Gov. Jay Nixon today signed Senate Bill 19, which gradually phases out Missouri's corporate franchise tax over the next five years. Eliminating this burdensome tax will open the door for additional expansion and job creation by employers located in Missouri. The Governor signed the legislation during a visit to an iconic Kansas City employer, Boulevard Brewing Co.
Despite the word "franchise" being in its name, the corporate franchise tax is not based upon whether a corporation is a franchise or operates franchises. Instead, the franchise tax is based on the amount of assets a business has located in Missouri. The current franchise tax rate is one-thirtieth of 1 percent of a company's taxable assets.
"As Governor, my top priority is working with Missouri businesses to create jobs and move our economy forward, and the gradual elimination of this tax is another step in the right direction," Gov. Nixon said. "Phasing out this burdensome tax will encourage businesses to expand their operations and create jobs in Missouri, boosting our economy and making our state more competitive for years to come. Together, we will keep Missouri's economy moving forward."
In 2009, Gov. Nixon signed House Bill 191, which eliminated the franchise tax for approximately 16,000 small businesses across Missouri. This new legislation, SB 19, gradually phases out the tax for the remaining Missouri businesses, those with assets of more than $10 million located in the state.
Under SB 19, the franchise tax liability for companies is capped at the level they paid in Tax Year 2010. Over the next five years, the franchise tax rate would be reduced as follows:
|Tax Year||Corporate Franchise Tax Rate|
|2010||1/30 of 1 percent|
|2011||1/30 of 1 percent*|
|2011||1/30 of 1 percent*|
|2012||1/37 of 1 percent*|
|2013||1/50 of 1 percent*|
|2014||1/75 of 1 percent*|
|2015||1/150 of 1 percent*|
|2016 and beyond||Tax eliminated|
* A company’s franchise tax liability is limited to no more than what it owed in Tax Year 2010.
"We applaud Gov. Nixon for standing with Missouri's employers and signing this legislation that will help companies expand and create jobs in our state," said Dan Mehan, president and CEO of the Missouri Chamber of Commerce and Industry. "This is a tax cut that will make Missouri more competitive and help bring new jobs and investment to the Show-Me State."
"Associated Industries of Missouri has always advocated for elimination of the Missouri Corporation Franchise Tax," said Ray McCarty, president of Associated Industries of Missouri. "This tax currently results in double tax for all Missouri corporations. We applaud the Missouri legislature and Governor Nixon for eliminating this tax once and for all."
During Fiscal Year 2010, Missouri collected approximately $87.5 million in corporate franchise taxes. Approximately 3,000 Missouri businesses will be affected by this phase out. In Fiscal Year 2012, the impact to state revenue will be approximately $24 million.