Legislative ...Franchise tax may be reduced or eliminated

Corporate franchise taxes, paid by Missouri businesses that have more than a given amount of assets, may be reduced or eliminated for some small businesses.

Missouri's House of Representatives' Ways and Means Committee passed House Bill 643, which would reduce the number of businesses who have to pay the corporate franchise tax, said Rep. Mike Schilling, a Springfield Democrat who serves on that committee.

As it now stands, businesses that have $200,000 or more in assets pay a corporate franchise to the state at the rate of one-twentieth of 1 percent. HB 643 proposes that the amount of assets be raised to $1 million, which would exempt a number of small businesses from the obligation, Schilling said.

"I think it's a good idea to reduce the corporate franchise tax. There are some who would like to do away with it altogether. I don't know that is the best option at this point," Schilling said.

A similar provision is circulating in the Senate. Senate Bill 162 not only raises the amount of assets for a business qualifying to pay the tax from $200,000 to $1 million, but also reduces the tax rate to 45 hundredths of 1 percent.

Schilling and Sen. Roseann Bentley think the corporate franchise tax reduction, in some form, has a good chance of passing because the governor has listed it as one of his objectives.

"One of the rationales for eliminating the tax has been that it is an unfair sort of tax, since businesses are already taxed in other areas; therefore it should be reduced or pitched out," Schilling said.

Cary Jones, senior manager at Baird, Kurtz & Dobson, said the corporate franchise tax rate is already low for many small business.

"Placing that base at $1 million basically means that a business who's going to pay anything under $500 doesn't need to file," Jones said.

That would mean the state would have to process only the big claims, he added, for the larger businesses. The state has already reduced the number of businesses who would pay the tax with the advent of the limited liability company designation, which sets up a business like a partnership, so that it is exempt from corporate franchise tax anyway, Jones said.

"It's a much bigger deal for a large company, but for the smaller companies, it could ease the administrative burden on them somewhat," Jones said.

The proposal to reduce the corporate franchise tax was also attached to Senate Bill 318, to which a number of tax cut proposals were also added, Bentley said.

The corporate franchise tax has existed in some form since 1919.

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