Section 143.436

Title X TAXATION AND REVENUE

Chapter 143

Effective - 28 Aug 2024, 2 histories   

  143.436.  SALT parity act — definitions — affected business entity tax, certain partnerships and S corporations — nonresident members — reporting — tax credits — election to become affected business entity — rules. — 1.  This section shall be known and may be cited as the "SALT Parity Act".

  2.  For the purposes of this section, the following terms shall mean:

  (1)  "Affected business entity", any partnership or S corporation that elects to be subject to tax pursuant to subsection 11 of this section;

  (2)  "Direct member", a member that holds an interest directly in an affected business entity;

  (3)  "Indirect member", a member that itself holds an interest, through a direct or indirect member that is a partnership or an S corporation, in an affected business entity;

  (4)  "Member":

  (a)  A shareholder of an S corporation;

  (b)  A partner in a general partnership, a limited partnership, or a limited liability partnership; or

  (c)  A member of a limited liability company that is treated as a partnership or S corporation for federal income tax purposes;

  (5)  "Partnership", the same meaning as provided in 26 U.S.C. Section 7701(a)(2), but not including a publicly traded partnership.  The term partnership shall include a limited liability company that is treated as a partnership for federal income tax purposes;

  (6)  "S corporation", a corporation or limited liability company that is treated as an S corporation for federal income tax purposes;

  (7)  "Tax year", the tax year of a partnership or S corporation for federal income tax purposes.

  3.  (1)  Notwithstanding any provision of law to the contrary, a tax is hereby imposed on each affected business entity that is a partnership and that is doing business in this state.  Such affected business entity shall, at the time that the affected business entity's return is due, pay a tax as determined in this subsection.  The sum of the separately and nonseparately computed income and deduction items, as described in 26 U.S.C. Section 702(a), of the affected business entity, to the extent derived from or connected with sources within this state, as determined pursuant to section 143.455, shall be decreased by the percentage deduction that would be allowable to the owners under section 143.022, and increased or decreased by any modification made pursuant to sections 143.121 and 143.141 that relates to an item of the affected business entity's income, gain, loss, or deduction, to the extent derived from or connected with sources within this state, as determined pursuant to section 143.455.  The resulting amount shall be the partnership's Missouri net income or loss, which, if greater than zero, shall be multiplied by the highest rate of tax used to determine a Missouri income tax liability for an individual pursuant to section 143.011 to arrive at the tax due.  An affected business entity paying the tax pursuant to this subsection shall include with the payment of such taxes each report provided to a member pursuant to subsection 7 of this section.

  (2)  If a Missouri net loss is calculated pursuant to subdivision (1) of this subsection, such net loss may be carried forward to succeeding tax years for which the affected business entity elects to be subject to tax pursuant to subsection 11 of this section until fully used.

  4.  (1)  Notwithstanding any provision of law to the contrary, a tax is hereby imposed on each affected business entity that is an S corporation and that is doing business in this state.  Such affected business entity shall, at the time that the affected business entity's tax return is due, pay a tax as determined in this subsection.  The sum of the separately and nonseparately computed income and deduction items, as described in 26 U.S.C. Section 1366, of the affected business entity, to the extent derived from or connected with sources within this state, as determined pursuant to section 143.455, shall be decreased by the percentage deduction that would be allowable to the owners under section 143.022, and increased or decreased by any modification made pursuant to sections 143.121 and 143.141 that relates to an item of the affected business entity's income, gain, loss, or deduction, to the extent derived from or connected with sources within this state, as determined pursuant to section 143.455.  The resulting amount shall be the S corporation's Missouri net income or loss, which if greater than zero, shall be multiplied by the highest rate of tax used to determine a Missouri income tax liability for an individual pursuant to section 143.011 to arrive at the tax due.  An affected business entity paying the tax pursuant to this subsection shall include with the payment of such taxes each report provided to a member pursuant to subsection 7 of this section.

  (2)  If a Missouri net loss is calculated pursuant to subdivision (1) of this section, such net loss may be carried forward to succeeding tax years for which the affected business entity elects to be subject to tax pursuant to subsection 11 of this section until fully used.

  5.  (1)  If an affected business entity is a direct or indirect member of another affected business entity, the member affected business entity shall, when calculating its Missouri net income or loss pursuant to subsection 3 or 4 of this section, subtract its distributive share of Missouri net income or add its distributive share of Missouri net loss from the affected business entity in which it is a direct or indirect member.

  (2)  Any member of an affected business entity may elect not to have tax imposed under this section with respect to the affected business entity's separately and nonseparately computed items described in subsection 3 or 4 of this section, as the case may be, and otherwise subject to tax under this section, to the extent such items are allocable to that member; however, any such opt-out election made by a nonresident member shall also comply with subdivision (3) of this subsection.  If and to the extent one or more members of the affected business entity make an opt-out election, the affected business entity shall, in computing the tax under this section, subtract the opt-out members' allocable items described in the preceding sentence.  The affected business entity shall, in applying the provisions of this section, take into account the effect of any opt-out election on each opt-out member's share of deductions, credits, and any other relevant items.

  (3)  Any opt-out election by a nonresident member shall be effective only if that member has agreed to:

  (a)  File a return in accordance with the provisions of section 143.181 and to make timely payment of all taxes imposed on the member by this state with respect to income of the affected business entity; and

  (b)  Be subject to personal jurisdiction in this state for purposes of the collection of income taxes, together with related interest and penalties, imposed on the member by this state with respect to the income of the affected business entity.

  (4)  An opt-out election shall be considered timely filed for a tax year, and for all subsequent tax years, if it is filed before or in conjunction with the annual return for such tax year under section 143.511.  If a member of an affected business entity does not timely file an opt-out election for a tax year, that member shall not be precluded from timely filing an opt-out election for subsequent tax years.

  6.  A nonresident individual who is a member shall not be required to file an income tax return pursuant to this chapter for a tax year if, for such tax year, the only source of income derived from or connected with sources within the state for such member, or the member and the member's spouse if a joint federal income tax return is or shall be filed, is from one or more affected business entities and such affected business entity or entities file and pay the tax due under this section.

  7.  Each partnership and S corporation shall report to each of its members, for each tax year, such member's direct pro rata share of the tax imposed pursuant to this section by such partnership or S corporation if it is an affected business entity and its indirect pro rata share of the tax imposed on any affected business entity in which such affected business entity is a direct or indirect member.  For each tax year in which it is subject to a tax under this section, the affected business entity shall file an affected business entity tax return on a date prescribed by the director of revenue.  The payment of any interest, additions to tax, or penalties shall not be considered part of the tax imposed under this section.

  8.  (1)  Each member that is subject to the tax imposed pursuant to section 143.011 or 143.041 shall be entitled to a credit against the tax imposed pursuant to section 143.011 or 143.041.  Such credit shall be in an amount equal to such member's direct and indirect pro rata share of the tax paid pursuant to this section by any affected business entity of which such member is directly or indirectly a member.

  (2)  If the amount of the credit authorized by this subsection exceeds such member's tax liability for the tax imposed pursuant to section 143.011 or 143.041, the excess amount shall not be refunded but may be carried forward to each succeeding tax year until such credit is fully taken.

  9.  (1)  Each member that is subject to the tax imposed pursuant to section 143.011 as a resident or part-year resident of this state shall be entitled to a credit against the tax imposed pursuant to section 143.011 for such member's direct and indirect pro rata share of taxes paid to another state of the United States or to the District of Columbia, on income of any partnership or S corporation of which such person is a member that is derived therefrom, provided the taxes paid to another state of the United States or to the District of Columbia results from a tax that the director of revenue determines is substantially similar to the tax imposed pursuant to this section.  Any such credit shall be calculated in a manner to be prescribed by the director of revenue, provided such calculation is consistent with the provisions of this section, and further provided that the limitations provided in subsection 2 of section 143.081 shall apply to the credit authorized by this subsection.

  (2)  If the amount of the credit authorized by this subsection exceeds such member's tax liability for the tax imposed pursuant to section 143.011, the excess amount shall not be refunded and shall not be carried forward.

  10.  (1)  Each corporation or fiduciary that is subject to the tax imposed pursuant to section 143.061 or 143.071 and that is a member, or, in the case of a fiduciary subject to tax under section 143.061, is the fiduciary of an estate or trust that is a member, shall be entitled to a credit against the tax imposed pursuant to section 143.071.  Such credit shall be in an amount equal to such corporation's, estate's, or trust's direct and indirect pro rata share of the tax paid pursuant to this section by any affected business entity of which such corporation, estate, or trust is directly or indirectly a member.  Such credit shall be applied after all other credits.

  (2)  If the amount of the credit authorized by this subsection exceeds such corporation's or fiduciary's tax liability for the tax imposed pursuant to section 143.061 or 143.071, the excess amount shall not be refunded but may be carried forward to each succeeding tax year until such credit is fully taken.

  11.  A partnership or an S corporation may elect to become an affected business entity that is required to pay the tax pursuant to this section.  A separate election shall be made for each tax year.  Such election shall be made on such form and in such manner as the director of revenue may prescribe by rule.  An election made pursuant to this subsection shall be signed by:

  (1)  Each member of the electing entity who is a member at the time the election is filed;

  (2)  Any officer, manager, or member of the electing entity who is authorized to make the election and who attests to having such authorization under penalty of perjury; or

  (3)  The designated affected business entity representative of the electing entity.

  12.  The provisions of sections 143.425 and 143.601 shall apply to any modifications made to an affected business entity's federal return, and such affected business entity shall pay any resulting underpayment of tax to the extent not already paid pursuant to section 143.425.

  13.  (1)  With respect to an action required or permitted to be taken by an affected business entity pursuant to this section, a proceeding under section 143.631 for reconsideration by the director of revenue, an appeal to the administrative hearing commission, or a review by the judiciary with respect to such action, a partnership or S corporation shall designate an affected business entity representative for the tax year, and such affected business entity representative shall have the sole authority to act on behalf of the affected business entity, and the affected business entity's members shall be bound by those actions.

  (2)  The department of revenue may establish reasonable qualifications and procedures for designating a person to be the affected business entity representative.

  (3)  The affected business entity representative shall be considered an authorized representative of the affected business entity and its members under section 32.057 for the purposes of compliance with this section, or participating in a proceeding described in subdivision (1) of this subsection.

  14.  The provisions of this section shall only apply to tax years ending on or after December 31, 2022.

  15.  The department of revenue may promulgate rules to implement the provisions of this section.  Any rule or portion of a rule, as that term is defined in section 536.010, that is created under the authority delegated in this section shall become effective only if it complies with and is subject to all of the provisions of chapter 536 and, if applicable, section 536.028.  This section and chapter 536 are nonseverable and if any of the powers vested with the general assembly pursuant to chapter 536 to review, to delay the effective date, or to disapprove and annul a rule are subsequently held unconstitutional, then the grant of rulemaking authority and any rule proposed or adopted after August 28, 2022, shall be invalid and void.

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(L. 2022 H.B. 2400, A.L. 2024 H.B. 1912)