All overridden bills will be effective 30 days after the override on October 14, 2016, unless a special effective date is indicated in the bill. HB 2030, for example, applies to tax years 2017 and beyond.
The Missouri Legislature took action to protect taxpayers and provide incentive for converting a company to employee ownership when it overrode Governor Jay Nixon’s veto of two bills during the 2016 Veto Session yesterday.
SB 1025, sponsored by Sen. Will Kraus, exempts instructional classes from sales tax. The Missouri Department of Revenue had used a very broad provision in current statute requiring sales taxes to be collected and remitted on “amounts paid in or to places of amusement, entertainment and recreation” to issue audit assessments to dance studios, yoga classes, martial arts classes and other classes that are conducted within places of amusement. Those same classes may not have been considered taxable if they occurred at a different location.
The DOR’s action sparked widespread taxpayer objection and pointed out inconsistency in the Department’s administration of the sales tax on this issue. Taxpayers testified in hearings they received conflicting decisions from the DOR as to whether they needed to collect taxes on these classes or not, usually resulting in a large tax bill for the operators of these classes. Because they did not know the lessons were taxable, these operators had to pay out of their pockets, rather than collecting and remitting the tax from the students.
Senator Kraus led the charge on this important bill and led the veto override effort. In a statement, Senator Kraus said, “The Governor’s claim Senate Bill 1025 is trying to ‘chip away at an area of law that has consistently been applied by the Missouri Supreme Court and diligently followed by the Department of Revenue’ is simply false. Prior to the Supreme Court making its interpretation in 2008, the tax on instructional classes was not uniformly collected. Since 2008, the law has not been diligently enforced by the DOR. Even worse is the fact that Missouri businesses who offer these instructional classes have only been made aware of the tax through audits performed by the department, and there are many who still do not know if they should be collecting the tax.”
“Instead of imposing burdensome regulations and overreaching into taxpayers’ pockets, our government should be looking to boost job growth and support the small businesses,” added Sen. Kraus. “I do not believe it was ever the intention of the General Assembly to tax these types of classes, just as we do not tax other educational classes. Senate Bill 1025 will correct this egregious revenue-grab while also promoting our economy and improving our communities.
“As a public servant, I cannot watch bureaucracy regulate our economy into the ground. I sponsored Senate Bill 1025 to prevent the DOR from inflicting further damage on Missouri’s business owners and communities. Plain and simple, today’s veto override is a victory for Missouri businesses and our hardworking taxpayers.”
Representative Andrew Koenig handled the bill in the Missouri House. The 29-3 vote in the Senate and 124-31 vote in the House included support from some Democrats.
Also receiving approval in the Veto Session was HB 2030, sponsored by Speaker Pro Tem Denny Hoskins. The bill allows an income tax deduction for half of the capital gains resulting from the sale or exchange of stock to a qualified Missouri employee stock ownership plan (ESOP), provided at the end of the transaction the ESOP owns at least 30% of the outstanding employer securities issued by the Missouri corporation. This bill will encourage business owners that are wanting to sell their businesses to consider selling the business to its employees, rather than a foreign buyer, according to those favoring the bill in debate. The Governor’s veto was overridden with a vote of 119-38 in the House and 26-4 in the Senate.
Another bill sponsored by House Speaker Pro Tem Denny Hoskins, HB 1870, an extension of the “Big Government Get Off My Back Act” that included a waiver from the use of E-Verify for small businesses that find it to be an undue burden, received a majority vote in both chambers, but fell short of the two-thirds majority necessary to override the veto in the Senate. The vote in the House was 113-43 and the vote in the Senate was 18-12.
“Associated Industries of Missouri is pleased the Legislature has enacted these bills over Governor Nixon’s objections,” said Ray McCarty, president of Associated Industries of Missouri. “Taxpayers will be treated more fairly and more Missouri businesses are likely to be sold to employees, rather than buyers that may want to move jobs and investment outside the state.”
AIM was also pleased the legislature overrode Governor Jay Nixon’s veto of HB 1713, a bill sponsored by Rep. Tim Remole and handled in the Senate by Senator Ed Emery.
HB 1713 allows additional representation from agriculture, industry and mining interests on the Clean Water Commission. Currently, agriculture, industry and mining are limited to two representatives in the seven-member body. This bill will change the makeup so that at least two members must represent these interests and no more than four may represent the public. AIM believes this is a good change because the vast majority of the Commission’s work involves regulating agriculture, industry and mining.
“It makes sense because the Commission needs to have greater knowledge in the areas they are regulating,” said McCarty. “Commissions regulating health care professionals and others are represented by people in those fields that have the knowledge and experience to make good decisions. This is no different. The more knowledge and experience Commission members have in the areas they are regulating, the more likely we will see fair and equitable regulation, which is what we all want.”
Unfortunately, the Veto Session was not completely successful. Governor Nixon’s vetoes of two bills that would have made very modest, but important, changes to Missouri’s legal environment were not overridden by the Legislature.
SB 847, sponsored by Senator Ed Emery, would have provided that in the cost recovery phase of a trial, a plaintiff could recover amounts actually paid, either by them or on their behalf (insurance), but would have blocked recovery of amounts that are never paid by anyone. Sound like commonsense? While the bill achieved the necessary two-thirds majority in the Senate, the bill was not taken up in the House because there were insufficient votes to pass the bill, according to our conversations with Representatives. Some Republicans would have voted against this commonsense legislation and nearly all Democrats would have opposed it, leaving us short of the total needed. There were no logical arguments against the bill.
Similarly, SB 591, a bill sponsored by Senator Mike Parson that aimed to ensure witnesses purporting to be “experts” in a field meet the same standard of qualification used in more than 40 other state courts and in federal courts in Missouri, was not overridden in either chamber.
“The failure of both of these bills should draw the attention of the business community as people are evaluating which candidates deserve your support in the upcoming election,” said McCarty. “The influence of plaintiff’s attorneys is the only explanation for the inability of the legislature to pass such minimal, commonsense bills like these without any good logical arguments against them. Business people should ask candidates seeking their support how they would have voted on these issues. We also have the votes recorded from the recent session and you may access every sitting legislator’s voting record with AIM on our website,” said McCarty.