Authorizes an income tax deduction for certain survivor benefits

SECOND REGULAR SESSION
SENATE BILL NO. 1063
103RD GENERAL ASSEMBLY
INTRODUCED BY SENATOR CARTER.
4328S.01I KRISTINA MARTIN, Secretary
AN ACT
To repeal section 143.121, RSMo, and to enact in lieu thereof one new section relating to an income
tax deduction for certain survivor benefits.
Be it enacted by the General Assembly of the State of Missouri, as follows:
Section A. Section 143.121, RSMo, is repealed and one new 1
section enacted in lieu thereof, to be known as section 143.121, 2
to read as follows:3
143.121. 1. The Missouri adjusted gross income of a 1
resident individual shall be the taxpayer's federal adjusted 2
gross income subject to the modifications in this section. 3
2. There shall be added to the taxpayer's federal 4
adjusted gross income: 5
(1) The amount of any federal income tax refund 6
received for a prior year which resulted in a Missouri 7
income tax benefit. The amount added pursuant to this 8
subdivision shall not include any amount of a federal income 9
tax refund attributable to a tax credit reducing a 10
taxpayer's federal tax liability pursuant to Public Law 116- 11
136 or 116-260, enacted by the 116th United States Congress, 12
for the tax year beginning on or after January 1, 2020, and 13
ending on or before December 31, 2020, and deducted from 14
Missouri adjusted gross income pursuant to section 143.171. 15
The amount added under this subdivision shall also not 16
include any amount of a federal income tax refund 17
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attributable to a tax credit reducing a taxpayer's federal 18
tax liability under any other federal law that provides 19
direct economic impact payments to taxpayers to mitigate 20
financial challenges related to the COVID-19 pandemic, and 21
deducted from Missouri adjusted gross income under section 22
143.171; 23
(2) Interest on certain governmental obligations 24
excluded from federal gross income by 26 U.S.C. Section 103 25
of the Internal Revenue Code, as amended. The previous 26
sentence shall not apply to interest on obligations of the 27
state of Missouri or any of its political subdivisions or 28
authorities and shall not apply to the interest described in 29
subdivision (1) of subsection 3 of this section. The amount 30
added pursuant to this subdivision shall be reduced by the 31
amounts applicable to such interest that would have been 32
deductible in computing the taxable income of the taxpayer 33
except only for the application of 26 U.S.C. Section 265 of 34
the Internal Revenue Code, as amended. The reduction shall 35
only be made if it is at least five hundred dollars; 36
(3) The amount of any deduction that is included in 37
the computation of federal taxable income pursuant to 26 38
U.S.C. Section 168 of the Internal Revenue Code as amended 39
by the Job Creation and Worker Assistance Act of 2002 to the 40
extent the amount deducted relates to property purchased on 41
or after July 1, 2002, but before July 1, 2003, and to the 42
extent the amount deducted exceeds the amount that would 43
have been deductible pursuant to 26 U.S.C. Section 168 of 44
the Internal Revenue Code of 1986 as in effect on January 1, 45
2002; 46
(4) The amount of any deduction that is included in 47
the computation of federal taxable income for net operating 48
loss allowed by 26 U.S.C. Section 172 of the Internal 49
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Revenue Code of 1986, as amended, other than the deduction 50
allowed by 26 U.S.C. Section 172(b)(1)(G) and 26 U.S.C. 51
Section 172(i) of the Internal Revenue Code of 1986, as 52
amended, for a net operating loss the taxpayer claims in the 53
tax year in which the net operating loss occurred or carries 54
forward for a period of more than twenty years and carries 55
backward for more than two years. Any amount of net 56
operating loss taken against federal taxable income but 57
disallowed for Missouri income tax purposes pursuant to this 58
subdivision after June 18, 2002, may be carried forward and 59
taken against any income on the Missouri income tax return 60
for a period of not more than twenty years from the year of 61
the initial loss; and 62
(5) For nonresident individuals in all taxable years 63
ending on or after December 31, 2006, the amount of any 64
property taxes paid to another state or a political 65
subdivision of another state for which a deduction was 66
allowed on such nonresident's federal return in the taxable 67
year unless such state, political subdivision of a state, or 68
the District of Columbia allows a subtraction from income 69
for property taxes paid to this state for purposes of 70
calculating income for the income tax for such state, 71
political subdivision of a state, or the District of 72
Columbia; 73
(6) For all tax years beginning on or after January 1, 74
2018, any interest expense paid or accrued in a previous 75
taxable year, but allowed as a deduction under 26 U.S.C. 76
Section 163, as amended, in the current taxable year by 77
reason of the carryforward of disallowed business interest 78
provisions of 26 U.S.C. Section 163(j), as amended. For the 79
purposes of this subdivision, an interest expense is 80
considered paid or accrued only in the first taxable year 81
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the deduction would have been allowable under 26 U.S.C. 82
Section 163, as amended, if the limitation under 26 U.S.C. 83
Section 163(j), as amended, did not exist. 84
3. There shall be subtracted from the taxpayer's 85
federal adjusted gross income the following amounts to the 86
extent included in federal adjusted gross income: 87
(1) Interest received on deposits held at a federal 88
reserve bank or interest or dividends on obligations of the 89
United States and its territories and possessions or of any 90
authority, commission or instrumentality of the United 91
States to the extent exempt from Missouri income taxes 92
pursuant to the laws of the United States. The amount 93
subtracted pursuant to this subdivision shall be reduced by 94
any interest on indebtedness incurred to carry the described 95
obligations or securities and by any expenses incurred in 96
the production of interest or dividend income described in 97
this subdivision. The reduction in the previous sentence 98
shall only apply to the extent that such expenses including 99
amortizable bond premiums are deducted in determining the 100
taxpayer's federal adjusted gross income or included in the 101
taxpayer's Missouri itemized deduction. The reduction shall 102
only be made if the expenses total at least five hundred 103
dollars; 104
(2) The portion of any gain, from the sale or other 105
disposition of property having a higher adjusted basis to 106
the taxpayer for Missouri income tax purposes than for 107
federal income tax purposes on December 31, 1972, that does 108
not exceed such difference in basis. If a gain is 109
considered a long-term capital gain for federal income tax 110
purposes, the modification shall be limited to one-half of 111
such portion of the gain; 112
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(3) The amount necessary to prevent the taxation 113
pursuant to this chapter of any annuity or other amount of 114
income or gain which was properly included in income or gain 115
and was taxed pursuant to the laws of Missouri for a taxable 116
year prior to January 1, 1973, to the taxpayer, or to a 117
decedent by reason of whose death the taxpayer acquired the 118
right to receive the income or gain, or to a trust or estate 119
from which the taxpayer received the income or gain; 120
(4) Accumulation distributions received by a taxpayer 121
as a beneficiary of a trust to the extent that the same are 122
included in federal adjusted gross income; 123
(5) The amount of any state income tax refund for a 124
prior year which was included in the federal adjusted gross 125
income; 126
(6) The portion of capital gain specified in section 127
135.357 that would otherwise be included in federal adjusted 128
gross income; 129
(7) The amount that would have been deducted in the 130
computation of federal taxable income pursuant to 26 U.S.C. 131
Section 168 of the Internal Revenue Code as in effect on 132
January 1, 2002, to the extent that amount relates to 133
property purchased on or after July 1, 2002, but before July 134
1, 2003, and to the extent that amount exceeds the amount 135
actually deducted pursuant to 26 U.S.C. Section 168 of the 136
Internal Revenue Code as amended by the Job Creation and 137
Worker Assistance Act of 2002; 138
(8) For all tax years beginning on or after January 1, 139
2005, the amount of any income received for military service 140
while the taxpayer serves in a combat zone which is included 141
in federal adjusted gross income and not otherwise excluded 142
therefrom. As used in this section, "combat zone" means any 143
area which the President of the United States by Executive 144
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Order designates as an area in which Armed Forces of the 145
United States are or have engaged in combat. Service is 146
performed in a combat zone only if performed on or after the 147
date designated by the President by Executive Order as the 148
date of the commencing of combat activities in such zone, 149
and on or before the date designated by the President by 150
Executive Order as the date of the termination of combatant 151
activities in such zone; 152
(9) For all tax years ending on or after July 1, 2002, 153
with respect to qualified property that is sold or otherwise 154
disposed of during a taxable year by a taxpayer and for 155
which an additional modification was made under subdivision 156
(3) of subsection 2 of this section, the amount by which 157
additional modification made under subdivision (3) of 158
subsection 2 of this section on qualified property has not 159
been recovered through the additional subtractions provided 160
in subdivision (7) of this subsection; 161
(10) For all tax years beginning on or after January 162
1, 2014, the amount of any income received as payment from 163
any program which provides compensation to agricultural 164
producers who have suffered a loss as the result of a 165
disaster or emergency, including the: 166
(a) Livestock Forage Disaster Program; 167
(b) Livestock Indemnity Program; 168
(c) Emergency Assistance for Livestock, Honeybees, and 169
Farm-Raised Fish; 170
(d) Emergency Conservation Program; 171
(e) Noninsured Crop Disaster Assistance Program; 172
(f) Pasture, Rangeland, Forage Pilot Insurance Program; 173
(g) Annual Forage Pilot Program; 174
(h) Livestock Risk Protection Insurance Plan; 175
(i) Livestock Gross Margin Insurance Plan; 176
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(11) For all tax years beginning on or after January 177
1, 2018, any interest expense paid or accrued in the current 178
taxable year, but not deducted as a result of the limitation 179
imposed under 26 U.S.C. Section 163(j), as amended. For the 180
purposes of this subdivision, an interest expense is 181
considered paid or accrued only in the first taxable year 182
the deduction would have been allowable under 26 U.S.C. 183
Section 163, as amended, if the limitation under 26 U.S.C. 184
Section 163(j), as amended, did not exist; 185
(12) One hundred percent of any retirement benefits 186
received by any taxpayer, including any survivor benefits 187
derived therefrom, as a result of the taxpayer's service in 188
the Armed Forces of the United States, including reserve 189
components and the National Guard of this state, as defined 190
in 32 U.S.C. Sections 101(3) and 109, and any other military 191
force organized under the laws of this state; 192
(13) For all tax years beginning on or after January 193
1, 2022, one hundred percent of any federal, state, or local 194
grant moneys received by the taxpayer if the grant money was 195
disbursed for the express purpose of providing or expanding 196
access to broadband internet to areas of the state deemed to 197
be lacking such access; 198
(14) (a) For all tax years beginning on or after 199
January 1, 2025, one hundred percent of all income reported 200
as a capital gain for federal income tax purposes by an 201
individual subject to tax pursuant to section 143.011; and 202
(b) For all tax years beginning on or after January 203
first of the tax year following the tax year in which the 204
top rate of tax imposed pursuant to section 143.011 is equal 205
to or less than four and one-half percent, one hundred 206
percent of all income reported as a capital gain for federal 207
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income tax purposes by an entity subject to tax pursuant to 208
section 143.071; and 209
(15) For all tax years beginning on or after January 210
1, 2026, the portion of capital gain on the sale or exchange 211
of specie, as that term is defined in section 408.010, that 212
are otherwise included in the taxpayer's federal adjusted 213
gross income. 214
4. There shall be added to or subtracted from the 215
taxpayer's federal adjusted gross income the taxpayer's 216
share of the Missouri fiduciary adjustment provided in 217
section 143.351. 218
5. There shall be added to or subtracted from the 219
taxpayer's federal adjusted gross income the modifications 220
provided in section 143.411. 221
6. In addition to the modifications to a taxpayer's 222
federal adjusted gross income in this section, to calculate 223
Missouri adjusted gross income there shall be subtracted 224
from the taxpayer's federal adjusted gross income any gain 225
recognized pursuant to 26 U.S.C. Section 1033 of the 226
Internal Revenue Code of 1986, as amended, arising from 227
compulsory or involuntary conversion of property as a result 228
of condemnation or the imminence thereof. 229
7. (1) As used in this subsection, "qualified health 230
insurance premium" means the amount paid during the tax year 231
by such taxpayer for any insurance policy primarily 232
providing health care coverage for the taxpayer, the 233
taxpayer's spouse, or the taxpayer's dependents. 234
(2) In addition to the subtractions in subsection 3 of 235
this section, one hundred percent of the amount of qualified 236
health insurance premiums shall be subtracted from the 237
taxpayer's federal adjusted gross income to the extent the 238
amount paid for such premiums is included in federal taxable 239
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income. The taxpayer shall provide the department of 240
revenue with proof of the amount of qualified health 241
insurance premiums paid. 242
8. (1) Beginning January 1, 2014, in addition to the 243
subtractions provided in this section, one hundred percent 244
of the cost incurred by a taxpayer for a home energy audit 245
conducted by an entity certified by the department of 246
natural resources under section 640.153 or the 247
implementation of any energy efficiency recommendations made 248
in such an audit shall be subtracted from the taxpayer's 249
federal adjusted gross income to the extent the amount paid 250
for any such activity is included in federal taxable 251
income. The taxpayer shall provide the department of 252
revenue with a summary of any recommendations made in a 253
qualified home energy audit, the name and certification 254
number of the qualified home energy auditor who conducted 255
the audit, and proof of the amount paid for any activities 256
under this subsection for which a deduction is claimed. The 257
taxpayer shall also provide a copy of the summary of any 258
recommendations made in a qualified home energy audit to the 259
department of natural resources. 260
(2) At no time shall a deduction claimed under this 261
subsection by an individual taxpayer or taxpayers filing 262
combined returns exceed one thousand dollars per year for 263
individual taxpayers or cumulatively exceed two thousand 264
dollars per year for taxpayers filing combined returns. 265
(3) Any deduction claimed under this subsection shall 266
be claimed for the tax year in which the qualified home 267
energy audit was conducted or in which the implementation of 268
the energy efficiency recommendations occurred. If 269
implementation of the energy efficiency recommendations 270
occurred during more than one year, the deduction may be 271
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claimed in more than one year, subject to the limitations 272
provided under subdivision (2) of this subsection. 273
(4) A deduction shall not be claimed for any otherwise 274
eligible activity under this subsection if such activity 275
qualified for and received any rebate or other incentive 276
through a state-sponsored energy program or through an 277
electric corporation, gas corporation, electric cooperative, 278
or municipally owned utility. 279
9. The provisions of subsection 8 of this section 280
shall expire on December 31, 2020. 281
10. (1) As used in this subsection, the following 282
terms mean: 283
(a) "Beginning farmer", a taxpayer who: 284
a. Has filed at least one but not more than ten 285
Internal Revenue Service Schedule F (Form 1040) Profit or 286
Loss From Farming forms since turning eighteen years of age; 287
b. Is approved for a beginning farmer loan through the 288
USDA Farm Service Agency Beginning Farmer direct or 289
guaranteed loan program; 290
c. Has a farming operation that is determined by the 291
department of agriculture to be new production agriculture 292
but is the principal operator of a farm and has substantial 293
farming knowledge; or 294
d. Has been determined by the department of 295
agriculture to be a qualified family member; 296
(b) "Farm owner", an individual who owns farmland and 297
disposes of or relinquishes use of all or some portion of 298
such farmland as follows: 299
a. A sale to a beginning farmer; 300
b. A lease or rental agreement not exceeding ten years 301
with a beginning farmer; or 302
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c. A crop-share arrangement not exceeding ten years 303
with a beginning farmer; 304
(c) "Qualified family member", an individual who is 305
related to a farm owner within the fourth degree by blood, 306
marriage, or adoption and who is purchasing or leasing or is 307
in a crop-share arrangement for land from all or a portion 308
of such farm owner's farming operation. 309
(2) (a) In addition to all other subtractions 310
authorized in this section, a taxpayer who is a farm owner 311
who sells all or a portion of such farmland to a beginning 312
farmer may subtract from such taxpayer's Missouri adjusted 313
gross income an amount to the extent included in federal 314
adjusted gross income as provided in this subdivision. 315
(b) Subject to the limitations in paragraph (c) of 316
this subdivision, the amount that may be subtracted shall be 317
equal to the portion of capital gains received from the sale 318
of such farmland that such taxpayer receives in the tax year 319
for which such taxpayer subtracts such capital gain. 320
(c) A taxpayer may subtract the following amounts and 321
percentages per tax year in total capital gains received 322
from the sale of such farmland under this subdivision: 323
a. For the first two million dollars received, one 324
hundred percent; 325
b. For the next one million dollars received, eighty 326
percent; 327
c. For the next one million dollars received, sixty 328
percent; 329
d. For the next one million dollars received, forty 330
percent; and 331
e. For the next one million dollars received, twenty 332
percent. 333
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(d) The department of revenue shall prepare an annual 334
report reviewing the costs and benefits and containing 335
statistical information regarding the subtraction of capital 336
gains authorized under this subdivision for the previous tax 337
year including, but not limited to, the total amount of all 338
capital gains subtracted and the number of taxpayers 339
subtracting such capital gains. Such report shall be 340
submitted before February first of each year to the 341
committee on agriculture policy of the Missouri house of 342
representatives and the committee on agriculture, food 343
production and outdoor resources of the Missouri senate, or 344
the successor committees. 345
(3) (a) In addition to all other subtractions 346
authorized in this section, a taxpayer who is a farm owner 347
who enters a lease or rental agreement for all or a portion 348
of such farmland with a beginning farmer may subtract from 349
such taxpayer's Missouri adjusted gross income an amount to 350
the extent included in federal adjusted gross income as 351
provided in this subdivision. 352
(b) Subject to the limitation in paragraph (c) of this 353
subdivision, the amount that may be subtracted shall be 354
equal to the portion of cash rent income received from the 355
lease or rental of such farmland that such taxpayer receives 356
in the tax year for which such taxpayer subtracts such 357
income. 358
(c) No taxpayer shall subtract more than twenty-five 359
thousand dollars per tax year in total cash rent income 360
received from the lease or rental of such farmland under 361
this subdivision. 362
(4) (a) In addition to all other subtractions 363
authorized in this section, a taxpayer who is a farm owner 364
who enters a crop-share arrangement on all or a portion of 365
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such farmland with a beginning farmer may subtract from such 366
taxpayer's Missouri adjusted gross income an amount to the 367
extent included in federal adjusted gross income as provided 368
in this subdivision. 369
(b) Subject to the limitation in paragraph (c) of this 370
subdivision, the amount that may be subtracted shall be 371
equal to the portion of income received from the crop-share 372
arrangement on such farmland that such taxpayer receives in 373
the tax year for which such taxpayer subtracts such income. 374
(c) No taxpayer shall subtract more than twenty-five 375
thousand dollars per tax year in total income received from 376
the lease or rental of such farmland under this subdivision. 377
(5) The department of agriculture shall, by rule, 378
establish a process to verify that a taxpayer is a beginning 379
farmer for purposes of this section and shall provide 380
verification to the beginning farmer and farm seller of such 381
farmer's and seller's certification and qualification for 382
the exemption provided in this subsection. 383
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