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4319S.02C
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SENATE COMMITTEE SUBSTITUTE
FOR
SENATE BILL NO. 1291
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 farmers.
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Section A. Section 143.121, RSMo, is repealed and one new
section enacted in lieu thereof, to be known as section 143.121,
to read as follows:
143.121. 1. The Missouri adjusted gross income of a
resident individual shall be the taxpayer's federal adjusted
gross income subject to the modifications in this section.
2. There shall be added to the taxpayer's federal
adjusted gross income:
(1) The amount of any federal income tax refund
received for a prior year which resulted in a Missouri
income tax benefit. The amount added pursuant to this
subdivision shall not include any amount of a federal income
tax refund attributable to a tax credit reducing a
taxpayer's federal tax liability pursuant to Public Law 116-
136 or 116-260, enacted by the 116th United States Congress,
for the tax year beginning on or after January 1, 2020, and
ending on or before December 31, 2020, and deducted from
Missouri adjusted gross income pursuant to section 143.171.
The amount added under this subdivision shall also not
include any amount of a federal income tax refund
attributable to a tax credit reducing a taxpayer's federal
tax liability under any other federal law that provides
direct economic impact payments to taxpayers to mitigate
financial challenges related to the COVID-19 pandemic, and
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deducted from Missouri adjusted gross income under section
143.171;
(2) Interest on certain governmental obligations
excluded from federal gross income by 26 U.S.C. Section 103
of the Internal Revenue Code, as amended. The previous
sentence shall not apply to interest on obligations of the
state of Missouri or any of its political subdivisions or
authorities and shall not apply to the interest described in
subdivision (1) of subsection 3 of this section. The amount
added pursuant to this subdivision shall be reduced by the
amounts applicable to such interest that would have been
deductible in computing the taxable income of the taxpayer
except only for the application of 26 U.S.C. Section 265 of
the Internal Revenue Code, as amended. The reduction shall
only be made if it is at least five hundred dollars;
(3) The amount of any deduction that is included in
the computation of federal taxable income pursuant to 26
U.S.C. Section 168 of the Internal Revenue Code as amended
by the Job Creation and Worker Assistance Act of 2002 to the
extent the amount deducted relates to property purchased on
or after July 1, 2002, but before July 1, 2003, and to the
extent the amount deducted exceeds the amount that would
have been deductible pursuant to 26 U.S.C. Section 168 of
the Internal Revenue Code of 1986 as in effect on January 1,
2002;
(4) The amount of any deduction that is included in
the computation of federal taxable income for net operating
loss allowed by 26 U.S.C. Section 172 of the Internal
Revenue Code of 1986, as amended, other than the deduction
allowed by 26 U.S.C. Section 172(b)(1)(G) and 26 U.S.C.
Section 172(i) of the Internal Revenue Code of 1986, as
amended, for a net operating loss the taxpayer claims in the
tax year in which the net operating loss occurred or carries
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forward for a period of more than twenty years and carries
backward for more than two years. Any amount of net
operating loss taken against federal taxable income but
disallowed for Missouri income tax purposes pursuant to this
subdivision after June 18, 2002, may be carried forward and
taken against any income on the Missouri income tax return
for a period of not more than twenty years from the year of
the initial loss; and
(5) For nonresident individuals in all taxable years
ending on or after December 31, 2006, the amount of any
property taxes paid to another state or a political
subdivision of another state for which a deduction was
allowed on such nonresident's federal return in the taxable
year unless such state, political subdivision of a state, or
the District of Columbia allows a subtraction from income
for property taxes paid to this state for purposes of
calculating income for the income tax for such state,
political subdivision of a state, or the District of
Columbia;
(6) For all tax years beginning on or after January 1,
2018, any interest expense paid or accrued in a previous
taxable year, but allowed as a deduction under 26 U.S.C.
Section 163, as amended, in the current taxable year by
reason of the carryforward of disallowed business interest
provisions of 26 U.S.C. Section 163(j), as amended. For the
purposes of this subdivision, an interest expense is
considered paid or accrued only in the first taxable year
the deduction would have been allowable under 26 U.S.C.
Section 163, as amended, if the limitation under 26 U.S.C.
Section 163(j), as amended, did not exist.
3. There shall be subtracted from the taxpayer's
federal adjusted gross income the following amounts to the
extent included in federal adjusted gross income:
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(1) Interest received on deposits held at a federal
reserve bank or interest or dividends on obligations of the
United States and its territories and possessions or of any
authority, commission or instrumentality of the United
States to the extent exempt from Missouri income taxes
pursuant to the laws of the United States. The amount
subtracted pursuant to this subdivision shall be reduced by
any interest on indebtedness incurred to carry the described
obligations or securities and by any expenses incurred in
the production of interest or dividend income described in
this subdivision. The reduction in the previous sentence
shall only apply to the extent that such expenses including
amortizable bond premiums are deducted in determining the
taxpayer's federal adjusted gross income or included in the
taxpayer's Missouri itemized deduction. The reduction shall
only be made if the expenses total at least five hundred
dollars;
(2) The portion of any gain, from the sale or other
disposition of property having a higher adjusted basis to
the taxpayer for Missouri income tax purposes than for
federal income tax purposes on December 31, 1972, that does
not exceed such difference in basis. If a gain is
considered a long-term capital gain for federal income tax
purposes, the modification shall be limited to one-half of
such portion of the gain;
(3) The amount necessary to prevent the taxation
pursuant to this chapter of any annuity or other amount of
income or gain which was properly included in income or gain
and was taxed pursuant to the laws of Missouri for a taxable
year prior to January 1, 1973, to the taxpayer, or to a
decedent by reason of whose death the taxpayer acquired the
right to receive the income or gain, or to a trust or estate
from which the taxpayer received the income or gain;
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(4) Accumulation distributions received by a taxpayer
as a beneficiary of a trust to the extent that the same are
included in federal adjusted gross income;
(5) The amount of any state income tax refund for a
prior year which was included in the federal adjusted gross
income;
(6) The portion of capital gain specified in section
135.357 that would otherwise be included in federal adjusted
gross income;
(7) The amount that would have been deducted in the
computation of federal taxable income pursuant to 26 U.S.C.
Section 168 of the Internal Revenue Code as in effect on
January 1, 2002, to the extent that amount relates to
property purchased on or after July 1, 2002, but before July
1, 2003, and to the extent that amount exceeds the amount
actually deducted pursuant to 26 U.S.C. Section 168 of the
Internal Revenue Code as amended by the Job Creation and
Worker Assistance Act of 2002;
(8) For all tax years beginning on or after January 1,
2005, the amount of any income received for military service
while the taxpayer serves in a combat zone which is included
in federal adjusted gross income and not otherwise excluded
therefrom. As used in this section, "combat zone" means any
area which the President of the United States by Executive
Order designates as an area in which Armed Forces of the
United States are or have engaged in combat. Service is
performed in a combat zone only if performed on or after the
date designated by the President by Executive Order as the
date of the commencing of combat activities in such zone,
and on or before the date designated by the President by
Executive Order as the date of the termination of combatant
activities in such zone;
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(9) For all tax years ending on or after July 1, 2002,
with respect to qualified property that is sold or otherwise
disposed of during a taxable year by a taxpayer and for
which an additional modification was made under subdivision
(3) of subsection 2 of this section, the amount by which
additional modification made under subdivision (3) of
subsection 2 of this section on qualified property has not
been recovered through the additional subtractions provided
in subdivision (7) of this subsection;
(10) For all tax years beginning on or after January
1, 2014, the amount of any income received as payment from
any program which provides compensation to agricultural
producers who have suffered a loss as the result of a
disaster or emergency, including the:
(a) Livestock Forage Disaster Program;
(b) Livestock Indemnity Program;
(c) Emergency Assistance for Livestock, Honeybees, and
Farm-Raised Fish;
(d) Emergency Conservation Program;
(e) Noninsured Crop Disaster Assistance Program;
(f) Pasture, Rangeland, Forage Pilot Insurance Program;
(g) Annual Forage Pilot Program;
(h) Livestock Risk Protection Insurance Plan;
(i) Livestock Gross Margin Insurance Plan;
(11) For all tax years beginning on or after January
1, 2018, any interest expense paid or accrued in the current
taxable year, but not deducted as a result of the limitation
imposed under 26 U.S.C. Section 163(j), as amended. For the
purposes of this subdivision, an interest expense is
considered paid or accrued only in the first taxable year
the deduction would have been allowable under 26 U.S.C.
Section 163, as amended, if the limitation under 26 U.S.C.
Section 163(j), as amended, did not exist;
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(12) One hundred percent of any retirement benefits
received by any taxpayer as a result of the taxpayer's
service in the Armed Forces of the United States, including
reserve components and the National Guard of this state, as
defined in 32 U.S.C. Sections 101(3) and 109, and any other
military force organized under the laws of this state;
(13) For all tax years beginning on or after January
1, 2022, one hundred percent of any federal, state, or local
grant moneys received by the taxpayer if the grant money was
disbursed for the express purpose of providing or expanding
access to broadband internet to areas of the state deemed to
be lacking such access;
(14) (a) For all tax years beginning on or after
January 1, 2025, one hundred percent of all income reported
as a capital gain for federal income tax purposes by an
individual subject to tax pursuant to section 143.011; and
(b) For all tax years beginning on or after January
first of the tax year following the tax year in which the
top rate of tax imposed pursuant to section 143.011 is equal
to or less than four and one-half percent, one hundred
percent of all income reported as a capital gain for federal
income tax purposes by an entity subject to tax pursuant to
section 143.071; and
(15) For all tax years beginning on or after January
1, 2026, the portion of capital gain on the sale or exchange
of specie, as that term is defined in section 408.010, that
are otherwise included in the taxpayer's federal adjusted
gross income.
4. There shall be added to or subtracted from the
taxpayer's federal adjusted gross income the taxpayer's
share of the Missouri fiduciary adjustment provided in
section 143.351.
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5. There shall be added to or subtracted from the
taxpayer's federal adjusted gross income the modifications
provided in section 143.411.
6. In addition to the modifications to a taxpayer's
federal adjusted gross income in this section, to calculate
Missouri adjusted gross income there shall be subtracted
from the taxpayer's federal adjusted gross income any gain
recognized pursuant to 26 U.S.C. Section 1033 of the
Internal Revenue Code of 1986, as amended, arising from
compulsory or involuntary conversion of property as a result
of condemnation or the imminence thereof.
7. (1) As used in this subsection, "qualified health
insurance premium" means the amount paid during the tax year
by such taxpayer for any insurance policy primarily
providing health care coverage for the taxpayer, the
taxpayer's spouse, or the taxpayer's dependents.
(2) In addition to the subtractions in subsection 3 of
this section, one hundred percent of the amount of qualified
health insurance premiums shall be subtracted from the
taxpayer's federal adjusted gross income to the extent the
amount paid for such premiums is included in federal taxable
income. The taxpayer shall provide the department of
revenue with proof of the amount of qualified health
insurance premiums paid.
8. (1) Beginning January 1, 2014, in addition to the
subtractions provided in this section, one hundred percent
of the cost incurred by a taxpayer for a home energy audit
conducted by an entity certified by the department of
natural resources under section 640.153 or the
implementation of any energy efficiency recommendations made
in such an audit shall be subtracted from the taxpayer's
federal adjusted gross income to the extent the amount paid
for any such activity is included in federal taxable
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income. The taxpayer shall provide the department of
revenue with a summary of any recommendations made in a
qualified home energy audit, the name and certification
number of the qualified home energy auditor who conducted
the audit, and proof of the amount paid for any activities
under this subsection for which a deduction is claimed. The
taxpayer shall also provide a copy of the summary of any
recommendations made in a qualified home energy audit to the
department of natural resources.
(2) At no time shall a deduction claimed under this
subsection by an individual taxpayer or taxpayers filing
combined returns exceed one thousand dollars per year for
individual taxpayers or cumulatively exceed two thousand
dollars per year for taxpayers filing combined returns.
(3) Any deduction claimed under this subsection shall
be claimed for the tax year in which the qualified home
energy audit was conducted or in which the implementation of
the energy efficiency recommendations occurred. If
implementation of the energy efficiency recommendations
occurred during more than one year, the deduction may be
claimed in more than one year, subject to the limitations
provided under subdivision (2) of this subsection.
(4) A deduction shall not be claimed for any otherwise
eligible activity under this subsection if such activity
qualified for and received any rebate or other incentive
through a state-sponsored energy program or through an
electric corporation, gas corporation, electric cooperative,
or municipally owned utility.
9. The provisions of subsection 8 of this section
shall expire on December 31, 2020.
10. (1) As used in this subsection, the following
terms mean:
(a) "Beginning farmer", a taxpayer who:
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a. Has filed at least one but not more than ten
Internal Revenue Service Schedule F (Form 1040) Profit or
Loss From Farming forms since turning eighteen years of age;
b. Is approved for a beginning farmer loan through the
USDA Farm Service Agency Beginning Farmer direct or
guaranteed loan program;
c. Has a farming operation that is determined by the
department of agriculture to be new production agriculture
but is the principal operator of a farm and has substantial
farming knowledge; or
d. Has been determined by the department of
agriculture to be a qualified family member;
(b) "Farm owner", [an individual] a taxpayer who owns
farmland and disposes of or relinquishes use of all or some
portion of such farmland as follows:
a. A sale to a beginning farmer;
b. A lease or rental agreement not exceeding ten years
with a beginning farmer; or
c. A crop-share arrangement not exceeding ten years
with a beginning farmer;
(c) "Qualified family member", an individual who is
related to a farm owner within the fourth degree by blood,
marriage, or adoption and who is purchasing or leasing or is
in a crop-share arrangement for land from all or a portion
of such farm owner's farming operation;
(d) "Taxpayer", any individual, trust, firm, partner
in a firm, corporation, partnership, shareholder in an S
corporation, or member of a limited liability company
subject to the income tax imposed under this chapter,
excluding withholding tax imposed under sections 143.191 to
143.265.
(2) (a) In addition to all other subtractions
authorized in this section, a taxpayer who is a farm owner
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who sells all or a portion of such farmland to a beginning
farmer may subtract from such taxpayer's Missouri adjusted
gross income an amount to the extent included in federal
adjusted gross income as provided in this subdivision.
(b) Subject to the limitations in paragraph (c) of
this subdivision, the amount that may be subtracted shall be
equal to the portion of capital gains received from the sale
of such farmland that such taxpayer receives in the tax year
for which such taxpayer subtracts such capital gain.
(c) A taxpayer may subtract the following amounts and
percentages per tax year in total capital gains received
from the sale of such farmland under this subdivision:
a. For the first two million dollars received, one
hundred percent;
b. For the next one million dollars received, eighty
percent;
c. For the next one million dollars received, sixty
percent;
d. For the next one million dollars received, forty
percent; and
e. For the next one million dollars received, twenty
percent.
(d) The department of revenue shall prepare an annual
report reviewing the costs and benefits and containing
statistical information regarding the subtraction of capital
gains authorized under this subdivision for the previous tax
year including, but not limited to, the total amount of all
capital gains subtracted and the number of taxpayers
subtracting such capital gains. Such report shall be
submitted before February first of each year to the
committee on agriculture policy of the Missouri house of
representatives and the committee on agriculture, food
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production and outdoor resources of the Missouri senate, or
the successor committees.
(3) (a) In addition to all other subtractions
authorized in this section, a taxpayer who is a farm owner
who enters a lease or rental agreement for all or a portion
of such farmland with a beginning farmer may subtract from
such taxpayer's Missouri adjusted gross income an amount to
the extent included in federal adjusted gross income as
provided in this subdivision.
(b) Subject to the limitation in paragraph (c) of this
subdivision, the amount that may be subtracted shall be
equal to the portion of cash rent income received from the
lease or rental of such farmland that such taxpayer receives
in the tax year for which such taxpayer subtracts such
income.
(c) No taxpayer shall subtract more than twenty-five
thousand dollars per tax year in total cash rent income
received from the lease or rental of such farmland under
this subdivision.
(4) (a) In addition to all other subtractions
authorized in this section, a taxpayer who is a farm owner
who enters a crop-share arrangement on all or a portion of
such farmland with a beginning farmer may subtract from such
taxpayer's Missouri adjusted gross income an amount to the
extent included in federal adjusted gross income as provided
in this subdivision.
(b) Subject to the limitation in paragraph (c) of this
subdivision, the amount that may be subtracted shall be
equal to the portion of income received from the crop-share
arrangement on such farmland that such taxpayer receives in
the tax year for which such taxpayer subtracts such income.
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(c) No taxpayer shall subtract more than twenty-five
thousand dollars per tax year in total income received from
the lease or rental of such farmland under this subdivision.
(5) The department of agriculture shall, by rule,
establish a process to verify that a taxpayer is a beginning
farmer for purposes of this section and shall provide
verification to the beginning farmer and farm seller of such
farmer's and seller's certification and qualification for
the exemption provided in this subsection.