Businesses Operating in Missouri Will Be Impacted by New SALT Bill Provisions

On July 1, 2022, Governor Parson signed into law Missouri House Bill 2400. This bill modifies provisions related to businesses operating in Missouri.  Here are some of the highlights of this legislation.

• Missouri Pass Through Entity Election – Addition of the SALT Parity Act.  Under this Act, partners and shareholders in flow-through entities are allowed to take full advantage of federal tax deductions.  Below are additional key points:
• Effective for tax years ending on or after December 31, 2022
• A partnership or S corporation may make an annual election prior to the due date of the return for that tax year.
• Nonresident members are not required to file a separate income tax return if the only source of income is from an entity(ies) filing under this election.
• Residents and part-year residents are only allowed a credit based on historic method and no excess can be carried forward.
• Any net loss resulting from this calculation may be carried forward to succeeding tax years until fully utilized.

Significant Planning Opportunities – Now that Missouri has provided Missouri residents with an opportunity to claim the SALT workaround there could be significant tax planning opportunities to reduce Missouri residents overall state tax liability.

• Missouri Works Program Suspension – Suspension of the Missouri Works program when a statewide state of emergency exists for more than 16 months (benefits would be suspended but participant would not lose the opportunity to participate in the program). 
• Missouri Tax Credit Program – Significant administrative changes have been added that can impact taxpayers filing obligations.

1. Changes to due date of annual reports and actual cost requirements.
2. Training Project Awards – provides for reimbursement of “new job” employee relocation cost, up to $350,000 per person, not to exceed 50% of overall training project award.

• Missouri Research & Development Tax Credit – Provides for a $10 million tax credit to support companies that increase research and development expenditures in Missouri, with extra benefit for those conducting research with Missouri universities and encouraging minority-owned and women-owned business participation.
  
  
• For Tax Years beginning on or after January 1, 2023
• Limited to $10M in any year. Of this amount $5M is reserved for minority, women’s, and small businesses. To the extent the demand exceeds the annual cap the credit will be administered on a pro-rata basis.
• Limit to $300,000 per single taxpayer.
• Sunset clause after 6 years from the effective date.

This bill becomes effective on August 28, 2022. Taxpayers, especially S corporation shareholders, should further review their current tax structure in order to minimize their 2022 and future state tax liabilities.