Missouri Senate Passes Corporate Rate Cut, Single Sales Factor Apportionment

The Missouri Senate has approved a bill that would lower the corporate tax rate beginning in 2019. The bill also requires corporations to use a single-sales factor apportionment method beginning in 2019.

Corporate Tax Rate

The tax rate would decrease from 6.25% to 3.5% for tax years beginning after 2018.

Apportionment

Also, all corporations would have to calculate their Missouri taxable income using a single-sales factor apportionment method for tax years beginning after 2018. Under the single-sales factor method, Missouri taxable income is based exclusively on the percentage of sales made in Missouri, not on the location of property or employees. The bill would eliminate the option to use the three-factor (property, payroll, sales) apportionment method available under the Multistate Tax Compact.

Other Changes

Other changes proposed in the bill include:

– removing the requirement that an affiliated group have 50% or more of its income from Missouri sources in order to file a Missouri consolidated return;

– eliminating all transactions between affiliated group members from the Missouri consolidated return;

– providing a five-year expiration period for elections to use separate accounting to show income attributable to Missouri; and

– when an income bracket is eliminated from the personal income tax table, applying the top remaining tax rate to all income in excess of the second highest remaining income bracket.

The changes in the bill would take effect on August 28, 2018, except as noted.

S.B. 674, as passed by the Missouri Senate on April 12, 2018
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