Missouri Enacts Legislation to Phase Out Franchise Tax

On April 26, 2011, Missouri Governor Jay Nixon signed Senate Bill 19 (SB 19), enacting legislation that will phase out Missouri’s corporate franchise tax over a five-year period, commencing in 2012. In addition, during the phase-in period, SB 19 caps a corporation’s franchise tax liabilities at the amount of the corporation’s 2010 franchise tax liability. Businesses that began paying the franchise tax during the phase-in period will not owe more than their first-year franchise tax liability in Missouri.

In 2009, the Legislature exempted corporations with less than $10 million in assets from the franchise tax. Under SB 19, and beginning January 1, 2012, the corporate franchise tax rate will be gradually reduced over a five-year period until the tax is completely phased out. Missouri businesses will eventually be relieved of paying the tax imposed on corporate assets (e.g., inventory and buildings). Missouri imposes earned income tax, sales tax, and property tax, and the phase out of this additional tax creates a notable incentive for businesses looking to expand or invest in Missouri. In particular, the legislation comes at a uniquely opportune time, just months after the neighboring State of Illinois raised taxes on corporations.

SB 19 becomes effective August 28, 2011. The newly enacted legislation will immediately begin to benefit businesses across the state by capping franchise tax liabilities at the amount of each corporation’s 2010 tax liability and will provide further financial advantages to businesses as the franchise tax is phased out over a five-year period and eventually eliminated in 2016.

TECHNICAL INFORMATION CONTACT:

Mark L. Nachbar
Principal
Ryan
630.515.0477
mark.nachbar@ryan.com