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EXPLANATION-Matter enclosed in bold-faced brackets [thus] in this bill is not enacted
and is intended to be omitted in the law.
SECOND REGULAR SESSION
SENATE BILL NO. 1231
103RD GENERAL ASSEMBLY
INTRODUCED BY SENATOR FITZWATER.
4495S.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 research expenses.
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Section A. Section 143.121, RSMo, is repealed and one new 1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
(7) For all tax years beginning on or after January 1, 85
2022, the amount deducted by the taxpayer under 26 U.S.C. 86
Section 174(a)(2)(B), as amended, for the tax year. 87
3. There shall be subtracted from the taxpayer's 88
federal adjusted gross income the following amounts to the 89
extent included in federal adjusted gross income: 90
(1) Interest received on deposits held at a federal 91
reserve bank or interest or dividends on obligations of the 92
United States and its territories and possessions or of any 93
authority, commission or instrumentality of the United 94
States to the extent exempt from Missouri income taxes 95
pursuant to the laws of the United States. The amount 96
subtracted pursuant to this subdivision shall be reduced by 97
any interest on indebtedness incurred to carry the described 98
obligations or securities and by any expenses incurred in 99
the production of interest or dividend income described in 100
this subdivision. The reduction in the previous sentence 101
shall only apply to the extent that such expenses including 102
amortizable bond premiums are deducted in determining the 103
taxpayer's federal adjusted gross income or included in the 104
taxpayer's Missouri itemized deduction. The reduction shall 105
only be made if the expenses total at least five hundred 106
dollars; 107
(2) The portion of any gain, from the sale or other 108
disposition of property having a higher adjusted basis to 109
the taxpayer for Missouri income tax purposes than for 110
federal income tax purposes on December 31, 1972, that does 111
not exceed such difference in basis. If a gain is 112
considered a long-term capital gain for federal income tax 113
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purposes, the modification shall be limited to one-half of 114
such portion of the gain; 115
(3) The amount necessary to prevent the taxation 116
pursuant to this chapter of any annuity or other amount of 117
income or gain which was properly included in income or gain 118
and was taxed pursuant to the laws of Missouri for a taxable 119
year prior to January 1, 1973, to the taxpayer, or to a 120
decedent by reason of whose death the taxpayer acquired the 121
right to receive the income or gain, or to a trust or estate 122
from which the taxpayer received the income or gain; 123
(4) Accumulation distributions received by a taxpayer 124
as a beneficiary of a trust to the extent that the same are 125
included in federal adjusted gross income; 126
(5) The amount of any state income tax refund for a 127
prior year which was included in the federal adjusted gross 128
income; 129
(6) The portion of capital gain specified in section 130
135.357 that would otherwise be included in federal adjusted 131
gross income; 132
(7) The amount that would have been deducted in the 133
computation of federal taxable income pursuant to 26 U.S.C. 134
Section 168 of the Internal Revenue Code as in effect on 135
January 1, 2002, to the extent that amount relates to 136
property purchased on or after July 1, 2002, but before July 137
1, 2003, and to the extent that amount exceeds the amount 138
actually deducted pursuant to 26 U.S.C. Section 168 of the 139
Internal Revenue Code as amended by the Job Creation and 140
Worker Assistance Act of 2002; 141
(8) For all tax years beginning on or after January 1, 142
2005, the amount of any income received for military service 143
while the taxpayer serves in a combat zone which is included 144
in federal adjusted gross income and not otherwise excluded 145
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therefrom. As used in this section, "combat zone" means any 146
area which the President of the United States by Executive 147
Order designates as an area in which Armed Forces of the 148
United States are or have engaged in combat. Service is 149
performed in a combat zone only if performed on or after the 150
date designated by the President by Executive Order as the 151
date of the commencing of combat activities in such zone, 152
and on or before the date designated by the President by 153
Executive Order as the date of the termination of combatant 154
activities in such zone; 155
(9) For all tax years ending on or after July 1, 2002, 156
with respect to qualified property that is sold or otherwise 157
disposed of during a taxable year by a taxpayer and for 158
which an additional modification was made under subdivision 159
(3) of subsection 2 of this section, the amount by which 160
additional modification made under subdivision (3) of 161
subsection 2 of this section on qualified property has not 162
been recovered through the additional subtractions provided 163
in subdivision (7) of this subsection; 164
(10) For all tax years beginning on or after January 165
1, 2014, the amount of any income received as payment from 166
any program which provides compensation to agricultural 167
producers who have suffered a loss as the result of a 168
disaster or emergency, including the: 169
(a) Livestock Forage Disaster Program; 170
(b) Livestock Indemnity Program; 171
(c) Emergency Assistance for Livestock, Honeybees, and 172
Farm-Raised Fish; 173
(d) Emergency Conservation Program; 174
(e) Noninsured Crop Disaster Assistance Program; 175
(f) Pasture, Rangeland, Forage Pilot Insurance Program; 176
(g) Annual Forage Pilot Program; 177
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(h) Livestock Risk Protection Insurance Plan; 178
(i) Livestock Gross Margin Insurance Plan; 179
(11) For all tax years beginning on or after January 180
1, 2018, any interest expense paid or accrued in the current 181
taxable year, but not deducted as a result of the limitation 182
imposed under 26 U.S.C. Section 163(j), as amended. For the 183
purposes of this subdivision, an interest expense is 184
considered paid or accrued only in the first taxable year 185
the deduction would have been allowable under 26 U.S.C. 186
Section 163, as amended, if the limitation under 26 U.S.C. 187
Section 163(j), as amended, did not exist; 188
(12) One hundred percent of any retirement benefits 189
received by any taxpayer as a result of the taxpayer's 190
service in the Armed Forces of the United States, including 191
reserve components and the National Guard of this state, as 192
defined in 32 U.S.C. Sections 101(3) and 109, and any other 193
military force organized under the laws of this state; 194
(13) For all tax years beginning on or after January 195
1, 2022, one hundred percent of any federal, state, or local 196
grant moneys received by the taxpayer if the grant money was 197
disbursed for the express purpose of providing or expanding 198
access to broadband internet to areas of the state deemed to 199
be lacking such access; 200
(14) For all tax years beginning on or after January 201
1, 2022, the amount of specified research or experimental 202
expenditures that are both required to be charged to capital 203
account and actually are charged to capital account as 204
required by 26 U.S.C. Section 174(a)(2)(A), as amended, for 205
the tax year, after any reduction to that amount under 26 206
U.S.C. Section 280C(c), as amended; 207
(15) (a) For all tax years beginning on or after 208
January 1, 2025, one hundred percent of all income reported 209
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as a capital gain for federal income tax purposes by an 210
individual subject to tax pursuant to section 143.011; and 211
(b) For all tax years beginning on or after January 212
first of the tax year following the tax year in which the 213
top rate of tax imposed pursuant to section 143.011 is equal 214
to or less than four and one-half percent, one hundred 215
percent of all income reported as a capital gain for federal 216
income tax purposes by an entity subject to tax pursuant to 217
section 143.071; and 218
[(15)] (16) For all tax years beginning on or after 219
January 1, 2026, the portion of capital gain on the sale or 220
exchange of specie, as that term is defined in section 221
408.010, that are otherwise included in the taxpayer's 222
federal adjusted gross income. 223
4. There shall be added to or subtracted from the 224
taxpayer's federal adjusted gross income the taxpayer's 225
share of the Missouri fiduciary adjustment provided in 226
section 143.351. 227
5. There shall be added to or subtracted from the 228
taxpayer's federal adjusted gross income the modifications 229
provided in section 143.411. 230
6. In addition to the modifications to a taxpayer's 231
federal adjusted gross income in this section, to calculate 232
Missouri adjusted gross income there shall be subtracted 233
from the taxpayer's federal adjusted gross income any gain 234
recognized pursuant to 26 U.S.C. Section 1033 of the 235
Internal Revenue Code of 1986, as amended, arising from 236
compulsory or involuntary conversion of property as a result 237
of condemnation or the imminence thereof. 238
7. (1) As used in this subsection, "qualified health 239
insurance premium" means the amount paid during the tax year 240
by such taxpayer for any insurance policy primarily 241
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providing health care coverage for the taxpayer, the 242
taxpayer's spouse, or the taxpayer's dependents. 243
(2) In addition to the subtractions in subsection 3 of 244
this section, one hundred percent of the amount of qualified 245
health insurance premiums shall be subtracted from the 246
taxpayer's federal adjusted gross income to the extent the 247
amount paid for such premiums is included in federal taxable 248
income. The taxpayer shall provide the department of 249
revenue with proof of the amount of qualified health 250
insurance premiums paid. 251
8. (1) Beginning January 1, 2014, in addition to the 252
subtractions provided in this section, one hundred percent 253
of the cost incurred by a taxpayer for a home energy audit 254
conducted by an entity certified by the department of 255
natural resources under section 640.153 or the 256
implementation of any energy efficiency recommendations made 257
in such an audit shall be subtracted from the taxpayer's 258
federal adjusted gross income to the extent the amount paid 259
for any such activity is included in federal taxable 260
income. The taxpayer shall provide the department of 261
revenue with a summary of any recommendations made in a 262
qualified home energy audit, the name and certification 263
number of the qualified home energy auditor who conducted 264
the audit, and proof of the amount paid for any activities 265
under this subsection for which a deduction is claimed. The 266
taxpayer shall also provide a copy of the summary of any 267
recommendations made in a qualified home energy audit to the 268
department of natural resources. 269
(2) At no time shall a deduction claimed under this 270
subsection by an individual taxpayer or taxpayers filing 271
combined returns exceed one thousand dollars per year for 272
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individual taxpayers or cumulatively exceed two thousand 273
dollars per year for taxpayers filing combined returns. 274
(3) Any deduction claimed under this subsection shall 275
be claimed for the tax year in which the qualified home 276
energy audit was conducted or in which the implementation of 277
the energy efficiency recommendations occurred. If 278
implementation of the energy efficiency recommendations 279
occurred during more than one year, the deduction may be 280
claimed in more than one year, subject to the limitations 281
provided under subdivision (2) of this subsection. 282
(4) A deduction shall not be claimed for any otherwise 283
eligible activity under this subsection if such activity 284
qualified for and received any rebate or other incentive 285
through a state-sponsored energy program or through an 286
electric corporation, gas corporation, electric cooperative, 287
or municipally owned utility. 288
9. The provisions of subsection 8 of this section 289
shall expire on December 31, 2020. 290
10. (1) As used in this subsection, the following 291
terms mean: 292
(a) "Beginning farmer", a taxpayer who: 293
a. Has filed at least one but not more than ten 294
Internal Revenue Service Schedule F (Form 1040) Profit or 295
Loss From Farming forms since turning eighteen years of age; 296
b. Is approved for a beginning farmer loan through the 297
USDA Farm Service Agency Beginning Farmer direct or 298
guaranteed loan program; 299
c. Has a farming operation that is determined by the 300
department of agriculture to be new production agriculture 301
but is the principal operator of a farm and has substantial 302
farming knowledge; or 303
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d. Has been determined by the department of 304
agriculture to be a qualified family member; 305
(b) "Farm owner", an individual who owns farmland and 306
disposes of or relinquishes use of all or some portion of 307
such farmland as follows: 308
a. A sale to a beginning farmer; 309
b. A lease or rental agreement not exceeding ten years 310
with a beginning farmer; or 311
c. A crop-share arrangement not exceeding ten years 312
with a beginning farmer; 313
(c) "Qualified family member", an individual who is 314
related to a farm owner within the fourth degree by blood, 315
marriage, or adoption and who is purchasing or leasing or is 316
in a crop-share arrangement for land from all or a portion 317
of such farm owner's farming operation. 318
(2) (a) In addition to all other subtractions 319
authorized in this section, a taxpayer who is a farm owner 320
who sells all or a portion of such farmland to a beginning 321
farmer may subtract from such taxpayer's Missouri adjusted 322
gross income an amount to the extent included in federal 323
adjusted gross income as provided in this subdivision. 324
(b) Subject to the limitations in paragraph (c) of 325
this subdivision, the amount that may be subtracted shall be 326
equal to the portion of capital gains received from the sale 327
of such farmland that such taxpayer receives in the tax year 328
for which such taxpayer subtracts such capital gain. 329
(c) A taxpayer may subtract the following amounts and 330
percentages per tax year in total capital gains received 331
from the sale of such farmland under this subdivision: 332
a. For the first two million dollars received, one 333
hundred percent; 334
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b. For the next one million dollars received, eighty 335
percent; 336
c. For the next one million dollars received, sixty 337
percent; 338
d. For the next one million dollars received, forty 339
percent; and 340
e. For the next one million dollars received, twenty 341
percent. 342
(d) The department of revenue shall prepare an annual 343
report reviewing the costs and benefits and containing 344
statistical information regarding the subtraction of capital 345
gains authorized under this subdivision for the previous tax 346
year including, but not limited to, the total amount of all 347
capital gains subtracted and the number of taxpayers 348
subtracting such capital gains. Such report shall be 349
submitted before February first of each year to the 350
committee on agriculture policy of the Missouri house of 351
representatives and the committee on agriculture, food 352
production and outdoor resources of the Missouri senate, or 353
the successor committees. 354
(3) (a) In addition to all other subtractions 355
authorized in this section, a taxpayer who is a farm owner 356
who enters a lease or rental agreement for all or a portion 357
of such farmland with a beginning farmer may subtract from 358
such taxpayer's Missouri adjusted gross income an amount to 359
the extent included in federal adjusted gross income as 360
provided in this subdivision. 361
(b) Subject to the limitation in paragraph (c) of this 362
subdivision, the amount that may be subtracted shall be 363
equal to the portion of cash rent income received from the 364
lease or rental of such farmland that such taxpayer receives 365
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in the tax year for which such taxpayer subtracts such 366
income. 367
(c) No taxpayer shall subtract more than twenty-five 368
thousand dollars per tax year in total cash rent income 369
received from the lease or rental of such farmland under 370
this subdivision. 371
(4) (a) In addition to all other subtractions 372
authorized in this section, a taxpayer who is a farm owner 373
who enters a crop-share arrangement on all or a portion of 374
such farmland with a beginning farmer may subtract from such 375
taxpayer's Missouri adjusted gross income an amount to the 376
extent included in federal adjusted gross income as provided 377
in this subdivision. 378
(b) Subject to the limitation in paragraph (c) of this 379
subdivision, the amount that may be subtracted shall be 380
equal to the portion of income received from the crop-share 381
arrangement on such farmland that such taxpayer receives in 382
the tax year for which such taxpayer subtracts such income. 383
(c) No taxpayer shall subtract more than twenty-five 384
thousand dollars per tax year in total income received from 385
the lease or rental of such farmland under this subdivision. 386
(5) The department of agriculture shall, by rule, 387
establish a process to verify that a taxpayer is a beginning 388
farmer for purposes of this section and shall provide 389
verification to the beginning farmer and farm seller of such 390
farmer's and seller's certification and qualification for 391
the exemption provided in this subsection. 392
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