Missouri Governor Nixon’s recently signed into law, House Bill 45, which modifies the so-called “Big Government Get Off My Back Act.”
The full text of HB 45 can be found by clicking here.
In the area of income taxation, the law creates a new income tax deduction for a “small business” for each full-time job created with an annual salary of at least the county average wage (about $41,000 in St. Louis City, St. Louis County and Jackson County).
To be an eligible “small business,” the business must employ fewer than 50 full and part-time employees. To be an eligible full-time job, the employee must work at least an average of 35 hours per week for a 52-week look-back period.
The business will be allowed either:
- a deduction of $10,000 for each new full-time job created OR
- a deduction of $20,000 for each new full-time job created IF the business offers health insurance and pays at least 50 percent of the premiums
The Missouri Department of Revenue is to establish rules and procedures for claiming this deduction. As of the date of this e-focus, no new rules, procedures or forms have been announced by the Missouri Department of Revenue.
The law is effective August 28, 2011. The income tax deduction will expire December 31, 2014.
As we read the new deduction, for an individual, owner of an S Corporation, or a partner in a partnership, with a top federal marginal tax rate of 35 percent, the benefit is either:
- $390 per eligible new employee OR
- $780 per eligible new employee IF greater than 50 percent of the health care premiums are paid by the eligible business
There is a cost to implement. However, businesses should be aware that specific information will be needed for each new hire. In addition, calculations will need to be made and forms will need to be filed to claim the benefits. Accountants will incur compliance costs to implement the deductions.
In addition, non-resident Missouri owners and lower income tax rate taxpayers will receive reductions in the above benefits due to apportionment and a less than 6 percent Missouri individual tax rate. C Corporations would also be subject to reduction of benefits if they apportion their income to Missouri.
Under U.S. Treasury Department guidelines, we hereby inform you that any tax advice contained in this communication is not intended or written to be used, and cannot be used by you for the purpose of avoiding penalties that may be imposed on you by the Internal Revenue Service, or for the purpose of promoting, marketing or recommending to another party any transaction or matter addressed within this tax advice. Further, RubinBrown LLP imposes no limitation on any recipient of this tax advice on the disclosure of the tax treatment or tax strategies or tax structuring described herein.
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