COMMITTEE ON LEGISLATIVE RESEARCH

OVERSIGHT DIVISION

FISCAL NOTE

L.R. No.: 4520-01

Bill No.: HB 1649

Subject: Elderly; Retirement Systems and Benefits - General; Revenue Department

Type: Original

Date: April 18, 2006

FISCAL SUMMARY

Numbers within parentheses: ( ) indicate costs or losses.

This fiscal note contains 4 pages.

ASSUMPTION

Officials of the Public School and Non-teacher School Employee Retirement Systems of Missouri, the Firemen's Retirement System of St. Louis, Kansas City Police Retirement, the Sheriffs' Retirement System, the Police Retirement System of St. Louis, the Public School Retirement System of the School District of Kansas City, LAGERS, and the County Employees' Retirement System assume this proposal would not fiscally impact their agencies.

Officials of the Department of Revenue (DOR) state they would expand the instructions for the pension exemption worksheet. This along with the "65 and over" check box will allow the MINITS system to verify and edit. DOR assumes no FTE would be needed.

DOR states this proposal will require modifications to the infividual income tax systems. Taxation estimate these modifications will require MINITS programming costs of $46,170. DOR proposes to cover these costs with current IT staff. DOR states that effective July 1, 2006, DOR's IT staff will be moved to OA pursuant to a consolidation, but DOR has no reason to believe this transfer will limit their ability to absorb these costs. In the event multiple new credits/deductions are passed, this cost could exceed current appropriations levels and result in additional funds being requested.

ASSUMPTION (continued)

Officials of the Office of Administration, Division of Budget and Planning (BAP) assume there would be no added cost to their office as a result of this proposal. BAP states the proposal allows a full $6,000 retirement benefit deduction for taxpayers over age 65 regardless of income. BAP defers to UM-EPARC for a precise estimate of the impact of this proposal.

Officials from the University of Missouri - Economic and Policy Analysis Research Center (MU) state in this proposal, the individual taxpayer would be permitted to deduct up to $6,000 from retirement and pension income if 65 years or older. Correspondingly, joint filers would deduct up to $12,000 per combined return. The existing law has means testing in order to obtain the deduction to pension income. MU states that gross tax receipts are predicted to fall by $11 million if the proposal is adopted.

This legislation will decrease Total State Revenues.

FISCAL IMPACT - Small Business

No direct fiscal impact to small businesses would be expected as a result of this proposal.

DESCRIPTION

Currently, a public or private retiree may deduct up to $6,000 of pension allowances received each year if his or her income is not in excess of $32,000 for married taxpayers or $25,000 for single taxpayers. This proposal would remove the income limitation when a taxpayer reaches the age of 65, allowing the full $6,000 of retirement benefits to be deducted from state income tax regardless of income. Taxpayers younger than 65 years of age would still be allowed the $6,000 benefit deduction subject to the income limitations.

The bill has an effective date of January 1, 2007.

This legislation is not federally mandated, would not duplicate any other program and would not require additional capital improvements or rental space.

SOURCES OF INFORMATION

Department of Revenue

Office of Administration - Budget and Planning

University of Missouri

Economic and Policy Analysis Research Center

Public School and Non-Teacher School Employee Retirement Systems of Missouri

Firemen's Retirement System of St. Louis

Kansas City Police Retirement

Sheriff's Retirement System

Public School Retirement System of the School District of Kansas City

LAGERS

County Employee's Retirement System

Mickey Wilson, CPA

Director

April 18, 2006