Political subdivision class action bills clear Senate and House Committees

The Senate Ways and Means Committee, chaired by Senator Will Kraus, Thursday advanced two pieces of legislation that would prohibit political subdivisions from participating in class action lawsuits against taxpayers on tax issues. Wednesday, the House Select Committee on Judiciary, chaired by Rep. Robert Cornejo, advanced companion House bills that accomplish the same purpose.

The bills, SB 1003 and SB 1004, both sponsored by Senator Bob Onder, and HB 2242 and HB 2243, sponsored by Rep. Robert Cornejo, are supported by Associated Industries of Missouri. The bills are targeted at political subdivisions that file class action lawsuits over locally imposed taxes, often at the request of contingency fee law firms. In recent years, such suits have involved local gross receipts taxes, which vary widely from one another in tax base, tax rate, and collection procedure based on the locally adopted ordinance or order. One bill addresses Missouri statute and the other changes Missouri Supreme Court rules.

“The fact that the local gross receipts taxes are so different between different adopting cities is reason enough to keep them from all being treated the same in a class action lawsuit,” said Ray McCarty during testimony in support of the bill. “I have looked at these ordinances and the differences between them are apparent. In fact, I was asked at one point in my career to try to provide a consistent framework for such taxes and the ordinances were just too different,” said McCarty. “Without such consistency, ‘commonality,’ one requirement for establishing a class, cannot be met, so these cases should not be granted class action status under current law anyway,” he said.

The bills now advance to the House and Senate floors for further consideration.