COMMITTEE ON LEGISLATIVE RESEARCH OVERSIGHT DIVISION FISCAL NOTE L.R. No.:5844H.01I Bill No.:HB 2796 Subject:Business and Commerce; Taxation and Revenue - General; Taxation and Revenue - Property; Emergencies Type:Original Date:March 1, 2024Bill Summary:This proposal establishes the "Protecting Missouri's Small Businesses Act”, which changes the law regarding businesses closed because of a shutdown order. FISCAL SUMMARY ESTIMATED NET EFFECT ON GENERAL REVENUE FUNDFUND AFFECTEDFY 2025FY 2026FY 2027Total Estimated Net Effect on General Revenue $0$0$0 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. 5844H.01I Bill No. HB 2796 Page 2 of March 1, 2024 KLP:LR:OD 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 2027Total Estimated Net Effect on FTE 000 ☐ 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 or (Unknown)$0 or (Unknown)$0 or (Unknown) L.R. No. 5844H.01I Bill No. HB 2796 Page 3 of March 1, 2024 KLP:LR:OD FISCAL ANALYSIS ASSUMPTION Section 44.251 “Protecting Missouri’s Small Businesses Act” Officials from the Office of Administration - Budget and Planning (B&P) note this proposal would require a reduction of fees, personal property tax, and real property tax in political subdivisions with shutdown orders. Qualifying shut down orders must be caused by reasons outside of a business’ control. Beginning January 1, 2025, any political subdivision with a shutdown order that lasts for at least 21 consecutive days, or 45 cumulative days must: longer. was closed due to the shutdown order. This proposal would not: subdivision. For shutdown orders that end before June 1 st , the county assessor must reduce the property tax liability for all real and personal property located within the boundaries of the shutdown order. The reduction shall be based on the number of days a business was closed due to the shutdown order. Affected taxpayers must then pay the reduced tax amount by December 31 st . For shutdown orders that end on or after June 1 st , the taxpayer must pay the full property tax liability by December 31 st . The county assessor must then provide information on how such taxpayer may apply for a refund. The taxpayer must apply for a tax refund by January 15 th . The county assessor must then calculate the allowable refund amount by February 15 th and pay all refund claims by March 15 th . B&P notes that Section 44.251.4(2) requires business owners that rent or lease their real property distribute the property tax savings to all renters and lessors. B&P further notes that it is unclear whether this proposal would impact state property tax levies, if there were a statewide shutdown order. B&P also notes that the Blind Pension Trust Fund levies a $0.03 per $100 assessed value property tax on all real and personal property located within Missouri. L.R. No. 5844H.01I Bill No. HB 2796 Page 4 of March 1, 2024 KLP:LR:OD B&P is unaware of any restrictive public health orders currently in effect. Therefore, this proposal may have an unknown impact on state and local revenues in the future. B&P notes the following concerns with the proposed language: o were a statewide shutdown order. Section 44.251.2(2) includes orders by the state within the definition of “shutdown order”. Therefore, B&P assumes that if there were a statewide shutdown order, state revenues would be impacted through the reduction in license fees as well as reductions in real and personal business property. o license fees for six months for any shutdown order that lasts less than 180 days. If a business is closed due to a shutdown order for 22 consecutive days, the political subdivision must still waive the fees for the full 180 days. B&P further notes that the last sentence Section 44.251.4(1)(a) allows business license fees to be prorated, but the language provides no information as to how they may be prorated. B&P assumes that the license fees may be prorated for the remaining six months (or less depending on the length of the closure) of the year. B&P further assumes that the license fees may not be prorated to account for only the days a business was actually closed (if less than six months). st o if a taxpayer paid the reduced tax after December 31. It is unclear whether the taxpayer would be assessed interest and penalties on the reduced tax liability or on the full tax liability. o liable for the full tax amount (amount before reduction) if they pay the tax liability after December 31st. st o after December 31st. Whether a late payment would disqualify such taxpayer from receiving a refund, or whether interest and penalties would be assessed on the full tax liability or the remaining tax liability accounting for the refund amount. o to review and calculate the eligible refund amount for all refund claims within that county. B&P notes that as of 2019, the median number of businesses per county was 385 and there were 25 counties with over 1,000 businesses. L.R. No. 5844H.01I Bill No. HB 2796 Page 5 of March 1, 2024 KLP:LR:OD Officials from the Department of Revenue (DOR) note beginning January 1, 2025, should a local political subdivision institute a business shutdown order that lasts at least 21 consecutive days or 45 days cumulative, the political subdivision will be required to do the following: Waive all business fees owed to the political subdivision during the shutdown period. Reduce all real and personal property tax liability by the number of days businesses were closed. DOR notes that this proposal is in regard to locally paid fees and property tax which are not handled by DOR. Therefore, this proposal will not fiscally impact DOR. Officials from the City of Kansas City note the proposed legislation has a negative fiscal impact of an indeterminate amount. Officials from the Rolling Hills Consolidated Library note governmental entities who are funded by property tax would still be expected to provide services during any kind of shutdown or closing of public businesses, and therefore need that tax funding to continue operations. The library questions how the library would pay police and fire personnel if taxes were allowed to be reduced? Many businesses found ways to continue running during COVID shutdowns, including working from home and curbside services. Everyone was asked to sacrifice and adapt in order to protect the health and well-being of all community members. It was an extraordinary circumstance. A dollar value of the impact of this bill is impossible to calculate, but could easily reach into tens of thousands, maybe hundreds of thousands, of dollars in lost tax revenue. Officials from the Newton County Health Department,, and the State Tax Commission, each assume the proposal will have no 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 agencies. In response to a similar proposal, HCS HB 1263 (2023), officials from the Department of Social Services assumed the proposal will have no fiscal impact on their organization. For purposes of this fiscal note, Oversight assumes this proposal would not impact the Blind Pension Fund. If this assumption is incorrect, it could substantially alter the impact provided in this fiscal note. Oversight will present an impact on this fiscal note as a $0 (no shutdown order in implemented) to an unknown loss in revenue to local political subdivisions for the reduced property tax revenues and the waived business license fees. FISCAL IMPACT – State GovernmentFY 2025 (10 Mo.) FY 2026FY 2027$0$0$0 L.R. No. 5844H.01I Bill No. HB 2796 Page 6 of March 1, 2024 KLP:LR:OD FISCAL IMPACT – Local GovernmentFY 2025 (10 Mo.) FY 2026FY 2027LOCAL POLITICAL SUBDIVISIONS Potential Revenue Reduction - §44.251 - Reduction in real and personal property tax revenues in the event of a shutdown order $0 or (Unknown) $0 or (Unknown) $0 or (Unknown) Potential Revenue Reduction - §44.251 - Waiving of business license fees in the event of a shutdown order $0 or (Unknown) $0 or (Unknown) $0 or (Unknown) ESTIMATED NET EFFECT ON LOCAL POLITICAL SUBDIVISIONS $0 or (Unknown) $0 or (Unknown) $0 or (Unknown) FISCAL IMPACT – Small Business This proposal could impact small businesses that may be impacted by a shutdown order. FISCAL DESCRIPTION This bill establishes the "Protecting Missouri's Small Businesses Act". The bill requires the State and its political subdivisions to give careful consideration and appropriate concern for the lasting effects of actions taken during a "shutdown order" as defined in the bill. The bill specifies that beginning January 1, 2025, if any political subdivision with jurisdiction over a business implements a shutdown order and the business closes due only to the shutdown order for at least 21 consecutive days or at least 45 cumulative days, the following requirements apply: (1) Waiving any fee for a business license during the period of the shutdown order or six months, whichever is longer; and (2) Reducing the real and personal property tax liability of the business based on the number of days the business was shut down in a given year, as specified in the bill. L.R. No. 5844H.01I Bill No. HB 2796 Page 7 of March 1, 2024 KLP:LR:OD If a taxpayer rents or leases all or a portion of the taxpayer's affected real property to one or more renters or lessors, the taxpayer must distribute a pro rata amount of the reduced liability to renters or lessors who are current on all lease or rental payments. This bill is not to be construed to affect professional licensure and does not require the State to provide restitution or to replace lost revenues to a political subdivision. 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 and Planning Department of Revenue Department of Social Services City of Kansas City Rolling Hills Consolidated Library Newton County Health Department Lincoln County Assessor State Tax Commission Julie MorffRoss StropeDirectorAssistant DirectorMarch 1, 2024March 1, 2024