposal creates a new tax credit that would require a new line being added to the Form
MO-TC ($7,138), updates to DOR’s website and changes to the individual income tax computer
system ($1,785). These changes are estimated to cost $8,923. DOR’s existing tax credit staff is
no longer able to take on any additional tax credits without additional resources. Due to the
intensive knowledge of credits that is needed DOR is not able to use temporary staff to help with
processing these returns. This proposal would require at least 1 FTE Associate Customer
Service Rep at a salary of $35,880.
Oversight notes the DOR assumes the need for 1 new FTE (Associate Customer Service
Representative at $35,880 annually). Oversight does not have any information to the contrary.
Therefore, Oversight will reflect the 1 DOR FTE cost in the fiscal note beginning in FY 2026.
Oversight notes the DOR assume one-time cost of $8,923 for the updates to the MO-TC form,
the website, and the individual income tax computer system in FY 2025.
Oversight notes Work Opportunity Tax Credit (WOTC), is a federal tax credit available to
employers who hire individuals from target groups, which include qualified Veterans,
individuals on food stamps, long time unemployed, and more. (For full list of the individuals,
please visit https://www.cmswotc.com/wotc-categories/).
Oversight notes that in order to verify some of the data provided through the national websites it
requested additional information form DOLIR and DHEWD shown below:
Officials from the Department of Labor and Industrial Relations notes:
MERIC has provided the following numbers which fit this definition of long term unemployed
shown below:
July 2021 – June 2022: 3,952 L.R. No. 5213H.01I
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July 2020 – June 2021: 24,044
July 2019 – June 2020: 6,954
July 2018 – June 2019: 7,237
The MERIC system is only able to provide 4 years of complete data.
Officials from the Department of Higher Education and Workforce Development (DHEWD)
note:
As of February 5, 2024, there are nearly 17,000 employers in the system. Employers tend to
have more than 1 new hire participating in the program. The number of certificates for the past 5
years is listed below:
2018: 46,044
2019: 41,704
2020: 41,826
2021: 48,362
2022: 36,575 (still processing 2022 hire dates)
2023: 23,246
Oversight provides full list of Missouri WOTC certifications that were approved below from
2014 to 2023:
WOTC
Certifications
Currently
PendingDenials
Total
Request
202343,12072,61274,777190,509
202243,82079,65072,929196,399202138,657113,67567,123219,455202054,033657,37775,355786,765201934,60942,98641,062118.657201877,31061,608109,495248,413201770,36667,27960,774198,419201634,00558,77028,342121,117201536,74565,77831,880134,403201434,79477,45430,201142,449Average
2019-202342,848223,42264,117300,684
Average
Percentage14%21%
https://www.dol.gov/agencies/eta/wotc/performance
(Annual Report FY 2023) L.R. No. 5213H.01I
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Oversight provides the profile of WOTC certifications in 2023:
CategoryCertificationsCertification %SNAP 25,89160%Long Term4,38410.2%Qualified Veteran2,6796.2%Designated Community
Resident3,1977.4%
Ex-Felon2,6136.1%SSI Recipient1,6153.7%Long Term IV-A (TANF)5461.3%Vocational Rehabilitation1,5013.5% IV-A (TANF) 2801.3%Ticket Holder1110.3%Summer Youth370.1%
https://www.dol.gov/agencies/eta/wotc/performance
Annual Report FY 2023
Oversight notes each tax credit certification represents employee who qualifies under any of
special categories shown above.
Oversight notes the proposal allows Missouri employers, after January 1, 2025, to receive up to
one hundred percent of the federal work opportunity credit properly claimed on such taxpayer's
federal income tax return.
Oversight notes currently the most common maximum cap allowed under I.R.C. §51 is 40% of
up to $6,000 wages paid to or incurred on behalf of an individual define within the specified
group (as shown above), or $2,400.
Oversight notes, according to the Analytical Perspectives Report – Tax Expenditures published
by the White House, there were an estimated $1.79 billion (page 228) paid in tax credit
expenditures to employers for 1,982,858 WOTC certifications filed in FY 2023 in U.S. (WOTC
Performance
Oversight assumes on average employers received $903 (rounded to near dollar) per such a
credit ($1.79B / $1,982,858) in the same year nationally.
Oversight notes there were, an average, 42,848 employees certified throughout Missouri over
the last five years. Therefore, Oversight estimates the impact at $38,673,684 ($903 x 42,848)
assuming average payout). Oversight notes the maximum payout is estimated at $102,834,720
($2,400 x 42,848) beginning FY 2026. For purposes of this fiscal note, Oversight will show a L.R. No. 5213H.01I
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cost that could exceed the average payout per WOTC Certification. Taxpayers are not able apply
for this credit until January 1, 2025, thus file income tax for the year in FY 2026.
Oversight notes the proposal allows employers, who are exempt from taxation under Section
(501) (c ) (such as: religious, charitable, scientific, testing for public safety, literary, educational,
or other specified purposes and that meet certain) of IRS code to apply using the section as a
credit for the payment of taxes that the organization is required to withhold from the wages of
employees and pay to the State.
Oversight notes, upon further inquiry with DOR, that since the tax credit is connected to the
federal government program the taxpayer (employers) would receive zero amount of the tax
credit unless the legislation has been extended in future years.
Lastly, notes that according to the U.S. DOL and the IRS, the WOTC is authorized
until December 31, 2025. However, if the taxpayer files for WOTC in CY 2026 and thereafter, it
is not certain the funds will be there to support the tax credit in FY 2027. Therefore, Oversight
will range the impact as $0 (the federal government did not extend the legislation) to full amount
of impact for FY 2027 and beyond.
Oversight notes that no tax credit (under this proposal) shall be transferable, refundable, or
carried forward.
Officials from the Department of Higher Education and the Workforce Development and
Department of Economic Development both assume 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 both respective agencies.
Officials from the Oversight Division
pursuant to Section 23.253 RSMo; however, Oversight assumes the Division can absorb the cost
with the current budget authority.
Rule Promulgation
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 L.R. No. 5213H.01I
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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.
FISCAL IMPACT – State GovernmentFY 2025
(10 Mo.)
FY 2026FY 2027GENERAL REVENUE
Reduction in Revenue –§§135.465
Work Opportunity Tax Credit p. 6$0
Could exceed
($38,673,684)
$0 or
Could exceed
($38,673,684)
Costs – DOR - §§135.462 7. 1 FTE Personnel Service$0($31,824)($37,330) Fringe Benefits$0($27,195)($29,204) Expense & Equipment($8,923)($22,231)($582)Total Costs – DOR p.5($8,923)($81,250)($67,116)FTE Change0 FTE1 FTE1 FTE
ESTIMATED NET EFFECT ON
GENERAL REVENUE
($8,923)
Could exceed
($38,754,934)
$0 or
Could exceed
($38,740,800)
FISCAL IMPACT – Local GovernmentFY 2025
(10 Mo.)
FY 2026FY 2027$0$0$0
FISCAL IMPACT – Small Business
A direct fiscal impact to small businesses would be expected as a result of this proposal.
FISCAL DESCRIPTION
This bill establishes the "Missouri Job Creators Tax Reduction Act." Beginning January 1, 2025,
a qualified taxpayer may claim a tax credit for any wages paid to an individual who is:
(1) In a "targeted group," as that term is defined in the federal Work Opportunity Tax Credit
(WOTC); and L.R. No. 5213H.01I
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(2) Who is employed in the State.
The tax credit shall be the lesser of:
(1) The amount of 100% of the federal WOTC claimed for the tax year, by the qualified
taxpayer; or
(2) The amount of the qualified taxpayer's State income tax for the year. A nonprofit
organization with no State income tax liability may retain withholding tax for such employees in
the amount of the tax credit that such an organization would have been authorized to claim.
The tax credits shall not be refundable or carried forward, and shall not be transferred, sold, or
assigned. The tax credit shall sunset on December 31, 2030.
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 Administration – Budget & Planning
Department of Revenue
Department of Labor and Industrial Relations
Office of the Secretary of State
Joint Committee on Administrative Rules
Department of Higher Education and Workforce Development
Department of Economic Development
Oversight Division
Julie MorffRoss StropeDirectorAssistant DirectorFebruary 6, 2024February 6, 2024