2018 LEGISLATION UPDATES

Transcription

1 MU Extension Fall Tax School 2018 Legislation and Tax Updates Cindy Doss, DOR Manager 2018 LEGISLATION UPDATES 1

2 HB1288 Champion for Children (CFC) Definition of child advocacy center expanded. Sunset moved to Credits can no longer be transferred, assigned or sold. Credit limit increased from $1 million to $1.5 million in fiscal year. Limit increase effective for fiscal years beginning on or after July 1, Schoolchildren Health and Hunger Tax Credit (SCH) established for donation to organization that provide funding for unmet health, hunger and hygiene need of children in school. Credit is equal to 50 percent of the taxpayer s contribution. Credit is not refundable. Credit can be carried forward four subsequent tax years Credit is transferrable. Effective January 1, 2019 HB1288 (cont) Diaper Bank Tax Credit (DBC) established for nonprofit entity located in this state established and operating primarily for the purpose of collecting or purchasing disposable diapers or other hygiene products for infants, children or incontinent adults. Products are to be distributed through schools, health care facilities, government agencies or other non profits entities to individuals free of charge. Equal to fifty percent of the contribution. Minimum donation is $100. Tax credit can not exceed taxpayer s state tax liability and is capped at $50,000 per tax year. Credit can be carried over one year. Credits can not be transferred, assigned or sold. Total accumulative tax credits is capped at $500,000 a fiscal year. Effective for fiscal years beginning on or after July 1,

3 HB1288 (cont) Maternity Home Credit (MHC) and Pregnancy Resource Credit (PRC) Definition of Maternity Home restricted. Credits can no longer be transferred, assigned or sold. Carryforward changed from 4 years to 1 year. Credit limit increased from $2.5 million to $3.5 million in fiscal year. Limit change effective for fiscal years beginning on or after July 1, Food Pantry Credit (FPT) Adds local soup kitchens and local homeless shelters to qualifying facilities for contributions. Excludes donation of expired foods. Sunset moved to 2026 Effective August 28, 2018 for donations made on or after January 1, HB1388 Professional Registration Adds amateur kickboxing and mixed martial arts to the jurisdiction of the Division of Professional Registration. Sporting Contribution Credit (SPC) Extends to sunset to 2025 Sporting Event Credit (SEC) modified eligibility requirements and expands the scope for qualifying events. Allows additional time for the applicant to apply for the credit. Adds new calculation for determining the amount of the credit. Overall limit for credit issued remains at $3 million per fiscal year, and a new $2.7 million limit for tax credits issued for events located St. Louis and Kansas City,, and on any city not within a county. This will allow for smaller counties to be able to participate. Effective August 28,

4 HB1456 Sales Tax Modifies and adds to the 911 Tax system by establishing a fee on contract and prepaid wireless telecommunications retail service. Contract phone requires voter approval and is not to exceed $1.00 per phone line. Prepaid wireless telecommunications service establishes a 3 percent fee on prepaid wireless telecommunications service (minutes) that automatically becomes effective January 1, 2019 unless the governing body adopts an ordinance, order, rule, resolution or regulation prohibiting the charge by November 16 th, HB1796 Creates the First Time Home Buyer Tax Deduction. Deduction of 50 percent of contribution to first time home buyer savings account. Deduction cannot exceed the taxpayer s MAGI Maximum deduction from MAGI is $800 per taxpayer per year. Income earned from the account is not subject to state income tax. Available for 2019 tax return New form or affidavit will be created to use when claiming the deduction. First Time Homebuyer saving account. Used for eligible expenses: down payment or closing cost for primary resident in Missouri on behalf of a qualified beneficiary. Maximum contribution is $1,600 per taxpayer. Cumulative maximum contribution to a account is $20,000 Maximum total amount in an account is $30,000 Amounts that exceed the limits do not qualify for the deduction. 4

5 HB1831 Sales Tax Back to School Sales Tax Holiday Adds disposable diapers to the list of approved items that are exempt during the August Sales Tax Holiday. Effective August 28, 2018 Nonprofit 501(c) 7 entities Exempts dues from taxation of 501 (c) 7. Effective August 28, 2018 HB1858 Refund Interest Rates Beginning July 1, 2019, individual income refund interest rate will be determined in the same way the underpayment interest rates are calculated. Refund Interest Beginning July 1, 2019, the Department is required to pay refund interest when less than a $1.00. This was implemented March Online Mapping By July 1, 2019, the Department is to create an online mapping feature where the taxing information of political subdivisions and special taxing districts will be made readily available. 5

6 HB2540 Individual Income Tax Changes Lowers individual income tax rate by.4 percent. With SB509 changes the 2019 individual income tax rate will be 5.4 percent. Withholding tax rate and individual tax rate tables will be modified annually with each tax rate change. Reduces the percentage of business income that can be subtracted from MAGI from 25 percent to 20 percent. Effective January 1, Reduces 2019 federal income tax deduction based on income. $25,000 or less 35% $25,001 to $50,000 25% $50,001 to $100,000 15% $100,001 to $125,000 5% $125,001 or more 0% SB573 Military Individual Income Tax Deduction Beginning January 1, 2020, a percentage of income received as salary or compensation from the below sources shall be deducted from the taxpayers MAGI, to the extent it is included in their FAGI: National Guard Inactive duty training (IDT) National Guard Annual training (AT) Reserve components of the Armed Forces The percentage is a gradual increase for 5 years up to 100% TY20 20% of military income TY21 40% of military income TY22 60% of military income TY23 80% of military income TY24 100% of military income 6

7 SB590 Historic Preservation Tax Credit (HPC) Modifies several provisions regarding the HPC tax credit. Modifies the approval of HPC application by DED. Make various changes relevant to the application process with DED. Effective August 28, SB769 Financial Institution Tax Adds brokered or negotiable certificates of deposit that are fully insured by the FDIC or the National Credit Union Share Insurance Fund to the collateral list. Reduces Financial Institutions tax rate with corporate income tax rate reductions. Effective August 28,

8 SB773 Local Use Tax for Motor Vehicles Extends the date a local taxing jurisdiction can place a question on the ballot regarding the repeal of a local use tax on certain motor vehicles purchased from out of state dealers from November 2018 to November Effective August 28, Sporting Event Credit (SEC) modified eligibility requirements and expands the scope for qualifying events. Allows additional time for the applicant to apply for the credit. Adds new calculation for determining the amount of the credit. Overall limit for credit issued remains at $3 million per fiscal year, and a new $2.7 million limit for tax credits issued for events located St. Louis and Kansas City, and on any city not within a county. Effective August 28, SB773 (cont.) Sporting Contribution Credit (SPC) Extends to sunset to Similar to HB1388. Effective August 28, 2018 Entertainer and Athletes Extends athlete and entertainer tax to December 31, 2030 Effective August 28, 2018 Corporate Income Tax Provides that intercompany transactions between corporations that file a consolidated return shall not be included in the definition of sales for the purposes of income tax apportionment. Effective August 28,

9 SB882 Missouri Education Saving Program Removes Higher from the name and expanding the definition of eligible education institution to include elementary and secondary education. Adds to the definition of Qualified higher education expenses to add or qualified education expenses. Added language to the Missouri Education Savings Program to exclude rollover contributions from being included in MAGI. SB884 Corporate Income Tax For tax years beginning on or after January 1, 2020, this act disallows the three factor apportionment method available in the Multistate Tax Compact in Chapter 32, along with the business transaction apportionment method available in Chapter 143, and requires all corporations subject to income tax in this state to apportion and allocate income according to the new provisions provided in Section (single sales factor apportionment method). Removes the provision that required affiliated corporations to have 50% or more of its income derived from sources within this state to be able to file a consolidate return. Eliminates the reporting of transactions between affiliated members of a group on a consolidated return. For all tax years beginning on or after January 1, 2020, this act reduces the corporate income tax rate from 6.25% to 4.0%. Ends the option for a corporation to apportion its income by using the single sales factor and optional single sales factor apportionment methods for tax years ending on or after 12/31/

10 SB884 (cont) Sales Tax Bonding Requirements Changes the law to allow, rather than require, the Director to request a sales or use tax bond. Removes the ability of the Director to request such a bond from a retail sales license applicant. Can require a bond when business is in default. Effective August 28, 2018 Individual Income Tax The current law provides for a reduction in the top rate of income tax over a period of years from 6% to 5.5%, if certain revenue collection triggers are met. This bill limits the number of reductions to the income tax rate to five. Effective January 1, TAX FORM AND TAX CHANGES 10

11 2018 Due Dates Return Due Dates: 2018 Missouri Individual Income and PTC return is due April 15, Missouri Individual Income and PTC statute of limitation due date is April 15, 2019 unless a October 15 th extension to file was approved Form Changes Exemption changes: Personal exemptions removed Dependent exemption removed Over 65 dependent exemption removed Additional personal exemption removed Married filing separate spouse not filing option removed 11

12 2018 Standard Deductions Standard Deductions: Single $12,000 Married filing Combined $24,000 Married Filing Separate $12,000 Head of Household $18,000 Qualified Widow(er) $24,000 Federal Income Tax Deduction Federal Tax Reform Changes Effecting Missouri Federal Tax Deduction. The individual income tax rates have been reduced. The tax rates are 10%, 12%, 22%, 24%, 32%, 35% and 37%. The reduction in the rates may lower the Missouri federal tax deduction. Child Tax Credit increased from $1,000 per child to $2,000. The increase will further reduce the Missouri federal tax deduction. The federal changes effecting Missouri federal tax deduction may mean the Missouri tax owed could be higher due to lowering of federal tax. 12

13 Itemize Deductions Missouri Itemize Deductions The income thresholds that began the phase out of federal itemized deductions are no longer in place. Missouri disallows the state income tax portion of the federal itemized deductions. Because this overall limit has been removed, there is no longer a need to determine the state income tax portion of a limited federal itemized deduction amount. The itemized deduction worksheet is no longer necessary. Itemize Deductions (cont) As part of the federal itemized deductions, the state and local taxes are limited to a cumulative amount of $5,000 for married individuals filing separately, and $10,000 for all other taxpayers. The Department will create a new worksheet to assist with the calculations. The taxes includes: state and local real estate tax, state and local personal property tax, state and local income tax, and state and local sales taxes. This limit will affect two items on the individual Missouri return: the calculation of Missouri itemized deductions, and addition modification to federal adjusted gross income for the itemized deduction for any property taxes paid to another state. 13

14 Deduction Changes Deductions Public Pension Maximum social security benefits for purposed of limiting public pension is $37,720. Railroad Retirement and Social Security Deduction limits on MO A are: Maximum tier I railroad benefits for tax year 2018 is $7,961 Maximum tier II railroad benefits for tax year 2018 is $4,675 Maximum social security deduction for tax year 2018 is $7, Tax Rates Tax Rates The income tax brackets for the 2018 tax year on each income increments have been increased based on inflation. The top rate for 2018 has decreased from 6.0 percent to 5.9 percent. Composite top income tax rate the tax rate on income on a composite return is reduced from 6.0 percent to 5.9 percent. 14

15 Business Income Deduction Business Income Deduction A five percent subtraction from federal adjusted gross income will be allowed on the 2018 Missouri return for the Missouri source combination of: The total combined profit as properly reported to the Internal Revenue Service on each Schedule C... filed, and The total partnership and S corporation income or loss properly reported to the Internal Revenue Service on Part II of Schedule E. The Department plans to provide a worksheet as part of the MO 1040 instructions. Net Operating Loss Changes Net Operating Loss The carryback and carryforward provisions have changed: The net operating loss cannot be carried back, and the carryforward period is indefinite Exception farming losses are carried back two years, with an indefinite carryforward period. Exception the net operating losses of insurance companies are carried back two years, and can be carried forward up to 20 years following the loss. 15

16 Department Website: Resolve Delinquent Accounts: (573) General Income Tax Questions/Refunds: (573) Listing of all Mailing Addresses and Phone Numbers Sign up for My Tax Missouri: Electronic Payment Issues: (573) Cindy Doss, Manager, Collections and Tax Assistance 301 West High Street Jefferson City, Missouri Telephone Fax

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