The Missouri General Assembly ended its first special session of 2021 on Wednesday afternoon, June 30, as the House truly agreed and finally passed the Senate’s version of the FRA (Federal Reimbursement Allowance) bill (Senate Bill 1, sponsored by Sen. Dan Hegeman, R-Cosby). The week before when calling for the special session, Governor Mike Parson (R) had threatened to withhold $722 million from the state’s FY22 budget if a solution to the FRA dilemma had not been passed. The FY22 budget kicks in on July 1.
Passage of the bill was important. In FY20, the FRA tax brought in $2.3 billion to support Missouri’s $10.8 billion Medicaid program, according to reports. In 2020, Medicaid cost the state $1.9 billion in general revenue.
The FRA is a tax placed on Missouri health care providers, including hospitals, nursing homes, pharmacies, and ambulances. It represents an allowance for reimbursement of the costs associated with certain Medicaid expenses, and is a primary funding stream for the state’s Medicaid program. For three decades the General Assembly had regularly passed the FRA tax extension with little debate by Republicans or Democrats.
However, this year the Senate’s conservatives, women, moderates, progressives, Republicans, and Democrats became entangled during the regular session in May and during the special session over issues affecting Missouri Right to Life, Planned Parenthood, and whether the state’s Medicaid funds should pay or not pay for abortions and certain contraceptives.
After hours of floor debate and closed-door negotiations, state senators passed the FRA bill on a 28-5 vote at 12:30 a.m. Saturday, June 26. The bill extends the tax for three years until Sept. 30, 2024, restates Missouri’s existing ban on paying for abortions with public funds, and limits when such funds will pay for some contraceptive drugs and devices.
The House held technical sessions on Monday and Tuesday, and the House Budget Committee heard testimony Tuesday and voted Do Pass by a vote of 27-2 on SB 1 during a hearing. Later Tuesday, the House Rules – Legislative Oversight Committee voted Do Pass on the bill by a vote of 9-0.
For a little more than two hours on Wednesday morning, the House debated House Bill 2 (Schroer, R-O’Fallon), legislation aimed at defunding Planned Parenthood in Missouri. Debate continued until shortly after noon when the House perfected HB 2 by a vote of 109-46. The House recessed for an hour while the Fiscal Review Committee assessed the bill. Then at 1:15 p.m. the House third read and passed HB 2 by a vote of 109-45, and sent the bill to the Senate.
Minutes later Senate Bill 1, the FRA bill, was taken up. Without debate, the bill was truly agreed to and finally passed by a vote of 140-13. After the Senate President Pro Tem and the Speaker of the House sign SB 1, it will be presented to Governor Mike Parson for his signature.
SUPREME COURT TO HEAR MEDICAID EXPANSION CASE
The next stop for Missouri’s Medicaid expansion issue is the state’s Supreme Court, as the high court’s judges will hear arguments regarding a lawsuit on July 13. After voters approved Medicaid expansion for an estimated 275,000 eligible Missourians, the General Assembly and the state have not funded the expansion which was supposed to kick in on July 1. Three women seeking Medicaid benefits filed a lawsuit on May 20 against the state, and on June 23, Circuit Judge Jon Beetem of Cole County ruled the amendment approved by voters last year was unconstitutional because it did not provide funding for the expansion. If the Supreme Court rules in favor of the three women, the General Assembly likely will be required to approve funding. The amendment was approved by voters in November 2020 by a margin of 53-47 percent. On May 13, Governor Mike Parson said, “Without a revenue source or funding authority from the General Assembly, we are unable to proceed with the expansion at this time . . . “ Earlier in the legislative session the Governor had sought expansion of Medicaid, but legislators did not include expansion funding in the state’s $35 billion budget for FY22.
GOVERNOR PARSON SIGNS MORE BILLS INTO LAW
WAYFAIR BILL SIGNED; TAXES TO BE COLLECTED ON INTERNET PURCHASES
On June 30, Governor Mike Parson signed Senate Bill 153, known as the Wayfair bill, that will establish economic nexus and collection of sales taxes on internet purchases in Missouri. And the bill enacts many other tax provisions. Sen. Andrew Koenig (R-Manchester) and Rep. J. Eggleston (R-Maysville) were the bill’s sponsor and House handler, respectively. Among the many different issues enacted in SB 153:
Wayfair provisions:
Economic Nexus Defined – The bill applies to a seller of $100,000 in gross receipts from taxable sales; calculated on a rolling 12-month basis at end of each calendar quarter; once nexus is established, a seller is required to collect and remit use tax for at least 12 months.
Marketplace Facilitators Defined – Facilitates a retail sale by a marketplace seller by listing or advertising for sale by the marketplace seller, in any forum, tangible personal property or services that are subject to tax under this chapter; and, Either directly or indirectly through agreements or arrangements with third parties collects payment from the purchaser and transmits all or part of the payment to the marketplace seller; and Provisions follow guidelines in Multi-State Tax Commission recommendations.
Tax Administration – The Department of Revenue will establish a use tax map; and sellers will be protected from penalties if they are a result of errors in the DOR database.
Changes tax filing threshold levels for all businesses: Monthly threshold is changed to $500 per calendar month for prior year; Quarterly changed to more than $200 per quarter to less than $500 per month; Annual filer increased to less than $200 per quarter.
Local Use Tax Provisions – The bill makes changes to ballot language; Establishes a formula for use tax distribution in St. Louis County; Requires all jurisdictions with an existing local use tax to publish a notice by November 2021 that certain purchases will become subject to taxation. (The jurisdictions with a use tax must alert their citizens that they will be paying taxes on internet sales.)
Tax cuts:
The collection of the Wayfair tax begins in January 2023. The bill reduces the income tax rate by 0.10 percent in 2024; Suspends SB 509 cut for 2024 but adds two additional 0.10 percent reductions when triggers are met; Establishes the Missouri Working Family Tax Credit. Credit is non-refundable and tied to Federal Earned Income Tax Credit. Begins at 10 percent and increases to 20 percent based on same triggers as tax cuts.
Video service provider fees (local governments charge telecom companies and cable companies to bury cable in rights-of-way). The bill provides a phased-in reduction of franchise fees from 2023 to 2027; Changes how the fee is collected; Establishes a task force to review management of local government rights of way.
Community Improvement District and Tax Increment Financing changes:
The legislation makes changes to petitions for formation; Creates reporting requirement to State Auditor; Establishes procedures for districts with nobody living in district; Establishes bidding requirements. TIF Changes: New definition of “blight”; Study requirements; Prohibits projects in flood plains; Adjusts formula funding.
Other tax changes:
Property Tax assessment on historic aircraft; Deductibility of CARES act credits on individual returns; Allows store front consumer-based retail trade establishments in third- or fourth-class counties to be included in Missouri Works program.
Effective Dates of SB 153 are: Wayfair Provisions – Jan. 1, 2023;CARES act credits – immediately upon signing by the Governor;Video Service Provider fees – Aug. 28, 2023;All other provisions – Aug. 28, 2021.
LOTTERY WINNERS’ NAMES TO BE SECRET
On June 29, Governor Mike Parson signed House Bill 402 (Mosley, D-St. Louis) which prohibits the Lottery Commission, state lottery, any contracted organization, or any of their employees from publicizing the name, address, or identifying information of a Lottery winner in printed or electronic form for distribution or sale to the public. Any violation of these provisions is a class A misdemeanor. The bill includes an “opt-in” for people who wish their names to be publicized if they fill out a form provided by the Lottery. The legislation becomes effective on Aug. 28.
