Special Session Ends: $764 Million Tax Cut and Agriculture Incentives Agreed Upon

October 7, 2022

Governor Parson called the Missouri General Assembly back to Jefferson City for Special Session in mid-September to enact legislation that provides an immediate income-tax cut (reduction from 5.4% to 4.8%); raising the standard income tax deductions; and exempting the first $16k individual or $32k joint filers; and an agriculture incentives package that includes tax credits for retailers that sell ethanol and biodiesel products, meatpackers and beginning farmers.

In late June, Governor Parson (R) vetoed HB 1720 that included several agricultural tax credits due to his concerns with the programs expiring in two years, as he was asking for a six-year sunset.  Also, Governor Parson vetoed HB 2090 that authorized a one-time $500 rebate to individuals making less that $150,000 and $1000 rebate to join filers making less than $300,000.  During the Governor’s press conference to announce his vetoes, he stated his intentions to bring the legislature back into a special session to correct his perceived errors to the bills as passed.  As such, the Governor followed through on his pledge and a special legislative session began in mid-September as the legislature returned for the Constitutionally required legislative veto session.

Tax Cuts: On Thursday, September 29, the Missouri House of Representatives passed Senate Bill 3 & 5 by a vote of 98-32. The House initially had a different plan than the Missouri Senate, however, the abandoned their attempt to cut the state’s corporate income tax rate after Governor Parson signaled his opposition and ultimately accepted the final version that had been drafted and passed by the Missouri Senate.

The Governor issued a modified special session call to align the session with the Senate passed bill.  The agreed upon bill cuts income taxes as follows:

• The bill reduces the top tax rate to 4.95 percent from the current 5.3 percent, effective January 1, 2023.
• If general revenue grows by $175 million or more in the next year the rate will decrease to 4.8 percent
• The bill has three additional 0.1 percent decreases to a ceiling of 4.5 percent if general revenue grows by $200 million adjusted for CPI.

The bill when fully implemented will reduce general revenue by $764 million. The tax cut will take effect in early 2023 and be phased in over the years as the reduction triggers occur.

Agriculture Incentives:  On Tuesday, October 4th, the Senate took up and passed House Bill 3, providing tax credits and other incentives for economic projects in rural areas.  House Bill 3 was sent to the Governor’s desk and the special session ended as both chambers adjourned “sine die”.  HB 3 includes provisions related to land surveys; wood energy tax credit; meat processing facility tax credit; ethanol and biodiesel retailers incentives; urban farming tax credit; rolling stock (freight) tax credit; adds utility vehicles to agriculture sales tax exemption; modifies soybean checkoff program; weight limitations on log trucks; extensions to state MASBDA tax credits; and creates loan programs for specialty agricultural crops and family farm livestock; and regulation of anhydrous ammonia.

On Wednesday, October 5th, Governor Mike Parson held a public ceremony and signed both bills into law.  Emergency clauses on both the Senate and House bills failed to pass in the House, so both bills would take effect 90 days after adjournment of the special session.