Attorney General says tax cut bill could trigger refunds
Opinion agrees with governor, is at odds with supporters
Originally published August 29, 2013 at 1:17 p.m., updated August 29, 2013 at 10:38 p.m.
Attorney General Chris Koster said Thursday that putting the Legislature’s tax-cut bill into law could result in Missourians getting tax refunds for three previous years’ returns.
Lawmakers on Sept. 11 could vote to overturn Gov. Jay Nixon’s veto of House Bill 253 and put it into law.
House Speaker Tim Jones, who asked Koster for the opinion two weeks ago, said he was “disappointed that ... Koster chose not to show his independence on this important issue and instead sided with the liberal, tax-and-spend views of the governor and the president.”
When Nixon vetoed the tax-cut bill in June, he said his reasons for the veto included the possibility that taxpayers could get refunds going back three years, under language in the bill that automatically cuts state income taxes by a half-percent if Congress passes a “Marketplace Fairness Act” that would impose taxes on Internet sales.
The governor and Budget Director Linda Luebbering have said that, if the federal proposal becomes law, Missouri government could find itself owing taxpayers about $1.2 billion in tax refunds.
When he asked for Koster’s legal opinion two weeks ago, Jones, R-Eureka, told the attorney general the General Assembly’s Legislative Research Department had refuted the governor’s claims.
Jones cited a memo he’d received from Legislative Research, which included the opinion the provision could not be applied retroactively to prior tax years.
Tax cut supporters say Missouri’s Constitution prohibits taxpayers from seeking refunds for any years before a law goes into effect.
But, Koster wrote Jones Thursday: “The provision of the Constitution inhibiting laws retrospective in their operation is for the protection of the citizen and not the state. ... The state may constitutionally pass retrospective laws impairing its own rights, and may impose new liabilities already past ...”
Koster said the key to his opinion is the lawmakers’ own language in the tax-cut bill, requiring the Revenue director to “adjust the tax tables ... by one-half of a percent” if the federal law is passed.
Another part of the bill changes the state’s base tax table “for all tax years beginning on or before” either Dec. 31, 2013, or a date triggered by revenue growth of at least $100 million.
Under that General Assembly-passed language, Koster said, if Congress ever passes a Marketplace Fairness Act or similar law, “The maximum tax rate would be reduced by one-half percent not only for the tax year in which the new legislation became effective, but also for all previous tax years. ...
“The base tax table is not set just for that calendar year, but also retroactively for every preceding tax year in Missouri history.”
And that would allow Missouri taxpayers to seek refunds on taxes already paid, up to three years, Koster said, “because there is a three-year statute of limitations on filing an amended tax return.”
Ray McCarty, president of the Associated Industries of Missouri, has argued for several weeks that the refunds could not be retroactive.
He said Thursday: “Tax experts may be surprised by Attorney General Chris Koster’s opinion that a provision in HB 253 would apply retroactively. ... Koster’s opinion seems contrary to the normal course of action for the Attorney General whose constitutional duty requires him to represent the state in disputes over taxes.
“Usually, taxpayers are asking the courts to grant an exemption or lower taxes and the Attorney General argues against such claims — against taxpayers and in favor of the government. I hope taxpayers are able to use this opinion in future disputes with the state over retroactive tax benefits.”
Earlier coverage, posted at 1:17 p.m.:
Attorney General Chris Koster said today that putting the Legislature's tax-cut bill into law could result in Missourians getting tax refunds for three previous years' returns.
Koster's three-page opinion was issued at the request of House Speaker Tim Jones, R-Eureka, who supports the tax cut measure, and suggested to Koster earlier this month that a massive tax refund would violate the state's Constitution.
Gov. Jay Nixon vetoed the tax-cut bill in June and, among his reasons for the veto is a provision in the proposed law that would trigger an automatic half-percent cut in income tax rates when, and if, Congress passes a "Marketplace Fairness Act" that would impose taxes on Internet sales.
Tax cut supporters say Missouri's Constitution prohibits taxpayers from seeking refunds for years before a law goes into effect.
But, Koster wrote Jones: "The provision of the Constitution inhibiting laws retrospective in their operation is for the protection of the citizen and not the state. ... The state may constitutionally pass retrospective laws impairing its own rights, and may impose new liabilities already past ..."
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