Groups back omnibus business legislation
State Sen. Denny Hoskins' SB 807 would allow authorized medical marijuana businesses a tax deduction covering any expenses that would be eligible for a federal income tax deduction for other businesses but are not due to cannabis' status as a controlled substance under federal law.
Tracy Keen, a lobbyist on behalf of the Missouri Medical Cannabis Trade Association (MoCannTrade), testified Wednesday in support of the bill during a hearing before the House Special Committee on Government Oversight, touting it as a level playing field for an industry generating around $1 million in sales a day in Missouri, according to the group.
"These businesses have just started operating here in Missouri; they pay sales tax and income taxes and property taxes on their businesses. This is new general revenue that is coming to the state, and what we're asking is that you take a small portion of that revenue to give them fairness in the way we tax them," she said. "While there may not be a large fiscal impact now, as they do start earning money and start earning profits, that fiscal impact will grow."
While that was the breadth of the original proposal, several provisions were added before it was passed on to the House as the legislative session approached its final weeks.
One addition would allow those who begin operating their business at or after the beginning of 2023 to reduce their federal adjusted gross income by an additional 20 percent for the first three years of the business. Those businesses would also see a reduced corporate income rate of 3 percent for its first $100,000 of income for three years, with the remainder of its income to be taxed at the standard 4 percent rate.
Another section covers S corporations, which are businesses that elect to be taxed under a different IRS code. While they do not pay income tax, their gains and losses are divided among shareholders, who must report them on their own income tax returns.
Under Hoskins' bill, those shareholders would be able to claim a tax credit equal to the amount of income tax imposed in Missouri on income earned in other states.
"Normally in Missouri, you're allowed to deduct any state income taxes that you pay to another state; however, there are some states that are no-income tax states, such as Texas and Tennessee," Hoskins said. "What this says is if you make money in a no-tax state, you're able to deduct the amount of tax that you would have normally paid in Missouri for the amount of business that you had in that other state."
The bill would also alter tax laws for S corporations and other pass-through entities, which see their income taxed as individual personal income rather than as business income. These companies could elect to pay the tax and receive a tax credit to offset the cost.
The state's Department of Economic Development would also be home to an Office of Entrepreneurship tasked with promoting initiatives and policies to grow the state's entrepreneurial growth if the bill became law.
"During the pandemic, there were a lot of executive orders that were issued that really relaxed or took away many of the things that have, I think, hindered business growth in this state throughout the years," Hoskins said. "This report would say 'hey, these are things we think the Legislature should take a look at in order to make Missouri more business friendly state and to help entrepreneurs actually be able to create a business easier.'"
Finally, the bill would include the Right-To-Start Act requiring the commissioner of Administration to file reports on contracts and resources for Missouri businesses that have been in operation for less than three years.
A plethora of other business groups testified in favor of different portions of the bill. Ross Lien, with the Missouri Chamber of Commerce and Industry, touted the proposed Office of Entrepreneurship, while Chuck Pierce, with the Missouri Society of CPAs and Associated Industries of Missouri, said the proposed taxation changes would compensate for a cap on the amount of state and federal taxes companies can put on their returns that passed on the federal level several years ago.
"It really put a squeeze on pass-through entities because they were paying the bulk of those taxes," he said. "This would be revenue neutral to this state. It is not revenue neutral to the federal government. But it's an opportunity for you to restore to Missouri business owners and taxpayers something that the feds took away several years ago."
Other witnesses representing NFIB Missouri and Allegis, Redwood, Maxim Public Affairs also voiced their support for the legislative package.
No one testified in opposition to the bill. The committee did not take executive action on the legislation Wednesday.